Registration No. 33-46499
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SILGAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 3441;3085 06-1207662
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Classification Code Identification
organization) Code Number) Number)
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Harley Rankin, Jr.
Silgan Corporation
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Frode Jensen, III, Esq.
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
(203) 348-2300
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<PAGE>
SILGAN CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Form S-1 Part I Item Prospectus Location or Caption
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus . . . Cross Reference Page; Outside
Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus . . Inside Front Cover Page
3. Summary Information, Risk
Factors and Ratio of Earnings to
Fixed Charges . . . . . . . . Prospectus Summary; Certain
Risk Factors; The Company;
Selected Financial Data
4. Use of Proceeds . . . . . . . Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution . . . . . . . . . . . Not Applicable
7. Selling Security Holders . . . Not Applicable
8. Plan of Distribution . . . . .
Market-Making Activities of
Morgan Stanley
9. Description of Securities to be
Registered . . . . . . . . . . Outside Front Cover Page;
Prospectus Summary; Description
of the 11-3/4% Notes
10. Interests of Named Experts and
Counsel . . . . . . . . . . . Certain Transactions; Legal
Matters; Experts
11. Information With Respect to the
Registrant . . . . . . . . . . Outside Front Cover Page;
Prospectus Summary; Certain
Risk Factors; The Company;
Capitalization; Selected
Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Business;
Management; Securities
Ownership of Certain Beneficial
Owners and Management; Certain
Transactions; Description of
Silgan Capital Stock;
Description of Holdings Common
Stock; Description of the 11-
3/4% Notes; Description of
Certain Indebtedness; Financial
Statements
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities . . Not Applicable
<PAGE>
PROSPECTUS
$135,000,000
Silgan Corporation
11-3/4% SENIOR SUBORDINATED NOTES DUE 2002
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Interest payable June 15 and December 15
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The 11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes") will be
redeemable at the option of Silgan Corporation (the "Company" or "Silgan"),
in whole or in part, at any time on or after June 15, 1997, initially at
105.875% of their principal amount plus accrued interest, declining to 100%
of their principal amount plus accrued interest on or after June 15, 1999.
_________________________
The 11-3/4% Notes were originally sold by the Company to the public in
1992 as part of a plan of the Company and Silgan Holdings Inc. ("Holdings"),
the Company's parent holding company, to refinance a substantial portion of
their indebtedness (the "Refinancing"). Because the Company is a holding
company that conducts all of its business through its subsidiaries, all
existing and future liabilities of the Company's subsidiaries will be
effectively senior to the 11-3/4% Notes. As of June 30, 1994, the Company
and its subsidiaries had approximately $362.3 million of indebtedness and
other liabilities effectively senior to the 11-3/4% Notes, including
approximately $225.0 million of Senior Indebtedness (as defined in
"Description of the 11-3/4% Notes--Subordination"). The Company has no
indebtedness outstanding that is subordinated to the 11-3/4% Notes. The
indenture relating to the 11-3/4% Notes (the "Indenture") permits, subject to
certain limitations contained therein, the incurrence by the Company and its
subsidiaries of a substantial amount of additional indebtedness, including
Senior Indebtedness, and the payment by the Company of dividends to Holdings.
See "Certain Risk Factors--Secured Indebtedness," "--Holding Company
Structure and Subordination" and "--Ability of the Company to Incur
Additional Indebtedness" and "Description of the 11-3/4% Notes." The 11-3/4%
Notes are listed on the Pacific Stock Exchange. Although Morgan Stanley &
Co. Incorporated ("Morgan Stanley") currently makes a market in the 11-3/4%
Notes, it is not obligated to do so and may discontinue or suspend its
market-making activities at any time. In addition, the liquidity of and
trading market for 11-3/4% Notes may be adversely affected by declines and
volatility in the market for high yield securities generally as well as by
any changes in the Company's financial performance and prospects. See
"Certain Risk Factors--Trading Market for the 11-3/4% Notes."
------------------
SEE "CERTAIN RISK FACTORS" FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_________________________
This Prospectus is to be used by Morgan Stanley & Co. Incorporated in
connection with offers and sales in market-making transactions at negotiated
prices relating to prevailing market prices at the time of sale. Morgan
Stanley & Co. Incorporated may act as principal or agent in such
transactions.
August 19, 1994
<PAGE>
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or Morgan
Stanley. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by any person in any jurisdiction in which it
is unlawful for such person to make such an offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall imply under
any circumstances that the information contained herein is correct as of any
date subsequent to the date hereof.
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TABLE OF CONTENTS
Page
Additional Information . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . 4
Certain Risk Factors . . . . . . . . . . . . . . . . . 10
The Company . . . . . . . . . . . . . . . . . . . . . . 16
Capitalization . . . . . . . . . . . . . . . . . . . . 18
Selected Financial Data . . . . . . . . . . . . . . . . 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 23
Business . . . . . . . . . . . . . . . . . . . . . . . 34
Management . . . . . . . . . . . . . . . . . . . . . . 47
Securities Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . 58
Certain Transactions . . . . . . . . . . . . . . . . . 59
Description of Certain Indebtedness . . . . . . . . . . 61
Description of Silgan Capital Stock . . . . . . . . . . 67
Description of Holdings Common Stock . . . . . . . . . 68
Description of the 11-3/4% Notes . . . . . . . . . . . 74
Certain Federal Income Tax Considerations . . . . . . . 101
Market-Making Activities of Morgan Stanley . . . . . . 105
Legal Matters . . . . . . . . . . . . . . . . . . . . . 105
Experts . . . . . . . . . . . . . . . . . . . . . . . . 105
Index to Consolidated Financial Statements . . . . . . F-1
------------------------
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-1 (which term shall
encompass any amendment thereto) relating to the 11-3/4% Notes under the
Securities Act of 1933, as amended (the "Securities Act"). For purposes
hereof, the term "Registration Statement" means the original Registration
Statement and any and all subsequent amendments thereto. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto to which reference is made
hereby. Each reference made in this Prospectus to a document filed as an
exhibit to the Registration Statement is qualified in its entirety by
reference to such exhibit for a complete statement of its provisions. Any
interested party may inspect the Registration Statement, without charge, at
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, DC 20549, and may obtain copies of all or any portion of the
Registration Statement from the Commission upon payment of the prescribed
fee. In addition, copies of any and all documents incorporated by reference
in this Prospectus (not including exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents) may
be obtained, without charge, from the Company by requesting such copies by
mail or telephone from Harold J. Rodriguez, Jr., Silgan Corporation, 4
Landmark Square, Stamford, CT 06901, telephone number (203) 975-7110.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
The Registration Statement and the exhibits and schedules thereto, as well as
all such reports and other information filed by the Company with the
Commission, can be inspected and copied at prescribed rates at the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, DC
20549, and at the following Regional Offices of the Commission: New York
Regional Office, 75 Park Place, New York, New York 10007 and Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Such reports and other information may also be
inspected at the offices of the Pacific Stock Exchange, 301 Pine Street,
Suite 1104, San Francisco, California 94104.
The Indenture requires the Company, and the Company intends, to
distribute to the holders of the 11-3/4% Notes annual reports containing
consolidated financial statements and the related report of independent
auditors and quarterly reports containing unaudited consolidated financial
statements for the first three quarters of each fiscal year for so long as
any 11-3/4% Notes are outstanding.
<PAGE>
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by the more
detailed information and financial statements and notes thereto that appear
elsewhere in this Prospectus. Prospective investors should carefully
consider the factors set forth under the caption "Certain Risk Factors."
THE COMPANY
The Company is a major manufacturer and seller of a broad range of
steel and aluminum containers for the human food and pet food markets and
plastic containers for the personal care, food, pharmaceutical and household
markets in the United States. In 1993, the Company had net sales of $645
million.
On December 21, 1993, the Company's wholly owned subsidiary, Silgan
Containers Corporation ("Containers"), acquired from Del Monte Corporation
("Del Monte") substantially all of the fixed assets and certain working
capital of Del Monte's container manufacturing business in the United States
("DM Can") for approximately $73 million. See "Business--Company History"
below. In connection therewith, Containers and Del Monte entered into a ten-
year supply agreement (the "DM Supply Agreement") pursuant to which
Containers supplies substantially all of the metal container requirements of
Del Monte. On a pro forma basis giving effect to the acquisition of DM Can,
in 1993 the Company would have had net sales of $818 million. See "Business-
- -Sales and Marketing" below.
Management believes that the Company is the largest food can producer
in the United States (based on pro forma unit sales after giving effect to
the acquisition of DM Can) and one of the largest producers in the United
States of high density polyethylene ("HDPE") containers for the personal care
market and a major producer of custom polyethylene terephthalate ("PET")
products for the personal care and food markets. The Company has experienced
significant growth since its inception in 1987 as a result of its
acquisitions and related increased market position.
Management estimates that Containers is currently the nation's
largest manufacturer of metal food containers and that in 1993 Containers
sold approximately 27% of all metal food containers sold in the United States
by non-captive manufacturers (manufacturers of containers not owned by a user
of containers) and approximately 16% of all metal food containers sold in the
United States, in each case based on unit sales. On a pro forma basis giving
effect to the acquisition of DM Can, in 1993 Containers would have sold
approximately 34% of all metal food containers sold in the United States by
non-captive manufacturers and approximately 22% of all metal food containers
sold in the United States. Although the food can industry in the United
States is relatively stable and mature in terms of unit sales growth,
Containers, on a pro forma basis giving effect to the acquisition of DM Can,
has realized compound annual unit sales growth in excess of 12% since 1987.
Types of containers manufactured include those for vegetables, fruit, pet
food, tomato based products, evaporated milk and infant formula. Containers
has agreements (the "Nestle Supply Agreements") with Nestle Food Company
("Nestle"), formerly known as The Carnation Company ("Carnation"), pursuant
to which Containers supplies substantially all of the can requirements of the
former Carnation operations of Nestle. In addition to the Nestle Supply
Agreements and the DM Supply Agreement, Containers has other long-term supply
arrangements with other customers. The Company estimates that in excess of
80% of Containers' sales in 1994 will be pursuant to long-term supply
arrangements. See "Business--Sales and Marketing" below.
Management believes that the Company's wholly owned subsidiary,
Silgan Plastics Corporation ("Plastics"), is one of the leading manufacturers
of plastic containers sold in the United States for the personal care,
household and pharmaceutical markets served by the Company. Plastic
containers manufactured by Plastics include personal care containers for
shampoos, conditioners, hand creams, lotions and cosmetics, household
containers for light detergent liquids, scouring cleaners and specialty
cleaning agents and pharmaceutical containers for tablets, laxatives and eye
cleaning solutions. Plastics is also one of the leading manufacturers of PET
containers sold in the United States for applications other than soft drinks.
Plastics manufactures custom PET medicinal and health care product containers
(such as mouthwash bottles), custom narrow-neck food product containers (such
as salad dressing bottles), custom wide-mouth food product containers (such
as mayonnaise and peanut butter containers) and custom non-soft drink
beverage product containers (such as juice, water and liquor bottles). See
"Business--Products."
The Company's strategy is to continue to improve its market position
and profitability through focus on product quality, customer service, cost
efficiencies, strategic acquisitions and market share growth through
customers experiencing market share growth. At Containers, management has
focused on achieving operating cost advantages over its competitors,
primarily through low labor costs, low overhead, technologically advanced
manufacturing processes and by exploiting the favorable geographic locations
of its 22 can plants. Since its acquisition in 1987 of the metal container
manufacturing division of Nestle ("Nestle Can"), Containers has invested more
than $82 million in its existing manufacturing facilities and has spent
approximately $66 million for the purchase of additional can manufacturing
assets. As a result of these efforts and management's focus on quality and
service, Containers has increased its overall share of the food can market by
approximately 100% in terms of unit sales, from a share of approximately 11%
in 1987 to a share of approximately 22% in 1993, on a pro forma basis giving
effect to the acquisition of DM Can.
Plastics has increased its market position primarily by strategic
acquisitions. From a sales base of $89 million in 1987, Plastics' sales
increased to $186 million in 1993, or 13% on a compound annual basis. While
many of Plastics' larger competitors employ technology oriented to large
bottles and long production runs, Plastics has focused on mid-sized,
extrusion blow-molded plastic containers requiring special decoration and
shorter production runs. Plastics emphasizes value-added fabrication of the
container, creative design and sophisticated decoration processes. Plastics
is also aggressively pursuing new markets for plastic containers, including
the post-consumer recycled ("PCR") resin segment of the market. Based upon
published information and management's experience in the industry, management
believes that PET custom containers are replacing glass containers for
products such as mouthwash, salad dressing, peanut butter and liquor.
Management also believes that Plastics is well positioned because of its
technologically advanced equipment to respond to opportunities for future
growth in the rigid plastic container market. Furthermore, to the extent
that mandatory recycling laws, customer preferences or manufacturing costs
result in increased demand for HDPE containers that are manufactured using
PCR resins, the Company believes that its proprietary equipment is
particularly well-suited for the production of such containers because of the
relatively low capital costs required to convert its equipment from the use
of virgin resins.
<PAGE>
THE 11-3/4% NOTES
Original Issue . . . $135,000,000 principal amount of 11-3/4% Senior
Subordinated Notes due 2002, originally issued on
June 29, 1992.
Maturity . . . . . . June 15, 2002.
Interest Payment
Dates . . . . . . June 15 and December 15, commencing December 15,
1992.
Optional Redemption . The 11-3/4% Notes may be redeemed at the option of
the Company, in whole or in part, at any time on or
after June 15, 1997, initially at 105.875% of their
principal amount plus accrued interest, declining
to 100% of such principal amount plus accrued
interest on or after June 15, 1999.
Change of Control . . In the event of a Change of Control (as defined
under "Description of the 11-3/4% Notes--Certain
Definitions"), each holder of 11-3/4% Notes may
require the Company to repurchase such 11-3/4%
Notes at 101% of the principal amount thereof plus
accrued interest.
Ranking . . . . . . . The 11-3/4% Notes are subordinated in right of
payment to all existing and future Senior
Indebtedness of the Company. In addition, because
the Company is a holding company that conducts all
of its business through its subsidiaries, all
existing and future liabilities of its subsidiaries
are effectively senior to the 11-3/4% Notes. As of
June 30, 1994, the Company and its subsidiaries
had approximately $362.3 million of indebtedness
and other liabilities effectively senior to the
11-3/4% Notes, of which approximately $225.0
million constituted Senior Indebtedness. See
"Certain Risk Factors--Holding Company Structure
and Subordination" and "Description of the 11-3/4%
Notes--Subordination."
Covenants . . . . . . The Indenture contains certain covenants that,
among other things, direct the application of
proceeds from certain asset sales and limit the
ability of the Company and its subsidiaries to
incur indebtedness, make certain payments with
respect to their capital stock, make prepayments of
certain indebtedness, make loans or investments in
entities other than Restricted Subsidiaries (as
defined under "Description of the 11-3/4%
Notes--Certain Definitions"), enter into
transactions with affiliates, engage in mergers or
consolidations and, with respect to the Company's
Restricted Subsidiaries, issue stock. See
"Description of the 11-3/4% Notes--Covenants."
Listing . . . . . . . The 11-3/4% Notes are listed on the Pacific Stock
Exchange.
CERTAIN RISK FACTORS
For a discussion of certain factors that should be considered in
evaluating an investment in the 11-3/4% Notes, see "Certain Risk Factors."
<PAGE>
SUMMARY FINANCIAL DATA
The following summary historical consolidated financial data of the
Company were derived from, and should be read in conjunction with, the
historical financial statements of the Company that appear elsewhere in this
Prospectus.
Six Months Ended
June 30,
1994 1993
(Dollars in thousands)
(Unaudited)
Operating Data:
Net sales . . . . . . . . . . . . . . . . . . . . $387,203 $297,250
Cost of goods sold . . . . . . . . . . . . . . . 335,748 260,405
------- -------
Gross profit . . . . . . . . . . . . . . . . . . 51,455 36,845
Selling, general and administrative expenses . . 18,274 16,517
------- -------
Income from operations . . . . . . . . . . . . . 33,181 20,328
Interest expense and other related financing costs 17,297 13,537
Other expense (income) . . . . . . . . . . . . . 161 (30)
------- -------
Income before income taxes . . . . . . . . . . . 15,723 6,821
Income tax provision . . . . . . . . . . . . . . 6,450 3,000
------- -------
Income before cumulative effect of changes in
accounting principles . . . . . . . . . . . . 9,273 3,821
Cumulative effect of changes in accounting
principles, net of income taxes . . . . . . . -- (9,951)
------- ------
Net income (loss) . . . . . . . . . . . . . . . . $ 9,273 $ (6,130)
======= =======
Ratio of earnings to fixed charges <fa> . . . . . 1.84 1.46
Balance Sheet Data (at end of period):
Fixed assets . . . . . . . . . . . . . . . . . . $281,580 $233,416
Total assets . . . . . . . . . . . . . . . . . . 559,051 425,852
Total long-term debt . . . . . . . . . . . . . . 305,000 205,553
Common stockholder's equity . . . . . . . . . . . 61,773 32,320
Other Data:
EBDITA <fb> . . . . . . . . . . . . . . . . . . . $ 52,224 $ 36,446
Capital expenditures . . . . . . . . . . . . . . 9,641 26,070
Depreciation and amortization . . . . . . . . . . 18,950 15,888
(footnotes follow)
<PAGE>
SUMMARY FINANCIAL DATA
Year Ended December 31,
1993<fc> 1992 1991<fd> 1990<fe> 1989<fe>
-------- ---- -------- -------- --------
(Dollars in thousands)
Operating data:
Net sales . . . . . . . $645,468 $630,039 $678,211 $657,537 $610,682
Cost of goods sold . . 571,174 554,972 605,185 582,991 537,485
------- ------- ------- ------- -------
Gross profit . . . . . 74,294 75,067 73,026 74,546 73,197
Selling, general and
administrative
expenses . . . . . . 31,786 32,249 33,619 36,366 34,687
------- ------- ------- ------- -------
Income from operations 42,508 42,818 39,407 38,180 38,510
Interest expense and
other related
financing costs . . . 27,928 26,916 28,981 34,233 36,714
Other expense (income) 35 25 (396) (574) (810)
------- ------- ------- ------- -------
Income before income
taxes . . . . . . . 14,545 15,877 10,822 4,521 2,606
Income tax provision
<ff> . . . . . . . . . 6,300 2,200 1,500 1,579 995
------- ------- ------- ------- -------
Income before
extraordinary charges
and cumulative effect
of changes in
accounting principles 8,245 13,677 9,322 2,942 1,611
Extraordinary charges
relating to early
extinguishment of debt (841) (9,075) -- -- --
Cumulative effect of
changes in accounting
principles, net of
taxes <fg> . . . . . (9,951) -- -- -- --
------- ------- -------- --------- -------
Net income (loss) . . . (2,547) 4,602 9,322 2,942 1,611
Preferred stock dividend
requirements . . . . -- 2,745 3,889 3,356 2,897
------ ------- ------- ------- -------
Net income (loss)
applicable to common
stockholder . . . . . $ (2,547) $ 1,857 $ 5,433 $ (414) $(1,286)
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges <fa> . . 1.48 1.54 1.34 1.12 1.07
Balance Sheet Data (at
end of period):
Fixed assets . . . . . $290,395 $223,879 $230,501 $244,672 $245,039
Total assets . . . . . 492,064 382,154 382,330 434,439 431,489
Total long-term debt . 305,000 206,681 140,701 188,598 213,512
Redeemable preferred -- -- 27,878 24,061 20,766
stock . . . . . . . . .
Common stockholder's 52,803 32,775 46,642 41,209 38,823
equity . . . . . . . .
Other Data:
EBDITA <fb> . . . . . . $ 76,769 $ 74,547 $ 72,651 $ 70,223$ 67,638
Capital expenditures . 42,480 23,447 21,834 22,908 20,201
Depreciation and
amortization . . . . 33,818 31,754 32,848 29,496 23,483
Number of employees (at
end of period) <fh> . 3,330 3,340 3,560 4,330 4,210
(footnotes follow)
<PAGE>
Notes to Summary Financial Data
[FN]
<fa> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges,
excluding capitalized interest, and fixed charges consist of interest,
whether expensed or capitalized, amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized, and such portion of rental expense that is representative
of the interest factor.
<fb> "EBDITA" means consolidated net income before extraordinary charges,
cumulative effect of changes in accounting principles and preferred
stock dividends plus, to the extent reflected in the income statement
for the period for which consolidated net income is to be determined,
without duplication, (i) consolidated interest expense, (ii) income tax
expense, (iii) depreciation expense, (iv) amortization expense, (v)
expenses relating to postretirement health care costs which amounted to
$0.254 million and $0.200 million for the six months ended June 30,
1994 and 1993, respectively, and $0.478 million for the year ended
December 31, 1993, and (vi) charges relating to the vesting of benefits
under stock appreciation rights ("SARs") in connection with the 1989
Mergers (as defined in "Business--Company History") of $1.973 million
and $4.835 million in 1990 and 1989, respectively.
<fc> On December 21, 1993, the Company acquired from Del Monte substantially
all of the fixed assets and certain working capital of its container
manufacturing business. The acquisition was accounted for as a purchase
transaction and the results of operations have been included with the
Company's historical results from the acquisition date. See "Business--
Company History." For a discussion of the adjustments relating to such
acquisition, see the Pro Forma Unaudited Combined Statement of
Operations for the year ended December 31, 1993 and the notes thereto
appearing on pages F-47 to F-50 of this Prospectus.
<fd> On November 15, 1991, the Company sold its nonstrategic PET carbonated
beverage bottle business (the "PET Beverage Sale"). For 1991, sales
from the PET carbonated beverage business were $33.4 million. See
"Business--Company History."
<fe> On July 13, 1990, Holdings and the Company entered into a business
combination (the "SPHI Business Combination") with Silgan P.E.T.
Holdings Inc. ("SPHI") whereby SPHI became a majority owned subsidiary
of the Company. The SPHI Business Combination was accounted for in a
manner similar to a pooling of interests and accordingly the Company's
consolidated financial statements include SPHI for periods subsequent to
July 24, 1989. SPHI was formed in 1989 to acquire, through its wholly
owned subsidiary Silgan P.E.T. Corp. ("Silgan PET"), the business and
related assets of Amoco Container Company ("Amoco Container"). Such
acquisition occurred on July 24, 1989 and was accounted for as a
purchase transaction. See "Business--Company History."
<ff> Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which requires the Company to provide for taxes as if it were a separate
taxpayer. For years prior to 1993, the Company determined its tax
provision on a separate company basis with the exception of certain
matters covered under a tax allocation agreement with Holdings under
which the Company obtained a federal tax benefit for Holdings' tax
losses. The effect of the adoption of SFAS No. 109 was to increase the
1993 tax provision by $4.4 million.
<fg> During 1993, the Company adopted SFAS No. 106, "Employers Accounting for
Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting
for Income Taxes" and SFAS No. 112, "Employers Accounting for
Postemployment Benefits." The Company has elected not to restate prior
years' financial statements for any of these pronouncements.
<fh> The number of employees at December 31, 1993 excludes 650 employees who
joined the Company on December 21, 1993 as a result of the acquisition
by Containers of DM Can.
<PAGE>
CERTAIN RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the 11-3/4% Notes.
High Leverage
The Company is highly leveraged primarily as a result of the financing
of the acquisitions of its metal and plastic container businesses. The
Company is a wholly owned subsidiary of Holdings, a holding company with no
significant assets or operations other than its investment in Silgan.
Holdings is highly leveraged as a result of the financing of its acquisition
of all of the outstanding stock of Silgan in June 1989. See
"Business--Company History."
As of June 30, 1994, the Company's total indebtedness was approximately
$360.0 million, its total assets were $559.1 million and its common
stockholder's equity was $61.8 million. See "Capitalization."
Although the Company is prohibited under the terms of the credit
agreement, dated as of December 21, 1993, among the Company and certain of
its subsidiaries, the lenders named therein (the "Banks"), Bank of America
National Trust and Savings Association ("Bank of America"), as Co-Agent, and
Bankers Trust Company ("Bankers Trust"), as Agent (the "Credit Agreement"),
from merging with Holdings (and is also subject to restrictions under the
Indenture and its Senior Secured Floating Rate Notes due 1997 (the "Secured
Notes") with respect to such a merger) and the Company has no present
intention of merging or entering into a similar transaction with Holdings,
the Company may in the future seek any consents necessary to allow the
Company to merge with Holdings. In the event of such a merger, Holdings' 13-
1/4% Senior Discount Debentures due 2002 (the "Holdings Discount Debentures")
would become obligations of the Company (subordinated in right of payment to
the 11-3/4% Notes) and increase the total indebtedness of the Company and
reduce the Company's net worth. The Company believes that if such a merger
were to take place at this time, the Company would be solvent, would continue
to have sufficient capital to carry on its business and would continue to be
able to meet its obligations as they mature.
Restrictive Covenants under Financing Agreements
In connection with the incurrence of its indebtedness, the Company has
entered into instruments and agreements governing such indebtedness (the
"Financing Agreements"), which Financing Agreements contain numerous
covenants, including financial and operating covenants, certain of which are
quite restrictive. In particular, certain financial covenants become more
restrictive over time in anticipation of scheduled debt amortization and
improved operating results. Such covenants affect, and in many respects
significantly limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, create liens, sell assets, engage
in mergers and acquisitions, make certain capital expenditures and pay
dividends. For a description of such covenants, see "Description of Certain
Indebtedness--Description of the Credit Agreement" and "--Description of the
Secured Notes" and "Description of the 11-3/4% Notes."
The ability of the Company and its subsidiaries to satisfy such
covenants and its other obligations (including scheduled reductions of their
indebtedness under the Credit Agreement and the Company's obligations under
the Secured Notes and the 11-3/4% Notes) depends upon, among other things,
the future performance of the Company and its subsidiaries, which will be
subject to prevailing economic conditions and to financial, business and
other factors (including the state of the economy and the financial markets,
demand for the products of the Company and its subsidiaries, costs of raw
materials, legislative and regulatory changes and other factors beyond the
control of the Company and its subsidiaries) affecting the business and
operations of the Company and its subsidiaries.
The factors described above could adversely affect the Company's ability
to meet its financial obligations, including its obligations to holders of
the 11-3/4% Notes. These factors could also limit the ability of the Company
to take advantage of business and technological opportunities and to effect
financings and could otherwise restrict corporate activities.
Management believes that the Company will be able to comply with the
financial covenants and other restrictions in the Financing Agreements and
that it will have sufficient cash flow available from operations to meet its
obligations; however, there can be no assurance of such compliance or of the
availability of sufficient cash flow. If the Company anticipates that it
will be unable to comply with covenants in any Financing Agreement or that
its cash flow will be insufficient to meet its debt service, dividend and
other operating needs, the Company might be required to seek amendments or
waivers to its Financing Agreements, refinance its debts or dispose of
assets. There can be no assurance that any such action could be effected on
satisfactory terms or would be permitted under the terms of the Financing
Agreements. In the event of a default under the terms of any of the
Financing Agreements, the obligees thereunder would be permitted to
accelerate the maturity of such obligations and cause defaults under other
obligations of the Company. Such defaults could be expected to delay or
preclude payment of principal of and/or interest on the 11-3/4% Notes.
Secured Indebtedness
At June 30, 1994, the Company and its subsidiaries had outstanding
approximately $225.0 million of indebtedness secured by assets of the Company
and its subsidiaries, including indebtedness under the Credit Agreement and
the Secured Notes. The Indenture permits the Company and its subsidiaries to
incur certain additional secured indebtedness. See "Description of the
11-3/4% Notes." Holders of secured indebtedness of the Company, including the
indebtedness under the Credit Agreement and the Secured Notes, have claims
with respect to the assets of the Company and its subsidiaries constituting
collateral that are prior to the claims of holders of the 11-3/4% Notes. In
the event of a default on the 11-3/4% Notes or a bankruptcy, insolvency,
liquidation, reorganization, dissolution or other winding up of the Company,
or upon the acceleration of any Senior Indebtedness, such assets would be
available to satisfy obligations with respect to the indebtedness secured
thereby before any payment therefrom could be made on the 11-3/4% Notes. See
"Description of Certain Indebtedness."
The indebtedness under the Credit Agreement and the Secured Notes is
secured by a pledge of assets of the Company and by pledges of the shares of
stock of the Company's subsidiaries. The indebtedness under the Credit
Agreement is also guaranteed by Holdings which guarantee is secured by a
pledge of the shares of stock of the Company. In addition, the Company's
indebtedness under the Credit Agreement and the Secured Notes is guaranteed
by substantially all the Company's subsidiaries and the obligations of each
such subsidiary are secured by substantially all the assets of each such
subsidiary. The 11-3/4% Notes are effectively subordinated to such pledges
and guarantees.
Holding Company Structure and Subordination
The Company is a holding company with no significant assets other than
its investments in and advances to its subsidiaries. The operations of the
Company are conducted principally through each of its wholly owned operating
subsidiaries, Containers and Plastics. Therefore, the Company's ability to
make interest and principal payments is largely dependent upon the future
performance and the cash flow of such operating subsidiaries, which will be
subject to prevailing economic conditions and to financial, business and
other factors (including the state of the economy and the financial markets,
demand for the products of the Company and its subsidiaries, cost of raw
materials, legislative and regulatory changes and other factors beyond the
control of such operating subsidiaries) affecting the business and operations
of such operating subsidiaries. Because the Company's subsidiaries do not
guarantee the payment of principal of and interest on the 11-3/4% Notes,
claims of holders of the 11-3/4% Notes effectively will be subordinated to
the claims of creditors of such operating subsidiaries, including trade
creditors, except to the extent that the Company may be a creditor with
recognized claims against such operating subsidiaries. At June 30, 1994,
the Company and its subsidiaries had approximately $362.3 million of
indebtedness and other liabilities effectively senior to the 11-3/4% Notes.
The payment of principal on the 11-3/4% Notes is expressly subordinate
to all existing and future Senior Indebtedness of the Company, including
borrowings under the Credit Agreement and the obligations under the Secured
Notes. Because of such subordination, in the event of the Company's
bankruptcy, insolvency, liquidation, reorganization, dissolution or other
winding up, or upon the acceleration of any Senior Indebtedness, the Banks
under the Credit Agreement and the holders of the Secured Notes and any other
Senior Indebtedness must be paid in full before the holders of the 11-3/4%
Notes may be paid. Payments on the 11-3/4% Notes might not be permitted if a
default under any Senior Indebtedness exists or if such a default would
result from any such payment. In addition, although the Credit Agreement,
the Indenture, the Secured Notes and the Holdings Discount Debentures impose
certain limitations on the ability of the Company and its subsidiaries to
incur additional indebtedness, the Company and its subsidiaries are not
prohibited under the Indenture from incurring additional indebtedness,
including additional Senior Indebtedness and other indebtedness that is
effectively senior to or pari passu with the 11-3/4% Notes. At June 30,
1994, the Company had outstanding approximately $225.0 million of Senior
Indebtedness.
Ability of the Company to Provide Financial Support to Holdings
Since Holdings' only asset is its investment in Silgan, its ability to
pay interest on the Holdings Discount Debentures on and after December 15,
1996 (the date on which interest is first payable on the Holdings Discount
Debentures) may depend upon its receipt of funds paid by dividend or
otherwise loaned, advanced or transferred by Silgan to Holdings. While
Silgan has no legal obligation to make such funds available, it is expected
that Silgan will do so if it is permitted under the agreements to which it
shall then be a party and if it then has sufficient funds available for such
purpose. If sufficient funds to pay such interest are not generated by the
operations of Silgan's subsidiaries, Silgan or Holdings may seek to borrow or
otherwise finance the amount of such payments or refinance the Holdings
Discount Debentures.
Neither the Indenture nor the Secured Notes limits the ability of Silgan
to pay cash dividends to Holdings in order to enable Holdings to pay interest
on the Holdings Discount Debentures. The Credit Agreement presently
prohibits Silgan from paying dividends or otherwise transferring funds to
Holdings in order to service Holdings' indebtedness; however, the Credit
Agreement matures on September 15, 1996, prior to the date on which interest
or principal is payable on the Holdings Discount Debentures. Silgan expects
to enter into a new credit facility to replace the Credit Agreement on or
before September 15, 1996 on terms which would not limit the ability of
Silgan to transfer funds to Holdings in order to enable Holdings to pay
interest on the Holdings Discount Debentures. However, there can be no
assurance that Silgan will be able to enter into a new credit facility on
such terms. In such event, Silgan and Holdings would consider pursuing
alternative arrangements, including possible equity and/or debt financings,
to enable Holdings to meet its obligations. There can be no assurance that
any such alternative, if pursued, would be accomplished or would enable
Holdings to make timely payments of its obligations under the Holdings
Discount Debentures. The funding requirements of Holdings to service its
indebtedness (beginning in December 1996) will be met by Silgan through cash
generated by operations or borrowings or by Holdings through refinancings of
its existing indebtedness or additional debt or equity financings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity," and "Description of Certain
Indebtedness--Description of the Secured Notes" and "Description of the
11-3/4% Notes."
In the event that Holdings fails to make any payment on the Holdings
Discount Debentures, the holders thereof would be permitted to accelerate
payment of all of the indebtedness evidenced thereby and seek any remedy
available to them under the indenture relating to the Holdings Discount
Debentures and applicable law. Any such action could result in the
bankruptcy of Holdings, cross defaults under the Company's indebtedness or
other agreements existing at such time, financial and operating difficulties
for the Company and, possibly, the bankruptcy of the Company. As of the date
hereof, a default by Holdings in the payment of any of its indebtedness
constitutes a default under the Holdings Guaranty (as defined under
"Description of Certain Indebtedness--Description of the Credit Agreement")
and such a default under the Holdings Guaranty would constitute a default
under the Credit Agreement. However, the Credit Agreement matures on
September 15, 1996 and Holdings has no payment obligations of any kind on its
indebtedness until December 1996. Nevertheless, Silgan expects to replace
its working capital facility under the Credit Agreement prior to or on
September 15, 1996 and any new working capital facility may require a
guaranty by Holdings of Silgan's obligations under such new working capital
facility. The lender or lenders under such new facility may require a
guaranty by Holdings which provides that a payment default by Holdings on any
of its indebtedness would constitute a default under such guaranty and a
provision that a default under such guaranty by Holdings would constitute a
default under such new facility.
Ability of the Company to Incur Additional Indebtedness
Although the Credit Agreement (which matures on September 15, 1996)
limits the incurrence by Silgan and its subsidiaries of additional
indebtedness, the Indenture and the Secured Notes permit, subject to certain
limitations, the incurrence by Silgan and its subsidiaries of a substantial
amount of additional indebtedness, including additional Senior Indebtedness,
indebtedness secured by liens on Silgan's and its subsidiaries' assets and
other indebtedness that is pari passu with the 11-3/4% Notes. The Indenture
permits the Company and its subsidiaries to incur any indebtedness, including
Senior Indebtedness and secured indebtedness, if after giving effect to the
incurrence of such indebtedness the Company's Interest Coverage Ratio (as
defined under "Description of the 11-3/4% Notes--Certain Definitions") is at
least 2.1 to 1. For the twelve month period ended December 31, 1993, the
Company's Interest Coverage Ratio was 3.0 to 1. The Indenture also permits
certain specified additional indebtedness to be incurred by the Company and
its subsidiaries. Neither the Indenture nor any of the other Financing
Agreements other than the Credit Agreement prohibit the assumption by the
Company of Holdings' indebtedness, including the Holdings Discount
Debentures, upon a merger of the Company and Holdings if the Company's
Interest Coverage Ratio after giving effect to such a merger is 1.75 to 1.
See "Description of the 11-3/4% Notes" and "Description of Certain
Indebtedness."
Risk of Fraudulent Transfer Liability; Certain State Law Considerations
The incurrence by the Company and its subsidiaries of indebtedness,
including the 11-3/4% Notes, may be limited by state and federal fraudulent
transfer laws. If a court in a lawsuit by an unpaid creditor or
representative of creditors of the Company, such as a trustee in bankruptcy
or the Company as debtor-in-possession, were to find that (i) there was
actual intent to hinder, delay or defraud creditors or (ii) the Company
received less than reasonably equivalent value for the indebtedness and that,
at the time of or after and giving effect to such incurrence, the Company (a)
was insolvent, (b) was rendered insolvent by reason of such incurrence, (c)
was engaged in a business or transaction for which the assets remaining
constituted unreasonably small capital or (d) intended to incur, or believed
that it would incur, debts beyond its ability to pay as such debts matured,
such court could void such indebtedness and order that the payments of
interest and principal on such indebtedness be returned to the Company or to
a fund for the benefit of its creditors.
The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction that is being applied. Generally,
an entity would be considered insolvent if the sum of its debts is greater
than all of its property at a fair valuation, or if the present fair saleable
value of its assets is less than the amount that will be required to pay its
probable liability on its existing debts (including contingent liabilities)
as they become absolute and matured. The Company believes that the
obligations under the 11-3/4% Notes were incurred for proper purposes and in
good faith and, based on the Company's prospects and other financial
information, the Company believes that at the time of the incurrence of such
obligations, the Company was solvent, would continue to have sufficient
capital to carry on its business and would continue to be able to pay its
debts as they matured. Furthermore, the Company believes that the proceeds
of the 11-3/4% Notes constitute reasonably equivalent value or fair
consideration therefor. There can be no assurance, however, that a court
would not determine that the Company was insolvent at the time and after
giving effect to the incurrence of the obligations under the 11-3/4% Notes.
Nor can there be any assurance that, regardless of whether the Company was
solvent, the incurrence of the obligations under the 11-3/4% Notes would not
constitute a fraudulent transfer on another of the criteria listed above.
Supply Agreements with Principal Customers
The Nestle Supply Agreements and the DM Supply Agreement provide
Containers with a potential market for a substantial portion of its can
output during the terms of these agreements. Sales to Nestle represented
approximately 34% of the Company's consolidated sales during 1993. On a pro
forma basis, giving effect to the acquisition of DM Can, approximately 27% of
the Company's 1993 sales would have been to Nestle and 21% of the Company's
1993 sales would have been to Del Monte. See "Business--Sales and
Marketing."
Pursuant to six of the original Nestle Supply Agreements, if Nestle
receives a competitive bid for any product supplied, Containers has the right
to match such bid with respect to the type and volume of cans over the period
of the competitive bid. Under the other three Nextle Supply Agreements which
were recently extended, Nestle's right to receive competitive bids is
narrowly limited to certain certain circumstances, and Containers has the
right to match any such bid. In either case, in the event that Containers
chooses not to match any such competitive bid, Nestle may purchase such cans
from the competitive bidder at the competitive bid price for the term of the
bid. Since 1990, Nestle has requested that Containers match certain bids
received from other potential suppliers. Containers has agreed to match such
bids (which has resulted in minor margin impact) and continues to supply
substantially all of the can requirements of the former Carnation operations
of Nestle. In the future, there can be no assurance that Containers will
choose to match any such bids or that, even if matched, such bids will be at
a level sufficient to allow Containers to maintain margins currently
received. Until any such bids are received by Nestle and submitted to the
Company, the Company cannot predict the effect, if any, of such bids upon its
financial condition or results of operations. Significant reduction of
margins or the loss of significant unit volume under the Nestle Supply
Agreements could, however, have a material adverse effect on the Company.
Under the DM Supply Agreement, after five (5) years, Del Monte may, under
certain circumstances, receive proposals with terms more favorable than those
under the DM 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 Del Monte, which proposals shall be
for the remainder of the term of the DM Supply Agreement and for 100% of the
annual volume of containers at one or more of Del Monte's canneries.
Containers has the right to retain the business subject to its meeting the
terms and conditions of such competitive proposal. See "Business--Sales and
Marketing."
Neither the Nestle Supply Agreements nor the DM Supply Agreement
requires the purchase of minimum amounts, and should Nestle's or DM's demand
decrease, the Company's consolidated sales could decrease. In addition,
should Nestle terminate any of the Nestle Supply Agreements or Del Monte
terminate the DM Supply Agreement because of Containers' inability to meet
quality or other requirements, it is highly unlikely that the Company or its
subsidiaries could quickly replace the amount of sales represented thereby.
Therefore, it is probable that any such termination would have a material
adverse effect on the Company. See "Business--Sales and Marketing."
Competition
The manufacture and sale of metal and plastic containers is highly
competitive and many of the Company's competitors have substantially greater
financial resources than the Company and its subsidiaries. See "Business-
- -Competition."
Dependence on Key Personnel
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services
provided by R. Philip Silver, the Chairman of the Board and Co-Chief
Executive Officer of the Company, and D. Greg Horrigan, the President and Co-
Chief Executive Officer of the Company, could materially adversely affect the
Company. However, the Company's operations are conducted through its
subsidiaries, Containers and Plastics, each of which has its own independent
management. S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and
Horrigan, has agreed to provide certain general management and administrative
services to each of the Company, Holdings, Containers and Plastics pursuant
to management services agreements which are effective through 1999. See
"Certain Transactions--Management Agreements" and "Description of Holdings
Common Stock--Description of the Holdings Organization Agreement."
Other Management Interests
In the future, Messrs. Silver and Horrigan, possibly together with
Morgan Stanley or its affiliates, may form additional corporations or
partnerships or enter into other transactions for the purpose of making other
acquisitions. In connection therewith, Messrs. Silver and Horrigan may
provide certain general management and administrative services to such
corporations and partnerships. Additionally, circumstances could arise in
which the interests of Messrs. Silver and Horrigan, Morgan Stanley and its
affiliates and such new corporations or partnerships could conflict with the
interests of the Company.
Certain Interests of Affiliates
The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") owns
38.48% of the outstanding common stock of Holdings. See "Securities
Ownership of Certain Beneficial Owners and Management--Certain Beneficial
Owners of Holdings' Capital Stock." The general partner of MSLEF II and
Morgan Stanley are both wholly owned subsidiaries of Morgan Stanley Group
Inc. ("MS Group"), and two of the directors of Holdings and the Company are
officers of Morgan Stanley. As a result of these relationships, MS Group and
its affiliates will continue to have significant influence over the
management policies and corporate affairs of the Company. Morgan Stanley
also receives compensation for ongoing financial advice to the Company and
its affiliates. See "Certain Transactions" and "Market-Making Activities of
Morgan Stanley."
Certain decisions concerning the operations or financial structure of
the Company may present conflicts of interest between the owners of Holdings'
common stock and the holders of the 11-3/4% Notes. For example, if the
Company encounters financial difficulties, or is unable to pay its debts as
they mature, the interests of the Company's equity investors might conflict
with those of the holders of the 11-3/4% Notes. In addition, the equity
investors may have an interest in pursuing acquisitions, divestitures,
financings or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the 11-3/4% Notes.
Trading Market for the 11-3/4% Notes
The 11-3/4% Notes are listed on the Pacific Stock Exchange. Morgan
Stanley currently makes a market in the 11-3/4% Notes. However, it is not
obligated to do so, and any such market-making may be discontinued at any
time without notice, at its sole discretion. Therefore, no assurance can be
given as to the liquidity of, or the trading market for, the 11-3/4% Notes.
See "Market-Making Activities of Morgan Stanley."
The liquidity of, and trading market for, the 11-3/4% Notes may also be
adversely affected by declines and volatility in the market for high yield
securities generally as well as by any changes in the Company's financial
performance or prospects.
THE COMPANY
The Company is a major manufacturer and seller of a broad range of steel
and aluminum containers for the human food and pet food markets and plastic
containers for the personal care, food, pharmaceutical and household markets
in the United States. In 1993, the Company had net sales of $645 million.
On December 21, 1993, the Company's wholly owned subsidiary, Containers,
acquired from Del Monte substantially all of the fixed assets and certain
working capital of DM Can for approximately $73 million. See "Business--
Company History" below. In connection therewith, Containers and Del Monte
entered into the DM Supply Agreement pursuant to which Containers supplies
substantially all of the metal container requirements of Del Monte for a term
of ten (10) years. On a pro forma basis giving effect to the acquisition of
DM Can, in 1993 the Company would have had net sales of $818 million. See
"Business--Sales and Marketing" below.
Management believes that the Company is the largest food can producer in
the United States (based on pro forma unit sales after giving effect to the
acquisition of DM Can) and one of the largest producers in the United States
of HDPE containers for the personal care market and a major producer of PET
products for the personal care and food markets. The Company has experienced
significant growth since its inception in 1987 as a result of its
acquisitions and related increased market position.
Management estimates that Containers is currently the nation's largest
manufacturer of metal food containers and that in 1993 Containers sold
approximately 27% of all metal food containers sold in the United States by
non-captive manufacturers (manufacturers of containers not owned by a user of
containers) and approximately 16% of all metal food containers sold in the
United States, in each case based on unit sales. On a pro forma basis giving
effect to the acquisition of DM Can, in 1993 Containers would have sold
approximately 34% of all metal food containers sold in the United States by
non-captive manufacturers and approximately 22% of all metal food containers
sold in the United States. Although the food can industry in the United
States is relatively stable and mature in terms of unit sales growth,
Containers, on a pro forma basis giving effect to the acquisition of DM Can,
has realized compound annual unit sales growth in excess of 12% since 1987.
Types of containers manufactured include those for vegetables, fruit, pet
food, tomato based products, evaporated milk and infant formula. Pursuant to
the Nestle Supply Agreements, Containers supplies substantially all of the
can requirements of the former Carnation operations of Nestle. In addition
to the Nestle Supply Agreements and the DM Supply Agreement, Containers has
other long-term supply arrangements with other customers. The Company
estimates that in excess of 80% of Containers' sales in 1994 will be pursuant
to long-term supply arrangements. See "Business--Sales and Marketing" below.
