Registration No. 33-47632
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 3441;3085 06-1269834
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification
Number)
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Harley Rankin, Jr.
Silgan Holdings Inc.
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Frode Jensen, III, Esq.
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
(203) 348-2300
<PAGE>
SILGAN HOLDINGS INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Form S-1 Part I Item Prospectus Location or Caption
1. Forepart of the Registration Statement
and Outside Front Cover Page
of Prospectus......................... Cross Reference Page; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................ Inside Front Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............ Prospectus Summary; Certain Risk
Factors; The Company; Selected
Financial Data
4. Use of Proceeds...................... Not Applicable
5. Determination of Offering Price...... Not Applicable
6. Dilution............................. Not Applicable
7. Selling Security Holders............. Not Applicable
8. Plan of Distribution................. Market-Making Activities of Morgan
Stanley
9. Description of Securities to be
Registered.......................... Outside Front Cover Page; Prospectus
Summary; Description of the
Debentures
10. Interests of Named Experts and
Counsel............................. Certain Transactions; Legal Matters;
Experts
11. Information With Respect to the
Registrant.......................... Outside Front Cover Page; Prospectus
Summary; Certain Risk Factors; The
Company; Capitalization; Selected
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Securities
Ownership of Certain Beneficial
Owners and Management; Certain
Transactions; Description of the
Debentures; Description of Holdings
Common Stock; Description of
Certain Silgan Indebtedness;
Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................... Not Applicable
<PAGE>
PROSPECTUS
$275,000,000
Silgan Holdings Inc.
13-1/4% SENIOR DISCOUNT DEBENTURES DUE 2002
No interest on the 13-1/4% Senior Discount Debentures due 2002 (the
"Debentures") will accrue prior to June 15, 1996. Thereafter, interest
on the Debentures will be payable on June 15 and December 15, commencing
December 15, 1996.
The Debentures were sold at a substantial discount from their principal
amounts, and there will not be any payment of interest on the Debentures prior
to December 15, 1996. See "Certain Federal Income Tax Considerations" for a
discussion of the federal income tax treatment of the Debentures under the
original issue discount rules. Interest on the Debentures will be payable in
cash at a rate of 13-1/4% per annum from and after June 15, 1996. The
Debentures may be redeemed at any time at the option of Silgan Holdings Inc.
("Holdings," and together with its subsidiaries, the "Company"), in whole
or in part, at 100% of their principal amount plus accrued interest.
The Debentures were originally sold by Holdings to the public in 1992 as
part of a plan of the Company to refinance a substantial portion of its
indebtedness (the "Refinancing"). The Debentures are pari passu with other
unsecured unsubordinated indebtedness of Holdings. Because Holdings is a
holding company that conducts all of its business through its subsidiaries,
all existing and future liabilities of Holdings' subsidiaries will be
effectively senior to the Debentures. As of March 31, 1995, Silgan Corporation,
a wholly owned subsidiary of Holdings ("Silgan"), and its subsidiaries had
approximately $460.9 million of indebtedness and other liabilities effectively
senior to the Debentures, all of which constituted Senior Indebtedness
(as defined in"Description of the Debentures--Subordination Upon
Certain Events") andapproximately $182.3 million of which was
secured by the assets of the Company. The indenture relating to the
Debentures (the "Indenture") permits, subject to certain limitations
contained therein, the incurrence by the Company of a substantial amount
of additional indebtedness, including Senior Indebtedness. See
"Certain Risk Factors--Holding Company Structure and Subordination Upon
Certain Events," "--Ability of the Company to Incur Additional Indebtedness"
and "Description of the Debentures."
The ability of Holdings to pay interest in cash on the Debentures on and
after December 15, 1996 may depend upon the ability of Silgan to pay dividends,
or otherwise loan, advance or transfer funds, to Holdings. See "Certain Risk
Factors--Ability of Silgan to Provide Financial Support to Holdings." Although
Morgan Stanley & Co. Incorporated ("Morgan Stanley") currently makes a market in
the Debentures, it is not obligated to do so and may discontinue or suspend its
market-making activities at any time. In addition, the liquidity of and trading
market for the Debentures may be adversely affected by declines and volatility
in the market for high yield securities generally as well as by any changes in
the Company's financial performance and prospects. See "Certain Risk
Factors--Trading Market for the Debentures."
SEE "CERTAIN RISK FACTORS" FOR INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is to be used by Morgan Stanley & Co.
Incorporated in connection with offers and sales in
market-making transactions at negotiated prices relating to
prevailing market prices at the time of sale. Morgan Stanley & Co.
Incorporated may act as principal or agent in such transactions.
May 24, 1995
<PAGE>
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by Holdings or Morgan Stanley.
This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy by any person in any jurisdiction in which it is unlawful
for such person to make such an offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder shall imply under any
circumstances that the information contained herein is correct as of
any date subsequent to the date hereof.
TABLE OF CONTENTS
Page
Additional Information........................................... 3
Prospectus Summary............................................... 4
Certain Risk Factors............................................. 11
The Company...................................................... 17
Capitalization................................................... 19
Selected Financial Data.......................................... 20
Management's Discussion and Analysis of
Financial Condition and Results
of Operations................................................... 24
Business......................................................... 33
Management....................................................... 46
Securities Ownership of Certain Beneficial
Owners and Management.......................................... 56
Certain Transactions............................................ 57
Description of the Debentures................................... 59
Description of Holdings Common Stock............................ 88
Description of Certain Silgan Indebtedness...................... 93
Certain Federal Income Tax Considerations....................... 99
Market-Making Activities of Morgan Stanley.................... 105
Legal Matters.................................................. 105
Experts........................................................ 106
Index to Consolidated Financial Statements..................... F-1
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<PAGE>
ADDITIONAL INFORMATION
Holdings has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (which term shall encompass
any amendment thereto) relating to the Debentures under the Securities Act of
1933, as amended (the "Securities Act"). For purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all subsequent amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto which reference is made hereby. Each reference made in this
Prospectus to a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. Any interested party may inspect the Registration Statement,
without charge, at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, DC 20549, and may obtain copies of all or any portion
of the Registration Statement from the Commission upon payment of the prescribed
fee. In addition, copies of any and all documents incorporated by reference in
this Prospectus (not including exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents) may be obtained,
without charge, from Holdings by requesting such copies by mail or telephone
from Harold J. Rodriguez, Jr., Silgan Holdings Inc., 4 Landmark Square,
Stamford, CT 06901, telephone number (203) 975-7110.
Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement and the exhibits and schedules thereto, as well as all
such reports and other information filed by Holdings with the Commission, can be
inspected and copied at prescribed rates at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, DC 20549, and at the following
Regional Offices of the Commission: New York Regional Office, 75 Park Place, New
York, New York 10007 and Chicago Regional Office, Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Indenture requires Holdings to file with the Commission annual reports
containing consolidated financial statements and the related report of
independent auditors and quarterly reports containing unaudited consolidated
financial statements for the first three quarters of each fiscal year for so
long as any Debentures are outstanding.
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<PAGE>
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto that appear elsewhere in
this Prospectus. Prospective investors should carefully consider the factors set
forth under the caption "Certain Risk Factors."
THE COMPANY
The Company is a major manufacturer of a broad range of steel and aluminum
containers for human and pet food . The Company also manufactures custom
designed plastic containers for health, personal care, food, beverage,
pharmaceutical and household chemical products in North America. In 1994, the
Company had net sales of $861.4 million.
Management believes that the Company is the sixth largest can producer and
one of the largest food can producers in North America, as well as one of the
largest producers in North America of custom designed plastic containers for
health and personal care products. Silgan has grown rapidly since its inception
in 1987 primarily as a result of acquisitions, but also through internally
generated growth. In December 1993, Silgan's wholly owned subsidiary, Silgan
Containers Corporation ("Containers"), acquired the U.S. metal container
business ("DM Can") of Del Monte Corporation ("Del Monte") . See
"Business--Company History ."
The Company's strategy is to continue to increase its share of the North
American packaging market through acquisitions, as well as investment in
internally generated opportunities. The Company intends to focus particular
attention on those rigid metal and plastic container segments where operating
and market synergies are likely.
Metal Container Business
Management estimates that Containers is currently the sixth largest can
producer and one of the largest manufacturers of metal food containers in North
America. In 1994 Containers sold approximately 21% of all metal food containers
used in North America. Although the food can industry in North America is
relatively mature in terms of unit sales growth, Containers 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") pursuant to
which Containers supplies substantially all of its metal container requirements,
and an agreement (the "DM Supply Agreement) with Del Monte pursuant to which
Containers supplies substantially all of its metal container requirements. In
addition to Nestle and Del Monte, Containers has multi-year supply arrangements
with other customers. The Company estimates that in excess of 80%of Containers'
sales in 1995 will be pursuant to such supply arrangements. See "Business--Sales
and Marketing."
Containers has focused on growth through acquisition followed by investment
in the acquired assets to achieve a low cost position in the food can segment.
Since its acquisition in 1987 of the metal container manufacturing division of
Nestle ("Nestle Can"), Containers has invested approximately $99 million in its
acquired manufacturing facilities and has spent approximately $67 million for
the acquisition of additional can manufacturing assets. As a result of these
efforts and management's focus on quality and service, Containers has more than
doubled its overall share of the food can segment in terms of unit sales, from a
share of approximately 10% in 1987 to a share of approximately 21% in 1994.
-4-
<PAGE>
Plastic Container Business
Management believes that Silgan's wholly owned subsidiary, Silgan Plastics
Corporation ("Plastics"), is one of the leading manufacturers of custom
designed, high density polyethylene ("HDPE") and polyethylene terephthalate
("PET") containers sold in North America for health and personal care products.
HDPE containers manufactured by Plastics include personal care containers for
shampoos, conditioners, hand creams, lotions and cosmetics, household chemical
containers for scouring cleaners, specialty cleaning agents and lawn and garden
chemicals and pharmaceutical containers for tablets, laxatives and eye cleaning
solutions. Plastics manufactures PET custom medicinal and health care product
containers (such as mouthwash and cough syrup bottles), custom food product
containers (such as salad dressing and instant coffee bottles), and custom
non-carbonated soft drink beverage product containers (such as juice bottles) as
well as water and liquor bottles. See "Business--Products."
Plastics has grown primarily by strategic acquisition. From a sales base of
$89 million in 1987, Plastics' sales have grown at a compound annual rate of 13%
to $204 million in 1994. Plastics emphasizes value-added design, fabrication and
decoration of custom containers. Plastics is aggressively pursuing opportunities
in custom designed PET and HDPE containers for which the market has been growing
principally due to consumer preferences for plastic containers . The Company
believes it has equipment and technical expertise to take advantage of these
growth segments.
-5-
<PAGE>
THE DEBENTURES
Original Issue.......................... $275,000,000
principal amount
($165,434,500 proceeds
amount) of 13-1/4% Senior
Discount Debentures due
2002, originally issued on
June 29, 1992.
Maturity ............................... December 15, 2002.
Interest ............................... The Debentures were offered
at a substantial discount
from their principal amount,
and there will not be any
payment of interest on the
Debentures prior to December
15, 1996. For a discussion of the
federal income tax treatment of
the Debentures under the original
issue discount rules, see
"Certain Federal Income Tax
Considerations." From and after
June 15, 1996, the Debentures bear
interest, which is payable in
cash, at a rate of 13-1/4%
per annum.
Interest Payment
Dates .................................. June 15 and December 15,
commencing December 15, 1996.
Optional Redemption..................... The Debentures may be redeemed
at any time, at the option of
Holdings, in whole or in
part, at 100% of their
principal amount plus
accrued interest (if any)
to the redemption date.
Change of Control....................... In the event of a Change of Control
(as defined under "Description
of the Debentures--Certain
Definitions"), each holder
of Debentures may require
Holdings to repurchase such
Debentures at 101% of the
Accreted Value (as defined under
"Description of the
Debentures--Certain Definitions")
thereof plus accrued interest (if
any).
Ranking................................ The Debentures are senior
indebtedness of Holdings,
ranking pari passu with
Holdings' obligations under all
other senior indebtedness and
senior in right of payment to all
existing and future subordinated
indebtedness of
Holdings. However, since all
of the operations of Holdings
are conducted through its
subsidiaries, all existing
and future liabilities of its
subsidiaries are effectively
senior in right of payment to the
Debentures. As of March 31,
1995, Silgan and its
subsidiaries had approximately
$460.9 million of indebtedness
and other liabilities effectively
senior to the Debentures.
Ranking in the
Event of a Holdings
Merger.................................. In the event of a Holdings Merger
(as defined under "Description of
the Debentures--Certain
Definitions") or similar transaction
between Holdings and Silgan,
or upon the assumption by Silgan
of the Debentures, the Debentures
will be subordinated in right
of payment to all Senior
Indebtedness of the Successor
Corporation (as defined
under "Description of the
Debentures--Subordination Upon
Certain Events") existing on the
date of such transaction or assumed
or incurred thereafter. If a
Holdings Merger or similar
transaction between
Holdings and Silgan had
occurred on March 31, 1995
or if
-6-
<PAGE>
Silgan had assumed
the Debentures at such
date, there would have been
$317.3 million of
indebtedness that would
have constituted Senior
Indebtedness and approximately
$460.9 million of indebtedness and
other liabilities effectively
senior to the Debentures.
See "Certain Risk Factors--Holding
Company Structure and
Subordination Upon Certain
Events" and "Description of
the Debentures--Subordination
Upon Certain Events."
Covenants............................... The Indenture contains certain
covenants that, among other things,
direct the application of proceeds
from certain asset sales and limit
the ability of Holdings and its
subsidiaries to incur indebtedness,
pay dividends or make other
distributions on its capital stock or
purchase, redeem or retire shares
of capital stock of Holdings or any
of its subsidiaries, make prepayments
of certain indebtedness, and
make loans or investments in
entities other than Restricted
Subsidiaries (as defined under
"Description of the
Debentures--Certain Definitions"),
enter into transactions with
affiliates, engage in mergers or
consolidations, and, with respect to
Holdings' Restricted Subsidiaries,
issue stock. See "Description of
the Debentures--Covenants."
CERTAIN RISK FACTORS
For a discussion of certain factors that should be considered in
evaluating an investment in the Debentures, see "Certain Risk Factors."
