SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 /FEE REQUIRED/
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 /NO FEE REQUIRED/
For the transition period from _____________________ to______________________
Commission file number 1-11200
SILGAN CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 06-1207662
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(State of incorporation) (I.R.S. Employer Identification No.)
4 Landmark Square, Stamford, Connecticut 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-7110
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
None of the registrant's voting stock was held by nonaffiliates as of March
15, 1994.
As of March 15, 1994, the number of shares outstanding of each of the
registrant's classes of common stock is as follows:
Classes of shares of common stock Number of shares
outstanding, $0.01 par value outstanding
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Class A 1
Class B 1
Class C 0
Documents Incorporated by Reference: None
TABLE OF CONTENTS
Page
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . 13
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 17
Item 8. Financial Statements and Supplementary Data . . . . 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . 26
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 10. Directors and Executive Officers of the Registrant . 26
Item 11. Executive Compensation. . . . . . . . . . . . . . . 30
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . 36
Item 13. Certain Relationships and Related Transactions. . . 44
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 14. Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . . 47
PART I.
Item 1. Business
General
Silgan Corporation (the "Company" or "Silgan") is a major
manufacturer and seller of a broad range of steel and aluminum containers for
the 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 "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 "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, 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. 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 "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).
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 inception in 1987, 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.
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.
The Company 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 Silgan Holdings Inc.
("Holdings"), a Delaware corporation whose principal asset is all of the
outstanding common stock of the Company. See "Company History" below.
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 2-5 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 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 the 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.
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 the 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. In the event that
Containers chooses not to match a competitive bid, Nestle' may purchase 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 February
28, 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 the metal container
manufacturing division of Nestle' ("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."
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 its 15% Cumulative
Exchangeable Redeemable Preferred Stock (the "Preferred Stock") and $85
million of its 14% Senior Subordinated Notes due 1997 (the "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 its Senior Reset Debentures due
2004 (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 its Class B Common 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 Silgan P.E.T. Holdings Inc. ("SPHI"), was used by Holdings in
connection with the purchase of Silgan P.E.T. Corp. ("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 Company ("Amoco Container").
On July 13, 1990, Holdings and the Company entered into a business
combination (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 (the "PET Beverage Sale"), exiting that commodity
business.
In 1992, Silgan and Holdings refinanced a substantial portion of
their indebtedness (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
its 11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes"); (ii)
the private placement in June 1992 by Silgan of $50 million principal amount
of its Senior Secured Floating Rate Notes due 1997 (the "Secured Notes") with
certain institutional investors; (iii) the public offering in June 1992 by
Holdings of its 13-1/4% Senior Discount Debentures due 2002 (the "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 Company ("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 redemption in August 1992 of all of the
outstanding 14% Notes (the "14% Notes Redemption"); (vi) the redemption in
August 1992 of all of the outstanding Preferred Stock (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 in
July 1992 of all of the outstanding Holdings Reset Debentures (the "Holdings
Reset Debentures Redemption;" together with the "14% Notes Redemption" and
the "Preferred Stock Redemption" being sometimes herein referred to as the
"Redemptions"); 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 a credit agreement, dated as of
December 21, 1993 (the "Credit Agreement") with the lenders from time to time
party thereto (the "Banks"), Bank of America National Trust and Savings
Association ("Bank of America"), as Co-Agent, and Bankers Trust, 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.
Item 2. 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 16216
Baxter Road, Suite 300, St. Louis, 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 February 28, 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.
Item 3. 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 & Co. Incorporated ("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 is
proceeding. The court has set a pre-trial conference for May 2, 1994 and the
week of May 9, 1994 for trial.
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 Health Services, 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 can companies participating in a steering committee. The
steering committee has actively undertaken a feasibility study and has
retained an environmental consultant. 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 no more than $3 million, approximately 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.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II.
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters.
The Company's common stock is not publicly traded on any market or
exchange. All of the outstanding common stock of the Company is held by
Holdings. Other than the payment of a $15.7 million dividend to Holdings
under the Refinancing in 1992, the Company has not paid any dividends on its
common stock. Unless certain financial tests are met, the Company is
prohibited under the Credit Agreement from paying any dividends on its Common
Stock. Also, the Secured Notes and the indenture relating to the 11-3/4%
Notes limit, subject to certain exceptions, the Company's ability to pay
dividends on its common stock. The Company does not intend to pay any
dividends on its common stock in the foreseeable future, except for dividends
to Holdings that the Company may pay to fund Holdings' consolidated federal
and state tax obligations and, under limited circumstances as permitted by
the Credit Agreement, the Secured Notes and the indenture in respect of the
11-3/4% Notes, certain other obligations of Holdings and, beginning no
earlier than December 1996, in order to enable Holdings to pay interest on
the Discount Debentures.
Item 6. Selected Financial Data.
Set forth below are selected historical consolidated financial data
of the Company at December 31, 1993, 1992, 1991, 1990 and 1989 and for the
periods then ended.
The selected historical consolidated financial data 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 Annual Report on Form 10-K. 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 Annual Report on Form
10-K.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Year Ended December 31,
---------------------------------------------------------------
1993<fa> 1992 1991<fb> 1990<fc> 1989<fc>
------- ----- ------- ------ ------
<S> <C> <C> <C> <C> <C>
(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 <fd> . . . . . . . . . . . . . 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 <fe> . . . . . (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)
====== ======== ======== ======== ========
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 equity . . . . . . . . . . . . 52,803 32,775 46,642 41,209 38,823
Other Data:
EBDITA <ff> . . . . . . . . . . . . . . . . . . . . $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) <fg> . . . . 3,330 3,340 3,560 4,330 4,210
(footnotes follow)
- --------------------------
<FN>
Notes to Selected Financial Data
<fa> 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.
<fb> On November 15, 1991, the Company completed the PET Beverage Sale. For 1991, sales from the PET carbonated
beverage business were $33.4 million.
<fc> 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.
<fd> 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.
<fe> 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.
<ff> "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 $0.478 million in 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.
<fg> 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.
</TABLE>
Item 7. 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, unit sales growth of Containers
is in excess of 12% since 1987. Plastics is pursuing new markets for its
plastic containers, including the post-consumer recycled 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 Del Monte's
metal food and beverage container manufacturing business ("DM Can") in the
United States for approximately $73 million. In connection with the
acquisition of DM Can, Containers and Del Monte entered into a ten-year
supply agreement under which 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 and pay
fees and expenses related thereto. Additionally, Holdings issued and sold
250,000 shares of its Class B Common Stock for $15 million, which amount
Holdings contributed to the capital of Silgan.
The Company believes 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 historical statements of operations and the notes thereto
included elsewhere in this Annual Report on Form 10-K. 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 operation 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 - Historical
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, 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 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
---- ----
(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, 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.
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. In addition, Holdings issued and sold 250,000 shares
of its Class B Common 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.
In June 1992, to improve their financial flexibility, Silgan and
Holdings effected the Refinancing. The Refinancing (i) lowered Holdings'
consolidated average cost of indebtedness by retiring the 14% Notes and 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 the
Preferred Stock through 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 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.
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 Discount Debentures, to redeem the
Holdings Reset Debentures. In addition, Silgan repaid $30 million of term
loans under the Credit Agreement. 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 term loan repayments of $10.2
million under the Amended and Restated Credit Agreement (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 were 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 December 31, 1993, the outstanding principal amount of
working capital loans was $2.2 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 $61.7 million. The
decrease of $38.2 million in the outstanding principal amount of working
capital loans since December 31, 1992 resulted from the repayment of
approximately $30 million of working capital loans with proceeds from the
refinancing of the Credit Agreement as well as with cash generated from
operations.
Because the Company sells metal containers used in vegetable and
fruit processing, its sales are seasonal. As a result, a significant portion
of the Company's revenues are generated in the first nine months of the year.
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, will be
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
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 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).
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 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.
The Credit Agreement prohibits the Company from paying any dividends
or making other distributions on its capital stock, making loans to or
transferring any assets to Holdings, merging or consolidating with Holdings
or assuming or guaranteeing any obligations of Holdings, although the Company
is permitted to advance funds to Holdings to enable Holdings to pay certain
administrative expenses and taxes. Accordingly, until the maturity
(scheduled to occur on September 15, 1996) or earlier repayment of borrowings
under the Credit Agreement (or the amendment or waiver of the restrictive
covenants contained therein), Holdings will be unable to use any amount of
cash generated by the operations of the Company and its subsidiaries.
However, interest on the Discount Debentures is not payable until December
15, 1996. Interest on the Discount Debentures is payable at a rate of 13-
1/4% per annum and commencing on December 15, 1996 semi-annual interest
payments of $18.2 million will be required to be made thereon. The ability
of Holdings to pay interest on the Discount Debentures on and after December
15, 1996 may depend upon the ability of the Company to pay dividends, or
otherwise loan, advance or transfer funds, to Holdings or the ability of
Holdings to refinance the Discount Debentures, obtain additional debt or
equity financing or obtain amendments to the indenture relating to the
Discount Debentures. There can be no assurance that any such alternative, if
pursued, would be accomplished, or that any such alternative would be
accomplished in sufficient time to enable Holdings to make timely payments of
interest on the Discount Debentures. Neither the Secured Notes nor the 11-
3/4% Notes limits the ability of the Company to pay cash dividends to
Holdings in order to enable Holdings to pay interest on the Discount
Debentures. Otherwise, subject to limited exceptions, the Secured Notes and
the 11-3/4% Notes prohibit the payment of dividends or other distributions by
the Company on its capital stock. Silgan has no obligation, legal or
otherwise, to pay dividends or otherwise loan, advance or transfer funds to
Holdings in order to fund Holdings' debt service requirements. The funding
requirements of Holdings to service its indebtedness (beginning in December
1996) may 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 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 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). Any AMT paid is allowed 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 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 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 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 Discount Debentures retired) should be
deductible under the carryback and carryforward rules under the Code unless
the holders of the Discount Debentures receive stock or debt of Holdings or a
related party in exchange for the Discount Debentures. No assurance can be
given that Holdings will be able to refinance the 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 Discount Debentures. In addition, the 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 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 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 December 31, 1993, 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 Annual Report on Form 10-K.
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 Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data.
See Item 14 below for a listing of financial statements and schedules
included therein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Management of the Company
The current directors and executive officers of the Company and their
respective ages, positions and principal occupations, five-year employment
history and other directorships held are furnished below:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
------------------- -------- ------------------------------------
R. Philip Silver 51 Prior to forming S&H, Inc. ("S&H")
Chairman of the Board and in 1987, President of Continental
Co-Chief Executive Can Company from June 1983 to August
Officer of Holdings and 1986; consultant to packaging
Silgan since March 1994; industry from August 1986 to August
Formerly President of 1987; Vice Chairman of the Board and
Holdings and Silgan; Director of Sweetheart Holdings Inc.
Director of Holdings and Sweetheart Cup Company, Inc.
since April 1989 and of from September 1989 to January 1991;
Silgan since August 1987; Chairman of the Board and Director
Chairman of the Board of of Sweetheart Holdings Inc. and
Plastics since March Sweetheart Cup Company, Inc. from
1994; Director of January 1991 through August 1993;
Containers and Plastics Director, Johnstown America
since August 1987. Corporation.
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
------------------- -------- ------------------------------------
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 Can
Holdings and Silgan since Company from 1984 to 1987; Chairman
March 1994; Formerly of the Board and Director of
Chairman of the Board of Sweetheart Holdings Inc. and
Holdings and Silgan; Sweetheart Cup Company, Inc. from
Director of Holdings September 1989 to January 1991; Vice
since April 1989 and of Chairman of the Board and Director
Silgan since August 1987; of Sweetheart Holdings Inc. and
Chairman of the Board of Sweetheart Cup Company, Inc. from
Containers since August January 1991 through August 1993.
1987; Chairman of the
Board of Plastics 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 Corporation,
Secretary of Holdings Sullivan Communications, Inc.,
since January 1991; Sullivan Graphics, Inc.
Director, Vice President
and 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 Stanley
Vice President, Assistant & Co. Incorporated since January 1,
Secretary and Director of 1990; Principal of Morgan Stanley &
Silgan since August 1987; Co. Incorporated from 1988 to 1989;
Vice President, Assistant Vice President of Morgan Stanley &
Secretary and Director of Co. Incorporated in 1987. Director
Containers and Plastics of American Italian Pasta Company,
since August 1987; Vice Randall's Food Markets, Inc.,
President, Assistant Randall's Management Corp., Inc.,
Secretary and Director of Randall's Properties, Inc.,
Holdings since April Randall's Warehouse, Inc., Fort
1989. 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.
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
------------------- -------- ------------------------------------
Harley Rankin, Jr. 54 Prior to joining the Company, Senior
Executive Vice President Vice President and Chief Financial
and Chief Financial Officer of Armtek Corporation; prior
Officer of Silgan since to Armtek Corporation, Vice
January 1989; Treasurer President and Chief Financial
of Silgan since January Officer of Continental Can Company
1992; Vice President of from November 1984 to August 1986.
Containers and Plastics Vice President, Chief Financial
since January 1989; Officer and Treasurer of Sweetheart
Treasurer of Plastics Holdings Inc. and Vice President of
since January 1994; Sweetheart Cup Company, Inc. from
Executive Vice President September 1989 to August 1993.
and Chief Financial
Officer of Holdings since
April 1989; Treasurer of
Holdings since January
1992.
Harold J. Rodriguez, Jr. 38 Employed by Ernst & Young from 1978
Vice President of Silgan to 1987, last serving as Senior
and Holdings since March Manager specializing in taxation.
1994; Vice President of Controller, Assistant Secretary and
Containers and Plastics Assistant Treasurer of Sweetheart
since March 1994; Holdings Inc. and Assistant
Controller and Assistant Secretary and Assistant Treasurer of
Treasurer of Silgan and Sweetheart Cup Company, Inc. from
Holdings since March September 1989 to August 1993.
1990; Assistant
Controller and 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 "Management of the
Company" above, the following are the principal executive officers of
Containers:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
----------------- -------- ------------------------------------
James D. Beam 51 Vice President-Marketing & Sales of
President and a Containers from September 1987 to
non-voting Director of July 1990; Vice President and
Containers since July General Manager of Continental Can
1990. Company, Western Food Can Division,
from March 1986 to September 1987.
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Other Directorships Held
----------------- -------- ------------------------------------
Gerald T. Wojdon 58 General Manager of Manufacturing of
Vice the Can Division of The Carnation
President-Operations Company from August 1982 to August
and Assistant Secretary 1987.
of Containers since
September 1987.
Gary M. Hughes 51 Vice President, Sales and Marketing
Vice President - Sales of the Beverage Division of
& Marketing of Continental Can Company from
Containers since July February 1988 to July 1990; prior to
1990. February 1988, was employed by
Continental Can in various regional
sales positions.
George S. Hartley 47 Vice President - Finance of Romanoff
Vice President - International, Inc. from 1990 to
Finance, Treasurer and 1993; Director, Business Planning of
Assistant Secretary Amphenol Corporation (Electronic
since March 1994. Connectors) from 1988 to 1989;
Continental Can Corporation, 1974-
1988, employed in various finance
and planning positions.
Dennis Nerstad 56 Vice President - Distribution and
Vice President since Container Manufacturing of Del Monte
March 1994. 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 "Management of the
Company" above, the following are the principal executive officers of
Plastics:
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Positions
----------------- -------- ---------------------
Russell F. Gervais 50 President and Chief Executive
President and Non-voting Officer of Aim Packaging, Inc.
Director of Plastics since from March 1984 to September
December 1992; Vice 1989.
President-Sales & Marketing
of Plastics from September
1989 until December 1992.
Howard H. Cole 48 Manager of Personnel of Monsanto
Vice President and Assistant Engineered Products Division of
Secretary of Plastics since the Monsanto Company from April
September 1987. 1986 to September 1987.
Age at
March 15, Five-Year Employment
Name and Position 1994 History and Positions
----------------- -------- ---------------------
Charles Minarik 56 President of Wheaton Industries
Vice President-Operations and Plastics Group from February
Commercial Development since 1991 to August 1992; Vice
May 1993. President-Marketing of Constar
International, Inc. from March
1983 to February 1991.
Item 11. 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."
<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 - - -
<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>
<TABLE>
<CAPTION>
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
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
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
<fa> Options are for, and tandem SARs relate to, shares of Holdings Class C Stock (as defined under "Security Ownership of
Certain Beneficial Owners and Management -- Description of Holdings Common 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.
</TABLE>
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.
<TABLE>
<CAPTION>
Containers Pension Plan Table
-----------------------------
Final Years of Service
Average ---------------------------------------------------------------------------------
Earnings 10 15 20 25 30 35
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
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 Cash 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.