Management believes that the Company's wholly owned subsidiary,
Plastics, is one of the leading manufacturers of plastic containers sold in
the United States for the personal care, household and pharmaceutical markets
served by the Company. Plastic containers manufactured by Plastics include
personal care containers for shampoos, conditioners, hand creams, lotions and
cosmetics, household containers for light detergent liquids, scouring
cleaners and specialty cleaning agents and pharmaceutical containers for
tablets, laxatives and eye cleaning solutions. Plastics is also one of the
leading manufacturers of PET containers sold in the United States for
applications other than soft drinks. Plastics manufactures custom PET
medicinal and health care product containers (such as mouthwash bottles),
custom narrow-neck food product containers (such as salad dressing bottles),
custom wide-mouth food product containers (such as mayonnaise and peanut
butter containers) and custom non-soft drink beverage product containers
(such as juice, water and liquor bottles). See "Business--Products."
The Company's strategy is to continue to improve its market position and
profitability through focus on product quality, customer service, cost
efficiencies, strategic acquisitions and market share growth through
customers experiencing market share growth. At Containers, management has
focused on achieving operating cost advantages over its competitors,
primarily through low labor costs, low overhead, technologically advanced
manufacturing processes and by exploiting the favorable geographic locations
of its 22 can plants. Since its acquisition in 1987 of Nestle Can,
Containers has invested more than $82 million in its existing manufacturing
facilities and has spent approximately $66 million for the purchase of
additional can manufacturing assets. As a result of these efforts and
management's focus on quality and service, Containers has increased its
overall share of the food can market by approximately 100% in terms of unit
sales, from a share of approximately 11% in 1987 to a share of approximately
22% in 1993, on a pro forma basis giving effect to the acquisition of DM Can.
Plastics has increased its market position primarily by strategic
acquisitions. From a sales base of $89 million in 1987, Plastics' sales
increased to $186 million in 1993, or 13% on a compound annual basis. While
many of Plastics' larger competitors employ technology oriented to large
bottles and long production runs, Plastics has focused on mid-sized,
extrusion blow-molded plastic containers requiring special decoration and
shorter production runs. Plastics emphasizes value-added fabrication of the
container, creative design and sophisticated decoration processes. Plastics
is also aggressively pursuing new markets for plastic containers, including
the PCR resin segment of the market. Based upon published information and
management's experience in the industry, management believes that PET custom
containers are replacing glass containers for products such as mouthwash,
salad dressing, peanut butter and liquor. Management also believes that
Plastics is well positioned because of its technologically advanced equipment
to respond to opportunities for future growth in the rigid plastic container
market. Furthermore, to the extent that mandatory recycling laws, customer
preferences or manufacturing costs result in increased demand for HDPE
containers that are manufactured using PCR resins, the Company believes that
its proprietary equipment is particularly well-suited for the production of
such containers because of the relatively low capital costs required to
convert its equipment from the use of virgin resins.
The Company is also engaged in the manufacture and sale of paper
containers primarily used by processors and packagers in the food industry.
Sales of paper containers in 1993 were approximately $13 million.
Silgan is a Delaware corporation formed in August 1987 as a holding
company to acquire interests in various packaging manufacturers. Prior to
1987, the Company did not engage in any business. In June 1989, the Company
became a wholly owned subsidiary of Holdings, a Delaware corporation whose
principal asset is all of the outstanding common stock of the Company. See
"Business--Company History" below. The principal executive offices of Silgan
are located at 4 Landmark Square, Stamford, Connecticut 06901, telephone
number (203) 975-7110.
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization
of the Company as of June 30, 1994. This table should be read in
conjunction with the consolidated financial information of the Company,
included elsewhere in this Prospectus.
June 30, 1994
-----------------
(Dollars in Thousands)
Short-term debt:
---------------
Current portion of term loans . . . . . . . . . . . $ 20,000
Working capital loans . . . . . . . . . . . . . . . 34,950
--------
Total short-term debt <fa> . . . . . . . . $ 54,950
========
Long-term debt:
--------------
Term loans . . . . . . . . . . . . . . . . . . . . $120,000
Senior Secured Floating Rate Notes due 1997 . . . . 50,000
11-3/4% Senior Subordinated Notes due 2002 . . . . 135,000
-------
Total long-term debt <fa> $305,000
=======
Common stockholder's equity <fb>:
Class A common stock, $0.01 par value, 1,000
shares authorized, 1 share issued and
outstanding . . . . . . . . . . . . . . . . . $ --
Class B common stock, $0.01 par value, 1,000
shares authorized, 1 share issued and
outstanding . . . . . . . . . . . . . . . . . --
Class C common stock, $0.01 par value, 1,000
shares authorized, no shares issued and
outstanding . . . . . . . . . . . . . . . . . --
Additional paid-in capital . . . . . . . . . . . 69,135
Accumulated deficit . . . . . . . . . . . . . . (7,362)
======
Total common stockholder's equity . . . . . $ 61,773
=======
Total capitalization . . . . . . . . . . . . . . . $366,773
=======
______________________
[FN]
<fa> See "Description of Certain Indebtedness" and "Description of the 11-
3/4% Notes."
<fb> For a description of the common stock of Silgan, see "Description of
Silgan Capital Stock."
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected historical consolidated financial data of
the Company at June 30, 1994 and 1993 and for the six months then ended, and
at December 31, 1993, 1992, 1991, 1990 and 1989 and for the years then ended.
The selected historical consolidated financial data of the Company for
the six months ended June 30, 1994 and 1993 is unaudited but, in the
opinion of management, such information reflects all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
financial data for the interim periods. The results for the interim periods
presented are not necessarily indicative of the results for the corresponding
full years. The selected historical consolidated financial data of the
Company at December 31, 1993 and 1992 and for each of the three years in the
period ended December 31, 1993 (with the exception of employee data) was
derived from the historical consolidated financial statements of the Company
for such periods that were audited by Ernst & Young, independent auditors,
whose report appears elsewhere in this Prospectus. The selected consolidated
historical financial data at December 31, 1991, 1990 and 1989 and for the
years ended December 31, 1990 and 1989 were derived from the historical
audited consolidated financial statements for such periods.
The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited financial statements and
accompanying notes thereto included elsewhere in this Prospectus.
<PAGE>
SELECTED FINANCIAL DATA
Six Months Ended
June 30,
----------------------
1994 1993
----- -----
(Dollars in thousands)
----------------------
Operating Data:
Net sales . . . . . . . . . . . . . . . . . . . . $387,203 $297,250
Cost of goods sold . . . . . . . . . . . . . . . 335,748 260,405
------- -------
Gross profit . . . . . . . . . . . . . . . . . . 51,455 36,845
Selling, general and administrative expenses . . 18,274 16,517
------- -------
Income from operations . . . . . . . . . . . . . 33,181 20,328
Interest expense and other related financing costs 17,297 13,537
Other expense (income) . . . . . . . . . . . . . 161 (30)
------- -------
Income before income taxes . . . . . . . . . . . 15,723 6,821
Income tax provision . . . . . . . . . . . . . . 6,450 3,000
------- -------
Income before cumulative effect of changes in
accounting principles . . . . . . . . . . . . 9,273 3,821
Cumulative effect of changes in accounting
principles, net of income taxes . . . . . . . -- (9,951)
------- ------
Net income (loss) . . . . . . . . . . . . . . . . $ 9,273 $ (6,130)
======= =======
Ratio of earnings to fixed charges <fa> . . . . . 1.84 1.46
Balance Sheet Data (at end of period):
Fixed assets . . . . . . . . . . . . . . . . . . $281,580 $233,416
Total assets . . . . . . . . . . . . . . . . . . 559,051 425,852
Total long-term debt . . . . . . . . . . . . . . 305,000 205,553
Common stockholder's equity . . . . . . . . . . . 61,773 32,320
Other Data:
EBDITA <fb> . . . . . . . . . . . . . . . . . . . $ 52,224 $ 36,446
Capital expenditures . . . . . . . . . . . . . . 9,641 26,070
Depreciation and amortization . . . . . . . . . . 18,950 15,888
(footnotes follow)
<PAGE>
SELECTED FINANCIAL DATA
Year Ended December 31,
----------------------------------------------------
1993<fc> 1992 1991<fd> 1990<fe> 1989<fe>
-------- ---- -------- -------- --------
(Dollars in thousands)
Operating data:
Net sales . . . . . . $645,468 $630,039 $678,211 $657,537 $610,682
Cost of goods sold . 571,174 554,972 605,185 582,991 537,485
------- ------- ------- ------- -------
Gross profit . . . . 74,294 75,067 73,026 74,546 73,197
Selling, general and
administrative
expenses . . . . . 31,786 32,249 33,619 36,366 34,687
------- ------- ------- ------- -------
Income from operations 42,508 42,818 39,407 38,180 38,510
Interest expense and
other related
financing costs . . 27,928 26,916 28,981 34,233 36,714
Other expense (income) 35 25 (396) (574) (810)
------- ------- ------- ------- -------
Income before income
taxes . . . . . . . 14,545 15,877 10,822 4,521 2,606
Income tax provision
<ff> . . . . . . . 6,300 2,200 1,500 1,579 995
------- ------- ------- ------- -------
Income before
extraordinary
charges and
cumulative effect of
changes in
accounting
principles . . . . 8,245 13,677 9,322 2,942 1,611
Extraordinary charges
relating to early
extinguishment of
debt . . . . . . . (841) (9,075) -- -- --
Cumulative effect of
changes in
accounting
principles, net of
taxes <fg> . . . . (9,951) -- -- -- --
------- --------- --------- --------- ---------
Net income (loss) . . (2,547) 4,602 9,322 2,942 1,611
Preferred stock
dividend
requirements . . . -- 2,745 3,889 3,356 2,897
--------- --------- --------- --------- ---------
Net income (loss)
applicable to common
stockholder . . . . $ (2,547) $ 1,857 $ 5,433$ (414) $ (1,286)
========= ========= =================== =========
Ratio of earnings to
fixed charges <fa> 1.48 1.54 1.34 1.12 1.07
Balance Sheet Data (at
end of period):
Fixed assets . . . . $290,395 $223,879 $230,501 $244,672 $245,039
Total assets . . . . 492,064 382,154 382,330 434,439 431,489
Total long-term debt 305,000 206,681 140,701 188,598 213,512
Redeemable preferred
stock . . . . . . . -- -- 27,878 24,061 20,766
Common stockholder's 52,803 32,775 46,642 41,209 38,823
equity . . . . . . .
Other Data:
EBDITA <fb> . . . . . $ 76,769 $ 74,547 $ 72,651 $ 70,223 $ 67,638
Capital expenditures 42,480 23,447 21,834 22,908 20,201
Depreciation and
amortization . . . 33,818 31,754 32,848 29,496 23,483
Number of employees
(at end of period)
<fh> . . . . . . . 3,330 3,340 3,560 4,330 4,210
(footnotes follow)
<PAGE>
Notes to Selected Financial Data
[FN]
<fa> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges,
excluding capitalized interest, and fixed charges consist of interest,
whether expensed or capitalized, amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized, and such portion of rental expense that is representative
of the interest factor.
<fb> "EBDITA" means consolidated net income before extraordinary charges,
cumulative effect of changes in accounting principles and preferred
stock dividends plus, to the extent reflected in the income statement
for the period for which consolidated net income is to be determined,
without duplication, (i) consolidated interest expense, (ii) income tax
expense, (iii) depreciation expense, (iv) amortization expense, (v)
expenses relating to postretirement health care costs which amounted to
$0.254 million and $0.200 million for the six months ended June 30,
1994 and 1993, respectively, and $0.478 million for the year ended
December 31, 1993, and (vi) charges relating to the vesting of benefits
under SARs in connection with the 1989 Mergers of $1.973 million and
$4.835 million in 1990 and 1989, respectively.
<fc> On December 21, 1993, the Company acquired from Del Monte substantially
all of the fixed assets and certain working capital of its container
manufacturing business. The acquisition was accounted for as a purchase
transaction and the results of operations have been included with the
Company's historical results from the acquisition date. See "Business--
Company History." For a discussion of the adjustments relating to such
acquisition, see the Pro Forma Unaudited Combined Statement of
Operations for the year ended December 31, 1993 and the notes thereto
appearing on pages F-47 to F-50 of this Prospectus.
<fd> On November 15, 1991, the Company completed the PET Beverage Sale. For
1991, sales from the PET carbonated beverage business were $33.4
million. See "Business--Company History."
<fe> On July 13, 1990, Holdings and the Company entered into the SPHI
Business Combination with SPHI whereby SPHI became a majority owned
subsidiary of the Company. The SPHI Business Combination was accounted
for in a manner similar to a pooling of interests and accordingly the
Company's consolidated financial statements include SPHI for periods
subsequent to July 24, 1989. SPHI was formed in 1989 to acquire,
through its wholly owned subsidiary Silgan PET, the business and related
assets of Amoco Container. Such acquisition occurred on July 24, 1989
and was accounted for as a purchase transaction. See "Business--Company
History."
<ff> Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes," which requires the Company to provide for taxes as if
it were a separate taxpayer. For years prior to 1993, the Company
determined its tax provision on a separate company basis with the
exception of certain matters covered under a tax allocation agreement
with Holdings under which the Company obtained a federal tax benefit for
Holdings' tax losses. The effect of the adoption of SFAS No. 109 was to
increase the 1993 tax provision by $4.4 million.
<fg> During 1993, the Company adopted SFAS No. 106, "Employers Accounting for
Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting
for Income Taxes" and SFAS No. 112, "Employers Accounting for
Postemployment Benefits." The Company has elected not to restate prior
year's financial statements for any of these pronouncements.
<fh> The number of employees at December 31, 1993 excludes 650 employees who
joined the Company on December 21, 1993 as a result of the acquisition
by Containers of DM Can.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Although the food can industry in the United States is relatively stable
and mature in terms of unit sales growth, Containers has realized compound
annual unit growth in excess of 7% since 1987. On a pro forma basis giving
effect to the acquisition of DM Can, annual unit sales growth of Containers
is in excess of 12% since 1987. Plastics is pursuing new markets for its
plastic containers, including the PCR resin segment of the market. Based
upon published information and management's experience in the industry,
management believes that PET custom containers are replacing glass containers
for products such as mouthwash, salad dressing, peanut butter and liquor.
Management also believes that Plastics is well positioned because of its
technologically advanced equipment to respond to opportunities for future
growth in the rigid plastic container market.
Sales growth at Containers and Plastics has enabled the Company to
improve EBDITA by achieving economies of scale. Since 1991 Containers has
closed two smaller, higher cost facilities and Plastics has implemented an
aggressive consolidation and rationalization program that resulted in the
closing of three plants, the consolidation of technical and administrative
centers and a substantial reduction in personnel. In November 1991, Plastics
sold its nonstrategic PET carbonated beverage bottle business, exiting that
commodity business. The Company has reduced its selling and administrative
expenses and its manufacturing costs as a result of these actions.
In 1992, the Company and Holdings completed the Refinancing to improve
their financial flexibility. See "Business--Company History."
On December 21, 1993, Containers acquired the assets of DM Can for
approximately $73 million. In connection with the acquisition of DM Can,
Containers and Del Monte entered into the DM Supply Agreement under which for
a term of ten years Containers will supply all of Del Monte's metal container
requirements for the packaging of food and beverages in the United States and
not less than 65% of Del Monte's annual requirements of metal containers for
the packaging of food and beverages at Del Monte's Irapuato, Mexico facility.
As a result of the acquisition of DM Can, the Company will produce almost all
of the containers necessary to package the canned vegetable and fruit
products of Del Monte, the largest provider of canned fruits and vegetables
in the United States.
In conjunction with the acquisition of DM Can, the Company entered into
the Credit Agreement with the Banks. The proceeds from the Credit Agreement
were used to finance, in part, the acquisition of DM Can, repay in full
amounts owing under the Amended and Restated Credit Agreement (as defined
under "Business--Company History") and pay fees and expenses related thereto.
Additionally, Holdings issued and sold 250,000 shares of its Class B common
stock, par value $.01 per share (the "Holdings Class B Stock"), for $15
million, which amount Holdings contributed to the capital of Silgan.
The Company believes that the combination of the nine DM Can facilities
with its existing thirteen can plants will create cost reduction
opportunities through plant rationalization and equipment investment as well
as additional cost savings from production scheduling and line
reconfiguration.
This discussion should be read in conjunction with the selected
financial data, the pro forma financial data, the historical statements of
operations and the notes thereto included elsewhere in this Prospectus. In
addition to the discussion of historical results of operations, to provide
more meaningful information about the acquisition of DM Can, management has
provided a pro forma discussion of the results of operations of the Company
for the year ended December 31, 1993 as compared to the year ended December
31, 1992, after giving effect to the acquisition of DM Can.
Results of Operations
Six Months Ended June 30, 1994 Compared with Six Months Ended June 30,
1993.
Net sales of metal containers were $283.7 million for the six months
ended June 30, 1994 (including net sales of $101.9 million and $76.5 million
to Nestle and Del Monte, respectively, during such period), an increase of
$88.4 million, or 45.3%, over net sales of metal containers of $195.3 million
for the same period in 1993 (including net sales of $106.3 million and $4.4
million to Nestle and Del Monte, respectively, during the same period in
1993). The increase in net sales for the six months ended June 30, 1994 as
compared to the six months ended June 30, 1993 was primarily attributable to
increased unit sales due to the acquisitions of DM Can in December 1993 and
of an additional manufacturing facility in May 1993 and increased sales of
containers to existing customers, including vegetable pack customers, offset,
in part, by lower unit sales to Nestle and modestly lower average sales
prices.
Net sales of plastic containers increased $3.2 million, or 3.4%, to
$98.1 million for the six months ended June 30, 1994, as compared to $94.9
million for the same period in 1993. The increase in net sales was
attributable to increased unit sales to new and existing customers and higher
average sales prices due to a change in the mix of products sold.
Sales of other containers totaled $5.4 million for the six months ended
June 30, 1994, compared to $7.1 million for the same period in 1993.
Cost of goods sold was 86.7% of net sales ($335.7 million) for the six
months ended June 30, 1994, a decrease of 0.9 percentage points as compared
to 87.6% of net sales ($260.4 million) for the same period in 1993. The
decrease in cost of goods sold as a percentage of net sales principally
resulted from improved manufacturing efficiencies as a result of capital
investments, increased margin contribution due to a change in the mix of
products sold and synergistic benefits resulting from the acquisition of DM
Can. Also, the purchase of an additional manufacturing facility in May 1993
increased production capacity and offset the Company's first half 1993
outsourcing requirement for which there was no margin contribution.
Selling, general and administrative expenses as a percentage of net
sales declined 0.9 percentage points to 4.7% of net sales ($18.3 million) for
the six months ended June 30, 1994, as compared to 5.6% ($16.5 million) for
the same period in 1993. The decrease as a percentage of net sales resulted
from the Company's ability to absorb the increase in selling, general and
administrative functions associated with the acquisition of DM Can with a
modest increase in expenses.
Income from operations as a percentage of net sales increased 1.8
percentage points to 8.6% ($33.2 million) for the six months ended June 30,
1994, compared with 6.8% ($20.3 million) for the same period in 1993. The
increase in income from operations of $12.9 million was attributable to the
margin realized on the increased sales volume, offset, in part, by slightly
higher selling, general and administrative expenses on the increased sales
base.
Interest expense increased by approximately $3.8 million to $17.3
million for the six months ended June 30, 1994. The increase resulted from
the incurrance of additional bank borrowings to finance the acquisition of DM
Can and higher average bank borrowing rates.
The provision for income taxes for the six months ended June 30, 1994
and June 30, 1993 provide for taxes as if the Company were a separate
taxpayer in accordance with SFAS No. 109.
As a result of the items discussed above, income before cumulative
effect of changes in accounting principles for the six months ended June 30,
1994 was $9.3 million, $5.5 million greater than income before cumulative
effect of changes in accounting principles for the six months ended June 30,
1993 of $3.8 million.
Effective January 1, 1993, the Company adopted SFAS No. 106, SFAS No.
109 and SFAS No. 112. The cumulative effect of these accounting changes for
years prior to 1993 was to decrease net income by $10.0 million.
Year Ended December 31, 1993 Compared with Year Ended December 31, 1992.
Net sales of metal containers increased $20.1 million, or 4.7%, to
$445.9 million for the year ended December 31, 1993, compared to $425.8
million for the same period in 1992. Net sales of metal containers to Nestle
decreased $11.6 million to $214.1 million, compared to net sales of $225.7
million for the same period in 1992, primarily due to reduced demand by
Nestle. Net sales of metal containers to other customers increased $31.7
million to $231.8 million, compared to net sales of $200.1 million for the
same period in 1992. The increase was primarily due to an increase in unit
sales to existing non-vegetable pack customers and the purchase of an
additional manufacturing facility in May 1993, which accounted for sales of
$12.5 million, offset, in part, by lower unit sales to vegetable pack
customers due to the extremely wet weather in the Midwest in the summer of
1993.
Net sales of plastic containers were $186.3 million for the year ended
December 31, 1993, $6.3 million lower than net sales of plastic containers of
$192.6 million for the same period in 1992. The decrease in net sales was
primarily attributable to lower unit sales to existing customers due to soft
market conditions.
Sales of other containers increased approximately 15% to $13.3 million
for the year ended December 31, 1993, compared to $11.6 million for the same
period in 1992.
Cost of goods sold was 88.5% of net sales ($571.2 million) for the year
ended December 31, 1993, compared to 88.1% of net sales ($555.0 million) for
the same period in 1992. The increase in cost of goods sold as a percentage
of sales principally resulted from higher per unit manufacturing costs
incurred as a result of higher depreciation expense, lost margin on
outsourced cans due to capacity constraints in early 1993, offset, in part,
by general gains in manufacturing efficiencies.
Selling, general and administrative expenses were 4.9% of net sales
($31.8 million) for the year ended December 31, 1993, compared to 5.1% ($32.2
million) for the same period in 1992. The decrease in selling, general and
administrative expenses as a percentage of sales was principally attributable
to the maintenance of a constant level of expenditures on a greater sales
base.
Income from operations as a percentage of net sales was 6.6% ($42.5
million) for the year ended December 31, 1993, compared to 6.8% ($42.8
million) for the same period in 1992. The 0.2% decrease in income from
operations as a percentage of sales was due primarily to the aforementioned
decrease in gross profit margin.
Interest expense increased by approximately $1.0 million to $27.9
million for the year ended December 31, 1993. The increase was due to
additional indebtedness incurred by the Company as a result of the
refinancing in June 1992 of the Company's debt and preferred stock and
Holdings debt, offset, in part, by lower average interest rates.
The provision for income taxes for 1993 of $6.3 million reflects the
adoption of SFAS No. 109 which requires the Company to provide for taxes as
if it were a separate taxpayer. Prior to the adoption of SFAS No. 109, the
Company determined its income tax provision on a separate company basis with
the exception of certain matters covered under a tax allocation agreement
with Holdings under which Silgan obtained a federal income tax benefit for
Holdings' tax losses. For purposes of SFAS No. 109, the benefit of the tax
allocation agreement is reflected as a contribution to additional paid-in
capital instead of a reduction in federal income tax expense. For 1992 the
provision for income taxes of $2.2 million was comprised of state and foreign
components and recognized the benefit of certain deductions for federal
income tax which were available to Holdings.
Income before the extraordinary charge and cumulative effect of changes
in accounting principles for the year ended December 31, 1993 was $8.2
million, as compared to $13.7 million for the year ended December 31, 1992.
The decline in income before the extraordinary charge and cumulative effects
of changes in accounting principles was principally the result of the change
in the financial reporting of income tax expense.
As a result of the refinancing of the Amended and Restated Credit
Agreement in conjunction with the acquisition of DM Can and the refinancing
in June 1992 of the Company's debt and preferred stock and Holdings' debt,
the Company incurred extraordinary charges of $0.8 million and $9.1 million
for the early extinguishment of debt in 1993 and 1992, respectively.
During 1993 the Company adopted SFAS No. 106, SFAS No. 109 and SFAS No.
112. The cumulative effect of these accounting changes was to decrease net
income by $3.2 million, $6.0 million and $0.8 million, respectively.
Year Ended December 31, 1992 Compared with Year Ended December 31, 1991
Net sales of metal containers decreased $9.5 million to $425.8 million
for the year ended December 31, 1992, compared to $435.3 million for the same
period in 1991. Net sales of metal containers to Nestle increased $12.6
million to $225.7 million, compared to net sales of $213.1 million for the
same period in 1991, primarily due to increased unit sales of pet food
containers, offset, in part, by less demand for tomato cans due to a smaller
pack in 1992 than in the prior year and by the pass through of lower material
costs. Net sales of metal containers to other customers decreased $22.1
million to $200.1 million, compared to net sales of $222.2 million for the
same period in 1991. The decrease was primarily due to colder and wetter
summer weather experienced in the Midwest which resulted in a reduced
vegetable pack as compared to the prior year along with lower unit sales
volume as a result of the closing by the Company of two metal container
manufacturing facilities, and was partially offset by increased sales to
existing customers.
Net sales of plastic containers were $192.6 million for the year ended
December 31, 1992, $39.5 million lower than net sales of plastic containers
of $232.1 million for the same period in 1991. The decrease in net sales was
primarily attributable to the disposition of the PET carbonated beverage
bottle business in November 1991 which accounted for sales of $33.4 million
during the year ended December 31, 1991. The decrease in net sales of other
plastic containers of $6.1 million was attributable to lower average sales
prices due to the pass through of lower average resin costs and a change in
the mix of products sold.
Sales of other containers totaled $11.6 million for the year ended
December 31, 1992, compared to $10.8 million for the same period in 1991.
Costs of goods sold was 88.1% of net sales ($555.0 million) for the year
ended December 31, 1992, compared to 89.2% of net sales ($605.2 million) for
the same period in 1991. The decrease in cost of goods sold as a percentage
of sales principally resulted from lower per unit manufacturing costs
realized through improved manufacturing efficiencies in the Company's
existing plant facilities, the benefits realized from the closing of four
higher cost manufacturing plants in the latter part of 1991 and early 1992,
and the sale of the lower margin PET carbonated beverage business, offset, in
part, by lower margins realized on certain products due to competitive
pricing conditions.
Selling, general and administrative expenses were 5.1% of net sales
($32.2 million) for the year ended December 31, 1992, compared to 5.0% ($33.6
million) for the same period in 1991. The $1.4 million decrease was
principally attributable to cost savings generated from a reduction in
administrative personnel, partially offset by a charge for an uncollectible
account that has been fully reserved.
Income from operations as a percentage of net sales was 6.8% ($42.8
million) for the year ended December 31, 1992, compared to 5.8% ($39.4
million) for the same period in 1991. The 1.0% increase in income from
operations as a percentage of sales was due primarily to the improved overall
margins realized by the Company from its existing operations after closing
four higher cost manufacturing facilities in the latter part of 1991 and
early 1992 and the disposition in November 1991 of the lower margin PET
carbonated beverage business.
Interest expense decreased by approximately $2.1 million to $26.9
million for the year ended December 31, 1992. The decrease was due to lower
average interest rates incurred on a lower average balance of bank
borrowings, offset, in part, by the incurrence of additional indebtedness as
a result of the Refinancing. Average bank borrowings declined due to tighter
management of inventories and term loan repayments.
The provisions for income tax for the years ended December 31, 1992 and
1991 were comprised of state and foreign components and recognize the benefit
of certain deductions for federal income tax purposes which are available to
Holdings.
As a result of the items discussed above, income before the
extraordinary charge and preferred stock dividends for the year ended
December 31, 1992 was $13.7 million, $4.4 million greater than the net income
before preferred stock dividends for the year ended December 31, 1991 of $9.3
million.
As a result of the Refinancing, the Company incurred an extraordinary
charge of $9.1 million for the early extinguishment of debt. Such charge
reflects a $5.8 million expense for premiums paid in connection with the
Redemptions (as defined in "-- Capital Resources and Liquidity") and the
charge-off of $3.3 million for unamortized debt financing costs related to
the securities redeemed under the Redemptions.
Results of Operations - Pro Forma
The following discussion sets forth the pro forma results of operations
of the Company for the year ended December 31, 1993 as compared to the year
ended December 31, 1992, after giving effect to the acquisition of DM Can.
The following table sets forth, for the years ended December 31, 1993
and 1992, certain consolidated pro forma data. This data includes the
historical results of operations for the Company and DM Can and give effect
to the pro forma adjustments assuming the acquisition occurred at the
beginning of each year presented. The pro forma adjustments are based upon
available information and upon certain assumptions that the Company believes
are reasonable. The final purchase price allocation may differ from that
used for the pro forma data, although it is not expected that the final
allocation of purchase price will be materially different. The unaudited pro
forma combined financial data do not purport to represent what the Company's
financial position or results of operations would actually have been had the
transactions in fact occurred on the dates or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations for any future date or period. This discussion should be read in
conjunction with the discussion of historical results of operations of the
Company for the years ended December 31, 1993 and 1992.
1993 1992
---- ----
(Dollars in millions)
Net sales $818.6 $819.6
Income from operations 51.3 57.3
Income before income taxes 18.9 25.4
Income before extraordinary charges and 10.9 22.3
cumulative effect of changes in
accounting principles
Net income 0.1 13.2
Management believes that pro forma income from operations in 1993
declined $6.0 million as compared to the prior year primarily as a result of
a one-time inventory reduction by Del Monte in anticipation of the sale of DM
Can to Containers and, to a lesser extent, due to lower vegetable pack sales
as a result of adverse growing conditions in the Midwest in the summer of
1993.
The pro forma income before the extraordinary charge and cumulative
effect of changes in accounting principles in 1993 of $10.9 million declined
$11.4 million from 1992. Management believes that this decrease principally
resulted from the one-time inventory reduction and reduced demand for
vegetable pack containers as referred to above and the adoption of SFAS No.
109 "Accounting for Income Taxes."
The pro forma provision for income taxes for 1993 reflects the adoption
of SFAS No. 109 which requires the Company to provide for taxes as if it were
a separate taxpayer. As a result of this new standard, the Company's 1993
pro forma income tax expense increased by $5.9 million over the prior year.
Prior to the adoption of SFAS No. 109, the provision for income taxes was
comprised of state and foreign components and recognized the benefit of
certain deductions for federal income tax which were available to Holdings.
Capital Resources and Liquidity
Silgan's liquidity requirements arise primarily from its obligations
under the indebtedness incurred in connection with its acquisitions and the
refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of Silgan's seasonal working capital needs.
Historically, Silgan has met these liquidity requirements through cash flow
generated from operating activities and working capital borrowings. As
described below, beginning in December 1996 Silgan's liquidity requirements
may also be affected by the interest associated with Holdings' indebtedness.
For the first six months of 1994, the borrowing of working capital loans
of $32.8 million was used to fund operating activities of $11.4 million and
capital expenditures of $9.6 million, increase cash balances by $6.5 million
and pay $5.3 million in partial settlement of outstanding litigation. The
Company's earnings before depreciation, interest, taxes and amortization for
the six months ended June 30, 1994 increased by $15.8 million over the same
period in the prior year to $52.2 million because of higher earnings realized
on increased sales volume. However, cash used by operations during the first
six months of 1994 increased by $10.5 million over the same period in 1993
because of an increase in working capital needs in 1994. During the first
six months of 1994, there was an increase in accounts receivable due to
greater sales during the first half of 1994 and an increase in inventories
due to the projected requirements for DM Can and other vegetable pack
customers, offset, in part, by an increase in trade accounts payable
resulting from the higher inventory levels.
On December 21, 1993 Silgan, Containers and Plastics entered into the
Credit Agreement to finance the acquisition of DM Can and to refinance and
repay in full all amounts owing under the Amended and Restated Credit
Agreement. In conjunction therewith, the Banks loaned the Company $60.0
million of A Term Loans, $80.0 million of B Term Loans and $29.8 million of
Working Capital Loans (each as defined in "Description of Certain
Indebtedness--Description of Credit Agreement"). In addition, Holdings
issued and sold 250,000 shares of Holdings Class B Stock for $15.0 million
and,
in turn, contributed such amount to Silgan. With these proceeds, the Company
(i) repaid $41.5 million of term loans and $60.8 million of working capital
loans under the Amended and Restated Credit Agreement; (ii) acquired from Del
Monte substantially all the fixed assets and certain working capital of Del
Monte's container manufacturing business for approximately $73 million; and
(iii) paid fees and expenses of $8.9 million.
For 1993, the Company used cash generated from operations of $48.3
million and available cash balances of $2.5 million to fund capital
expenditures of $42.5 million, repay working capital loans of $7.2 million
(in addition to working capital loans which were repaid with proceeds from
the Credit Agreement), and pay $1.1 million of term loans. During the year,
the Company increased its annual amount of capital spending in order to
reduce costs and to add incremental production capacity. The increase in
inventory at December 31, 1993 as compared to the prior year principally
resulted from the inventory acquired as part of the acquisition of DM Can.
To improve their financial flexibility, Silgan and Holdings completed
the Refinancing in 1992. The Refinancing (i) lowered Holdings' consolidated
average cost of indebtedness by refinancing Silgan's 14% Senior Subordinated
Notes due 1997 (the "14% Notes") and Holdings' Senior Reset Debentures due
2004 (the "Holdings Reset Debentures") with new indebtedness bearing lower
interest rates, (ii) improved Silgan's liquidity and ability to further repay
its indebtedness by eliminating Silgan's obligation to pay cash dividends on
Silgan's 15% Cumulative Exchangeable Preferred Stock (the "Preferred Stock")
through the redemption by Silgan on August 16, 1992 of all of the outstanding
Preferred Stock (the "Preferred Stock Redemption") and by deferring for an
additional two years (until December 1996) and reducing the cash interest
requirements on Holdings' indebtedness, (iii) provided Holdings with
additional financial flexibility by eliminating restrictions in the indenture
relating to the 14% Notes on Silgan's ability to pay dividends to Holdings in
order to fund interest payments on Holdings' indebtedness through the
redemption by Silgan on August 28, 1992 of all of the outstanding 14% Notes
(the "14% Notes Redemption") and (iv) extended the average length of maturity
of Silgan's indebtedness by issuing the 11-3/4% Notes and the Secured Notes
to refinance $30 million of bank term loans and the 14% Notes.
The Refinancing included the following components: (i) the public
offering (the "11-3/4% Notes Offering") in June 1992 by Silgan of $135
million principal amount of the 11-3/4% Notes; (ii) the private placement in
June 1992 by Silgan of $50 million principal amount of the Secured Notes with
certain institutional investors (the "Secured Notes Placement"); (iii) the
public offering in June 1992 by Holdings of $275 million principal amount of
the Holdings Discount Debentures for an aggregate amount of proceeds of
$165.4 million (the "Holdings Debentures Offering" and, together with the 11-
3/4% Notes Offering and the Secured Notes Placement, the "Debt Securities
Financings"); (iv) the amendment of the Amended and Restated Credit
Agreement, followed by the borrowing by Silgan of approximately $17 million
of working capital loans and the prepayment of $30 million of term loans
under the Amended and Restated Credit Agreement; (v) the 14% Notes
Redemption; (vi) the Preferred Stock Redemption; (vii) the repayment by
Silgan of a $25.2 million advance from Holdings and the payment to Holdings
of a $15.7 million dividend; (viii) the payment by Holdings in cash of $15.3
million of interest payable on July 1, 1992 on the Holdings' Reset
Debentures; (ix) the redemption by Holdings on July 29, 1992 of all of the
outstanding Holdings Reset Debentures at 103.67% of the principal amount
thereof and the payment in cash of accrued interest thereon for an aggregate
amount of $184 million (the "Holdings Reset Debentures Redemption" and,
together with the 14% Notes Redemption and the Preferred Stock Redemption,
the "Redemptions"); and (x) the payment of transaction fees and expenses of
$17.3 million related to the Refinancing.
In connection with the Refinancing, Silgan received $174.7 million in
proceeds from the issuance of the Secured Notes and 11-3/4% Notes, net of
debt issuance costs of $10.3 million. Silgan repaid a $25.2 million advance
from Holdings and made a $15.7 million dividend payment to Holdings, for an
aggregate payment of $40.9 million which was used by Holdings, together with
the proceeds received from the sale of the Holdings Discount Debentures, to
redeem the Holdings Reset Debentures. In addition, Silgan repaid $30 million
of bank term loans. On August 16, 1992, the Company paid $31.5 million to
redeem the Preferred Stock. On August 28, 1992, the Company paid $89.3
million to redeem the 14% Notes. Approximately $17 million of working
capital loans were borrowed to complete such redemptions.
In addition to the borrowing of working capital loans used to effect the
Refinancing, Silgan borrowed working capital loans of $2.2 million during the
year ended December 31, 1992 which, along with cash provided by operations
during 1992 of $34.4 million, were used principally to fund capital
expenditures of $23 million, to make bank term loan repayments of $10.2
million (in addition to the term loan repayment made in connection with the
Refinancing), to pay cash dividends of $1.1 million on the Preferred Stock
and to increase outstanding cash balances by $2.3 million.
During 1991, cash provided from operations of $61.3 million was used to
fund capital expenditures of $21.8 million and scheduled bank term loan
repayments of $25 million. The balance of the cash provided from operations
during the year of $14.5 million was used to repay working capital loans and
principally resulted from the receipt in January 1991 of $16 million from a
major customer on an account normally settled by the prior year's end. In
November 1991, the Company completed the sale of its PET carbonated beverage
bottle business. The proceeds of approximately $12 million, net of costs
associated with such sale, were principally used to repay bank term loans.
Due to reduced working capital requirements, $4 million of working capital
loans was also repaid.
Since a portion of the proceeds realized from the Credit Agreement on
December 21, 1993 was used to repay working capital loans under the Amended
and Restated Credit Agreement, the Company was able to reduce the amount of
its commitment for working capital loans. Under the Credit Agreement, the
commitment for working capital loans was reduced by $41 million to $70
million. As of June 30, 1994, the outstanding principal amount of working
capital loans was $35.0 million and, subject to a borrowing base limitation
and taking into account outstanding letters of credit, the unused portion of
working capital commitments at such date was $28.3 million.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As is common in the packaging industry,
the Company must access working capital to build inventory and then carry
accounts receivable for some customers beyond the end of the summer and fall
packing season. Seasonal accounts are generally settled by year end. Due to
the Company's seasonal requirements, the Company expects to incur short term
indebtedness to finance its working capital requirements, and it is estimated
that approximately $50 million of the working capital revolver, including
letters of credit, was utilized at its peak in July 1994.
In addition to its operating cash needs, the Company's cash requirements
over the next several years are anticipated to consist primarily of (i)
annual capital expenditures of $25 million to $33 million (approximately $13
million of which is nondiscretionary in each year), (ii) principal
amortization payments of A Term Loans under the Credit Agreement of $20
million in each of 1994, 1995 and 1996, (iii) expenditures of approximately
$13 million associated with the rationalization of facilities related to the
acquisition of DM Can, (iv) the scheduled maturity on September 15, 1996 of
the Working Capital Loans and $80 million of B Term Loans under the Credit
Agreement, (v) payments by Silgan to Holdings to fund Holdings' semi-annual
cash interest requirements of $18.2 million on the Holdings Discount
Debentures commencing in December 1996, (vi) the scheduled maturity of the
$50 million principal amount of the Secured Notes in 1997, and (vii) the
Company's interest requirements (including interest on the Working Capital
Loans, the principal amount of which will vary depending upon seasonal
requirements, the Secured Notes and bank term loans, all of which bear
fluctuating rates of interest, and the 11-3/4% Notes).
The Company is a wholly owned subsidiary of Holdings, a holding company
with no significant assets or operations other than its investment in and
advances to Silgan. Holdings is highly leveraged as a result of the
indebtedness that it incurred in connection with the 1989 Mergers. See
"Business -- Company History." Holdings' principal liabilities are the
Holdings Discount Debentures and its guaranty of the Credit Agreement.
Because Holdings' indebtedness does not require payment of interest until
December 1996 and because the Company has not in the past provided funds to
Holdings to pay interest on Holdings' indebtedness, the Company's liquidity
has not been, and until December 1996 is not expected to be, affected by
Holdings' indebtedness.
Interest on the Holdings Discount Debentures is payable at a rate of 13-
1/4% per annum from and after June 15, 1996, and commencing on December 15,
1996 semi-annual interest payments of $18.2 million will be required to be
made thereon. Since Holdings' only asset is its investment in Silgan, its
ability to pay interest on the Holdings Discount Debentures on and after
December 15, 1996 (the date on which interest is first payable on the
Holdings Discount Debentures) may depend upon its receipt of funds paid by
dividend or otherwise loaned, advanced or transferred by Silgan to Holdings.
While Silgan has no legal obligation to make such funds available, it is
expected that Silgan will do so if it is permitted under the agreements to
which it shall then be a party and if it then has sufficient funds available
for such purpose. If sufficient funds to pay such interest are not generated
by the operations of Silgan's subsidiaries, Silgan or Holdings may seek to
borrow or otherwise finance the amount of such payments or refinance the
Holdings Discount Debentures. Neither the Indenture nor the Secured Notes
limits the ability of Silgan to pay cash dividends to Holdings in order to
enable Holdings to pay interest on the Holdings Discount Debentures. The
Credit Agreement presently prohibits Silgan from paying dividends or
otherwise transferring funds to Holdings in order to service Holdings'
indebtedness; however, the Credit Agreement matures on September 15, 1996,
prior to the date on which interest or principal is payable on the Holdings
Discount Debentures. Silgan expects to enter into a new credit facility to
replace the Credit Agreement on or before September 15, 1996 on terms which
would not limit the ability of Silgan to transfer funds to Holdings in order
to enable Holdings to pay interest on the Holdings Discount Debentures.
However, there can be no assurance that Silgan will be able to enter into a
new credit facility on such terms. In such event, Silgan and Holdings would
consider pursuing alternative arrangements, including possible equity and/or
debt financings, to enable Holdings to meet its obligations. There can be no
assurance that any such alternative, if pursued, would be accomplished or
would enable Holdings to make timely payments of its obligations under the
Holdings Discount Debentures. The funding requirements of Holdings to
service its indebtedness (beginning in December 1996) will be met by Silgan
through cash generated by operations or borrowings or by Holdings through
refinancings of its existing indebtedness or additional debt or equity
financings.
The Holdings Discount Debentures represent "applicable high yield
discount obligations" ("AHYDOs") within the meaning of Section 163(i) of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the tax
deduction which would otherwise be available to Holdings in respect of the
accretion of interest on the Holdings Discount Debentures during their
noncash interest period ending June 15, 1996 ($109.6 million) has been and
will continue to be deferred, which, in turn, will increase the taxable
income of Holdings and reduce the after-tax cash flows of Holdings. However,
as a result of Holdings' utilization of its net operating loss carryforward,
which currently amounts to approximately $105 million for regular federal
income tax purposes, the effect of such deferral on the regular federal
income taxes of Holdings has been and will continue to be mitigated until
such net operating loss carryforward is fully utilized.
In 1993, Holdings became subject to alternative minimum tax ("AMT").
Because Holdings has AMT net operating loss carryforwards, Holdings has
incurred and will continue to incur an AMT liability at a rate of 2%. In
1995, Holdings anticipates that the AMT loss carryforward will have been
fully utilized. Thereafter, Holdings will incur an AMT liability at a rate
of 20% (or the applicable rate then in effect). The AMT paid is allowed
(subject to certain limitations) as an indefinite credit carryover against
Holdings' regular tax liability in the future when and if Holdings' regular
tax liability exceeds the AMT liability.
The deferred accreted interest will not be deductible until the
redemption, retirement or other repayment of the Holdings Discount Debentures
(other than with stock or debt of Holdings or a related party). Until the
deferred accreted interest is deductible, except to the extent the net
operating loss carryforward is available, Holdings will realize taxable
income sooner and in a greater amount than if the deferred accreted interest
on the Holdings Discount Debentures were deductible as it accretes.
Depending upon its tax position and financial condition and the benefit which
may be available through the deduction of the deferred accreted interest,
Holdings could decide in the future to refinance the Holdings Discount
Debentures or a portion thereof prior to their stated maturity date. In such
event, the full amount of the deferred accreted interest (applicable to the
Holdings Discount Debentures retired) should be deductible under the
carryback and carryforward rules under the Code unless the holders of the
Holdings Discount Debentures receive stock or debt of Holdings or a related
party in exchange for the Holdings Discount Debentures. No assurance can be
given that Holdings will be able to refinance the Holdings Discount
Debentures at such time; however, management believes that application of the
AHYDO rules will not have a material adverse effect on Holdings' financial
condition or ability to repay the Holdings Discount Debentures. In addition,
the Internal Revenue Service ("IRS") has broad authority to issue regulations
under the AHYDO rules with retroactive effect to prevent the avoidance of the
purposes of those rules through agreements to borrow amounts due under a debt
instrument or other arrangements, and thus these regulations, when issued,
may affect the timing or availability of the tax deductions for original
issue discount on the Holdings Discount Debentures.