-7-
<PAGE>
SUMMARY FINANCIAL DATA
The following summary historical consolidated financial data of Holdings
were derived from, and should be read in conjunction with, the historical
financial statements of Holdings that appear elsewhere in this Prospectus. The
following summary historical consolidated financial data of Silgan were derived
from, and should be read in conjunction with, the historical financial
statements of Silgan.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1995<F1> 1994
-------- ----
(Dollars in thousands)
(Unaudited)
<S> <C> <C>
Operating Data:
Net sales................ $203,264 $186,243
Cost of goods sold....... 174,265 163,520
-------- --------
Gross profit............. 28,999 22,723
Selling, general and administrative
expenses............... 10,168 8,745
-------- ---------
Income from operations... 18,831 13,978
Interest expense and other
related financing
costs.................. 17,251 15,647
-------- ---------
Income (loss) before income
taxes....................... 1,580 (1,669)
Income tax provision....... 3,000 575
------- --------
Net loss................... $ (1,420) $ (2,244)
======= ========
Ratio of earnings to fixed
charges <F2> 1.09 --
Deficiency of earnings available
to cover fixed charges <F2>.. -- $ 1,669
Balance Sheet Data (at end of period):
Fixed assets............... $251,832 $285,738
Total assets............... 534,489 533,105
Total long-term debt....... 518,280 512,328
Common stockholders' deficiency.. (159,418) (147,211)
Other Data:
EBDITA<F3>........................ $ 28,033 $ 23,941
EBDITA as a percentage of net sales. 13.8% 12.9%
Capital expenditures............... 8,359 4,896
Depreciation and amortization<F4> . 8,779 9,836
(footnotes follow)
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY FINANCIAL DATA
Year Ended December 31,
-------------------------------------------------------------------------------------
1994<F1><F5> 1993<F5> 1992 1991<F6> 1990
---------- ------- ----- ------- -------
(Dollars in Thousands)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net sales................................. $861,374 $645,468 $630,039 $678,211 $657,537
Cost of goods sold........................ 747,457 571,174 554,972 605,185 582,991
------- ------- -------- ------- -------
Gross profit.............................. 113,917 74,294 75,067 73,026 74,546
Selling , general and administrative
expenses.................................. 38,830 32,495 32,809 33,733 36,962
Reduction in carrying value of assets..... 16,729 -- -- -- --
------ -------- -------- -------- ------
Income from operations.................... 58,358 41,799 42,258 39,293 37,584
Interest expense and other related
financing costs........................... 65,789 54,265 57,091 55,996 55,115
Minority interest expense................. -- -- 2,745 3,889 3,356
------- -------- ------ ------ -------
Loss before income taxes.................. (7,431) (12,466) (17,578) (20,592) (20,887)
Income tax provision (benefit)............ 5,600 1,900 2,200 -- (2,495)
------ ------- -------- ---------- ---------
Loss before extraordinary
charges and cumulative effect of
changes in accounting principles.......... (13,031) (14,366) (19,778) (20,592) (18,392)
Extraordinary charges relating to
early extinguishment of debt........ -- (1,341) (23,597) -- --
Cumulative effect of changes in
accounting principles<F7>....... -- (6,276) -- -- --
--------- -------- -------- -------- -------
Net loss........................ $(13,031) $(21,983) $(43,375) $(20,592) $(18,392)
======= ======= ======= ======= =======
Deficiency of earnings available
to cover fixed charges and preferred
stock dividends<F2>.................. $ 7,431 $ 12,466 $17,578 $ 20,592 $ 20,887
Balance Sheet Data (at end of period):
Fixed assets......................... $251,810 $ 290,395 $223,879 $230,501 $244,672
Total assets............................ 504,821 497,633 389,035 390,693 443,889
Total long-term debt.................... 510,763 505,718 383,232 315,461 337,821
Redeemable preferred stock of Silgan
(minority interest of Holdings).... -- -- -- 27,878 24,061
Deficiency in stockholders' equity<F8> (157,998) (144,967) (137,984) (94,609) (74,017)
Other Data:
EBDITA<F3>............................... $114,489 $76,095 $74,012 $72,141 $69,053
EBDITA as a percentage of net sales....... 13.3% 11.8% 11.7% 10.6% 10.5%
Capital expenditures...................... $29,184 $42,480 $23,447 $21,834 $22,908
Depreciation and amortization <F4>........ $37,187 $33,818 $31,754 $32,848 $29,496
Number of employees (at end of period)<F9> 4,000 3,330 3,340 3,560 4,330
(footnotes follow)
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<PAGE>
Notes to Summary Financial Data
<FN>
<F1>Effective October 1, 1994, the Company extended the estimated useful lives
of certain fixed assets to more properly reflect the true economic lives of
the assets and to better align the Company's depreciable lives with the
predominate practice in its industry. For the three months ended March 31,
1995, the change had the effect of decreasing depreciation expense by $1.5
million and increasing net income by $1.3 million. For 1994, the change had
the effect of decreasing depreciation expense and increasing net income by
$1.3 million.
<F2>For purposes of computing the ratio of earnings to fixed charges and the
deficiency of earnings available to cover fixed charges , earnings consist
of income (loss) before income taxes plus fixed charges, excluding
capitalized interest, and fixed charges consist of interest, whether
expensed or capitalized, minority interest expense, amortization of debt
expense and discount or premium relating to any indebtedness, whether
expensed or capitalized, and such portion of rental expense that is
representative of the interest factor.
<F3>"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 (including minority interest
expense), (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, (v) expenses relating to postretirement health care
costs which amounted to $0.2 million and $0.1 million for the three months
ended March 31, 1995 and 1994, respectively, and $0.7 million and $0.5
million for the years ended December 31, 1994 and 1993, respectively, (vi)
charges relating to the vesting of benefits under stock appreciation rights
("SARs") of $0.2 million and $0.1 million for the three months ended March
31, 1995 and 1994, respectively , and $1.5 million and $2.0 million in 1994
and 1990, respectively, and (vii) the reduction in carrying value of assets
of $16.7 million in 1994. EBDITA is being presented by the Company as a
supplement to the discussion of the Company's operating income and cash flow
from operations analysis because the Company believes that certain persons
may find it to be useful in measuring the Company's performance and ability
to service its debt. EBDITA is not a substitute for generally accepted
accounting principles ("GAAP") operating and cash flow data.
<F4>Depreciation and amortization excludes amortization of debt financing costs.
<F5>On December 21, 1993, the Company acquired from Del Monte substantially all
of the fixed assets and certain working capital of its container
manufacturing business. The acquisition was accounted for as a purchase
transaction and the results of operations have been included with the
Company's historical results from the acquisition date. See
"Business--Company History." See Note 3 to the Notes to Holdings'
Consolidated Financial Statements included elsewhere in this Prospectus.
<F6>On November 15, 1991, the Company sold its nonstrategic PET carbonated
beverage bottle business (the "PET Beverage Sale"). For 1991, sales
from the PET carbonated beverage business were $33.4 million. See
"Business--Company History."
<PAGE>
<F7>During 1993, the Company adopted Statement of Financial Accounting
Standards ("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 did not elect to restate
prior years' financial statements for any of these pronouncements.
<F8>Effective June 30, 1994, the put option for Holdings Class A common stock,
par value $.01 per share (the "Holdings Class A Stock"), expired. The fair
market value that had been assigned to the liability associated with such
put option has been reclassified as stockholders' equity for each period
presented. See Note 9 to Holdings' Consolidated Financial Statements
included elsewhere in this Prospectus.
<F9>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.
[/FN]
</TABLE>
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<PAGE>
CERTAIN RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Debentures.
Holding Company Structure and Subordination Upon Certain Events
Holdings is a holding company with no significant assets other than its
investment in and advances to Silgan. The operations of Holdings are conducted
principally through Silgan's operating subsidiaries, Containers and Plastics,
each of which is a wholly owned subsidiary of Silgan. Therefore, Holdings'
ability to pay interest on the Debentures in 1996 when interest thereon becomes
due and payable and to pay the principal of the Debentures at maturity is
largely dependent upon the future performance and the cash flow of such
operating subsidiaries, which will be subject to prevailing economic conditions
and to financial, business and other factors (including the state of the economy
and the financial markets, demand for the products of the Company, costs of raw
materials, legislative and regulatory changes and other factors beyond the
control of such operating subsidiaries) affecting the business and operations of
such operating subsidiaries. Because Silgan and its subsidiaries do not
guarantee the payment of principal of and interest on the Debentures, claims of
holders of the Debentures effectively will be subordinated to the claims of
creditors of Silgan and its subsidiaries, including claims of the lenders (the
"Banks") named in the credit agreement dated as of December 21, 1993 among
Silgan and certain of its subsidiaries, the Banks, Bank of America National
Trust and Savings Association ("Bank of America"), as Co-Agent, and Bankers
Trust Company ("Bankers Trust"), as Agent (the "Silgan Credit Agreement"), and
holders of Silgan's Senior Secured Floating Rate Notes due 1997 (the "Secured
Notes"), which are guaranteed directly by all of the operating subsidiaries of
Silgan, holders of Silgan's 11-3/4% Senior Subordinated Notes due 2002 (the
"11-3/4% Notes") and claims of trade creditors, except to the extent that
Holdings may be a creditor with recognized claims against Silgan or such
subsidiaries. As a result, in the event of Silgan's insolvency, liquidation,
reorganization, dissolution or other winding up, or upon acceleration of
certain of Silgan's indebtedness, holders of Silgan's indebtedness
(including the Banks and the holders of the Secured Notes and the
11-3/4% Notes) must be paid in full before holders of the Debentures
may be paid. Although the Silgan Credit Agreement, the Secured Notes,
the 11-3/4% Notes and the Debentures impose certain limitations
on Silgan's and its subsidiaries' ability to incur additional
indebtedness, the Indenture does not prohibit Silgan and its
subsidiaries from incurring additional indebtedness. See "Description of
Debentures--Covenants." At March 31, 1995, Silgan and its subsidiaries had
$460.9 million of indebtedness and other liabilities that were effectively
senior to the Debentures.
In the event of a Holdings Merger or any similar transaction between
Holdings and Silgan or the assumption by Silgan of the Debentures, the
Debentures will be subordinated in right of payment to all existing and future
Senior Indebtedness of the Successor Corporation, including indebtedness under
the Silgan Credit Agreement, the Secured Notes and the 11-3/4% Notes. Other than
as set forth in the previous sentence, the Debentures will be senior
indebtedness of Holdings ranking pari passu with other senior indebtedness of
Holdings and senior in right of payment to all existing and future subordinated
indebtedness of Holdings. Because of such subordination, in the event of the
Successor Corporation's bankruptcy, insolvency, liquidation, reorganization,
dissolution or other winding up, or upon acceleration of certain indebtedness of
the Successor Corporation, holders of Senior Indebtedness must be paid in full
before holders of the Debentures may be paid. Although other instruments and
agreements governing the indebtedness of the Successor Corporation, including
indebtedness under the Silgan Credit Agreement, the Secured Notes and the
11-3/4% Notes, may impose certain limitations on the Successor Corporation's
ability to incur additional indebtedness (including Senior Indebtedness), the
Indenture does not prohibit the Successor Corporation from incurring additional
indebtedness (including Senior Indebtedness). As of March 31, 1995, Holdings had
total consolidated liabilities of approximately $693.9 million, including
Silgan's outstanding aggregate liabilities of approximately $317.3 million that
constituted Senior Indebtedness and indebtedness and other liabilities of
approximately $460.9
-11-
<PAGE>
million that were effectively senior to the Debentures in the event of a
Holdings Merger or any similar transaction between Holdings and Silgan or the
assumption by Silgan of the Debentures. A Holdings Merger or any similar
transaction between Holdings and Silgan or the assumption by Silgan of the
Debentures is generally prohibited by the Silgan Credit Agreement. Holdings has
no present intention of merging or entering into a similar transaction with
Silgan.
Ability of Silgan to Provide Financial Support to Holdings
Since Holdings' only asset is its investment in Silgan, its ability to
pay interest on the Debentures on and after December 15, 1996 (the date on which
interest is first payable on the Debentures) may depend upon its receipt of
funds paid by dividend or otherwise loaned, advanced or transferred by Silgan to
Holdings. While Silgan has no legal obligation to make such funds available, it
is expected that Silgan will do so if it is permitted under the agreements to
which it shall then be a party and if it then has sufficient funds available for
such purpose. If sufficient funds to pay such interest are not generated by the
operations of Silgan and its subsidiaries, Holdings or Silgan may seek to borrow
or otherwise finance the amount of such payments or refinance the Debentures.
Neither the Secured Notes nor the 11-3/4% Notes limits the ability of
Silgan to pay cash dividends to Holdings in order to enable Holdings to pay
interest on the Debentures. The Silgan Credit Agreement presently prohibits
Silgan from paying dividends or otherwise transferring funds to Holdings in
order to service Holdings' indebtedness; however, the Silgan Credit Agreement
matures on September 15, 1996, prior to the date on which interest or principal
is payable on the Debentures. Silgan expects to enter into a new credit facility
to replace the Silgan Credit Agreement on or before September 15, 1996 on terms
which would not limit the ability of Silgan to transfer funds to Holdings in
order to enable Holdings to pay interest on the Debentures. However, there can
be no assurance that Silgan will be able to enter into a new credit facility on
such terms. In such event, Silgan and Holdings would consider pursuing
alternative arrangements, including possible equity and/or debt financings, to
enable Holdings to meet its obligations. There can be no assurance that any such
alternative, if pursued, would be accomplished or would enable Holdings to make
timely payments of its obligations under the Debentures. The funding
requirements of Holdings to service its indebtedness (beginning in December
1996) will be met by Silgan through cash generated by operations or borrowings
or by Holdings through refinancings of its existing indebtedness or additional
debt or equity financings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources and Liquidity"
and "Description of Certain Silgan Indebtedness--Description of the Secured
Notes" and "--Description of the 11-3/4% Notes."
High Leverage; Stockholders' Deficiency
The Company is highly leveraged primarily as a result of the financing of
the acquisitions of its metal and plastic container businesses and as a result
of the sale by Holdings in 1989 of its Senior Reset Debentures due 2004 (the
"Holdings Reset Debentures") in connection with the 1989 Mergers (as defined in
"Business--Company History") and the refinancing of the Holdings Reset
Debentures and incurrence of additional indebtedness pursuant to the Debentures
in connection with the Refinancing. See "Business--Company History." In
addition, the accretion of original issue discount on the Debentures will cause
an increase in indebtedness of $109.6 million by June 15, 1996. Holdings has
also guaranteed the obligations and liabilities of Silgan and its subsidiaries
under the Silgan Credit Agreement. See "Description of Certain Silgan
Indebtedness--Description of the Silgan Credit Agreement." Also, Holdings has a
common stockholders' deficiency. As of March 31, 1995, Holdings' stockholders'
deficiency was $159.4 million. See "Capitalization." Additionally, Holdings'
ratio of earnings to fixed charges for the three months ended March 31, 1995 was
1.09. For the year ended December 31, 1994, Holdings' earnings before fixed
charges were less
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<PAGE>
than its fixed charges by $7.4 million. Holdings' high level of indebtedness and
common stockholders' deficiency pose substantial risks to purchasers of the
Debentures.
Restrictive Covenants under Financing Agreements
In connection with the incurrence of their indebtedness, Silgan and
Holdings have entered into instruments and agreements governing such
indebtedness (the "Financing Agreements"), which Financing Agreements contain
numerous covenants, including financial and operating covenants, certain of
which are quite restrictive. In particular, certain financial covenants become
more restrictive over time in anticipation of scheduled debt amortization and
improved operating results. Such covenants also affect, and in many respects
significantly limit or prohibit, among other things, the ability of the Company
to incur additional indebtedness, create liens, sell assets, engage in mergers
and acquisitions, make certain capital expenditures and pay dividends. For a
description of such covenants, see "Description of Certain Silgan Indebtedness"
and "Description of the Debentures."
The ability of the Company to satisfy such covenants and its other
obligations (including scheduled reductions of its indebtedness under the Silgan
Credit Agreement and its obligations under the Secured Notes, the 11-3/4% Notes
and the Debentures) depends upon, among other things, the future financial
performance of Silgan 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, costs of raw materials, legislative and regulatory changes and other
factors beyond the control of the Company) affecting the business and operations
of Silgan and its subsidiaries.
The factors described above could adversely affect the Company's
ability to meet its financial obligations, including its obligations to holders
of the Debentures. These factors could also limit the ability of the Company to
take advantage of business and technological opportunities and to effect
financings and could otherwise restrict corporate activities.
Management believes that the Company will be able to comply with the
financial covenants and other restrictions in the Financing Agreements and that
it will have sufficient cash flow available from operations to meet its
obligations; however, there can be no assurance of such compliance or of the
availability of sufficient cash flow. If the Company anticipates that it will be
unable to comply with covenants in any Financing Agreement or that its cash flow
will be insufficient to meet its debt service, dividend and other operating
needs, the Company might be required to seek amendments or waivers to its
Financing Agreements, refinance its debts or dispose of assets. There can be no
assurance that any such action could be effected on satisfactory terms or would
be permitted under the terms of the Financing Agreements. In the event of a
default under the terms of any of the Financing Agreements, the obligees
thereunder would be permitted to accelerate the maturity of such obligations and
cause defaults under other obligations of the Company. Such defaults could be
expected to delay or preclude payment of principal of and/or interest on the
Debentures.