<TABLE>
<CAPTION>
Plastics Pension Plan Table
---------------------------
Years of Service
Final Average ---------------------------------------------------------------------------------------------
Earnings 10 15 20 25 30 35
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
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
virtually identical stock option plans entitled, respectively, the Silgan
Containers Corporation Amended and Restated 1989 Stock Option Plan (the
"Containers Plan"), the Silgan Plastics Corporation Amended and Restated 1989
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 15,000 authorized but unissued shares of its Class C common
stock, $.01 par value, for issuance under the Holdings Plan.
Pursuant to the Merger Agreement dated April 28, 1989 between Silgan,
Holdings and Acquisition (the "Merger Agreement"), all outstanding options
and SARs granted under predecessor stock option plans to the Containers Plan,
Plastics Plan and Holdings Plan (the "Predecessor Option Plans") were
surrendered for cancellation and, in partial consideration therefor, holders,
including executive officers, were issued in 1989 nonstatutory options and
related SARs under each of the Plans, as appropriate.
Generally, each option granted under the Plans becomes exercisable over
a period of five years, with 20% of the option having become exercisable on
June 30, 1990 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 to $2,456 per share. The purchase
price of options granted under the Plastics Plan is $746 per share. The
purchase price of options granted under the Holdings Plan is $35.00 per
share. Each option granted under the Plans was granted with related SARs.
The SARs extend to all option shares and 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. Each option
and related SAR granted under each of the Plans expires on June 29, 1999 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,
however, 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, shares of common stock of the sponsoring
company already owned or a combination thereof.
All SARs granted under any of the Plans must be evidenced by an
agreement containing the terms of exercise and manner of settlement;
provided, however, 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 and any stock issued upon
exercise of such options are convertible into either stock options or 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 this Annual Report on Form
10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Certain Beneficial Owners of the Company's Capital Stock
All of the outstanding shares of common stock of the Company, consisting
of one share of Class A Common Stock, par value $.01 per share (the "Company
Class A Stock"), and one share of Class B Common Stock, par value $.01 per
share (the "Company 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 March 15, 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 class of Percentage Ownership of
Holdings Common Stock Owned Holdings Common Stock
--------------------------------- ------------------------------------------------
Class A Class B Class C Class A Class B Class C Consolidated <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> -- -- 15.63% --
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 -- 14,000<F4> 100% -- 21.88%<F8> 38.48%
___________________
<FN>
<F1> This column reflects the percentage ownership of voting common stock that would exist if Holdings Class A Stock (as
defined under "Description of Holdings Common Stock" below) and Holdings Class B Stock (as defined under "Description
of Holdings Common Stock" below) were treated as a single class. Holdings Class C Stock (as defined under
"Description of Holdings Common Stock" below) generally does not have voting rights and is not included in the
percentage ownership reflected in this column. See "Description of Holdings Common Stock" below.
<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 Silgan Holdings
Inc. Amended and Restated 1989 Stock Option Plan.
<F5> Options to purchase shares of common stock of Containers and tandem SARs have been granted to such person pursuant to
the Silgan Containers Corporation Amended and Restated 1989 Stock Option Plan (the "Containers Plan"). Pursuant to
the Containers Plan, such options may be converted into stock options of Holdings (and the Containers' common stock
issuable upon exercise of such options may be converted into common stock of Holdings) in the event of a public
offering of any of Holdings' common stock or a sale of Holdings to a third party.
<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., acts as the trustee (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 the Trustee as to the voting and disposition of these shares.
Because of the Trustee's limited role, beneficial ownership of the shares by the Trustee is disclaimed.
<F8> Bankers Trust New York Corporation beneficially owns 50,000 shares of Holdings Class C Stock.
</TABLE>
See "Description of Holdings Common Stock" and "Description of the
Holdings Organization Agreement" for additional information about the common
stock of Holdings, the holders thereof and certain arrangements among them.
Description of Common Stock of the Company
Under the Company's Restated Certificate of Incorporation, the Company
has authority to issue 1,000 shares of Company Class A Stock, 1,000 shares of
Company Class B Stock and 1,000 shares of Class C Common Stock, par value
$.01 per share (the "Company Class C Stock"). The Company currently has one
share of Company Class A Stock and one share of Company 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 Company
Class C Stock are currently outstanding.
Description of Holdings Common Stock
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 (the
"Holdings Class A Stock"), 667,500 shares of Class B Common Stock, par value
$.01 per share (the "Holdings Class B Stock"), and 1,000,000 shares of Class
C Common Stock, par value $.01 per share (the "Holdings Class C Stock" and,
together with the Holdings Class A Stock and Holdings Class B Stock, the
"Holdings Common Stock"). Holdings has an aggregate of 1,135,000 shares of
Holdings 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 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, The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF
II"), Bankers Trust New York Corporation ("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, Inc., a company wholly-owned by Messrs. Silver and Horrigan ("S&H"), and
Holdings (described below under "Description of Management Agreements"), to a
third party, in each case, if it first offers such stock to: (a) Holdings,
(b) the Group (defined generally to mean, collectively, Silver and Horrigan
and their respective affiliates and certain related family transferees and
estates, with Silver and his affiliates and certain related family
transferees and estates being deemed to be collectively one member of the
Group, and Horrigan and his affiliates and certain related family transferees
and estates being deemed to be collectively one member of the Group) and (c)
BTNY, in each case on the same terms and conditions as the proposed sale to
an Investment Entity or the proposed third party sale. In addition, in any
such sale by MSLEF II, BTNY and First Plaza must be given the opportunity to
sell the same percentage of its stock to such Investment Entity or third
party. At any time on or after June 30, 1994, each member of the Group may
transfer shares of stock to a third party if such holder first offers such
shares to: (a) the other member of the Group, (b) Holdings, (c) MSLEF II and
(d) BTNY, in each case on the same terms and conditions as the proposed third
party sale. At any time on or after June 30, 1994, BTNY may effect a sale of
stock to a third party if it first offers such shares to: (a) Holdings, (b)
MSLEF II and (c) the Group, in each case on the same terms and conditions as
the proposed third party sale.
At any time on or after June 30, 1994, either MSLEF II or the Group has
the right to require a recapitalization transaction. A recapitalization
transaction is defined as any transaction (such as a merger, consolidation,
exchange of securities or liquidation) involving Holdings pursuant to which
MSLEF II and the Group retain their proportionate ownership interest in the
surviving entity if the following conditions are met: (i) the value of any
securities of the surviving entity acquired or retained by the party not
initiating the recapitalization transaction does not exceed 67% of the
difference between (x) the value of such securities and any cash received by
such party and (y) all taxes payable as a result of the transaction, (ii) if
MSLEF II initiates the recapitalization transaction and will not own all the
voting equity securities of the surviving entity not owned by the Group, the
Group shall have the right to purchase such securities, (iii) if the Group
initiates the recapitalization transaction and will not own all of the voting
equity securities of the surviving entity, MSLEF II shall have the right to
purchase such securities, and (iv) the majority in principal amount of the
indebtedness incurred in connection with such transaction shall be held for
at least one year by persons not affiliated with either MSLEF II or any
member of the Group.
The Holdings Organization Agreement provides that in the event that
either Mr. Silver or Mr. Horrigan (each, a "Manager") dies or becomes
permanently disabled prior to June 30, 1994 (an "Inactive Manager"), such
Inactive Manager or his affiliates shall have the right to sell to Holdings
all Holdings Class A Stock held by the Inactive Manager at the Fair Market
Value (as defined in the Holdings Organization Agreement) of such stock,
provided that such stock must first be offered to the remaining Manager at
the same price. The Holdings Organization Agreement also provides that if
either Mr. Silver or Mr. Horrigan dies, becomes permanently disabled or is
convicted of any felony directly related to the business of Holdings prior to
June 30, 1994, the other Manager and his affiliates shall have the right to
purchase all of such person's Holdings Class A Stock at a price equal to Fair
Market Value in the case of death or disability and the Adjusted Book Value
(as defined in the Holdings Organization Agreement) in the case of a
conviction as stated above, and Holdings shall have the right to purchase all
such stock not purchased by the other Manager.
At any time prior to December 21, 1998, Holdings shall have the right
and option to purchase from First Plaza, and First Plaza shall have the
obligation to sell to Holdings, all (but not less than all) of the Holdings
Stock for a price per share equal to the greater of (i) $120 per share and
(ii) the purchase price necessary to yield on an annual basis a compound
return on investment of forty percent (40%). The number of shares subject to
such call and the call purchase price shall be proportionately adjusted to
take into account any stock dividend, stock split, combination of shares,
subdivision or other recapitalization of the capital stock of Holdings.
The Holdings Organization Agreement provides that at any time after June
15, 1996, the holders of a majority of the issued and outstanding shares of
Holdings Class A Stock and Holdings Class B Stock (considered together as a
class) may by written notice to Holdings require Holdings to pursue the first
public offering of Holdings' common stock pursuant to an effective
registration statement (an "IPO") on the terms and conditions provided in the
Holdings Organization Agreement. 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
Relationships and Related Transactions -- Management Agreements" below.
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 "Description
of Management Agreements" below.
The Holdings Organization Agreement terminates upon the earlier of (i)
the mutual agreement of the parties, (ii) such time as it becomes unlawful,
(iii) the completion of an IPO, and (iv) June 30, 1999. The parties may
agree to extend the term of the Holdings Organization Agreement.
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 Silver or Horrigan
and the other person, if not Silver or 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 the Closing Date (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 the Closing Date (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 the Closing Date (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 the Closing
Date (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).
Item 13. Certain Relationships and Related 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; (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) the occurrence of
a Change of Control (as defined in the Restated Certificate of Incorporation
of Holdings and as described under "Description of Holdings Common Stock"
above).
In addition to the management fees described above, the Management
Agreements provide for the payment to S&H on the closing date of the IPO of
an amount, if any (the "Additional Amount") equal to the sum of the present
values, calculated for each year or portion thereof, of (i) the amount of the
annual management fee for such year or portion thereof that otherwise would
have been payable to S&H for each such year or portion thereof for the period
beginning as of the time of the IPO and ending on June 30, 1999 (the
"Remaining Term") pursuant to the provisions described in the preceding
paragraph but for the occurrence of the IPO, minus (ii) the amount payable to
S&H for the Remaining Term at the rate of $2.0 million per year. The
Management Agreements further provide that the amounts described in clause
(i) of the first sentence of this paragraph will be calculated based upon
S&H's good faith projections of Holdings EBDIT for each such year (or portion
thereof) during the Remaining Term (the "Estimated Fees"), which projections
shall be made on a basis consistent with S&H's past projections. The
difference between the amount of Estimated Fees for any particular year and
$2 million shall be discounted to present value at the time of the IPO using
a discount rate of eight percent (8%) per annum, compounded annually.
Additionally, the Management Agreements provide that Holdings, Silgan,
Containers, Plastics and their respective subsidiaries shall reimburse S&H,
on a monthly basis, for all out-of-pocket expenses paid by S&H in providing
the Services, including fees and expenses to consultants, subcontractors and
other third parties, in connection with such Services. All fees and expenses
paid to S&H under each of the Management Agreements are credited against
amounts paid to S&H under the other Management Agreements. Under the terms
of the Management Agreements, Holdings, Silgan, Containers and Plastics have
agreed, subject to certain exceptions, to indemnify S&H and its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any losses, damages, costs and expenses they may sustain
arising in connection with the Management Agreements.
The Management Agreements also provide that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H has retained Morgan
Stanley to render financial advisory services to S&H. In connection with
such retention, S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of
the fees paid to S&H under the Management Agreements.
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 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.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K.
(a)
Financial Statements:
SILGAN CORPORATION:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . F-2
Consolidated Statements of Operations for the years ended December 31,
1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Common Stockholder's Equity for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . F-7
Schedules:
SILGAN CORPORATION:
III. Condensed Financial Information of Silgan Corporation:
Condensed Balance Sheets at December 31, 1993 and 1992 . . . . F-28
Condensed Statements of Operations for the years ended December
31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . F-29
Condensed Statements of Cash Flows for the years ended December
31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . F-30
V. Schedules of Property, Plant and Equipment for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-31
VI. Schedules of Accumulated Depreciation and Amortization of Property,
Plant and Equipment for the years ended December 31, 1993, 1992
and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
VIII. Schedules of Valuation and Qualifying Accounts for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-33
All other financial statements and schedules not listed have been omitted
because they are not applicable, or not required, or because the required
information is included in the consolidated financial statements or notes
thereto.
Exhibits:
Exhibit
Number Description
- -------- -----------
*3.1 Restated Certificate of Incorporation of the Company, as amended.
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 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 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).
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 June 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(xi) 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 Containers Amended and Restated 1989 Stock Option Plan
(incorporated by reference to Exhibit 10.119 filed with Holdings'
Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 33-28409).
10.101 Form of Containers Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.120 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.102 Plastics Amended and Restated 1989 Stock Option Plan (incorporated
by reference to Exhibit 10.121 filed with Holdings' Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File
No. 33-28409).
10.103 Form of Plastics Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to Exhibit
10.122 filed with Holdings' Annual Report on Form 10-K for the year
ended December 31, 1992, Commission File No. 33-28409).
10.104 Holdings Amended and Restated 1989 Stock Option Plan (incorporated
by reference to Exhibit 10.123 filed with Holdings' Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File
No. 33-28409).
10.105 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. (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. (Portions of this Exhibit are
subject to an application for confidential treatment filed with the
Commission.)
*22 Subsidiaries of the Registrant.
(b) Reports on Form 8-K:
None.
_________________________
*Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SILGAN CORPORATION
Date: March 29, 1994 By /s/ R. Philip Silver
----------------------------
R. Philip Silver
Chairman of the Board and
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Chairman of the Board and
Co-Chief Executive Officer
/s/ R. Philip Silver (Principal Executive Officer) March 29, 1994
- ------------------------------
(R. Philip Silver)
/s/ D. Greg Horrigan President, Co-Chief Executive March 29, 1994
- ------------------------------ Officer and Director
(D. Greg Horrigan)
Vice President, Assistant
/s/ James S. Hoch Secretary and Director March 29, 1994
- ------------------------------
(James S. Hoch)
Vice President, Assistant
/s/ Robert H. Niehaus Secretary and Director March 29, 1994
- ------------------------------
(Robert H. Niehaus)
Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Harley Rankin, Jr. (Principal Financial Officer) March 29, 1994
- ------------------------------
(Harley Rankin, Jr.)
Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer) March 29, 1994
- ------------------------------
(Harold J. Rodriguez, Jr.)
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. Our audits
also included the financial statement schedules listed in the index at Item
14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules 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. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
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-1
<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-2
<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-3
<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-4
<PAGE>
SILGAN CORPORATION
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-5 <PAGE>
SILGAN CORPORATION
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-6
<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-7
<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-8
<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-9
<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-10
<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-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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-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 (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-18
<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-19
<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-20
<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-21
<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-22
<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-23
<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-24
<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-25
<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-26
<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-27
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands)
ASSETS
1993 1992
Current assets:
Cash and cash equivalents $ 61 $ 202
Notes receivable-subsidiaries 39,850 18,644
Interest receivable-subsidiaries 810 1,456
Other current assets 214 114
Total current assets 40,935 20,416
Investment in and other amounts due
from subsidiaries 37,104 38,861
Notes receivable-subsidiaries 305,072 206,180
Amount receivable from parent 607 746
Other assets 950 1,379
$384,668 $267,582
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of term loans $ 20,000 $ 18,644
Accrued interest payable 763 967
Accrued expenses 1,268 331
Total current liabilities 22,031 19,942
Term loans 120,000 19,341
Senior secured notes 50,000 50,000
11 3/4% Senior subordinated notes 135,000 135,000
Amounts payable to subsidiaries 3,123 6,491
Other long-term liabilities 1,711 4,033
Stockholder's equity:
Common stock - -
Additional paid-in capital 64,135 41,560
Retained earnings (deficit) (11,332) (8,785)
Total stockholder's equity 52,803 32,775
$384,668 $267,582
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-28
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 368 239 313
Loss from operations (368) (239) (313)
Equity in earnings (losses) of
consolidated subsidiaries (7,570) 6,148 9,718
Other income 1,480 832 -
Interest expense and other related
financing costs (19,899) (21,429) (19,635)
Interest income-subsidiaries 23,940 19,313 19,552
Income (loss) before income
taxes (2,417) 4,625 9,322
Income tax provision - - -
Income (loss) before
extraordinary charges (2,417) 4,625 9,322
Extraordinary charges relating
to early extinguishment
of debt (130) (23) -
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 Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-29
<PAGE>
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED 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: 359 1,825 26
Cash flows from investing activities:
(Increase) decrease in notes
receivable-subsidiaries (117,515) (39,323) 23,000
Decrease in investment in
subsidiaries - 30,008 -
Cash dividends received from
subsidiaries - 16,861 -
Net cash provided (used) by
investing activities (117,515) 7,546 23,000
Cash flows from financing activities:
Repayment of term loan (37,985) (35,827) (23,000)
Proceeds from issuance of term loans 140,000 - -
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 - (85,000) -
Redemption of preferred stock - (30,008) -
Capital contribution by Parent 15,000 - -
Repayment of advance from Parent - (25,200) -
Dividend to Parent - (15,724) -
Cash dividends paid on
preferred stock - (1,137) -
Debt financing costs - (1,301) -
Net cash provided (used) by
financing activities 117,015 (9,197) (23,000)
Net increase (decrease) in cash
and cash equivalents (141) 174 26
Cash and cash equivalents at
the beginning of year 202 28 2
Cash and cash equivalents at
end of year $ 61 $ 202 $ 28
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Form 10-K.