Management believes that cash generated by operations and funds from
working capital borrowings under the Credit Agreement will be sufficient to
meet the Company's expected operating needs, planned capital expenditures and
debt service requirements until the maturity of the working capital facility
under the Credit Agreement on September 15, 1996. Management also believes
that it will be able to replace the working capital facility under the Credit
Agreement with another facility on or prior to September 15, 1996 on terms
which will be acceptable to the Company. However, there can be no assurance
that the Company will be able to replace its working capital facility. In
such event, the Company could be required to consider alternative equity or
debt financings in order to meet its cash needs. The ability of the Company
to effect any such financing and the extent to which the Company may seek or
be required to obtain additional financing will depend upon a variety of
factors, including, the future performance of the Company and its
subsidiaries, which will be subject to prevailing economic conditions and to
financial, business and other factors (including the state of the economy and
the financial markets, demand for the products of the Company and its
subsidiaries, costs of raw materials, legislative and regulatory changes and
other factors beyond the control of the Company and its subsidiaries)
affecting the business and operations of the Company and its subsidiaries as
well as prevailing interest rates, actual amounts expended for capital
expenditures and other corporate purposes and the timing and amount of debt
prepayments or redemptions.
The Credit Agreement, the Secured Notes and the indentures relating to
the 11-3/4% Notes and the Holdings Discount Debentures each contain
restrictive covenants that, among other things, limit the Company's ability
to incur debt, sell assets and engage in certain transactions. Management
does not expect these limitations to have a material effect on the Company's
business or results of operations. The Company is in compliance with all
financial and operating covenants contained in such financing agreements and
believes that it will continue to be in compliance during 1994 with all such
covenants.
Effect of Interest Rate Fluctuations and Inflation
Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing interest rates. To mitigate the effect of significant changes in
interest rates, the Company may enter into interest rate protection
agreements (with counterparties that, in the Company's judgment, have
sufficient creditworthiness) with respect to a portion of its floating rate
indebtedness. At June 30, 1994, the Company was not a party to any interest
rate protection agreement.
Historically, inflation has not had a material effect on the Company,
other than to increase its cost of borrowing. In general, the Company has
been able to increase the sales prices of its products to reflect any
increases in the prices of raw materials.
Impact of New Accounting Standards
Postretirement Benefits. Effective January 1, 1993, the Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions." Under Statement No. 106 the Company is required to accrue the
cost of retiree health and other postretirement benefits during the years
that covered employees render service. The cumulative effect of this
accounting change was to decrease net income by $3.1 million after related
income tax benefit. This change in accounting principle, excluding the
cumulative effect, decreased pretax income for the year ended December 31,
1993 by $0.5 million. Prior to 1993, the Company recorded these benefits on
a pay-as-you-go basis, and the Company has elected not to restate prior years
for this change. The new rules are expected to result in an increase in net
annual periodic postretirement benefit costs of less than $1.0 million. See
Note 14 to consolidated financial statements of the Company included
elsewhere in this Prospectus.
Income Taxes. Effective January 1, 1993 the Company adopted SFAS No.
109, "Accounting for Income Taxes." This Statement superseded SFAS No. 96.
Under SFAS No. 96 the Company has recognized a federal income tax benefit
from Holdings' tax losses. Under SFAS No. 109, this benefit will be
reflected as a contribution to additional paid-in capital instead of a
reduction of income tax expense. Accordingly, in 1993, the Company recorded
a cumulative charge to earnings and credit to paid-in-capital of
approximately $6.0 million for the difference in methods up to the date of
adoption. The Company is not currently paying, and does not expect in the
near future to pay, any regular federal income taxes because it has been and
will be able to avail itself of Holdings' consolidated tax loss
carryforwards, which amount to approximately $105 million at December 31,
1993. See Note 9 to consolidated financial statements of the Company
included elsewhere in this Prospectus.
BUSINESS
General
The Company is a major manufacturer and seller of a broad range of steel
and aluminum containers for the human food and pet food markets and plastic
containers for the personal care, food, pharmaceutical and household markets
in the United States. In 1993, the Company had net sales of $645 million.
On December 21, 1993, the Company's wholly owned subsidiary, Containers,
acquired from Del Monte substantially all of the fixed assets and certain
working capital of DM Can for approximately $73 million. See "--Company
History" below. In connection therewith, Containers and Del Monte entered
into the DM Supply Agreement pursuant to which Containers supplies
substantially all of the metal container requirements of Del Monte for a term
of ten years. On a pro forma basis giving effect to the acquisition of DM
Can, in 1993 the Company would have had net sales of $818 million. See "--
Sales and Marketing" below.
Management believes that the Company is the largest food can producer in
the United States (based on pro forma unit sales after giving effect to the
acquisition of DM Can) and one of the largest producers in the United States
of HDPE containers for the personal care market and a major producer of PET
products for the personal care and food markets. The Company has experienced
significant growth since its inception in 1987 as a result of its
acquisitions and related increased market position.
Management estimates that Containers is currently the nation's largest
manufacturer of metal food containers and that in 1993 Containers sold
approximately 27% of all metal food containers sold in the United States by
non-captive manufacturers (manufacturers of containers not owned by a user of
containers) and approximately 16% of all metal food containers sold in the
United States, in each case based on unit sales. On a pro forma basis giving
effect to the acquisition of DM Can, in 1993 Containers would have sold
approximately 34% of all metal food containers sold in the United States by
non-captive manufacturers and approximately 22% of all metal food containers
sold in the United States. Although the food can industry in the United
States is relatively stable and mature in terms of unit sales growth,
Containers, on a pro forma basis after giving effect to the acquisition of DM
Can, has realized compound annual unit sales growth in excess of 12% since
1987. Types of containers manufactured include those for vegetables, fruit,
pet food, tomato based products, evaporated milk and infant formula.
Pursuant to the Nestle Supply Agreements, Containers supplies substantially
all of the can requirements of the former Carnation operations of Nestle. In
addition to the Nestle Supply Agreements and the DM Supply Agreement,
Containers has other long-term supply arrangements with other customers. The
Company estimates that in excess of 80% of Containers' sales in 1994 will be
pursuant to long-term supply arrangements. See "--Sales and Marketing"
below.
Management believes that the Company's wholly owned subsidiary,
Plastics, is one of the leading manufacturers of plastic containers sold in
the United States for the personal care, household and pharmaceutical markets
served by the Company. Plastic containers manufactured by Plastics include
personal care containers for shampoos, conditioners, hand creams, lotions and
cosmetics, household containers for light detergent liquids, scouring
cleaners and specialty cleaning agents and pharmaceutical containers for
tablets, laxatives and eye cleaning solutions. Plastics is also one of the
leading manufacturers of PET containers sold in the United States for
applications other than soft drinks. Plastics manufactures custom PET
medicinal and health care product containers (such as mouthwash bottles),
custom narrow-neck food product containers (such as salad dressing bottles),
custom wide-mouth food product containers (such as mayonnaise and peanut
butter containers) and custom non-soft drink beverage product containers
(such as juice, water and liquor bottles). See "--Products."
The Company's strategy is to continue to improve its market position and
profitability through focus on product quality, customer service, cost
efficiencies, strategic acquisitions and market share growth through
customers experiencing market share growth. At Containers, management has
focused on achieving operating cost advantages over its competitors,
primarily through low labor costs, low overhead, technologically advanced
manufacturing processes and by exploiting the favorable geographic locations
of its 22 can plants. Since its acquisition in 1987 of Nestle Can,
Containers has invested more than $82 million in its existing manufacturing
facilities and has spent approximately $66 million for the purchase of
additional can manufacturing assets. As a result of these efforts and
management's focus on quality and service, Containers has increased its
overall share of the food can market by approximately 100% in terms of unit
sales, from a share of approximately 11% in 1987 to a share of approximately
22% in 1993, on a pro forma basis giving effect to the acquisition of DM Can.
Plastics has increased its market position primarily by strategic
acquisitions. From a sales base of $89 million in 1987, Plastics' sales
increased to $186 million in 1993, or 13% on a compound annual basis. While
many of Plastics' larger competitors employ technology oriented to large
bottles and long production runs, Plastics has focused on mid-sized,
extrusion blow-molded plastic containers requiring special decoration and
shorter production runs. Plastics emphasizes value-added fabrication of the
container, creative design and sophisticated decoration processes. Plastics
is also aggressively pursuing new markets for plastic containers, including
the PCR resin segment of the market. Based upon published information and
management's experience in the industry, management believes that PET custom
containers are replacing glass containers for products such as mouthwash,
salad dressing, peanut butter and liquor. Management also believes that
Plastics is well positioned because of its technologically advanced equipment
to respond to opportunities for future growth in the rigid plastic container
market. Furthermore, to the extent that mandatory recycling laws, customer
preferences or manufacturing costs result in increased demand for HDPE
containers that are manufactured using PCR resins, the Company believes that
its proprietary equipment is particularly well-suited for the production of
such containers because of the relatively low capital costs required to
convert its equipment from the use of virgin resins.
The Company is also engaged in the manufacture and sale of paper
containers primarily used by processors and packagers in the food industry.
Sales of paper containers in 1993 were approximately $13 million.
Products
The Company is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers in the food
and pet food industries. Types of containers manufactured include those for
vegetables, fruit, pet food, tomato based products, evaporated milk and
infant formula. The Company does not produce cans for use in the beer or
soft drink industries. Cans are produced in a variety of sizes, ranging in
diameter from 2-1/8 inches to 6-3/16 inches and in height from 1-7/16 inches
to 7 inches.
The Company is also engaged in the manufacture and sale of plastic
containers primarily used in the personal care, food, beverage (other than
carbonated soft drinks), household and pharmaceutical container markets.
Plastic containers are produced by converting thermoplastic materials into
plastic containers ranging in size from 1/2 to 96 ounces. Emphasis is on
value-added fabrication of the container and the decoration process. The
Company designs and manufactures a wide range of containers for toiletries
and cosmetic products such as shampoos, hand creams and lotions. Because
toiletries and cosmetic products are characterized by short product life and
a demand for creative packaging, the containers manufactured for these
products generally have more sophisticated designs and decorations. Food and
beverage containers are designed and manufactured (generally to unique
specifications for a specific customer) to contain products such as
mouthwash, salad dressing, peanut butter, coffee, juice, water and liquor.
Household containers are designed and manufactured to contain light-duty
dishwasher and heavy-duty laundry detergents, bleach, polishes, specialty
cleaning agents, insecticides and liquid household products. Pharmaceutical
containers are designed and manufactured (either in a generic or in a
custom-made form) to contain tablets, solutions and similar products for the
ethical and over-the-counter markets.
Manufacturing and Production
The Company uses three basic processes to produce cans. The traditional
three-piece method requires three pieces of flat metal to form a cylindrical
body with a welded side seam, a bottom and a top. The Company uses a welding
process for the side seam of three-piece cans to achieve a superior seal.
High integrity of the side seam is further assured by the use of
sophisticated electronic weld monitors and organic coatings that are
thermally cured by induction and convection processes. The other two methods
of producing cans start by forming a shallow cup that is then formed into the
desired height using either the draw and iron process or the draw and redraw
process. Using the draw and redraw process, the Company manufactures steel
and aluminum two-piece cans, the height of which does not exceed the
diameter. For cans the height of which is greater than the diameter, the
Company also manufactures steel two-piece cans by using a drawing and ironing
process. Quality and stackability of such cans are comparable to that of the
shallow two-piece cans described above. Can bodies and ends are manufactured
from thin, high-strength aluminum alloys and steels by utilizing proprietary
tool and die designs and selected can making equipment. The Company's
manufacturing operations include cutting, coating, lithographing,
fabricating, assembling and packaging finished cans.
The Company utilizes two basic processes to produce plastic bottles. In
the blow molding process, pellets of plastic resin are heated and extruded
into a tube of plastic. A two-piece metal mold is then closed around the
plastic tube and high pressure air is blown into it causing a bottle to form
in the mold's shape. In the injection blow molding process, pellets of
plastic resin are heated and injected into a mold, forming a plastic tube.
The plastic tube is then blown into a bottle-shaped metal mold, creating a
plastic bottle.
The Company believes that its proprietary equipment for the production
of HDPE containers is particularly well-suited for the use of PCR resins
because of the relatively low capital costs required to convert its equipment
from the use of virgin resins.
The Company's decorating methods for its plastic products include (i)
silk screen decoration, which enables the application of one to six images in
multiple colors to the bottle, (ii) post-molding decoration, which uses paper
labels applied to the bottles with glue and (iii) pressure-sensitive
decoration, which applies a paper label to a post-molded bottle by pressing
against the bottle. The Company has state-of-the-art decorating equipment,
including, management believes, one of the largest sophisticated decorating
facilities in the Midwest, which allows the Company to custom-design new
products with short lead times.
As is the practice in the industry, most of the Company's can and
plastic container customers provide it with annual estimates of products and
quantities pursuant to which periodic commitments are given. Such estimates
enable the Company to effectively manage production and control working
capital requirements. At December 31, 1993, Containers had in excess of 80%
of its projected 1994 sales under long-term contracts. Plastics has written
purchase orders or contracts for containers with the majority of its
customers. In general, these purchase orders and contracts are for
containers made from proprietary molds and are for a duration of 2 to 5
years. Both Containers and Plastics schedule their production to meet their
customers' requirements. Because the production time for the Company's
products is short, the backlog of customer orders in relation to sales is not
significant.
Raw Materials
The Company uses tin plated and chromium plated steel, aluminum, copper
wire, organic coatings, lining compound and inks in the manufacture and
decoration of its metal can products. The Company's steel and other material
requirements are supplied through purchase orders with suppliers with whom
the Company, through its predecessors, has long-term relationships or through
open market purchases. The Company has a contract to obtain the majority of
its requirements for aluminum from a supplier at prices that are subject to
adjustment based on formulas and market conditions. Such contract expires in
1996. The Company believes that it would be able to satisfy its requirements
for aluminum from other suppliers in the event of the loss of its current
supplier. The Company believes that it will be able to purchase sufficient
quantities of steel and aluminum can sheet for the foreseeable future.
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as PCR and virgin HDPE
and PET and, to a lesser extent, low density polyethylene, extrudable
polyester terephthalate, polyethylene terephthalate glycol, polypropylene,
polyvinyl chloride and medium density polyethylene. The Company's resin
requirements are acquired through a series of informal annual purchase orders
for specific quantities of resins with several suppliers of resins. The
price the Company pays to purchase resin is determined at the time of
purchase. The Company believes that it will be able to purchase sufficient
quantities of resin for the foreseeable future.
The Company does not believe that it is materially dependent upon any
single supplier for any of its raw materials and, based upon the existing
arrangements with suppliers discussed above, its current and anticipated
requirements and market conditions, the Company believes that it has made
adequate provisions for acquiring raw materials. Although increases in the
prices of raw materials have generally been passed along to the Company's
customers, the inability to do so in the future could have a significant
impact on the Company's operating margins. In addition, should any of its
suppliers fail to deliver under their arrangements, the Company would be
forced to purchase raw materials on the open market, and no assurances can be
given that it would be able to make such purchases at prices which would
allow it to remain competitive.
Sales and Marketing
The Company markets its products in most areas of the continental United
States primarily by a direct sales force through regional sales offices.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. See also "--Competition" below.
In 1987, the Company, through Containers, and Nestle entered into the
Nestle Supply Agreements pursuant to which Containers has agreed to supply
Nestle with, and Nestle has agreed to purchase from Containers, substantially
all of the can requirements of the former Carnation operations of Nestle for
a period of ten years, subject to certain conditions. In 1994, the term of
three of the Nestle Supply Agreements (representing approximately 65% of the
Company's 1993 unit sales to Nestle) was extended through 2001.
The Nestle Supply Agreements provide for certain prices and specify that
such prices will be increased or decreased based upon cost change formulas
set forth therein. During the duration of six of the original Nestle Supply
Agreements, if Nestle receives a competitive bid for any product supplied,
Containers has the right to match such bid with respect to the type and
volume of cans over the period of the competitive bid. Under the other three
Nestle Supply Agreements which were recently extended through 2001, Nestle's
right to receive competitive bids is narrowly limited to certain
circumstances, and Containers has the right to match any such bids. In
either case the event that Containers chooses not to match any such
competitive bid, Nestle may purchase such cans from the competitive bidder at
the competitive bid price for the term of the bid. The Nestle Supply
Agreements contain provisions that require Containers to maintain certain
levels of product quality, service and delivery in order to retain the Nestle
business. In the event of a breach of a particular Nestle Supply Agreement,
Nestle may terminate such Nestle Supply Agreement but the other Nestle Supply
Agreements would remain in effect.
Since 1990, Nestle has requested that Containers match certain bids
received from other potential suppliers. Containers agreed to match such
bids (which resulted in minor margin impact) and continues to supply
substantially all of the can requirements of the former Carnation operations
of Nestle. In the future, there can be no assurance that Containers will
choose to match any such bids or that, even if matched, such bids will be at
a level sufficient to allow Containers to maintain margins currently
received. Until any such bids are received by Nestle and submitted to the
Company, the Company cannot predict the effect, if any, of such bids upon its
financial condition or results of operations. Significant reductions of
margins or the loss of significant unit volume under the Nestle Supply
Agreements could, however, have a material adverse effect on the Company.
On December 21, 1993, Containers and Del Monte entered into the DM
Supply Agreement. Under the DM Supply Agreement, Del Monte has agreed to
purchase from Containers, and Containers has agreed to sell to Del Monte,
100% of Del Monte'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 Del Monte's annual requirements of metal containers for the packaging
of food and beverages at Del Monte's Irapuato, Mexico facility, subject to
certain limited exceptions.
The DM Supply Agreement provides for certain prices for all metal
containers supplied by Containers to Del Monte thereunder and specifies that
such prices will be increased or decreased based upon specified cost change
formulas.
Under the DM Supply Agreement, after five years, Del Monte may, under
certain circumstances, receive proposals with terms more favorable than those
under the DM 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 Del Monte, which proposals shall be
for the remainder of the term of the DM Supply Agreement and for 100% of the
annual volume of containers at one or more of Del Monte's canneries.
Containers has the right to retain the business subject to the terms and
conditions of such competitive proposal.
The sale of metal containers to vegetable pack customers is seasonal and
monthly revenues increase during the months of June through October. As is
common in the packaging industry, the Company must build inventory and then
carry accounts receivable for some seasonal vegetable pack customers beyond
the end of the harvest season. Consistent with industry practice, such
customers may return unused containers. Historically, such returns have been
minimal.
As part of its marketing strategy, the Company has arrangements to sell
some of its plastic products to distributors, which in turn sell such
products primarily to small-size regional customers. Plastic containers sold
to distributors are manufactured by using generic molds with decoration,
color and neck finishes added to meet the distributors' individual
requirements. The distributors' warehouses and their sales personnel enable
the Company to market and inventory a wide range of such products to a
variety of customers.
In 1993, 1992 and 1991, metal containers accounted for approximately
69%, 68% and 64%, respectively, of the Company's total sales, and plastic
containers accounted for approximately 29%, 30% and 34%, respectively, of the
Company's total sales. On a pro forma basis after giving effect to the
acquisition of DM Can, metal and plastic containers in 1993 would have
accounted for approximately 76% and 23% of the Company's total sales,
respectively. The Company's total sales of paperboard cartons accounted for
approximately 2% of the Company's total sales in each of 1993, 1992 and 1991.
In 1993, 1992 and 1991, approximately 34%, 37% and 32%, respectively, of the
Company's sales were to Nestle. On a pro forma basis after giving effect to
the acquisition of DM Can, approximately 27% of the Company's 1993 sales
would have been to Nestle and 21% of the Company's 1993 sales would have been
to Del Monte. No other customer accounted for more than 10% of the Company's
total sales during such years.
Competition
The packaging industry is highly competitive. The Company competes in
this industry with other packaging manufacturers as well as fillers, food
processors and packers who manufacture containers for their own use and for
sale to others. The Company attempts to compete effectively through the
quality of its products, pricing and its ability to meet customer
requirements for delivery, performance and technical assistance. The Company
also pursues market niches such as the manufacture of easy-open ends and
special feature cans, which may differentiate the Company's products from its
competitors' products.
Management believes that the market for metal food containers is mature.
Some self-manufacturers have sold or closed can manufacturing operations and
entered into long-term supply agreements with the new owners or with
commercial can manufacturers. Of the commercial metal can manufacturers,
Crown Cork and Seal Company, Inc., American National Can Company and Ball
Corporation (through its Heekin Can operations) are the Company's most
significant competitors.
Although metal containers face continued competition from plastic, paper
and composite containers, management believes that metal containers are
superior to plastic and paper containers in industry sectors where the
contents are processed at high temperatures, where the contents are packaged
in large or institutional quantities (14 to 64 oz.) or where long-term
storage of the product is desirable. Such sectors include canned vegetables,
fruits, meats, juices, non-carbonated beverages and pet foods. These sectors
are the principal areas for which the Company manufactures its products.
Plastics competes with a number of large national producers of food,
beverage and household plastic container products, including Owens-Brockway
Plastics Products, a division of Owens-Illinois, Inc., Plastic Containers
Inc., Johnson Controls Inc., Constar Plastics Inc., a subsidiary of Crown
Cork and Seal Company, Inc., Graham Packaging Co. and Plastipak Packaging
Inc. In order to compete effectively in the constantly changing market for
plastic bottles, the Company must remain current with, and to some extent
anticipate innovations in, resin composition and applications and changes in
the manufacturing of plastic bottles.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. Strategically located existing plants give the Company an advantage
over competitors from other areas, and the Company would be disadvantaged by
the loss or relocation of a major customer. As of June 30, 1994, the
Company operated 35 manufacturing facilities, geographically dispersed
throughout the United States and Canada, that serve the distribution needs of
its customers.
Employees
As of December 31, 1993, the Company employed approximately 630 salaried
and 3,350 hourly employees on a full time basis, including 650 employees who
joined the Company on December 21, 1993 as a result of the acquisition of DM
Can. Approximately 60% of the Company's hourly plant employees are
represented by one of the following unions: (i) Sheet Metal Workers
International Association, (ii) International Association of Machinists and
Aerospace Workers, (iii) The International Brotherhood of Teamsters, (iv) The
United Steel Workers of America, (v) Industrial, Technical & Professional
Employees Union, (vi) The Glass, Molders, Pottery, Plastics and Allied
Workers International Union, (vii) The United Rubber, Cork and Plastic
Workers of America and (viii) Oil, Chemical & Atomic Workers International
Union.
The Company's labor contracts expire at various times between 1994 and
1998. Contracts covering approximately 14% of the Company's hourly employees
presently expire during 1994. The Company expects no significant changes in
its relations with these unions. Management believes that its relationship
with its employees is good.
Regulation
The Company is subject to federal, state and local environmental laws
and regulations. In general, these laws and regulations limit the discharge
of pollutants into the air and water and establish standards for the
treatment, storage, and disposal of solid and hazardous waste. The Company
believes that all of its facilities are either in compliance in all material
respects with all presently applicable environmental laws and regulations or
are operating in accordance with appropriate variances, delayed compliance
orders or similar arrangements. In the past, the Company inadvertently made
late filings with the federal Environmental Protection Agency under the
Emergency Planning and Community Right to Know Act ("EPCRA"). The Company is
currently in compliance in all material respects with EPCRA.
In addition to costs associated with regulatory compliance, the Company
may be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances
disposed of at sites at which environmental problems are alleged to exist, as
well as the owners of those sites and certain other classes of persons, are
subject to claims under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") regardless of fault or the
legality of the original disposal. Liability under CERCLA and under many
similar state statutes is joint and several, and, therefore, any responsible
party may be held liable for the entire cleanup cost at a particular site.
Other state statutes may impose proportionate rather than joint and several
liability. The federal Environmental Protection Agency or a state agency may
also issue orders requiring responsible parties to undertake removal or
remedial actions at certain sites. Pursuant to the agreement relating to the
acquisition in 1987 of Nestle Can, the Company has assumed liability for the
past waste disposal practices of Nestle Can. The Company has received notice
that it is one of many potentially responsible parties (or similarly
designated parties) for cleanup of hazardous waste at two sites to which it
(or its predecessor Nestle Can) is alleged to have shipped such waste, one
site at which the Company's share of cleanup costs could exceed $100,000.
See "--Legal Proceedings" below.
Pursuant to the agreement relating to the acquisition in 1987 from
Monsanto Company ("Monsanto") of substantially all of the business and
related fixed assets and inventory of Monsanto's plastic containers business
("Monsanto Plastic Containers"), Monsanto has agreed to indemnify the Company
for substantially all of the costs attributable to the past waste disposal
practices of Monsanto Plastic Containers. In connection with the acquisition
of DM Can, Del Monte has agreed to indemnify the Company for a period of
three years for substantially all of the costs attributable to any
noncompliance by DM Can with any environmental law prior to the closing,
including all of the costs attributable to the past waste disposal practices
of DM Can.
The Company is subject to the Occupational Safety and Health Act and
other laws regulating noise exposure levels in the production areas of its
plants.
Management does not believe that any of the matters described above
individually or in the aggregate will have a material effect on the Company's
capital expenditures, earnings, financial position or competitive position.
Research and Technology
The Company's research, product development and product engineering
efforts relating to its metal containers are conducted at its research center
at Oconomowoc, Wisconsin and at other plant locations.
The Company's research, product development and product engineering
efforts with respect to its plastic containers are currently performed by its
manufacturing and engineering personnel located at its Norcross, Georgia
facility. In addition to its own research and development staff, the Company
participates in arrangements with four non-U.S. plastic container
manufacturers that call for an exchange of technology among these
manufacturers. Pursuant to these arrangements, the Company licenses its blow
molding technology to such manufacturers.
Company History
The Company was organized in August 1987 as a holding company to acquire
interests in various packaging manufacturers. On August 31, 1987, the
Company, through Containers, purchased from Nestle the business and related
assets and working capital of Nestle Can for approximately $151 million in
cash and the assumption of substantially all of the liabilities of Nestle
Can. Also on August 31, 1987, the Company, through Plastics, purchased from
Monsanto substantially all the business and related fixed assets and
inventory of Monsanto Plastic Containers for approximately $43 million in
cash and the assumption of certain liabilities of Monsanto Plastic
Containers. To finance these acquisitions and to pay related fees and
expenses, the Company raised approximately $222.5 million on August 31, 1987
by issuing $6 million of common stock, $15 million of Preferred Stock and $85
million of 14% Notes and by borrowing $116.5 million under its credit
agreement.
During 1988, Containers acquired from The Dial Corporation its metal
container manufacturing division known as the Fort Madison Can Company ("Fort
Madison"), and from Nestle its carton manufacturing division known as the
Seaboard Carton Division ("Seaboard").
During 1989, Plastics acquired Aim Packaging, Inc. ("Aim") and Fortune
Plastics, Inc. ("Fortune") in the United States, and Express Plastic
Containers Limited ("Express") in Canada, to improve its competitive position
in the HDPE container market. Such acquisitions were financed through
additional borrowings under the Company's credit agreement.
Holdings was organized in April 1989 as a holding company to acquire all
of the outstanding common stock of the Company. On June 30, 1989, Silgan
Acquisition, Inc. ("Acquisition"), a wholly owned subsidiary of Holdings,
merged with and into the Company, and the Company became a wholly owned
subsidiary of Holdings (the "1989 Mergers"). In connection with the 1989
Mergers, Holdings received $109.4 million in proceeds from the issuance of
$120 million aggregate principal amount of the Holdings Reset Debentures, net
of debt issuance costs of $10.1 million. Additionally, Holdings received
$14.6 million in proceeds from the issuance of the Holdings Class B Stock.
With such proceeds, payments of $69.9 million were made to Silgan's
stockholders and stock option holders in connection with the 1989 Mergers and
$25.2 million was advanced to Silgan and used by Silgan to repay working
capital loans. The balance of such proceeds, along with additional term loan
borrowings under the Company's credit agreement of $24.0 million and a
capital contribution of $5.0 million by the stockholders of SPHI, was used by
Holdings in connection with the purchase of Silgan PET on August 1, 1989 for
$51.4 million, including $2.2 million of acquisition costs.
In 1989, Silgan PET, a wholly owned subsidiary of SPHI, acquired the
business and related assets of Amoco Container. On July 13, 1990, Holdings
and the Company entered into the SPHI Business Combination pursuant to which
SPHI became a majority owned subsidiary of the Company. The SPHI Business
Combination was accounted for in a manner similar to a pooling of interests.
See "Selected Financial Data."
In November 1991, Plastics sold its nonstrategic PET carbonated beverage
bottle business, exiting that commodity business.
In 1992, Silgan and Holdings completed the Refinancing pursuant to a
plan to improve their financial flexibility. The Refinancing included the
following: (i) the public offering in June 1992 by Silgan of $135 million
principal amount of the 11-3/4% Notes; (ii) the private placement in June
1992 by Silgan of $50 million principal amount of the Secured Notes with
certain institutional investors; (iii) the public offering in June 1992 by
Holdings of the Holdings Discount Debentures for an aggregate amount of
proceeds of $165.4 million; (iv) the amendment of the Amended and Restated
Credit Agreement, dated as of August 31, 1987, as amended (the "Amended and
Restated Credit Agreement") among Silgan and certain of its subsidiaries, the
lenders named therein and Bankers Trust, as Agent, followed by the prepayment
in June 1992 by Silgan of $30 million of term loans and the borrowing by
Silgan of approximately $17 million of working capital loans under the
Amended and Restated Credit Agreement; (v) the 14% Notes Redemption; (vi) the
Preferred Stock Redemption; (vii) the repayment by Silgan of a $25.2 million
advance from Holdings and the payment to Holdings of a $15.7 million
dividend; (viii) the payment by Holdings in cash of $15.3 million of interest
payable on July 1, 1992 on the Holdings Reset Debentures; (ix) the Holdings
Reset Debentures Redemption; and (x) the payment of transaction fees and
expenses relating to the Refinancing. Additionally, in June 1992 the Company
merged Aim, Fortune, Silgan PET and SPHI into Plastics.
On December 21, 1993, Containers acquired from Del Monte substantially
all of the fixed assets and certain working capital of Del Monte's container
manufacturing business in the United States for a purchase price of
approximately $73 million and the assumption of certain limited liabilities.
To finance the acquisition, (i) Silgan, Containers and Plastics
(collectively, the "Borrowers"), entered into the Credit Agreement with the
Banks, Bank of America, as Co-Agent, and Bankers Trust, as Agent, and (ii)
Holdings 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 million. 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 the
Amended and Restated Credit Agreement.
Properties
Silgan's and Holdings' principal executive offices are located at 4
Landmark Square, Stamford, Connecticut 06901. The administrative
headquarters and principal places of business for Containers and Plastics are
located at 21800 Oxnard Street, Woodland Hills, California 91367 and 14515 N.
Outer Forty, Suite 210, Chesterfield, Missouri 63017, respectively. All of
these offices are leased by the Company.
The Company owns and leases properties for use in the ordinary course of
business. Such properties consist primarily of 22 metal container
manufacturing facilities, 12 plastic container manufacturing facilities and
one paper container manufacturing facility. Eighteen of these facilities are
owned and 17 are leased by the Company. The leases expire at various times
through 2020. Some of these leases provide for options to purchase or to
renew the lease.
Below is a list of the Company's operating facilities, including
attached warehouses, as of June 30, 1994:
Approximate
Building Area
Location (square feet)
-------- ------------
Anaheim, CA 127,000 (leased)
Kingsburgh, CA 37,783 (leased)
Modesto, CA 35,585 (leased)
Oakland, CA 173,780 (leased)
Riverbank, CA 167,000
Stockton, CA 243,500
Stockton, CA 71,785 (leased)
Deep River, CT 140,000
Monroe, GA 117,000
Norcross, GA 59,000 (leased)
Broadview, IL 85,000
Rochelle, IL 175,000
Ft. Dodge, IA 49,500 (leased)
Fort Madison, IA 66,000
Ligonier, IN 284,000 (leased)
Seymour, IN 406,000
Franklin, KY 118,000 (leased)
Louisville, KY 30,000 (leased)
Maysville, KY 31,300
Mt. Vernon, MO 100,000
St. Joseph, MO 173,725
Port Clinton, OH 336,000 (leased)
Hillsboro, OR 47,000
Cambridge Springs, PA 55,000
Langhorne, PA 156,000 (leased)
Crystal City, TX 26,045 (leased)
Smithfield, UT 105,000
Toppenish, WA 98,000
Menomonee Falls, WI 116,000
Menomonie, WI 60,000 (leased)
Oconomowoc, WI 105,200
Plover, WI 44,495 (leased)
Waupun, WI 212,000
Mississauga, Ontario 80,000 (leased)
Mississauga, Ontario 60,000 (leased)
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. In addition, the Company owns
four other properties, two of which the Company subleases to a third party
and intends to sell and the other two of which the Company is not currently
using and intends to sell or sublease.
The Company believes that its plants, warehouses and other facilities
are in good operating condition, adequately maintained, and suitable to meet
its present needs and future plans. The Company believes that it has
sufficient capacity to satisfy the demand for its products in the foreseeable
future. To the extent that the Company needs additional capacity, management
believes that the Company can convert certain facilities to continuous
operation or make the appropriate capital expenditures to increase capacity.
Legal Proceedings
Fidelity and EQJ Complaints. On June 28, 1989, a complaint was filed in
the Court of Chancery in the State of Delaware in and for New Castle County
jointly by Fidelity Bankers Life Insurance Company ("Fidelity"), which was
the beneficial holder of 150,000 shares of Class B common stock of the
Company, and Ince & Co. ("Ince," together with Fidelity, sometimes
hereinafter referred to as the "Fidelity Plaintiffs"), which was the
registered owner of Fidelity's shares, against the Company, Holdings, Morgan
Stanley, certain officers, directors and majority stockholders of the Company
and certain other parties (the "Fidelity Complaint"). In addition, on
September 14, 1989, a second complaint was filed in the Court of Chancery in
the State of Delaware in and for New Castle County jointly by EQJ
Partnership, Equitable Life Assurance Society of the United States, Integrity
Life Insurance Company, Kleinwort Benson Limited, Merrill Lynch Corporate
Bond Fund, Inc., New Locke Fund, SAM Associates, L.P., the beneficial holder
of shares of Class B common stock of the Company held in the name of Calmont
& Co., as nominee, and SIB Nominees Ltd. (the "EQJ Plaintiffs"), which
plaintiffs were the beneficial holders of an aggregate of 900,000 shares of
Class B common stock of the Company, against the Company, Holdings,
Acquisition and directors of the Company (the "EQJ Complaint," together with
the Fidelity Complaint, sometimes hereinafter referred to as the
"Complaints"). Although filed separately, the Complaints are similar and
allege, among other things, that the defendants breached their fiduciary
duties of loyalty and candor under Delaware law to minority stockholders of
the Company by engaging in unfair dealings, attempting to effect a merger at
a grossly inadequate price and distributing misleading proxy materials. See
"Business -- Company History." The Complaints also allege that various
defendants aided and abetted these purported breaches of fiduciary duties.
The Complaints ask the court, among other things, to rescind the 1989 Mergers
and/or to grant to the plaintiffs such damages, including rescissory damages,
as are found by the court to be proven at trial.
In the fall of 1989, all defendants moved to dismiss the Complaints for
failure to state a claim upon which relief can be granted. The court ruled
on the motion in the Fidelity Complaint on February 7, 1991, dismissing seven
of the ten claims asserted and allowing the Fidelity Plaintiffs leave to
plead one additional claim. On February 27, 1991, the Fidelity Plaintiffs
filed an amended complaint. On May 24, 1991, the defendants answered the
amended complaint, denying the material allegations and asserting affirmative
defenses. On January 29, 1992, the Company and the EQJ Plaintiffs filed a
stipulation dismissing the EQJ Complaint with respect to all defendants
without prejudice to the right of the EQJ Plaintiffs to reinstate the action
at the conclusion of the appraisal proceeding instituted by the EQJ
Plaintiffs and described below.
On September 14, 1989, the EQJ Plaintiffs filed a Petition for Appraisal
(the "EQJ Appraisal") against the Company in the Court of Chancery in the
State of Delaware in and for New Castle County. On October 13, 1989, the
Fidelity Plaintiffs filed a Petition for Appraisal (the "Fidelity Appraisal,"
together with the EQJ Appraisal, sometimes hereinafter referred to as the
"Appraisals") against the Company in the Court of Chancery in the State of
Delaware in and for New Castle County. Although filed separately, the
Appraisals both purport to invoke the rights of the EQJ Plaintiffs and the
Fidelity Plaintiffs to seek an appraisal of their shares of Class B common
stock of the Company pursuant to Section 262 of the Delaware General
Corporation Law as a consequence of the 1989 Mergers.
The Fidelity Appraisal purports to seek, among other relief, a judgment
awarding the Fidelity Plaintiffs the fair value of their shares of Class B
common stock of the Company in an unspecified amount. On May 13, 1991,
Fidelity was seized and placed into receivership by the Virginia State
Corporation Commission. As a result, the Fidelity Complaint and Fidelity
Appraisal were stayed until March 30, 1992. Both the Fidelity Complaint and
Fidelity Appraisal were dismissed in February 1994 following settlement with
the Fidelity Plaintiffs.
The EQJ Appraisal alleges that the EQJ Plaintiffs' shares are worth more
than three times the price offered in connection with the 1989 Mergers and
seeks, among other relief, a judgment awarding the EQJ Plaintiffs the fair
value of their shares of Class B common stock of the Company in an amount of
no less than $24 per share. Discovery in the EQJ Appraisal has concluded.
At the EQJ Plaintiffs' request, the court has agreed to postpone the start of
the trial until the week of October 24, 1994. In addition, the Company has
settled with several of the EQJ Plaintiffs with respect to the EQJ Appraisal.
Management believes that there is no factual basis for the allegations
and claims contained in the Complaints. Management also believes that the
lawsuits are without merit and intends to defend the lawsuit vigorously. In
addition, management believes that the ultimate resolution of these matters
and the appraisal proceedings will not have a material effect on the
financial condition or results of operations of the Company or Holdings.
Katell/Desert Complaint. On November 6, 1991, Gerald L. Katell
("Katell") and Desert Equities, Inc. ("Desert"), who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF"), filed a
consolidated complaint in the Court of Chancery of the State of Delaware in
and for New Castle County (the "Katell/Desert Complaint") against a number of
defendants, including the Company and Holdings. (The plaintiffs previously
had filed similar complaints in the New York Supreme Court, but the
complaints were dismissed on the grounds that, in the interests of
substantial justice, the actions should be heard in the courts of Delaware.)
The plaintiffs allege, among other things, that The Morgan Stanley Leveraged
Capital Fund, Inc. and Cigna Leveraged Capital Fund, Inc., the general
partners of MSLEF, breached duties owed to the limited partners. Holdings
and the Company are named as defendants in Count III of such amended
complaint, which charges them with aiding and abetting breaches of fiduciary
duty by MSLEF and the general partners. These aiding and abetting claims are
premised on the same allegations concerning the 1989 Mergers that form the
basis of the Complaints. The plaintiffs claim damages in the amount of $4.67
million.
On December 9, 1991, all defendants moved to dismiss the Katell/Desert
Complaint on the grounds that (i) plaintiffs' claims are derivative in nature
and cannot be maintained as individual actions, (ii) plaintiffs' claims as to
shares of stock and other rights allegedly held by them directly fail to
state a claim and, in some cases, are time barred and (iii) with respect to
the aiding and abetting claims asserted against the Company and Holdings, the
Katell/Desert Complaint fails to allege sufficient knowing participation to
constitute a cause of action for aiding and abetting breaches of fiduciary
duties. On February 17, 1992, the plaintiffs filed an amended complaint
asserting derivative claims on behalf of the partnership alternatively to
Counts I through IV of the Katell/Desert Complaint. The amended complaint
also deletes specific allegations as to the amount of damages, seeking a
determination of such damages by the court. All defendants moved to dismiss
the amended complaint on February 27, 1992. After full briefing and oral
argument, the court dismissed all claims against the Company and Holdings by
memorandum opinion and order dated January 14, 1993. On January 25, 1993,
the plaintiffs moved for reargument, seeking that the court amend its order
to provide that the dismissal of the claims against certain defendants,
including the Company and Holdings, be without prejudice to reinstatement.
The court denied this motion by order dated March 29, 1993.
Management believes that there is no factual basis for the allegations
and claims contained in the Katell/Desert Complaint. Management also
believes that the lawsuit is without merit and intends to defend the lawsuit
vigorously. In addition, management believes that the ultimate resolution of
these matters and the appraisal proceedings will not have a material effect
on the financial condition or results of operations of the Company or
Holdings.
Summer del Caribe. On October 17, 1989, the State of California, on
behalf of the California Department of Toxic Substances, filed a suit in the
United States District Court for the Northern District of California against
the owners and operators of a recycling facility operated by Summer del
Caribe, Inc., Dale Summer and Lynn Rodich. The complaint also named 16
can manufacturing companies, including Silgan, that had sent small amounts
of solder dross to the facility for recycling as "Responsible Parties"
under the California Superfund statute. The court has stayed the action.
The Company is one of 16 defendant can companies participating in a steering
committee. The steering committee has actively undertaken a feasibility
study which was approved by the California Department of Toxic Substances in
June 1994. The Company has agreed with the other can company defendants that
Silgan's apportioned share of cleanup costs would be 6.72% of the total cost
of cleanup. Although the total cost of cleanup has not yet been determined,
the Company understands that the State of California's current worst case
estimate of total cleanup costs for all parties is $5.5 million. The
steering committee believes that the cost to remediate will be less than one-
half the government's estimate. Accordingly, the Company believes its
maximum exposure is not greater than 6.72% of $3 million, or approximately
$202,000.
Other. Other than the actions mentioned above, there are no other
pending legal proceedings, other than ordinary routine litigation incidental
to the business of the Company, to which the Company is a party or to which
any of its properties are subject.
<PAGE>
MANAGEMENT
Directors and Executive Officers of the Company and Holdings.
The current directors and executive officers of the Company and Holdings
and their respective ages, positions and principal occupations, five-year
employment history and other directorships held are furnished below:
Age at Five-Year Employment
June 1, History and Other Directorships
Name and Position 1994 Held
----------------- --------- -------------------------------
51 Prior to forming S&H in 1987,
R. Philip Silver President of Continental Can
Chairman of the Board and Company from June 1983 to August
Co-Chief Executive Officer 1986; consultant to packaging
of Holdings and Silgan industry from August 1986 to
since March 1994; formerly August 1987; Vice Chairman of the
President of Holdings and Board and Director of Sweetheart
Silgan; Director of Holdings Inc. and Sweetheart Cup
Holdings since April 1989 Company, Inc. from September 1989
and of Silgan since August to January 1991; Chairman of the
1987; Chairman of the Board Board and Director of Sweetheart
of Plastics since March Holdings Inc. and Sweetheart Cup
1994; Director of Company, Inc. from January 1991
Containers and Plastics through August 1993; Director,
since August 1987. Johnstown America Corporation.
D. Greg Horrigan 50 Prior to forming S&H in 1987,
President and Co-Chief Executive Vice President and
Executive Officer of Operating Officer of Continental
Holdings and Silgan since Can Company from 1984 to 1987;
March 1994; formerly Chairman of the Board and
Chairman of the Board of Director of Sweetheart Holdings
Holdings and Silgan; Inc. and Sweetheart Cup Company,
Director of Holdings since Inc. from September 1989 to
April 1989 and of Silgan January 1991; Vice Chairman of
since August 1987; Chairman the Board and Director of
of the Board of Containers Sweetheart Holdings Inc. and
since August 1987; Chairman Sweetheart Cup Company, Inc. from
of the Board of Plastics January 1991 through August 1993.
from May 1991 to March
1994; Director of
Containers and Plastics
since August 1987.
James S. Hoch 34 Principal of Morgan Stanley & Co.
Director of Silgan since Incorporated since 1993, Vice
January 1991; Vice President of Morgan Stanley & Co.
President and Assistant Incorporated from 1991 to 1993,
Secretary of Silgan since Associate of Morgan Stanley & Co.
1987; Director, Vice Incorporated from 1986 to 1990.
President and Assistant Director of Fort Howard
Secretary of Holdings since Corporation, Sullivan
January 1991; Director, Communications, Inc., Sullivan
Vice President and Graphics, Inc.
Assistant Secretary of
Containers since January
1991; Director, Vice
President and Assistant
Secretary of Plastics since
January 1991.
Robert H. Niehaus 38 Managing Director of Morgan
Vice President, Assistant Stanley & Co. Incorporated since
Secretary and Director of January 1, 1990; Principal of
Silgan since August 1987; Morgan Stanley & Co.
Vice President, Assistant Incorporated from 1988 to 1989;
Secretary and Director of Vice President of Morgan Stanley
Containers and Plastics & Co. Incorporated in 1987.
since August 1987; Vice Director of American Italian
President, Assistant Pasta Company, Randall's Food
Secretary and Director of Markets, Inc., Randall's
Holdings since April 1989. Management Corp., Inc., Randall's
Properties, Inc., Randall's
Warehouse, Inc., Fort Howard
Corporation, Waterford Wedgwood
plc, Waterford Crystal Ltd.,
Waterford Wedgwood UK plc, MS
Distribution Inc., Tennessee
Valley Steel Corporation, NCC
L.P., Shuttleway and MS/WW
Holdings Inc.
Harley Rankin, Jr. 54 Prior to joining the Company,
Executive Vice President Senior Vice President and Chief
and Chief Financial Officer Financial Officer of Armtek
of Silgan since January Corporation; prior to Armtek
1989; Treasurer of Silgan Corporation, Vice President and
since January 1992; Vice Chief Financial Officer of
President of Containers and Continental Can Company from
Plastics since January November 1984 to August 1986.
1989; Treasurer of Plastics Vice President, Chief Financial
since January 1994; Officer and Treasurer of
Executive Vice President Sweetheart Holdings Inc. and Vice
and Chief Financial Officer President of Sweetheart Cup
of Holdings since April Company, Inc. from September 1989
1989; Treasurer of Holdings to August 1993.
since January 1992.