Secured Indebtedness
As of March 31, 1995, the Company had outstanding approximately $182.3
million of indebtedness that is secured by assets of Silgan and its
subsidiaries, including indebtedness under the Silgan Credit Agreement and the
Secured Notes. The Indenture permits the Company to incur certain additional
secured indebtedness. See "Description of the Debentures." Holders of secured
indebtedness of the Company, including the indebtedness under the Silgan Credit
Agreement and the Secured Notes, have claims with respect to the assets of the
Company constituting collateral that are prior to the claims of holders of the
Debentures. In the event of a default on the Debentures or a bankruptcy,
insolvency, liquidation, reorganization, dissolution or other winding up of the
Company, or upon the acceleration of any Senior Indebtedness, such assets would
be
-13-
<PAGE>
available to satisfy obligations with respect to the indebtedness secured
thereby before any payment therefrom could be made on the Debentures. See
"Description of Certain Silgan Indebtedness."
The indebtedness under the Silgan Credit Agreement and the Secured
Notes is secured by a pledge of assets of Silgan and by pledges of the shares of
stock of Silgan's subsidiaries. The indebtedness under the Silgan Credit
Agreement is also guaranteed by Holdings which guarantee is secured by a pledge
of the shares of stock of Silgan. In addition, Silgan's indebtedness under the
Silgan Credit Agreement and the Secured Notes is guaranteed by substantially all
of Silgan's subsidiaries and the obligations of each such subsidiary are secured
by substantially all the assets of each such subsidiary. The Debentures are
effectively subordinated to such pledges and guarantees as well as all other
indebtedness and liabilities of Silgan and its subsidiaries.
Certain Federal Income Tax Consequences
For federal income tax purposes, a holder of a Debenture is required to
include in income as interest original issue discount ("OID") as such OID
accrues, although no cash payments of interest will be made on the Debentures
prior to December 15, 1996. See "Certain Federal Income Tax Considerations."
However, because of their yield, the Debentures are subject to the high yield
discount obligation rules of the Internal Revenue Code, and thus Holdings is not
able to deduct interest, including OID, accruing on the Debentures until such
interest and OID is paid in cash or property (other than stock or debt of
Holdings or a related party). See "Certain Federal Income Tax Considerations."
As a result, a portion of the tax deductions that would otherwise be available
to Holdings in respect of the Debentures is deferred (until their maturity or
sooner upon early repayment in cash or qualified property) which, in turn, might
reduce the after-tax cash flows of Holdings and its subsidiaries. Holdings
expects to utilize the net operating loss carryforwards available to the Company
to offset (but not eliminate) the effect of such deferral. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity."
Ability of the Company to Incur Additional Indebtedness
Although the Silgan Credit Agreement (which matures on September 15,
1996) limits the incurrence by the Company of additional indebtedness and
prohibits any transaction pursuant to which Silgan becomes the direct obligor on
the Debentures, the 11-3/4% Notes, the Secured Notes and the Indenture permit,
subject to certain limitations, the incurrence by Holdings and its subsidiaries
of a substantial amount of additional indebtedness, including additional Senior
Indebtedness, indebtedness secured by liens on the Company's assets and other
indebtedness that is effectively senior to or pari passu with the Debentures.
For example, the Indenture permits Silgan and its subsidiaries to incur
indebtedness, which would be effectively senior to the Debentures, including
secured indebtedness, if after giving effect to the incurrence of such
indebtedness, Silgan's Interest Coverage Ratio (as defined under "Description of
the Debentures--Certain Definitions") is at least 2.1 to 1. For the twelve month
period ended December 31, 1994, Silgan's Interest Coverage Ratio was 3.66 to 1.
The Indenture also permits Holdings to incur any indebtedness, including Senior
Indebtedness, if, after giving effect to the incurrence of such indebtedness,
Holdings' Interest Coverage Ratio is at least 1.75 to 1. For the twelve month
period ended December 31, 1994, Holdings' Interest Coverage Ratio was 1.89 to 1.
The Indenture also permits certain specified additional indebtedness to be
incurred by Holdings including up to an additional $50 million of any type of
indebtedness. See "Description of Certain Silgan Indebtedness" and "Description
of the Debentures."
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<PAGE>
Risk of Fraudulent Transfer Liability; Certain State Law Considerations
The incurrence by Holdings and its subsidiaries of indebtedness,
including the Debentures, and Silgan's ability to make distributions to Holdings
may be limited by state and federal fraudulent transfer laws. If a court in a
lawsuit by an unpaid creditor or representative of creditors of Holdings, such
as a trustee in bankruptcy or Holdings as debtor-in-possession, were to find
that (i) there was actual intent to hinder, delay or defraud creditors or (ii)
Holdings received less than reasonably equivalent value for the indebtedness and
that, at the time of or after and giving effect to such incurrence, Holdings (a)
was insolvent, (b) was rendered insolvent by reason of such incurrence, (c) was
engaged in a business or transaction for which the assets remaining constituted
unreasonably small capital or (d) intended to incur, or believed that it would
incur, debts beyond its ability to pay as such debts matured, such court could
void such indebtedness and order that the payments of interest and principal on
such indebtedness be returned to Holdings or to a fund for the benefit of its
creditors.
The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction that is being applied. Generally, an
entity would be considered insolvent if the sum of its debts is greater than all
of its property at a fair valuation, or if the present fair saleable value of
its assets is less than the amount that will be required to pay its probable
liability on its existing debts (including contingent liabilities) as they
become absolute and matured. Holdings believes that the obligations under the
Debentures were incurred for proper purposes and in good faith and, based on
Holdings' prospects and other financial information, Holdings believes that at
the time of the incurrence of such obligations, Holdings was solvent, would
continue to have sufficient capital to carry on its business and would continue
to be able to pay its debts as they matured. Furthermore, Holdings believes that
the proceeds of the Debentures constitute reasonably equivalent value or fair
consideration therefor. There can be no assurance, however, that a court would
not determine that Holdings was insolvent at the time and after giving effect to
the incurrence of the obligations under the Debentures. Nor can there be any
assurance that, regardless of whether Holdings was solvent, the incurrence of
the obligations under the Debentures would not constitute a fraudulent transfer
on another of the criteria listed above.
Supply Agreements with Principal Customers
The Nestle Supply Agreements and the DM Supply Agreement provide
Containers with a potential market for a substantial portion of its can output
during the terms of these agreements. In 1994, approximately 26% of the
Company's sales were to Nestle and approximately 21% of the Company's sales were
to Del Monte. See "Business--Sales and Marketing."
Pursuant to the Nestle Supply Agreements, if Nestle receives a
competitive bid for any product supplied thereunder , 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. 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
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<PAGE>
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. Under the three Nestle Supply Agreements that
were recently extended through 2001, Nestle's right to receive competitive bids
is narrowly limited to certain circumstances. See "Business--Sales and
Marketing."
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 its meeting the terms and conditions of
such competitive proposal. See "Business--Sales and Marketing."
Neither the Nestle Supply Agreements nor the DM Supply Agreement
requires the purchase of minimum amounts, and should Nestle's or Del Monte's
demand decrease, the Company's consolidated sales could decrease. In addition,
should Nestle terminate any of the Nestle Supply Agreements or Del Monte
terminate the DM Supply Agreement because of Containers' inability to meet
quality or other requirements, it is highly unlikely that the Company or its
subsidiaries could quickly replace the amount of sales represented thereby.
Therefore, it is probable that any such termination would have a material
adverse effect on the Company. See "Business--Sales and Marketing."
Competition
The manufacture and sale of metal and plastic containers is highly
competitive and many of the Company's competitors have substantially
greater financial resources than the Company. See "Business--Competition."
Dependence on Key Personnel
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services provided
by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer of
Holdings and Silgan, and D. Greg Horrigan, the President and Co-Chief Executive
Officer of Holdings and Silgan, could materially adversely affect the Company.
However, the Company's operations are conducted through Containers and Plastics,
each of which has its own independent management. S&H, Inc. ("S&H"), a company
wholly owned by Messrs. Silver and Horrigan, has agreed to provide certain
general management and administrative services to each of Holdings, Silgan,
Containers and Plastics pursuant to management services agreements which are
effective through 1999. See "Certain Transactions--Management Agreements" and
"Description of Holdings Common Stock--Description of the Holdings Organization
Agreement."
Other Management Interests
In the future, Messrs. Silver and Horrigan, possibly together with
Morgan Stanley or its affiliates, may form additional corporations or
partnerships or enter into other transactions for the purpose of making other
acquisitions. In connection therewith, Messrs. Silver and Horrigan may provide
certain general management and administrative services to such corporations and
partnerships. Additionally, circumstances could arise in which the interests of
Messrs. Silver and Horrigan, Morgan Stanley and its affiliates and such new
corporations or partnerships could conflict with the interests of the Company.
Certain Interests of Affiliates
The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") owns 38.48%
of the outstanding voting common stock of Holdings. See "Securities Ownership of
Certain Beneficial Owners and Management--Certain Beneficial Owners of Holdings'
Capital Stock." The general partner of MSLEF II and Morgan Stanley are both
wholly owned subsidiaries of Morgan Stanley Group Inc. ("MS Group"), and two of
the directors of
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<PAGE>
Holdings and Silgan are officers of Morgan Stanley. As a result of these
relationships, MS Group and its affiliates will continue to have significant
influence over the management policies and corporate affairs of the Company.
Morgan Stanley also receives compensation for ongoing financial advice to the
Company and its affiliates. See "Certain Transactions" and "Market-Making
Activities of Morgan Stanley."
Certain decisions concerning the operations or financial structure of
the Company may present conflicts of interest between the owners of Holdings'
common stock and the holders of the Debentures. For example, if the Company
encounters financial difficulties, or is unable to pay its debts as they mature,
the interests of the Holdings' equity investors might conflict with those of the
holders of the Debentures. In addition, the equity investors may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might involve risks to the holders of the
Debentures.
Trading Market for the Debentures
Morgan Stanley currently makes a market in the Debentures.
However, it is not obligated to do so, and any such market-making
may be discontinued at any time without notice, at its sole discretion.
Therefore, no assurance can be given as to the liquidity of, or the
trading market for, the Debentures. See "Market-Making Activities of
Morgan Stanley."
The liquidity of, and trading market for, the Debentures may also be
adversely affected by declines and volatility in the market for high yield
securities generally as well as by any changes in the Company's financial
performance or prospects.
THE COMPANY
The Company is a major manufacturer of a broad range of steel and
aluminum containers for human and pet food . The Company also manufactures
custom designed plastic containers for health, personal care, food, beverage,
pharmaceutical and household chemical products in North America. In 1994, the
Company had net sales of $861.4 million.
Management believes that the Company is the sixth largest can producer and
one of the largest food can producers in North America, as well as one of the
largest producers in North America of custom designed plastic containers for
health and personal care products. Silgan has grown rapidly since its inception
in 1987 primarily as a result of acquisitions, but also through internally
generated growth. In December 1993, Silgan's wholly owned subsidiary,
Containers, acquired the U.S. metal container business of Del Monte. See
"Business--Company History ."
The Company's strategy is to continue to increase its share of the
North American packaging market through acquisitions, as well as investment in
internally generated opportunities. The Company intends to focus particular
attention on those rigid metal and plastic container segments where operating
and market synergies are likely.
The Company is also engaged in the manufacture and sales of paper
containers primarily used by processors and packagers in the food industry.
Holdings is a Delaware corporation organized in April 1989, that, in
June 1989, through certain mergers acquired all of the outstanding common stock
of Silgan. Holdings' principal asset is all of the outstanding capital stock of
Silgan. Prior to June 30, 1989, Holdings did not engage in any business. Silgan
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<PAGE>
is a Delaware corporation formed in August 1987 as a holding company to acquire
interests in various packaging manufacturers. See "Business-- Company History."
The principal executive offices of Holdings are located at 4 Landmark Square,
Stamford, Connecticut 06901, telephone number (203) 975-7110.
Metal Container Business
Management estimates that Containers is currently the sixth largest can
producer and one of the largest manufacturers of metal food containers in North
America. In 1994 Containers sold approximately 21% of all metal food containers
used in North America. Although the food can industry in North America is
relatively mature in terms of unit sales growth, Containers 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
with Nestle pursuant to which Containers supplies substantially all of its metal
container requirements , and an agreement with Del Monte pursuant to which
Containers supplies substantially all of its metal container requirements. In
addition to Nestle and Del Monte, Containers has multi-year supply arrangements
with other customers. The Company estimates that in excess of 80% of Containers'
sales in 1995 will be pursuant to such supply arrangements. See "Business--Sales
and Marketing."
Containers has focused on growth through acquisition followed by
investment in the acquired assets to achieve a low cost position in the food can
segment. Since its acquisition in 1987 of Nestle Can, Containers has invested
approximately $99 million in its acquired manufacturing facilities and has spent
approximately $67 million for the acquisition of additional can manufacturing
assets. As a result of these efforts and management's focus on quality and
service, Containers has more than doubled its overall share of the food can
segment in terms of unit sales, from a share of approximately 10% in 1987 to a
share of approximately 21% in 1994.
Plastic Container Business
Management believes that Silgan's wholly owned subsidiary, Plastics, is
one of the leading manufacturers of custom designed HDPE and PET containers sold
in North America for health and personal care products. HDPE containers
manufactured by Plastics include personal care containers for shampoos,
conditioners, hand creams, lotions and cosmetics, household chemical containers
for scouring cleaners , specialty cleaning agents and lawn and garden chemicals
and pharmaceutical containers for tablets, laxatives and eye cleaning solutions.
Plastics manufactures PET custom medicinal and health care product containers
(such as mouthwash and cough syrup bottles), custom food product containers
(such as salad dressing and instant coffee bottles), and custom non- carbonated
soft drink beverage product containers (such as juice bottles) as well as water
and liquor bottles. See "Business--Products."
Plastics has grown primarily by strategic acquisition. From a sales
base of $89 million in 1987, Plastics' sales have grown at a compound annual
rate of 13% to $204 million in 1994. Plastics emphasizes value-added design,
fabrication and decoration of custom containers. Plastics is aggressively
pursuing opportunities in custom designed PET and HDPE containers for which the
market has been growing principally due to consumer preferences for plastic
containers . The Company believes it has equipment and technical expertise to
take advantage of these growth segments
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<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated
capitalization of Holdings as of March 31, 1995. This table should be read in
conjunction with the consolidated financial information of Holdings included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1995
--------------
(Dollars in thousands)
Short-term debt:
---------------
<S> <C>
Current portion of term loans............. $ 19,514
Working capital loans..................... 15,200
------
Total short-term debt<F1>............. $ 34,714
=======
Long-term debt:
--------------
Term loans................................ $ 97,568
Senior Secured Floating Rate Notes due 1997 50,000
11-3/4% Senior Subordinated Notes due 2002 135,000
13-1/4% Senior Discount Debentures due 2002 235,712
-------
Total long-term debt<F1>.............. $518,280
=======
Deficiency in stockholders' equity:
Common stock<F2>..................... $ 12
Additional paid-in capital........... 33,606
Accumulated deficit.................. (193,036)
--------
Total deficiency in stockholders' equity $(159,418)
-------
Total capitalization........................... $ 358,862
========
----------------------
<FN>
<F1> See "Description of Certain Silgan Indebtedness" and
"Description of the Debentures."
<F2> For a description of the common stock of Holdings, see
"Description of Holdings Common Stock--General."
</FN>
</TABLE>
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SELECTED FINANCIAL DATA
Set forth below are selected historical consolidated financial data of
Holdings at March 31, 1995 and 1994 and for the three months then ended, and at
December 31, 1994, 1993, 1992, 1991 and 1990 and for the years then ended.
The selected historical consolidated financial data of Holdings for the
three months ended March 31, 1995 and 1994 is unaudited, but, in the opinion of
management, such information reflects all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial data for
the interim periods. The results for the interim periods presented are not
necessarily indicative of the results for the corresponding full years. The
selected historical consolidated financial data of Holdings at December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994
(with the exception of employee data) were derived from the historical
consolidated financial statements of Holdings for such periods that were audited
by Ernst & Young LLP, independent auditors, whose report appears elsewhere in
this Prospectus. The selected historical consolidated financial data of Holdings
at December 31, 1992, 1991 and 1990 and for the years ended December 31, 1991
and 1990 were derived from the historical audited consolidated financial
statements of Holdings for such periods.
The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited financial statements and accompanying
notes thereto included elsewhere in this Prospectus.