F-30 <PAGE>
SCHEDULE V
SILGAN CORPORATION
SCHEDULES OF PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Balance at Other changes
beginning Additions add(deduct) Balance at
Description of period at cost Retirements describe end of period
For the year ended
December 31, 1991:
Land $ 4,666 $ - $ (650) $ (79) $ 3,937
Buildings and improvements 50,307 1,770 (2,520) (709) 48,848
Machinery and equipment 235,249 23,635 (8,005) 1,890 252,769
Construction-in-progress 17,448 (3,571) - - 13,877
$307,670 $ 21,834 $ (11,175)(1) $ 1,102 $319,431
For the year ended
December 31, 1992:
Land $ 3,937 $ - $ (194) $ - $ 3,743
Buildings and improvements 48,848 1,542 (8) - 50,382
Machinery and equipment 252,769 20,448 (1,643) (729) 270,845
Construction-in-progress 13,877 1,457 - - 15,334
$319,431 $ 23,447 $ (1,845) $ (729) $340,304
For the year ended
December 31, 1993:
Land $ 3,743 $ 726 $ - $ - $ 4,469
Buildings and improvements 50,382 5,705 - - 56,087
Machinery and equipment 270,845 87,189 (5,335) (290) 352,409
Construction-in-progress 15,334 4,560 - - 19,894
$340,304 $ 98,180(2) $ (5,335) $ (290) $432,859
<FN>
(1)Principally represents the sale of the PET carbonated bottle beverage
assets.
(2)Includes the preliminary allocation of property, plant and equipment
acquired from Del Monte.
</TABLE>
F-31 <PAGE>
SCHEDULE VI
SILGAN CORPORATION
SCHEDULES OF ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E Column F
Additions
Balance at charged to Other changes
beginning costs and add (deduct) Balance at
Description of period expenses Retirements describe end of period
For the year ended
December 31, 1991:
Land $ - $ - $ - $ - $ -
Buildings and improvements 5,618 2,027 (227) - 7,418
Machinery and equipment 57,380 27,992 (3,852) (8) 81,512
Construction-in-progress - - - - -
$ 62,998 $ 30,019 $ (4,079) $ (8) $ 88,930
For the year ended
December 31, 1992:
Land $ - $ - $ - $ - $ -
Buildings and improvements 7,418 2,079 (3) 3 9,497
Machinery and equipment 81,512 27,459 (1,808) (235) 106,928
Construction-in-progress - - - - -
$ 88,930 $ 29,538 $ (1,811) $ (232) $116,425
For the year ended
December 31, 1993:
Land $ - $ - $ - $ - $ -
Buildings and improvements 9,497 2,140 - - 11,637
Machinery and equipment 106,928 29,467 (5,452) (116) 130,827
Construction-in-progress - - - - -
$116,425 $ 31,607 $ (5,452) $ (116) $142,464
</TABLE>
F-32 <PAGE>
SCHEDULE VIII
SILGAN CORPORATION
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to
beginning costs and other accounts Deductions Balance at
Description of period expenses describe describe end of period
For the year ended
December 31, 1991:
Allowance for
doubtful accounts
receivable $ 919 $ 108 $ - $ 102 $ 925
For the year ended
December 31, 1992
Allowance for
doubtful accounts
receivable $ 925 $ 815 $ - $ 97 $1,643
For the year ended
December 31, 1993:
Allowance for
doubtful accounts
receivable $1,643 $ 91 $ - $ 650(1) $1,084
(1) Uncollectible accounts written off, net of recoveries.
</TABLE>
F-33 <PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
----------- -------
3.1 Restated Certificate of Incorporation of Silgan Corporation,
as amended.
10.118 Supply Agreement, dated as of September 3, 1993, between
Silgan Containers Corporation and Del Monte Corporation.
(Portions of this Exhibit are subject to confidential
treatment pursuant to an order of the Commission.)
10.119 Amendment to Supply Agreement, dated as of December 21, 1993,
between Silgan Containers Corporation and Del Monte
Corporation. (Portions of this Exhibit are subject to
confidential treatment pursuant to an order of the
Commission.)
22 Subsidiaries of the Registrant.
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
MS/S&H HOLDINGS INC.
PURSUANT TO SECTIONS 242 and 245
OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
MS/S&H HOLDINGS INC. a Delaware corporation, the original
Certificate of Incorporation of which was filed with the Secretary of State
of the State of Delaware on August 6, 1987, under that name HEREBY CERTIFIES
that this Restated Certificate of Incorporation, restating, integrating and
amending its Certificate of Incorporation, was duly proposed by its Board of
Directors and adopted by its stockholders in accordance with Sections 242 and
245 of the General Corporation Law of the State of Delaware, and that the
capital of the Corporation is not being reduced under or by reason of any
amendment in this Restated Certificate of Incorporation.
FIRST: The name of the Corporation is MS/S&H Holdings Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent
at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH: The name and address of the Sole Incorporator of the
Corporation is:
Theodore J. Kozloff, Esq.
919 Third Avenue
New York, NY 10022
FIFTH: Except as set forth below, the number of directors of the
Corporation shall be four. At each annual meeting of stockholders two Class
A Directors of the Corporation shall be elected by the vote of the holders of
a majority of the outstanding shares of the Class A Stock (as defined in
Article SEVENTH), and two Class B Directors shall be elected by the vote of
the holders of a majority of the outstanding shares of the Class B Stock (as
defined in Article SEVENTH).
A. If a Dividend Default (as defined below) occurs prior to a
Change of Control (as defined in Article ELEVENTH), the number of Class B
Directors shall be increased to three, and the holders of a majority of the
Class B Stock shall be entitled to nominate and elect a total of two Class B
Directors and the holders of a majority of the Preferred Stock, voting as a
separate class, shall be entitled to nominate and elect one Class B Director.
If a Change of Control occurs prior to a Dividend Default, the number of
Class B Directors shall be increased to five, and the holders of a majority
of the outstanding shares of Class B Stock shall be entitled to nominate and
elect a total of five Class B Directors. If a Dividend Default occurs or is
continuing on or after a Change of Control, the number of Class B Directors
shall be increased to seven, and the holders of a majority of the Class B
Stock shall be entitled to nominate and elect a total of five Class B
Directors and the holders of a majority of the Preferred Stock, voting as a
separate class, shall be entitled to nominate and elect a total of two Class
B Directors. A "Dividend Default" shall occur immediately following a
dividend payment date for any series of Preferred Stock if at such time the
Corporation shall be in default in the payment of dividends on such series of
Preferred Stock in an amount equivalent to or exceeding six full quarterly
dividends. When all arrears on dividends on the Preferred Stock then
outstanding shall have been paid and dividends thereon for the current
quarterly period shall have been paid or declared or a sum sufficient for the
payment thereof set aside, then (i) the right of holders of Preferred Stock
to participate in the election of directors pursuant to this paragraph A of
Article FIFTH shall cease but subject always to the same provisions for
vesting of such voting rights in the case of any similar future arrearages in
dividends; (ii) the term of any director then in office elected by holders of
the Preferred Stock as a class pursuant to this paragraph A of Article FIFTH
shall terminate immediately; and (iii) the number of Class B Directors shall
be reduced by the number of directors whose term so expired.
B. In the event that a vacancy among the Class A Directors or the
Class B Directors shall occur at any time prior to the next scheduled
election of directors of the Corporation, the remaining Class A Directors or
Class B Directors, respectively, shall be entitled to fill such vacancy,
except that holders of the Preferred Stock shall be entitled to fill any
vacancy caused by the death, removal or resignation of a director previously
elected by the holders of the Preferred Stock.
C. (i) Prior to a Change of Control (but not thereafter), at all
meetings of the Board of Directors, one Class A Director and one Class B
Director other than a Class B Director elected by the holders of the
Preferred Stock shall be required to constitute a quorum ("Quorum") for the
transaction of business. Prior to a Change of Control (but not thereafter),
the approval of the majority of the entire Board of Directors, voting
together as a single class, such majority to include at least one Class A
Director and one Class B Director other than a Class B Director elected by
the holders of the Preferred Stock ("Required Majority"), at a meeting at
which there is a Quorum, shall be required to approve the actions set forth
in Article SIXTH hereof and, except as set forth in Article EIGHTH hereof,
all other matters submitted to the Board of Directors; provided, however,
that prior to a Change of Control (but not thereafter), the Class A Directors
shall have the sole right to appoint any Class A Director to any committee of
the Board of Directors, the Class B Directors shall have the sole right to
appoint any Class B Director to any committee of the Board of Directors, and
the approval of a majority of the members of any such committee, voting
together as a single class, shall be required to approve all matters
submitted to such committee.
(ii) When and after a Change of Control occurs, at all
meetings of the Board of Directors, a majority of the entire Board of
Directors (regardless of class) shall be sufficient to constitute a quorum
for the transaction of business and, except as set forth in article EIGHTH
hereof, the act of a majority of the directors (regardless of class) present
at any meeting at which there is a quorum present shall be sufficient to
constitute the act of the Board of Directors.
D. There shall be an Audit Committee consisting of two or more of
the directors of the Corporation, which shall include at least one Class A
Director and one Class B Director who shall perform such functions as shall
be established by the Board of Directors; provided, however, that prior to a
Change of Control (but not thereafter) if a majority of the Class B Directors
so determine at any time, such committee shall consist of one Class A
Director and two Class B Directors. From and after a Change of Control, such
committee shall consist of such number of directors of such classes as shall
be determined by a majority of the Board of Directors.
E. There shall be an Investment Opportunity Committee, which shall
have sole authority to consider and approve of any investment opportunity
that is submitted to the Board of Directors by a holder of Class A Stock who,
under the terms of any agreement then in effect among one or more of the
stockholders and the Corporation, is required to first offer such opportunity
to the Corporation. Prior to a Change of Control (but not thereafter), such
committee shall consist of one Class A Director and two Class B Directors.
From and after a Change of Control, such committee shall consist of such
number of directors of such classes as shall be determined by a majority of
the Board of Directors.
F. (i) In the event that, prior to a Change of Control, and while
the Initial Investors (as defined below) are parties to an agreement among
themselves and the Corporation, the Board of Directors shall be unable to
reach agreement upon any particular matter submitted to it (an "Open
Matter"), Morgan Stanley Group Inc., a Delaware corporation ("MS Group"), The
Morgan Stanley Leveraged Equity Fund, L.P., a Delaware limited partnership
("Ms Equity"), Silver Capital Corp., a Connecticut corporation ("Silver
Capital"), and D.G.H. Holdings, Inc., a Connecticut corporation ("D.G.H.
Holdings"), and their respective Affiliates (collectively, the "Initial
Investors"), acting through the Chairman of the Board and President of either
Silver Capital or D.G.H. Holdings and through a designee of MS Group, have
agreed to hold one or more informal meetings promptly in an effort to discuss
and resolve such Open Matter. The Initial Investors have agreed to seek to
cause any conclusions arrived at during such meetings to be implemented,
where necessary, by action of the Required Majority of the Board of
Directors.
(ii) If the procedure specified in paragraph (i) has not led
to a satisfactory resolution regarding an Open Matter within 30 days of any
Initial Investor seeking such an informal meeting with respect to such Open
Matter, then, upon a finding by any two directors (regardless of class) that
failure to resolve the Open Matter threatens the continued existence of, or
will result in irreparable injury to, the Corporation, the Open Matter shall
be submitted for determination in the following manner; provided, however,
that (a) of the items set forth in subparagraphs one through twenty of
Article SIXTH, only item number five may be so submitted and (b) any Open
Matter not involving an item set forth in subparagraphs one through twenty of
Article SIXTH may be submitted to arbitration only if the Initial Investors
have agreed that such item shall be so submitted. The directors in favor of
the Open Matter as a group and the directors opposed to the Open Matter as a
group shall, within ten days of such request, each appoint an independent
person as arbitrator to resolve the Open Matter. The arbitrators so chosen
promptly shall agree upon and appoint an independent person as an additional
arbitrator. The arbitrators promptly shall determine whether the Open Matter
meets the standard set forth in this paragraph as to matters which are to be
submitted to arbitration by the Initial Investors, and, if so, promptly shall
seek to resolve the Open Matter. The decision of the arbitrators shall be
final and binding upon the Corporation and the stockholders. The Board of
Directors or, if the Board of Directors shall not have done so within five
days of the arbitrators' decision, the stockholders, shall take any and all
action necessary to implement such decision. If, pursuant to the preceding
sentence, the resolution of an Open Matter is submitted to the stockholders
for authorization, the Initial Investor which is in favor of such resolution
shall be entitled to vote all of the shares of Class A Stock and Class B
Stock held by any other Initial Investors in favor of such resolution, and
the action of a majority of the holders of outstanding Class A Stock and
Class B Stock, voting as a single class, shall be sufficient to approve such
resolution.
(iii) If the arbitrators chosen by the directors are unable
to agree upon and appoint an additional arbitrator, the Open Matter shall be
resolved by three arbitrators appointed by the American Arbitration
Association (the "AAA") in accordance with the then prevailing Commercial
Arbitration Rules thereof (the "Rules"). The AAA shall be required to
endeavor to appoint experts in a discipline relevant to the Open Matter and,
if the same issue or an issue similar to the Open Matter has been submitted
to arbitration by the Initial Investors before, to appoint one or more of the
same arbitrators to determine the Open Matter and each such same (or similar)
issue, but the failure to do any of the foregoing shall not be a basis for
avoiding, setting aside or altering the arbitral award.
(iv) Any arbitration referred to in subparagraph F (iii) of
Article FIFTH shall be conducted under the Rules in the City of Wilmington,
Delaware unless the Initial Investors mutually agree to have the arbitration
held elsewhere, and the award made therein shall be entered in the applicable
State Courts of Delaware or, as the case may be, the United States District
Court for Delaware.
SIXTH: The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, provided that
the Corporation may retain such qualified persons (as determined by the Board
of Directors) to provide the Corporation with general management, supervision
and administrative services relating to the operations of the Corporation.
Approval of the following actions shall not be delegated to any
officer, employee or agent of the Corporation:
1. Amendment of the Certificate of Incorporation or By-laws
of the Corporation or any of its subsidiaries.
2. Issuance, sale, purchase or redemption of any capital
stock, warrants, options or other securities of the Corporation or any of its
subsidiaries (other than, in the case of any issuance or sale, to the
Corporation or any direct or indirect wholly owned subsidiary of the
Corporation) except as may be otherwise provided in this Certificate of
Incorporation.
3. Sale of assets other than inventory to or from the
Corporation or any of its subsidiaries in excess of $2 million (i) in one or
a series of related transactions (regardless of the period of time in which
such transaction or series of related transactions take place) or (ii) in any
number of transactions within a six month period.
4. Merger, consolidation, dissolution or liquidation of the
Corporation or any of its subsidiaries.
5. Filing of any petition by or on behalf of the Corporation
seeking relief under the federal bankruptcy act or similar relief under any
law or statute of the United States or any state thereof.
6. Setting aside, declaration or making of any payment or
distribution by way of dividend or otherwise to the Corporation's
stockholders (or setting dividend policy) except for dividends paid with
respect to the Preferred Stock in shares of such Preferred Stock.
7. Incurrence of new indebtedness (including capitalized
leases, but excluding indebtedness incurred pursuant to debt instruments of
the Corporation in existence on the later of the Carnation Closing Date and
the Monsanto Closing Date or any fixed or contingent liabilities in excess of
$l million.
8. Creation or incurrence of a lien or encumbrance on the
property of the Corporation or any of its subsidiaries, except for liens
relating to the Bank Financing (as defined in Article ELEVENTH) or other
minor liens, including liens for taxes or those arising by operation of law,
permitted to exist under the terms of the Bank Financing.
9. Guarantees in excess of $1 million of payment by or
performance of obligations of third parties other than in the ordinary course
of business.
10. The Corporation's institution of, termination or
settlement of litigation not in the ordinary course of the Corporation's
business (in each case where such litigation represents a case or controversy
in excess of $2 million).
11. Surrendering or abandoning any property, tangible or
intangible, or any rights having a book value in excess of $l million.
12. Except as set forth in subsection 16 below with respect
to leases which are not capitalized, any commitment of the Corporation (other
than in the ordinary course of its business) which creates a liability or
commitment in excess of $2 million.