Harold J. Rodriguez, Jr. 38 Employed by Ernst & Young from
Vice President of Silgan 1978 to 1987, last serving as
and Holdings since March Senior Manager specializing in
1994; Vice President of taxation. Controller, Assistant
Containers and Plastics Secretary and Assistant Treasurer
since March 1994; of Sweetheart Holdings Inc. and
Controller and Assistant Assistant Secretary and Assistant
Treasurer of Silgan and Treasurer of Sweetheart Cup
Holdings since March 1990; Company, Inc. from September 1989
Assistant Controller and to August 1993.
Assistant Treasurer of
Holdings from April 1989 to
March 1990; Assistant
Controller and Assistant
Treasurer of Silgan from
October 1987 to March 1990.
Management of Containers
In addition to the persons listed under "--Directors and Executive
Officers of the Company and Holdings" above, the following are the principal
executive officers of Containers:
Age at Five-Year Employment
June 1, History and Other Directorships
Name and Position 1994 Held
----------------- -------- -------------------------------
51 Vice President-Marketing & Sales
James D. Beam of Containers from September
President and a 1987 to July 1990; Vice
non-voting Director of President and General Manager of
Containers since July Continental Can Company, Western
1990. Food Can Division, from March
1986 to September 1987.
Gerald T. Wojdon 58 General Manager of Manufacturing
Vice President of the Can Division of The
-Operations and Carnation Company from August
Assistant Secretary of 1982 to August 1987.
Containers since
September 1987.
52 Vice President, Sales and
Gary M. Hughes Marketing of the Beverage
Vice President - Sales & Division of Continental Can
Marketing of Containers Company from February 1988 to
since July 1990. July 1990; prior to February
1988, was employed by
Continental Can in various
regional sales positions.
George S. Hartley 47 Vice President - Finance of
Vice President - Romanoff International, Inc.
Finance, Treasurer and from 1990 to 1993; Director,
Assistant Secretary Business Planning of Amphenol
since March 1994. Corporation (Electronic
Connectors) from 1988 to 1989;
Continental Can Corporation,
1974-1988, employed in various
finance and planning positions.
Dennis Nerstad 56 Vice President - Distribution
Vice President since and Container Manufacturing of
March 1994. Del Monte from August 1989 to
December 1993; Director of
Container Manufacturing of Del
Monte from November 1983 to July
1989; prior to 1983, employed by
Del Monte in various regional
and plant positions.
Management of Plastics
In addition to the persons listed under "--Directors and Executive
Officers of the Company and Holdings" above, the following are the principal
executive officers of Plastics:
Age at
June 1, Five-Year Employment
Name and Position 1994 History and Positions
----------------- -------- ----------------------
50 President and Chief Executive
Russell F. Gervais Officer of Aim Packaging, Inc.
President and non-voting from March 1984 to September
Director of Plastics since 1989.
December 1992; Vice
President-Sales & Marketing
of Plastics from September
1989 until December 1992.
Howard H. Cole 48 Manager of Personnel of
Vice President and Monsanto Engineered Products
Assistant Secretary of Division of the Monsanto
Plastics since September Company from April 1986 to
1987. September 1987.
Charles Minarik 56 President of Wheaton Industries
Vice President-Operations Plastics Group from February
and Commercial Development 1991 to August 1992; Vice
since May 1993. President-Marketing of Constar
International, Inc. from March
1983 to February 1991.
Executive Compensation
The following table sets forth information concerning the annual and
long term compensation for services rendered in all capacities to the Company
and its subsidiaries during the fiscal years ended December 31, 1993, 1992
and 1991 of those persons who at December 31, 1993 were (i) the Chief
Executive Officer of the Company and (ii) the other four most highly
compensated executive officers of the Company and its subsidiaries. No
director of the Company or its subsidiaries receives any compensation for
serving as a director of the Company or its subsidiaries. See "Certain
Transactions--Management Agreements."
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------------- -----------
Awards
------
Other
Annual Stock All Other
Name and Principal Position Year Salary<fa><fb>Bonus<fa><fc> Compensation Options/SARs Compensation<fd>
- --------------------------- ---- --------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver 1993 $1,378,799 - - - -
(Chairman of the Board and 1992 1,528,844 - - - -
Co-Chief Executive Officer of 1991 1,378,000 - - - -
the Company and Chairman of
the Board of Plastics)
D. Greg Horrigan 1993 1,378,799 - - - -
(President and Co-Chief 1992 1,528,844 - - - -
Executive Officer of the 1991 1,378,000 - - - -
Company and Chairman of the
Board of Containers)
Harley Rankin, Jr. 1993 321,898 - - - -
(Executive Vice President, 1992 324,407 - - - -
Chief Financial Officer and 1991 303,200 - - - -
Treasurer of the
Company and Vice President of
Containers and Plastics)
James D. Beam 1993 239,949 $65,277 - - $24,883
(President of Containers) 1992 231,949 65,497 - - 24,215
1991 221,894 38,854 - - -
Gary M. Hughes 1993 167,763 45,701 - - 17,397
(Vice President - Sales and 1992 162,372 45,851 - - 16,952
Marketing of Containers) 1991 155,326 27,198 - - -
Gerald T. Wojdon 1993 167,763 45,701 - - 17,397
(Vice President - Operations 1992 162,372 45,850 - - 16,952
of Containers) 1991 155,326 27,198 - - -
<FN>
<fa> The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez was paid by S&H and they received no direct
compensation from Holdings, the Company or their respective subsidiaries. See "Certain Transactions -- Management
Agreements."
<fb> The salaries of Messrs. Beam, Hughes and Wojdon were paid by Containers.
<fc> Bonuses of Messrs. Beam, Hughes and Wojdon were earned by them in such year and paid in the following year,
pursuant to the Silgan Containers Corporation Performance Incentive Plan. Under the Silgan Containers
Corporation Performance Incentive Plan, executive officers and other key employees of Containers may be awarded
cash bonuses provided that Containers achieves certain assigned financial targets.
<fd> Reflects amounts contributed by Containers under the Silgan Containers Corporation Deferred Incentive Savings
Plan (the "Savings Plan"). Containers contributes to the Savings Plan an amount each year based on its profits
for such year, as determined by Containers' board of directors. Such contribution is allocated proportionately
to participants in accordance with their compensation. A participant's allocable share of such contribution
becomes fully vested after five years of service or, if earlier, upon reaching age 55, death, total and permanent
disability or termination on account of the sale or closure of a work facility.
</TABLE>
<PAGE>
OPTION/SAR VALUES AT DECEMBER 31, 1993
--------------------------------------
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
December 31, 1993 December 31, 1993
----------------- ------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
R. Philip Silver . . . -- -- -- --
D. Greg Horrigan . . . -- -- -- --
Harley Rankin, Jr.
<fa> . . . . . . . . 10,000 -- -0- --
James D. Beam
<fb><fc> . . . . . . 336 144 $402,390 $100,597
Gary M. Hughes
<fb><fd> . . . . . . 144 96 -0- -0-
Gerald T. Wojdon
<fb><fe> . . . . . . 48 48 100,597 100,597
[FN]
<fa> Options are for, and tandem SARs relate to, shares of Holdings Class C
common stock, par value $.01 per share (the "Holdings Class C Stock").
Value is the excess of the book value of Holdings Class C Stock from the
date of grant over the exercise price. In the event of a public
offering or third party sale, value would be based on fair market value.
See "-- Stock Option Plans" below.
<fb> Options are for, and tandem SARs relate to, shares of Containers' common
stock. As of December 31, 1993, 10,800 shares of Containers' common
stock are issued and outstanding and an additional 1,200 shares of
Containers' common stock are authorized but not issued. Value is the
excess of the book value of Containers' common stock from the date of
grant, less the portion of parent debt allocable to Containers, over the
exercise price. In the event of a public offering or third party sale,
value would be based on fair market value as determined under the
Containers Plan (as defined in "-- Stock Option Plans" below). See "--
Stock Option Plans" below.
<fc> 240 options and tandem SARs were granted in June 1989 under the
Containers Plan, for which the book value, as computed under the
Containers Plan, exceeds the exercise price. An additional 240 options
and tandem SARs were granted in July 1990 under the Containers Plan.
<fd> 240 options and tandem SARs were granted in July 1990 under the
Containers Plan.
<fe> 240 options and tandem SARs were granted in June 1989 under the
Containers Plan, of which 144 SARs have been exercised prior to 1993.
Pension Plans
The Company has established pension plans (the "Pension Plans") covering
substantially all of the salaried employees of Containers and Plastics,
respectively, including the executive officers (the "Containers Pension Plan"
and the "Plastics Pension Plan," respectively). The Pension Plans are
defined benefit plans intended to be qualified pension plans under Section
401(a) of the Code, under which pension costs are determined annually on an
actuarial basis with contributions made accordingly. The pension benefits at
normal retirement under each Pension Plan are generally comparable to the
benefits under the pension plan covering individuals at Nestle Can or
Monsanto, as the case may be, at the time of acquisition in 1987.
Certain salaried employees of Containers, including Containers'
executive officers, were covered by the Carnation Employees Plan Number Two
for United States Employees (the "Carnation Pension Plan") immediately prior
to the acquisition of Nestle Can. The Containers Pension Plan recognizes
prior service under the Carnation Pension Plan for purposes of eligibility,
vesting and benefit accrual. The benefits payable at retirement under, or
upon vested termination from, the Containers Pension Plan are based on the
benefit formula and all other factors then in effect under the Containers
Pension Plan applied to all combined pension service. Such benefit shall be
offset by the accrued benefit, if any, such employee is entitled to receive
under the Carnation Pension Plan as of August 31, 1987.
Under the Containers Pension Plan, both the employer and participants
contribute. Participants contribute approximately 3% of their annual
compensation. The benefit for any participant thereunder is calculated under
the greater of either (i) a career average formula of the sum of, for each
year of participation up to March 31, 1991, 1% of annual base salary up to
$5,400 plus 2% of such salary over $5,400 or (ii) a final pay formula of the
average base salary over the final three years of employment multiplied by a
percentage (not to exceed 61-1/4%) based upon the participant's years of
credited service (not to exceed 35), less a percentage (not to exceed
approximately 50%) of such participant's primary social security benefit at
employment termination based upon the participant's years of credited service
(not to exceed 35). Compensation covered by the Containers Pension Plan is a
participant's base salary exclusive of any bonus, overtime or other extra
compensation. A participant becomes fully vested after five years of service
or upon reaching age 55, if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Containers Pension Plan based upon the
final pay formula. Such benefit levels assume retirement at age 65, the
years of service shown, continued existence of the Containers Pension Plan
without substantial change and payment in the form of a single life annuity
and includes benefits, if any, payable under the Carnation Pension Plan which
will be paid by that plan.
Containers Pension Plan Table
Final Years of Service
Average
Earnings 10 15 20 25 30 35
-------- -------- -------- -------- -------- -------- --------
$ 50,000 $ 7,130 $ 10,640 $ 14,260 $ 17,830 $ 21,390 $ 24,960
75,000 11,510 17,260 23,010 28,760 34,520 40,270
100,000 15,880 23,820 31,760 39,700 47,640 55,580
125,000 20,260 30,380 40,510 50,640 60,770 70,890
150,000 24,630 36,950 49,260 61,580 73,890 86,210
175,000 29,010 43,510 58,010 72,510 87,020 101,520
200,000 33,380 50,070 66,760 83,450 100,140 116,830
225,000 37,760 56,630 75,510 94,390 113,270 132,140
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the
Containers Pension Plan. The dollar limit on compensation for 1993 was
$235,840. The dollar limit on compensation for 1994 is $150,000. The dollar
limit, where applicable, will reduce the amount of benefits payable to highly
compensated participants in the Containers Pension Plan.
As of December 31, 1993, the years of credited service under the
Containers Pension Plan for each of the eligible executive officers named in
the Summary Compensation Table are as follows: James D. Beam, 6, Gary M.
Hughes, 3, and Gerald T. Wojdon 34.
In conjunction with the acquisition of DM Can, the employees of Del
Monte that are employed by Containers will participate in the Containers
Pension Plan. Pursuant to the purchase agreement for the acquisition of DM
Can, Del Monte has agreed to transfer to the Containers Pension Plan assets
for benefits accrued for such employees while they were employed by Del
Monte.
Certain salaried employees of Plastics, including Plastics' executive
officers, were covered by the Monsanto Company Salaried Employees' Pension
Plan (the "Monsanto Pension Plan") immediately prior to the acquisition of
Monsanto Plastic Containers. The Plastics Pension Plan recognizes prior
service under the Monsanto Pension Plan for purposes of eligibility, vesting
and benefit accrual. The benefits payable at retirement under, or upon
vested termination from, the Plastics Pension Plan are based on the benefit
formula and all other factors then in effect under the Plastics Pension Plan
applied to all combined pension service. Such benefit is offset by the
accrued benefit, if any, such employee is entitled to receive under the
Monsanto Pension Plan as of August 31, 1987.
Under the Plastics Pension Plan, pensions are based on the greatest of
(i) years of benefit service multiplied by 1.4% of Average Earnings, which is
defined as the greater of (a) average compensation received during the final
36 months of employment or (b) average compensation received during the
highest three of the final five calendar years of employment; (ii) years of
benefit service multiplied by 1.5% of Average Earnings less a 50% social
security offset; or (iii) years of benefit service multiplied by $30.00. For
employees hired between April 1, 1986 and September 1, 1987, the formula is
the greater of (i) years of benefit service multiplied by 1.2% of Average
Earnings; or (ii) years of benefit service multiplied by 1.5% of Average
Earnings less a 50% social security offset. For employees hired after
September 1, 1987, the formula is years of benefit service multiplied by 1.1%
of Average Earnings. Average Earnings under the Plastics Pension Plan is a
participant's total cash income before deduction for contributions, if any,
to a plan pursuant to Section 401(k) of the Code or Section 125 of the Code
less any moving expense allowance but, in no event, shall Average Earnings
exceed 125% of base pay of the participant. A participant becomes fully
vested after five years of service or attainment of Normal Retirement Age (as
defined under the Plastics Pension Plan), if earlier.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan based upon the
greater of 1.4% of Average Earnings, without reduction for social security or
other offset amounts, or 1.5% of Average Earnings less a 50% social security
offset. Such benefit levels assume retirement age at 65, the years of
service shown, continued existence of the Plastics Pension Plan without
substantial change and payment in the form of a single life annuity and
includes benefits, if any, payable under the Monsanto Pension Plan which will
be paid by that plan.
Plastics Pension Plan Table
Final Years of Service
Average
Earnings 10 15 20 25 30 35
-------- -------- -------- -------- -------- -------- --------
$ 50,000 $ 7,000 $ 10,550 $ 14,000 $ 17,500 $ 21,000 $ 24,500
75,000 10,500 15,750 21,000 26,250 31,500 36,750
100,000 14,000 21,000 28,000 35,000 42,000 49,000
125,000 17,500 26,250 35,000 43,750 52,500 61,250
150,000 21,000 31,500 42,000 52,500 63,000 73,950
175,000 24,500 36,750 49,000 61,250 73,950 87,075
200,000 28,000 42,000 56,000 70,200 85,200 100,200
225,000 31,500 47,250 63,000 79,575 96,450 113,325
Pursuant to Section 401(a)(17) of the Code, there is a limit on the
amount of annual compensation which can be taken into account under the
Plastics Pension Plan. The dollar limit on compensation for 1993 was
$235,840. The dollar limit on compensation for 1994 is $150,000. The dollar
limit, where applicable, will reduce the amount of benefits payable to highly
compensated participants in the Plastics Pension Plan.
Stock Option Plans
Containers, Plastics and Holdings have established separate but similar
stock option plans entitled, respectively, the Silgan Containers Corporation
Amended and Restated 1989 Stock Option Plan (the "Containers Plan"), the
Silgan Plastics Corporation 1994 Stock Option Plan (the "Plastics Plan") and
the Silgan Holdings Inc. Amended and Restated 1989 Stock Option Plan (the
"Holdings Plan"; collectively, the "Plans"). Under each such Plan,
participants may be granted options to purchase shares of common stock or
restricted stock and/or SARs. Options granted may be either nonstatutory
stock options or incentive stock options under Section 422 of the Code. SARs
granted may be related to options concurrently granted or independent of any
options.
The board of directors of each of the respective sponsoring companies,
through a committee, administers its respective plan and has the power to,
among other things, choose participants, the type of grant and all the terms
and conditions thereof, including number of shares covered by a grant and the
exercise price, if applicable. Only officers (including executive officers)
and other key employees are eligible to participate in the plan sponsored by
their employer. As of December 31, 1993, Containers and Plastics have
reserved 1,200 authorized but unissued shares of their respective common
stock, $.01 par value, for issuance under their respective plans and Holdings
has reserved 24,000 authorized but unissued shares of Holdings Class C Stock,
for issuance under the Holdings Plan.
Generally, each option granted under the Plans becomes exercisable over
a period of five years, with 20% of the option having become exercisable on
the first anniversary of the grant and an additional 20% having become or
becoming exercisable on each anniversary thereafter. The purchase price of
each option granted under the Containers Plan ranges from $2,122.00 to
$4,933.20 per share. The purchase price of options granted under the
Plastics Plan is $126 per share. The purchase price of options granted under
the Holdings Plan ranges from $35.00 to $60.71 per share. Each option
granted under the Plans was granted with related SARs. The SARs extend to
all option shares and under the Containers Plan and Holdings Plan provide for
a payment by the sponsoring company to the holder of an amount equal to the
excess of the book value of a share of the sponsoring company at the SAR
exercise date or, if applicable, the fair market value of such share at the
SAR exercise date after a public offering of such shares, over the exercise
price of the SAR multiplied by the number of shares involved in the SAR
exercise and under the Plastics Plan provide for a payment by Plastics to the
holder of an amount equal to the excess of the fair market value of such
share at the SAR exercise date over the exercise price of the SAR multiplied
by the number of shares involved in the SAR exercise. Each option and
related SAR granted under each of the Plans expires on the date that is one
day before ten years after the date of grant or on such earlier date as the
holder's employment shall terminate or within a specified period after
termination as provided in the respective Plans.
All options granted under any of the Plans must be evidenced by an
option agreement between the sponsoring company and the option recipient
embodying all the terms and conditions of the option grant; provided that (i)
all options must be granted before the respective Plan expires, (ii)
incentive stock options granted must comply with Section 422 of the Code,
(iii) all options must be exercisable no earlier than one year from the date
of grant, (iv) no option shall be transferable or assignable otherwise than
by will or the laws of descent and distribution and, during the lifetime of
the recipient, such option shall be exercisable only by the recipient, (v)
all options must expire or remain exercisable for a limited time after
termination of employment, all as specified in the respective Plans, and (vi)
upon exercise of all options, full payment for the shares covered shall be
made in cash for each of the Plans or, for the Containers Plan and Holdings
Plan, shares of common stock of the sponsoring company already owned or a
combination of cash and shares of common stock.
All SARs granted under any of the Plans must be evidenced by an
agreement containing the terms of exercise and manner of settlement, provided
that (i) all SARs must be granted before the respective Plan expires, (ii)
SARs must be exercisable no earlier than one year from the date of grant,
(iii) SARs granted in tandem with options must have the same terms and
conditions as the related option and the exercise of a related SAR
extinguishes the related option to the extent exercised and vice versa and
(iv) SARs may contain a provision for automatic exercise on the last day of
the term thereof.
Restricted stock issued under any of the Plans must bear an appropriate
legend referring to the terms, conditions and restrictions applicable
thereto. The sponsoring company has a right to purchase and participants
have a right to require the sponsoring company to repurchase its common stock
acquired pursuant to the respective Plan upon the occurrence of certain
events in accordance with such Plan.
In the event of a public offering of any of Holdings' common stock or a
sale of Holdings to a third party, the options granted by Containers and
Plastics pursuant to their respective Plans are convertible into stock
options of Holdings under the Holdings Plan and any stock issued upon
exercise of options under the Containers Plan are convertible into common
stock of Holdings. The calculation of the number of shares to be issued upon
the conversion of such options or shares will be determined based upon a
valuation of Holdings and an allocation of such value among its subsidiaries
(after giving effect to, among other things, that portion of the outstanding
indebtedness of Holdings allocable to each such subsidiary).
Certain Employment Agreements
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Wojdon) have executed employment
agreements. The initial term of such employment agreements is generally
three years from its effective date and is automatically extended for
successive one year periods unless terminated pursuant to the terms of such
agreement. Each such employment agreement provides for, among other things,
a minimum severance benefit equal to base salary and benefits for, in most
cases, a period of one year (or the remainder of the term of the agreement,
if longer) (i) if the employee is terminated by his employer for any reason
other than disability or for cause as specified in the agreement or (ii) if
the employee voluntarily terminates employment due to a demotion and, in some
cases, significant relocation, all as specified in the agreement.
The foregoing summaries of the various benefit plans and agreements of
the Company are qualified by reference to such plans and agreements, copies
of certain of which have been filed as exhibits to the Registration Statement
of which this Prospectus is a part.
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners of Silgan's Capital Stock
All of the outstanding shares of common stock of Silgan, consisting of
one share of Class A common stock, par value $.01 per share (the "Silgan
Class A Stock"), and one share of Class B common stock, par value $.01 per
share (the "Silgan Class B Stock"), are owned by Holdings. Holdings' address
is 4 Landmark Square, Stamford, CT 06901.
Certain Beneficial Owners of Holdings' Capital Stock
The following table sets forth, as of June 30, 1994, certain information
with respect to the beneficial ownership by certain persons and entities of
outstanding shares of capital stock of Holdings:
<TABLE>
<CAPTION>
Number of Shares of each Percentage Ownership of
class of Holdings Common
Stock Owned Holdings Common Stock
------------------------- ------------------------------------------
Consolidated
Class A Class B Class C Class A Class B Class C <F1>
------- ------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Philip Silver <F2> . . . . 208,750 -- -- 50% -- -- 19.24%
D. Greg Horrigan <F2> . . . . 208,750 -- -- 50% -- -- 19.24%
James S. Hoch <F3> . . . . . -- -- -- -- -- -- --
Robert H. Niehaus <F3> . . . -- -- -- -- -- -- --
Harley Rankin, Jr. . . . . . -- -- 10,000<F4> -- -- 15.38% --
James D. Beam <F5> . . . . . -- -- -- -- -- -- --
Gary M. Hughes <F5> . . . . . -- -- -- -- -- -- --
Gerald T. Wojdon <F5> . . . . -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, L.P. <F6> . -- 417,500 -- -- 62.55% -- 38.48%
Mellon Bank, N.A., as trustee
for First Plaza Group
Trust <F7> . . . . . . . . . -- 250,000 -- -- 37.45% -- 23.04%
All officers and directors
as a group . . . . . . . . . 417,500 -- 15,000<F4> 100% -- 23.08%<F8> 38.48%
___________________
<FN>
<F1> This column reflects the percentage ownership of voting common stock that would exist if Holdings' Class A common
stock, par value $.01 per share (the "Holdings Class A Stock"), and Holdings Class B Stock were treated as a
single class. Holdings Class C Stock generally does not have voting rights and is not included in the
percentage ownership reflected in this column. See "Description of Holdings Common Stock--General."
<F2> Director of Holdings and Silgan. Messrs. Silver and Horrigan 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.
<F3> 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.
<F4> Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to the
Holdings Plan.
<F5> Options to purchase shares of common stock of Containers and tandem SARs have been granted to such person
pursuant to 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.
<F6> The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1251 Avenue of the Americas, New York, NY
10020.
<F7> The address for First Plaza Group Trust is c/o General Motors Investment Management Corporation, 767 Fifth Avenue,
New York, NY 10153. Mellon Bank, N.A. ("Mellon"), acts as the trustee for First Plaza, a trust under and for the
benefit of certain employee benefit plans of General Motors Corporation ("GM") and its subsidiaries. These shares
may be deemed to be owned beneficially by General Motors Investment Management Corporation ("GMIMCo"), a wholly
owned subsidiary of GM. GMIMCo is serving as First Plaza's investment manager with respect to these shares and
in that capacity it has the sole power to direct Mellon as to the voting and disposition of these shares.
Because of Mellon's limited role, beneficial ownership of the shares by Mellon is disclaimed.
<F8> Bankers Trust New York Corporation ("BTNY") beneficially owns 50,000 shares of Holdings Class C Stock.
See "Description of Holdings Common Stock" for additional information
about the common stock of Holdings, the holders thereof and certain
arrangements among them.
</TABLE>
CERTAIN TRANSACTIONS
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 (as defined in "Description of Holdings Common
Stock--Description of the Holdings Organization Agreement"); (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. Silver and Horrigan; and (v) upon 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--General").
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.
The Credit Agreement does not permit the payment of fees under the
Management Agreements above amounts provided for therein.
For the years ended December 31, 1993, 1992 and 1991, pursuant to the
arrangements described above, S&H earned aggregate fees, including
reimbursable expenses and fees payable to Morgan Stanley, of $4.4 million,
$4.2 million and $4.0 million, respectively, from the Company, Holdings,
Containers, Plastics, SPHI and Silgan PET and during 1993, 1992 and 1991,
Morgan Stanley earned fees of $337,000, $324,000 and $306,000, respectively.
Other
In connection with the 1989 Mergers, subject to the provisions of
Delaware law, the Company agreed to indemnify each director, officer,
employee, fiduciary and agent of the Company, Containers, Plastics and its
subsidiaries and their respective affiliates against costs, expenses,
judgments, fines, losses, claims, damages and settlements (except for any
settlement effected without the Company's written consent) in connection with
any claims, actions, suits, proceedings or investigations arising out of or
related to the 1989 Mergers or their financing, including certain liabilities
arising under the federal securities laws.
Simultaneously with the consummation of the 1989 Mergers, a tax
allocation agreement was entered into by Holdings, the Company, Plastics and
Containers that permits the Company and its subsidiaries to use the tax
benefits provided by the debt of Holdings and permits funds to be provided to
Holdings from the Company and its subsidiaries in an amount equal to the
federal and state tax liabilities of Holdings, as the parent of the
consolidated group consisting of Holdings, the Company and its Subsidiaries.
Such tax allocation agreement has been amended and restated from time to time
to include new members of the consolidated group.
In connection with the Amended and Restated Credit Agreement under the
Refinancing, the lenders thereunder (including Bankers Trust) received
certain fees amounting to $1.4 million. In connection with the Refinancing,
Morgan Stanley received as compensation for its services as underwriter for
the 11-3/4% Notes Offering and Holdings Debentures Offering and as initial
purchaser of the Secured Notes an aggregate of $11.5 million. In connection
with the Credit Agreement entered into in December 1993, the Banks (including
Bankers Trust) received certain fees amounting to $8.1 million.
G. William Sisley, Secretary of the Company and Holdings, is a partner
in the law firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson,
Putnam & Roberts provides legal services to Holdings, the Company and the
Company's subsidiaries.
DESCRIPTION OF CERTAIN INDEBTEDNESS
Description of the Credit Agreement
The following is a summary of the terms of the Credit Agreement.
The Available Credit Facility. Pursuant to the Credit Agreement, an
aggregate of (i) $60.0 million of term loans designated as A Term Loans (the
"A Term Loans") and (ii) $80.0 million of term loans designated as B Term
Loans (the "B Term Loans," together with the A Term Loans, the "Term Loans")
are outstanding and owing to the Banks by Silgan, and the Banks have agreed to
lend to Containers and Plastics up to an aggregate of $70.0 million of working
capital loans (the "Working Capital Loans").
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) Containers pledged to the Banks all of the
capital stock of the California-Washington Can Corporation ("CW Can") held by
Containers; (iii) Plastics pledged to the Banks 65% of the capital stock of
827599 Ontario Inc. ("Canadian Holdco") held by Plastics; (iv) Silgan,
Containers, Plastics and CW 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 the Secured Notes, subject to
intercreditor arrangements. Holdings and each of the Borrowers have
guaranteed on a secured basis all of the obligations of the Borrowers under
the Credit Agreement.
The aggregate amount of Working Capital Loans which may be outstanding
at any time is, subject to a borrowing base limitation, the sum of (i) 85% of
eligible accounts receivable and (ii) 50% of eligible inventory of
Containers, Plastics and CW Can.
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.
As of June 30, 1994, the outstanding principal amount of the A Term
Loans, the B Term Loans and the Working Capital Loans under the Credit
Agreement were $60.0 million, $80.0 million and $35.0 million, respectively.
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. Amounts repaid under the Term Loans
cannot be reborrowed.
The B Term Loans mature on September 15, 1996 and are payable in full on
such date. The A Term Loans are payable in installments as follows:
A Term Loan
Scheduled Repayment Date 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 Term Loans and Working Capital Loans may be prepaid, without
penalty or premium, at any time. The Term Loans are required to be prepaid,
and the working capital commitment may be required to be reduced, upon the
occurrence of, among other things, certain asset sales and certain sales of
equity by Silgan or Holdings and to the extent of 75% of Excess Cash Flow (as
defined 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 base rate loans accrues at floating rates of the
Applicable Margin (as defined in the Credit Agreement), plus the highest of
(i) 1/2 of 1% in excess of a formula rate based on the offering rate for
negotiable certificates of deposit with a three month maturity, (ii) 1/2 of
1% in excess of the Federal Funds Rate, and (iii) Bankers Trust's then
applicable prime lending rate. Interest on Eurodollar rate loans accrues at
floating rates of the Applicable Margin over a formula rate determined with
reference to the rate offered by Bankers Trust for dollar deposits in the New
York interbank Eurodollar market.
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.
Containers and Plastics are required to pay to the Banks, on a
quarterly basis, a letter of credit fee of 3.0% per annum on the daily
average stated amount of each letter of credit issued for the account of
Containers or Plastics. Containers and Plastics are also required to pay to
Bankers Trust, on a quarterly basis, a facing fee of 1/4 of 1% per annum on
the daily average stated amount of each letter of credit issued for the
account of Containers or Plastics.
Certain Covenants. The Credit Agreement contains numerous financial
and operating covenants, under which the Company 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, CW Can may pay
dividends to Containers, Canadian Holdco may pay dividends to Plastics and
Express may pay dividends to Canadian Holdco; and (c) Silgan may repurchase
or redeem stock options or SARs, issued to management of Containers and
Plastics 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; (b) indebtedness of Containers to Plastics or Plastics to
Containers; and (c) Silgan's indebtedness represented by the Secured Notes,
the 11-3/4% Notes and by the intercompany notes; (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; (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,
CW 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)(taken as one accounting period) ending 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:
Period Ratio
------ ---------
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 a
current asset 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, and accrued interest thereon, under the Credit
Agreement, the current portion of any loans made by Silgan to Containers or
Plastics, the current portion of, and accrued interest on, the Secured Notes
and the 11-3/4% Notes from the last 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.
For purposes of all computations to determine compliance with the
financial covenants under the Credit Agreement, such computations are to be
made utilizing the accounting principles and policies in conformity with
those used to prepare Silgan's audited financial statements for the fiscal
year ended December 31, 1992, for purposes of determining the Net Worth of
Silgan, no effect is given to the Allowed Reduction (as defined in the Credit
Agreement).
The ability of Holdings to take certain actions is restricted or limited
pursuant to the terms of the Silgan Holdings Guaranty, dated as of June 30,
1989, as amended, made by Holdings in favor of the Banks 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 to 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 making certain investments.
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 (collectively, a "Payment Default"); (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 (other than Silgan Preferred Stock);
and (ix) a Change of Control (as defined in the Holdings Guaranty, the
Secured Notes Purchase Agreement (as defined below), the indenture relating
to the 11-3/4% Notes or the Indenture) 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 Holdings Discount
Debenture 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 Working Capital Loans and of all outstanding indebtedness
under the Credit Agreement and terminate their commitment to make any further
Working Capital Loans or to issue any letters of credit.
Description of the Secured Notes
The Secured Notes, which were issued on June 29, 1992 pursuant to a
secured notes purchase agreement (as such agreement may be amended from time
to time, the "Secured Notes Purchase Agreement"), constitute senior
indebtedness of the Company, are limited to an aggregate principal amount of
$50 million, and mature on June 30, 1997. The Secured Notes are secured by a
first lien (subject to permitted liens) on substantially all of the assets of
the Company and its subsidiaries. Such collateral also secures on an equal
and ratable basis, subject to certain intercreditor arrangements, all other
Secured Obligations (as defined in the Secured Notes Purchase Agreement),
including indebtedness of the Company and its subsidiaries under the Credit
Agreement. In addition, the obligations of the Company under the Secured
Notes and the Secured Notes Purchase Agreement are guaranteed by Containers
and Plastics.
The Secured Notes bear interest at a rate of three-month LIBOR plus 300
basis points.
The Secured Notes are redeemable at the option of the Company at par
plus accrued and unpaid interest to the redemption date. Net cash proceeds
from (i) certain asset sales and (ii) the issuance of capital stock by any
Restricted Subsidiary (as defined in the Secured Notes Purchase Agreement) of
the Company, are required to be applied to prepay the Secured Notes and
indebtedness under the Credit Agreement on a pro rata basis, subject to
certain exceptions. In the event of a Change of Control (as defined in the
Secured Notes Purchase Agreement), each holder of a Secured Note has the
right to require the Company to repurchase such holder's Secured Notes at a
purchase price equal to 100% of the principal amount thereof plus accrued
interest.
The Secured Notes contain certain restrictive covenants including,
subject to certain exceptions, the following: (i) limitations on the ability
of the Company and its Restricted Subsidiaries to grant liens on any
property; (ii) limitations on the ability of the Company and its Restricted
Subsidiaries to incur indebtedness; (iii) limitations on payments of
dividends and purchases of the capital stock of the Company and its
Restricted Subsidiaries; (iv) restrictions on repayments of subordinated
indebtedness; (v) limitations on investments by the Company or any Restricted
Subsidiary in affiliates of the Company or in any Unrestricted Subsidiary (as
defined in the Secured Notes Purchase Agreement); (vi) limitations on the
incurrence by the Company and its Restricted Subsidiaries of any restriction
on the ability of any Restricted Subsidiaries to pay dividends or repay any
indebtedness owed to, or transfer any property or assets to, the Company or
any Restricted Subsidiary; (vii) limitations on transactions with affiliates;
and (viii) limitations on the Company's ability to effect certain mergers,
consolidations and transfers of assets. The covenants referred to in clauses
(ii) through (viii) above are substantially similar to the comparable
covenants that are contained in the Indenture, except that the covenant
referred to in clause (ii) above is more restrictive than the comparable
covenant contained in the Indenture and becomes even more restrictive over
the term of the Secured Notes. However, none of the covenants relating to the
Secured Notes are more restrictive upon the Company or any Restricted
Subsidiary than the corresponding restrictive covenant in the Credit
Agreement. See "--Description of the Credit Agreement" above and "Description
of the 11-3/4% Notes."
Events of default under the Secured Notes include: (i) failure to pay
principal or premium, if any, when due, or to pay interest within 30 days of
when due; (ii) failure by the Company to comply with any of its covenants or
agreements under the Secured Notes and the continuance of such failure for 30
days after written notice; (iii) an acceleration of certain other
indebtedness of the Company; (iv) certain events of bankruptcy of the Company
or any Significant Subsidiary (as defined in the Secured Notes Purchase
Agreement); and (v) a judgment is rendered against the Company or certain
Subsidiaries for an amount in excess of $5 million which is not discharged
within 60 days.
Description of Holdings Discount Debentures
Holdings sold the Holdings Discount Debentures in a public offering on
June 29, 1992. The Holdings Discount Debentures were offered at a substantial
discount from their principal amount and there is no payment of interest on
the Holdings Discount Debentures prior to December 15, 1996. From and after
June 15, 1996, the Holdings Discount Debentures bear interest, payable in
cash, at a rate of 13-1/4% per annum. The gross proceeds to Holdings from the
offering of the Holdings Discount Debentures were $165.4 million. The
Holdings Discount Debentures are redeemable at any time, at the option of
Holdings, in whole or in part, at 100% of their principal amount plus accrued
interest (if any) to the redemption date. In the event of a Change of Control
(as defined in the indenture relating to the Holdings Discount Debentures
(the "Debentures Indenture")), each holder of Holdings Discount Debentures
may require Holdings to repurchase such Holdings Discount Debentures at 101%
of the Accreted Value (as defined in the Debentures Indenture) plus accrued
interest (if any).
In the event of a Holdings Merger (as defined in the Debentures
Indenture) or similar transaction between Holdings and Silgan, or upon the
assumption by Silgan of the Holdings Discount Debentures, the Holdings
Discount Debentures will be subordinated in right of payment to all existing
and future Senior Indebtedness (as defined in the Debentures Indenture) of
the Successor Corporation (as defined in the Debentures Indenture) existing
on the date of such transaction or assumed or incurred thereafter. The
Debentures Indenture contains certain covenants that, among other things,
direct the application of proceeds from certain asset sales, limit the
ability of Holdings and its subsidiaries to incur indebtedness, make certain
payments with respect to their capital stock, make prepayments of certain
indebtedness, make loans or investments in entities other than Restricted
Subsidiaries (as defined in the Debentures Indenture), enter into
transactions with affiliates, engage in mergers or consolidations, and the
ability of the Restricted Subsidiaries to issue stock.
DESCRIPTION OF SILGAN CAPITAL STOCK
Under Silgan's Restated Certificate of Incorporation, Silgan has
authority to issue 1,000 shares of Silgan Class A Stock, par value $.01 per
share, 1,000 shares of Silgan Class B Stock, par value $.01 per share, and
1,000 shares of Silgan Class C common stock, par value $.01 per share (the
"Silgan Class C Stock"). The Company currently has one share of Silgan Class
A Stock and one share of Silgan Class B Stock outstanding, which shares were
issued to Holdings on June 30, 1989 in conjunction with the effectiveness of
the 1989 Mergers. No shares of Silgan Class C Stock are currently
outstanding.
DESCRIPTION OF HOLDINGS COMMON STOCK
General
Certain of the statements contained herein are summaries of the detailed
provisions of the Restated Certificate of Incorporation of Holdings (the
"Certificate of Incorporation") and are qualified in their entirety by
reference to the Certificate of Incorporation, a copy of which is filed
herewith.
Under the Certificate of Incorporation, Holdings has authority to issue
500,000 shares of Class A Common Stock, par value $.01 per share, 667,500
shares of Class B Common Stock, par value $.01 per share, and 1,000,000
shares of Class C Common Stock, par value $.01 per share. Holdings has an
aggregate of 1,135,000 shares of common stock outstanding as follows: (i)
417,500 shares of Holdings Class A Stock; (ii) 667,500 shares of Holdings
Class B Stock; and (iii) 50,000 shares of 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. Silver and
Horrigan 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 Holdings Discount 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, MSLEF II, BTNY, First Plaza and Messrs. R. Philip Silver and
D. Greg Horrigan 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. Silver and
Horrigan (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. Silver
and Horrigan 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. Silver and Horrigan or trusts for the benefit of those
family members, (iii) certain transfers among MSLEF II, BTNY, First Plaza and
Messrs. Silver and Horrigan 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, a company wholly-owned by Messrs. Silver and Horrigan, and Holdings
(described under "Certain Transactions--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, Messrs. Silver and Horrigan
and their respective affiliates and certain related family transferees and
estates, with Mr. Silver and his affiliates and certain related family
transferees and estates being deemed to be collectively one member of the
Group, and Mr. 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. 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 has agreed 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, the Amended and Restated By-laws of Holdings, and the
Amended and Restated Management Services Agreement (the "Post-IPO Management
Services Contract"), in each case substantially in the form agreed to
pursuant to the Holdings Organization Agreement and 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. See "Certain
Transactions--Management Agreements."
Pursuant to the provisions of the Holdings Organization Agreement, MSLEF
II has agreed 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 have agreed 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 has agreed 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. Silver and Horrigan. See "Certain
Transactions--Management Agreements."
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.
Description of the Holdings Stockholders 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.
The operative provisions of the Stockholders Agreement do not take effect
until after the occurrence of an IPO, at which time the Holdings Organization
Agreement will have terminated in accordance with its terms as described
above under "Description of the Holdings Organization Agreement." Certain of
the statements contained herein are summaries of the detailed provisions of
the Stockholders Agreement and are qualified in their entirety by reference
to the Stockholders Agreement.
The Stockholders Agreement provides that for a period of eight years
after the IPO, each of MSLEF II and First Plaza shall have the right to
demand two separate registrations of its shares of Holdings' common stock
(equalling a total of four separate demand registrations); provided, however,
that such demand right will terminate as to MSLEF II or First Plaza, as the
case may be, at such time as MSLEF II or First Plaza, as the case may be,
together with its affiliates, owns less than five percent of the issued and
outstanding shares of Holdings' common stock at any time. If, at any time or
from time to time for a period of eight years after the IPO, Holdings shall
determine to register Holdings' common stock (other than in connection with
certain non-underwritten offerings), Holdings will offer each of MSLEF II,
BTNY, First Plaza and Messrs. Silver and Horrigan the opportunity to register
shares of Holdings' common stock it holds in a "piggyback registration."
The Stockholders Agreement prohibits the transfer prior to June 30, 1999
(or, in the case of any restriction applicable to First Plaza, December 21,
1998) by MSLEF II, First Plaza or Messrs. Silver or Horrigan of Holdings'
common stock without the prior written consent of Messrs. Silver and Horrigan
and MSLEF II, except for (i) transfers made in connection with a public
offering or a Rule 144 Open Market Transaction (as defined in the
Stockholders Agreement), (ii) transfers made to an affiliate, which, in the
case of a transfer by First Plaza or MSLEF II to an affiliate, must be an
Investment Entity (defined generally to be any person who 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),
(iii) transfers made to certain family members of Messrs. Silver and Horrigan
or trusts for the benefit of those family members, (iv) certain transfers by
First Plaza to a third party that comply with certain rights of first refusal
of the Group and MSLEF II set forth in the Stockholders Agreement, (v)
certain transfers by MSLEF II to an Investment Entity or, in the event of
certain defaults under the amended and restated management services agreement
between S&H and Holdings, to a third party, that comply with certain rights
of first refusal of the Group set forth in the Stockholders Agreement, (vi)
certain transfers by either member of the Group to a third party that comply
with certain rights of first refusal of the other member of the Group and
MSLEF II set forth in the Stockholders Agreement, and (vii) in the case of
MSLEF II, a distribution of all or substantially all of the shares of
Holdings' common stock then owned by MSLEF II to the partners of MSLEF II (a
"MSLEF Distribution"). Notwithstanding the foregoing, MSLEF II may pledge
its shares of Holdings' common stock to a lender or lenders reasonably
acceptable to Holdings to secure a loan or loans to MSLEF II. In the event
of any proposed foreclosure of such pledge, such shares will be subject to
certain rights of first refusal of the Group set forth in the Stockholders
Agreement.
The Stockholders Agreement provides that until December 21, 1998, for so
long as MSLEF II and its affiliates (excluding the limited partners of MSLEF
II who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF
Distribution) shall hold at least one-half of the number of shares of
Holdings' common stock held by MSLEF II on December 21, 1993 (as adjusted, if
necessary, to take into account any stock dividend, stock split, combination
of shares, subdivision or recapitalization of the capital stock of Holdings),
the parties and their Restricted Voting Transferees (as defined in the
Stockholders Agreement) shall use their best efforts (including to vote any
shares of Holdings' common stock owned or controlled by such person or
otherwise) to cause the nomination and election of two (2) members of the
Board of Directors of Holdings to be chosen by MSLEF II; provided, however,
that each such nominee shall be (i) either an employee of Morgan Stanley
whose primary responsibility is managing investments for MSLEF II (or a
successor or related partnership) or (ii) a person reasonably acceptable to
the Group not engaged in (as a director, officer, employee, agent or
consultant or as a holder of more than five percent of the equity securities
of) a business competitive with that of Holdings.
In addition, until December 21, 1998, for so long as the Group shall
hold at least one-half of the number of shares of Holdings' common stock held
by it in the aggregate on December 21, 1993 (as adjusted, if necessary, to
take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings), the
parties and their Restricted Voting Transferees shall use their best efforts
(including to vote any shares of Holdings' common stock owned or controlled
by such person or otherwise) to cause the nomination and election of two (2)
individuals nominated by the "holders of a majority of the shares of [c]ommon
[s]tock held by the Group" (as such phrase is defined in the Stockholders
Agreement) as members of the Board of Directors of Holdings; provided,
however, that at least one (1) of such nominees shall be Mr. Silver or Mr.
Horrigan and the other person, if not Mr. Silver or Mr. Horrigan, shall be a
person reasonably acceptable to MSLEF II, so long as MSLEF II and its
affiliates (other than any affiliate which is not an Investment Entity and
excluding the limited partners of MSLEF II who may acquire shares of
Holdings' common stock from MSLEF II in a MSLEF distribution) shall hold at
least one-half of the number of shares of Holdings' common stock held by
MSLEF II at December 21, 1993 (as adjusted, if necessary, to take into
account any stock dividend, stock split, combination of shares, subdivision
or recapitalization of the capital stock of Holdings).
Subject to the terms of the preceding two paragraphs, for so long as the
Group shall hold at least one-half of the number of shares of Holdings'
common stock held by it in the aggregate at Decmeber 21, 1993 (as adjusted,
if necessary, to take into account any stock dividend, stock split,
combination of shares, subdivision or recapitalization of the capital stock
of Holdings), First Plaza and its Restricted Voting Transferees shall vote
all shares of Holdings' common stock held by them in favor of any other
directors standing for election to Holdings' Board of Directors for whom the
holders of a majority of the shares of Holdings' common stock held by the
Group shall direct First Plaza to vote.