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Three Months Ended March 31,
----------------------------
1995<F1> 1994
-------- ----
(Dollars in thousands)
(Unaudited)
<S> <C> <C>
Operating Data:
Net sales.......................................... $203,264 $186,243
Cost of goods sold................................. 174,265 163,520
-------- -------
Gross profit....................................... 28,999 22,723
Selling, general and administrative expenses....... 10,168 8,745
-------- -------
Income from operations............................ 18,831 13,978
Interest expense and other related financing costs 17,251 15,647
-------- -------
Income (loss) before income taxes................ 1,580 (1,669)
Income tax provision............................. 3,000 575
------- -------
Net loss.... .................................... $ (1,420) $ (2,244)
======= =======
Ratio of earnings to fixed charges<F2>........... 1.09 --
Deficiency of earnings available to cover
fixed charges <F2>............................... -- $ 1,669
Balance Sheet Data (at end of period):
Fixed assets...................................... $251,832 $285,738
Total assets...................................... 534,489 533,105
Total long-term debt.............................. 518,280 512,328
Common stockholders' deficiency................... (159,418) (147,211)
Other Data:
EBDITA<F3>........................................ $ 28,033 $ 23,941
EBDITA as a percentage of net sales............... 13.8% 12.9%
Capital expenditures.............................. 8,359 4,896
Depreciation and amortization <F4>................ 8,779 9,836
(footnotes follow)
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Year Ended December 31,
--------------------------------------------------------------------------
1994<F1><F5> 1993<F5> 1992 1991<F6> 1990
---------- -------- --------- ------- --------
(Dollars in Thousands)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net sales................................. $861,374 $645,468 $630,039 $678,211 $657,537
Cost of goods sold........................ 747,457 571,174 554,972 605,185 582,991
------- ------- -------- ------- -------
Gross profit.............................. 113,917 74,294 75,067 73,026 74,546
Selling , general and administrative
expenses................................. 38,830 32,495 32,809 33,733 36,962
Reduction in carrying value of assets..... 16,729 -- -- -- --
------ ------- ------- ------- ------
Income from operations.................... 58,358 41,799 42,258 39,293 37,584
Interest expense and other related
financing costs........................... 65,789 54,265 57,091 55,996 55,115
Minority interest expense................. -- -- 2,745 3,889 3,356
------ ------- ------- ------- ------
Loss before income taxes.................. (7,431) (12,466) (17,578) (20,592) (20,887)
Income tax provision (benefit)............ 5,600 1,900 2,200 -- ( 2,495)
------ ------- ------- ------- --------
Loss before extraordinary
charges and cumulative effect of
changes in accounting principles.... (13,031) (14,366) (19,778) (20,592) (18,392)
Extraordinary
charges relating to
early extinguishment of debt............. -- (1,341) (23,597) -- --
Cumulative effect of changes in accounting
principles<F7>........................... -- (6,276) -- -- --
--------- -------- -------- -------- -------
Net loss.................................. $(13,031) $(21,983) $(43,375) $ (20,592) $(18,392)
========= ======== ======== ======== ========
Deficiency of earnings available
to cover fixed charges and preferred
stock dividends<F2>...................... $ 7,431 $ 12,466 $ 17,578 $ 20,592 $ 20,887
Balance Sheet Data (at end of period):
Fixed assets.............................. $251,810 $290,395 $223,879 $230,501 $244,672
Total assets.............................. 504,821 497,633 389,035 390,693 443,889
Total long-term debt...................... 510,763 505,718 383,232 315,461 337,821
Redeemable preferred stock of Silgan
(minority interest of Holdings).... -- -- -- 27,878 24,061
Deficiency in stockholders' equity<F8>.... (157,998) (144,967) (137,984) (94,609) (74,017)
Other Data:
EBDITA<F3>................................ $114,489 $ 76,095 $ 74,012 $ 72,141 $ 69,053
EBDITA as a percentage of net sales....... 13.3% 11.8% 11.7% 10.6% 10.5%
Capital expenditures...................... $ 29,184 $ 42,480 $ 23,447 $ 21,834 $ 22,908
Depreciation and amortization<F4>......... $ 37,187 $ 33,818 $ 31,754 $ 32,848 $ 29,496
Number of employees (at end of
period)<F9>......................... 4,000 3,330 3,340 3,560 4,330
(footnotes follow)
-22-
<PAGE>
Notes to Selected Financial Data
<FN>
<F1> Effective October 1, 1994, the Company extended the estimated useful
lives of certain fixed assets to more properly reflect the true economic
lives of the assets and to better align the Company's depreciable lives
with the predominate practice in its industry. For the three months
ended March 31, 1995, the change had the effect of decreasing
depreciation expense by $1.5 million and increasing net income by $1.3
million. For 1994, the change had the effect of decreasing depreciation
expense and increasing net income by $1.3 million.
<F2> For purposes of computing the ratio of earnings to fixed charges and the
deficiency of earnings available to cover fixed charges , earnings
consist of income (loss) before income taxes plus fixed charges,
excluding capitalized interest, and fixed charges consist of interest,
whether expensed or capitalized, minority interest expense, amortization
of debt expense and discount or premium relating to any indebtedness,
whether expensed or capitalized, and such portion of rental expense that
is representative of the interest factor.
<F3> "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 (including
minority interest expense), (ii) income tax expense,
(iii) depreciation expense, (iv) amortization expense, (v) expenses
relating to postretirement health care costs which amounted to
$0.2 million and $0.1 million for the three months ended March 31,
1995 and 1994, respectively, and $0.7 million and $0.5 million for
the years ended December 31, 1994 and 1993, respectively,
(vi) charges relating to the vesting of benefits under SARs of $0.2 million
and $0.1 million for the three months ended March 31, 1995 and 1994,
respectively, and $1.5 million and $2.0 million in 1994 and 1990,
respectively, and (vii) the reduction in carrying value of assets
of $16.7 million in 1994. EBDITA is being presented by the Company
as a supplement to the discussion of the Company's operating income
and cash flow from operations analysis because the Company
believes that certain persons may find it to be useful in
measuring the Company's performance and ability to
service its debt. EBDITA is not a substitute for GAAP operating
and cash flow data.
<F4> Depreciation and amortization excludes amortization of debt financing
costs.
<F5> On December 21, 1993, the Company acquired from Del Monte substantially
all of the fixed assets and certain working capital of its container
manufacturing business. The acquisition was accounted for as a purchase
transaction and the results of operations have been included with the
Company's historical results from the acquisition date. See
"Business--Company History." See Note 3 to the Notes to Holdings'
Consolidated Financial Statements included elsewhere in this Prospectus.
<F6> On November 15, 1991, the Company sold its nonstrategic PET
carbonated beverage bottle business. For 1991, sales from the PET
carbonated beverage business were $33.4 million. See
"Business--Company History."
<F7> 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 did
not elect to restate prior years' financial statements for any of these
pronouncements.
<F8> Effective June 30, 1994, the put option for Holdings Class A Stock
expired. The fair market value that had been assigned to the liability
associated with such put option has been reclassified as stockholders'
equity for each period presented. See Note 9 to Holdings' Consolidated
Financial Statements included elsewhere in this Prospectus.
<F9> 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.
[/FN]
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company has focused on growth through acquisitions followed by
investment in the acquired assets to gain production efficiencies and provide
internal growth. Since Silgan's inception in 1987, the metal food can business,
which had sales of $647 million in 1994, has realized compound annual growth of
12% through both internal growth and acquisitions of food can businesses,
including the acquisition of Del Monte's captive can manufacturing operations in
December 1993. The Company believes that its investments have enabled it to
achieve a low cost position in the food can segment. To contain costs, the
Company closed two smaller, higher cost metal container facilities in 1992 and
another smaller facility in early 1995. The Company believes that the addition
of the Del Monte facilities has created further cost reduction opportunities
through plant rationalization as well as line reconfiguration and production
scheduling. The Company expects that these cost reduction opportunities,
which began to be implemented in late 1994, will be fully realized by 1997. To
enhance its competitive position, the Company has maintained a stable customer
base by entering into multi-year supply arrangements with a majority of its
metal food can customers. Such arrangements generally provide for pricing
changes in accordance with cost change formulas, thereby reducing the Company's
exposure to the volatility of raw material prices but also limiting the
Company's ability to increase prices. The arrangement to supply substantially
all of Del Monte's metal container requirements in the United States under the
DM Supply Agreement extends to 2002 and the arrangement to supply a majority of
Nestle's domestic metal container requirements under the Nestle Supply
Agreements extends through 2001. The Company estimates that in excess of 80% of
its 1995 metal container sales will be subject to long term contracts.
The plastic container business has grown from a sales base of $89
million in 1987 to $204 million in 1994. In 1989, the Company made four
acquisitions of plastic container manufacturers to improve its competitive
position in the plastic container segment. As a result of these acquisitions,
the Company implemented an aggressive consolidation and rationalization program
during the period from 1991 through 1993, closing three manufacturing facilities
and consolidating the technical and administrative functions of its plastic
container business. The full benefit of the consolidation and rationalization
program was not realized until 1994. The Company is aggressively pursuing
opportunities in custom designed PET and HDPE containers for which the market
has been growing principally due to consumer preferences for plastic containers.
The Company believes it has equipment and technical expertise to take advantage
of these growth segments.
Summary results for the Company's two business segments, metal and
plastic containers, for the three months ended March 31, 1995 and 1994 and for
the calendar years 1994, 1993 and 1992 are provided below. See Note 13 of the
Notes to Consolidated Financial Statements which are included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
---------------------------- ------------------------
1995 1994 1994 1993 1992
----- ----- ----- ----- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net sales:
Metal containers and other $144.7 $136.3 $657.1 $459.2 $437.4
Plastic containers 58.6 50.0 204.3 186.3 192.6
----- ----- ----- ----- -----
Consolidated $203.3 $186.3 $861.4 $645.5 $630.0
===== ===== ===== ===== =====
Operating profit:
Metal containers and other $ 15.9 $ 12.2 $67.0 $42.3 $40.7
Plastic containers 4.3 2.0 9.4 0.6 2.3
Reduction in asset value<F1> -- -- (16.7) -- --
Corporate expense (1.4) (0.2) (1.3) (1.1) (0.7)
----- ----- ----- ----- -----
Consolidated $ 18.8 $ 14.0 $58.4 $41.8 $42.3
===== ===== ==== ==== ====
-----------------------------
<FN>
<F1> $7.2 million of this charge for 1994 is allocable to the metal container
business and $9.5 million is allocable to the plastic container business.
</FN>
</TABLE>
-24-
<PAGE>
For interim reporting purposes, the accounting period for the metal
container business ends on the last Friday of the month. As a result, the 1995
operating results for the metal container business include activity for six more
days than in 1994, which had the effect of increasing both sales and operating
profit for this segment. The accounting period for the plastic container
business ends on the last day of each month, and, accordingly, it reported
activity for the same period in both 1995 and 1994.
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 Prospectus.
Results of Operations
Three Months Ended March 31, 1995 Compared with
Three Months Ended March 31, 1994
Consolidated net sales increased $17.0 million, or 9.1%, to $203.3
million for the three months ended March 31, 1995, as compared to $186.3 million
for the same period in 1994. This increase resulted from the generation of
greater sales by the plastic container business, along with the additional sales
realized by the metal container business because of its longer reporting period.
Net sales for the metal container business (including paper containers)
were $144.7 million for the three months ended March 31, 1995, an increase of
$8.4 million (6.2%) over net sales of $136.3 million for the same period in
1994. As compared to the first three months of the prior year, net sales of
metal cans increased $9.3 million (6.5%) for the first three months of 1995 due
to greater unit volume. Sales to Nestle increased $8.5 million (16.8%) due to
an increase in unit sales for most product lines of Nestle's business, while
sales to Del Monte were $4.7 million (13.2%) higher than 1994 because
first quarter 1994 sales were reduced to adjust for excess finished
goods inventory acquiredupon the purchase in December 1993 of DM Can.
Sales to other customers decreased $3.9 million (8.2%) principally due
to the earlier shipment of containers to certain vegetable pack customers
in 1994. Sales of paper containers included in the metal container segment
declined $0.9 million to $2.1 million during 1995.
Net sales for the plastic container business of $58.6 million during
the three months ended March 31, 1995 increased $8.6 million, or 17.2%, over net
sales of plastic containers of $50.0 million for the same period in 1994. This
increase was attributable to both higher average sales prices due to the pass
through of higher resin costs and increased unit sales to new and existing
customers.
Cost of goods sold was 85.7% of consolidated net sales ($174.3 million)
for the three months ended March 31, 1995, a decrease of 2.1 percentage points,
as compared to 87.8% of consolidated net sales ($163.5 million) for the same
period in 1994. The decrease in cost of goods sold as a percentage of
consolidated net sales principally resulted from lower per unit manufacturing
costs realized on higher sales and production volumes, improved manufacturing
efficiencies resulting from capital investment and the incurrence of lower
depreciation expense.
Selling, general and administrative expenses as a percentage of
consolidated net sales were 5.0% ($10.2 million) for the three months ended
March 31, 1995, an increase of 0.3 percentage points, compared with 4.7% ($8.7
million) for the same period in 1994. This increase principally resulted from
increased administrative requirements associated with DM Can, for which the
Company did not fully staff until after the first quarter of 1994, and increased
corporate legal and administrative costs.
Income from operations as a percentage of consolidated net sales
increased 1.8 percentage points to 9.3% ($18.8 million) for the three months
ended March 31, 1995 , compared with 7.5% ($14.0 million) for the same period in
1994. The increase in income from operations as a percentage of sales was
principally attributable to the aforementioned improvement in gross margin.
-25-
<PAGE>
Income from operations as a percentage of net sales for the metal
container business increased 2.1 percentage points to 11.0% ($15.9 million)
during the first three months of 1995, as compared to the same period in the
prior year, principally due to lower per unit manufacturing costs realized on
greater unit volume and improved manufacturing efficiency as a result of capital
investment. Income from operations as a percentage of net sales attributable to
the plastic container business for the three months ended March 31, 1995 was
7.3% ($4.3 million), as compared to 4.1% ($2.0 million) for the same period in
1994. The improved operating performance of the plastic container business
resulted from improved manufacturing efficiency and from increased unit volume.
Interest expense increased by approximately $1.6 million to $10.2
million for the three months ended March 31, 1995. The increase resulted from
higher average borrowing rates and greater accretion of interest on the discount
debentures offset, in part, by lower average outstanding bank borrowings.
The provisions for income taxes for the three months ended March 31,
1995 and 1994 were comprised of federal, state and foreign income taxes
currently payable. The provision for income taxes for the first quarter of 1995
increased because the Company fully utilized its alternative minimum tax net
operating loss carryovers in 1994 and, therefore, is subject to tax at the rate
of 20% on its alternative minimum taxable income.
As a result of the items discussed above, the net loss for the three
months ended March 31, 1995 was $1.4 million, $0.8 million less than the net
loss for the three months ended March 31, 1994 of $2.2 million.
Year Ended December 31, 1994 Compared with Year Ended December 31,
1993.
Consolidated net sales increased $215.9 million, or 33.4%, to $861.4
million for the year ended December 31, 1994, as compared to $645.5 million for
the same period in 1993. Approximately 81% of this increase related to sales to
Del Monte pursuant to the DM Supply Agreement entered into by the Company on
December 21, 1993 to supply substantially all of Del Monte's metal container
requirements for a period of ten years. The remainder of this increase resulted
principally from greater unit sales in both the metal container and plastic
container businesses.
Net sales for the metal container business (including paper containers)
were $657.1 million for the year ended December 31, 1994, an increase of $197.9
million (43.1%) over net sales for the metal container business of $459.2
million for the same period in 1993. Sales of metal containers increased $201.6
million primarily as a result of the DM Supply Agreement, which represented
$174.7 million of this increase, an increase of $20.1 million (9.1%) in sales to
all other customers and an increase of $6.8 million (3.2%) in sales to Nestle.