13. Capital expenditures in excess of accumulated
depreciation allowance (based on historical depreciation levels).
14. Donations of money or property in excess of $100,000 in a
single year.
15. Any investment of the Corporation or any of its
subsidiaries in another corporation, partnership or joint venture in excess
of $2 million (in one or a series of related transactions or in any number of
transactions within six months).
16. Entering into any lease (other than a capitalized lease
which shall be subject to the limitation set forth in subsection 12 above) of
any assets of the Corporation located in any one place having a book value in
excess of $4 million, or in excess of $1 million if the lease has a term of
more than five years.
17. Entering into agreements or material transactions between
the Corporation and a director or officer of any of the following companies
or their Affiliates (as defined in Article ELEVENTH): the Corporation; D.G.H.
Holdings; Silver Capital; MS Equity and MS Group.
18. Replacement of independent accountants for the
Corporation or any of its subsidiaries.
19. Modification of significant accounting methods,
practices, procedures and policies.
20. Removal of officers.
SEVENTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 17,520,000 shares, consisting of
4,500,000 shares of Class A common stock, par value $.01 per share (the
"Class A Stock"), 11,000,000 shares of Class B common stock, par value $.01
per share (the "Class B Stock") 1,520,000 shares of Class C common stock, par
value $.01 per share (the "Class C Stock") (the Class A Stock, Class B Stock
and Class C Stock being sometimes referred to herein collectively as the
"Common Stock"), and 500,000 shares of preferred stock, par value $1.00 per
share (the "Preferred Stock").
A. Except as set forth below, the rights, privileges and powers,
including the voting powers, of the Class A Stock and the Class B Stock shall
be identical, with each share of each class being entitled to one vote on all
matters to come before the stockholders of the Corporation.
(i) Until the occurrence of a Change of Control, but not
thereafter, the affirmative vote of the holders of not less than a majority
of the outstanding shares of Class A Stock and Class B Stock, voting as
separate classes, shall be required for the approval of any matter to come
before the stockholders of the Corporation, except as follows:
(a) The holders of a majority of the outstanding shares
of Class A Stock, voting as a separate class, shall have the sole right to
vote for and elect two directors (such directors being referred to herein as
"Class A Directors") and to remove any Class A Director with or without
cause.
(b) Except as provided in paragraph A of Article FIFTH,
the holders of a majority of the outstanding shares of Class B Stock, voting
as a separate class, shall have the sole right to vote for and elect all
directors other than the Class A Directors (the directors elected by the
holders of Class B Stock and the Preferred Stock being referred to herein as
"Class B Directors") and to remove any Class B Director with or without
cause, other than Class B Directors elected by the holders of the Preferred
Stock pursuant to paragraph A of Article FIFTH.
(c) The vote of the holders of not less than a majority
of the outstanding shares of Class A Stock and Class B Stock, voting together
as a single class, shall be required (x) to determine whether a product is
similar to such products as are manufactured or sold or proposed to be
manufactured or sold in North America by the Corporation or its subsidiaries
or is otherwise directly competitive with products produced by the
Corporation and its subsidiaries and (y) to authorize any action necessary to
be taken by the stockholders to implement the decision of an arbitrator as
provided in paragraph F of Article FIFTH.
(ii) From and after a Change of Control, the affirmative vote
of the holders of not less than a majority of the outstanding shares of Class
A Stock and Class B Stock, voting together as a single class, shall be
required for the approval of any matter to come before the stockholders of
the Corporation, except that the provisions of subparagraphs A(i)(a) and
A(i)(b) of this Article SEVENTH shall continue to apply from and after a
Change of Control and except as otherwise provided in Article TWELFTH.
B. The holders of Class C Stock will not have any voting rights
except as provided by applicable law and except that such holders shall be
entitled to vote as a separate class on certain amendments to this
Certificate of Incorporation as provided in Article TWELFTH.
C. The Board of Directors of the Corporation may cause dividends
to be paid to the holders of shares of Common Stock out of funds legally
available for the payment of dividends by declaring an amount per share as a
dividend. When and as dividends are declared, other than dividends declared
with respect to the Preferred Stock, whether payable in cash, in property or
in shares of stock of the Corporation, other than shares of Class A Stock,
Class B Stock or Class C Stock, the holders of Class A Stock, the holders of
Class B Stock and the holders of Class C Stock shall be entitled to share
equally, share for share, in such dividends. No dividends shall be declared
or paid in shares of Class A Stock, Class B Stock or Class C Stock or
options, warrants, or rights to acquire such stock or securities convertible
into or exchangeable for shares of such stock, except dividends payable
ratably in shares of, or securities convertible into or exchangeable for,
Class A Stock to holders of that class of stock, and in shares of, or
securities convertible into or exchangeable for, Class B Stock to holders of
that class of stock, and in shares of, or securities convertible into or
exchangeable for, Class C Stock to holders of that class of stock.
D. (i) Upon compliance with the provisions of paragraph D(iii)
below, any Regulated Stockholder (as defined below) shall be entitled to
convert, at any time and from time to time (except as set forth in
subparagraph D(v)(c) of this Article SEVENTH), any or all of the shares of
Class A Stock or Class B Stock held by such stockholder into the same number
of shares of Class C Stock. The term "Regulated Stockholder" shall mean (a)
any stockholder that is subject to the provisions of Regulation Y of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 225) or any
successor to such regulation ("Regulation Y") that holds shares of Common
Stock originally issued to such stockholder or acquired by such stockholder
pursuant to a right of first refusal granted to the stockholder under the
terms of an agreement among one or more of the stockholders and the
Corporation, or shares issued upon conversion of any such shares, so long as
such stockholder shall hold, and only with respect to, such Common Stock or
shares issued upon conversion of such shares, (b) any Affiliate of any such
Regulated Stockholder that is a transferee of any shares of Common Stock, so
long as such Affiliate shall hold, and only with respect to, such shares of
Common Stock or shares issued upon a conversion of such shares and (c) any
Person (x) to which such Regulated Stockholder or any of its Affiliates has
transferred such shares, so long as such transferee shall hold, and only with
respect to, any shares of Common Stock transferred by such stockholder or
Affiliate or any shares issued upon conversion of such shares, and (y) which
is, or any Affiliate of which is, subject to the provisions of Regulation Y.
(ii) Upon compliance with the provisions of paragraph D(iii)
below, any Regulated Stockholder shall be entitled to convert, at any time
and from time to time, any and all shares of Class C Stock held by such
stockholder into the same number of shares of Class B Stock, (or, to the
extent such Class C Stock was issued upon the conversion of Class A Stock,
into the same number of shares of Class A Stock); provided, however, that no
holder of any shares of Class C Stock shall be entitled to convert any such
shares into shares of Class A Stock or Class B Stock if, as a result of such
conversion, (i) such holder and its Affiliates, directly or indirectly, would
own, control or have the power to vote a greater number of shares of Common
Stock or other securities of any kind issued by the Corporation than such
holder and its Affiliates shall be permitted to own, control or have the
power to vote under any law, regulation, rule or other requirement of any
governmental authority at the time applicable to such holder or its
Affiliates, or (ii) the rights, activities or business of the Corporation
would become limited in any respect as a result of the application of
Regulation Y.
(iii) (a) Each conversion of shares of Common Stock of the
Corporation into shares of another class of Common Stock of the Corporation
shall be effected by the surrender of the certificate or certificates
evidencing the shares of the class of stock to be converted (the "Converting
Shares") at the principal office of the Corporation (or such other office or
agency of the Corporation as the Corporation may designate by notice in
writing to the holders of Common Stock), at any time during its usual
business hours, together with written notice by the holder of such Converting
Shares, (1) stating that the holder desires to convert the Converting Shares
evidenced by such certificate or certificates into an equal number of shares
of the class into which such shares may be converted (the "Converted
Shares"), and (2) giving the name or names (with addresses) and denominations
in which the certificate or certificates evidencing the Converted Shares
shall be issued, and instructions for the delivery thereof. The Corporation
shall promptly notify each Regulated Stockholder of record of its receipt of
such notice. Except as otherwise provided in paragraph D(iii)(b), upon
receipt of the notice described in the first sentence of this paragraph
D(iii)(a), together with the certificate or certificates evidencing the
Converting Shares, the Corporation shall be obligated to, and shall, issue
and deliver in accordance with such instructions the certificate or
certificates evidencing the Converted Shares issuable upon such conversion
and a certificate (which shall contain such legends, if any, as were set
forth on the surrendered certificate or certificates) representing any shares
which were represented by the certificate or certificates surrendered to the
Corporation in connection with such conversion but which were not Converting
Shares and, therefore, were not converted; provided, however, that if such
conversion is subject to paragraph D(iii)(d) below, the Corporation shall not
issue said certificate or certificates until the expiration of the Deferral
Period referred to therein. Such conversion, to the extent permitted by law,
shall be deemed to have been effected as of the close of business on the date
on which such certificate or certificates shall have been surrendered and
such written notice shall have been received by the Corporation, and at such
time the rights of the holder of such Converting Shares as such holder shall
cease (except that in the case of a conversion subject to paragraph D(iii)(d)
below, the conversion shall be deemed effective upon expiration of the
Deferral Period referred to therein), and the person or persons in whose name
or names any certificate or certificates evidencing the Converted Shares are
to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the Converted Shares. The Corporation shall be
entitled to rely conclusively as to the truth of the statements made in such
written notice, and the Corporation shall not be liable to any person with
respect to any action taken or omitted to be taken by it in connection with
such conversion in reliance on the statements made in such written notice.
(b) Notwithstanding any provision of paragraph D(iii)(a)
to the contrary, the Corporation shall not be required to record the
conversion of, and no holder of shares shall be entitled to convert, shares
of Class C Stock into shares of Class A Stock or Class B Stock, as the case
may be, unless such conversion is permitted under applicable law and the
Certificate of Incorporation; provided, however, that the Corporation shall
be entitled to rely without independent verification upon the representation
of any holder, that the conversion of shares by such holder is permitted
under applicable law, and in no event shall the Corporation be liable to any
such holder or any third party arising from any such conversion whether or
not permitted by applicable law.
(c) Upon the issuance of the Converted Shares in
accordance with this paragraph D, such shares shall be deemed to be duly
authorized, validly issued, fully paid and non-assessable.
(d) The Corporation shall not directly or indirectly
redeem, purchase or otherwise acquire any shares of Class A or B Stock or
take any other action affecting the voting rights of such shares, if such
action will increase the percentage of outstanding voting securities known by
the Corporation to be owned or controlled by any Regulated Stockholder unless
the Corporation gives written notice (the "First Notice") of such action to
each such Regulated Stockholder. The Corporation will defer making any
conversion, redemption, purchase or other acquisition or taking any such
other action for a period of 30 days (the "Deferral Period") after giving the
First Notice in order to allow each such Regulated Stockholder to determine
whether it wishes to convert or take any other action with respect to the
Common Stock it owns, controls or has the power to vote, and if any such
Regulated Stockholder then elects to convert any shares of Common Stock, it
shall notify the Corporation in writing within 20 days of the issuance of the
First Notice, in which case the Corporation (x) shall defer taking the
pending action until the end of the Deferral Period, (y) shall promptly
notify each other Regulated Stockholder holding shares of which it has
knowledge of each proposed conversion and the proposed transactions, and (z)
effect the conversion requested by all Regulated Stockholders in response to
the notices issued pursuant to this paragraph D(iii)(d) at the end of the
Deferral Period or as soon thereafter as is reasonably practicable.
(e) Shares of Class A Stock, Class B Stock or Class C
Stock that are converted into shares of any other class shall not be
reissued, except in connection with the conversion of Class A Stock or Class
B Stock into Class C Stock or the conversion of Class C Stock into Class A
Stock or Class B Stock.
(f) The issue of certificates evidencing shares of any
class of Common Stock upon conversion of shares of any other class of Common
Stock pursuant to this article SEVENTH shall be made without charge to the
holders of such shares for any issue tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion; provided,
however, the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the holder of the Common Stock
converted.
(iv) If the Corporation shall in any manner subdivide (by
stock split, stock dividend or otherwise) or combine (by reverse stock split
or otherwise) the outstanding shares of any class of Common Stock, the
outstanding shares of the other classes of Common Stock shall be
proportionately subdivided or combined, as the case may be, and effective
provision shall be made for the protection of all conversion rights, if any,
hereunder. In case of any reorganization, reclassification or change of
shares of Common Stock of the Corporation (other than a change in par value,
or from par value to no par value as a result of a subdivision or
combination), or in case of any consolidation of the Corporation with one or
more other corporations or a merger of the Corporation with another
corporation (other than a consolidation or merger in which the Corporation is
the continuing corporation and which does not result in any reclassification
or change of outstanding shares of Common Stock), or in the case of any sale,
lease or other disposition to another corporation (other than a wholly owned
subsidiary of the Corporation) of all or substantially all the assets of the
Corporation, each holder of a share of Common Stock, irrespective of class,
shall have the right at any time thereafter, so long as the conversion right
hereunder with respect to such shares of Common Stock would exist had such
event not occurred, to convert such share into the kind and amount of shares
of stock and other securities and property receivable upon such
reorganization, reclassification, change, consolidation, merger, sale, lease
or other disposition by a holder of the number of shares of the class of
Common Stock into which such shares of Common Stock might have been converted
immediately prior to such reorganization, reclassification, change,
consolidation, merger, sale, lease or other disposition. In the event of
such a reorganization, reclassification, change, consolidation, merger, sale,
lease or other disposition, effective provision shall be made in the
certificate of incorporation of the resulting or surviving corporation or
otherwise for the protection of the conversion rights of the shares of Common
Stock of each class that shall be applicable, as nearly as reasonably may be,
to any such other shares of stock and other securities and property
deliverable upon conversion of shares of Common Stock into which such Common
Stock might have been converted immediately prior to such event.
(v) In the event the Corporation effects a Public Offering
(as defined below), the following shall occur on the first day shares are
sold to the public:
(a) The distinction between Class A Stock and Class B
Stock and all special rights and limitations and quorum and required vote
provisions applicable to such classification shall terminate. Following a
Public Offering, the rights, privileges and powers, including the voting
powers, of the Class A Stock and Class B Stock shall be identical, with each
share of each such class being entitled to one vote on all matters to come
before the stockholders of the Corporation, and all quorum and required vote
provisions applicable to the Class A Stock and Class B Stock voting as a
single class shall be as provided by applicable Delaware law as then in
effect.
(b) The distinction between the Class A Directors and
Class B Directors and all rights and voting and quorum requirements
applicable thereto shall be abolished and the quorum and required vote
provisions applicable to action by the Board of Directors shall be as
provided by applicable Delaware law as then in effect. The holders of
majority of the outstanding shares of the Class A Stock and Class B Stock
voting as a single class shall elect all of the directors of the Corporation,
except that holders of Preferred Stock shall be entitled to elect up to two
directors to the extent provided pursuant to paragraph A of Article FIFTH.
(c) Shares of Class C Stock shall continue to be
convertible into shares of Class A Stock or Class B Stock in the same manner
as provided in this paragraph D of Article SEVENTH; provided, however, that
holders of Class A Stock or Class B Stock shall not be entitled to convert
any of such shares into shares of Class C Stock.
(d) "Public Offering" shall mean the sale of shares of
Common Stock to the public, pursuant to an effective registration statement,
registered under the Securities Act of 1933.
E. Shares of Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the
Board of Directors of the Corporation prior to the issuance of any shares
thereof. Each such class or series of Preferred Stock shall have such voting
powers, full or limited, or no voting powers, and such preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in
such resolution providing for the issue of such class or series of Preferred
Stock as may be adopted from time to time by the Board of Directors prior to
the issuance of any shares thereof pursuant to the authority hereby expressly
vested in it, all in accordance with the laws of the State of Delaware. The
foregoing notwithstanding, the Preferred Stock shall have the power, under
certain circumstances as set forth in paragraph A of Article FIFTH, to
nominate and elect not more than two directors to the Board of Directors.
The Board of Directors is further authorized to increase or decrease (but not
below the number of such shares of such series then outstanding) the number
of shares of any series subsequent to the issuance of shares of that series.
EIGHTH: A. Prior to a Change of Control, the Chief Executive
Officer shall also be the Chairman of the Board of Directors and shall
preside at all meetings of the stockholders and of the Board of Directors.
All officers of the Corporation shall serve until voluntary resignation or
retirement, or removal by the Board of Directors in accordance with the
provisions set forth herein. Any number of offices may be held by the same
person, unless otherwise prohibited by law, this Certificate of Incorporation
or the By-Laws. The officers of the Corporation need not be stockholders of
the Corporation nor, except in the case of the Chairman or the Board of
Directors, need such officers be directors of the Corporation.