The Stockholders Agreement further provides that until December 21,
1998, MSLEF II and its Restricted Voting Transferees shall vote all shares of
Holdings' common stock held by them against any unsolicited merger, or sale
of Holdings' business or its assets, if such transaction is opposed by the
holders of a majority of the shares of common stock held by the Group, unless
as of the applicable record date for such vote, the Group holds less than
ninety percent (90%) of the number of shares of Holdings' common stock held
by it in the aggregate at December 21, 1993 (as adjusted, if necessary, to
take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings). Until
December 21, 1998, First Plaza and its Restricted Voting Transferees shall
vote all shares of common stock held by them against any unsolicited merger,
or sale of Holdings' business or its assets, if such transaction is opposed
by the holders of a majority of the shares of common stock held by the Group;
provided, however, that First Plaza and its Restricted Voting Transferees
shall not be required to vote their shares of Holdings' common stock in
accordance with the foregoing if (i) in connection with such merger or sale,
(x) First Plaza and its Restricted Voting Transferees propose to sell or
otherwise transfer all of their shares of Holdings' common stock to a third
party for aggregate cash consideration of less than $10 million and (y) the
Group and/or MSLEF II has not exercised their right of first refusal in
respect of such sale or transfer by First Plaza or such right of first
refusal in respect of the shares of Holdings' common stock held by First
Plaza shall have terminated, or (ii) as of the applicable record date for
such vote, the Group holds less than ninety percent (90%) of the number of
shares of Holdings' common stock held by it in the aggregate at December 21,
1993 (as adjusted, if necessary, to take into account any stock dividend,
stock split, combination of shares, subdivision or recapitalization of the
capital stock of Holdings).
DESCRIPTION OF THE 11-3/4% NOTES
The 11-3/4% Notes were issued under an Indenture, dated as of June 29,
1992, between the Company and Shawmut Bank, N.A., as Trustee (the "Trustee").
A copy of the Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part and is available as described under
"Additional Information." The following summaries of certain provisions of
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended. Wherever
particular Sections or defined terms of the Indenture not otherwise defined
herein are referred to, such Sections or defined terms are incorporated
herein by reference. Capitalized terms used herein that are not otherwise
defined shall have the meanings assigned to them in the Indenture.
General
The 11-3/4% Notes are unsecured senior subordinated obligations of the
Company, limited to $135 million aggregate principal amount, and mature on
June 15, 2002. Each 11-3/4% Note bears interest at the rate per annum shown
on the front cover of this Prospectus from June 29, 1992 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually (to Holders of record at the close of business on the
June 1 or December 1 immediately preceding the Interest Payment Date) on June
15 and December 15 of each year, commencing December 15, 1992. Principal of,
premium, if any, and interest on the 11-3/4% Notes are payable, and the 11-
3/4% Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which shall
initially be the office of Shawmut Trust Company, at 40 Broad Street, New
York, New York 10004); provided that, at the option of the Company, payment
of interest may be made by check mailed to the address of the Holders as such
address appears in the Security Register. (Sections 2.01, 2.03 and 2.05)
The 11-3/4% Notes are issuable only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000.
(Section 2.02) No service charge shall be made for any registration of
transfer or exchange of 11-3/4% Notes, but the Company may require payment of
a sum sufficient to cover any transfer tax or other similar governmental
charge payable in connection therewith. (Section 2.05)
Subordination
The payment of the Senior Subordinated Obligations is, to the extent set
forth in the Indenture, subordinated in right of payment to the prior payment
in full, in cash or cash equivalents, of all Senior Indebtedness (as defined
below), including the Company's obligations under the Credit Agreement and
the Secured Notes. At June 30, 1994, $225.0 million of Senior Indebtedness
of the Company was outstanding. See "Capitalization."
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Indebtedness
or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred. To the extent
the obligation to repay any Senior Indebtedness is declared to be fraudulent,
invalid, or otherwise set aside under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then the obligation so
declared fraudulent, invalid or otherwise set aside (and all other amounts
that would come due with respect thereto had such obligations not been so
affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes of the Indenture as if such declaration,
invalidity or setting aside had not occurred. Upon any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, upon any dissolution or winding up
or total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due or to become due upon all Senior Indebtedness
(including any interest accruing subsequent to an event of bankruptcy,
whether or not such interest is an allowed claim enforceable against the
debtor under the United States Bankruptcy Code) shall first be paid in full,
in cash or cash equivalents before the Holders or the Trustee on behalf of
the Holders shall be entitled to receive any payment by the Company on
account of any Senior Subordinated Obligations, or any payment to acquire any
of the 11-3/4% Notes for cash, property or securities, or any distribution
with respect to the 11-3/4% Notes of any cash, property or securities. Before
any payment may be made by or on behalf of the Company of any Senior
Subordinated Obligations upon any such dissolution, winding up, liquidation
or reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee on behalf of the Holders would be entitled,
but for the subordination provisions of the Indenture, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person making such payment or distribution, or by the
Holders or the Trustee if received by them or it, directly to the holders of
the Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
representatives, or to the trustee or trustees under any indenture pursuant
to which any such Senior Indebtedness may have been issued, as their
respective interests appear, to the extent necessary to pay all such Senior
Indebtedness in full, in cash or cash equivalents after giving effect to any
concurrent payment, distribution or provision therefor, to or for the holders
of such Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company of Senior
Subordinated Obligations, whether pursuant to the terms of the 11-3/4% Notes
or upon acceleration or otherwise, shall be made if, at the time of such
payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness, and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of
the holders of such Senior Indebtedness. In addition, during the continuance
of any other event of default with respect to (i) the Credit Agreement or the
Secured Notes pursuant to which the maturity thereof may be accelerated and
(a) upon receipt by the Trustee of written notice from the Bank Agent or, if
there is no Credit Agreement in effect, from an authorized representative of
the Requisite Secured Noteholders or (b) if such event of default under the
Credit Agreement or the Secured Notes results from the acceleration of the
11-3/4% Notes, from and after the date of such acceleration, no payment of
Senior Subordinated Obligations may be made by or on behalf of the Company
upon or in respect of the 11-3/4% Notes for a period (a "Payment Blockage
Period") commencing on the earlier of the date of receipt of such notice or
the date of such acceleration and ending 159 days thereafter (unless such
Payment Blockage Period shall be terminated by written notice to the Trustee
from the Bank Agent or, if there is no Credit Agreement in effect, from an
authorized representative of the Requisite Secured Noteholders or such event
of default has been cured or waived) or (ii) any other Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated, upon
receipt by the Trustee of written notice from the trustee or other
representative for the holders of such other Designated Senior Indebtedness
(or the holders of at least a majority in principal amount of such other
Designated Senior Indebtedness then outstanding), no payment of Senior
Subordinated Obligations may be made by or on behalf of the Company upon or
in respect of the 11-3/4% Notes for a Payment Blockage Period commencing on
the date of receipt of such notice and ending 119 days thereafter (unless, in
each case, such Payment Blockage Period shall be terminated by written notice
to the Trustee from such trustee or other representatives for such holders).
Not more than one Payment Blockage Period may be commenced with respect to
the 11-3/4% Notes during any period of 360 consecutive days; provided that,
subject to the limitation contained in the next sentence, the commencement of
a Payment Blockage Period by the representatives for, or the holders of,
Designated Senior Indebtedness other than under the Credit Agreement, the
Secured Notes or under clause (i)(b) of this paragraph shall not bar the
commencement of another Payment Blockage Period by the Bank Agent or, if
there is no Credit Agreement in effect, by an authorized representative of
the Requisite Secured Noteholders within such period of 360 consecutive days.
Notwithstanding anything in the Indenture to the contrary, there must be 180
consecutive days in any 360-day period in which no Payment Blockage Period is
in effect. No event of default (other than an event of default pursuant to
the financial maintenance covenants under the Credit Agreement) that existed
or was continuing (it being acknowledged that any subsequent action that
would give rise to an event of default pursuant to any provision under which
an event of default previously existed or was continuing shall constitute a
new event of default for this purpose) on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis for
the commencement of a second Payment Blockage Period by the representative
for, or the holders of, such Designated Senior Indebtedness, whether or not
within a period of 360 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
(Article Ten)
By reason of the subordination provisions described above, in the event
of liquidation or insolvency, creditors of the Company who are not holders of
Senior Indebtedness or of the 11-3/4% Notes may recover less ratably than
holders of Senior Indebtedness and may recover more ratably than Holders of
the 11-3/4% Notes.
"Senior Indebtedness" is defined to mean the following obligations of
the Company: (i) all Indebtedness and other monetary obligations of the
Company under the Credit Agreement, the Secured Notes (including the Secured
Notes Purchase Agreement), any Interest Rate Agreement or any Currency
Agreement, (ii) all other Indebtedness of the Company (other than
Indebtedness evidenced by the 11-3/4% Notes), including principal and
interest on such Indebtedness, unless such Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such Indebtedness
is issued, is pari passu with, or subordinated in right of payment to, the
11-3/4% Notes and (iii) all fees, expenses and indemnities payable in
connection with the Credit Agreement, the Secured Notes (including the
Secured Notes Purchase Agreement) and, if applicable, Currency Agreements and
Interest Rate Agreements; provided that the term "Senior Indebtedness" shall
not include (a) any Indebtedness of the Company that, when Incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code, was without recourse to the Company, (b) any Indebtedness of
the Company to a Subsidiary of the Company or to a joint venture in which the
Company has an interest, (c) any Indebtedness of the Company (other than such
Indebtedness already described in clause (i) above) of the type described in
clause (ii) above and not permitted by the "Limitation on Indebtedness"
covenant described below, (d) in the event the Holdings Discount Debentures
become obligations of the Company (or any Person becoming the successor
obligor on the 11-3/4% Notes), Indebtedness under the Holdings Discount
Debentures, which shall be subordinated in right of payment to the 11-3/4%
Notes, (e) any repurchase, redemption or other obligation in respect of
Redeemable Stock, (f) any Indebtedness to any employee or officer of the
Company or any of its Subsidiaries, (g) any liability for federal, state,
local or other taxes owed or owing by the Company and (h) any Trade Payables.
"Senior Indebtedness" also includes interest accruing subsequent to events of
bankruptcy of the Company and its Subsidiaries at the rate provided for in
the document governing such Indebtedness, whether or not such interest is an
allowed claim enforceable against the debtor in a bankruptcy case under
federal bankruptcy law. (Section 1.01)
"Designated Senior Indebtedness" is defined to mean (i) Indebtedness
under the Credit Agreement and the Secured Notes (including the Secured Notes
Purchase Agreement), including refinancings thereof if it is specifically
designated by the Company in the instrument creating or evidencing such
refinancing Indebtedness that such refinancing Indebtedness constitutes
"Designated Senior Indebtedness" and (ii) any other Indebtedness constituting
Senior Indebtedness that, at any date of determination, has an aggregate
principal amount of at least $25 million and is specifically designated by
the Company in the instrument creating or evidencing such Senior Indebtedness
as "Designated Senior Indebtedness." (Section 1.01)
Except as set forth in the Indenture, the subordination provisions
described above will cease to be applicable to the 11-3/4% Notes upon any
defeasance of the 11-3/4% Notes as described under "--Defeasance" below.
(Article Eight)
Optional Redemption
The 11-3/4% Notes are redeemable at any time, at the Company's option,
in whole or in part, on or after June 15, 1997 and prior to maturity, upon
not less than 30 nor more than 60 days' prior notice mailed by first class
mail to each Holder's last address as it appears in the Security Register, at
the following Redemption Prices (expressed in percentages of principal
amount) plus accrued interest to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date), if
redeemed during the 12-month period commencing on or after June 15 of the
years set forth below:
Redemption
Year Price
---- ---------
1997 . . . . . . . . . . . . . . . . . . . . 105.8750%
1998 . . . . . . . . . . . . . . . . . . . . 102.9375%
and after June 15, 1999, at 100% of principal amount. (Sections 3.01 and
3.04)
Selection. In the case of any partial redemption, selection of the 11-
3/4% Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the 11-3/4% Notes are listed or, if the 11-3/4% Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Note of $1,000 in original principal amount or
less shall be redeemed in part. If any 11-3/4% Note is to be redeemed in part
only, the notice of redemption relating to such 11-3/4% Note shall state the
portion of the principal amount thereof to be redeemed. A new 11-3/4% Note
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original 11-3/4%
Note. (Sections 3.03 and 3.04)
The Credit Agreement and the Secured Notes each contain a covenant
prohibiting the optional redemption of the 11-3/4% Notes. See "Description of
Certain Indebtedness--Description of the Credit Agreement" and "--Description
of the Secured Notes."
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided. (Section
1.01)
"Adjusted Consolidated Net Income" is defined to mean, for any period,
the aggregate net income (or loss) of any Person and its consolidated
Subsidiaries for such period determined in conformity with GAAP; provided
that the following items shall be excluded in computing Adjusted Consolidated
Net Income (without duplication): (i) the net income (or loss) of such Person
(other than a Subsidiary of such Person) in which any other Person (other
than such Person or any of its Subsidiaries) has a joint interest, except to
the extent of the amount of dividends or other distributions actually paid to
such Person or any of its Subsidiaries by such other Person during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (c) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below (and in such
case, except to the extent includible pursuant to clause (i) above), the net
income (or loss) of such Person accrued prior to the date it becomes a
Subsidiary of any other Person or is merged into or consolidated with such
other Person or any of its Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by such other Person or any
of its Subsidiaries; (iii) the net income (or loss) of any Subsidiary of any
Person to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary of such net income is not at the time
permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary; (iv) any gains or losses (on an after-tax
basis) attributable to Asset Sales; (v) any amounts paid or accrued as
dividends on Preferred Stock of such Person or Preferred Stock of any
Subsidiary of such Person; (vi) any amounts reducing Adjusted Consolidated
Net Income resulting from payments made to holders of stock options or stock
appreciation rights resulting from the 1989 Mergers; and (vii) all
extraordinary gains and extraordinary losses; provided that, solely for the
purposes of calculating the Interest Coverage Ratio (and in such case, except
to the extent includible pursuant to clause (i) above), "Adjusted
Consolidated Net Income" of the Company shall include the amount of all cash
dividends received by the Company or any Subsidiary of the Company from an
Unrestricted Subsidiary.
"Affiliate" is defined to mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
is defined to mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
For purposes of this definition, neither the Bank Agent nor any Bank nor any
affiliate of any of them shall be deemed to be an Affiliate of the Company or
any Subsidiary of the Company.
"Asset Acquisition" is defined to mean (i) an investment by the Company
or any of its Subsidiaries in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any of its Subsidiaries or shall
be merged into or consolidated with the Company or any of its Subsidiaries or
(ii) an acquisition by the Company or any of its Subsidiaries of the property
and assets of any Person other than the Company or any of its Subsidiaries
that constitute substantially all of an operating unit or business of such
Person.
"Asset Disposition" is defined to mean the sale or other disposition by
the Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) of (i) all or substantially all of the Capital
Stock of any Subsidiary of the Company or (ii) all or substantially all of
the property and assets that constitute an operating unit or business of the
Company or any of its Subsidiaries.
"Asset Sale" is defined to mean, with respect to any Person, any sale,
transfer or other disposition (including by way of merger, consolidation or
sale-leaseback transactions) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person other
than the Company or any of its Subsidiaries of (i) all or any of the Capital
Stock of any Subsidiary of such Person, (ii) all or substantially all of the
property and assets of an operating unit or business of such Person or any of
its Subsidiaries or (iii) any other property and assets of such Person or any
of its Subsidiaries outside the ordinary course of business of such Person or
such Subsidiary and, in each case, that is not governed by the provisions in
the Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company; provided that
sales or other dispositions of inventory, receivables and other current
assets shall not be included within the meaning of such term.
"Average Life" is defined to mean, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum
of the product of (a) the number of years from such date of determination to
the dates of each successive scheduled principal payment of such debt
security and (b) the amount of such principal payment by (ii) the sum of all
such principal payments.
"Bank Agent" is defined to mean Bankers Trust Company, as agent for the
Banks pursuant to the Credit Agreement, and any successor or successors
thereto.
"Banks" is defined to mean the lenders who are from time to time parties
to the Credit Agreement.
"Board of Directors" is defined to mean the Board of Directors of the
Company or any committee of such Board of Directors duly authorized to act
under the Indenture.
"Business Day" is defined to mean any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city
of the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock of such Person
which is outstanding or issued on or after the date of the Indenture,
including, without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which the
discounted present value of the rental obligations of such Person as lessee,
in conformity with GAAP, is required to be capitalized on the balance sheet
of such Person; and "Capitalized Lease Obligation" is defined to mean the
rental obligations, as aforesaid, under such lease.
"Change of Control" is defined to mean such time as (i) (a) a "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than MSLEF II, Mr. Horrigan, Mr. Silver and their respective
Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of more than 35% of the total voting power of the then
outstanding Voting Stock of Holdings and (b) MSLEF II, Mr. Horrigan, Mr.
Silver and their respective Affiliates beneficially own, directly or
indirectly, less than 25% of the total voting power of the then outstanding
Voting Stock of Holdings; (ii) individuals who at the beginning of any period
of two consecutive calendar years constituted the board of directors of
Holdings (together with any new directors whose election by the board of
directors of Holdings or whose nomination for election by the Holdings'
shareholders was approved by a vote of at least two-thirds of the members of
the board of directors of Holdings then still in office who either were
members of the board of directors of Holdings at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the members of the board of
directors of Holdings then in office; (iii) (a) Holdings merges into or
consolidates with any other Person or sells, conveys, transfers, leases or
otherwise disposes of, all or substantially all of its property and assets to
any Person or (b) any Person merges into Holdings, in either case pursuant to
a transaction in which any Voting Stock of Holdings outstanding immediately
prior to the effectiveness thereof is reclassified or changes into or is
exchanged for cash, securities or other property; provided that any merger,
consolidation, sale, transfer, lease or other disposition (1) between the
Company and Holdings, (2) between Holdings and any of its Subsidiaries or
between Subsidiaries (including, without limitation, the reincorporation of
Holdings in another jurisdiction) or (3) for the purpose of creating a public
holding company for Holdings in which all holders of Holdings' Capital Stock
would be entitled to receive (other than cash in lieu of fractional shares)
solely Capital Stock of the holding company in amounts proportionate to their
holdings of Capital Stock of Holdings immediately prior to such transaction,
shall be excluded from the operation of this clause (iii); or (iv) Holdings
shall not beneficially own, directly or indirectly, at least a majority of
the issued and outstanding Voting Stock of the Company other than as a result
of a merger or consolidation of Holdings and the Company.
"Closing Date" is defined to mean the date on which the 11-3/4% Notes
are originally issued under the Indenture.
"Common Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of common stock of such Person
which is outstanding or issued on or after the date of the Indenture,
including, without limitation, all series and classes of such common stock.
"Consolidated EBITDA" is defined to mean, with respect to any Person for
any period, the sum of the amounts for such period of (i) Adjusted
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) income
taxes (other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, (v) amortization expense and (vi) all other noncash
items reducing Adjusted Consolidated Net Income, less all noncash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with
GAAP; provided that, if a Person has any Subsidiary that is not a Wholly
Owned Subsidiary of such Person, Consolidated EBITDA of such Person shall be
reduced by an amount equal to (a) the Adjusted Consolidated Net Income of
such Subsidiary multiplied by (b) the quotient of (1) the number of shares of
outstanding Common Stock of such Subsidiary not owned on the last day of such
period by such Person or any Subsidiary of such Person divided by (2) the
total number of shares of outstanding Common Stock of such Subsidiary on the
last day of such period.
"Consolidated Interest Expense" is defined to mean, with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation,
calculated in accordance with the effective interest method of accounting;
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing; and the net costs
associated with Interest Rate Agreements) and all but the principal component
of rentals in respect of Capitalized Lease Obligations paid, accrued or
scheduled to be paid or accrued by such Person during such period; excluding,
however, (i) any amount of such interest of any Subsidiary of such Person if
the net income (or loss) of such Subsidiary is excluded in the calculation of
Adjusted Consolidated Net Income for such Person pursuant to clause (iii) of
the definition thereof (but only in the same proportion as the net income (or
loss) of such Subsidiary is excluded from the calculation of Adjusted
Consolidated Net Income for such Person pursuant to clause (iii) of the
definition thereof), (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the 1989 Mergers and the
Refinancing and (iii) amortization of any other deferred financing costs, all
as determined on a consolidated basis in conformity with GAAP.
"Consolidated Net Tangible Assets" is defined to mean the total amount
of assets of the Company and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting
from write-ups of capital assets (excluding write-ups in connection with
accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its consolidated
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, all as set forth on the most recently available
consolidated balance sheet of the Company and its consolidated Subsidiaries
prepared in conformity with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of
determination, stockholders' equity as set forth on the most recently
available consolidated balance sheet of the Company and its consolidated
Subsidiaries (which shall be as of a date not more than 60 days prior to the
date of such computation), less any amounts attributable to Redeemable Stock
or any equity security convertible into or exchangeable for Indebtedness, the
cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of Capital Stock of the Company or any of its
Subsidiaries, each item to be determined in conformity with GAAP (excluding
the effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
52).
"Credit Agreement" is defined to mean the Credit Agreement dated as of
December 21, 1993, among the Company, Containers, Plastics, the Banks party
thereto, Bank of America, as Co-Agent, and the Bank Agent, together with the
related documents thereto (including, without limitation, any Guarantees and
security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented, replaced or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing or otherwise restructuring (including, but not
limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Company whose obligations are Guaranteed by the Company
thereunder and who are included as additional borrowers thereunder) all or
any portion of the Indebtedness under such agreement or any successor
agreement; provided that, with respect to any agreement providing for the
refinancing of Indebtedness under the Credit Agreement, such agreement shall
only be the Credit Agreement under the Indenture if a notice to that effect
is delivered by the Company to the Trustee and there shall be at any time
only one debt instrument that is the Credit Agreement under the Indenture.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in
currency values to or under which the Company or any of its Subsidiaries is a
party or a beneficiary on the date of the Indenture or becomes a party or a
beneficiary thereafter.
"GAAP" is defined to mean generally accepted accounting principles in
the United States of America as in effect as of the date of the Indenture
applied on a basis consistent with the principles, methods, procedures and
practices employed in the preparation of the Company's audited financial
statements, including, without limitation, those set forth in the opinions
and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other statements by
such other entity as approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP, except that calculations
made for purposes of determining compliance with the terms of the covenants
described below and other provisions of the Indenture shall be made without
giving effect to (i) the amortization of any expenses incurred in connection
with the 1989 Mergers or the Refinancing, (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 and 17 and (iii) any charges associated with
the adoption of Statement No. 106 or Statement No. 109.
"Guarantee" is defined to mean any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); provided
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Holder" is defined to mean the registered holder of any 11-3/4% Note.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness; provided that neither the accrual of interest
(whether such interest is payable in cash or kind) nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any
date of determination (without duplication), (i) all indebtedness of such
Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (v) all
obligations of such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided that the
amount of such Indebtedness shall be the lesser of (a) the fair market value
of such asset at such date of determination and (b) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person, (viii)
all obligations of such Person in respect of borrowed money under the Credit
Agreement, the Secured Notes (including the Secured Notes Purchase Agreement)
and any Guarantees thereof and (ix) to the extent not otherwise included in
this definition, all obligations of such Person under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any contingent
obligations at such date; provided that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of
such Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at such time as determined in conformity
with GAAP.
"Interest Coverage Ratio" is defined to mean, with respect to any Person
on any Transaction Date, the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the four fiscal quarters for which
financial information in respect thereof is available immediately prior to
such Transaction Date to (ii) the aggregate Consolidated Interest Expense of
such Person during such four fiscal quarters. In making the foregoing
calculation, (a) pro forma effect shall be given to (1) any Indebtedness
Incurred subsequent to the end of the four-fiscal-quarter period referred to
in clause (i) and prior to the Transaction Date (other than Indebtedness
Incurred under a revolving credit or similar arrangement to the extent of the
commitment thereunder (or under any predecessor revolving credit or similar
arrangement) on the last day of such period), (2) any Indebtedness Incurred
during such period to the extent such Indebtedness is outstanding at the
Transaction Date and (3) any Indebtedness to be Incurred on the Transaction
Date, in each case as if such Indebtedness had been Incurred on the first day
of such four-fiscal-quarter period and after giving effect to the application
of the proceeds thereof; (b) Consolidated Interest Expense attributable to
interest on any Indebtedness (whether existing or being Incurred) computed on
a pro forma basis and bearing a floating interest rate shall be computed as
if the rate in effect on the date of computation (taking into account any
Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term in excess of 12 months) had been the
applicable rate for the entire period; (c) there shall be excluded from
Consolidated Interest Expense any Consolidated Interest Expense related to
any amount of Indebtedness that was outstanding during such
four-fiscal-quarter period or thereafter but which is not outstanding or
which is to be repaid on the Transaction Date, except for Consolidated
Interest Expense accrued (as adjusted pursuant to clause (b)) during such
four-fiscal-quarter period under a revolving credit or similar arrangement to
the extent of the commitment thereunder (or under any successor revolving
credit or similar arrangement) on the Transaction Date; (d) pro forma effect
shall be given to Asset Dispositions and Asset Acquisitions that occur during
such four-fiscal-quarter period or thereafter and prior to the Transaction
Date (including any Asset Acquisition to be made with the Indebtedness
Incurred pursuant to clause (i) above) as if they had occurred on the first
day of such four-fiscal-quarter period; (e) with respect to any such
four-fiscal-quarter period commencing prior to the Refinancing, the
Refinancing shall be deemed to have taken place on the first day of such
period; and (f) pro forma effect shall be given to asset dispositions and
asset acquisitions that have been made by any Person that has become a
Subsidiary of the Company or has been merged with or into the Company or any
Subsidiary of the Company during the four-fiscal-quarter period referred to
above or subsequent to such period and prior to the Transaction Date and that
would have been Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Subsidiary of the Company as if
such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such period.
"Interest Rate Agreement" is defined to mean any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement or other
similar agreement or arrangement designed to protect the Company or any of
its Subsidiaries against fluctuations in interest rates to or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
the Indenture or becomes a party or a beneficiary thereafter.
"Investment" is defined to mean any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of any Person or its
Subsidiaries) or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other similar
instruments issued by any other Person. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments"
covenant described below, (i) "Investment" shall include the fair market
value of the net assets of any Subsidiary of the Company at the time that
such Subsidiary of the Company is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Subsidiary of the Company and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time
of such transfer, in each case as determined by the Board of Directors in
good faith.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Net Cash Proceeds" is defined to mean, with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of
counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (whether or not such taxes will actually be paid or are
payable) as a result of such Asset Sale computed without regard to the
consolidated results of operations of the Company and its Subsidiaries, taken
as a whole, (iii) payments made to repay Indebtedness or any other obligation
outstanding at the time of such Asset Sale that either (a) is secured by a
Lien on the property or assets sold or (b) is required to be paid as a result
of such sale and (iv) appropriate amounts to be provided by the Company or
any Subsidiary of the Company as a reserve against any liabilities associated
with such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Person" is defined to mean an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of preferred or preference stock of
such Person which is outstanding or issued on or after the date of the
Indenture, including, without limitation, the Silgan Preferred Stock.
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the 11-3/4% Notes, (ii) redeemable
at the option of the holder of such class or series of Capital Stock at any
time prior to the Stated Maturity of the 11-3/4% Notes or (iii) convertible
into or exchangeable for Capital Stock referred to in clause (i) or (ii)
above or Indebtedness having a scheduled maturity prior to the Stated
Maturity of the 11-3/4% Notes; provided that any Capital Stock that would not
constitute Redeemable Stock but for provisions thereof giving holders thereof
the right to require the Company to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or a "change of control" occurring
prior to the Stated Maturity of the 11-3/4% Notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provision
applicable to such Capital Stock is no more favorable to the holders of such
Capital Stock than the provisions contained in the "Limitation on Asset
Sales" and "Repurchase of Notes upon Change of Control" covenants described
below and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior
to the Company's repurchase of 11-3/4% Notes required to be repurchased by
the Company under the "Limitation on Asset Sales" and "Repurchase of Notes
upon Change of Control" covenants described below.
"Restricted Subsidiary" is defined to mean any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Requisite Secured Noteholders" means a majority in aggregate principal
amount of outstanding Secured Notes.
"Senior Subordinated Obligations" is defined to mean any principal of,
premium, if any, or interest on the 11-3/4% Notes payable pursuant to the
terms of the 11-3/4% Notes or upon acceleration, including any amounts
received upon the exercise of rights of rescission or other rights of action
(including claims for damages) or otherwise, to the extent relating to the
purchase price of the 11-3/4% Notes or amounts corresponding to such
principal, premium, if any, or interest on the 11-3/4% Notes.
"Shareholder Subordinated Notes" shall have the same meaning given such
term in the Amended and Restated Credit Agreement (including the exhibits
thereto) as in effect on the date of the Indenture.
"Significant Subsidiary" is defined to mean, at any date of
determination, any Subsidiary of the Company that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted
for more than 10% of the consolidated revenues of the Company or (ii) as of
the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company, all as set forth on the most recently
available consolidated financial statements of the Company and its
consolidated Subsidiaries for such fiscal year prepared in conformity with
GAAP.
"Stated Maturity" is defined to mean, with respect to any debt security
or any installment of interest thereon, the date specified in such debt
security as the fixed date on which any principal of such debt security or
any such installment of interest is due and payable.
"Stock Based Plan" is defined to mean any stock option plan, stock
appreciation rights plan or other similar plan or agreement of the Company or
any Subsidiary of the Company relating to Capital Stock of Holdings, the
Company or any Subsidiary of the Company established and in effect from time
to time, including, without limitation, the Holdings Organization Agreement
or any stock option plan, stock appreciation rights plan or other similar
plan or agreement for the benefit of employees of the Company and its
Subsidiaries.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity of which more than 50% of
the outstanding Voting Stock is owned, directly or indirectly, by the Company
or by one or more other Subsidiaries of the Company, or by such Person and
one or more other Subsidiaries of such Person; provided that, except as the
term "Subsidiary" is used in the definition of "Unrestricted Subsidiary"
described below, an Unrestricted Subsidiary shall not be deemed to be a
Subsidiary of the Company.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with
the acquisition of goods or services.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien
on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided that
either (a) the Subsidiary to be so designated has total assets of $1,000 or
less or (b) if such Subsidiary has assets greater than $1,000, that such
designation would be permitted under the "Limitation on Restricted Payments"
covenant described below. The Board of Directors may designate any
Unrestricted Subsidiary to be a Subsidiary of the Company; provided that
immediately after giving effect to such designation (1) the Company could
Incur $1.00 of additional Indebtedness under the first paragraph in part (a)
of the "Limitation on Indebtedness" covenant described below and (2) no Event
of Default, or any event that is, or after the giving of notice or the
passage of time or both would be, an Event of Default, shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing promptly with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" is defined to mean, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the
election of directors of such Person.
"Wholly Owned Subsidiary" is defined to mean, (i) with respect to
Holdings and the Company, Plastics and Containers, and (ii) with respect to
any Person, any Subsidiary of such Person if all of the Common Stock or other
similar equity ownership interests (but not including Preferred Stock) in
such Subsidiary (other than any director's qualifying shares or Investments
by foreign nationals mandated by applicable law) is owned directly or
indirectly by such Person.
Covenants
Limitation on Indebtedness
(a) So long as any of the 11-3/4% Notes are outstanding, the Company
shall not Incur any Indebtedness (other than the 11-3/4% Notes, the Secured
Notes (including the Secured Notes Purchase Agreement) and Indebtedness
existing on the Closing Date) unless after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom,
the Interest Coverage Ratio of the Company would be greater than 2.1:1.
Notwithstanding the foregoing, the Company may Incur each and all of the
following: (i) Indebtedness outstanding at any time in an aggregate principal
amount not to exceed the sum of (a) the aggregate outstanding Indebtedness
and unutilized commitment on the Closing Date under the Amended and Restated
Credit Agreement plus (b) an aggregate amount not to exceed $85 million
outstanding at any time; provided that if Indebtedness Incurred under this
clause (i) is exchanged, refinanced or refunded with Indebtedness of Holdings
that is Incurred under clause (v) of the second paragraph of part (a) of
Section 4.03 of the Indenture relating to the Holdings Discount Debentures,
the aggregate amount of Indebtedness permitted to be Incurred under this
clause (i) shall be reduced by the principal amount (or, if such indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, the original issue price)
of the Indebtedness issued by Holdings; (ii) Indebtedness to any Restricted
Subsidiary; (iii) Indebtedness Incurred after the date of the Indenture the
net proceeds of which are used to retire the Holdings Discount Debentures;
provided that such Indebtedness (A) by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
expressly made subordinate in right of payment to the 11-3/4% Notes at least
to the extent that the 11-3/4% Notes are subordinated to Senior Indebtedness
and (B) determined as of the date of Incurrence of such Indebtedness, does
not mature prior to the Stated Maturity of the 11-3/4% Notes, and the Average
Life of such Indebtedness is greater than the remaining Average Life of the
11-3/4% Notes; (iv) Indebtedness issued in exchange for, or the net proceeds
of which are used to exchange, refinance or refund, outstanding Indebtedness
of the Company, other than Indebtedness Incurred under clauses (i), (v) and
(x) and any refinancings thereof, in an amount (or, if such new Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, with an original issue
price) not to exceed the amount so exchanged, refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness
the proceeds of which are used to exchange, refinance or refund the 11-3/4%
Notes or other Indebtedness of the Company that is subordinated in right of
payment to the 11-3/4% Notes shall only be permitted under this clause (iv)
if: (A) in case the 11-3/4% Notes are exchanged, refinanced or refunded in
part, such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is expressly made
pari passu with, or subordinate in right of payment to, the remaining 11-3/4%
Notes, (B) in case the Indebtedness to be exchanged, refinanced or refunded
is subordinated in right of payment to the 11-3/4% Notes, such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, is expressly made subordinate in right of
payment to the 11-3/4% Notes at least to the extent that the Indebtedness to
be exchanged, refinanced or refunded is subordinated in right of payment to
the 11-3/4% Notes and (C) in case the 11-3/4% Notes are exchanged, refinanced
or refunded in part or the Indebtedness to be exchanged, refinanced or
refunded is subordinated in right of payment to the 11-3/4% Notes, such
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the 11-3/4%
Notes, and the Average Life of such Indebtedness is at least equal to the
remaining Average Life of the 11-3/4% Notes; and provided further that in no
event may Indebtedness of the Company that is pari passu with, or
subordinated in right of payment to, the 11-3/4% Notes be exchanged,
refinanced or refunded by means of Indebtedness of any Subsidiary of the
Company pursuant to this clause (iv); (v) Indebtedness to Holdings in an
aggregate amount not to exceed $30 million outstanding at any time; provided
that such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is expressly made
subordinate in right of payment to the 11-3/4% Notes at least to the extent
that the 11-3/4% Notes are subordinated to Senior Indebtedness; (vi) in the
event the Holdings Discount Debentures or any other Indebtedness of Holdings
become obligations of the Company (or any Person becoming the successor
obligor on the 11-3/4% Notes), the Holdings Discount Debentures or such other
Indebtedness of Holdings; (vii) Indebtedness Incurred in connection with the
purchase, redemption, acquisition, cancellation or other retirement for value
of shares of Capital Stock of Holdings, the Company or any Restricted
Subsidiary, options on any such shares or related stock appreciation rights
or similar securities held by officers or employees or former officers or
employees (or their estates or beneficiaries under their estates) and which
were issued pursuant to any Stock Based Plan, upon death, disability,
retirement, termination of employment or pursuant to the terms of such Stock
Based Plan or any other agreement under which such shares of Capital Stock,
options, related rights or similar securities were issued; provided that (A)
such Indebtedness (other than any Shareholder Subordinated Notes, which must
be pari passu with, or subordinated in right of payment to, the 11-3/4%
Notes), by its terms or by the terms of any agreement or instrument pursuant
to which such Indebtedness is issued, is expressly made subordinate in right
of payment to the 11-3/4% Notes at least to the extent that the 11-3/4% Notes
are subordinated in right of payment to Senior Indebtedness, (B) such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, provides that no payments of
principal of such Indebtedness by way of sinking fund, mandatory redemption
or otherwise (including defeasance) may be made by the Company (including,
without limitation, at the option of the holder thereof other than an option
given to a holder pursuant to an "asset sale" or a "change of control"
provision that is no more favorable to the holders of such Indebtedness than
the provisions contained in the "Limitation on Asset Sales" and "Repurchase
of Notes upon a Change of Control" covenants and such Indebtedness
specifically provides that the Company will not repurchase or redeem such
Indebtedness pursuant to such provisions prior to the Company's repurchase of
the 11-3/4% Notes required to be repurchased by the Company under the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of
Control" covenants) at any time prior to the Stated Maturity of the 11-3/4%
Notes and (C) the scheduled maturity of all principal of such Indebtedness is
beyond the Stated Maturity of the 11-3/4% Notes; (viii) Indebtedness (A) in
respect of performance bonds, bankers' acceptances and surety or appeal bonds
provided in the ordinary course of business, (B) under Currency Agreements
and Interest Rate Agreements; provided that in the case of Currency
Agreements that relate to other Indebtedness, such Currency Agreements do not
increase the Indebtedness of the Company outstanding at any time other than
as a result of fluctuations in foreign currency exchange rates or by reason
of fees, indemnities and compensation payable thereunder and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Subsidiaries pursuant to such agreements, in any case Incurred in connection
with the disposition of any business, assets or Subsidiary of the Company,
other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Subsidiary of the Company for the
purpose of financing such acquisition; (ix) Indebtedness in respect of
letters of credit (other than letters of credit issued pursuant to the Credit
Agreement) in an aggregate amount not to exceed $15 million outstanding at
any time; and (x) Indebtedness in an aggregate amount not to exceed $10
million outstanding at any time; provided that such Indebtedness, (A) by its
terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, is expressly made subordinate in right of payment to
the 11-3/4% Notes at least to the extent that the 11-3/4% Notes are
subordinated in right of payment to Senior Indebtedness, (B) determined as of
the date of Incurrence of such Indebtedness, does not mature prior to the
Stated Maturity of the 11-3/4% Notes, and the Average Life of such
Indebtedness is greater than the remaining Average Life of the 11-3/4% Notes
and (C) by its terms or by the terms of any agreement or instrument pursuant
to which such Indebtedness is issued, provides that no payments of principal
of such Indebtedness by way of sinking fund, mandatory redemption or
otherwise (including defeasance) may be made by the Company (including,
without limitation, at the option of the holder thereof other than an option
given to a holder pursuant to an "asset sale" or "change of control"
provision that is no more favorable to the holders of such Indebtedness than
the provisions contained in the "Limitation on Asset Sales" and "Repurchase
of Notes upon a Change of Control" covenants and such Indebtedness
specifically provides that the Company will not repurchase or redeem such
Indebtedness pursuant to such provisions prior to the Company's repurchase of
the 11-3/4% Notes required to be repurchased by the Company under the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of
Control" covenants) at any time prior to the Stated Maturity of the 11-3/4%
Notes.
(b) So long as any of the 11-3/4% Notes are outstanding, the Company
shall not permit any Restricted Subsidiary to Incur any Indebtedness (other
than Indebtedness existing on the Closing Date) other than the following: (i)
Indebtedness under the Credit Agreement in an aggregate amount not to exceed
the amount referred to in clause (i) of the second paragraph in part (a) of
this "Limitation on Indebtedness" covenant; (ii) Guarantees of Indebtedness
of the Company and other Restricted Subsidiaries under (A) the Credit
Agreement and (B) the Secured Notes; (iii) Indebtedness issued in exchange
for, or the net proceeds of which are used to refinance or refund outstanding
Indebtedness (including the amount of any undrawn commitments) of a
Restricted Subsidiary, other than Indebtedness Incurred under clause (i) of
this part (b) and any refinancings thereof, in an amount (or, if such new
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, the original
issue price) not to exceed the amount so exchanged, refinanced or refunded
(plus premiums, accrued interest, fees and expenses); (iv) Indebtedness to
the Company or to another Restricted Subsidiary; and (v) Indebtedness of the
type permitted to be Incurred by the Company pursuant to clauses (viii) and
(ix) of the second paragraph in part (a) of this "Limitation on Indebtedness"
covenant; provided that, in the case of clause (i) in this part (b) and this
clause (v), the Company would be permitted to Incur such Indebtedness at the
time thereunder after giving effect to subclause (C) in part (c) of this
"Limitation on Indebtedness" covenant.
(c) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, (i) Indebtedness Incurred
pursuant to the Amended and Restated Credit Agreement prior to or on the
Closing Date shall be treated as Incurred pursuant to clause (i) of the
second paragraph in part (a) of this "Limitation on Indebtedness" covenant
and (ii) Guarantees of, or obligations with respect to letters of credit
supporting, Indebtedness otherwise included in the determination of such
particular amount shall not be included. For purposes of determining
compliance with this "Limitation on Indebtedness" covenant, (A) in the event
that an item of Indebtedness meets the criteria of more than one of the types
of Indebtedness described in the above clauses, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses, (B)
the amount of Indebtedness issued at a price that is less than the principal
amount thereof shall be equal to the amount of the liability in respect
thereof determined in conformity with GAAP and (C) Indebtedness Incurred
pursuant to clause (i) or (v) in part (b) of this "Limitation on
Indebtedness" covenant shall be treated as having been Incurred by the
Company pursuant to the applicable clause in part (a) of this "Limitation on
Indebtedness" covenant for purposes of determining the remaining availability
thereunder. (Section 4.03)
Limitation on Restricted Payments
So long as any of the 11-3/4% Notes are outstanding, the Company will
not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on its
Capital Stock (other than dividends or distributions payable solely in shares
of its or such Restricted Subsidiary's Capital Stock (other than Redeemable
Stock) of the same class held by such holders or in options, warrants or
other rights to acquire such shares of Capital Stock) held by Persons other
than the Company or another Restricted Subsidiary, (ii) purchase, redeem,
retire or otherwise acquire for value, any shares of Capital Stock of the
Company, any Restricted Subsidiary or any Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock)
held by Persons other than the Company or another Restricted Subsidiary,
(iii) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance or other acquisition or
retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the 11-3/4% Notes or (iv) make any Investment in any
Affiliate (other than the Company or a Restricted Subsidiary) or Unrestricted
Subsidiary (such payments or any other actions described in clauses (i)
through (iv) being collectively "Restricted Payments") if at the time of and
after giving effect to the proposed Restricted Payment: (a) an Event of
Default or event that, after the giving of notice or lapse of time or both
would become an Event of Default, shall have occurred and be continuing, (b)
the Company could not Incur at least $1.00 of Indebtedness under the first
paragraph in part (a) of the "Limitation on Indebtedness" covenant or (c) the
aggregate amount expended for all Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) after the date of the Indenture (other than any Restricted
Payments described in clauses (ii), (iv), (v) (other than subclause (A)),
(vi), (vii), (xiii) and (xiv) of the second paragraph of this "Limitation on
Restricted Payments" covenant) shall exceed the sum of (1) 50% of the
aggregate amount of Adjusted Consolidated Net Income (or, if Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) of the Company
(determined by excluding income resulting from the transfers of assets
received by the Company or a Restricted Subsidiary from an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the month immediately
following the Closing Date and ending on the last day of the last fiscal
quarter preceding the Transaction Date plus (2) the aggregate net proceeds
(including the fair market value of noncash proceeds, as determined in good
faith by the Board of Directors) received by the Company from the issuance
and sale permitted by the Indenture of its Capital Stock to any Person other
than a Subsidiary of the Company (not including Redeemable Stock), including
an issuance or sale permitted by the Indenture for cash or other property
upon the conversion of any Indebtedness of the Company subsequent to the
Closing Date, or from the issuance of any options, warrants or other rights
to acquire Capital Stock of the Company (in each case, exclusive of any
Redeemable Stock or any options, warrants or other rights that are redeemable
at the option of the holder, or are required to be redeemed, prior to the
Stated Maturity of the 11-3/4% Notes) plus (3) an amount equal to the net
reduction in Investments in Unrestricted Subsidiaries resulting from payments
of interest on Indebtedness, dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed in the case of
any Unrestricted Subsidiary the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary plus (4)
$13 million.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof
if, at the date of declaration, such payment would comply with the foregoing
provision; (ii) the declaration and payment of dividends (or the making of
loans or advances) to Holdings for the purpose of and in an amount not to
exceed the amount necessary for the payment in cash of the interest expense
on outstanding Holdings Discount Debentures as such interest becomes due and
payable; (iii) in the event the Holdings Discount Debentures become
obligations of the Company (or any Person becoming the successor obligor on
the 11-3/4% Notes), the voluntary or optional principal payment, or the
redemption, repurchase, defeasance or other acquisition or retirement for
value, of the Holdings Discount Debentures prior to their Stated Maturity;
provided that, at the time of the redemption, repurchase, defeasance,
acquisition or retirement thereof, the Interest Coverage Ratio of the Company
(or any Person becoming the successor obligor on the 11-3/4% Notes) would be
greater than 1.75:1; (iv) (A) the declaration and payment in cash of stated
dividends on the Preferred Stock and the Containers Mirror Preferred Stock
and Plastics Mirror Preferred Stock (each as defined in the Amended and
Restated Credit Agreement) and (B) the redemption, repurchase or other
acquisition for value of Preferred Stock, Containers Mirror Preferred Stock
and Plastics Mirror Preferred Stock, in each case in connection with the
Refinancing; (v) the declaration and payment of dividends (or the making of
loans or advances) to Holdings (A) for the redemption, repurchase, defeasance
or other acquisition or retirement for value of the Holdings Discount
Debentures prior to their Stated Maturity; provided that, at the time of the
declaration thereof, the Interest Coverage Ratio of the Company would be
greater than 1.75:1, (B) in an aggregate amount not to exceed $2 million per
annum for reasonable expenses (including all reasonable professional fees and
expenses in connection with market making activities in the Holdings Discount
Debentures or complying with its reporting obligations or as may be required
by law) incurred in the ordinary course of business and (C) in an amount not
to exceed the amount necessary for the payment of any liability of the
Company in connection with federal, state, local or foreign taxes; (vi) the
making of Investments in an Unrestricted Subsidiary in an aggregate amount
not to exceed $10 million outstanding at any time; provided that the
aggregate amount of Investments in all of the Unrestricted Subsidiaries does
not exceed $30 million outstanding at any time; (vii) the redemption,
repurchase, defeasance or other acquisition or retirement for value of
Indebtedness that is subordinated in right of payment to the 11-3/4% Notes,
including premium, if any, and accrued and unpaid interest, with the proceeds
of Indebtedness Incurred under clauses (iii), (iv) and (x) of the second
paragraph in part (a) of the "Limitation on Indebtedness" covenant; (viii)
the declaration and payment of dividends on the Common Stock of the Company,
following an initial public offering of the Common Stock of the Company, of
up to 6% per annum of the net proceeds received by the Company in such
initial public offering; (ix) the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock of
Holdings, the Company or any Restricted Subsidiary, options on any such
shares or related stock appreciation rights or similar securities held by
officers or employees or former officers or employees (or their estates or
beneficiaries under their estates) and which were issued pursuant to any
Stock Based Plan, upon death, disability, retirement, termination of
employment or pursuant to the terms of such Stock Based Plan or any other
agreement under which such shares of Capital Stock, options, related rights
or similar securities were issued; provided that the aggregate cash
consideration paid for such purchase, redemption, acquisition, cancellation
or other retirement for value of such shares of Capital Stock, options,
related rights or similar securities after the date of the Indenture does not
exceed $13 million and that any additional consideration in excess of such
$13 million is in the form of Indebtedness that would be permitted to be
Incurred under clause (vii) of the second paragraph in part (a) of the
"Limitation on Indebtedness" covenant; (x) the repurchase of Common Stock of
the Company followed immediately by the reissuance thereof for consideration
in an amount at least equal to the consideration paid to acquire such stock,
or the redemption, repurchase or other acquisition for value of Capital Stock
of the Company or any Subsidiary of the Company in exchange for, or with the
proceeds of a substantially concurrent offering of, other shares of the
Capital Stock of such entity (other than Redeemable Stock); (xi) the
acquisition of Indebtedness of the Company that is subordinated in right of
payment to the 11-3/4% Notes in exchange for, or out of the proceeds of a
substantially concurrent issuance of, shares of the Capital Stock of the
Company (other than Redeemable Stock); (xii) payments or distributions
pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with the provisions of the Indenture applicable to
mergers, consolidations and transfers of all or substantially all of the
property and assets of the Company; (xiii) the repayment prior to August 31,
1992 of advances or loans from Holdings in order to allow Holdings to pay
interest on and redeem Holdings Reset Debentures in connection with the
Refinancing; or (xiv) the declaration and payment of dividends (or the making
of loans and advances) to Holdings for the redemption, repurchase, defeasance
or other acquisition or retirement for value of the Holdings Reset Debentures
in connection with the Refinancing; provided that, in the case of clauses
(ii), (iii), (v) (other than subclause (C)), (vi), (viii), (ix), (xii),
(xiii) and (xiv), no Event of Default, or event that through the giving of
notice or lapse of time or both would become an Event of Default, shall have
occurred and be continuing or shall occur as a consequence thereof. (Section
4.04)
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
So long as any of the 11-3/4% Notes are outstanding, the Company will
not, and will not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions permitted by applicable law on
any Capital Stock of such Restricted Subsidiary owned by the Company or any
other Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or
any other Restricted Subsidiary, (iii) make loans or advances to the Company
or any other Restricted Subsidiary or (iv) transfer, subject to certain
exceptions, any of its property or assets to the Company or any other
Restricted Subsidiary.