Sales of metal containers increased principally from higher unit volume and
reflected continued growth in sales of pet food containers, as well as greater
sales to vegetable pack customers due to a larger than normal pack in 1994.
Sales of paper containers included in the metal container segment declined $3.7
million to $9.6 million during 1994.
Net sales for the plastic container business of $204.3 million during
the year ended December 31, 1994 increased $18.0 million, or 9.7%, over net
sales of plastic containers of $186.3 million for the same period in 1993. The
increase in net sales of plastic containers was attributable to increased unit
sales to new and existing customers, particularly PET customers, and to a lesser
extent, higher average sales prices due to the pass through of increased resin
costs.
Cost of goods sold was 86.8% of consolidated net sales ($747.5 million) for
the year ended December 31, 1994, a decrease of 1.7 percentage points as
compared to 88.5% of consolidated net sales ($571.2 million) for the same period
in 1993. The decrease in cost of goods sold as a percentage of consolidated net
sales principally resulted from synergistic benefits resulting from the
acquisition of DM Can, lower per unit
-26-
<PAGE>
manufacturing costs realized on higher sales and production volumes and improved
manufacturing efficiencies in the plastic container business resulting from
larger cost reduction and productivity investments in 1993.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.5 percentage points to 4.5% of consolidated
net sales ($38.8 million) for the year ended December 31, 1994, as compared to
5.0% ($32.5 million) for the same period in 1993. The decrease as a percentage
of consolidated net sales resulted principally from a modest increase in
selling, general and administrative functions relative to the increased sales
associated with the acquisition of DM Can, offset in part by an increase of $1.3
million in benefits accrued under stock appreciation rights agreements.
Income from operations as a percentage of consolidated net sales
increased 0.3 percentage points to 6.8% ($58.4 million) for the year ended
December 31, 1994, compared with 6.5% ($41.8 million) for the same period in
1993. During 1994 the Company incurred a charge of $16.7 million to write-down
certain properties held for sale to their net realizable value and to reduce the
carrying value of certain technologically obsolete and inoperable equipment.
Without giving effect to this nonrecurring charge, income from operations in
1994 would have been 8.7% ($75.1 million), an increase of 2.2 percentage points
as compared to 1993, and was principally attributable to the aforementioned
improvement in gross margin.
Income from operations as a percentage of net sales for the metal
container business (without giving effect to the $7.2 million charge to
write-down the carrying value of certain assets) increased 1.0% to 10.2% ($67.0
million) during 1994 as compared to 1993, principally due to operating synergies
realized from the acquisition of DM Can and lower per unit manufacturing costs
incurred as a result of higher production volumes in 1994. Income from
operations as a percentage of net sales attributable to the plastic container
business (without giving effect to the $9.5 million charge to write-down the
carrying value of certain assets) in 1994 was 4.6% ($9.4 million), as compared
to 0.3% ($0.6 million) in 1993. The improved operating performance of the
plastic container business resulted from production efficiencies realized as a
result of rationalizations and capital investment made in prior periods, and
lower unit manufacturing costs.
Interest expense, including amortization of debt financing costs, increased
by approximately $11.5 million to $65.8 million for the year ended December 31,
1994. This increase resulted from the incurrence of additional bank borrowings
to finance the acquisition of DM Can, higher average bank borrowing rates,
higher accretion of interest on the Debentures and increased charges for the
amortization of debt financing costs.
The provisions for income taxes for the years ended December 31, 1994
and 1993 were comprised of federal, state and foreign income taxes currently
payable. The increase in the provision for income taxes in 1994 reflects an
increase in federal income taxes currently payable. During 1994, the Company
fully utilized its alternative minimum tax net operating loss carryovers and,
therefore, was subject to tax at the rate of 20% on its alternative minimum
taxable income. Without the benefit of its alternative minimum tax net operating
loss carryovers, the Company expects that its provision for federal income taxes
payable in 1995 will approximate $10 million and increase annually thereafter.
As a result of the items discussed above, the net loss for the year
ended December 31, 1994 was $13.0 million, $1.4 million less than the loss
before extraordinary charges and cumulative effect of changes in accounting
principles for the year ended December 31, 1993 of $14.4 million.
In conjunction with the acquisition of DM Can in 1993, the Company
incurred an extraordinary charge of $1.3 million for the early extinguishment of
debt. Also, during 1993 the Company adopted SFAS No. 106, SFAS No. 109 and SFAS
No. 112. The cumulative effect of these accounting changes, for years prior to
1993, was to decrease net income by $6.3 million. As a result of these charges,
the net loss for 1993 was $22.0 million.
-27-
<PAGE>
Year Ended December 31, 1993 Compared with Year Ended December 31, 1992.
Consolidated net sales increased $15.5 million, or 2.5%, to $645.5
million for the year ended December 31, 1993, as compared to $630.0 million for
the same period in 1992. This increase resulted from greater unit sales by the
metal container business offset by a decline in sales volume of the plastic
container business.
Net sales for the metal container business (including paper containers)
were $459.2 million for the year ended December 31, 1993, an increase of $21.8
million (5.0%) over net sales for the metal container business of $437.4 million
for the same period in 1992. Sales of metal containers increased 4.7% in 1993,
primarily as a result of higher unit sales to non-vegetable pack customers and
to a lesser extent the purchase of an additional manufacturing facility in May
1993, offset in part, by a decline in sales to Nestle due to reduced demand and
lower unit sales to vegetable pack customers due to the extremely wet weather in
the summer of 1993. Sales of paper containers included in the metal container
segment increased $1.7 million to $13.3 million during 1993.
Net sales for the plastic container business of $186.3 million during
the year ended December 31, 1993 were $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 of plastic containers was primarily attributable to lower unit
sales to existing customers due to soft market conditions.
Cost of goods sold was 88.5% of consolidated net sales ($571.2 million)
for the year ended December 31, 1993, as compared to 88.1% of consolidated net
sales ($555.0 million) for the same period in 1992. The increase in cost of
goods sold as a percentage of consolidated net 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 improved manufacturing efficiency.
Selling, general and administrative expenses as a percentage of net
sales declined 0.2 percentage points to 5.0% of consolidated net sales ($32.5
million) for the year ended December 31, 1993, as compared to 5.2% ($32.8
million) for the same period in 1992. The decrease in selling, general and
administrative expenses as a percentage of consolidated net 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 consolidated net sales was
6.5% ($41.8 million) for the year ended December 31, 1993, as compared to 6.7%
($42.3 million) for the same period in 1992. The decrease was principally
attributable to the aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal
container business was 9.2% ($42.3 million) during 1993, as compared to 9.3%
($40.7 million) in 1992. Income from operations as a percentage of net sales
attributable to the plastic container business was 0.3% ($0.6 million) during
1993, as compared to 1.2% ($2.3 million) in 1992. The decline in operating
performance of the plastic container business resulted from production
inefficiencies incurred as a result of plant consolidations and higher per unit
manufacturing costs realized from reduced unit volume.
Interest expense decreased by approximately $5.5 million to $54.3
million for the year ended December 31, 1993 compared with $59.8 million
(including minority interest expense of $2.7 million) for the same period in
1992. The decrease principally reflected the benefit of the refinancing in June
1992 of the Company's and Silgan's debt and Silgan's preferred stock at lower
average interest rates.
The provisions for income taxes for 1993 and 1992 were comprised of state
and foreign components and recognized the benefit of certain deductions for
federal income tax which were available to Holdings.
-28-
<PAGE>
Effective January 1, 1993, the Company adopted SFAS No. 109. The application of
the new standard did not have an effect on the Company's provision for income
taxes for 1993.
The loss before extraordinary charges and cumulative effect of changes
in accounting principles for the year ended December 31, 1993 was $14.4 million,
as compared to $19.8 million for the year ended December 31, 1992. The decrease
in the loss before extraordinary charges and cumulative effect of changes in
accounting principles was principally the result of the decrease in interest
expense in 1993.
As a result of the refinancing of the Amended and Restated Credit
Agreement (as defined under "Business--Company History") in conjunction with the
acquisition of DM Can and the refinancing in June 1992 of Silgan's debt and
preferred stock and Holdings' debt, the Company incurred extraordinary charges
of $1.3 million and $23.6 million for the early extinguishment of debt in 1993
and 1992, respectively.
During 1993 the Company adopted SFAS No. 106 and SFAS No. 112. The
cumulative effect of these accounting changes was to decrease net income
by $5.0 million and $1.3 million, respectively.
Capital Resources and Liquidity
The Company's liquidity requirements arise primarily from its
obligations under the indebtedness incurred in connection with its acquisitions
and the refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of the Company's seasonal working capital needs.
Historically, the Company has met these liquidity requirements through cash flow
generated from operating activities and working capital borrowings. As described
below, beginning in December 1996 the Company's liquidity requirements may also
be affected by the interest associated with Holdings' indebtedness.
For the first three months of 1995, capital expenditures of $8.3
million and the repayment of $2.5 million of term loans were funded through the
borrowing of $2.6 million of working capital loans, cash provided from
operations of $3.7 million, proceeds of $3.2 million realized from the sale of
assets, and the use of $1.3 million of outstanding cash balances. The Company's
earnings before depreciation, interest, taxes and amortization for the three
months ended March 31, 1995 increased by $4.1 million over the same period in
the prior year to $28.0 million . However, cash provided by operations during
the first three months of 1995 declined slightly from the same period in 1994
because there was a greater increase in working capital needs in 1995. During
the first three months of 1995, working capital needs increased due to increased
accounts receivable as a result of greater sales and increased inventories as a
result of the planned 1995 acceleration of finished goods production.
During 1994, cash generated from operations of $47.3 million along with
working capital borrowings of $10.4 million were used to fund capital
expenditures of $27.9 million (net of proceeds of $1.3 million), make mandatory
debt repayments of $20.5 million, pay $6.9 million to former shareholders of
Silgan in partial settlement of outstanding litigation and increase cash
balances by $2.4 million. In late 1994, the Company entered into a program to
accelerate the purchase of certain raw materials prior to anticipated 1995 price
increases. As a result, at December 31, 1994 inventories were approximately $14
million higher than the prior year. There was not a corresponding increase in
trade payables, however, because the advance purchase of raw materials was paid
for prior to year-end through additional working capital borrowings. The trade
receivable balance increased at December 31, 1994 as compared to the prior
year-end principally as a result of the DM Supply Agreement, which became
effective on December 21, 1993.
On December 21, 1993 Silgan, Containers and Plastics entered into the
Silgan Credit Agreement to finance the acquisition of DM Can and to refinance
and repay in full all amounts owing under the Amended and Restated Credit
Agreement. In conjunction therewith the Banks loaned the Company $60.0 million
of A Term Loans, $80.0 million of B Term Loans and $29.8 million of Working
Capital Loans (each as defined in "Description of Certain Silgan
Indebtedness--Description of Silgan Credit Agreement"). In addition, Holdings
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<PAGE>
issued and sold 250,000 shares of its Class B common stock, par value $.01 per
share (the "Holdings Class B Stock "), for $15.0 million. 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 $48.1
million and available cash balances of $2.7 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 Silgan Credit
Agreement), and pay $1.1 million of term loans. During the year, the Company
increased its annual amount of capital spending in order to reduce costs and to
add incremental production capacity. The increase in inventory at December 31,
1993 as compared to the prior year principally resulted from the inventory
acquired as part of the acquisition of DM Can.
To improve their financial flexibility, Holdings and Silgan completed
the Refinancing in 1992. The Refinancing (i) lowered Holdings' consolidated
average cost of indebtedness by retiring Silgan's 14% Senior Subordinated Notes
due 1997 (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 its 15% Cumulative Exchangeable Redeemable Preferred Stock
(the "Silgan Preferred Stock") through the redemption by Silgan on August 16,
1992 of all the outstanding Silgan Preferred Stock (the "Silgan Preferred Stock
Redemption") and by deferring for an additional two years (until December 1996)
and reducing the cash interest requirements on Holdings' indebtedness, (iii)
provided Holdings with additional financial flexibility by eliminating
restrictions in the indenture relating to the 14% Notes on Silgan's ability to
pay dividends to Holdings in order to fund interest payments on Holdings'
indebtedness through the redemption by Silgan on August 28, 1992 of all of the
outstanding 14% Notes (the "14% Notes Redemption") and (iv) extended the average
length of maturity of Silgan's indebtedness by issuing the 11-3/4% Notes and the
Secured Notes to refinance $30 million of bank term loans and the 14% Notes.
In connection with the Refinancing, Holdings and Silgan received $333.1
million in proceeds from the issuance of the Secured Notes, the 11-3/4% Notes,
and the Debentures net of debt issuance costs of $17.3 million. On June 29,
1992, Silgan repaid $30 million of term loans under its credit agreement. On
July 29, 1992, Holdings paid $181.6 million to redeem the Holdings Reset
Debentures. On August 16, 1992, Silgan paid $31.5 million to redeem the Silgan
Preferred Stock. On August 28, 1992, Silgan paid $89.3 million to redeem the 14%
Notes.
In connection with the Refinancing, Holdings and Silgan received $333.1
million in proceeds from the issuance of the Secured Notes, the 11-3/4% Notes,
and the Debentures net of debt issuance costs of $17.3 million. On June 29,
1992, Silgan repaid $30 million of term loans under its credit agreement. On
July 29, 1992, Holdings paid $181.6 million to redeem the Holdings Reset
Debentures. On August 16, 1992, Silgan paid $31.5 million to redeem the Silgan
Preferred Stock. On August 28, 1992, Silgan paid $89.3 million to redeem the
14% Notes.
The Company borrowed working capital loans of $19.2 million during the
year ended December 31, 1992 which, along with cash provided by operations
during 1992 of $15.4 million (which included payment of $17.7 million in cash
interest on the Holdings Reset Debentures) were used principally to fund capital
expenditures of $23 million, to make term loan repayments of $10.2 million (in
addition to the term loan repayment made in connection with the Refinancing), to
pay cash dividends of $1.1 million on the Silgan Preferred Stock and to increase
outstanding cash balances by $1.1 million.
Since a portion of the proceeds realized from the Silgan 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 Silgan Credit
Agreement, the commitment for working capital loans was reduced by $41 million
to $70 million. As of March 31, 1995, the outstanding principal amount of
working capital loans was $15.2 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 $49.1 million.
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
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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 $40
million of the working capital revolver, including letters of credit, will be
utilized at its peak in July 1995.
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 $35 million to $40 million (approximately $15
million of which is nondiscretionary in each year), (ii) principal amortization
payments of A Term Loans under the Silgan Credit Agreement of approximately $20
million in each of 1995 and 1996, (iii) expenditures of approximately $7 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 Silgan Credit Agreement, (v) the
scheduled maturity of the $50 million principal amount of the Secured Notes in
1997, (vi) 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, and the 11-3/4% Notes) and semi-annual cash
interest payments of $18.2 million on the Debentures commencing in December
1996, and (vii) payments of approximately $14 million for federal and state tax
liabilities beginning in 1995 (assuming the redemption of the Debentures at
maturity) and increasing annually thereafter by approximately $2 million.
Interest on the Debentures is payable at a rate of 13-1/4% per annum from
and after June 15, 1996, and commencing on December 15, 1996 semi-annual
interest payments of $18.2 million will be required to be made thereon. Since
Holdings' only asset is its investment in Silgan, its ability to pay interest on
the Debentures on and after December 15, 1996 (the date on which interest is
first payable on the Debentures) may depend upon its receipt of funds paid by
dividend or otherwise loaned, advanced or transferred by Silgan to Holdings.
While Silgan has no legal obligation to make such funds available, it is
expected that Silgan will do so if it is permitted under the agreements to which
it shall then be a party and if it then has sufficient funds available for such
purpose. If sufficient funds to pay such interest are not generated by the
operations of Silgan's subsidiaries, Silgan or Holdings may seek to borrow or
otherwise finance the amount of such payments or refinance the Debentures.