B. Prior to a Change of Control, the officers of the Corporation
shall be nominated and elected to their positions by the Class A Directors
and may be removed by the Required Majority (as defined in Article FIFTH) of
the Board of Directors present at a meeting at which a Quorum shall be
present throughout. Prior to a Change of Control, any vacancy occurring in
any office of the Corporation shall be filled by vote of the Class A
Directors.
C. From and after a Change of Control, all of the officers of the
Corporation shall be nominated and elected to their positions by the Class B
Directors and may be removed by the Class B Directors and any vacancy
occurring in any office of the Corporation shall be filled by vote of the
Class B Directors.
D. All officers of the Corporation shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of
the Corporation shall hold office until their successors are chosen and
qualified, or until their earlier resignation or removal. The salaries of
all officers of the Corporation shall be fixed by the Board of Directors.
E. From and after a Public Offering, all of the officers of the
Corporation shall be nominated and elected to their positions, and may be
removed from their positions, by a majority of the Board of Directors.
NINTH: In the event the Corporation shall issue shares of any
class of Common Stock for cash, cash equivalents or notes, other than
issuances of Common Stock (including options, warrants and similar rights to
purchase Common Stock) for cash to the officers and other employees or agents
of the Corporation (other than Silver Capital or D.G.H. Holdings or any of
their respective Affiliates), the holders of each class of Common Stock shall
have the preemptive right to purchase, subscribe for or otherwise acquire
such shares of Common Stock of the Corporation; provided, however, that upon
the exercise of such preemptive rights, the Corporation shall issue only
shares of Class A Stock, Class B Stock and Class C Stock to the holders of
Class A Stock, Class B Stock and Class C Stock, respectively; and provided
further that the Corporation shall not issue shares of Common Stock in a
manner giving rise to the foregoing preemptive rights unless the Corporation
shall have available sufficient authorized but unissued shares or treasury
shares of each class of Common Stock to permit the exercise of such
preemptive rights by each holder of Common Stock to the full extent indicated
by such holder in a written notice delivered to the Corporation.
TENTH: In furtherance and not in limitation of the powers
conferred by statute, the By-laws of the Corporation may be altered, amended
or repealed in whole or in part, or new By-laws may be adopted by approval of
the Required Majority present at a meeting of the Board of Directors at which
a Quorum is present and acting throughout, until a Change of Control occurs,
and thereafter by a majority of the Board of Directors voting at a meeting at
which a quorum is present and acting throughout.
ELEVENTH: As used in this Restated Certificate of Incorporation,
the following terms shall have the meanings indicated below:
1. "Affiliate" shall mean with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under
common control with such Person. For the purpose of this definition, the
term "control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise.
2. "Bank Financing" shall mean any financing obtained from
any bank or other institution by the Corporation in connection with the
Carnation Acquisition and the Monsanto Acquisition, as defined below, as in
effect from time to time, and any refinancings, renewals, amendments or
extensions thereof or additional borrowings thereunder.
3. "Carnation Closing Date" shall mean the date and time at
which the purchase of substantially all of the assets of the Can Division of
Carnation Company (the "Carnation Acquisition") by a subsidiary of the
Corporation is effective.
4. "Change of Control" shall mean the occurrence of any of
the following events: (i) R. Philip Silver and D. Gregory Horrigan shall
collectively own, directly or indirectly, less than three-quarters of the
aggregate number of outstanding shares of Class A Stock owned by them
directly or indirectly on the later of the Carnation Closing Date or the
Monsanto Closing Date on a common stock equivalent basis and as adjusted for
stock splits, recapitalizations and the like, (ii) the acceleration of the
Bank Financing by the lenders thereunder or by their agent or the Senior
Subordinated Notes (as defined below), by the trustee under the indenture
relating thereto as a result of the occurrence of an event of default under
the terms of the Bank Financing or the Senior Subordinated Notes, as the case
may be, relating to a payment default or financial covenant default, or (iii)
the Corporation shall fail to declare, set aside or pay full regularly
quarterly dividends on any Preferred Stock for an aggregate of eight
quarters.
5. "Monsanto Closing Date" shall mean the date and time at
which the purchase of substantially all of the assets of the Blown Plastics
Division of Monsanto Company (the "Monsanto Acquisition") by a subsidiary of
the Corporation is effective.
6. "Senior Subordinated Notes" shall mean the Senior
Subordinated Notes due August 15, 1997 of the Corporation, and any
refinancings or amendments thereof.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation
in the manner now or hereafter prescribed by law, provided that (i) the
resolution approving such amendment, alteration, change or repeal be adopted
by the Board of Directors by approval of the Required Majority present at a
meeting at which the Quorum is present and acting throughout, until a Change
of Control occurs, and thereafter by a majority of the members of the Board
of Directors voting together as a single class present at a meeting at which
a quorum is present and acting throughout and (ii) the proposed amendment,
alteration, change or repeal be approved by a majority of the outstanding
shares of Class A Stock and Class B Stock, each voting as a separate class,
until a Change of Control occurs and thereafter by a majority of the
outstanding shares of Class A Stock and Class B Stock, voting together as a
single class; provided, however, that from and after a Change of Control, any
amendment, alteration, change or repeal of subparagraph A(i)(a) of Article
SEVENTH or of this sentence shall also be approved by a majority of the
outstanding shares of Class A Stock, voting as a separate class, and any
amendment, alteration, change or repeal of subparagraph A(i)(b) and paragraph
D of Article SEVENTH or paragraphs C or E of Article EIGHTH or of this
sentence shall also be approved by a majority of the outstanding shares of
Class B Stock, voting as a separate class. With respect to any amendment,
alteration, change or repeal of paragraphs B, C or D of Article SEVENTH or
Article NINTH or of this sentence which would adversely affect the rights of
the holders of the Class C Stock, such amendment shall require, in addition
to the approval of the holders of the Class A Stock and the Class B Stock as
provided in the first sentence of this Article TWELFTH, approval by a
majority of the outstanding shares of Class C Stock, voting as a separate
class. With respect to any amendment, alteration, change or repeal of
Article FIFTH or paragraph E of Article SEVENTH or of this sentence which
would adversely affect the rights of the holders of any outstanding series of
Preferred Stock, such amendment shall require, in addition to the approval of
the holders of the Class A Stock and the Class B Stock as provided in the
first sentence of this Article TWELFTH, approval by two-thirds of the
outstanding shares of such series of Preferred Stock, voting as a separate
class.
THIRTEENTH: A. The Corporation shall indemnify to the full extent
authorized or permitted by law (as now or hereafter in effect) any Person
made, or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact
that he, his testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
in any capacity. Nothing contained herein shall effect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this paragraph A of Article
THIRTEENTH shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to
such amendment or repeal.
B. No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such a director as a director. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the GCL, or (iv) for any transaction from which
such director derived an improper personal benefit. No amendment to or
repeal of this paragraph B of Article THIRTEENTH shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
C. In furtherance and not in limitation of the powers conferred by
statute:
(i) the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of
law; and
(ii) the Corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements), as well
as enter into contracts providing indemnification to the full extent
authorized or permitted by law and including as part thereof provisions with
respect to any or all of the foregoing to ensure the payment of such amounts
as may become necessary to effect indemnification as provided therein, or
elsewhere.
FOURTEENTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-laws of the
Corporation.
IN WITNESS WHEREOF, MS/S&H HOLDINGS INC. has caused this Restated
Certificate of Incorporation to be executed in its corporate name by its
chairman and attested by its Assistant Secretary on the 28th day of August,
1987.
MS/S&H HOLDINGS INC.
By /s/ R. Philip Silver R. Philip Silver
---------------------- Chairman of the Board
ATTEST:
By /s/ Richard P. Emerson
---------------------------
Richard P. Emerson
Assistant Secretary
CERTIFICATE OF AMENDMENT
OF RESTATED
CERTIFICATE OF INCORPORATION
________________________________________________
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
------------------------------------------------
MS/S&H Holdings Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, by
unanimous written consent of its members, filed with the minutes of the
Board, adopted a resolution proposing and declaring advisable the following
amendment to the Restated Certificate of Incorporation of said Corporation:
RESOLVED: That the Restated Certificate of Incorporation be amended
by changing the FIRST Article thereof so that, as
amended, said Article shall be and read as follows:
"FIRST: The name of the Corporation is Silgan
Corporation."
SECOND: That in lieu of a meeting and vote of stockholders, a
majority of the stockholders entitled to vote have given written consent to
said amendment in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said MS/S&H Holdings Inc. has caused this
certificate to be signed by its Chairman of the Board of Directors and
attested by its Secretary this 29th day of April, 1988.
MS/S&H HOLDINGS INC.
By /s/ R. Philip Silver
---------------------------
R. Philip Silver
Chairman of the Board
ATTEST:
/s/ G. William Sisley
- ------------------------------
G. William Sisley
Secretary
CERTIFICATE OF AMENDMENT
OF THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
SILGAN CORPORATION
Silgan Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. That the Board of Directors of the Corporation has duly and
unanimously adopted the following resolution setting forth the proposed
amendment to the Restated Certificate of Incorporation of the Corporation:
RESOLVED, that the Restated Certificate of Incorporation of the
Corporation, as amended, be amended pursuant to Section 242 of the General
Corporation Law of the State of Delaware by deleting the first paragraph of
Article Seventh thereof in its entirety and replacing therefor the following:
SEVENTH: The total number of shares of capital
stock which the Corporation shall have authority to issue
is 503,000 shares, consisting of 1,000 shares of Class A
common stock, par value $.01 per share (the "Class A
Stock"), 1,000 shares of Class B common stock, par value
$.01 per share (the "Class B Stock"), 1,000 shares of
Class C common stock, par value $.01 per share (the
"Class C Stock") (the Class A Stock, Class B Stock and
Class C Stock being sometimes referred to herein
collectively as the "Common Stock"), and 500,000 shares
of preferred stock, par value $1.00 per share (the
"Preferred Stock").
2. By a consent of the sole stockholder of the Corporation dated
as of July 12, 1990 given in accordance with Section 228 of the General
Corporation Law of the State of Delaware, the holder of all of the
outstanding shares of capital stock of the Corporation has approved the
adoption of the aforesaid resolution.
3. That this amendment to the Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its Executive Vice President and attested to by
its Secretary this 12th day of July, 1990.
SILGAN CORPORATION
By /s/ Harley Rankin, Jr.
---------------------------
Harley Rankin, Jr.
Executive Vice President
ATTEST:
/s/ G. William Sisley
- ------------------------------
G. William Sisley
Secretary
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
SILGAN CORPORATION
Silgan Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. That the Board of Directors of the Corporation has duly and
unanimously adopted the following resolution setting forth the proposed
amendment to the Restated Certificate of Incorporation of the Corporation:
RESOLVED: That the Restated Certificate of Incorporation of the
Corporation, as amended, be amended pursuant to Section 242 of the General
Corporation Law of the State of Delaware by deleting the first paragraph of
Article Seventh thereof in its entirety and replacing therefor the following:
SEVENTH: The total number of shares of capital stock which
the Corporation shall have the authority to issue is 3,000 shares,
consisting of 1,000 shares of Class A common stock, par value $.01
per share (the "Class A Stock"), 1,000 shares of Class B common
stock, par value $.01 per share (the "Class B Stock"), 1,000 shares
of Class C common stock, par value $.01 per share (the "Class C
Stock") (the Class A Stock, Class B Stock and Class C Stock being
sometimes referred to herein collectively as the "Common Stock"),
and 1,000 shares of preferred stock, par value $1.00 per share (the
"Preferred Stock").
2. By a written consent of the sole stockholder of the
Corporation dated as of September 7, 1993 given in accordance with Section
228 of the General Corporation Law of the State of Delaware, the holder of
all of the outstanding shares of capital stock of the Corporation has
approved the adoption of the aforesaid resolution.
3. That this amendment to the Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its Executive Vice President and attested to by
its Assistant Secretary this 7th day of September, 1993.
SILGAN CORPORATION
By /s/ Harley Rankin, Jr.
---------------------------
Harley Rankin, Jr.
Executive Vice President
Attest:
By /s/ Sharon E. Budds
---------------------------
Sharon E. Budds
Assistant Secretary
Exhibit 10.118
SUPPLY AGREEMENT
THIS IS AN AGREEMENT (the "Agreement") made and entered into as of
September 3, 1993 by and between DEL MONTE CORPORATION, a New York
corporation ("DM"), and SILGAN CONTAINERS CORPORATION, a Delaware corporation
("Seller").
B A C K G R O U N D
Seller has agreed to purchase certain assets and assume certain
liabilities of DM's container manufacturing business pursuant to the terms
and conditions of a Purchase Agreement dated the date hereof between DM and
Seller (the "Purchase Agreement"). As a condition to the closing under the
Purchase Agreement and to induce the other party to consummate the
transactions contemplated by the Purchase Agreement, Seller and DM desire to
enter into a ten-year supply agreement under which Seller will supply DM's
metal container requirements for foods and beverages in the United States and
certain of DM's metal container requirements for foods and beverages in
Mexico, subject to the terms and conditions of this Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
EFFECTIVENESS
The parties have executed this Agreement as of the date that
appears in the first paragraph of this Agreement, and this Agreement will
become effective upon the closing of the Purchase Agreement (the "Effective
Date"). This Agreement will terminate without any obligation or liability
upon the termination of the Purchase Agreement.
ARTICLE II
PURCHASE AND SALE OF CONTAINERS
2.1 Commitment for Purchase and Sale. During the term of this
Agreement specified in Article VIII of this Agreement (the "Term"), Seller
shall sell and deliver to DM, and DM shall purchase and accept from Seller,
at DM's food processing plants identified on Schedule 2.1 to this Agreement
(the "Facilities") or as otherwise provided in this Agreement, the ready-to-
fill sanitary cans comprised of the can bodies which are enclosed at one end
by affixing a separately manufactured end onto a welded or tin soldered or a
one piece continuously formed metal cylinder closed at one end ("Cans") and
ends which are covers to be affixed after the Cans are filled ("Ends") (each
Can and End together constituting a "Container") described on Schedule 2.1 to
this Agreement. The annual quantities of Containers to be purchased and sold
during the Term and pursuant to the terms of this Agreement shall be (a) 100
percent of DM's annual requirements for such Containers to be used for the
packaging of foods and beverages in the United States and (b) not less than
65 percent of DM's annual requirements of those Containers to be used for the
packaging of foods and beverages at the Mexican Facilities identified on
Schedule 2.1 (with the actual percentage to be determined in DM's sole
discretion in connection with DM's estimates provided pursuant to Section
3.1), subject to reduction only in accordance with the terms of this
Agreement. This Agreement shall not apply to DM's purchase of metal
containers for pineapples, mandarin oranges and sardines which are not packed
in the United States or Mexico and any other products which are not packed in
the United States or Mexico. In addition, DM shall provide Seller all
Polystar lids necessary for DM Containers, which lids shall be provided by
Seller to DM at the same cost, if any, charged by DM to Seller for such lids
adjusted for actual spoilage exceeding the higher of <f*> or the average
spoilage incurred by DM during the three-month period prior to the Effective
Date (based on DM's records).
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
* CONFIDENTIAL INFORMATION OMITTED
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2.4 Other Agreements. The parties acknowledge that it is their
intent that Seller supply all metal food containers to DM pursuant to the
terms of this Agreement for any food or beverage product packed in the United
States or Mexico which DM requires pursuant to any toll-pack, co-pack or
similar agreements
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
Any such containers required for such toll-
pack, co-pack or similar agreements entered into after the date of this
Agreement ("Product Sourcing Containers") shall be considered New Containers,
and the prices for such Product Sourcing Containers shall be established in
accordance with the terms of Section 7.2 of this Agreement; provided that if
the volume of Product Sourcing Containers in any Supply Year (as defined
below) exceeds <f*> of the aggregate Containers required in the Supply Year
in which such agreement is entered into, the parties shall negotiate in good
faith the pricing for that portion of such Product Sourcing Containers that
exceeds said <f*> for that Supply Year.
2.5 Schedule 2.1. Schedule 2.1 sets forth the following
information, certain items of which may be established (only for New
Containers as defined below) or amended from time to time in accordance with
the terms of this Agreement:
(a) Container sizes;
(b) specifications (including special features and the
finished product ("Product") with which DM will fill each type of Container)
for each type of Container which shall serve as a basis for DM's acceptance
or rejection of Containers and for determining cost savings resulting from
specification changes effected under Article VII of this Agreement;
(c) the pallet-can configuration requirement and packaging
specification for each type of Container;
(d) DM's estimate, by type of Container and the location to
which the Containers are expected to be delivered, of DM's annual
requirements of Containers for DM's fiscal year ending June 30, 1994
estimated as of June 18, 1993;
(e) the selling price to be charged to DM by Seller for each
thousand Cans and Ends by type of Container and delivery location (indicating
metal, labor and other costs consistent with the format applicable to Section
5.1).