This covenant shall not restrict or prohibit any encumbrances or
restrictions existing: (i) in the Credit Agreement, the Secured Notes
(including the Secured Notes Purchase Agreement) or any other agreements in
effect on the Closing Date, including extensions, refinancings, renewals or
replacements thereof; provided that the encumbrances and restrictions in any
such extensions, refinancings, renewals or replacements are no less favorable
in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) in the event the Holdings Discount Debentures
become obligations of the Company (or any Person becoming the successor
obligor on the 11-3/4% Notes), in the Holdings Discount Debentures; (iii)
under or by reason of applicable law, rule or regulation (including, without
limitation, applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances); (iv)
under any other agreement providing for the Incurrence of Indebtedness;
provided that the encumbrances and restrictions in any such agreement are no
less favorable in any material respect to the Holders than those encumbrances
and restrictions contained in the Credit Agreement as of the Closing Date;
(v) with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Subsidiary and existing at the time
of such acquisition, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or
the property or assets of such Person so acquired; (vi) in the case of clause
(iv) of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict
in a customary manner the subletting, assignment or transfer of any property
or asset that is a lease, license, conveyance or contract or similar property
or asset, (B) by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by the Indenture or (C)
arising or agreed to in the ordinary course of business and that do not,
individually or in the aggregate, detract from the value of the property or
assets of the Company or any Restricted Subsidiary in any manner material to
the Company or such Restricted Subsidiary; or (vii) with respect to any
Restricted Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary.
Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) entering into any agreement
permitting the incurrence of Liens otherwise permitted under the Indenture or
(2) restricting the sale or other disposition of property or assets of the
Company or any of its Subsidiaries that secure Indebtedness of the Company or
any of its Subsidiaries. (Section 4.05)
Limitation on Senior Subordinated Indebtedness
So long as any of the 11-3/4% Notes are outstanding, the Company will
not Incur any Indebtedness, other than the 11-3/4% Notes, that is expressly
made subordinate in right of payment to any Senior Indebtedness unless such
Indebtedness is either pari passu with, or subordinate in right of payment
to, the 11-3/4% Notes pursuant to provisions substantially similar to those
contained in Article Ten of the Indenture; provided, however, that the
foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness that exist by reason of any Liens or Guarantees arising
or created in respect of some but not all Senior Indebtedness or by reason of
intercreditor agreements between (i) the holders of the Secured Notes and the
Banks or (ii) the Banks and/or the holders of the Secured Notes, on the one
hand, and the holders of or representatives for other Senior Indebtedness,
the proceeds of which other Senior Indebtedness are used to refinance
Indebtedness under the Credit Agreement and/or the Secured Notes, on the
other hand. (Section 4.06)
Limitation on Transactions with Shareholders and Affiliates
So long as any of the 11-3/4% Notes are outstanding, the Company will
not, and will not permit any Subsidiary of the Company to, directly or
indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or
the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company (other
than Holdings and the Bank Agent or any of its Affiliates) or any Subsidiary
of the Company or with any Affiliate of the Company (other than Holdings) or
any Subsidiary of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary of the Company than could be
obtained in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to: (i) any
transaction between the Company and any Subsidiary of the Company or between
Subsidiaries of the Company; (ii) transactions (A) for which the Company or
any Subsidiary of the Company delivers to the Trustee a written opinion of a
nationally recognized investment banking firm stating that the transaction is
fair to the Company or such Subsidiary of the Company from a financial point
of view or (B) approved by a majority of the disinterested members of the
Board of Directors; (iii) the payment of fees pursuant to the Management
Agreements or pursuant to any similar management contracts entered into by
the Company or any Subsidiary of the Company; (iv) the payment of reasonable
and customary regular fees to directors of the Company or any Subsidiary of
the Company who are not employees of the Company or such Subsidiary of the
Company; (v) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and Holdings or any other Person with which the
Company is required or permitted to file a consolidated tax return or with
which the Company is or could be part of a consolidated group for tax
purposes; (vi) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant; (vii) the payment of fees to Morgan Stanley,
S&H or their respective Affiliates for financial, advisory, consulting or
investment banking services that the Board of Directors deems to be advisable
or appropriate for the Company or any Subsidiary of the Company to obtain
(including the payment to Morgan Stanley of any underwriting discounts or
commissions or placement agency fees) in connection with the issuance and
sale of any securities by the Company or any Subsidiary of the Company; or
(viii) any transaction contemplated by any of the Stock Based Plans. (Section
4.07)
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
So long as any 11-3/4% Notes are outstanding, the Company will not
permit any Restricted Subsidiary to, directly or indirectly, issue or sell
any shares of its Capital Stock (including options, warrants or other rights
to purchase shares of such Capital Stock) except (i) to the Company or
another Restricted Subsidiary that is a Wholly Owned Subsidiary of the
Company, (ii) pursuant to options on such Capital Stock granted to officers
and directors of such Restricted Subsidiary, (iii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary or (iv) in connection with an
initial public offering of the Common Stock of such Restricted Subsidiary;
provided that, within 12 months after the date the Net Cash Proceeds of such
initial public offering are received by such Restricted Subsidiary, such
Restricted Subsidiary shall (a) apply an amount equal to such Net Cash
Proceeds to repay Senior Indebtedness or Indebtedness of such Restricted
Subsidiary, in each case owing to a Person other than the Company or any of
its Subsidiaries, (b) apply an amount equal to such Net Cash Proceeds to the
repurchase of Indebtedness pursuant to mandatory repurchase or repayment
provisions applicable to such Indebtedness or (c) invest an equal amount, or
the amount not so applied pursuant to subclause (a) (or enter into a
definitive agreement committing to so invest within 12 months of the date of
such agreement), in property or assets that (as determined in good faith by
the Board of Directors, whose determination shall be conclusive and evidenced
by a Board Resolution) are of a nature or type or are used in a business (or
in a company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or to the business of, any Restricted Subsidiary and its Subsidiaries
existing on the date thereof. (Section 4.08).
Repurchase of 11-3/4% Notes upon Change of Control
(a) In the event of a Change in Control, each Holder shall have the
right to require the repurchase of its 11-3/4% Notes by the Company in cash
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the date of purchase (the "Change of Control Payment").
Prior to the mailing of the notice to Holders provided for in the succeeding
paragraph, but in any event within 30 days following any Change of Control,
the Company covenants to (i) repay in full all Indebtedness under the Credit
Agreement and the Secured Notes, or to offer to repay in full all such
Indebtedness and to repay the Indebtedness of each Bank and each holder of
Secured Notes who has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and the Secured Notes to permit the
repurchase of the 11-3/4% Notes as provided for in the succeeding paragraph.
The Company shall first comply with the covenant in the preceding sentence
before it shall be required to repurchase 11-3/4% Notes pursuant to this
"Repurchase of Notes upon Change of Control" covenant.
(b) Within 30 days of the Change of Control, the Company shall mail a
notice to the Trustee and each Holder stating: (i) that a Change of Control
has occurred, that the Change of Control Offer is being made pursuant to this
"Repurchase of Notes upon Change of Control" covenant and that all 11-3/4%
Notes validly tendered will be accepted for payment; (ii) the purchase price
and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the "Change
of Control Payment Date"); (iii) that any 11-3/4% Note not tendered will
continue to accrue interest; (iv) that, unless the Company defaults in the
payment of the Change of Control Payment, any 11-3/4% Note accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date; (v) that Holders electing
to have any 11-3/4% Note purchased pursuant to the Change of Control Offer
will be required to surrender such 11-3/4% Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of such
11-3/4% Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Change of Control Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the third Business Day immediately preceding
the Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of such Holder, the principal amount of 11-
3/4% Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such 11-3/4% Notes purchased; and (vii) that
Holders whose 11-3/4% Notes are being purchased only in part will be issued
new 11-3/4% Notes equal in principal amount to the unpurchased portion of the
11-3/4% Notes surrendered; provided that each 11-3/4% Note purchased and each
new 11-3/4% Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
(c) On the Change of Control Payment Date, the Company shall: (i) accept
for payment 11-3/4% Notes or portions thereof tendered pursuant to the Change
of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay
the purchase price of all 11-3/4% Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all 11-3/4% Notes or
portions thereof so accepted together with an Officers' Certificate
specifying the 11-3/4% Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail, to the Holders of 11-3/4%
Notes so accepted, payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new 11-3/4%
Note equal in principal amount to any unpurchased portion of the 11-3/4%
Notes surrendered; provided that each 11-3/4% Note purchased and each new 11-
3/4% Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this "Repurchase of 11-3/4% Notes upon
Change of Control" covenant, the Trustee shall act as Paying Agent.
(d) The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in the event that a Change of Control occurs
under this "Repurchase of 11-3/4% Notes upon Change of Control" covenant and
the Company is required to repurchase 11-3/4% Notes as described above.
(Section 4.09)
Limitation on Asset Sales
(a) In the event and to the extent that the Net Cash Proceeds received
by the Company or any Restricted Subsidiary from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
(other than Asset Sales by the Company or any Restricted Subsidiary to the
Company or another Restricted Subsidiary) exceed 15% of Consolidated Net
Tangible Assets in any one fiscal year (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance
sheet of the Company and its Subsidiaries has been prepared), then the
Company shall, or shall cause such Restricted Subsidiary to, (i) within 12
months after the date Net Cash Proceeds so received exceed 15% of
Consolidated Net Tangible Assets in any one fiscal year (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been
prepared) (A) apply an amount equal to such excess Net Cash Proceeds to repay
Senior Indebtedness or repay Indebtedness of such Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its Subsidiaries
or (B) invest an equal amount, or the amount not so applied pursuant to
subclause (A) (or enter into a definitive agreement committing to so invest
within 12 months of the date of such agreement), in property or assets that
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) are of a nature or
type or are used in a business (or in a company having property and assets of
a nature or type, or engaged in a business) similar or related to the nature
or type of the property and assets of, or to the business of, the Company and
its Subsidiaries existing on the date thereof and (ii) apply such excess Net
Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided
in the following paragraphs of this "Limitation on Asset Sales" covenant. The
amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in
subclause (A) or (B) of the preceding sentence and not applied as so required
by the end of such period shall constitute "Excess Proceeds."
(b) If, as of the first day of any calendar month, the aggregate amount
of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $5 million, the Company must, not later than
the fifteenth Business Day of such month, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate
principal amount of 11-3/4% Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 101% of the principal amount thereof, plus
accrued interest (if any) to the date of purchase (the "Excess Proceeds
Payment"); provided, however, that no Excess Proceeds Offer shall be required
to be commenced with respect to the 11-3/4% Notes until the Business Day
following the date that payments are made pursuant to a similar offer that is
made to holders of the Secured Notes with respect to the Secured Notes and
need not be commenced if the Excess Proceeds remaining after application to
the Secured Notes purchased in the offer made to the holders of the Secured
Notes are less than $5 million; and provided further, however, that no 11-
3/4% Notes may be purchased under this "Limitation on Asset Sales" covenant
unless the Company shall have purchased all Secured Notes tendered pursuant
to the offer applicable thereto.
(c) The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder stating: (i) that the Excess Proceeds
Offer is being made pursuant to this "Limitation on Asset Sales" covenant and
that all 11-3/4% Notes validly tendered will be accepted for payment on a pro
rata basis; (ii) the purchase price and the date of purchase (which shall be
a Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Excess Proceeds Payment Date"); (iii) that any
11-3/4% Note not tendered will continue to accrue interest; (iv) that, unless
the Company defaults in the payment of the Excess Proceeds Payment, any 11-
3/4% Note accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest after the Excess Proceeds Payment Date; (v) that
Holders electing to have any 11-3/4% Note purchased pursuant to the Excess
Proceeds Offer will be required to surrender such 11-3/4% Note, together with
the form entitled "Option of the Holder to Elect Purchase" on the reverse
side of such 11-3/4% Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Excess Proceeds Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately
preceding the Excess Proceeds Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of 11-3/4% Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such 11-3/4% Notes purchased; and
(vii) that Holders whose 11-3/4% Notes are being purchased only in part will
be issued new 11-3/4% Notes equal in principal amount to the unpurchased
portion of the 11-3/4% Notes surrendered; provided that each 11-3/4% Note
purchased and each new 11-3/4% Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof.
(d) On the Excess Proceeds Payment Date, the Company shall: (i) accept
for payment on a pro rata basis 11-3/4% Notes or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all 11-3/4% Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee, all 11-3/4% Notes or portions thereof so accepted, together with an
Officers' Certificate specifying the 11-3/4% Notes or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail to
the Holders of 11-3/4% Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to such
Holders a new 11-3/4% Note equal in principal amount to any unpurchased
portion of the 11-3/4% Note surrendered; provided that each 11-3/4% Note
purchased and each new 11-3/4% Note issued shall be in an original principal
amount of $l,000 or integral multiples thereof. The Company will publicly
announce the results of the Excess Proceeds Offer as soon as practicable
after the Excess Proceeds Payment Date. For purposes of this "Limitation on
Asset Sales" covenant, the Trustee shall act as the Paying Agent.
(e) The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in the event that such Excess Proceeds are
received by the Company under this "Limitation on Asset Sales" covenant and
the Company is required to repurchase 11-3/4% Notes as described above.
(Section 4.10)
Events of Default
An "Event of Default" occurs with respect to the 11-3/4% Notes if: (i)
the Company defaults in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (ii) the Company
defaults in the payment of interest on any Note when the same becomes due and
payable, and such default continues for a period of 30 days, whether or not
such payment is prohibited by the subordination provisions of the Indenture;
(iii) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the 11-3/4%
Notes, and such default or breach continues for a period of 30 consecutive
days after written notice by the Trustee or the Holders of 25% or more in
aggregate principal amount of the 11-3/4% Notes; (iv) there occurs with
respect to any issue or issues of Indebtedness of the Company and/or any
Significant Subsidiary having an outstanding principal amount of $5 million
or more individually or $10 million or more in the aggregate for all such
issues of the Company and/or any Significant Subsidiary, whether such
Indebtedness now exists or shall hereafter be created, an event of default
that has caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration; (v) any final judgment or order (not
covered by insurance) for the payment of money in excess of $5 million
individually or $10 million or more in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be discharged, and there
shall be any period of 60 consecutive days following entry of the final
judgment or order in excess of $5 million individually or that causes the
aggregate amount for all such final judgments or orders outstanding against
all such Persons to exceed $10 million during which a stay of enforcement of
such final judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; (vi) a court having jurisdiction in the premises
enters a decree or order for (a) relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (b)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary
or for all or substantially all of the property and assets of the Company or
any Significant Subsidiary or (c) the winding up or liquidation of the
affairs of the Company or any Significant Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; (vii) the Company or any Significant Subsidiary (a)
commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (b) consents to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (c) effects any
general assignment for the benefit of creditors; (viii) the Company and/or
one or more Significant Subsidiaries fails to make (a) at the final (but not
any interim) fixed maturity of any issue of Indebtedness a principal payment
of $5 million or more or (b) at the final (but not any interim) fixed
maturity of more than one issue of such Indebtedness principal payments
aggregating $10 million or more and, in the case of clause (a), such
defaulted payment shall not have been made, waived or extended within 30 days
of the payment default and, in the case of clause (b), all such defaulted
payments shall not have been made, waived or extended within 30 days of the
payment default that causes the amount described in clause (b) to exceed $10
million; or (ix) there occurs the nonpayment of any two or more items of
Indebtedness that would constitute at the time of such nonpayments, but for
the individual amounts of such Indebtedness, an Event of Default under clause
(iv) or clause (viii) above, or both, and which items of Indebtedness
aggregate $10 million or more. (Section 6.01)
If an Event of Default (other than an Event of Default specified in
clause (vi) or (vii) above that occurs with respect to the Company) occurs
and is continuing under the Indenture, the Trustee thereunder or the Holders
of at least 25% of the aggregate principal amount of the 11-3/4% Notes then
outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders (the "Acceleration Notice")), may, and the
Trustee at the request of the Holders of at least 25% in aggregate principal
amount of the 11-3/4% Notes then outstanding shall, declare the entire unpaid
principal of, premium, if any, and accrued interest on the 11-3/4% Notes to
be immediately due and payable. Upon a declaration of acceleration, such
principal, premium, if any, and accrued interest shall be immediately due and
payable; provided that, for so long as the Credit Agreement is in effect or
any Secured Notes are outstanding, such declaration shall not become
effective until the earlier of (i) five Business Days after receipt of the
Acceleration Notice by the Bank Agent, the Company and the agent for the
holders of the Secured Notes (which shall be the Bank Agent unless and until
the holders of a majority in principal amount of Secured Notes designate
another agent in writing to the Company and the Trustee) or (ii) acceleration
of the Indebtedness under the Credit Agreement or the Secured Notes; and
provided further that such acceleration shall automatically be rescinded and
annulled without any further action required on the part of the Holders in
the event that any and all Events of Default specified in the Acceleration
Notice under the Indenture shall have been cured, waived or otherwise
remedied as provided in the Indenture prior to the expiration of the period
referred to in the preceding clauses (i) and (ii). In the event of a
declaration of acceleration because an Event of Default set forth in clause
(iv), (viii) or (ix) above has occurred and is continuing, such declaration
of acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (iv), (viii) or
(ix) shall be remedied, cured by the Company and/or such Significant
Subsidiary or waived by the holders of the relevant Indebtedness within 60
days after the declaration of acceleration with respect thereto. If an Event
of Default specified in clause (vi) or (vii) above occurs with respect to the
Company, all unpaid principal of, premium, if any, and accrued interest on
the 11-3/4% Notes then outstanding shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee or
any Holder. The Holders of at least a majority in principal amount of the
outstanding 11-3/4% Notes, by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default,
other than the non-payment of the principal of, premium, if any, and interest
on the 11-3/4% Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
(Sections 6.02 and 6.04) For information as to the waiver of defaults, see "-
- -Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding 11-3/4% Notes may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on the Trustee. However, the Trustee may refuse to
follow any direction that the Trustee is advised by counsel conflicts with
law or the Indenture, that may involve the Trustee in personal liability or
that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders not joining in the giving of such direction. (Section 6.05)
A Holder may not pursue any remedy with respect to the Indenture or the 11-
3/4% Notes unless: (i) the Holder gives to the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount of outstanding 11-3/4% Notes make a written request to the
Trustee to pursue the remedy; (iii) such Holder or Holders offer to the
Trustee indemnity satisfactory to the Trustee against any costs, liability or
expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and (v) during such
60-day period, the Holders of a majority in aggregate principal amount of the
outstanding 11-3/4% Notes do not give the Trustee a direction that is
inconsistent with the request. (Section 6.06) However, such limitations do
not apply to the right of any Holder to receive payment of the principal of,
premium, if any, or interest on its 11-3/4% Notes, or to bring suit for the
enforcement of any such payment, on or after the respective due dates
expressed in its 11-3/4% Notes, which rights shall not be impaired or
affected without the consent of the Holder. (Section 6.07)
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 120 days after the end of each fiscal year, that
a review has been conducted of the activities of the Company and its
Subsidiaries and the Company's and its Subsidiaries' performance under the
Indenture and that the Company has fulfilled all obligations thereunder, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default and the nature and status thereof. The Company
is also obligated to notify the Trustee of any default or defaults in the
performance of any covenants or agreements under the Indenture. (Section
4.15)
Consolidation, Merger and Sale of Assets
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of
its property and assets (as an entirety or substantially as an entirety in
one transaction or a series of related transactions) to, any Person (other
than a Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company
with a positive net worth; provided that, in connection with any merger of
the Company with any Restricted Subsidiary that is a Wholly Owned Subsidiary
of the Company, no consideration (other than common stock in the surviving
Person or the Company) shall be issued or distributed to the stockholders of
the Company) or permit any Person to merge with or into the Company, unless:
(i) the Company shall be the continuing Person, or the Person (if other than
the Company) formed by such consolidation or into which the Company is merged
or that acquired or leased such property and assets of the Company shall be a
corporation organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and shall expressly assume, by
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company on all of
the 11-3/4% Notes and under the Indenture; (ii) immediately after giving
effect to such transaction, no Event of Default, and no event that after the
giving of notice or lapse of time or both will become an Event of Default,
shall have occurred and be continuing; (iii) immediately after giving effect
to such transaction on a pro forma basis, the Interest Coverage Ratio of the
Company (or any Person becoming the successor obligor on the 11-3/4% Notes)
is at least 1:1; provided that if the Interest Coverage Ratio of the Company
before giving effect to such transaction is within the range set forth in
column (A) below, then the Interest Coverage Ratio of the Company (or any
Person becoming the successor obligor on the 11-3/4% Notes) shall be at least
equal to the lesser of (1) the ratio determined by multiplying the percentage
set forth in column (B) below by the Interest Coverage Ratio of the Company
prior to such transaction and (2) the ratio set forth in column (C) below:
(A) (B) (C)
--- --- ---
1.11:1 to 1.99:1 . . . . . . . . . . 90% 1.5:1
2.00:1 to 2.99:1 . . . . . . . . . . 80% 2.1:1
3.00:1 to 3.99:1 . . . . . . . . . . 70% 2.4:1
4.00:1 or more . . . . . . . . . . . 60% 2.5:1
and provided further that, if the Interest Coverage Ratio of the Company (or
any Person becoming the successor obligor on the 11-3/4% Notes) is 3:1 or
more, the calculation in the preceding proviso shall be inapplicable and such
transaction shall be deemed to have complied with the requirements of this
clause (iii); (iv) immediately after giving effect to such transaction on a
pro forma basis, the Company (or any Person that becomes the successor
obligor on the 11-3/4% Notes) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction; and (v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv)) and an Opinion of Counsel, in each case stating
that such consolidation, merger or transfer and such supplemental indenture
comply with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with; provided,
however, that clause (iv) of this covenant (A) does not apply to, and the
Interest Coverage Ratio required by clause (iii) of this "Consolidation,
Merger and Sale of Assets" covenant shall be 1.75:1 with respect to, any
consolidation of the Company (or any Person becoming the successor obligor on
the 11-3/4% Notes) with, or merger of the Company (or any Person becoming the
successor obligor on the 11-3/4% Notes) with or into, or any sale,
conveyance, transfer, lease or other disposition of all or substantially all
of the property and assets of the Company (or any Person becoming the
successor obligor on the 11-3/4% Notes) or Holdings (or its successor) to,
Holdings (or its successor) or the Company (or any Person becoming the
successor obligor on the 11-3/4% Notes), as the case may be, or (B) does not
apply if, in the good faith determination of the Board of Directors, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the state of incorporation of the Company;
and provided further, however, that any such transaction shall not have as
one of its purposes the evasion of the limitations of this covenant. (Section
5.01)
Defeasance
Defeasance and Discharge. The Indenture provides that the Company will
be deemed to have paid and will be discharged from any and all obligations in
respect of the 11-3/4% Notes on the 123rd day after the deposit referred to
below, and the provisions of the Indenture will no longer be in effect with
respect to the 11-3/4% Notes (except for, among other matters, certain
obligations to register the transfer or exchange of the 11-3/4% Notes, to
replace stolen, lost or mutilated 11-3/4% Notes, to maintain paying agencies
and to hold monies for payment in trust) if, among other things, (A) the
Company has deposited with the Trustee, in trust, money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of, premium, if any, and accrued
interest on the 11-3/4% Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the 11-3/4% Notes, (B) the
Company has delivered to the Trustee (i) either an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for federal
income tax purposes as a result of the Company's exercise of its option under
this "Defeasance" provision and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred, which
Opinion of Counsel must be accompanied by a ruling of the Internal Revenue
Service to the same effect or a change in applicable federal income tax law
after the date of the Indenture or a ruling directed to the Trustee received
from the Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (ii) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment Company Act
of 1940 and after the passage of 123 days following the deposit, the trust
fund will not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (C)
immediately after giving effect to such deposit on a pro forma basis, no
Event of Default, or event that after the giving of notice or lapse of time
or both would become an Event of Default, shall have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day after the date of such deposit, and such deposit shall not result
in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which the
Company is bound, (D) the Company is not prohibited from making payments in
respect of the 11-3/4% Notes by the provisions described under "--
Subordination," above and (E) if at such time the 11-3/4% Notes are listed on
a national securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the 11-3/4% Notes will not be delisted
as a result of such deposit, defeasance and discharge. (Section 8.02)
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under
"--Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "--Covenants," clause (iii) under "--Events of Default" with
respect to such covenants and clauses (iii) and (iv) under "--Consolidation,
Merger and Sale of Assets," and clauses (iv), (v) and (viii) under "--Events
of Default" shall be deemed not to be Events of Default, and the provisions
described herein under "--Subordination" shall not apply, upon, among other
things, the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of, premium, if any, and accrued
interest on the 11-3/4% Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the 11-3/4% Note, the
satisfaction of the provisions described in clauses (B)(ii), (C), (D) and (E)
of the preceding paragraph and the delivery by the Company to the Trustee of
an Opinion of Counsel to the effect that, among other things, the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain covenants and Events of
Default and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred. (Section 8.03)
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions
of the Indenture with respect to the 11-3/4% Notes as described in the
immediately preceding paragraph and the 11-3/4% Notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the 11-3/4% Notes
at the time of their Stated Maturity but may not be sufficient to pay amounts
due on the 11-3/4% Notes at the time of the acceleration resulting from such
Event of Default. However, the Company shall remain liable for such payments.
The Credit Agreement and the Secured Notes each contain a covenant
prohibiting defeasance of the 11-3/4% Notes. See "Description of Certain
Indebtedness--Description of the Credit Agreement" and "--Description of the
Secured Notes."
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority
in aggregate principal amount of the outstanding 11-3/4% Notes; provided,
however, that no such modification or amendment may, without the consent of
each Holder affected thereby, (i) change the Stated Maturity of the principal
of, or any installment of interest on, any 11-3/4% Note, (ii) reduce the
principal amount of, premium, if any, or interest on, any 11-3/4% Note, (iii)
change the place or currency of payment of principal of, premium, if any, or
interest on, any 11-3/4% Note, (iv) impair the right to institute suit for
the enforcement of any payment on or after the Stated Maturity (or, in the
case of a redemption, on or after the Redemption Date) of any 11-3/4% Note,
(v) modify the subordination provisions in a manner adverse to the Holders,
(vi) reduce the above-stated percentage of outstanding 11-3/4% Notes the
consent of whose Holders is necessary to modify or amend the Indenture, (vii)
waive a default in the payment of principal of, premium, if any, or interest
on the 11-3/4% Notes or (viii) reduce the percentage of aggregate principal
amount of outstanding 11-3/4% Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults. (Section 9.02)
The Holders of a majority in aggregate principal amount of the
outstanding 11-3/4% Notes may waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 9.02)
The Credit Agreement and the Secured Notes each contain a covenant
prohibiting the Company from consenting to any modification of the Indenture
or waiver of any provision thereof without the consent of a specified
percentage of the lenders under the Credit Agreement and the holders of the
Secured Notes. See "Description of Certain Indebtedness--Description of the
Credit Agreement" and "--Description of the Secured Notes."
No Personal Liability of Incorporators, Shareholders, Officers, Directors or
Employees
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the 11-3/4% Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company contained in the
Indenture or in any of the 11-3/4% Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator, or
past, present or future shareholder, officer, director, employee or
controlling person of the Company or of any successor thereof. Each Holder,
by accepting such Note, waives and releases all such liability. (Section
11.09)
Concerning the Trustee
Shawmut Bank, N.A. acts as Trustee under the Indenture.
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is
continuing, the Trustee will exercise such rights and powers vested in it
under such Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs. (Section 7.01)
The provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference in the Indenture contain limitations on the rights
of the Trustee thereunder, should it become a creditor of the Company, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions; provided, however, that
if it acquires any conflicting interest, it must eliminate such conflict or
resign.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the purchase, ownership and disposition of the
11-3/4% Notes but does not purport to be a complete analysis of all the
potential tax effects of such purchase, ownership and disposition. This
summary is based upon the Code, Treasury regulations, proposed regulations,
IRS rulings and judicial decisions now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action, as the
case may be. In particular, the proposed regulations issued with respect to
original issue discount ("OID") in 1986 (and amended in 1989 and 1991) (the
"1986 Proposed Regulations") were withdrawn as of December 21, 1992, the date
of issuance of new proposed regulations relating to OID (the "1992 Proposed
Regulations"). The 1992 Proposed Regulations substantially revised and
clarified the 1986 Proposed Regulations (for example, the 1992 Proposed
Regulations address certain ambiguities in the 1986 Proposed Regulations,
such as the application of the aggregation rules). The 1992 Proposed
Regulations are generally proposed to be effective for debt instruments
issued on or after the date that is 60 days after the date such proposed
regulations are issued in final form. The IRS, however, intends to treat the
1986 Proposed Regulations as substantial authority for debt instruments
issued prior to December 21, 1992. Any change to the 1986 Proposed
Regulations, or to the existing laws, regulations, proposed regulations,
rulings and judicial decisions, could apply retroactively in a manner that
could adversely affect a holder of one or more of the 11-3/4% Notes.
Accordingly, holders of 11-3/4% Notes are urged to monitor the substance and
effective dates of the 1992 Proposed Regulations (including the finalization
thereof).
This information is directed only to investors who will hold the 11-3/4%
Notes as "capital assets" within the meaning of Section 1221 of the Code. In
addition, the tax consequences to a particular person may be affected by
matters not addressed in this discussion. For example, certain types of
investors (including life insurance companies, tax exempt organizations,
banks and dealers in securities or foreign persons) may be subject to special
rules that are not addressed in this summary. This summary does not discuss
tax consequences under state, local, or foreign tax laws. Persons considering
the purchase of 11-3/4% Notes should consult with their own tax advisors
concerning the application of United States federal income tax laws, as well
as the laws of any state, local or foreign taxing jurisdictions, to their
particular situations.
The following discussion, subject to the qualifications stated herein,
describes the material federal income tax considerations relevant to the
purchase, ownership and disposition of the 11-3/4% Notes and constitutes the
opinion of Winthrop, Stimson, Putnam & Roberts, counsel to Silgan. Such
opinion represents its best legal judgment, but it will not be binding on the
IRS or the courts. Silgan has not sought, nor does it intend to seek, a
ruling from the IRS that its position as reflected in the following
discussion will be accepted by the IRS.
Interest on 11-3/4% Notes. Subject to the discussion in the next
succeeding paragraph, a holder of an 11-3/4% Note is required to include in
income the stated interest on the 11-3/4% Note in accordance with the
holder's method of tax accounting. A holder of an 11-3/4% Note using the cash
method of accounting for tax purposes generally is required to include such
interest in income when cash payments are actually received (or made
available for receipt if earlier) by the holder. A holder of an 11-3/4% Note
using the accrual method of accounting for tax purposes generally is required
to include such interest in income as it accrues.
If a holder owns the 11-3/4% Notes and either the Secured Notes or the
Holdings Discount Debentures, or, possibly, if a holder owns only the 11-3/4%
Notes but the 11-3/4% Notes are not traded on an established securities
market, the 1986 Proposed Regulations could, under certain circumstances, be
interpreted to require that some or all of such notes and debentures be
aggregated and treated as a single debt instrument for purposes of computing
original issue discount. If these aggregation rules were to apply, the
11-3/4% Notes could be treated as having original issue discount and cash
basis taxpayers who hold the 11-3/4% Notes could be required to report stated
interest on the 11-3/4% Notes as original issue discount on an accrual basis
prior to the receipt of cash attributable to that stated interest.
In any event, a holder of the 11-3/4% Notes who does not also hold
either the Secured Notes or the Holdings Discount Debentures should not be
subject to these aggregation rules if the 11-3/4% Notes are treated as
separately traded on an established securities market. Moreover, absent
further clarification of the 1986 Proposed Regulations, the Company does not
intend to treat any of the 11-3/4% Notes as being subject to these
aggregation rules.
Since the issue price of the 11-3/4% Notes equals their stated
redemption price at maturity (i.e., their principal amount) and the Company
does not intend to treat any of the 11-3/4% Notes as being subject to the
aggregation rules (discussed above), the remaining discussion set forth below
assumes that the 11-3/4% Notes were not issued with original issue discount.
Prospective purchasers of the 11-3/4% Notes are advised to consult their own
tax advisors with respect to the existence of original issue discount and the
consequences thereof.
Disposition of Securities. Upon a redemption, sale or exchange of an 11-
3/4% Note, a holder will recognize gain or loss measured by the difference
between the amount received in exchange therefor (other than the portion
received for accrued but unpaid interest which portion is treated as interest
received) and such holder's adjusted tax basis in the 11-3/4% Note. Except to
the extent the market discount rules described below apply, any gain or loss
recognized on the redemption, sale or exchange of an 11-3/4% Note will be
long-term capital gain or loss if such 11-3/4% Note is held as a capital
asset for the applicable long-term holding period (currently, more than one
year) at the time of such redemption, sale or exchange. A holder's initial
tax basis in an 11-3/4% Note will be equal to the price paid for such 11-3/4%
Note and may be subject to adjustment as described below under market
discount and bond premium.
Market Discount. The sale of the 11-3/4% Notes may be affected by the
market discount provisions of the Code. Generally, market discount will exist
to the extent a holder's purchase price for a 11-3/4% Note (presumably
exclusive of the portion attributable to accrued but unpaid interest) is less
than the principal amount of the 11-3/4% Note. Under a statutory de minimis
rule, however, market discount on a debt instrument will be considered to be
zero for purposes of the rules discussed below if such market discount is
less than 0.25% of the principal amount of the debt instrument at maturity
multiplied by the number of complete years (that is, rounding down for
partial years) to maturity (after the holder acquires the instrument).
Generally, holders of a 11-3/4% Note who acquire the 11-3/4% Note with
market discount will be required to treat any gain realized upon the sale or
other disposition of such 11-3/4% Note as ordinary income to the extent of
the market discount that accrued (but was not previously included in income)
during the period such holder held the 11-3/4% Note. Market discount on a
debt instrument generally accrues on a straight-line basis in equal daily
portions or, at the election of the holder, under a constant interest method.
If a holder disposes of an 11-3/4% Note in any transaction other than a sale,
exchange or involuntary conversion (for example, as a gift), that holder
generally is treated as having an amount realized equal to the fair market
value of the 11-3/4% Note and will be required to recognize as ordinary
income any gain on disposition to the extent of the accrued and previously
unrecognized market discount. As a result of this rule, a holder may be
required to recognize ordinary income on the disposition of a 11-3/4% Note,
even though the disposition would not otherwise be taxable.
Generally, if a holder incurs or continues indebtedness for the purpose
of purchasing or carrying an 11-3/4% Note acquired at a market discount, the
"net direct interest expense" arising from the indebtedness is allowed as a
current deduction only to the extent it exceeds the portion of market
discount allocable to the days during the year which the 11-3/4% Note was
held by such holder. Net direct interest expense is the excess, if any, of
the amount of interest paid or accrued during the taxable year on such
indebtedness over the aggregate amount of interest (including OID, if any)
includible in gross income for the taxable year with respect to the 11-3/4%
Note. Net direct interest expense that exceeds the amount currently
deductible is allowable as a deduction in any subsequent year, to the extent
it does not exceed net interest income (that is, interest income on the 11-
3/4% Note (including OID, if any) less interest on indebtedness incurred or
continued to purchase or carry the 11-3/4% Note) for such year, if a proper
election is made. Disallowed interest deductions, if any, remaining at the
time of any taxable disposition of the 11-3/4% Note would be treated as
interest paid or accrued in the year of disposition.
A holder may elect to include market discount in income as such discount
accrues with a corresponding increase in the holder's tax basis in the 11-
3/4% Note. If a holder so elects, the foregoing rules regarding the treatment
as ordinary income of gain upon a disposition of an 11-3/4% Note, and
regarding the deferral of interest deductions on indebtedness incurred or
continued to purchase or carry an 11-3/4% Note, would not apply. Once made,
such an election applies to all debt obligations of the holder that are
purchased at a market discount on or after the first day of the first taxable
year for which the election is made, and all subsequent taxable years of the
holder, unless the IRS consents to a revocation of the election. Holders are
urged to consult their own tax advisors with regard to the advisability of
making such an election or any of the other elections with respect to market
discount described above.
The market discount provisions also contain a rule providing that in the
case of a partial principal payment on a market discount bond, the holder
must include in income at the time of the partial principal payment the
portion of the unrecognized market discount that accrued prior to the receipt
of such payment (up to the amount of such payment). It is unclear whether
this rule would apply in the case of a partial redemption of an 11-3/4% Note
acquired with market discount.
Bond Premium. If a holder of an 11-3/4% Note acquires such 11-3/4% Note
at a cost in excess of its principal amount, the 11-3/4% Note will be
purchased at a premium. Under the bond premium rules contained in the Code,
generally, such holder should be entitled to elect to offset its interest
income by an allocable portion of the bond premium pursuant to Section 171 of
the Code, with a corresponding reduction to the holder's tax basis in the 11-
3/4% Note, under a constant yield method over the remaining term of the 11-
3/4% Note. Such a holder should consult a tax advisor to determine the
advisability of such an election. However, if the 11-3/4% Note is purchased
at a time when the 11-3/4% Note may be optionally redeemed for an amount that
is in excess of its principal amount, special rules would apply that could
result in a deferral of the amortization of bond premium until later in the
term of the 11-3/4% Note. An election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the holder and
may be revoked only with the permission of the IRS.
Backup Withholding. Under Section 3406 of the Code and applicable
Treasury regulations, a holder of a 11-3/4% Note may be subject to backup
withholding at a rate of 31% of certain amounts paid or deemed paid to the
holder unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, provides proof of such exemption or (b)
provides a correct taxpayer identification number, certifies that he has not
lost exemption from backup withholding, and has met the requirements for the
reporting of previous income set forth in the backup withholding rules.
Holders of 11-3/4% Notes should consult their tax advisors as to their
qualification for exemption from withholding and the procedure for obtaining
such an exemption. Amounts paid as backup withholding do not constitute an
additional tax and will be credited against the holder's federal income tax
liability.
EXCEPT AS DISCUSSED ABOVE, NO INFORMATION IS PROVIDED HEREIN AS TO THE
TAX TREATMENT OF HOLDERS OF THE 11-3/4% NOTES UNDER APPLICABLE UNITED STATES
OR OTHER TAX LAWS. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY
AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. FOR
EXAMPLE, THE DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO HOLDERS WHO ARE
NOT CITIZENS OR RESIDENTS OF THE UNITED STATES. THEREFORE, PROSPECTIVE
PURCHASERS OF 11-3/4% NOTES ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF THE 11-3/4% NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE,
LOCAL AND FOREIGN AND OTHER TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX
LAWS.
MARKET-MAKING ACTIVITIES OF
MORGAN STANLEY
The Prospectus is to be used by Morgan Stanley in connection with offers
and sales of the 11-3/4% Notes in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Morgan
Stanley may act as principal or agent in such transactions. Morgan Stanley
has no obligation to make a market in the 11-3/4% Notes, and may discontinue
its market-making activities at any time without notice, in its sole
discretion.
Morgan Stanley acted as underwriter in connection with the original
offering of the 11-3/4% Notes and received an underwriting discount of
$4,050,000 in connection therewith.
As of the date of this Prospectus, MSLEF II owns 38.48% of the
outstanding common stock of Holdings. See "Securities Ownership of Certain
Beneficial Owners and Management--Certain Beneficial Owners of Holdings'
Capital Stock." Morgan Stanley also acted as the purchaser for the private
placement of the Secured Notes and the underwriter for the Holdings
Debentures Offering, for which it was paid an aggregate of $7,482,708. For a
description of certain transactions between the Company and Morgan Stanley
and affiliates of Morgan Stanley, see "Certain Transactions."
In connection with the original offering of the 11-3/4% Notes, the
Company agreed to indemnify Morgan Stanley, as the underwriter, and A.G.
Edwards & Sons, Inc., as a "qualified independent underwriter," against
certain liabilities, including liabilities under the Securities Act.
Morgan Stanley has provided, and continues to provide, investment
banking services to the Company and its affiliates.
LEGAL MATTERS
The legality of the 11-3/4% Notes has been passed on for the Company by
Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street,
Stamford, Connecticut 06901. G. William Sisley, a partner in Winthrop,
Stimson, Putnam & Roberts, is Secretary of the Company and Holdings.
Winthrop, Stimson, Putnam & Roberts from time to time represents Morgan
Stanley in connection with certain legal matters unrelated to its
representation of the Company.