Neither the Indenture for the 11-3/4% Notes nor the Secured Notes limits the
ability of Silgan to pay cash dividends to Holdings in order to enable Holdings
to pay interest on the Debentures. The Silgan Credit Agreement presently
prohibits Silgan from paying dividends or otherwise transferring funds to
Holdings in order to service Holdings' indebtedness; however, the Silgan Credit
Agreement matures on September 15, 1996, prior to the date on which interest or
principal is payable on the Debentures. Silgan expects to enter into a new
credit facility to replace the Silgan Credit Agreement on or before September
15, 1996 on terms which would not limit the ability of Silgan to transfer funds
to Holdings in order to enable Holdings to pay interest on the Debentures.
However, there can be no assurance that Silgan will be able to enter into a new
credit facility on such terms. In such event, Silgan and Holdings would consider
pursuing alternative arrangements, including possible equity and/or debt
financings, to enable Holdings to meet its obligations. There can be no
assurance that any such alternative, if pursued, would be accomplished or would
enable Holdings to make timely payments of its obligations under the Debentures.
The funding requirements of Holdings to service its indebtedness (beginning in
December 1996) will be met by Silgan through cash generated by operations or
borrowings or by Holdings through refinancings of its existing indebtedness or
additional debt or equity financings.
In addition to any financing effected as described above, the Company
may consider refinancing all or any part of its indebtedness through other debt
financings and/or equity financings, including a public offering of equity. Any
such financings would depend upon the market conditions existing at the time and
would have to be effected in compliance with the Company's agreements in respect
of its indebtedness.
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The 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 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 , as of December 31, 1994, amounts to approximately $75
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")
and, due to the utilization of its AMT net operating loss carryforwards,
incurred an AMT liability at a rate of 2%. In 1994, Holdings fully utilized its
AMT loss carryforward . Accordingly, in 1995 and thereafter, Holdings will incur
an AMT liability at a rate of 20% (or the applicable rate then in effect). The
AMT paid is allowed (subject to certain limitations) as an indefinite credit
carryover against Holdings' regular tax liability in the future when and if
Holdings' regular tax liability exceeds the AMT liability.
The deferred accreted interest will not be deductible until the
redemption, retirement or other repayment of the 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 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 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 Debentures retired)
should be deductible under the carryback and carryforward rules under the Code
unless the holders of the Debentures receive stock or debt of Holdings or a
related party in exchange for the Debentures. No assurance can be given that
Holdings will be able to refinance the 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
Debentures. In addition, the Internal Revenue Service (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 Debentures.
Management believes that cash generated by operations and funds from
working capital borrowings under the Silgan 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 Silgan Credit Agreement on September 15, 1996. Management also
believes that it will be able to replace the working capital facility under the
Silgan 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.
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The Silgan Credit Agreement, the Secured Notes and the indentures
relating to the 11-3/4% Notes and the 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 1995 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 hedge agreements (with
counterparties that, in the Company's judgment, have sufficient
creditworthiness) with respect to a portion of its floating rate indebtedness.
At March 31, 1995, the Company was not a party to any interest rate hedge
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.
BUSINESS
General
The Company is a major manufacturer of a broad range of steel and aluminum
containers for human and pet food . The Company also manufactures custom
designed plastic containers for health, personal care, food, beverage,
pharmaceutical and household chemical products in North America. In 1994, the
Company had net sales of $861.4 million.
Management believes that the Company is the sixth largest can producer and
one of the largest food can producers in North America, as well as one of the
largest producers in North America of custom designed plastic containers for
health and personal care products. Silgan has grown rapidly since its inception
in 1987 primarily as a result of acquisitions , but also through internally
generated growth. In December 1993, Silgan's wholly owned subsidiary,
Containers, acquired the U.S. metal container business of Del Monte. See
"--Company History" below.
The Company's strategy is to continue to increase its share of the North
American packaging market through acquisitions, as well as investment in
internally generated opportunities. The Company intends to focus particular
attention on those rigid metal and plastic container segments where operating
and market synergies are likely.
The Company is also engaged in the manufacture and sales of paper
containers primarily used by processors and packagers in the food industry.
Metal Container Business
Management estimates that Containers is currently the sixth largest can
producer and one of the largest manufacturers of metal food containers in North
America. In 1994 Containers sold approximately 21% of all metal food containers
used in North America. Although the food can industry in North America is
relatively mature in terms of unit sales growth, Containers 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
with Nestle pursuant to which
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Containers supplies substantially all of its metal container requirements , and
an agreement with Del Monte pursuant to which Containers supplies substantially
all of its metal container requirements. In addition to Nestle and Del Monte,
Containers has multi-year supply arrangements with other customers. The Company
estimates that in excess of 80% of Containers' sales in 1995 will be pursuant to
such supply arrangements. See " --Sales and Marketing" below.
Containers has focused on growth through acquisition followed by investment
in the acquired assets to achieve a low cost position in the food can segment.
Since its acquisition in 1987 of Nestle Can, Containers has invested
approximately $99 million in its acquired manufacturing facilities and has spent
approximately $67 million for the acquisition of additional can manufacturing
assets. As a result of these efforts and management's focus on quality and
service, Containers has more than doubled its overall share of the food can
segment in terms of unit sales, from a share of approximately 10% in 1987 to a
share of approximately 21% in 1994.
Plastic Container Business
Management believes that Silgan's wholly owned subsidiary, Plastics, is one
of the leading manufacturers of custom designed HDPE and PET containers sold in
North America for health and personal care products. HDPE containers
manufactured by Plastics include personal care containers for shampoos,
conditioners, hand creams, lotions and cosmetics, household chemical containers
for scouring cleaners , specialty cleaning agents and lawn and garden chemicals
and pharmaceutical containers for tablets, laxatives and eye cleaning solutions.
Plastics manufactures PET custom medicinal and health care product containers
(such as mouthwash and cough syrup bottles), custom food product containers
(such as salad dressing and instant coffee bottles), and custom non- carbonated
soft drink beverage product containers (such as juice bottles) as well as water
and liquor bottles. See "--Products" below.
Plastics has grown primarily by strategic acquisition. From a sales base of
$89 million in 1987, Plastics' sales have grown at a compound annual rate of 13%
to $204 million in 1994. Plastics emphasizes value-added design, fabrication and
decoration of custom containers. Plastics is aggressively pursuing opportunities
in custom designed PET and HDPE containers for which the market has been growing
principally due to consumer preferences for plastic containers. The Company
believes it has equipment and technical expertise to take advantage of these
growth segments.
Products
Metal Container Business
The Company is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers for human and pet
food . 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.
Plastic Container Business
The Company is also engaged in the manufacture and sale of plastic
containers primarily used for health, personal care, food, beverage (other than
carbonated soft drinks), pharmaceutical and household chemical products. Plastic
containers are produced by converting thermoplastic materials into containers
ranging in size from 1/2 to 96 ounces. Emphasis is on value-added design,
fabrication and decoration of the containers. The Company designs and
manufactures a wide range of containers for health and personal care
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products such as shampoos, hand creams , lotions and mouthwash. Because these
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 salad dressing, coffee, juice, water and liquor.
Household chemical containers are designed and manufactured to contain polishes,
specialty cleaning agents, lawn and garden chemicals 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
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, 1994, Containers had in excess of 80% of its
projected 1995 sales under multi-year contracts. Plastics has written purchase
orders or contracts for containers with the majority of its customers. In
general, these purchase orders and contracts are for containers made from
proprietary molds and are for a duration of 2 to 5 years. Both Containers and
Plastics schedule their production to meet their customers' requirements.
Because the production time for the Company's products is short, the backlog of
customer orders in relation to sales is not significant.
Metal Container Business
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 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.
Plastic Container Business
The Company utilizes two basic processes to produce plastic bottles. In
the blow extrusion 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 preform. The
plastic preform 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 post-consumer
recycled ("PCR") resins because of the relatively low capital costs required to
convert its equipment from the use of virgin resins.
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The Company's decorating methods for its plastic products include (i)
silk screen decoration, which enables the application of images in multiple
colors to the bottle, (ii) post- molded decoration, which uses paper labels
applied to the bottles with glue , (iii) pressure-sensitive decoration, which
applies a plastic film label to a post-molded bottle by pressing against the
bottle and (iv) in-mold labeling, which applies a plastic film label to the
bottle during the blowing process. 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.
Raw Materials
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.
Metal Container Business
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 . If 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. The Company has a contract to obtain the majority of its
requirements for aluminum from a supplier at prices that are subject to
adjustment based on formulas and market conditions. Such contract expires in
1996. The Company believes that it would be able to satisfy its requirements for
aluminum from other suppliers in the event of the loss of its current supplier.
The Company believes that it will be able to purchase sufficient quantities of
steel and aluminum can sheet for the foreseeable future.
Plastic Container Business
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as HDPE- 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 multi-year arrangements for specific quantities of resins with
several major suppliers of resins. The price the Company pays for resin raw
materials is not fixed and is subject to market pricing. Currently, demand for
PET exceeds supplies of PET. However, the Company has long-term arrangements for
PET with a number of producers and, as a result, believes that it has adequate
supply commitments for PET to satisfy its current business and obligations to
customers. The Company anticipates that there will be new capacity for PET
beginning in mid-to-late 1995 and into 1996. The Company believes that the
successful start-up of such announced new capacity will bring supply of and
demand for PET into better balance in 1996. However, delays in the availability
of such new capacity could have an adverse impact on the Company's plans for
growth in its plastic containers business in 1996. The Company believes that it
will be able to purchase sufficient quantities of other resins (including HDPE)
for the foreseeable future.
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Sales and Marketing
The Company markets its products in most areas of North America
primarily by a direct sales force and through a large network of distributors.
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 1994, 1993 and 1992, the Company's metal container business
accounted for approximately 76%, 71% and 69%, respectively, of the Company's
total sales, and the Company's plastic container business accounted for
approximately 24%, 29% and 31%, respectively, of the Company's total sales. In
1994, 1993 and 1992, approximately 26%, 34% and 37%, respectively, of the
Company's sales were to Nestle and in 1994 approximately 21% of the Company's
sales were to Del Monte. No other customer accounted for more than 10% of the
Company's total sales during such years.
Metal Container Business
Management believes that the Company is currently the sixth largest can
producer and one of the largest food can producers in North America. In 1994,
Containers sold approximately 21% of all metal food containers in North America.
Containers has entered into multi-year supply arrangements with many of its
customers, including Nestle and Del Monte. The Company estimates that in excess
of 80% of its metal container sales in 1995 will be pursuant to such
arrangements.
In 1987, the Company, through Containers, and Nestle entered into the
Nestle Supply Agreements pursuant to which Containers has agreed to supply
Nestle with, and Nestle has agreed to purchase from Containers, substantially
all of the can requirements of the former Carnation operations of Nestle for a
period of ten years, subject to certain conditions. In 1994, the term of three
of the Nestle Supply Agreements (representing approximately 70% of the Company's
1994 unit sales to Nestle) was extended through 2001.
The Nestle Supply Agreements provide for certain prices and specify
that such prices will be increased or decreased based upon cost change formulas
set forth therein. 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.
Under the three Nestle Supply Agreements which were recently extended
through 2001, Nestle has the right to receive competitive bids under narrowly
limited circumstances, and Containers has the right to match any such bids.
Under the other six Nestle Supply Agreements, if Nestle receives a competitive
bid for any product supplied thereunder, 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 either case, 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. Since 1990, under the
original Nestle Supply Agreements 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.
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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.
Plastic Container Business
The Company is one of the leading manufacturers of custom designed HDPE
and PET containers sold in North America. The Company markets its plastic
containers in most areas of North America through a direct sales force and
through a large network of distributors. More than 70% of the Company's plastic
containers are sold for health and personal care products, such as hair care,
oral care, pharmaceutical and other health care applications. The Company's
customers in these product segments include Helene Curtis Inc., Procter & Gamble
Co., Avon Products, Inc., Jergens Inc., Warner-Lambert Company and Pfizer Inc.
The Company also manufactures plastic containers for food and beverage products,
such as salad dressings, mustard, mayonnaise, coffee and premium bottled
water. Customers in these product segments include Procter
& Gamble Co., Kraft General Foods Inc. and General Mills, Inc.
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.
Plastics has written purchase orders or contracts for containers with
the majority of its customers. In general, these purchase orders and contracts
are for containers made from proprietary molds and are for a duration of 2 to 5
years.
-38-
<PAGE>
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.
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 April 30, 1995, the Company operated 33
manufacturing facilities, geographically dispersed throughout the United States
and Canada, that serve the distribution needs of its customers.
Metal Container Business
Management believes that the metal food containers segment 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, American National
Can Company, Crown Cork and Seal Company, Inc. and Ball Corporation 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 applications 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 applications include canned vegetables, fruits, meats
and pet foods. These sectors are the principal areas for which the Company
manufactures its products.
Plastic Container Business
Plastics competes with a number of large national producers of health,
personal care, food, beverage, pharmaceutical and household chemical plastic
container products, including Owens-Brockway Plastics Products, a division of
Owens-Illinois, Inc., Constar Plastics Inc., a subsidiary of Crown Cork and Seal
Company, Inc., Johnson Controls Inc., Continental Plastics Inc. 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.
Employees
As of December 31, 1994, the Company employed approximately 670 salaried
and 3,330 hourly employees on a full time basis . Approximately 63% 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.
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<PAGE>
The Company's labor contracts expire at various times between 1995 and
1999. Contracts covering approximately 8% of the Company's hourly employees
presently expire during 1995. 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 addition to costs associated with regulatory compliance, the Company may
be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances disposed of
at sites at which environmental problems are alleged to exist, as well as the
owners of those sites and certain other classes of persons, are subject to
claims under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the
original disposal. Liability under CERCLA and under many similar state statutes
is joint and several, and, therefore, any responsible party may be held liable
for the entire cleanup cost at a particular site. Other state statutes may
impose proportionate rather than joint and several liability. The federal
Environmental Protection Agency or a state agency may also issue orders
requiring responsible parties to undertake removal or remedial actions at
certain sites. Pursuant to the agreement relating to the acquisition in 1987 of
Nestle Can, the Company has assumed liability for the past waste disposal
practices of Nestle Can. The Company has received notice that it is one of many
potentially responsible parties (or similarly designated parties) for cleanup of
hazardous waste at a site to which it (or its predecessor Nestle Can) is alleged
to have shipped such waste and at which the Company's share of cleanup costs
could exceed $100,000. See "--Legal Proceedings" below.
Pursuant to the agreement relating to the acquisition in 1987 from Monsanto
Company ("Monsanto") of substantially all of the business and related fixed
assets and inventory of Monsanto's plastic containers business ("Monsanto
Plastic Containers"), Monsanto has agreed to indemnify the Company for
substantially all of the costs attributable to the past waste disposal practices
of Monsanto Plastic Containers. In connection with the acquisition of DM Can,
Del Monte has agreed to indemnify the Company for a period of three years for
substantially all of the costs attributable to any noncompliance by DM Can with
any environmental law prior to the closing, including all of the costs
attributable to the past waste disposal practices of DM Can.
The Company is subject to the Occupational Safety and Health Act and other
laws regulating noise exposure levels in the production areas of its plants.
Management does not believe that any of the matters described above
individually or in the aggregate will have a material effect on the Company's
capital expenditures, earnings, financial position or competitive position.
-40-
<PAGE>
Research and Technology
Metal Container Business
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.
Plastic Container Business
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
Silgan was organized in August 1987 as a holding company to acquire
interests in various packaging manufacturers. On August 31, 1987, Silgan,
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, Silgan, 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, Silgan issued common stock, preferred stock and
senior subordinated notes and borrowed amounts 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 segment.
Holdings was organized in April 1989 as a holding company to acquire
all of the outstanding common stock of Silgan. On June 30, 1989, Silgan
Acquisition, Inc. ("Acquisition"), a wholly owned subsidiary of Holdings, merged
with and into Silgan, and Silgan became a wholly owned subsidiary of Holdings
(the "1989 Mergers").
In 1989, the Company acquired the business and related assets of Amoco
Container Company ("Amoco Container"). In November 1991, Plastics sold its
nonstrategic PET carbonated beverage bottle business, exiting that commodity
business.