* CONFIDENTIAL INFORMATION OMITTED
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WITH THE COMMISSION *
The packaging
specifications required at (c) above shall be provided by DM prior to the
Effective Date and shall be consistent with DM's current packaging
specifications.
2.6 Additional Commitments of DM and Seller.
(a) New Facility. For purposes of this Agreement, except as
set forth in Section 2.6(d) below, (i) DM's agreement to purchase its annual
requirements of Containers to be used for the packaging of foods and
beverages by or for the account of DM in the United States as set forth in
Section 2.1 of this Agreement shall include all Containers to be so used by
or for the account of DM at any of DM's plants or facilities in the United
States (including those plants and facilities hereafter built, acquired,
operated or leased (a "New Facility")) or any other plant, facility or
location in the United States where any food or beverage product is packed
for the account of DM at any time during the Term of this Agreement,
including, without limitation, pursuant to any toll pack, co-pack or similar
arrangements as provided for in Section 2.4 of this Agreement, and (ii) DM's
agreement to purchase not less than 65 percent of its annual requirements of
Containers to be used for the packaging of foods and beverages at the Mexican
Facilities as set forth in Section 2.1 of this Agreement shall include not
less than 65 percent of the aggregate of (A) all Containers to be so used by
DM at any of its plants or facilities in Mexico (owned, leased or otherwise
used) (the "Mexico Facilities") where DM packages any food or beverage
product at any time during the Term of this Agreement and (B) if DM transfers
any food processing business from a Mexico Facility to a plant, facility or
location or another person or entity in Mexico, all Containers to be used for
the packaging of any food or beverage product for the account of DM, the
packaging for which has been transferred by DM from a Mexico Facility to any
such plant, facility or other location in Mexico, including, without
limitation, pursuant to any toll pack, co-pack or similar arrangements as
provided for in Section 2.4 of this Agreement. Notwithstanding the above
provisions, if DM packs food or beverage products for the account of another
person or entity, (a) DM shall be required to purchase Containers from Seller
pursuant to the terms of this Agreement for such food or beverage product if
such other person or entity is not subject to a contractual obligation to
purchase containers from a person or entity other than Seller; however, DM
and Seller shall negotiate in good faith for the supply of Containers by
Seller for such food or beverage products which may be at prices more
advantageous to Seller than those set forth in the Agreement (it being
understood that Seller is not obligated to supply such Containers except on
the terms and conditions of this Agreement) and (b) DM shall not be required
to purchase Containers from Seller for such food or beverages if such other
person or entity is subject to a prior contractual obligation to purchase
containers from a person or entity other than Seller. In connection with all
such obligations of DM, DM shall permit Seller's accountants reasonable
access during normal business hours to DM's books, records, plants and
facilities so that Seller may verify compliance with this Agreement. DM
agrees to provide Seller with reasonable notice of any New Facility and any
plans to transfer DM's food processing business from a Facility or New
Facility to a facility owned or operated by another person or entity and to
take all steps reasonably necessary and to cooperate with Seller to carry out
the intent of this Agreement.
(b) Sale of DM Business; <f*> . Notwithstanding
anything herein to the contrary, DM shall not enter into any transaction with
any other person or entity providing for the merger, consolidation or other
similar business combination of DM with such other person or entity or for
the sale, transfer, disposition or lease of all or substantially all of the
assets of DM to such other person or entity or for the sale, transfer,
disposition or lease of all or substantially all of the assets of DM's
vegetable, fruit or tomato business without first obtaining the written
agreement of such other person or entity to enter into a written agreement
with Seller on the same terms and conditions contained in this Agreement and
for the remainder of the Term hereof for the purchase by such other person or
entity of its Container requirements from Seller for use with the former DM
Products and any extensions of any Product. In addition, if DM sells
<f*> cannery, as a condition to consummation by DM of such
sale (which condition may not be waived without Seller's consent), DM shall
purchase its Container requirements from Seller pursuant to the terms of this
Agreement for use with any Product and any extensions of any Product produced
for DM at such cannery.
(c) Trademark License. With respect to any of the Products
or any extensions of any of the Products, DM shall not sell, transfer or
license the brand name "Del Monte" or any derivative thereof or any other
brand name or trade name used by DM without first obtaining the written
agreement of such purchaser, transferee or licensee to enter into a written
agreement with Seller on the same terms and conditions contained in this
Agreement and for the remainder of the Term hereof for the purchase by such
other person or entity of its Container requirements from Seller to be used
to package any of the Products and any extension of any Products using the
brand name "Del Monte" or any derivative thereof of any such other brand name
or trade name used by DM.
(d) Further DM Acquisitions. This subsection shall not apply
to acquisition by DM of PCP pursuant to the PCP Option (as defined at Section
6.2 of the Purchase Agreement) which is subject to the terms of Section 6.2
of the Purchase Agreement. Notwithstanding anything herein to the contrary,
DM's agreement to purchase its requirements of Containers as set forth in
this Agreement shall not include the requirements of any company or other
entity acquired by DM subsequent to the date hereof (the "Acquired Entity")
(i) where, in such acquisition, DM is required to assume the obligations of
such Acquired Entity under a written agreement requiring such Acquired Entity
to purchase containers to be used by such Acquired Entity or (ii) where, in
such acquisition, the Acquired Entity is a captive manufacturer of a material
portion of its containers. In the case of (i) above, upon expiration or
termination of such written agreement to purchase containers, Seller shall
have the right for the remainder of the Term to supply the Container
requirements of such Acquired Entity on the same terms and conditions
contained in this Agreement. In the case of (ii) above, DM shall notify
Seller in writing of any such acquisition five business days after the
consummation thereof. Seller shall have the right, exercisable no later than
45 days after receipt by Seller of such notice from DM, to purchase the can
manufacturing assets of such Acquired Entity at a purchase price equal to the
fair market value of such assets determined on the assumption that Seller
shall obtain a supply contract as set forth in the next sentence.
Additionally, in connection with any such purchase of can manufacturing
assets by Seller, DM (or the Acquired Entity) shall enter into a supply
agreement with Seller on the same terms and conditions contained in this
Agreement and for the remainder of the Term hereof for the supply by Seller
of all of the container requirements of such Acquired Entity. If the
purchase by Seller of such can manufacturing assets is not consummated within
120 days after delivery by Seller of notice of its intent to exercise this
right (other than by reason of the failure of DM to satisfy its conditions to
such purchase), then DM (or the Acquired Entity) may sell or otherwise
transfer or dispose of all or substantially all of such can manufacturing
assets of such Acquired Entity to any other party and to enter into a supply
agreement for the requirements of such Acquired Entity; provided that if in
the aggregate the terms and conditions offered to DM by another party are
less favorable to DM than those offered by DM to Seller, DM shall notify
Seller prior to DM's acceptance of such terms and Seller shall have 30 days
after receipt of such notice to accept such terms and if Seller timely
accepts such term, DM and Seller shall promptly enter into an agreement on
such terms.
(e) Expiration of Transferee Obligations. The obligations of
DM and any other person or entity, purchaser, transferee or licensee or
Acquired Entity set forth in subsections (b), (c) and (d) above shall
terminate upon the expiration of the initial Term unless specifically
extended by written agreement of DM, Seller and such other person or entity,
purchaser, transferee or licensee or Acquired Entity, as the case may be.
(f) Extension of a Product. For purposes of this Section
2.6, determination of whether a food or beverage constitutes an extension of
a Product shall be made in accordance with DM's good faith marketing
determination. By way of example, (a) soup would not be an extension of a
Product and (b) spaghetti sauce would be an extension of DM tomato Products.
2.7 Close of Oakland Facility. Seller will have as of the closing
a lease to operate the former DM facility in Oakland, California
<f*> <f*>
. Seller will transfer the production of Ends currently produced at the
Oakland facility to other locations without any supply interruption or cost
increase to DM.
ARTICLE III
SHIPMENT QUANTITIES
3.1 DM Estimates; Purchase Obligations. On the date of
effectiveness of this Agreement and on October 1 of each year of the Term
thereafter, DM shall furnish Seller with DM's good faith written estimate, by
type of Container and delivery location, of DM's proposed monthly
requirements for Containers under this Agreement for the ensuing Supply Year.
"Supply Year" shall mean the 12 month period from November 1 to October 31 of
each year during the Term of this Agreement. The annual estimate shall be
updated as follows: no later than the 20th calendar day of each month, DM
shall furnish Seller with DM's good faith written estimate, by type of
Container and delivery location, of any revisions to DM's estimated Container
requirements for the following four months; during the packing season (which
is the period from July 1 to October 31 of each year), DM shall furnish any
such revisions as soon as practical but at least once per calendar month.
Such estimates shall supersede the Container quantities specified in Section
2.5(d) of this Agreement. In any Supply Year, DM shall be obligated to
purchase no less than, and Seller shall be obligated to sell no more than,
that number and type of Containers as shall equal the sum of the periodic
monthly estimates (as revised in accordance with this Section) for each type
of Container for that Supply Year. The parties agree to cooperate and use
their reasonable best efforts to resell any excess Cans or Ends which DM has
purchased.
3.2 Shipping Arrangements. As of the date of effectiveness of
this Agreement and on November 1 of each year of the Term thereafter, Seller
shall furnish DM with Seller's 12-month Container Production Forecast which
shall be developed in accordance with DM's past practice. Such 12-month
Container Production Forecast will be revised monthly by Seller in accordance
with DM's requirements and shall serve DM as the basis for DM's arrangement
of shipments and space planning. Seller will notify DM immediately if Seller
anticipates that it will be unable to provide Containers to DM in accordance
with DM's most recent estimate. Seller shall advise DM's transportation
department of transit requirements from Seller's location to the DM delivery
location for Containers manufactured by Seller as required by Section 3.1 of
this Agreement and the applicable Container Production Forecast referred to
above. DM's transportation department will arrange for transportation of
such Containers using either DM trucks, trucks of an alternate carrier or
rail.
3.3 Manufacture; Transfer of Ownership; Payment Terms. Seller will
use reasonable efforts and cooperate with DM to follow DM's prior practices
of manufacturing smaller size Cans after the end of the packing season and
large Cans as close as practicable to the time of their use by DM with a view
to lowering DM's working capital requirements and minimizing DM's storage
space requirements. Ownership of, title to and risk of loss for Cans and
Ends will transfer on the date that such Cans or Ends are placed on DM trucks
or other carriers (or rail) for transit as arranged by DM or (in case of the
same location for manufacture by Seller and DM delivery location) upon Seller
placing such Cans at the palletizer exit; provided Ends will be shipped or
delivered to DM only in accordance with DM's instructions.
* CONFIDENTIAL INFORMATION OMITTED
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WITH THE COMMISSION *
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WITH THE COMMISSION *
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3.5 DM Transportation. It is acknowledged that DM has
transportation capability and has established very good traffic rates using
both its own equipment and equipment of outside carriers. It is also
acknowledged that Seller has established very good contracts for both
incoming and outgoing delivery. Seller and DM agree that the transportation
departments of each will work closely in all areas and allow, to the extent
possible, the other to make use of existing and future contract rates. Such
cooperation will ensure that both parties enjoy well controlled freight
costs.
3.6 Unexpected Increase in Requirements. If DM experiences an
unexpected increase in its production needs at any Facility whereby (a) a
calendar month's requirements at such Facility exceed 125 percent of that
month's estimate for any Container as set forth in that month's estimate
provided two months before (e.g. estimate for month of June dated April 20)
or (b) the requirements in a 24-hour period at such Facility exceed 10
percent of that month's estimate for any Container as set forth in that
month's estimate provided two months before (e.g., estimate for month of June
dated April 20), Seller shall use its best efforts to fulfill those needs but
shall not be considered to have breached this Agreement if it fails to
deliver any Containers in excess of either percentage described above during
that period.
* CONFIDENTIAL INFORMATION OMITTED
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WITH THE COMMISSION *
* CONFIDENTIAL INFORMATION OMITTED
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3.7 Return of Nonconforming Containers. If, after application of
the sampling and acceptance plan (the "AQL Plan") referred to in Section 13.1
of this Agreement, any of the Containers delivered to DM fails to meet the
specifications for that type of Container set out in Schedule 2.1, as that
schedule may be amended by the parties from time to time, DM shall be
entitled to refuse to use those nonconforming Containers and upon notice of
rejection to Seller, DM shall be entitled to return the nonconforming
Containers to Seller. Upon receipt of a notice of rejection, Seller shall
either (i) replace the nonconforming Containers if such replacement can be
made in a timely manner or (ii) credit DM for the cost of such Containers.
In addition, Seller shall reimburse DM: (a) for DM's reasonable
transportation and handling costs, if any, incurred in returning those
Containers, (b) any freight cost incurred by DM for the shipment of the
Containers to DM and (c) any and all other amounts required to be paid by
Seller to DM under Section 13.6 of this Agreement. Title and risk of loss or
damage to nonconforming Containers shall pass to Seller upon receipt by
Seller of a notice of rejection, and upon delivery of a notice of rejection
DM shall act in a commercially reasonable manner in storing and returning to
Seller such nonconforming Containers. Seller shall provide monthly to DM a
"Conformance to Specification Report" in substantially the form used by DM as
of the date immediately preceding the date of this Agreement.
3.8 Recycling. Seller acknowledges that DM derives a marketing
benefit from the fact that as of the date immediately preceding the date of
this Agreement DM used recycled metal in its containers and engaged in an
active can recycling effort. Seller agrees to notify DM of the approximate
percentage of recycled metal incorporated in Containers provided pursuant to
this Agreement so that DM may, at its election, make consumers aware of such
information. In addition, Seller agrees to use its reasonable efforts to
maintain DM's can recycling effort.
3.9 Class I Plate. Seller acknowledges that DM has engaged in a
Class I plate program, and Seller agrees to use its reasonable efforts to
continue such program to the extent it is consistent with the terms and
conditions of this Agreement.
3.10 Warehouse Space. Seller agrees to provide DM storage space
during the Term at the Toppenish and Rochelle can manufacturing facilities
and the Smithfield cannery, and DM agrees to provide Seller storage space
during the Term at DM's Crystal City, Stockton, Modesto, Kingsburg and Plover
canneries, in each case (other than Smithfield) consistent with DM's past
practice and at prevailing market rates and so long as such facilities are
owned by the respective party (or its affiliates). DM storage at Smithfield
shall be provided at no cost to DM. The parties shall invoice each other
monthly for any charges for use of any such storage space and shall make any
required net payment for any Supply Year within 60 days after the end of such
Supply Year.
ARTICLE IV
DELIVERY AND FREIGHT TERMS
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4.2 Container Loading. Seller shall be responsible for the proper
loading of Containers onto the appropriate DM pallets and onto shipping
vehicles in accordance with DM's reasonable shipping instructions.
ARTICLE V
PRICES AND PRICE CHANGES FOR CONTAINERS
5.1 Price Changes. Seller's selling prices for Containers are
specified in Schedule 2.1 attached hereto.
* CONFIDENTIAL INFORMATION OMITTED
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In
addition, as set forth in Schedule 2.1, the selling price for a Container
shall consist of the total of the following:
(a) Metal Costs;
(b) Labor Costs (composed of all direct and facility indirect
compensation and benefits); and
(c) Other Costs (composed of those items set forth on
Schedule 5.1A).
Seller's selling prices for Containers shall be subject to change
based on the following criteria:
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* CONFIDENTIAL INFORMATION OMITTED
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Examples of such price adjustments are shown on Schedule 5.1B hereto. For
any price adjustment pursuant to this Section 5.1, Seller shall notify DM and
set forth with reasonable specificity the reasons for the change in costs (a
"Cost Notice").
* CONFIDENTIAL INFORMATION OMITTED
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5.2 Sharing of Cost Savings. The parties intend to actively
pursue efficiencies and cost savings in connection with the transactions
contemplated by this Agreement. For each mutually agreed upon cost savings
attempt, the parties shall share the cost savings associated therewith as set
forth in this Section 5.2.
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To the extent
that the Section 5.2 Investment in respect of a cost savings attempt is less
than the cost savings allocated to DM for such cost savings attempt for a
particular Supply Year, Seller shall reduce the selling price of Containers
(per thousand) affected by such cost savings attempt by such difference.