EXPERTS
The consolidated financial statements of the Company at December 31,
1993 and 1992, and for each of the three years in the period ended December
31, 1993 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The Statement of Assets, Liabilities and Net Assets of the Del Monte
Corporation Can Manufacturing Operations (an operation of Del Monte
Corporation), as Constituted for Sale to Silgan Containers Corporation, as of
June 30, 1993 and the Schedule of Sales and Cost of Sales for the year then
ended appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SILGAN CORPORATION:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . F-4
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Common Stockholder's Equity for the years
ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . F-9
Condensed Unaudited Consolidated Balance Sheets at June 30, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-30
Condensed Unaudited Consolidated Statements of Operations for the three
months ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . F-31
Condensed Unaudited Consolidated Statements of Operations for the six
months ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . F-32
Condensed Unaudited Consolidated Statements of Cash Flows for the six
months ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . . . . F-33
Notes to Condensed Unaudited Consolidated Financial Statements . . . . F-35
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-37
Statement of Assets, Liabilities and Net Assets at June 30, 1993 . . . F-38
Schedule of Sales and Cost of Sales for the year ended
June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-39
Notes to Financial Statement and Schedule . . . . . . . . . . . . . . . F-40
Statement of Assets, Liabilities and Net Assets at
September 30, 1993 (unaudited) . . . . . . . . . . . . . . . . . . F-43
Schedule of Sales and Cost of Sales for the three months ended
September 30, 1993 and 1992 (unaudited) . . . . . . . . . . . . . . F-44
Notes to Financial Statement and Schedule . . . . . . . . . . . . . . . F-45
ADDITIONAL FINANCIAL INFORMATION:
Silgan Corporation:
Pro Forma Unaudited Combined Statement of Operations for the year
ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . F-47
Notes to Pro Forma Unaudited Combined Statement of Operations . . . . . F-49
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Silgan Corporation
We have audited the accompanying consolidated balance sheets of Silgan
Corporation as of December 31, 1993 and 1992, and the related consolidated
statements of operations, common stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Silgan Corporation at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in
1993, the Company changed its method of accounting for postretirement
benefits other than pensions, income taxes and postemployment benefits.
Ernst & Young
Stamford, CT
March 10, 1994
F-3<PAGE>
SILGAN CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS 1993 1992
Current assets:
Cash and cash equivalents $ 205 $ 2,672
Accounts receivable, less allowances for
doubtful accounts of $1,084 and $1,643 for
1993 and 1992, respectively 44,409 44,557
Inventories 108,653 75,007
Prepaid expenses and other current assets 3,562 3,354
Total current assets 156,829 125,590
Property, plant and equipment, at cost 432,859 340,304
Less accumulated depreciation and amortization (142,464) (116,425)
Net property, plant and equipment 290,395 223,879
Other assets 44,840 32,685
$492,064 $382,154
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Working capital loans $ 2,200 $ 40,400
Current portion of term loans 20,000 20,899
Trade accounts payable 31,913 27,956
Accrued payroll and related costs 20,523 19,242
Accrued interest payable 783 1,067
Accrued expenses and other current liabilities 11,094 6,217
Total current liabilities 86,513 115,781
Term loans 120,000 21,681
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
Deferred income taxes 13,017 11,970
Other long-term liabilities 34,731 14,947
Common stockholder's equity:
Common stock $0.01 par value:
Class A: 1,000 shares authorized, 1 share
issued and outstanding - -
Class B: 1,000 shares authorized, 1 share
issued and outstanding - -
Class C: 1,000 authorized, none outstanding - -
Additional paid-in capital (Note 8) 64,135 41,560
Retained earnings (deficit) (11,332) (8,785)
Total common stockholder's equity 52,803 32,775
$492,064 $382,154
See accompanying notes.
F-4<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $645,468 $630,039 $678,211
Cost of goods sold 571,174 554,972 605,185
Gross profit 74,294 75,067 73,026
Selling, general and
administrative expenses 31,786 32,249 33,619
Income from operations 42,508 42,818 39,407
Interest expense and other
related financing costs 27,928 26,916 28,981
Other (income) expense 35 25 (396)
Income before income taxes 14,545 15,877 10,822
Income tax provision (Note 9) 6,300 2,200 1,500
Income before extraordinary
charges and cumulative effects of
changes in accounting principles 8,245 13,677 9,322
Extraordinary charges relating to early
extinguishment of debt, net of taxes (841) (9,075) -
Cumulative effect of changes in accounting
principles, net of taxes (Notes 2, 9 & 15) (9,951) - -
Net income (loss) (2,547) 4,602 9,322
Preferred stock dividend requirements - 2,745 3,889
Net income (loss) applicable to
common stockholder $ (2,547) $ 1,857 $ 5,433
See accompanying notes.
F-5<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Total
Additional Retained common
Common paid-in Earnings stockholder's
stock capital (deficit) equity
Balance at December 31, 1990 $ - $41,560 $ (351) $41,209
Preferred stock dividend
requirements of Silgan - - (3,889) (3,889)
Net income - - 9,322 9,322
Balance at December 31, 1991 - 41,560 5,082 46,642
Preferred stock dividend
requirements of Silgan - - (2,745) (2,745)
Net income - - 4,602 4,602
Dividend to Parent - - (15,724) (15,724)
Balance at December 31, 1992 - 41,560 (8,785) 32,775
Capital contribution
by Parent - 15,000 - 15,000
Tax benefit realized
from Parent - 7,575 - 7,575
Net loss - - (2,547) (2,547)
Balance at December 31, 1993 $ - $ 64,135 $ (11,332) $ 52,803
See accompanying notes.
F-6<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from operating activities:
Net income (loss) $ (2,547) $ 4,602 $ 9,322
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 31,607 29,538 30,019
Amortization 4,817 4,424 4,038
Other items 342 1,215 324
Contribution by Parent for federal
income tax provision 7,575 - -
Extraordinary charges relating
to early extinguishment of debt 1,341 9,075 -
Cumulative effect of changes in
accounting principles 6,276 - -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable 707 (8,705) 23,539
(Increase) decrease in inventories (4,316) 5,541 8,471
Increase (decrease) in trade
accounts payable 3,757 (4,330) (10,448)
Other, net (1,228) (7,000) (3,931)
Total adjustments 50,878 29,758 52,012
Net cash provided by operating
activities 48,331 34,360 61,334
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets (73,865) - -
Capital expenditures (42,480) (23,447) (21,834)
Proceeds from sale of assets 262 429 12,028
Net cash used in investing activities (116,083) (23,018) (9,806)
Continued on following page.
F-7<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Cash flows from financing activities:
Borrowings under working capital loans 328,050 316,050 357,560
Repayments under working capital loans (366,250) (296,850) (372,960)
Repayment of term loans (42,580) (40,205) (36,507)
Proceeds from issuance of term loans 140,000 - -
Capital contribution by Parent 15,000 - -
Proceeds from issuance of senior
secured notes - 50,000 -
Proceeds from issuance of
11 3/4% senior subordinated notes - 135,000 -
Redemption of 14% senior
subordinated notes - (89,250) -
Redemption of preferred stock - (31,508) -
Repayment of advance from Parent - (25,200) -
Dividend to Parent - (15,724) -
Cash dividends paid on preferred stock - (1,137) -
Debt financing costs (8,935) (10,250) -
Net cash provided (used) by financing
activities 65,285 (9,074) (51,907)
Net increase (decrease) in cash and
cash equivalents (2,467) 2,268 (379)
Cash and cash equivalents at
beginning of year 2,672 404 783
Cash and cash equivalents at
end of year $ 205 $ 2,672 $ 404
Supplementary data:
Interest paid $ 25,733 $ 29,046 $ 27,503
Income taxes paid, net of refunds 722 1,206 764
Additional preferred stock issued
in lieu of dividend - 2,130 3,817
See accompanying notes.
F-8<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
1. Basis of Presentation
Silgan Corporation ("Silgan", together with its wholly owned subsidiaries,
Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics"), the "Company") is a wholly owned subsidiary of
Silgan Holdings Inc. ("Holdings" or "Parent"). Holdings is a company
controlled by Silgan management and Morgan Stanley Leveraged Equity Fund
II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co. Incorporated
("MS & Co.").
The Company is engaged in the packaging business which includes the
manufacture and sale of steel, aluminum and paperboard containers, mainly
to processors and packagers of food products, and the design, manufacture
and sale of various plastic containers, mainly for food, beverage,
household, pharmaceutical and personal care products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated. Assets and liabilities of the Company's foreign subsidiary are
translated at rates of exchange in effect at the balance sheet date.
Income amounts are translated at the average of monthly exchange rates.
Accounts Receivable
Accounts receivable consist primarily of amounts due from domestic
companies. Credit is extended based on an evaluation of the customer's
financial condition and collateral is not generally required. The Company
maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Finished goods, work-in-process and raw material inventories are
principally accounted for by the last-in, first-out method (LIFO).
Property, plant and equipment
Property, plant and equipment are recorded at cost and are depreciated on
the straight-line method over their estimated useful lives (ranging from 3
to 25 years). Maintenance and repair expenditures are charged to expense
as incurred; major renewals and betterments are capitalized. The total
amount of repairs and maintenance expense for the years ended December 31,
1993, 1992 and 1991 was $17,072, $14,962 and $16,507, respectively.
F-9<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Other Assets
Cost in excess of fair value of net assets acquired is amortized on a
straight-line basis over a period not exceeding forty years. Covenants not
to compete are being amortized over five years. Debt issuance costs are
being amortized over the terms of the related debt agreements (3 to 10
years).
Cash flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less at the time of purchase and investments in money market accounts to be
cash equivalents.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate
their fair value. The fair values of fixed-rate borrowings are based on
quoted market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
Adoption of New Accounting Policies
Postretirement Benefits Other than Pensions: Effective January 1, 1993,
the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". Under SFAS No. 106, the Company is required to accrue the
estimated cost of retiree health and other postretirement benefits during
the years that covered employees render service. Prior to 1993, the
Company recorded these benefits on the pay-as-you-go basis. As permitted
by the Statement, prior years' financials have not been restated. See Note
15 - Postretirement Benefits Other than Pensions.
F-10<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
2. Summary of Significant Accounting Policies (continued)
Income Taxes: Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the use of the
liability method of accounting for deferred income taxes. The provision
for income taxes includes federal, state and foreign income taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities. The Company
had previously reported under SFAS No. 96, "Accounting for Income Taxes".
Under SFAS No. 96, the Company had recognized a federal income tax benefit
from the tax losses of Holdings. Under SFAS No. 109, this benefit will be
reflected as a contribution to additional paid-in capital instead of as a
reduction of income tax expense. As permitted by the Statement, prior
years' financial statements have not been restated. See Note 9 - Income
Taxes.
Postemployment Benefits: During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". The cumulative effect
as of January 1, 1993 of this accounting change was to decrease net income
by $826 (after related income taxes of $450). There was no effect on
income before income taxes as a result of this change in accounting
principle.
3. Acquisitions
On December 21, 1993, Containers acquired from Del Monte Corporation ("Del
Monte") substantially all of the fixed assets and certain working capital
of its container manufacturing business in the United States ("DM Can").
The purchase price, which is subject to post-closing adjustments, for the
assets acquired and the assumption of certain specified liabilities,
including related transaction costs, was $73,865. The acquisition was
accounted for as a purchase transaction and the results of operations have
been included with the Company's results from the acquisition date. The
total purchase cost was allocated first to the tangible assets acquired and
liabilities assumed based upon their respective fair values as determined
from preliminary appraisals and valuations and the excess was allocated to
cost over fair value of assets acquired. The aggregate purchase cost and
its preliminary allocation to the assets and liabilities is as follows:
Net working capital acquired $26,400
Property, plant and equipment 57,238
Cost in excess of fair value of assets acquired 6,587
Other liabilities assumed (16,360)
$73,865
F-11<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
3. Acquisitions (continued)
Set forth below is the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1993 and 1992. The unaudited
pro forma results of operations for the year ended December 31, 1993
include the historical results of DM Can for the period ended December 21,
1993 and give effect to the pro forma adjustments. The unaudited pro forma
results of operations for the year ended December 31, 1992 include the
historical results of DM Can and the Company for the year ended December
31, 1992 and give effect to the pro forma adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in a supply agreement with Del Monte, the
estimated effect of purchase accounting adjustments based upon preliminary
appraisals and evaluations, the financing of the acquisition and certain
other adjustments as if these events had occurred as of the beginning of
the periods mentioned therein. The following unaudited pro forma results
of operations do not purport to represent what the Company's results of
operations would actually have been had the transactions in fact occurred
on the dates indicated or to project the Company's results for any future
period:
1993 1992
Net sales $818,614 $819,579
Income from operations 51,343 57,282
Income before income taxes 18,877 25,353
Income before extraordinary charges
and cumulative effect of accounting changes 10,844 22,301
Net income 52 13,226
4. Dispositions
In November 1991 the Company sold substantially all of the assets used in
its PET carbonated beverage bottle business. Most of the sales proceeds of
$12,000 were used to repay term loans. No gain or loss was recognized as a
result of the disposition.
F-12<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
5. Refinancings
1993
Effective December 21, 1993, Silgan, Containers and Plastics entered into a
credit agreement (the "Credit Agreement") with certain lenders (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, dated as of August 31, 1987, and to finance the acquisition of
DM Can by Containers. Under the Credit Agreement, the Banks loaned the
Company $140,000 of term loans and $29,800 of working capital loans on the
effective date. In addition, Holdings contributed $15,000 to the Company.
The Company used these proceeds to repay $41,452 of term loans and $60,800
of working capital loans, to acquire DM Can and pay fees and expenses. As
a result of the early extinguishment of debt, the Company incurred a charge
of $841 (net of $500 of taxes). See Note 10 - Bank Credit Facility.
1992
Effective June 29, 1992, the Company and Holdings refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by the Company of $50,000 principal amount of
its Senior Secured Floating Rate Notes due June 30, 1997 (the "Secured
Notes") and a public offering of $135,000 principal amount of the Company's
11 3/4% Senior Subordinated Notes due 2002 (the "11 3/4% Notes"). The
proceeds from the new debt offerings, net of $10,250 of transaction fees
and expenses, were used, in part, to redeem the Company's 14% Senior
Subordinated Notes (the "14% Notes") and 15% Cumulative Exchangeable
Redeemable Preferred Stock (the "Preferred Stock"). The Preferred Stock
(300,083 shares) was redeemed on August 16, 1992 at a redemption price of
$105 per share plus accrued dividends. The 14% Notes ($85,000 aggregate
principal amount) were redeemed on August 28, 1992 at a redemption price of
105% of the principal amount thereof plus accrued interest.
In conjunction with the Refinancing, the Amended and Restated Credit
Agreement was amended to, among other things, permit the Refinancing and
the Company repaid $30,000 of term loans thereunder. In addition, the
Company repaid the $25,200 advance from Holdings and advanced $16,000 to
Holdings. Upon completion of the redemption of the 14% Notes, the Company
paid a $15,724 dividend to Holdings which Holdings, along with additional
cash earned on its short term investments of proceeds received by it in
connection with the Refinancing, used to retire the outstanding advance to
the Company. Such payments to Holdings, along with the public offering by
Holdings of its 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures") for an aggregate amount of proceeds of $165,435, were used by
Holdings to redeem its Senior Reset Debentures due 2004 (the "Holdings
Reset Debentures") on July 29, 1992.
F-13<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
5. Refinancings (continued)
1992 (continued)
As a result of the Refinancing, unamortized deferred financing costs
elating to the 14% Notes, the Preferred Stock and the repayment of term
loans under the Amended and Restated Credit Agreement totaling $3,325 in
the aggregate were written off in 1992 and, along with the redemption
premiums of $5,750, are reflected as an extraordinary charge. Since the
Company was reporting under SFAS No. 96, there was no tax effect on this
charge due to the tax allocation arrangement with Holdings and Holdings'
net operating loss position.
6. Inventories
Inventories at December 31, 1993 and 1992 consist of the following:
1993 1992
Raw materials and supplies $ 26,458 $ 17,623
Work-in-process 17,105 10,413
Finished goods 65,072 49,546
108,635 77,582
Adjustment to value inventory
at cost on the LIFO method 18 (2,575)
$108,653 $ 75,007
The amount of inventory recorded on the first-in first-out method at
December 31, 1993 and 1992 was $2,178 and $2,189, respectively.
7. Property, plant and equipment
Net property, plant and equipment at December 31, 1993 and 1992 consist of
the following:
1993 1992
Land $ 4,469 $ 3,743
Buildings and improvements 56,087 50,382
Machinery and equipment 352,409 270,845
Construction in progress 19,894 15,334
432,859 340,304
Less: accumulated depreciation
and amortization (142,464) (116,425)
$290,395 $223,879
F-14<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
8. Other Assets
Other assets at December 31, 1993 and 1992 consist of the following:
1993 1992
Cost in excess of fair value of
assets acquired $ 26,671 $ 20,178
Debt issuance costs 18,163 17,029
Covenants not to compete 8,500 8,500
Other 4,146 1,342
57,480 47,049
Less: accumulated amortization (12,640) (14,364)
$ 44,840 $ 32,685
In 1993, upon the effectiveness of the Credit Agreement, the Company wrote
off $841 of net debt issuance costs (net of tax) and capitalized $8,935 in
new debt issuance costs. In 1992, as part of the Refinancing, the Company
wrote off $3,325 of net debt issuance costs and capitalized $10,250 in new
debt issuance costs. Amortization expense for the years ended December 31,
1993 and 1992 was $4,817 and $4,424, respectively.
9. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" which requires the use of the liability method of
accounting for deferred income taxes. The Company had previously reported
under SFAS No. 96, "Accounting for Income Taxes". Under SFAS No. 96, the
Company had recognized a federal income tax benefit from the tax losses of
Holdings. Under SFAS No. 109, this benefit will be reflected as a
contribution to additional paid-in capital instead of a reduction of income
tax expense. Accordingly, the Company recorded a cumulative charge to
earnings and credit to paid-in capital of $6,000 for the difference in
methods up to the date of adoption. As permitted by SFAS No. 109, the
Company has elected not to restate prior years' financial statements.
F-15<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
at December 31 are as follows:
1993
Deferred tax liabilities:
Tax over book depreciation $20,700
Book over tax basis of assets acquired 24,000
Other 6,392
Total deferred tax liabilities 51,092
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 20,700
Net operating loss carryforwards 7,800
Benefit taken for Holdings' losses 7,575
Other 2,000
Total deferred tax assets 38,075
Net deferred tax liabilities $13,017
The Company files a consolidated Federal income tax return with Holdings.
In accordance with the tax allocation agreement thereunder, the Company is
obligated to reimburse Holdings for the use of Holdings losses only to the
extent that Holdings has taxable income on a stand-alone basis. A
liability has not been established to the extent of the use of Holdings'
losses since the possibility of the ultimate payment for these benefits is
considered remote. Accordingly, the use of Holdings' losses has been
accounted for as a contribution of capital.
Also, in accordance with the tax allocation agreement, the Company is
required to reimburse Holdings for its allocable share of Holdings' tax
liability. In 1993, the Company's share of Holdings' federal tax
liability, for alternative minimum tax, aggregated $300.
The income tax provision for 1993 reflects the adoption of SFAS No. 109
under which the Company provides for taxes as if it were a separate
taxpayer. The income tax provision for 1992 and 1991 takes into
consideration certain matters covered under a tax allocation arrangement
with Holdings, under which the Company obtains a federal income tax
benefit from Holdings' tax losses.
F-16<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
9. Income Taxes (continued)
The income tax provision consists of the following:
1993 1992 1991
Current
Federal $ 300 $ - $ -
State 1,900 1,705 682
Foreign (400) 31 380
1,800 1,736 1,062
Deferred:
Federal 4,100 - -
State 400 464 438
Foreign - - -
4,500 464 438
$6,300 $2,200 $1,500
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following:
1993 1992 1991
Income tax provision
at the U.S. federal
income tax rate $5,091 $5,398 $3,679
Income tax benefit realized
from Holdings - (4,650) (3,169)
State and foreign tax expense
net of federal income taxes 1,209 1,452 990
$6,300 $2,200 $1,500
The Company files a consolidated federal income tax return with Holdings.
On a consolidated basis the Company and Holdings have net operating loss
carryforwards at December 31, 1993 of approximately $105,000 which are
available to offset future consolidated taxable income of the group and
expire from 2001 through 2008. The Company and Holdings, on a consolidated
basis at December 31, 1993, have $1,900 of alternative minimum tax credits
which are available indefinitely to reduce future tax payments for regular
federal income tax purposes.
At December 31, 1993 the Company, if reporting on a separate company basis,
would have had net operating loss carryforwards for federal tax purposes of
approximately $19,000 which are available for carryforward for a period of
up to 15 years.
F-17<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") and the Banks entered into the Credit Agreement pursuant to
which the Banks loaned to Silgan (i) $60,000 of term loans (the "A Term
Loans") and (ii) $80,000 of term loans (the "B Term Loans"), collectively,
the "Term Loans", and agreed to lend to Containers or Plastics up to an
aggregate of $70,000 of working capital loans (the "Working Capital
Loans"). Concurrent with the borrowings under the Credit Agreement, the
Company repaid in full amounts outstanding under the Amended and Restated
Credit Agreement. See Note 5 - Refinancings.
To secure the obligations of Borrowers under the Credit Agreement, the
Company pledged to the Banks principally all of the capital stock of its
subsidiaries and the subsidiaries have each granted to the Banks security
interests in substantially all of their respective real and personal
property. Such collateral also secures on an equal and ratable basis the
Secured Notes, subject to certain intercreditor arrangements. Holdings has
pledged to the Banks all of the capital stock of the Company. Holdings and
each of the Borrowers have guaranteed on a secured basis all of the
obligations of the Borrowers under the Credit Agreement.
The A Term Loans mature on September 15, 1996 and are payable in
installments during the listed years as follows:
A Term Loan
Installment Repayment Date Principal Amount
1994 $ 20,000
1995 20,000
1996 20,000
The B Term Loans mature and are payable in full on September 15, 1996.
Amounts repaid under the Term Loans cannot be reborrowed.
Under the Credit Agreement, the Company is required to repay the Term Loans
(pro rata for each tranche of Term Loans) in an amount equal to 75% of the
Company'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, the Company is required to repay the Term Loans (pro
rata for each tranche of Term Loans) and the Secured Notes, in an aggregate
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 and the Secured Notes Agreement.
F-18<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility (continued)
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 Plastics and (ii) 50% of
eligible inventory of Containers and Plastics. In lieu of Working Capital
Loans, Containers and Plastics may request Bankers Trust to issue up to
$15,000 of letters of credit (the "Letters of Credit"). At December 31,
1993, $6,094 of Letters of Credit were outstanding.
Subject to the terms of the Credit Agreement, 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.
Each of the Term Loans and each of the Working Capital Loans, at the
respective Borrower's election, consist 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.
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. At
December 31, 1993, the loans were maintained as Base Rate loans and the
interest rate was between 7 3/4% and 8 1/4%.
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.
F-19<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
10. Bank Credit Facility (continued)
The Credit Agreement requires the Company to meet certain financial
covenants, and restricts or limits, among other items, each of the
Borrowers' ability to (i) incur additional indebtedness, (ii) create
certain liens, (iii) consolidate, merge or sell assets, (iv) make capital
expenditures and (v) pay dividends, except for distributions to Holdings to
fund federal and state tax obligations.
For 1993, 1992 and 1991, respectively, the average amount of borrowings
under the Working Capital Loans was $51,935, $44,525, and $56,342; the
average annual interest rate was 6.5%, 7.2% and 9.0%; and the highest
amount of such borrowings at any month-end was $80,250, $80,800 and
$81,300.
11. Senior Secured Notes
The Secured Notes constitute senior indebtedness of the Company and are
secured by a first lien on substantially all of the assets of the Company.
Such collateral also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, all indebtedness of the Company under
the Credit Agreement. The Secured Notes mature on June 30, 1997 and bear
interest, which is payable quarterly, at a rate of three-month LIBOR plus
3%. The interest rate is adjusted quarterly. The interest rate in effect
at December 31, 1993 was 6.38%.
The Secured Notes are redeemable at the option of the Company at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from
certain asset sales and the issuance of capital stock by the Company are
required to be applied to prepay the Secured Notes and indebtedness under
the Credit Agreement on a pro rata basis, subject to certain exceptions.
The Secured Notes contain covenants which are comparable to or less
restrictive than those required by the Credit Agreement. These covenants
limit, among other items, the Company's ability to (i) incur additional
indebtedness, (ii) pay dividends, except for distributions to Holdings to
fund federal and state tax obligations, (iii) enter into certain
transactions with affiliates, (iv) repay subordinated indebtedness, and (v)
effect certain mergers, consolidations and transfers of assets.
12. 11 3/4% Senior Subordinated Notes
The 11 3/4% Notes, which mature on June 15, 2002, represent unsecured
general obligations of Silgan, subordinate in right of payment to
obligations of the Company under the Credit Agreement and the Secured Notes
and effectively subordinate to all of the obligations of the subsidiaries
of the Company. Interest is payable semi-annually on June 15 and December
15.
F-20<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
12. 11 3/4% Senior Subordinated Notes (continued)
The 11 3/4% Notes are redeemable at the option of the Company, in whole or
in part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount plus
accrued interest:
Redemption
Year Percentage
1997 105.8750%
1998 102.9375%
1999 and thereafter 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those required by the Credit Agreement and the
Secured Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1993 was
$145,800.
13. Preferred Stock
The Preferred Stock holders received cumulative preferential dividends at
the rate per annum of 15% per share calculated as a percentage of $100.
Dividends were, at the option of the Company, paid in additional shares of
Preferred Stock. During 1992 and 1991, the Company issued 21,301 and
38,173 shares of Preferred Stock at $100 per share, representing its
Preferred Stock dividend requirement for the two quarters ended May 15,
1992 and the four quarters ended November 15, 1991. A cash dividend
payment of $1,137 was made for the quarter ended August 15, 1992.
As of December 31, 1993, the Company has authorized 1,000 shares of
Preferred Stock, of which, none is issued or outstanding.
14. Retirement Plans
The Company sponsors contributory and non-contributory pension and
retirement plans which cover substantially all employees, other than union
employees covered by multi-employer defined benefit pension plans under
collective bargaining agreements. The benefits are paid based on either a
career average, final pay or years of service formula. With respect to
certain hourly employees, pension benefits are provided for based on stated
amounts for each year of service. The Company funds the minimum amount
required under the Employee Retirement Income Security Act of 1974 with
certain employees contributing approximately 3% of their annual
compensation.
F-21<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
14. Retirement Plans (continued)
The provisions of SFAS No. 87, "Employers' Accounting for Pensions" require
recognition in the balance sheet of an additional minimum liability and
related intangible asset for pension plans with accumulated benefits in
excess of plan assets. At December 31, 1993, an additional liability of
$2,107 and an intangible asset of equal amount are reflected in the
consolidated balance sheet. The additional liability is principally the
result of the change in the assumed discount rate.
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status and amounts recognized
in the Company's balance sheets as of December 31:
1993 1992
Actuarial present value of
benefit obligations:
Vested benefit obligations $ 19,096 $ 13,543
Non-vested benefit obligations 1,100 970
Accumulated benefit obligations 20,196 14,513
Additional benefits due to
future salary levels 9,825 9,847
Projected benefit obligations 30,021 24,360
Plan assets at fair value 18,327 14,644
Projected benefit obligation
in excess of plan assets 11,694 9,716
Unrecognized actuarial gain (loss) 2 2,431
Unrecognized prior service costs (2,093) (2,218)
Additional minimum liability 2,107 114
Net pension liability $ 11,710 $10,043
The 1992 funded status amounts have been restated to reflect revisions in
actuarial computations. These revisions had no effect on the Company's net
pension liability.
In addition to amounts set forth above, the Company has assumed defined
benefit plan obligations of approximately $11,000 (as calculated at the
Company's discount rate of 7 1/2%) in connection with the acquisition of DM
Can. Under the terms of the DM Can purchase agreement, Del Monte will be
transferring to the Company fund assets of approximately $9,000 (as
computed using a discount rate of 9%).
F-22<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
14. Retirement Plans (continued)
The assumptions used in determining actuarial present value of plan benefit
obligations as of December 31:
1993 1992 1991
Discount rate 7.5% 8.5% 8.5%
Weighted average rate of
compensation increase 4.5% 5.0 - 5.5% 5.0 - 5.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
The components of total pension expense are as follows:
1993 1992 1991
Service cost $1,809 $1,722 $1,816
Interest cost 2,144 2,101 1,977
Net amortization and deferrals 500 75 1,298
Actual return on assets (1,784) (891) (1,717)
Other (gains) (183) (183) (307)
Net pension cost of defined
benefit plans 2,486 2,824 3,067
Multi-employer plans 2,210 2,159 2,041
Total pension expense $4,696 $4,983 $5,108
Plan assets are invested in money market funds, equity funds and bond
funds.
In 1991, the Company realized a curtailment gain of $2,500 due to a
reduction in the Company's work force. Such amount has not been reflected
in total pension expense above.
Containers sponsors a deferred incentive savings plan for eligible salaried
employees where contributions are provided if Containers meets certain
financial targets. The maximum aggregate amount of awards will not exceed
15% of the aggregate salaries of the participants in the Plan.
Contributions of $1,630, $1,730 and $1,700 were made for 1993, 1992 and
1991, respectively.
Plastics sponsors a savings and investment plan which is organized under
Section 401(k) of the Internal Revenue Code. Plastics' contributions to
the plan were $146, $147 and $149 in 1993, 1992 and 1991, respectively.
F-23<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Postretirement Benefits Other than Pensions
As discussed in Note 2, the Company adopted SFAS No. 106 in 1993. The
Company has elected to immediately recognize a cumulative charge of $3,125
(after related income taxes of $1,875) for this change in accounting
principle which represents the accumulated postretirement benefit
obligation existing as of January 1, 1993. This change in accounting
principle, excluding the cumulative effect, decreased pretax income for the
year ended December 31, 1993 by approximately $478. The postretirement
benefit cost for 1992 and 1991, which was recorded on a pay-as-you-go
basis, has not been restated and was not material.
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain
cost sharing features including deductibles and coinsurance. The Company
does not fund the plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31, 1993:
Accumulated postretirement
benefit obligation:
Retirees $1,209
Fully eligible active plan participants 1,197
Other active plan participants 2,127
4,533
Plan assets at fair value -
Accumulated postretirement benefit
obligation in excess of plan assets 4,533
Unrecognized net gain or (loss) (462)
Unrecognized transition obligation -
Accrued postretirement benefit cost $4,071
Net periodic postretirement benefit cost for 1993 included the following
components:
Service cost $ 152
Interest cost 326
Net periodic postretirement benefit cost $ 478
F-24<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
15. Postretirement Benefits Other than Pensions (continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The weighted average rate of
increase in future compensation levels was 4.5%. For measuring the
expected postretirement benefit obligation, the weighted-average annual
assumed rate of increase in the per capita cost of covered benefits (i.e.,
health care cost trend rate) principally used is 14% for 1994 (15% for
1993). This rate is assumed to decrease by 1% per year to an ultimate rate
of 6%. A 1% increase in the trend rate assumption would increase the
accumulated postretirement benefit obligation as of December 31, 1993 by
approximately $62 and increase the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost for 1993 by
approximately $12. As of December 31, 1992, the plan's unfunded
accumulated postretirement benefit obligations for retirees and active
participants was $1,144 and $3,856, respectively.
16. Stock Option Plans
Containers and Plastics have established separate but virtually identical
stock option plans for their key employees pursuant to which options to
purchase shares of common stock of Holdings' and its subsidiaries and stock
appreciation rights ("SARs") may be granted.
Options granted under the plans may be either incentive stock options or
non qualified stock options. To date, all stock options granted have been
non qualified stock options. Under the plans, Containers and Plastics have
each reserved 1,200 shares of their common stock in order to enable them to
issue shares under the plans. Both Containers and Plastics have 10,800
shares of $0.01 par value common stock currently issued, all of which are
owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment by either Containers or Plastics, as the case may be, to the
holders of the options an amount in cash or stock equal to the excess of
the proforma book value, as defined, of a share of common stock (or in the
event of a public offering, the fair market value of a share of common
stock) over the exercise price of the option with certain adjustments for
the portion of vested stock appreciation not paid at the time of
recapitalization in June, 1989. The subsidiaries have the right to
repurchase, and employees have the right to require the subsidiaries to
repurchase, their common stock at the then proforma book value, or market
value as the case may be, should employees leave the Company.
F-25<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
16. Stock Option Plans (continued)
At December 31, 1993, there were outstanding options for 816 shares under
the Containers' Plan and 300 shares under the Plastics' Plan. The exercise
prices per share range from $2,122 to $2,456 for the Containers' options
and are $746 for the Plastics' options. There were 528 options and 240
options exercisable at December 31, 1993 under the Containers' and
Plastics' plans, respectively. The Company incurred charges relating to
the vesting and payment of benefits under the stock option plans of $200
and $350 in 1993 and 1992, respectively (none in 1991).
The stock options and SARs generally become exercisable ratably over a five
year period.
In the event of a public offering of any of the Company's or Holdings'
capital stock or a sale of the Company or Holdings to a third party, (i)
the options granted by Containers and Plastics pursuant to the plans, or
(ii) any stock issued upon exercise of such options issued by Containers
and Plastics are convertible into either stock options or common stock of
the Company or Holdings. The conversion of such options or shares will be
based upon a valuation of Holdings and an allocation of such value among
the subsidiaries after giving affect to, among other things, that portion
of the outstanding obligation of Holdings allocable to each such
subsidiary.
17. Business Information
The Company is engaged in the packaging business. Its principal products
are metal and plastic containers. Net sales for its metal and plastic
containers were $445,871 and $186,319; $425,844 and $192,596; and $435,349
and $232,139 for the years ended December 31, 1993, 1992 and 1991,
respectively. Other sales amounted to $13,278, $11,599 and $10,723 for the
years ended December 31, 1993, 1992 and 1991, respectively.
One customer accounted for 34.1%, 36.5% and 32.2%, of net sales during the
years ended December 31, 1993, 1992 and 1991 respectively. At December 31,
1993 and 1992, 12.9% and 14.5%, respectively, of the accounts receivable
balance is due from this customer.
F-26<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
18. Related Party Transactions
Pursuant to various management services agreements (the "Management
Agreement") entered into between Holdings, Silgan, Containers, Plastics,
and S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and
Horrigan, the Chairman of the Board and President of Holdings,
respectively, S&H provides Holdings and the Company and its subsidiaries
with general management, supervision and administrative services (the
"Services"). In consideration for the Services, S&H receives a fee of
4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated
earnings before depreciation, amortization, interest and taxes ("EBDIT")
until EBDIT has reached the Scheduled Amount set forth in the Management
Agreement and 3.3% (of which 0.3% is payable to MS & Co.) after EBDIT has
exceeded the Scheduled Amount up to the Maximum Amount as set forth in the
Management Agreement, plus reimbursement for all related out-of-pocket
expenses. The total amount incurred for the years ended December 31, 1993,
1992 and 1991 was approximately $4,385, $4,225 and $4,027, respectively.
Included in accounts payable at December 31, 1993 and 1992, was
approximately $575 and $200, payable to S&H, respectively.
Under the terms of the Management Agreement, the Company agreed, subject to
certain exceptions, to indemnify S&H and any of its affiliates, officers,
directors, employees, subcontractors, consultants or controlling persons
against any loss or damage they may sustain arising in connection with the
Management Agreement.
In connection with the 1992 Refinancing, MS & Co. received as compensation
for its services as underwriter for the Secured Notes, the 11 3/4% Notes
and the Discount Debentures an aggregate of $11,500.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8,100.
19. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Minimum future
rental payments under these operating leases are:
1994 $8,960
1995 6,700
1996 5,829
1997 4,873
1998 3,606
Thereafter 9,44l
$39,409
Rental expense for the years ended December 31, 1993, 1992 and 1991 was
approximately $7,999, $7,977 and $8,102, respectively.
F-27<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
20. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of the
Company for $6.50 per share (the "Merger"). In connection with the Merger,
two complaints were filed during 1989 in the Court of Chancery in the State
of Delaware (the "Court") by certain Silgan Class B Common Stockholders
against Silgan, Holdings, MS & Co., officers and directors.
The complaints allege, among other things, that certain defendants breached
their fiduciary duties under Delaware law to minority stockholders of
Silgan by engaging in unfair dealing, attempting to effect a merger at a
grossly inadequate price and distributing misleading proxy materials. The
complaints ask the Court, among other things, to rescind the Merger and/or
to grant to plaintiffs such damages, including rescissory damages, as are
found by the Court to be proven at trial. Additionally, the plaintiffs
each filed a petition for appraisal.
In 1991, the Court stayed one of the actions and related appraisal
proceeding based upon the seizure and placement into receivership of one
plaintiff. The Court lifted the stay of the action and appraisal
proceeding on March 30, 1992 and both the action and appraisal were
dismissed in February 1994 following settlement with the plaintiffs. The
second action was voluntarily dismissed on January 29, 1992 without
prejudice to the right of the plaintiffs to reinstate the action at the
conclusion of the related appraisal proceeding. Discovery is proceeding in
the appraisal. The Court has set the week of May 9, 1994 for trial.
Additionally, a complaint was filed by parties who are limited partners of
The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number
of defendants including Silgan and Holdings. The complaint alleges that
Silgan and Holdings aided and abetted the general partners MSLEF in
breaching their fiduciary duties to the limited partners. The Court
dismissed all claims against Silgan and Holdings related to this action on
January 14, 1993, and subsequently upheld that dismissal after the
plaintiff filed a motion for reargument.
The defendants believe that there is no factual basis for the allegations
and claims contained in the complaints. Management also believes that the
lawsuits are without merit and they intend to defend the lawsuits
vigorously. In addition, management believes that the ultimate resolution
of these matters and the appraisal proceedings will not have a material
effect on the financial condition or results of operations of Silgan or
Holdings.
F-28<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Dollars in thousands
except for per share data)
20. Litigation (continued)
In connection with the Merger and the litigation described above, as of
December 31, 1993 approximately $6,800 of the purchase price has not been
paid to certain former stockholders and such amount has been recorded by
Holdings as a current liability. To the extent the Company elects to make
such payments to former stockholders, the Company's stockholder's equity
could be reduced by the amount of such payment.
Other than the actions mentioned above there are no other pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Company, to which the Company is a party or to which any of
its properties are subject.
F-29<PAGE>
SILGAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30, June 30,
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 6,658 $ 217
Accounts receivable, net 77,216 49,435
Inventories 142,560 108,403
Prepaid expenses and other current
assets 3,873 3,738
Total current assets 230,307 161,793
Property, plant and equipment, net 281,580 233,416
Other assets 47,164 30,643
$559,051 $425,852
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Working capital loans $ 34,950 $ 65,750
Current portion of term loans 20,000 20,899
Trade accounts payable 49,814 38,076
Accrued payroll and related costs 24,530 20,070
Accrued interest payable 1,746 1,056
Accrued expenses and other current
liabilities 13,281 11,396
Total current liabilities 144,321 157,247
Term loans 120,000 20,553
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
Deferred income taxes 12,957 12,717
Other long-term liabilities 35,000 18,015
Common stockholder's equity:
Additional paid-in capital 69,135 47,235
Retained earnings (deficit) (7,362) (14,915)
Total common stockholder's equity 61,773 32,320
$559,051 $425,852
See accompanying notes.
F-30<PAGE>
SILGAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
June 30, June 30,
1994 1993
Net sales $200,959 $148,522
Cost of goods sold 172,228 128,583
Gross profit 28,731 19,939
Selling, general and administrative expenses 9,831 8,458
Income from operations 18,900 11,481
Interest expense and other related financing costs 8,928 6,804
Other expense 5 62
Income before income taxes 9,967 4,615
Income tax provision 4,075 1,825
Net income $ 5,892 $ 2,790
See accompanying notes.
F-31<PAGE>
SILGAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Six Months Ended
June 30, June 30,
1994 1993
Net sales $387,203 $297,250
Cost of goods sold 335,748 260,405
Gross profit 51,455 36,845
Selling, general and administrative expenses 18,274 16,517
Income from operations 33,181 20,328
Interest expense and other related financing costs 17,297 13,537
Other (income) expense 161 (30)
Income before income taxes 15,723 6,821
Income tax provision 6,450 3,000
Income before cumulative effects of changes
in accounting principles 9,273 3,821
Cumulative effect of changes in accounting
principles, net of taxes - (9,951)
Net income (loss) $ 9,273 $ (6,130)
See accompanying notes.
F-32<PAGE>
SILGAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30, June 30,
1994 1993
Cash flows from operating activities:
Net income (loss) $ 9,273 $ (6,130)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation 18,280 14,782
Amortization 2,973 2,406
Other items 551 (539)
Reserve for postretirement health care
benefits 254 200
Contribution by Parent for federal income tax
provision 5,000 5,675
Cumulative effect of changes in accounting
principles - 6,276
Changes in assets and liabilities:
(Increase) in accounts receivable (33,182) (4,302)
(Increase) in inventories (33,907) (31,806)
Increase in trade accounts payable 17,901 10,120
Other, net 1,504 2,495
Total adjustment (20,626) 5,307
Net cash used by operating activities (11,353) (823)
Cash flows from investing activities:
Capital expenditures (9,641) (26,070)
Proceeds from sale of assets - 216
Net cash used in investing activities (9,641) (25,854)
Continued on following page.
F-33<PAGE>
SILGAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
Six Months Ended
June 30, June 30,
1994 1993
Cash flows from financing activities:
Borrowings under working capital loans $183,500 $157,200
Repayments under working capital loans (150,750) (131,850)
Repayment of term loans - (1,128)
Payments to former shareholders (5,303) -
Net cash provided by financing activities 27,447 24,222
Net increase (decrease) in cash and cash equivalents 6,453 (2,455)
Cash and cash equivalents at beginning of year 205 2,672
Cash and cash equivalents at end of period $ 6,658 $ 217
Supplementary data:
Interest paid $ 14,071 $ 12,275
Income taxes paid, net of refunds 1,389 (110)
See accompanying notes.
F-34<PAGE>
SILGAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1994 and 1993 and for the
three months and six months then ended is unaudited)
(Dollars in thousands)
1. Basis of Presentation
The accompanying condensed unaudited consolidated financial statements of
Silgan Corporation ("Silgan" or the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. All adjustments of a
normal recurring nature have been made, including appropriate estimates
for reserves and provisions which are normally determined or settled at
year end. In the opinion of the Company, however, the accompanying
financial statements contain all adjustments (consisting solely of a
normal recurring nature) necessary to present fairly Silgan's financial
position as of June 30, 1994 and 1993 and December 31, 1993, the results
of operations for the three months and six months ended June 30, 1994 and
1993, and the statements of cash flows for the six months ended June 30,
1994 and 1993.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in Silgan's Annual Report on Form 10-K for the year ended
December 31, 1993.
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 109 "Accounting
for Income Taxes". In the fourth quarter of 1993, the Company adopted
SFAS No. 112 "Employers' Accounting for Postemployment Benefits" effective
as of January 1, 1993. The cumulative effect of these changes in
accounting methods aggregated $9,951. The financial statements for the
period ended June 30, 1993 have been restated to reflect the adoption of
SFAS No. 112.
F-35<PAGE>
SILGAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 1994 and 1993 and for the
three months and six months then ended is unaudited)
(Dollars in thousands)
2. Inventories
Inventories consisted of the following:
June 30, June 30,
1994 1993
Raw materials and supplies $ 28,127 $ 22,869
Work-in-process 19,221 10,491
Finished goods 93,835 75,939
141,183 109,299
Adjustment to value inventory
at cost on the LIFO Method 1,377 (896)
$142,560 $108,403
F-36<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Del Monte Corporation
We have audited the accompanying Statement of Assets, Liabilities and Net
Assets of the Del Monte Corporation Can Manufacturing Operations (an
operation of Del Monte Corporation) as Constituted for Sale to Silgan
Containers Corporation, as of June 30, 1993, and the Schedule of Sales and
Cost of Sales for the year then ended. This financial statement and
schedule are the responsibility of Del Monte Corporation's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Assets,
Liabilities and Net Assets and the Schedule of Sales and Cost of Sales are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the presentation of the overall financial statement and
schedule. We believe that our audit provides a reasonable basis for our
opinion.
The Del Monte Corporation Can Manufacturing Operations is an operation of
Del Monte Corporation and has no separate legal status or existence.
In our opinion, the Statement of Assets, Liabilities and Net Assets and the
Schedule of Sales and Cost of Sales referred to above present fairly, in
all material respects, the financial position of the Del Monte Corporation
Can Manufacturing Operations as Constituted for Sale to Silgan Containers
Corporation at June 30, 1993 and the sales and cost of sales for the year
then ended in conformity with generally accepted accounting principles.
Ernst & Young
San Francisco, California
December 17, 1993
F-37<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS
JUNE 30, 1993
(Dollars in Thousands)
ASSETS
Current assets:
Cash $ 2
Inventories 30,407
Prepaid expenses 6
Total current assets 30,415
Property, plant and equipment, net 36,880
TOTAL ASSETS $67,295
LIABILITIES AND NET ASSETS
Current liabilities:
Trade accounts payable $ 969
Accrued expenses 1,159
Total current liabilities 2,128
Net assets 65,167
TOTAL LIABILITIES AND NET ASSETS $67,295
See Notes to Financial Statement and Schedule
F-38<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
SCHEDULE OF SALES AND COST OF SALES
YEAR ENDED JUNE 30, 1993
(Dollars in Thousands)
Sales (at manufactured cost - Note B) $197,054
Cost of sales $197,054
See Notes to Financial Statement and Schedule
F-39<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
NOTES TO FINANCIAL STATEMENT AND SCHEDULE
JUNE 30, 1993
(Dollars in Thousands)
NOTE A - BASIS OF PRESENTATION
The financial statement and schedule of Del Monte Corporation Can
Manufacturing Operations as Constituted for Sale to Silgan Containers
Corporation have been prepared in accordance with U.S. generally accepted
accounting principles. The financial statement includes the assets to be
purchased and certain related liabilities which are to be assumed of DMC's
can manufacturing operations ("Can Man") pursuant to the Purchase Agreement
(the "Agreement") dated September 3, 1993, as amended by the Amendment to
the Purchase Agreement dated December 10, 1993, between Del Monte
Corporation ("DMC") and Silgan Containers Corporation ("Silgan"). Can Man,
comprising DMC's metal food and beverage container manufacturing
operations, has no separate legal status or existence.