In 1992, Holdings and Silgan completed the Refinancing pursuant to a plan
to improve their financial flexibility. The Refinancing included the following:
(i) the public offering (the "Silgan Notes Offering") in June 1992 by Silgan of
$135 million principal amount of the 11-3/4% Notes; (ii) the private placement
in June 1992 by Silgan of $50 million principal amount of the Secured Notes with
certain institutional investors; (iii) the public offering in June 1992 by
Holdings of the Debentures for an aggregate amount of proceeds of $165.4 million
(the "Debentures Offering"); (iv) the amendment of the Amended and Restated
Credit Agreement, dated
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<PAGE>
as of August 31, 1987, as amended (the "Amended and Restated Credit Agreement")
among Silgan and certain of its subsidiaries, the lenders named therein and
Bankers Trust, as agent, followed by the prepayment in June 1992 by Silgan of
$30 million of term loans and the borrowing by Silgan of approximately $17
million of working capital loans under the Amended and Restated Credit
Agreement; (v) the 14% Notes Redemption; (vi) the Silgan 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 ; and (x) the payment of
transaction fees and expenses relating to the Refinancing. Additionally, in June
1992 Aim, Fortune and certain other subsidiaries of Plastics were merged into
Plastics.
On December 21, 1993, Containers acquired from Del Monte substantially
all of the fixed assets and certain working capital of Del Monte's container
manufacturing business in the United States for a purchase price of
approximately $73 million and the assumption of certain limited liabilities. To
finance the acquisition, (i) Silgan, Containers and Plastics (collectively, the
"Borrowers") entered into the Silgan Credit Agreement with the Banks, Bank of
America, as Co-Agent, and Bankers Trust, as Agent, and (ii) Holdings issued and
sold to Mellon Bank, N.A., as trustee for First Plaza Group Trust, a group trust
established under the laws of the State of New York ("First Plaza"), 250,000
shares of Holdings Class B Stock (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 Silgan Credit Agreement to refinance and repay in full all amounts owing
under the Amended and Restated Credit Agreement.
Properties
Holdings' and Silgan's principal executive offices are located at 4
Landmark Square, Stamford, Connecticut 06901. The administrative headquarters
and principal places of business for Containers and Plastics are located at
21800 Oxnard Street, Woodland Hills, California 91367 and 14515 N. Outer Forty,
Chesterfield, Missouri 63017, respectively. All of these offices are leased by
the Company.
The Company owns and leases properties for use in the ordinary course
of business. Such properties consist primarily of 20 metal container
manufacturing facilities, 12 plastic container manufacturing facilities and one
paper container manufacturing facility. Seventeen of these facilities are owned
and 16 are leased by the Company. The leases expire at various times through
2020. Some of these leases provide renewal options .
-42-
<PAGE>
Below is a list of the Company's operating facilities, including
attached warehouses, as of April 30, 1995 for its metal container business:
Approximate
Building Area
Location (square feet)
-------- -------------
Kingsburgh, CA 37,783 (leased)
Modesto, CA 35,585 (leased)
Riverbank, CA 167,000
Stockton, CA 243,500
Stockton, CA 71,785 (leased)
Broadview, IL 85,000
Rochelle, IL 175,000
Ft. Dodge, IA 49,500 (leased)
Fort Madison, IA 66,000
Mt. Vernon, MO 100,000
St. Joseph, MO 173,725
Hillsboro, OR 47,000
Cambridge Springs,PA 55,000
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
Below is a list of the Company's operating facilities, including
attached warehouses, as of April 30, 1995 for its plastic container business:
Approximate
Building Area
Location (square feet)
-------- ------------
Anaheim, CA 127,000 (leased)
Deep River, CT 140,000
Monroe, GA 117,000
Norcross, GA 59,000 (leased)
Ligonier, IN 388,000 (leased)
Seymour, IN 406,000
Franklin, KY 122,000 (leased)
Louisville, KY 30,000 (leased)
Port Clinton, OH 336,000 (leased)
Langhorne, PA 156,000 (leased)
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 two
other properties that it is not currently using and intends to sell. All of the
Company's facilities are subject to liens in favor of the Banks.
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<PAGE>
The Company believes that its plants, warehouses and other facilities
are in good operating condition, adequately maintained, and suitable to meet its
present needs and future plans. The Company believes that it has sufficient
capacity to satisfy the demand for its products in the foreseeable future. To
the extent that the Company needs additional capacity, management believes that
the Company can convert certain facilities to continuous operation or make the
appropriate capital expenditures to increase capacity.
Legal Proceedings
Complaints and Appraisal Petition Arising Out of the 1989 Mergers.
Contemporaneous with the merger of Silgan into a subsidiary of Holdings in June
1989, certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware (the "Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the 1989 Mergers. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the action
upon the conclusion of the appraisal proceeding described below. The second
action was dismissed following settlement.
In 1989, the same Silgan stockholders also sought appraisal of the
value of their shares of Class B common stock pursuant to Section 262 of the
Delaware General Corporation Law. Following discovery, and settlement with the
holders of 650,000 shares of Class B common stock, trial of the appraisal
with respect to the remaining 400,000 shares of Class B common stock
was conducted during
the week of November 28, 1994.Post-trial briefing has been completed and the
matter is before the court for decision.
Management believes that the consideration offered in the 1989 Mergers
fully reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect
on the financial condition or results of operations of the Company.
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 Chancery Court (the "Katell/Desert Complaint") against a number
of defendants, including Holdings and Silgan. (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 general partners of MSLEF breached duties owed to the
limited partners by selling MSLEF's investment in Silgan at a grossly inadequate
price. Holdings and Silgan are named as defendants in Court III of such amended
complaint, which charges them with aiding and abetting breaches of fiduciary
duty by MSLEF and the general partners. The plaintiffs claim damages in the
amount of $4.67 million.
After full briefing and oral argument on a motion by defendants to
dismiss the amended complaint filed by plaintiffs, the court dismissed all
claims against Holdings and Silgan by memorandum opinion and order dated January
14, 1993. The court denied plaintiffs' motion to reargue the dismissal by order
dated March 29, 1993. Because the Katell/Desert Complaint continues against
certain other defendants, the plaintiffs' right to appeal the dismissal of the
claims against Holdings and Silgan has not yet expired.
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.
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<PAGE>
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 Company is one of 16 defendant can companies participating in a steering
committee. The steering committee has actively undertaken a feasibility study
which was approved by the California Department of Toxic Substances in June
1994. The Company has agreed with the other can company defendants that its
apportioned share of cleanup costs would be 6.72% of the total cost of cleanup.
On March 14, 1995, the court approved the Consent Order settling the case and
reaffirming the Company's 6.72% apportioned share of the cleanup costs. Although
the total cost of cleanup has not yet been determined, the Company understands
that the State of California's current worst case estimate of total cleanup
costs for all parties is $5.5 million. The steering committee believes that the
cost to remediate will be less than one-half the government's estimate.
Accordingly, the Company believes its maximum exposure is not greater than 6.72%
of $3 million, or approximately $202,000.
Other. Other than the actions mentioned above, there are no other
pending legal proceedings, other than ordinary routine litigation incidental to
the business of the Company, to which the Company is a party or to which any of
its properties are subject.
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<PAGE>
MANAGEMENT
Directors and Executive Officers of Holdings and Silgan
The current directors and executive officers of Holdings and Silgan,
and their respective ages, positions and principal occupations, five-year
employment history and other directorships held are furnished below:
Age
at Five-Year Employment
Name and Position April 30, History and Other
1995 Directorships Held
--------------------------------------------------------------------------
R. Philip Silver 52 Prior to forming S&H, Inc.
Chairman of the Board ("S&H") in 1987, President
Officer of of Continental Can Company
Holdings and Silgan; from June 1983 to August 1986;
March 1994; Director of consultant to packaging industry
Containers and Plastics from August 1985 to August 1987;
since August 1987. Vice Chairman of the Board
and Director of Sweetheart Holdings Inc.
and Sweetheart Cup Company, Inc. from
September 1989 to January 1991;
Chairman of the Board and Director
of Sweetheart Holdings Inc. and
Sweetheart Cup Company, Inc. from
January 1991 through August 1993;
Director, Johnstown America Corporation.
D. Greg Horrigan 51 Prior to forming S&H in 1987, Executive
President and Co-Chief Vice President and Operating Officer of
Executive of Holdings and Continental Can Company from 1984 to 1987;
Silgan since March 1994; Chairman of the Board of and Director of
formerly Chairman of the Sweetheart Holdings Inc. and Sweetheart
Board of Holdings and Silgan Cup Company, Inc. from September 1989 to
and Silgan; Director of Holdings January 1991; Vice Chairman of the Board
since April 1989 and of Silgan and Director of Sweetheart Holdings Inc.
since August 1987; Chairman of and Sweetheart Cup Company, Inc.
the Board of Containers since from January 1991 through August 1993.
August 1987.
James S. Hoch 35 Executive Director of Morgan Stanley &
Director, Vice President and Co., Ltd. since 1994; Principal of Morgan
Assistant Secretary of Holdings Stanley & Co. Incorporated since 1993;
since January 1991; Director of Vice President of Morgan Stanley & Co.
Silgan since January 1991; Incorporated from 1991 to 1993.
Vice President and Assistant Director of Sullivan
Assistant Secretary of Silgan Communications, Inc., Sullivan Graphics,
since 1987; Director, Vice Inc. and Nokia Aluminium Ox.
President and Assistant Secretary
of Containers since January 1991;
Director, Vice President and
Assistant Secretary of Plastics
since January 1991.
-46-
<PAGE>
Robert H. Niehaus 39 Managing Director of Morgan Stanley & Co.
Vice President, Assistant Co. Incorporated since January 1, 1990;
Secretary and Director of Principal of Morgan Stanley & Co.
Holdings since April 1989; Incorporated from 1988 to 1989. Vice
Vice Presidnet, Assistant President and Director of MSLEF II,
Secretary and Director of Inc. since January 1990; Vice
Silgan since August 1987; Vice Chairman of MSCP III since January 1994.
President, Assistant Secretary Director of American Italian Pasta
and Director of Containers and Company, Collings Farm, Inc., Fort
Plastics since August 1987. Howard Corporation, PSF Finance
Holdings, Inc., Randall's Food Markets,
Inc., Waterford Crystal Ltd. and
Waterford Wedgewood UK plc.
Harley Rankin, Jr. 55 Prior to joining the Company,
Executive Vice President Senior Vice President and
and Chief Financial Officer Chief Financial Officer of
of Holdings since April 1989; Armtek Corporation; prior to Armtek
Treasurer of Holdings since Corporation, Vice President and Chief
January 1992; Executive Vice Financial Officer of Continental Can
President and Chief Financial Company from November 1984 to August
Officer of Silgan since January 1986. Vice President, Chief Financial
1989; Treasurer of Silgan since Officer and Treasurer of Sweetheart
1992; Vice President of Containers Holdings, Inc. and Vice President
and Plastics since January 1989; of Sweetheart Cup Company, Inc.
Treasurer of Plastics since from September 1989 to August 1993.
January 1994.
Harold J. Rodriguez, Jr. 39 Employed by Ernst & Young from 1978 to
Vice President of Holdings and 1987, last serving as Senior Manager
Silgan since March 1994; Vice specializing in taxation. Controller,
President of Containers and Assistant Secretary and Assistant
Plastics since March 1994; Treasurer of Sweetheart Holdings Inc.
Controller and Assistant Treasurer and Assistant Secretary and
of Holdings and Silgan since March Assistant Treasurer of Sweetheart
1990; Assistant Controller and Cup Company, Inc. from September 1989
Assistant Treasurer of Holdings to August 1993.
from April 1989 to March 1990;
Assistant Controller and
Assistant Treasurer of Silgan from
October 1987 to March 1990.
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<PAGE>
Mangement of Metal Container Business
In addition to the persons listed under "--Directors and Executive
Officers of Holdings and Silgan" above, the following are the principal
executive officers of Containers:
Age at
April 30, Five-Year Employment
Name and Position 1995 History and Other Directorships
Held
---------------------------------------------------------------------------
James D. Beam 52 Vice President - Marketing & Sales of
President and a non- Containers from September 1987 to
voting Director of July 1990; Vice President and General
Containers Manager of Continental Can Company,
since July 1990. Western Food Can Division, from
March 1986 to September 1987.
Gerald T. Wojdon 59 General Manager of Manufacturing of
Vice President - the Can Division of The Carnation
Operation and Assistant Company from August 1982 to August
Secretary of Containers 1987.
since September 1987.
Gary M. Hughes 53 Vice President, Sales and Marketing of
Vice President - Sales the Beverage Division of Continental
and Marketing of Can Company from February 1988 to
Containers July 1990; prior to February 1988, was
since July 1990. employed by Continental Can in
various regional sales positions.
Dennis Nerstad 57 Vice President of Containers from
Vice President - December 1993 to June 1994. Vice
Production Services of President - Distribution and Container
Containers since July 1994. Manufacturing of Del Monte from
August 1989 to December 1993;
Director of Container Manufacturing of
Del Monte from November 1983 to
July 1989; prior to 1983, employed by
Del Monte in various regional and plant
positions.
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<PAGE>
Management of Plastic Container Business
In addition to the persons listed under "--Directors and Executive
Officers of Holdings and Silgan" above, the following are the principal
executive officers of Plastics:
Age at
April 30, Five-Year Employment
Name and Position 1995 History and Positions
------------------------------------------------------------------------
Russell F. Gervais 51 President and Chief Executive Officer of
President and non-voting Aim Packaging, Inc. from March 1984 to
Director of Plastics since September 1989.
December 1992; Vice President -
Sales & Marketing of Plastics
from September 1989 until
December 1992.
Howard H. Cole 49 Manager of Personnel of Monsanto
Vice President and Engineered Products Division of the
Assistant Secretary of Monsanto Company from April 1986 to
Plastics since September September 1987.
1987.
Charles Minarik 57 President of Wheaton Industries Plastics
Vice President - Operations Group from February 1991 to August 1992;
Commercial Development of Vice President - Marketing of Constar
Plastics since May 1993. International, Inc. from March 1983 to
February 1991.
Alan H. Koblin 43 Vice President of Churchill Industries from
Vice President - Sales & 1990 to 1992.
Marketing of Plastics from
1992 to 1994.
Colleen J. Jones 35 Audit Manager, Arthur Young & Company
Vice President - Finance from July 1982 to July 1989.
and Chief Financial Officer
of Plastics since January
1995, Assistant Secretary
of Plastics since
November 1993, Corporate
Controller of Plastics from
October 1993 to January 1995,
Manager - Finance of Plastics
from July 1989 to October 1993.
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<PAGE>
Executive Compensation.
The following table sets forth information concerning the annual and
long term compensation for services rendered in all capacities to the Company
during the fiscal years ended December 31, 1994, 1993 and 1992 of those persons
who at December 31, 1994 were (i) the Chief Executive Officer of Holdings and
(ii) the other four most highly compensated executive officers of Holdings and
its subsidiaries. No director of Holdings or its subsidiaries receives any
compensation for serving as a director of Holdings or its subsidiaries. See
"Certain Transactions--Management Agreements."
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<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------ ------------
Awards
------
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary<F1><F2> Bonus<F1><F3> Compensation Stock Options/SARs<F4> Compensation<F5>
--------------------------- ---- ------------ ----------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver 1994 1,684,135 - - - -
(Chairman of the Board 1993 1,608,799 - - - -
and Co-Chief Executive 1992 1,528,844 - - - -
Officer of Holdings and
Silgan and Chairman of
the Board of Plastics)
D. Greg Horrigan 1994 1,684,135 - - - -
(President 1993 1,608,799 - - - -
and Co-Chief 1992 1,528,844 - - - -
Executive Officer of
Holdings and Silgan
and Chairman of the
Board of Containers)
Harley Rankin, Jr. 1994 384,930 - - 6,000 -
(Executive Vice President, 1993 347,598 - - - -
Chief Financial Officer and 1992 324,407 - - - -
Treasurer of Holdings and
Silgan and Vice President
of Containers and Plastics)
James D. Beam 1994 354,375 $169,092 - - $32,491
(President of Containers) 1993 239,949 65,277 - - 24,883
1992 231,949 65,497 - - 24,215
Russell F. Gervais 1994 218,553 83,300 - 600 -
(President of Plastics) 1993 210,000 - - - -
___________________ 1992 165,585 - - - -
<FN>
<F1> The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez
reflects amounts as earned and was paid by S&H. Such persons received
no direct compensation from Holdings, Silgan or their respective
subsidiaries. See "Certain Transactions--Management Agreements."