Notwithstanding anything to the contrary set forth in this Section 5.2, this
Section 5.2 shall not apply to any cost savings affected by a Spec Change (as
defined in Section 7.1) or a New Container (as defined in Section 7.1) or to
any freight, handling, warehousing or spoilage charges as a result of any
relocation of the manufacture and production of a Container. DM shall
reasonably cooperate with Seller to achieve cost savings identified by Seller
to DM prior to the date of this Agreement. DM and Seller will prepare within
30 days after the date of this Agreement a detailed list of such cost savings
items
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
5.3 Operating Reviews. The parties shall meet periodically during
the Term and at least once in every Supply Year to consider suggestions for
efficiencies and cost savings and to review the results of previously
implemented cost savings attempts.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
ARTICLE VI
MEETING COMPETITION
If, at any time after the fifth anniversary of this Agreement, DM
receives a bona fide written proposal from an independent commercial can
manufacturer (an "Offeror") having the capability to manufacture and sell
containers to DM of a type and quality similar to the Containers that Seller
is required to furnish DM under this Agreement for the remainder of the Term
for one or more Facilities, which written proposal provides selling prices
and terms that are in DM's good faith opinion more favorable than the selling
prices and terms for Containers then provided by Seller and is based on not
less than one hundred percent of the annual volume of all such Containers as
DM is then purchasing from Seller hereunder for one or more Facilities for
the remainder of the Term, DM shall notify Seller of such proposal and shall
furnish Seller with a summary of all terms of the offer with reasonable
specificity, including the identity of the Offeror. At Seller's request,
such summary shall be reviewed and confirmed in writing by DM's independent
certified public accountants as an accurate summary of terms of such offer.
Seller shall have 30 days from the date of receipt of DM's notice within
which to submit a counterproposal to such bona fide competitive proposal.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
If Seller's
counterproposal would result in DM paying the same net selling price for
Containers that would be paid if the competitive proposal were accepted and
if Seller meets all the other terms and conditions, including warranties but
excluding any provisions providing for meeting competitive bidding, of the
competitive proposal, then DM shall accept Seller's counterproposal and the
provisions of this Article VI (and any meeting competitive bidding provisions
contained in the competitive proposal) will not be applicable during the term
of Seller's counterproposal for those Containers supplied to the Facilities
subject to the counterproposal. If Seller declines to meet the competitive
proposal, DM shall be free to purchase Containers from the Offeror pursuant
to the competitive proposal commencing 60 days after the expiration of the
30-day period; provided that, if prior to acceptance of the competitive
proposal in the aggregate the terms and conditions of the competitive
proposal are changed to be less favorable to DM, DM shall resubmit such
changed proposal to Seller for Seller's counterproposal in accordance with
this Article VI. Notwithstanding anything herein to the contrary, the
Containers purchased from all Offerors shall not exceed, in any Supply Year,
one-half of the aggregate number of Containers to be furnished to DM during
that Supply Year from Seller and all Offerors. Subject to the preceding
sentence, any Containers purchased from the Offerors shall reduce accordingly
the minimum requirements which DM must purchase from Seller under this
Agreement.
ARTICLE VII
SPECIFICATION CHANGE; NEW CONTAINERS
7.1 Procedure for Identification. DM and Seller acknowledge that
it may be appropriate, from time to time, for Seller to supply DM with
Containers under this Agreement with a change in specification from the
version on Schedule 2.1 in effect from time to time ("Spec Change") or of a
type which were not identified on Schedule 2.1 as of the date of this
Agreement ("New Containers"). Schedule 7.1 sets forth the changes in
specification which constitute a Spec Change. If DM or Seller desires to
make a Spec Change or purchase or sell any New Container under this
Agreement, it shall submit to the other a proposed new Schedule 2.1
identifying the Spec Change proposed to be made or the New Container proposed
to be supplied under this Agreement (a "Proposal"). If the parties agree on
the Proposal, they shall initial the new Schedule 2.1 for that Spec Change
only and that new Schedule 2.1, as so initialed, shall thereafter become a
part of this Agreement for all purposes including, but not limited to, the
calculation of minimum volume requirements referred to in Section 2 of this
Agreement.
7.2 Prices for Spec Changes and New Containers.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
For any proposed Spec Change, Seller shall provide DM as
promptly as practical and with reasonable specificity, the impact of such
proposed Spec Change on Seller's costs.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
The parties shall negotiate in good faith to
resolve any issues relating to the pricing of Spec Changes and New
Containers. If they do not reach agreement within 60 days after agreement on
the Proposal, the dispute shall be resolved in accordance with Section 19.9.
For purposes of this Agreement
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
7.3 Investment; Usage Percentage and Investment Cost. In
conjunction with any proposed Spec Change or New Container Seller shall
promptly provide DM with a statement of any required Investment and Usage
Percentage for each of the <f*> Supply Years following the required
Investment. The "Investment" shall be Seller's required investment in
machinery and equipment, inclusive of installation, delivery and
implementation costs. Investment Charge shall be <f*> of any required
Investment.
<f*> shall be the <f*>
<f*> . Unamortized Investment shall be determined
based on a <f*> useful life and straight-line amortization.
<f*> .
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
7.4 Review. <f*>
<f*>
<f*> as described in this Article VII shall be
reviewed and confirmed in writing by Seller's independent certified public
accountants upon DM's or Seller's request, as the case may be.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
ARTICLE VIII
TERM OF AGREEMENT
The term of this Agreement ("Term") shall commence on the Effective
Date and shall continue for a period of ten years. The parties shall
negotiate in good faith <f*>
<f*> (or any extension) for an extension of the
Term (or any extension), and the Term (and any extension) shall automatically
be extended for additional <f*> periods unless on or before <f*>
prior to the end of the Term (or any extension) either party notifies the
other of its intent to terminate this Agreement.
ARTICLE IX
FORCE MAJEURE
9.1 Seller's Obligations. Seller shall not be liable to DM for
any failure or delay by Seller in the performance of any of Seller's
obligations under this Agreement due to events beyond Seller's reasonable
control, including, but not limited to, fire, storm, flood, earthquake,
explosion, accident, acts of a public enemy, wars, riots, public disorders,
sabotage, strikes, lock-outs, labor disputes, failures or delays of energy,
transportation embargoes or delays, inability to obtain materials (except
where such inability results from Seller's failure to order sufficient
quantities of materials or comply with delivery lead times specified by
suppliers), acts of God, acts or regulations of government or inability of
Seller to perform its obligations as a result of any breach by DM of its
obligations under any of the lease agreements between DM and Seller relating
to the former DM container manufacturing facilities (the "Leases"). However,
if Seller is unable to supply the required quantity of Containers because of
any such circumstance, Seller shall grant DM a priority over all of Seller's
other customers and needs with respect to Containers made from the DM
facilities purchased or leased by Seller referred to in the Background
Section of this Agreement.
9.2 DM's Obligations. DM shall not be liable to Seller for any
failure or delay by DM in the performance of any of DM's obligations under
this Agreement (excluding, however, the payment of monies otherwise due under
this Agreement for Containers for which ownership has been transferred to
DM), including any delay or failure by DM to accept or use conforming
Containers as ordered, if such failure or delay is due to any event beyond
DM's reasonable control, including, but not limited to, those force majeure
events identified in Section 9.1.
9.3 Notice of Force Majeure. Either party unable to perform due
to force majeure conditions shall promptly advise the other party of the
probable extent of its inability to perform and shall take all reasonable
actions to lessen the impact on the other party's business (including, in
Seller's case, the building of inventories in anticipation of, in Seller's
reasonable belief, labor disputes). When any force majeure event operating
to excuse performance by either party shall cease, this Agreement shall
continue in full force and effect until all deliveries have been completed or
until the earlier expiration or termination of this Agreement in accordance
with its terms.
ARTICLE X
DM'S RIGHT TO COVER
If Seller, for any reason (other than DM's breach under this
Agreement or under the Leases or as otherwise permitted in this Agreement),
including, but not limited to, a force majeure event as described in Article
IX, fails to deliver conforming Containers to DM at the required location by
the delivery date specified by DM to Seller, Seller will use its best efforts
to obtain an alternate supply of Containers for DM at no cost increase to DM.
If Seller cannot obtain such an alternate supply, DM may, in addition to any
other rights or remedies available to DM under applicable law, purchase from
other sources, only during any such period of failure or delay in performance
by Seller, the type and volume of Containers that were scheduled for delivery
to DM during the period of failure or delay in performance. Such purchases
shall reduce accordingly the minimum requirements which DM must purchase from
Seller under this Agreement. Any such Containers DM purchases from <f*> or
its affiliates shall increase accordingly the <f*> Containers which
DM can purchase from <f*> and its affiliates in such Supply Year only.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
ARTICLE XI
QUALIFICATION OF CONTAINERS; TECHNICAL SUPPORT
11.1 Qualification of Containers. DM reserves the right to
qualify Seller's production capabilities according to DM's quality assurance
standards. DM hereby represents and warrants to Seller that the container
production facilities of DM immediately prior to the closing under the
Purchase Agreement are qualified according to DM's quality assurance
standards for those Containers produced at each such Facility. DM shall have
the right to make reasonable changes to its quality assurance standards, and
if DM changes any of its quality assurance standards, it shall notify Seller
in writing of any change in detail and shall give Seller adequate opportunity
to conform its production capabilities accordingly. DM shall not
unreasonably withhold qualification of Seller's production capabilities in
accordance with DM's quality assurance standards and shall exercise its best
efforts to qualify Seller's production capabilities in accordance with
customary industry practice. Seller shall not change any specifications for
Containers without the prior written consent of DM.
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
11.2 Inspection. DM shall have the right periodically to inspect
Seller's facilities at which Containers are manufactured. Such inspection
shall be during normal business hours and upon at least three business days'
notice to Seller.
11.3 Technical Support. Upon DM's reasonable request, Seller
shall provide technical support to those canneries at which Containers are
filled in accordance with industry standards and at no cost to DM. Upon DM's
reasonable request, Seller shall provide technical support for DM's
Philippine container manufacturing operations, PCP and any Product Sourcing
Container arrangements to which DM is a party; provided that Seller's
personnel shall not be required to visit DM's Philippine facilities more than
twice in any calendar year. DM and Seller shall cooperate to provide
technical assistance relating to Polystar lids. Technical support shall
consist of advice on engineering reviews of new equipment, advice on line
productivity, use of laboratory facilities to research container failures,
development of container specifications and similar matters. DM shall
reimburse Seller for all of Seller's reasonable costs, including without
limitation, out-of-pocket costs, for such support within 30 days after
submission of invoices from Seller. At DM's request, Seller will also supply
DM
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
11.4 Research and Development Cooperation. The parties intend to
cooperate in research and development relating to the manufacture and coating
of containers. In connection with such cooperation, each party shall
maintain in confidence and shall not disclose or otherwise use for a period
of five years after disclosure any information of a confidential or business
sensitive nature disclosed by the other party. This obligation of
confidentiality shall not apply to material which
(a) is in or later enters the public domain by public use,
publication, general or public knowledge or the like, through no fault of the
receiving party;
(b) is obtained from a third party which has the legal right
to use and disclose the same to receiving party;
(c) either party already possesses, as evidenced by its
written records, predating receipt thereof from the other party; or
(d) is developed by either party independently of the
information disclosed.
The parties agree that ownership of all right, title and interest to
information disclosed in connection with such research and development
cooperation and the inventions and trade secrets related thereto or based
thereon shall remain the property of the disclosing party and that the
receiving party shall not obtain any rights to such information or related
inventions or trade secrets by way of license, shop right or otherwise.
Seller will make available to DM Seller's manufacturing facilities for a
reasonable number of test runs of containers, coatings, seals or other items
relating to containers. Such test runs shall take place at the manufacturing
facility selected by Seller and shall be scheduled to minimize any disruption
to Seller's commercial operations. The cost to DM for such test runs shall
be Seller's labor and materials cost, including a reasonable charge for set
up and change over of any manufacturing line.
ARTICLE XII
RETURNABLE PACKAGING MATERIALS
12.1 Packaging Specifications. DM's current packaging
specifications are set forth on Schedule 2.1 to this Agreement. DM will
consider in good faith any proposed changes to these specifications if DM's
functional performance criteria (set forth on Schedule 2.1) are satisfied.
12.2 Coding. Can identification coding and cook check standards
used by Seller must comply with DM's product certification program as
currently in effect and as that program may be changed in the future. DM
shall notify Seller at least 45 days before any change in DM's certification
program.
12.3 Title to Packaging Materials. All packaging materials for
Containers supplied by Seller, including, but not limited to, pallets, top
frames and separators, shall remain the property of Seller. All packaging
materials for Containers supplied by DM, including but not limited to pallets
and top frames, shall remain the property of DM. The parties shall return
all such other party's materials to the other party's closest plant, except
to the extent, if any, that such other party wishes to exclude certain items
from the provisions of this Section 12.3. Each party shall pay the
transportation costs for return of its own packaging materials.
12.4 Annual Settlement of Packaging Materials. Seller shall
maintain a daily inventory record of pallets and top frames shipped to, and
returned by, DM. DM shall maintain inventory records of pallets and top
frames shipped to, and returned by, Seller. As of the end of each three-
month period in each Supply Year, Seller shall determine from such records
the quantity (if any) of pallets and top frames: (a) shipped by Seller or DM
to the other party during such three-month period and (b) not returned during
that period. If those records show in any Supply Year that either party owes
the other more than 10,000 pallets or top frames (other than those excluded
pursuant to Section 11.3), such party shall pay the other $12.00 per pallet
and $3.00 per top frame for such excess shortage within 90 days after the end
of such Supply Year. The parties shall furnish a copy of such inventory
records to the other as often as such other party may reasonably request and
shall cooperate with each other to reconcile such inventory records.
12.5 Transition of 45 x 50 Two-Way Pallets. DM will cooperate
with Seller in the orderly transition from 45 x 50 Two-Way pallets and top
frames to 44 x 56 Four-Way pallets and top frames, with all transition costs
to be paid by Seller.
ARTICLE XIII
CLAIMS, WARRANTIES AND LIMITATIONS OF LIABILITY
13.1 Container Specifications. Seller warrants that all
Containers delivered to DM will conform to the Container specifications set
forth in Schedule 2.1 to this Agreement as that Schedule may be amended from
time to time in accordance with this Agreement. The acceptance criteria
relating to Container quality and the AQL Plan to determine quality
compliance are set forth on Schedule 13.1. If Seller supplies any Containers
to DM which fail to conform to Schedule 2.1, as determined by those
acceptance criteria and the AQL Plan, unless Seller can supply conforming
Containers in a timely manner, DM shall be entitled to purchase substitute
Containers from a third party. Such purchases shall reduce accordingly the
minimum requirements which DM must purchase from Seller under this Agreement.
13.2 Compliance with Laws and Regulations. Seller warrants that
all Containers will be produced in accordance with and will satisfy all
applicable federal, state and local laws, regulations and orders.
13.3 Title to Containers. Seller warrants that it will convey to
DM good title to all Containers delivered under this Agreement, free and
clear of any and all security interests and other liens and encumbrances.
13.4 Infringement Claims. Seller shall indemnify and hold DM
harmless from and against any and all claims of patent and other
"intellectual property" infringement or misuse relating to Containers and
shall bear all costs and expenses, including reasonable attorneys' fees,
arising from or related to any such claim, unless the claim arises from
events which occurred before the date of this Agreement or from DM's request
for a Spec Change or New Container. The term "claim" as used in the
preceding sentence includes, but is not limited to, any claim for temporary
or permanent injunctive relief. DM represents and warrants to Seller that
none of the specifications set forth on Schedule 2.1 delivered on the date
hereof infringe the intellectual property rights of any third party.
13.5 Shelf Life Warranty. DM warrants to Seller that each
container manufactured by DM prior to the effective date of this Agreement
for the Product or Products designated by DM and listed on Schedule 2.1 to
this Agreement provides the Product packed in such container a shelf life of
at least <f*> (and at least <f*> for vegetables) at a mean
temperature of <f*> from time of use by DM. In reliance upon the
preceding sentence, Seller warrants that each Container delivered by Seller
to DM for the Product or Products designated by DM and listed on Schedule 2.1
to this Agreement, as it may be modified from time to time in accordance with
this Agreement, shall assure that the Product packed in the Container will
have a shelf life of at least <f*> <f*> (and at least <f*>
for vegetables) at a mean temperature of <f*> from time of use by DM,
except for those Containers for which DM insists on a Spec Change or New
Container with which Seller reasonably disagrees in good faith in writing
before it manufactures the Container in question. Seller's warranty under
this Section 13.5 assumes that the Product identified on Schedule 2.1 shall
remain substantially unchanged as to formulation and content during the Term.
If DM elects to make changes to the formulation or content of the Product
which, to DM's knowledge after due inquiry, might cause the Container to be
used for that Product to be inadequate or inappropriate to assure the
required <f*> (or <f*> for vegetables) shelf life at a mean
temperature of <f*> , DM shall notify Seller at least 60 days before the
change and Seller shall confirm the continued appropriateness of the
Container for use with the Product or to request changes in the
specifications for the Container if required in Seller's opinion by changes
to the Product. Such changes in specifications shall be in accordance with
the procedures set forth in Article VII of this Agreement. The parties agree
that tomatoes are fruits and not vegetables.