Substantially all of the metal containers produced by Can Man are used by
DMC in its canning business. DMC has accounted for Can Man as a cost
center. Due to DMC's highly-integrated operations, interest, general and
administrative costs, including income taxes, have never been allocated to
Can Man and no allocation of these costs has been made in the financial
statement or schedule. As a cost center, the transfer of metal containers
to DMC canneries has not resulted in the exchange of cash, and as a result,
no statement of cash flows is presented.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories: Inventories are stated at the lower of cost or market
utilizing the last-in, first-out (LIFO) method. For purposes of the
purchase price determination, inventories will be valued utilizing the LIFO
method, however there will be no adjustments for a LIFO reserve.
Property, Plant and Equipment: Property, plant and equipment is stated at
cost. Significant expenditures that increase useful lives are capitalized.
Maintenance and repair costs are expensed as incurred.
Depreciation is calculated by the straight-line method over the estimated
useful lives of the respective assets. The principal estimated useful
lives are: land improvements - 10 to 30 years; buildings and leasehold
improvements - 4 to 25 years; machinery and equipment - 3 to 15 years.
F-40<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
NOTES TO FINANCIAL STATEMENT AND SCHEDULE (Continued)
JUNE 30, 1993
(Dollars in Thousands)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales: Due to DMC's highly-integrated operations, no intercompany sale is
recorded when metal containers manufactured by Can Man are transferred into
the canning process. Since virtually all of DMC's metal containers have
been supplied from its can manufacturing facilities, and since sales of
unpacked metal containers to third parties have been minimal, DMC cannot
reasonably estimate an arms-length market price for Can Man's metal
containers. Therefore, sales in the Schedule of Sales and Cost of Sales
are presented on the basis of cost and may not be indicative of market
price.
Cost of sales: Cost of sales represents fully absorbed manufacturing costs
directly related to the manufacturing of metal containers.
Interest and other general and administrative expenses: DMC does not
allocate corporate interest or general and administrative expenses to its
facilities. Accordingly, no such expenses are reflected in the Schedule of
Sales and Cost of Sales.
NOTE C - INVENTORIES
Tinplate $ 4,023
Work in process 10,421
Purchased ends 3,255
Tin ends 10,980
Aluminum plate 324
Aluminum cups and tops 1,150
Materials and supplies 800
Reserve for obsolete inventory (236)
LIFO reserve (310)
Total Inventory $30,407
F-41<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
NOTES TO FINANCIAL STATEMENT AND SCHEDULE (Continued)
JUNE 30, 1993
(Dollars in Thousands)
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value
Land and land improvements $ 1,042 $ (110) $ 932
Buildings and leasehold
improvements 6,839 (903) 5,936
Machinery and equipment 41,269 (11,708) 29,561
Construction in process 451 -- 451
$49,601 $(12,721) $36,880
Depreciation expense included in cost of sales for the year ended June 30,
1993 was $3,970.
NOTE E - COMMITMENTS
DMC leases certain equipment in connection with its can manufacturing
operations. At June 30, 1993, the aggregate minimum rental payments
required under operating leases which are to be assumed by Silgan that have
initial or remaining terms in excess of one year are as follows:
1994 $ 107
1995 106
1996 73
1997 20
1998 5
Thereafter --
$ 311
Rent expense included in cost of sales for the year ended June 30, 1993 was
$942.
F-42<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS
SEPTEMBER 30, 1993
(Dollars in Thousands)
(Unaudited)
ASSETS
Current assets:
Cash $ 3
Inventories 25,177
Prepaid expenses 159
Total current assets 25,339
Property, plant and equipment, net 36,511
TOTAL ASSETS $61,850
LIABILITIES AND NET ASSETS
Current liabilities:
Trade accounts payable $ 1,891
Accrued expenses 1,478
Total current liabilities 3,369
Net assets 58,481
TOTAL LIABILITIES AND NET ASSETS $61,850
See Notes to Financial Statement and Schedule
F-43<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
SCHEDULE OF SALES AND COST OF SALES
(Dollars in Thousands)
(Unaudited)
Three Months Ended
September 30,
1993 1992
Sales (at manufactured cost - Note B) $56,433 $59,929
Cost of sales $56,433 $59,929
See Notes to Financial Statement and Schedule
F-44<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
NOTES TO FINANCIAL STATEMENT AND SCHEDULE
SEPTEMBER 30, 1993
(Dollars in Thousands)
NOTE A - BASIS OF PRESENTATION
The financial statement and schedule of Del Monte Corporation Can
Manufacturing Operations as Constituted for Sale to Silgan Containers
Corporation at September 30, 1993 and for the three-month periods ended
September 30, 1993 and 1992 are unaudited, but have been prepared in
accordance with U.S. generally accepted accounting principles. The
financial statement includes the assets to be purchased and certain related
liabilities which are to be assumed of DMC's can manufacturing operations
("Can Man") pursuant to the Purchase Agreement (the "Agreement") dated
September 3, 1993, as amended by the Amendment to the Purchase Agreement
dated December 10, 1993, between Del Monte Corporation ("DMC") and Silgan
Containers Corporation ("Silgan"). Can Man, comprising DMC's metal food
and beverage container manufacturing operations, has no separate legal
status or existence.
Substantially all of the metal containers produced by Can Man are used by
DMC in its canning business. DMC has accounted for Can Man as a cost
center. Due to DMC's highly-integrated operations, interest, general and
administrative costs, including income taxes, have never been allocated to
Can Man and no allocation of these costs has been made in the financial
statement or schedule. As a cost center, the transfer of metal containers
to DMC canneries has not resulted in the exchange of cash, and as a result,
no statement of cash flows is presented.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories: Inventories are stated at the lower of cost or market
utilizing the last-in, first-out (LIFO) method. For purposes of the
purchase price determination, inventories will be valued utilizing the LIFO
method, however there will be no adjustments for a LIFO reserve.
Property, Plant and Equipment: Property, plant and equipment is stated at
cost. Significant expenditures that increase useful lives are capitalized.
Maintenance and repair costs are expensed as incurred.
Depreciation is calculated by the straight-line method over the estimated
useful lives of the respective assets. The principal estimated useful
lives are: land improvements - 10 to 30 years; buildings and leasehold
improvements - 4 to 25 years; machinery and equipment - 3 to 15 years.
F-45<PAGE>
DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS
AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION
NOTES TO FINANCIAL STATEMENT AND SCHEDULE
SEPTEMBER 30, 1993
(Dollars in Thousands)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales: Due to DMC's highly-integrated operations no intercompany sale is
recorded when metal containers manufactured by Can Man are transferred into
the canning process. Since virtually all of DMC's metal containers have
been supplied from its can manufacturing facilities, and since sales of
unpacked metal containers to third parties have been minimal, DMC cannot
reasonably estimate an arms-length market price for Can Man's metal
containers. Therefore, sales in the Schedule of Sales and Cost of Sales
are presented on the basis of cost and may not be indicative of market
price.
Cost of sales: Cost of sales represents fully absorbed manufacturing costs
directly related to the manufacturing of metal containers.
Interest and other general and administrative expenses: DMC does not
allocate corporate interest or general and administrative expenses to its
facilities. Accordingly, no such expenses are reflected in the Schedule of
Sales and Cost of Sales.
NOTE C - INVENTORIES September 30,
1993
Tinplate $ 4,777
Work in process 9,839
Purchased ends 1,822
Tin ends 6,369
Aluminum plate 289
Aluminum cups and tops 1,809
Materials and supplies 822
Reserve for obsolete inventory (236)
LIFO reserve (314)
Total Inventory $25,177
F-46<PAGE>
SILGAN CORPORATION
PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(Dollars in Thousands)
Set forth below is the Company's summary pro forma unaudited combined
statement of operations for the year ended December 31, 1993 which include
the historical results of DM Can for the period ended December 21, 1993 and
give effect to the pro forma adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in a supply agreement with Del Monte, the
estimated effect of purchase accounting adjustments based upon preliminary
appraisals and evaluations, the financing of the acquisition and certain
other adjustments as if these events had occurred as of the beginning of
the periods mentioned therein. The following unaudited pro forma results
of operations do not purport to represent what the Company's results of
operations would actually have been had the transaction in fact occurred on
the date indicated or to project the Company's results for any future
period.
F-47<PAGE>
SILGAN CORPORATION
PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(Dollars in Thousands)
Pro Forma
Historical DM Can Adjustments Pro Forma
Net sales $645,468 $175,169 $ (2,023)(a) $818,614
1,516 (b)
330 (c)
Cost of goods sold 571,174 175,169 (14,704)(d) 733,485
Gross profit 74,294 $ - 10,835 85,129
Selling, general and
administrative expenses 31,786 2,000 (e) 33,786
Income from operations 42,508 - 8,835 51,343
Interest expense and other
related financing costs 27,928 4,503 (f) 32,431
Other expense 35 - 35
Income before income taxes 14,545 4,332 18,877
Income tax provision 6,300 1,733 (g) 8,033
Income before extraordinary
charges and cumulative
effect of changes in
accounting principles $ 8,245 $ 2,599 $ 10,844
F-48<PAGE>
SILGAN CORPORATION
NOTES TO PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(a) Historical net sales have been adjusted to reflect the prices set
forth in the supply agreement with Del Monte as applied against
quantities delivered.
(b) Increased depreciation charge based upon the estimated fair values of
property, plant and equipment and applying Silgan's estimated useful
life of 25 years for buildings and improvements and 3 - 11 years for
machinery and equipment.
(c) Amortization of excess of fair value over net assets acquired over
estimated life of 20 years.
(d) Decreased cost of goods sold for the difference between DM Can's
historical costs to produce units transferred to Del Monte in 1993
(calculated from the audited Schedule of Sales and Cost of Sales for
the year ended June 30, 1993 for Del Monte Corporation Can
Manufacturing Operations included elsewhere in this Prospectus and
certain other financial information provided by Del Monte) and the
costs, calculated by the Company on a pro forma basis, that the
Company would have incurred to produce such units in 1993. With
respect to Del Monte's Schedule of Sales and Cost of Sales, since
virtually all of Del Monte's metal containers were supplied from its
can manufacturing facilities and since sales of unpacked metal
containers to third parties were minimal, Del Monte could not
reasonably estimate an arms-length market price for Del Monte's metal
containers. Therefore, sales in the Schedule of Sales and Cost of
Sales are presented on the basis of cost and may not be indicative of
market price. Cost of sales in the Schedule of Sales and Cost of
Sales represents fully absorbed manufacturing costs directly related
to the manufacturing by Del Monte of metal containers. Additionally,
Del Monte did not allocate corporate interest or general and
administrative expenses to its can manufacturing facilities.
Accordingly, no such expenses are reflected in the Schedule of Sales
and Cost of Sales. The Company's calculation of the cost that it
would have incurred was based upon the actual units (by can
specification) transferred by DM Can to Del Monte during 1993,
multiplied by the Company's calculated cost of material, labor and
overhead for each such can specification. The Company's cost data
used for such calculation was derived from the detail information it
used to determine the cost components for each can specification which
was provided in the Supply Agreement with Del Monte. Management
believes that such adjustment reflects the margins inherent in the
F-49<PAGE>
SILGAN CORPORATION
NOTES TO PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(Continued)
contractual pricing under the Supply Agreement with Del Monte based
upon 1993 unit volume.
(e) Increase in administrative support services which will be incurred as
a result of the increased sales volume of DM Can.
(f) Estimated increase in interest expense due to additional bank
borrowings of approximately $70 million at a rate of 6.5% (the 1993
average annual bank borrowing rate) to finance the acquisition of DM
Can.
(g) Adjustment for estimated effective income tax rate as calculated in
accordance with SFAS 109 applied to pro forma income before income
taxes.
F-50<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
Exhibit
Number Description
- ------ -----------
3.1 Restated Certificate of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 filed with Silgan's
Annual Report on Form 10-K for the year ended December 31, 1993,
Commission File No. 1-11200).
3.2 By-laws of the Company (incorporated by reference to Exhibit
3(ii) filed with the Company's Registration Statement on Form S-
1, dated January 11, 1988, Registration Statement No. 33-18719).
3.3 Restated Certificate of Incorporation of Holdings (incorporated
by reference to Exhibit 1 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
3.4 By-laws of Holdings (incorporated by reference to Exhibit 3.4
filed with the Company's Registration Statement on Form S-1,
dated May 1, 1989, Registration Statement No. 33-28409).
4.1 Indenture dated as of June 29, 1992, between the Company and
Shawmut Bank, N.A., as Trustee, with respect to the 11-3/4%
Notes (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K dated July 15, 1992,
Commission File No. 33-46499).
4.2 Secured Notes Purchase Agreement dated as of June 29, 1992,
between the Company and Morgan Stanley (incorporated by
reference to Exhibit 2 filed with the Company's Current Report
on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
4.3 Indenture, dated as of June 29, 1992, between Holdings and The
Connecticut National Bank, as trustee, with respect to the
Holdings Discount Debentures (incorporated by reference to
Exhibit 1 filed with Holdings' Current Report on Form 8-K dated
July 15, 1992, Commission File No. 33-47632).
4.4 Form of the Company's 11-3/4% Senior Subordinated Notes due 2002
(incorporated by reference to Exhibit 4.5 filed with Holdings'
Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 33-28409).
4.5 Form of Holdings' 13-1/4% Senior Discount Debentures due 2002
(incorporated by reference to Exhibit 4.4 filed with Holdings'
Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 33-28409).
4.6 Registration Rights Agreement, dated August 31, 1987, among the
Company and each of the Purchasers who are signatory thereto
with respect to the Company's Class B Common Stock (incorporated
by reference to Exhibit 10(ii) filed with the Company's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the
legality of the 11-3/4% Notes (incorporated by reference to
Exhibit 5 filed with Amendment No. 4 to Silgan's Registration
Statement on Form S-1, dated June 19, 1992, Registration
Statement No. 33-46499).
8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax matters
(incorporated by reference to Exhibit 8 filed with Post-
Effective Amendment No. 1 to Silgan's Registration Statement on
Form S-1, dated June 18, 1993, Registration Statement No. 33-
46499).
10.1 Agreement for Purchase and Sale of Assets, dated as of June 18,
1987, between Carnation Company and Canaco Corporation
(Containers) (incorporated by reference to Exhibit 2(i) filed
with the Company's Registration Statement on Form S-1, dated
January 11, 1988, Registration Statement No. 33-18719).
10.2 First Amendment to Agreement for Purchase and Sale of Assets,
dated as of July 15, 1987, between Carnation Company and Canaco
Corporation (Containers) (incorporated by reference to Exhibit
2(ii) filed with the Company's Registration Statement on Form S-
1, dated January 11, 1988, Registration Statement No. 33-18719).
10.3 Second Amendment to Agreement for Purchase and Sale of Assets,
dated as of August 31, 1987, between Carnation Company and
Canaco Corporation (Containers) (incorporated by reference to
Exhibit 2(iii) filed with the Company's Registration Statement
on Form S-1, dated January 11, 1988, Registration Statement No.
33-18719).
10.4 Asset Purchase Agreement, dated as of July 29, 1987, between
Plastico Corporation (Plastics) and Monsanto Company
(incorporated by reference to Exhibit 2(iv) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719).
10.5 First Amendment to the Asset Purchase Agreement, dated as of
July 29, 1987, between Plastico Corporation (Plastics) and
Monsanto Company (incorporated by reference to Exhibit 2(v)
filed with the Company's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No. 33-18719).
10.6 Agreement for Purchase and Sale of Assets, dated as of September
27, 1988, between Carnation Company and Containers (incorporated
by reference to Exhibit 1 filed with the Company's Current
Report on Form 8-K, dated October 17, 1988).
10.7 Agreement for Purchase and Sale of Cartons, effective October 1,
1988, between Containers and Carnation Company (incorporated by
reference to Exhibit 2 filed with the Company's Current Report
on Form 8-K, dated October 17, 1988).
10.8 Agreement for Sale and Purchase of Containers, dated as of
December 3, 1988, between Containers and Dial (incorporated by
reference to Exhibit 2 filed with the Company's Current Report
on Form 8-K, dated December 19, 1988).
10.9 Asset Purchase Agreement, dated as of November 7, 1988, between
Containers and Dial (incorporated by reference to Exhibit 1
filed with the Company's Current Report on Form 8-K, dated
December 19, 1988).
10.10 Amended and Restated Stock Purchase Agreement, dated as of
January 1, 1989, among Aim, certain shareholders of Aim, and the
Company (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated March 15, 1989).
10.11 Assignment and Assumption, dated as of March 1, 1989, between
the Company and InnoPak Plastics Corporation (Plastics)
(incorporated by reference to Exhibit 2 filed with the Company's
Current Report on Form 8-K, dated March 15, 1989).
10.12 Agreement for Purchase and Sale of Assets between Fortune and
InnoPak Plastics Corporation (Plastics) dated as of March 1,
1989 (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated April 14, 1989).
10.13 Amendment to Agreement for Purchase and Sale of Assets, dated as
of March 30, 1989, between Fortune and InnoPak Plastics
Corporation (Plastics) (incorporated by reference to Exhibit 2
to the Company's Current Report on Form 8-K, dated April 14,
1989).
10.14 Assignment and Assumption Agreement, dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and Fortune
Acquisition Corporation (incorporated by reference to Exhibit 3
to the Company's Current Report on Form 8-K, dated April 14,
1989).
10.15 Agreement for Purchase and Sale of Shares between and among
InnoPak Plastics Corporation (Plastics), Gordon Malloch and
Jurgen Arnemann and Express, dated as of March 1, 1989
(incorporated by reference to Exhibit 5 to the Company's Current
Report on Form 8-K, dated April 14, 1989).
10.16 Amendment to Agreement for Purchase and Sale of Shares, dated as
of March 31 , 1989, among InnoPak Plastics Corporation
(Plastics), Express, Gordon Malloch and Jurgen Arnemann
(incorporated by reference to Exhibit 6 to the Company's Current
Report on Form 8-K, dated April 14, 1989).
10.17 Assignment and Assumption Agreement dated as of March 31, 1989,
between InnoPak Plastics Corporation (Plastics) and 827598
Ontario Inc. (incorporated by reference to Exhibit 7 to the
Company's Current Report on Form 8-K, dated April 14, 1989).
10.18 Employment Agreement, dated as of September 14, 1987, between
James Beam and Canaco Corporation (Containers) (incorporated by
reference to Exhibit 10(vi) filed with the Company's
Registration Statement on Form S-1, dated January 11, 1988,
Registration Statement No. 33-18719).
10.19 Amended and Restated Employment Agreement, dated as of June 18,
1987, between Gerald Wojdon and Canaco Corporation (Containers)
(incorporated by reference to Exhibit 10(vii) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719).
10.20 Employment Agreement, dated as of September 1, 1989, between the
Company, InnoPak Plastics Corporation (Plastics), Russell F.
Gervais and Aim (incorporated by reference to Exhibit 5 filed
with the Company's Report on Form 8-K, dated March 15, 1989).
10.21 Supply Agreement for Gridley, California effective August 31,
1987 (incorporated by reference to Exhibit 10(ix) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.22 Amendment to Supply Agreement for Gridley, California, dated
July 1, 1990 (incorporated by reference to Exhibit 10.27 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.23 Supply Agreement for Gustine, California effective August 31,
1987 (incorporated by reference to Exhibit 10(x) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.24 Amendment to Supply Agreement for Gustine, California, dated
March 1, 1990 (incorporated by reference to Exhibit 10.29 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.25 Supply Agreement for Hanford, California effective August 31,
1987 (incorporated by reference to Exhibit 10(xi) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.26 Amendment to Supply Agreement for Hanford, California, dated
July 1, 1990 (incorporated by reference to Exhibit 10.31 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.27 Supply Agreement for Riverbank, California effective August 31,
1987 (incorporated by reference to Exhibit 10(xii) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.28 Supply Agreement for Woodland, California effective August 31,
1987 (incorporated by reference to Exhibit 10(xiii) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.29 Amendment to Supply Agreement for Woodland, California, dated
July 1, 1990 (incorporated by reference to Exhibit 10.34 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.30 Supply Agreement for Morton, Illinois, effective August 31, 1987
(incorporated by reference to Exhibit 10(vii) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.31 Amendment to Supply Agreement for Morton, Illinois, dated July
1, 1990 (incorporated by reference to Exhibit 10.36 filed with
the Company's Registration Statement on Form S-1, dated March
18, 1992, Registration Statement No. 33-46499) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.32 Supply Agreement for Ft. Dodge, Iowa, effective August 31, 1987
(incorporated by reference to Exhibit 10(xiv) filed with the
Company's Registration Statement on Form S-1, dated January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.33 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March
1, 1990 (incorporated by reference to Exhibit 10.38 filed with
the Company's Registration statement on Form S-1, dated March
18, 1992, Registration Statement No. 33-46499) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.34 Supply Agreement for Maysville, Kentucky, effective August 31,
1987 (incorporated by reference to Exhibit 10(xvi) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.35 Amendment to Supply Agreement for Maysville, Kentucky, dated
March 1, 1990 (incorporated by reference to Exhibit 10.40 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.36 Supply Agreement for St. Joseph, Missouri, effective August 31,
1987 (incorporated by reference to Exhibit 10(xvii) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.37 Amendment to Supply Agreement for St. Joseph, Missouri, dated
March 1, 1990 (incorporated by reference to Exhibit 10.42 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.38 Supply Agreement for Trenton, Missouri, effective August 31,
1987 (incorporated by reference to Exhibit 10(xviii) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.39 Amendment to Supply Agreement for Trenton, Missouri, dated March
1, 1990 (incorporated by reference to Exhibit 10.44 filed with
the Company's Registration Statement on Form S-1, dated March
18, 1992, Registration Statement No. 33-46499) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.40 Supply Agreement for South Dayton, New York, effective August
31, 1987 (incorporated by reference to Exhibit 10(xix) filed
with the Company's Registration Statement on Form S-1, dated
January 11, 1988, Registration Statement No. 33-18719) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.41 Amendment to Supply Agreement for South Dayton, New York, dated
March 1, 1990 (incorporated by reference to Exhibit 10.46 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.42 Supply Agreement for Statesville, North Carolina, effective
August 31, 1987 (incorporated by reference to Exhibit 10(xx)
filed with the Company's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No. 33-18719)
(Portions of this Exhibit are subject to confidential treatment
pursuant to order of the Commission).
10.43 Supply Agreement for Hillsboro, Oregon, effective August 31,
1987 (incorporated by reference to Exhibit 10(xxi) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.44 Amendment to Supply Agreement for Hillsboro, Oregon, dated March
1, 1990 (incorporated by reference to Exhibit 10.49 filed with
the Company's Registration Statement on Form S-1, dated March
18, 1992, Registration Statement No. 33-46499) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.45 Supply Agreement for Moses Lake, Washington, effective August
31, 1987 (incorporated by reference to Exhibit 10(xxii) filed
with the Company's Registration Statement on Form S-1, dated
January 11, 1988, Registration Statement No. 33-18719) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.46 Amendment to Supply Agreement for Moses Lake, Washington, dated
March 1, 1990 (incorporated by reference to Exhibit 10.51 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.47 Supply Agreement for Jefferson, Wisconsin, effective August 31,
1987 (incorporated by reference to Exhibit 10(xxiii) filed with
the Company's Registration Statement on Form S-1, dated January
11, 1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.48 Amendment to Supply Agreement for Jefferson, Wisconsin, dated
March 1, 1990 (incorporated by reference to Exhibit 10.53 filed
with the Company's Registration Statement on Form S-1, dated
March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant
to order of the Commission).
10.49 Supply Agreement for Seaboard, effective October 1, 1988
(incorporated by reference to Exhibit 2 filed with the Company's
Current Report on Form 8-K, dated October 17, 1988).
10.50 Supply Agreement for Fort Madison, dated as of December 3, 1988
(incorporated by reference to Exhibit 2 filed with the Company's
Current Report on Form 8-K, dated December 19, 1988).
10.51 Amendment to Supply Agreements dated November 17, 1989 for Ft.
Dodge, Iowa; Hillsboro, Oregon; Jefferson, Wisconsin; St.
Joseph, Missouri; and Trenton, Missouri (incorporated by
reference to Exhibit 10.49 filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 33-18719) (Portions of this Exhibit are
subject to confidential treatment pursuant to order of the
Commission).
10.52 Raw Materials Agreement, dated as of November 12, 1986, by and
between Carnation and Alcoa (incorporated by reference to
Exhibit 10(xxxix) filed with the Company's Registration
Statement on Form S-1, dated September 14, 1988, Registration
Statement No. 33-18719).
10.53 Assignment of Raw Materials Agreement, dated as of August 31,
1987, by and between Carnation and Alcoa (incorporated by
reference to Exhibit 10(xl) filed with the Company's Post-
Effective Amendment No. 4 to its Registration Statement on Form
S-1, dated September 14, 1988, Registration No. 33-18719).
10.54 Amendment to Raw Materials Agreement, dated February 21, 1990,
by and between Containers and Alcoa (incorporated by reference
to Exhibit 10.52 filed with the Company's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No.
33-18719) (Portions of this Exhibit are subject to confidential
treatment pursuant to order of the Commission).
10.55 InnoPak Plastics Corporation (Plastics) Pension Plan for
Salaried Employees (incorporated by reference to Exhibit 10.32
filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1988, Commission File No. 33-18719).
10.56 InnoPak Plastics Corporation (Plastics) Compensation Investment
Plan for Salaried Employees (incorporated by reference to
Exhibit (xli) filed with the Company's Post-Effective Amendment
No. 4 to its Registration Statement on Form S-1, dated September
14, 1988, Registration No. 33-18719).
10.57 Containers Pension Plan for Salaried Employees (incorporated by
reference to Exhibit 10.34 filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1988,
Commission File No. 33-18719).
10.58 Non-Competition Agreement, dated as of January 1, 1989, among
the Company, Aim, and certain shareholders of Aim (incorporated
by reference to Exhibit 4 filed with the Company's Current
Report on Form 8-K, dated March 15, 1989).
10.59 Sharonville Conversion Agreement, dated as of August 31, 1987,
between Monsanto and InnoPak Plastics Corporation (Plastics)
(incorporated by reference to Exhibit 10(xxix) filed with the
Company's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration
No. 33-18719).
10.60 Consent, dated August 11, 1987, by Yoshino Kogyosno Co., Ltd. to
the Sharonville Conversion Agreement (incorporated by reference
to Exhibit 10(xxx) filed with the Company's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1, dated
September 14, 1988, Registration No. 33-18719).
10.61 Lease, dated as of August 31, 1987, between Monsanto and InnoPak
Plastics Corporation (Plastics), concerning the land and plant
in Anaheim, California (incorporated by reference to Exhibit
10(xxxi) filed with the Company's Post-Effective Amendment No. 4
to its Registration Statement on Form S-1, dated September 14,
1988, Registration No. 33-18719).
10.62 Assignment and Assumption Agreement, dated as of August 31,
1987, between Monsanto and Innopak Plastics Corporation
(Plastics), with respect to certain premises known as the
Westport Plant located in Westport, Missouri (incorporated by
reference to Exhibit 10(xxxii) filed with the Company's Post-
Effective Amendment No. 4 to its Registration Statement on Form
S-1, dated September 14, 1988, Registration No. 33-18719).
10.63 Amendment to Lease, dated August 31, 1987, between Houston/St.
Louis Properties (Successor) and InnoPak Plastics Corporation
(Plastics), with respect to property located in Westport,
Missouri (incorporated by reference to Exhibit 10(xxxiii) filed
with the Company's Post-Effective Amendment No. 4 to its
Registration Statement on Form S-1, dated September 14, 1988,
Registration No. 33-18719).
10.64 Assignment and Assumption Agreement, dated as of August 31,
1987, between Monsanto and InnoPak Plastics Corporation
(Plastics), with respect to certain premises at 2469 Schuetz
Road, Westport, Missouri (incorporated by reference to Exhibit
10(xxxiv) filed with the Company's Post-Effective Amendment No.
4 to its Registration Statement on Form S-1, dated September 14,
1988, Registration No. 33-18719).
10.65 Assignment and Assumption Agreement, dated as of August 31,
1987, between Monsanto and InnoPak Plastics Corporation
(Plastics), with respect to certain premises at 2451 Schuetz
Road, Westport, Missouri (incorporated by reference to Exhibit
10(xxxv) filed with the Company's Post-Effective Amendment No. 4
to its Registration Statement on Form S-1, dated September 14,
1988, Registration No. 33-18719).
10.66 Landlord Estoppel Certificates dated August 17, 1987, with
respect to real property lease located in Westport, Missouri
(incorporated by reference to Exhibit 10(xxxvi) filed with the
Company's Post-Effective Amendment No. 4 to its Registration
Statement on Form S-1, dated September 14, 1988, Registration
No. 33-18719).
10.67 Landlord Estoppel Certificates dated August 25, 1987, with
respect to real property lease covering certain premises at 2451
Schuetz Road, Westport, Missouri (incorporated by reference to
Exhibit 10(xxxvii) filed with the Company's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1, dated
September 14, 1988, Registration No. 33-18719).
10.68 Express Guaranty dated as of March 31, 1989 (incorporated by
reference to Exhibit 10.66 to Holdings' Registration Statement
on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.69 Express Security Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.67 to Holdings'
Registration Statement on Form S-1, dated May 1, 1989,
Registration No. 33-28409).
10.70 Canadian Holdco Guaranty dated as of March 31, 1989
(incorporated by reference to Exhibit 10.68 to Holdings'
Registration Statement on Form S-1, dated May 1, 1989,
Registration No. 33-28409).
10.71 Canadian Holdco Pledge Agreement dated as of March 31, 1989
(incorporated by reference to Exhibit 10.69 to Holdings'
Registration Statement on Form S-1, dated May 1, 1989,
Registration No. 33-28409).
10.72 Canadian Acquisition Co. Guaranty dated as of March 31, 1989
(incorporated by reference to Exhibit 10.70 to Holdings'
Registration Statement on Form S-1, dated May 1, 1989,
Registration No. 33-28409).
10.73 Canadian Acquisition Co. Pledge Agreement dated as of March 31,
1989 (incorporated by reference to Exhibit 10.71 to Holdings'
Registration Statement on Form S-1, dated May 1, 1989,
Registration No. 33-28409).
10.74 Agreement and Plan of Merger, dated as of April 28, 1989, among
Holdings, Acquisition and the Company (incorporated by reference
to Exhibit 2.6 to Holdings' Registration Statement on Form S-1,
dated May 1, 1989, Registration No. 33-28409).
10.75 Lease between Containers and Riverbank Venture dated May 1, 1990
(incorporated by reference to Exhibit 10.99 filed with the
Company's Annual Report on Form 10-K for the year ended December
31, 1989, Commission File No. 33-18719).
10.76 Loan Agreement between The Iowa Department of Economic
Development, City of Iowa City and Iowa City Can Manufacturing
Company, dated November 17, 1988 (incorporated by reference to
Exhibit 10.100 filed with the Company's Annual Report on Form
10-K for the year ended December 31,1989, Commission File No.
33-18719).
10.77 Promissory Note and Promissory Note Agreement dated November 17,
1988 from Iowa City Can Manufacturing Company to the City of
Iowa City (incorporated by reference to Exhibit 10.101 filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. 33-18719).
10.78 Mortgage between City of Iowa City, Iowa City Can Manufacturing
Company and Michael Development dated January 5, 1990
(incorporated by reference to Exhibit 10.102 filed with the
Company's Annual Report on Form 10-K for the year ended December
31, 1989, Commission File No. 33-18719).
10.79 Containers Master Equipment Lease with Decimus Corporation,
dated as of October 11, 1989 (incorporated by reference to
Exhibit 10.103 filed with the Company's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No.
33-18719).
10.80 Underwriting Agreement dated June 22, 1989 between Holdings and
Morgan Stanley (incorporated by reference to Exhibit 1 filed
with Amendment No. 4 to Holdings' Registration Statement on Form
S-1, dated June 23, 1989, Registration Statement No. 33-28409).
10.81 Amended and Restated Tax Allocation Agreement by and among
Holdings, the Company, Containers, InnoPak Plastics Corporation
(Plastics), Aim, Fortune, SPHI and Silgan PET dated as of July
13, 1990 (incorporated by reference to Exhibit 10.107 filed with
Post-Effective Amendment No. 6 to the Company's Registration
Statement on Form S-1, dated August 20, 1990, Registration
Statement No. 33-18719).
10.82 Sublease Agreement between Amoco and PET Acquisition Corp.
(Silgan PET) dated July 24, 1989 (incorporated by reference to
Exhibit 10.111 filed with Post-Effective Amendment No. 6 to the
Company's Registration Statement on Form S-1, dated August 20,
1990, Registration Statement No. 33-18719).
10.83 Lease Agreement between the Trustees of Cabot 95 Trust and Amoco
Plastic Products Company dated August 16, 1978 (incorporated by
reference to Exhibit 10.112 filed with Post-Effective Amendment
No. 6 to the Company's Registration Statement on Form S-1, dated
August 20, 1990, Registration Statement No. 33-18719).
10.84 Contribution Agreement by and among Messrs. Silver, Horrigan,
Rankin and Rodriguez, MSLEF II and BTNY dated as of July 13,
1990 (incorporated by reference to Exhibit 2 filed with the
Company's Current Report on Form 8-K, dated July 1990).
10.85 Asset Purchase Agreement, dated as of November 1, 1991 by and
among Silgan PET, Holdings and Sewell Plastics, Inc.
(incorporated by reference to Exhibit 1 filed with the Company's
Current Report on Form 8-K, dated December 2,1991).
10.86 Inventory and Equipment Purchase Agreement, dated as of November
1, 1991 by and among Silgan PET, Holdings and Sewell Plastics,
Inc. (incorporated by reference to Exhibit 2 filed with the
Company's Current Report on Form 8-K, dated December 2, 1991).
10.87 Letter Agreement, dated November 15, 1991, amending the Asset
Purchase Agreement dated as of November 1, 1991 by and among
Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by
reference to Exhibit 3 to the Company's Current Report on Form
8-K, dated December 2, 1991).
10.88 Letter Agreement, dated November 15, 1991, amending the
Inventory and Equipment Purchase Agreement dated as of November
1, 1991 by and among Silgan PET, Holdings and Sewell Plastics,
Inc. (incorporated by reference to Exhibit 4 filed with the
Company's Current Report on Form 8-K, dated December 2,1991).
10.89 Letter Agreement, dated November 31, 1991, amending the
Inventory and Equipment Purchase Agreement dated as of November
1, 1991 by and among Silgan PET, Holdings and Sewell Plastics,
Inc. (incorporated by reference to Exhibit 5 filed with the
Company's Current Report on Form 8-K, dated December 2, 1991).
10.90 Containers Deferred Incentive Savings Plan (incorporated by
reference to Exhibit 10.144 filed with the Company's
Registration Statement on Form S-1, dated March 18, 1992,
Registration Statement No. 33-46499).
10.91 Amended and Restated Credit Agreement dated as of June 18, 1992,
among the Company, Containers, Plastics, various banks and
Bankers Trust, as Agent (incorporated by reference to Exhibit 4
filed with the Company's Current Report on Form 8-K, dated July
15, 1992, Commission File No. 33-46499).
10.92 Amended and Restated Pledge Agreement dated as of June 18, 1992,
made by the Company (incorporated by reference to Exhibit 5
filed with the Company's Current Report on Form 8-K, dated July
15, 1992, Commission File No. 33-46499).
10.93 Amended and Restated Pledge Agreement dated as of June 18, 1992,
made by Containers and Plastics (incorporated by reference to
Exhibit 6 filed with the Company's Current Report on Form 8-K,
dated July 15, 1992, Commission File No. 33-46499).
10.94 Amended and Restated Pledge Agreement dated as of June 18, 1992,
made by Holdings (incorporated by reference to Exhibit 7 filed
with the Company's Current Report on Form 8-K, dated July 15,
1992, Commission File No. 33-46499).
10.95 Amended and Restated Security Agreement dated as of June 18,
1992, among Plastics, Containers and Bankers Trust (incorporated
by reference to Exhibit 8 filed with the Company's Current
Report on Form 8-K, dated July 15, 1992, Commission File No. 33-
46499).
10.96 Amended and Restated Holdings Guaranty dated as of June 18, 1992
(incorporated by reference to Exhibit 9 filed with the Company's
Current Report on Form 8-K, dated July 15, 1992, Commission File
No. 33-46499).
10.97 Borrowers Guaranty, dated as of June 18, 1992, made by the
Company, Containers and Plastics (incorporated by reference to
Exhibit 10 filed with the Company's Current Report on Form 8-K,
dated July 15, 1992, Commission File No. 33-46499).
10.98 Subsidiaries Guarantee, dated as of June 29, 1992, of Containers
and Plastics (incorporated by reference to Exhibit 11 filed with
the Company's Current Report on Form 8-K, dated July 15, 1992,
Commission File No. 33-46499).
10.99 Underwriting Agreement, dated June 22, 1992, between the Company
and Morgan Stanley with respect to the 11-3/4% Notes
(incorporated by reference to Exhibit 3 filed with the Company's
Current Report on Form 8-K, dated July 15, 1992, Commission File
No. 33-46499).
10.100 Silgan Containers Corporation Second Amended and Restated 1989
Stock Option Plan (incorporated by reference to Exhibit 10.100
filed with Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form S-1, dated May 11, 1994,
Commission File No. 33-46499).
10.101 Form of Containers Nonstatutory Restricted Stock Option and
Stock Appreciation Right Agreement (incorporated by reference to
Exhibit 10.100 filed with Holdings' Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 33-
28409).
10.102 Silgan Plastics Corporation 1994 Stock Option Plan (incorporated
by reference to Exhibit 10.102 filed with Post-Effective
Amendment No. 2 to the Company's Registration Statement on Form
S-1, dated May 11, 1994, Commission File No. 33-46499).
10.103 Form of Plastics Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to
Exhibit 10.103 filed with Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-1, dated May 11,
1994, Commission File No. 33-46499).
10.104 Silgan Holdings Inc. Second Amended and Restated 1989 Stock
Option Plan (incorporated by reference to Exhibit 10.104 filed
with Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form S-1, dated May 11, 1994,
Commission File No. 33-46499).
10.105 Form of Holdings Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to
Exhibit 10.124 filed with Holdings' Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 33-
28409).
10.106 Purchase Agreement, dated as of September 3, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit 1
filed with Holdings' Current Report on Form 8-K, dated January
5, 1994, Commission File No. 33-28409).
10.107 Amendment to Purchase Agreement, dated as of December 10, 1993,
between Containers and Del Monte (incorporated by reference to
Exhibit 2 filed with Holdings' Current Report on Form 8-K, dated
January 5, 1994, Commission File No. 33-28409).
10.108 Amended and Restated Organization Agreement, dated as of
December 21, 1993, among R. Philip Silver, D. Greg Horrigan,
MSLEF II, BTNY, First Plaza and Holdings (incorporated by
reference to Exhibit 2 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
10.109 Stockholders Agreement, dated as of December 21, 1993, among R.
Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and
Holdings (incorporated by reference to Exhibit 3 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994,
Commission File No. 33-28409).
10.110 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Holdings (incorporated by
reference to Exhibit 4 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
10.111 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Silgan (incorporated by
reference to Exhibit 5 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
10.112 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Containers (incorporated by
reference to Exhibit 6 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
10.113 Amended and Restated Management Services Agreement, dated as of
December 21, 1993, between S&H and Plastics (incorporated by
reference to Exhibit 7 filed with Holdings' Current Report on
Form 8-K, dated March 25, 1994, Commission File No. 33-28409).
10.114 Stock Purchase Agreement, dated as of December 21, 1993, between
Holdings and First Plaza (incorporated by reference to Exhibit 8
filed with Holdings' Current Report on Form 8-K, dated March 25,
1994, Commission File No. 33-28409).
10.115 Credit Agreement, dated as of December 21, 1993, among Silgan,
Containers, Plastics, the lenders from time to time party
thereto, Bank of America, as co-agent, and Bankers Trust, as
agent (incorporated by reference to Exhibit 9 filed with
Holdings' Current Report on Form 8-K, dated March 25, 1994,
Commission File No. 33-28409).
10.116 Amended and Restated Holdings Guaranty, dated as of December 21,
1993, made by Holdings (incorporated by reference to Exhibit 10
filed with Holdings' Current Report on Form 8-K, dated March 25,
1994, Commission File No. 33-28409).
10.117 Amended and Restated Borrowers Guaranty, dated as of December
21, 1993, made by Silgan, Containers, Plastics and California-
Washington Can Corporation (incorporated by reference to Exhibit
11 filed with Holdings' Current Report on Form 8-K, dated March
25, 1994, Commission File No. 33-28409).
10.118 Supply Agreement, dated as of September 3, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit
10.118 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, Commission File No. 1-11200).
(Portions of this Exhibit are subject to an application for
confidential treatment filed with the Commission.)
10.119 Amendment to Supply Agreement, dated as of December 21, 1993,
between Containers and Del Monte (incorporated by reference to
Exhibit 10.119 filed with the Company's Annual Report on Form
10-K for the year ended December 31, 1993, Commission File No.
1-11200). (Portions of this Exhibit are subject to an
application for confidential treatment filed with the
Commission.)
*12.1 Computations of Ratio of Earnings to Fixed Charges for the six
months ended June 30, 1994 and 1993.
12.2 Computations of Ratio of Earnings to Fixed Charges for the three
months ended March 31, 1994 and 1993 (incorporated by reference
to Exhibit 12.1 filed with Post-Effective Amendment No. 3 to the
Company's Registration Statement on Form S-1, dated August 2,
1994, Registration No. 33-46499).
12.3 Computations of Ratio of Earnings to Fixed Charges for the years
ended December 31, 1993, 1992, 1991, 1990 and 1989 (incorporated
by reference to Exhibit 12.1 filed with Post-Effective Amendment
No. 2 to the Company's Registration Statement on Form S-1, dated
May 11, 1994, Registration No. 33-46499).
22 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 22 filed with Silgan's Annual Report on Form 10-K for
the year ended December 31, 1993, Commission File No. 1-11200).
24<f*> Consent of Ernst & Young.
25 Power of Attorney (incorporated by reference to Exhibit 25 filed
with Post-Effectvie Amendment No. 2 to the Company's Registration
Statement on Form S-1, dated on May 11, 1994, Registration
No. 33-46499).
26 Statement of Eligibility of Trustee (incorporated by reference
to Exhibit 26 filed with Amendment No. 3 to Silgan's
Registration Statement on Form S-1, dated June 8, 1992,
Registration Statement No. 33-46499).
____________________
[FN]
<f*> Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Stamford, State of Connecticut, on August 19, 1994.
SILGAN CORPORATION
By /s/ D. Greg Horrigan
--------------------------------
D. Greg Horrigan
President and Co-Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
R. Philip Silver * Chairman of the Board and
- ----------------------------- Co-Chief Executive Officer
(R. Philip Silver) (Principal Executive Officer) August 19,1994
/s/ D. Greg Horrigan President, Co-Chief Executive
- ----------------------------- Officer and Director August 19,1994
(D. Greg Horrigan)
James S. Hoch * Vice President, Assistant
- ----------------------------- Secretary and Director August 19,1994
(James S. Hoch)
Robert H. Niehaus * Vice President, Assistant
- ----------------------------- Secretary and Director August 19,1994
(Robert H. Niehaus)
Harley Rankin, Jr. * Executive Vice President, Chief
- ----------------------------- Financial Officer and Treasurer August 19,1994
(Harley Rankin, Jr.) (Principal Financial Officer)
Harold J. Rodriguez, Jr. * Vice President, Controller and
- ----------------------------- Assistant Treasurer August 19,1994
(Harold J. Rodriguez, Jr.) (Principal Accounting Officer)
/s/ D. Greg Horrigan
- -----------------------------
(D. Greg Horrigan)
Attorney-in-fact
INDEX TO EXHIBITS
Exhibit No. Exhibit
----------- -------
12.1 Computations of Ratio of Earnings to Fixed Charges for the
six months ended June 30, 1994 and 1993.
24 Consent of Ernst & Young.
EXHIBIT 12.1
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
The following table reflects the Company's computation of the ratio of
earnings to fixed charges for the periods indicated.
Six Months Six Months
Ended Ended
June 30, 1994 June 30, 1993
-------------- --------------
(Dollars in Thousands)
Income before income taxes . . $15,723 $ 6,821
Add:
Interest expense and
amortization of
debt expense . . . 17,297 13,537
Rental expense
representative of
the interest 1,493 1,203
factor . . . . . . ------- -------
Income as adjusted $34,513 $21,561
======= =======
Fixed charges:
Interest expense and
amortization
of debt expense . $17,297 $13,537
Rental expense
representative of
the interest 1,493 1,203
factor . . . . . . ------- -------
Total fixed charges $18,790 $14,740
======= =======
Ratio of earnings to fixed 1.84 1.46
charges . . . . . . . . . . . ======= =======
EXHIBIT 24
Consent of Independent Auditors
We consent to the references to our firm under the caption "Experts" and to
the use of our reports dated March 10, 1994 with respect to the consolidated
financial statements of Silgan Corporation and to our report dated December
17, 1993 with respect to the financial statements of the Del Monte
Corporation Can Manufacturing Operations as constituted for sale to Silgan
Corporation included in the Post-Effective Amendment No. 5 to the
Registration Statement (Form S-1, No. 33-46499) and related Prospectus of
Silgan Corporation for the registration of $135,000,000 of 11 3/4% Senior
Subordinated Notes Due 2002.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Stamford, Connecticut
August 18, 1994