13.6 Limitations on Warranties. Except as set forth in this
Article XIII:
SELLER EXTENDS NO WARRANTIES, EXPRESS OR IMPLIED, AND NO
WARRANTY WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
Seller's liability for Containers which do not conform with the warranties
provided in this Agreement shall be limited (a) with respect to personal
injury, to the coverage available under the insurance policy referred to in
Article XIV of this Agreement and (b) with respect to all other damage, loss
or injury, to the sum of DM's cost of the defective Containers, DM's cost of
the contents of the Containers lost as a result of the defects, DM's cost of
recovery and disposition of the defective Containers and DM's incremental
labor and overhead cost of lost production time caused by the Containers. DM
shall exercise reasonable diligence to discover any defects in Containers
before filling them with Products.
ARTICLE XIV
INSURANCE
Seller, at its cost, shall maintain broad form comprehensive
general liability insurance, including product liability insurance with
limits in an amount not less than $30,000,000 in the aggregate which shall
include DM as an additional named insured and shall require the insurer to
give DM at least 30-days' advance notice of any cancellation or expiration of
the policy, or of any significant change in the coverage, scope or amount of
the policy. On or before 30 days after the Effective Date, Seller will
provide DM with a certificate of insurance evidencing the above coverage,
additional insured endorsement, and thereafter Seller shall promptly provide
DM notice of cancellation or change in policy conditions.
ARTICLE XV
SALE OF REJECTED CONTAINERS
Seller shall not resell, except for scrap, any Containers rejected
or not purchased by DM which bear any trademarks or trade names of DM or DM's
customers.
ARTICLE XVI
LABOR DISPUTES
Seller agrees that, whenever an actual or potential labor dispute
delays or could be reasonably expected to delay the timely performance of
this Agreement, Seller shall promptly give notice of such actual or potential
dispute to DM.
ARTICLE XVII
TITLE TO DRAWINGS
Seller shall at all times have title to all drawings and
specifications used in connection with this Agreement provided that DM shall
at all times be entitled to retain and use (without any further
consideration) copies of all such drawings and specifications.
ARTICLE XVIII
BREACH AND WAIVER
18.1 Event of Default. Each of the following shall constitute an
Event of Default:
(a) the making by a party of any general assignment for the
benefit of creditors; or the filing by or against a party of a petition to
have such party adjudged a bankrupt or a petition for reorganization or
arrangement under any bankruptcy law which, in the case of a petition filed
against a party, is not dismissed within 60 days of filing; and
(b) the material breach of any obligation pursuant to this
Agreement.
18.2 Effect of Default. If either party commits an Event of
Default, the other party may immediately in the case of Section 18.1(a) and
30 days after notice and failure to cure (or such longer period if such
failure cannot be reasonably cured within 30 days of notice, so long as such
defaulting party diligently takes all steps necessary to cure such failure)
in the case of Section 18.1(b), in addition to and without prejudice to its
other lawful rights and remedies, terminate this Agreement at any time upon
notice to the other party. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL,
INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES.
18.3 Nonwaiver. No course of conduct or delay on the part of
either party in exercising any of its rights under this Agreement shall waive
any rights of that party or modify this Agreement.
ARTICLE XIX
MISCELLANEOUS
19.1 Notices. All notices, demands and requests required or
permitted to be given under this Agreement shall be in writing and shall be
deemed duly given three business days after mailing if mailed by certified or
registered mail, postage prepaid, or on the date of delivery if delivered
personally or one business day after deposit with a nationally recognized
overnight courier, in all cases subject to the subsequent designation of
another address in accordance with this Section 18.1, if addressed as
follows:
If to Seller:
Silgan Containers Corporation
3800 W. Alameda Avenue
Suite 900
Burbank, CA 91505
Attention: Mr. James D. Beam
With a copy to:
Silgan Corporation
4 Landmark Square, Suite 301
Stamford, CT 06901
Attention: D. Greg Horrigan
and
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Attention: G. William Sisley, Esq.
If to DM:
Del Monte Corporation
One Market
P.O. Box 193575
San Francisco, California 94119-3585
Attention: Phyllis Kay Dryden
With a copy to:
Heller, Ehrman, White & McAuliffe
525 University Avenue, Suite 1100
Palo Alto, California 94301
Attention: August J. Moretti
19.2 Assignment. This Agreement shall not be assigned by any
party without the prior written consent of the other party, except that
either party may transfer or assign this Agreement to any Affiliate (as
defined in the Purchase Agreement) of such party upon any merger,
consolidation, sale of all or substantially all of the assets of such party
(or, in the case of Seller only, all or substantially all of the Assets (as
defined in the Purchase Agreement) of the Business (as defined in the
Purchase Agreement) or, in the case of DM only, all or substantially all of
the assets of all of the Facilities) or other similar business combination
with or to such Affiliate of such party without the prior written consent of
the other party. This Agreement shall be binding upon and shall inure to the
benefit of the successors and permitted assigns of both parties and upon all
persons or corporations succeeding to their respective businesses.
19.3 Modifications. This Agreement may not be modified and no
provision of this Agreement may be waived unless the modification or waiver
is in writing and is signed by an authorized representative of each party.
19.4 Confidentiality. Each party to this Agreement shall hold in
confidence and use only for its benefit in performing this Agreement, any
confidential technical information (including, without limitation,
specifications, drawings, designs and samples), pricing information, raw
material sources, the data on Schedule 2.1 and any other information, whether
conveyed orally or in writing, furnished by one to the other in connection
with this Agreement. No party to this Agreement shall have liability for
disclosures of information made in accordance with requirements imposed by
any applicable law, rule or regulation or by any court or regulatory agency
with proper jurisdiction if the party of whom disclosure is required
reasonably assists and cooperates with the other party in attempting to
preserve the confidentiality of the information, including, without
limitation, notifying the other party upon learning of any such disclosure
requirement and not disclosing the information earlier than is required.
19.5 Independent Contractors. The parties acknowledge that the
relationship established under this Agreement shall be that of independent
contractors. Seller and DM shall not be deemed partners, joint venturers or
agents for one another for any purpose whatsoever.
19.6 Corporate Authority. Each party warrants to the other that
it has the corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated by this Agreement and that this
Agreement has been duly executed and delivered on its behalf.
19.7 Further Documentation. Each of the parties agrees to furnish
to the other such additional documents and instruments as shall be reasonably
requested to effectuate the purposes of this Agreement.
19.8 Severability. If any provision of this Agreement is
determined by a court of competent jurisdiction to be null and void or
unenforceable, that provision shall be deemed to be severed, and the
remaining provisions of this Agreement shall remain in full force and effect.
19.9 Dispute Resolution. Any disputes arising pursuant to this
Agreement and relating to cost, Cost Notices, Investment, Allocated Cost
Savings, manufacturing cost, gross profit margin or similar matters shall be
submitted to the accounting firm of Arthur Anderson & Co. ("AA"), and its
determinations shall be final and binding on all parties. Determinations of
such matters shall be made in accordance with United States Generally
Accepted Accounting Principles and, United States Generally Accepted Cost
Accounting Principles, in each case, consistently applied, in each case as
modified by the specific provisions of this Agreement. All costs of AA shall
be shared equally by the parties. All other disputes arising pursuant to
this Agreement shall be submitted to binding arbitration in San Francisco,
California pursuant to the then applicable rules of the American Arbitration
Association.
19.10 Governing Law. This Agreement shall be governed by the laws
of the State of California applicable to contracts between California
residents and wholly to be performed in California.
19.11 Entire Agreement. This Agreement, including its Schedules
as they may be modified from time to time in accordance with this Agreement,
contains all the terms agreed upon by the parties with respect to its subject
matter and supersedes any and all prior and contemporaneous agreements,
representations and warranties of the parties regarding that subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date that appears in the first paragraph of this Agreement.
DEL MONTE CORPORATION
BY /s/ David Meyers
-------------------------------
Name: David Myers
Title: Executive Vice President
and Chief Financial
Officer
SILGAN CONTAINERS CORPORATION
BY /s/ D. Greg Horrigan
------------------------------
Name: D. Greg Horrigan
Title: Chairman of the Board
- -----------------------------
[FN]
<f*> CONFIDENTIAL INFORMATION OMITTED PURSUANT TO RULE 24B-2 AND FILED
SEPARATELY WITH THE COMMISSION
Schedule 2.1(a) to Del Monte Corporation
Supply Agreement
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
Schedule 2.1(b) to Del Monte Corporation
Supply Agreement
* CONFIDENTIAL INFORMATION OMITTED
PURSUANT TO RULE 24b-2 AND FILED SEPARATELY
WITH THE COMMISSION *
Schedule 2.1(c) to Del Monte Corporation
Supply Agreement
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Schedule 2.1(d) to Del Monte Corporation
Supply Agreement
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Schedule 2.1(e) to Del Monte Corporation
Supply Agreement
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Schedule 5.1A to Del Monte Corporation
Supply Agreement
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Schedule 5.1B to Del Monte Corporation
Supply Agreement
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Schedule 7.1 to Del Monte Corporation
Supply Agreement
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Schedule 13.1 to Del Monte Corporation
Supply Agreement
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Exhibit 10.119
AMENDMENT TO SUPPLY AGREEMENT
THIS AMENDMENT TO SUPPLY AGREEMENT (this "Amendment") is made and
entered into as of December 21, 1993 by and between DEL MONTE CORPORATION, a
New York corporation ("DM"), and SILGAN CONTAINERS CORPORATION, a Delaware
corporation ("Seller").
B A C K G R O U N D
DM and Seller are parties to that Supply Agreement made and entered
into as of September 3, 1993 (the "Supply Agreement"). DM and Seller desire
to amend the Supply Agreement as set forth in this Amendment. Accordingly,
the parties agree as follows:
ARTICLE I
DEFINITIONS
Any terms used in this Amendment without definition shall have the
meanings set forth in the Supply Agreement.
ARTICLE II
MEXICAN FACILITIES
Schedule 2.1 to the Supply Agreement is hereby amended to clarify
that the Mexican Facility referred to in such Schedule 2.1(a) is the DM
cannery located in Irapuato, Mexico.
ARTICLE III
SCHEDULE 2.1(e)
Schedule 2.1(e) to the Supply Agreement is hereby amended by
deleting such Schedule 2.1(e) in its entirety and replacing it with Schedule
2.1(e) set forth in Exhibit 2 hereto.
By January 15, 1994, Seller shall revise and reissue to DM Schedule
2.1(e) to the Supply Agreement (which shall replace the Schedule 2.1(e)
attached hereto). Such revised Schedule 2.1(e) shall effect the following:
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ARTICLE IV
AMENDMENT TO SECTION 2.3
The phrase "the last sentence in Section 2.1" that is contained in
the third sentence of Section 2.3 of the Supply Agreement is hereby amended
by deleting such phrase in its entirety and inserting in place therefor "the
second sentence in Section 2.1."
ARTICLE V
CONTAINER REQUIREMENTS PLAN; SUPPLY SCHEDULE; WORKING CAPITAL
1. Sections 3.1 and 3.2 of the Supply Agreement are hereby
amended by deleting such Sections 3.1 and 3.2 in their entirety and inserting
in place therefor the following:
3.1 Container Requirements Plan. On the date of
effectiveness of this Agreement (for the 1994 Supply Year) and
prior to November 15 before each subsequent Supply Year thereafter,
DM shall furnish Seller with a "Container Requirements Plan" for
such Supply Year, which Container Requirements Plan shall set forth
DM's good faith written estimate, by type of Container and delivery
location, of the quantity of Cans estimated to be needed for such
Supply Year and the quantity of Ends to be affixed to such Cans.
"Supply Year" shall mean a calendar year during the Term of this
Agreement (based on DM's accounting month). The Container
Requirements Plan for a Supply Year shall be adjusted by DM as
follows: no later than the 20th calendar day of each month during
such Supply Year, DM shall furnish Seller with DM's good faith
written estimate of the revised Container Requirements Plan, by
type of Container and delivery location, for the remaining months
of such Supply Year, provided that during the packing season (which
is the period from July 1 to October 31 of each year) DM shall
revise such Container Requirements Plan as soon as practical but at
least no later than the 20th calendar day of each such month.
3.2 Supply Schedule. On the date of effectiveness of this
Agreement (for the 1994 Supply Year) and prior to December 15
before each subsequent Supply Year thereafter, Seller shall furnish
DM with a "Supply Schedule" for such Supply Year, which Supply
Schedule shall indicate the estimated quantity and type of Cans and
Ends to be supplied by Seller by DM accounting month for each DM
Facility and which shall satisfy the Container Requirements Plan
for such Supply Year. Such Supply Schedule shall be revised
monthly on or before the 30th calendar day of each month in which
Seller receives a revised Container Requirements Plan and shall
serve as the basis for DM's arrangement of shipments and space
planning. In any Supply Year, DM shall be obligated to purchase no
less than, and Seller shall be obligated to sell no more than, that
number and type of Containers as shall equal the sum of the
periodic monthly estimates set forth in the Supply Schedule (as
revised in accordance with this Section) for each type of Container
for that Supply Year. The parties agree to cooperate and use their
reasonable best efforts to resell any excess Cans or Ends which DM
has purchased. Seller will notify DM immediately if Seller
anticipates that it will be unable to provide Containers to DM in
accordance with DM's most recent Container Requirements Plan.
Seller shall advise DM's transportation department of transit
requirements from Seller's location to the DM delivery location for
Containers supplied by Seller as required by this Section 3.2 and
the most recent Supply Schedule for the current Supply Year. DM's
transportation department will arrange for transportation of such
Containers.
2. Section 3.4 of the Supply Agreement is hereby amended by
deleting such Section 3.4 in its entirety and inserting in place therefor the
following:
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ARTICLE VI
METAL COSTS
Subparagraph (a) of Section 5.1 of the Supply Agreement (which
subparagraph begins "The metal cost component of selling price . . .") is
hereby amended by deleting such subparagraph in its entirety and inserting in
place therefor the following:
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ARTICLE VII
PROCTER & GAMBLE
The Supply Agreement is hereby amended by adding the following new
Section to the Supply Agreement immediately following Section 2.7 and
immediately before Article III:
2.8 Procter & Gamble. DM hereby agrees that it will not
cancel or terminate that certain Containers Purchase Agreement
dated as of March 2, 1990 (the "Container Purchase Agreement")
between DM and The Procter & Gamble Company ("P & G") <f*>
<f*> and that it will purchase from Seller in
accordance with this Agreement all Containers (as defined in such
Containers Purchase Agreement) that it is required to sell to P & G
under the Containers Purchase Agreement.
ARTICLE VIII
COST SAVINGS
The Supply Agreement is hereby amended by adding the following to
Section 5.2 immediately before the penultimate sentence of Section 5.2:
Attached hereto as Schedule 5.2 is a list of cost savings
items (from which DM and Seller agree to reasonably cooperate to
achieve and to work together to test and approve as quickly as
possible), it being understood that the cost savings associated
with all such items which accrue to Seller are included in the
selling prices for Containers set forth in Schedule 2.1(e) and
shall not be shared or allocated pursuant to this Section 5.2 or
Article VII.
ARTICLE IX
REAFFIRMATION
The parties hereby reaffirm all of the other terms and conditions
of the Supply Agreement. This Amendment amends the Supply Agreement only to
the extent specified herein and shall not constitute an amendment to any
other provision of the Supply Agreement. From and after the date hereof, all
references to the Supply Agreement in the Supply Agreement and other
documents referred to therein shall be references to the Supply Agreement as
amended hereby.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly signed and delivered as of the date that appears in the first paragraph
of this Amendment.
DEL MONTE CORPORATION
By /s/ Thomas E. Gibbons
----------------------------
Its Vice President
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SILGAN CONTAINERS CORPORATION
By /s/ Harley Rankin, Jr.
----------------------------
Its Vice President
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[FN]
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Attachments:
Exhibit 2 - Schedule 2.1(e)
Schedule 3.4(a) - Sample Working Capital Plan
Schedule 3.4(b) - Examples of Adjustments to Sample Working
Capital Plan
Schedule 3.4(c) - 1994 Working Capital Plan
Schedule 5.2 - Cost Savings
Exhibit 2 to Del Monte Corporation
Amendment to Supply Agreement
Schedule 2.1(e)
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Schedule 3.4(a) to Del Monte Corporation
Amendment to Supply Agreement
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Schedule 3.4(b) to Del Monte Corporation
Amendment to Supply Agreement
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Schedule 3.4(c) to Del Monte Corporation
Amendment to Supply Agreement
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Schedule 5.2 to Del Monte Corporation
Amendment to Supply Agreement
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EXHIBIT 22
Subsidiaries of Silgan Corporation
Silgan Plastics Corporation
827599 Ontario Inc. (Canadian Holdco.) <F1>
Express Plastic Containers Limited <F2>
Silgan Containers Corporation
California-Washington Can Corporation <F3>
828745 Ontario Inc. (NRO, Ltd.)
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[FN]
<F1> Wholly-owned subsidiary of Silgan Plastics Corporation.
<F2> Wholly-owned subsidiary of Canadian Holdco.
<F3> Wholly-owned subsidiary of Silgan Containers Corporation.