<F2> The salaries of Messrs. Beam and Gervais were paid by
Containers and Plastics, respectively.
<F3> Bonuses of Messrs. Beam and Gervais were earned by them in such year and
paid in the following year, pursuant to the Silgan Containers
Corporation Performance Incentive Plan and the Silgan Plastics
Corporation Incentive Plan, respectively. Under such plans, executive
officers and other key employees of Containers and Plastics may be
awarded cash bonuses provided that such company achieves certain
assigned financial targets.
<F4> Reflects options to purchase, and tandem SARs relating to, shares of
Holdings Class C common stock, par value $.01 per share (the "Holdings
Class C Stock") granted under the Silgan Holdings Inc. Second Amended
and Restated 1989 Stock Option Plan (the "Holdings Plan") in the case of
Mr. Rankin, and Plastics' common stock granted under the Silgan Plastics
Corporation 1994 Stock Option Plan (the "Plastics Plan") in the case of
Mr. Gervais. Such options and tandem SARs become exercisable ratably
over a five-year period beginning on January 1, 1995.
<F5> Reflects amounts contributed by Containers under the Silgan Containers
Corporation Deferred Incentive Savings Plan (the "Savings Plan").
Containers contributes to the Savings Plan an amount each year based on
its profits for such year, as determined by Containers' board of
directors. Such contribution is allocated proportionately to
participants in accordance with their compensation. A participant's
allocable share of such contribution becomes fully vested after five
years of service or, if earlier, upon reaching age 55, death, total and
permanent disability or termination on account of the sale or closure of
a work facility.
[/FN]
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation For Option Term <F3>
------------------------------------------------ ------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Option/SARs Employees in Base Price
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
----- ----------- ------------- ------------ --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver......... -- -- -- -- -- --
D. Greg Horrigan......... -- -- -- -- -- --
Harley Rankin, Jr. <F1>... 6,000 66.67% $60.71 December 31, 2003 $229,080 $580,060
James D. Beam............ -- -- -- -- -- --
Russell F. Gervais <F2>... 600 66.67% $126.00 December 31, 2003 $47,544 $120,486
-------------------
<FN>
<F1> Reflects options to purchase, and tandem SARs relating to, shares of
Holdings Class C Stock granted under the Holdings Plan.
<F2> Reflects options to purchase, and tandem SARs relating to, shares of
Plastics' common stock granted under the Plastics Plan. In the event of
a public offering by Holdings or a change of control of Holdings, such
options and tandem SARs would be converted into options and tandem SARs
under the Holdings Plan as provided in the Plastics Plan.
<F3> The 5% and 10% assumed annual rates of appreciation were set by the
Securities and Exchange Commission and are not intended to forecast
future appreciation, if any, of the stock underlying such options. If
such stock does not increase in value, then these option and tandem SAR
grants will be valueless.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR VALUES AT DECEMBER 31, 1994
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
December 31, 1994 December 31, 1994
----------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver..................... -- -- -- --
D. Greg Horrigan..................... -- -- -- --
Harley Rankin, Jr. <F1>.............. 11,200 4,800 -- --
James D. Beam<F2><F3>................. 432 48 $1,109,854 $59,209
Russell F. Gervais <F4>............... 120 480 -- --
-------------------
<FN>
<F1> Options are for, and tandem SARs relate to, shares of Holdings Class C
Stock. Value is determined based upon 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 by Holdings or a change of control
of Holdings, value would be based on fair market value as provided
in the Holdings Plan.
<F2> Options are for, and tandem SARs relate to, shares of Containers'
common stock. As of December 31, 1994, 13,754 shares of Containers'
common stock are issued and outstanding and an additional 1,200 shares
of Containers' common stock are authorized for issuance under the Silgan
Containers Corporation Second Amended and Restated 1989 Stock Option
Plan (the "Containers Plan"). Value is determined based upon 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 by Holdings
or a change of control of Holdings, such options and tandem SARs
would be converted into options and tandem SARs
-52-
<PAGE>
under the Holdings Plan as provided in the Containers Plan, and value
would be based on fair market value as determined under the Holdings Plan.
<F3> 240 options and tandem SARs were granted in June 1989 under the
Containers Plan and an additional 240 options and tandem SARs were
granted in July 1990 under the Containers Plan. The book value, as
computed under the Containers Plan, for the shares underlying the
options and tandem SARs exceeds the exercise price therefor.
<F4> Options are for, and tandem SARs relate to, shares of Plastics' common
stock. As of December 31, 1994, 13,800 shares of Plastics' common stock
are issued and outstanding and an additional 1,200 shares of Plastics'
common stock are authorized for issuance under the Plastics Plan. The
options and related SARs are not exercisable until a public offering by
Holdings or a change of control of Holdings shall have occurred. At the
time of such public offering or change of control, such options and
tandem SARs would be converted into options and tandem SARs under the
Holdings Plan as provided in the Plastics Plan, and value would
be based upon the fair market value of such options and
tandem SARs as determined under the Holdings Plan.
</FN>
</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.
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. In connection with the acquisition of DM
Can, employees of Del Monte that were employed by Containers are also covered by
the Containers Pension Plan . Generally, the Containers Pension Plan credits
such employees with their prior service with Del Monte for purposes of
eligibility, vesting and benefit accrual.
The Containers Pension Plan was amended effective July 1, 1994 to
eliminate mandatory employee contributions, and to substantially revise the
benefit formula. The new formula is based on a percentage of the
participant's average base pay over the final three years of employment,
multiplied by the participant's years of service (not to exceed 35). The
particular percentage applied in the formula depends on when the participant's
services were performed and on whether the participant's average base salary
exceeds "covered compensation" (the average of Social Security wage bases for
the 35 years preceding retirement). For service performed through June 30, 1994,
the percentage is 1.3% up to covered compensation, and 1.75% above covered
compensation. For service performed after June 30, 1994, the percentage is .75%
up to covered compensation, and 1.2% above covered compensation. In no event
will a participant's benefit be less than the benefit accrued as of June 30,
1994 under the prior benefit formula. Average base pay used in the benefit
formula consists of 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.
-53-
<PAGE>
<TABLE>
<CAPTION>
Containers Pension Plan Table
Final Average Years of Service
Earnings 10 15 20 25 30 35
--------- ----- ----- ----- ----- ----- -----
<C> <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, 1994, the years of credited service under the
Containers Pension Plan for the eligible executive officer named in the
Summary Compensation Table is as follows: James D. Beam, 7.
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.
-54-
<PAGE>
<TABLE>
<CAPTION>
Plastics Pension Plan Table
Final Average Years of Service
Earnings 10 15 20 25 30 35
--------- ------- ------- -------- ------- ------- --------
<C> <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.
As of December 31, 1994, the years of credited service under the Plastics
Pension Plan for the eligible executive officer named in the Summary
Compensation Table is as follows: Russell F. Gervais, 5 .
Certain Employment Agreements
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Gervais) have executed employment
agreements. The initial term of each such employment agreement 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 Prospectus.
-55-
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners of Holdings' Capital Stock
The following table sets forth, as of April 30, 1995, 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. <F4>......... -- -- 11,200<F5> -- -- 16.77% --
James D. Beam <F6>.............. -- -- -- -- -- -- --
Russell F.Gervais <F7>.......... -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, L.P. <F8>...... -- 417,500 -- -- 62.55% -- 38.48%
Mellon Bank, N.A., as trustee for
First Plaza Group Trust <F9>... -- 250,000 -- -- 37.45% -- 23.04%
All officers and directors as a
group......................... 417,500 -- 16,800<F5> 100% -- 25.15%<F10> 38.48%
-------------------
<FN>
<F1> This column reflects the percentage ownership of voting common stock
that would exist if Holdings Class A Stock and Holdings Class B Stock
were treated as a single class. Holdings Class C Stock generally does
not have voting rights and is not included in the percentage ownership
reflected in this column. See "Description of Holdings Common
Stock--General."
<F2> Director of Holdings and Silgan. Messrs. Silver and Horrigan are
parties to a voting agreement pursuant to which they have agreed to
use their best efforts to vote their shares as a block. The address
for such person is 4 Landmark Square, Stamford, CT 06901.
<F3> Director of Holdings and Silgan. The address for such person is c/o
Morgan Stanley & Co. Incorporated, 1221 Avenue of the Americas, New
York, NY 10020.
<F4> The address for such person is 4 Landmark Square, Stamford, CT 06901.
<F5> Reflects shares that may be acquired through the exercise of vested
stock options granted pursuant to the Holdings Plan.
<F6> Options to purchase shares of common stock of Containers and tandem
SARs have been granted to such person pursuant to the Containers Plan.
Pursuant to the Containers Plan, such options may be converted into
stock options of Holdings (and the Containers' common stock issuable
upon exercise of such options may be converted into common stock of
Holdings) in the event of a public offering of any of Holdings' common
stock or a change of control of Holdings. The address for such person
is 21800 Oxnard Street, Woodland Hills, CA 91367.
<F7> Options to purchase shares of common stock of Plastics and tandem SARs
have been granted to such person pursuant to the Plastics Plan.
Pursuant to the Plastics Plan, such options may be converted into
stock options of Holdings in the event of a public offering of any of
Holdings' common stock or a change of control of Holdings. The address
for such person is 14515 N. Outer Forty, Chesterfield, MO 63017.
-56-
<PAGE>
<F8> The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is
1221 Avenue of the Americas, New York, NY 10020.
<F9> The address for First Plaza Group Trust is c/o General Motors
Investment Management Corporation, 767 Fifth Avenue, New York, NY
10153. Mellon Bank, N.A. ("Mellon") acts as the trustee for First
Plaza, a trust under and for the benefit of certain employee benefit
plans of General Motors Corporation ("GM") and its subsidiaries. These
shares may be deemed to be owned beneficially by General Motors
Investment Management Corporation ("GMIMCo"), a wholly owned
subsidiary of GM. GMIMCo is serving as First Plaza's investment
manager with respect to these shares and in that capacity it has the
sole power to direct Mellon as to the voting and disposition of these
shares. Because of Mellon's limited role, beneficial ownership of the
shares by Mellon is disclaimed.
<F10> Bankers Trust New York Corporation ("BTNY") beneficially owns 50,000
shares of Holdings Class C Stock.
[/FN]
</TABLE>
See "Description of Holdings Common Stock" for additional information
about the common stock of Holdings, the holders thereof and certain arrangements
among them.
CERTAIN TRANSACTIONS
Management Agreements
Holdings, Silgan, Containers and Plastics each entered into an amended
and restated management services agreement dated as of December 21, 1993
(collectively, the "Management Agreements") with S&H to replace in its entirety
its existing management services agreement, as amended, with S&H. Pursuant to
the Management Agreements, S&H provides Holdings, Silgan, Containers and
Plastics and their respective subsidiaries with general management and
administrative services (the "Services"). The Management Agreements provide for
payments to S&H (i) on a monthly basis, of $5,000 plus an amount equal to 2.475%
of consolidated earnings before depreciation, interest and taxes of Holdings and
its subsidiaries ("Holdings EBDIT"), for such calendar month until Holdings
EBDIT for the calendar year shall have reached an amount set forth in the
Management Agreements for such calendar year (the "Scheduled Amount") and 1.65%
of Holdings EBDIT for such calendar month to the extent that Holdings EBDIT for
the calendar year shall have exceeded the Scheduled Amount but shall not have
been greater than an amount (the "Maximum Amount") set forth in the Management
Agreements (the "Monthly Management Fee") and (ii) on a quarterly basis, of an
amount equal to 2.475% of Holdings EBDIT for such calendar quarter until
Holdings EBDIT for the calendar year shall have reached the Scheduled Amount and
1.65% of Holdings EBDIT for such calendar quarter to the extent that Holdings
EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall
not have been greater than the Maximum Amount (the "Quarterly Management Fee").
The Scheduled Amount was $71.5 million for the calendar year 1994 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
Silgan Credit Agreement have occurred, the Quarterly Management Fee shall
continue to accrue, but shall not be paid to S&H until the fulfillment of
certain conditions, as set forth in the Management Agreements.
The Management Agreements continue in effect until the earliest of: (i)
the completion of an IPO (as defined in "Description of Holdings Common
Stock--Description of the Holdings Organization Agreement"); (ii) June 30, 1999;
(iii) at the option of each of the respective companies, the failure or refusal
of S&H to perform its obligations under the Management Agreements, if such
failure continues unremedied for more than 60 days after written notice of its
existence shall have been given; (iv) at the option of MSLEF II (a) if S&H
-57-
<PAGE>
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--General").
In addition to the management fees described above, the Management
Agreements provide for the payment to S&H on the closing date of the IPO of an
amount, if any (the "Additional Amount") equal to the sum of the present values,
calculated for each year or portion thereof, of (i) the amount of the annual
management fee for such year or portion thereof that otherwise would have been
payable to S&H for each such year or portion thereof for the period beginning as
of the time of the IPO and ending on June 30, 1999 (the "Remaining Term")
pursuant to the provisions described in the preceding paragraph but for the
occurrence of the IPO, minus (ii) the amount payable to S&H for the Remaining
Term at the rate of $2.0 million per year. The Management Agreements further
provide that the amounts described in clause (i) of the first sentence of this
paragraph will be calculated based upon S&H's good faith projections of Holdings
EBDIT for each such year (or portion thereof) during the Remaining Term (the
"Estimated Fees"), which projections shall be made on a basis consistent with
S&H's past projections. The difference between the amount of Estimated Fees for
any particular year and $2 million shall be discounted to present value at the
time of the IPO using a discount rate of eight percent (8%) per annum,
compounded annually.
Additionally, the Management Agreements provide that Holdings, Silgan,
Containers, Plastics and their respective subsidiaries shall reimburse S&H, on a
monthly basis, for all out-of-pocket expenses paid by S&H in providing the
Services, including fees and expenses to consultants, subcontractors and other
third parties, in connection with such Services. All fees and expenses paid to
S&H under each of the Management Agreements are credited against amounts paid to
S&H under the other Management Agreements. Under the terms of the Management
Agreements, Holdings, Silgan, Containers and Plastics have agreed, subject to
certain exceptions, to indemnify S&H and its affiliates, officers, directors,
employees, subcontractors, consultants or controlling persons against any
losses, damages, costs and expenses they may sustain arising in connection with
the Management Agreements.
The Management Agreements also provide that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H has retained Morgan Stanley
to render financial advisory services to S&H. In connection with such retention,
S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of the fees paid to S&H
under the Management Agreements.
The Silgan Credit Agreement does not permit the payment of fees under
the Management Agreements above amounts provided for therein.
For the years ended December 31, 1994, 1993 and 1992 , pursuant to the
arrangements described above, S&H earned aggregate fees, including reimbursable
expenses and fees payable to Morgan Stanley, of $5.0 million, $4.4 million and
$4.2 million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1994, 1993 and 1992 Morgan Stanley earned fees of $383,000, $337,000 and
$324,000 , respectively.
-58-
<PAGE>
Other
In connection with the 1989 Mergers, subject to the provisions of
Delaware law, Silgan agreed to indemnify each director, officer, employee,
fiduciary and agent of Silgan, 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
Silgan'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, Silgan, Plastics and
Containers that permits Silgan and its subsidiaries to use the tax benefits
provided by the debt of Holdings and permits funds to be provided to Holdings
from Silgan 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, Silgan 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 Silgan
Notes Offering and the Debentures Offering and as initial purchaser of the
Secured Notes an aggregate of $11.5 million. In connection with the Silgan
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 Holdings and Silgan, is a partner in the
law firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson, Putnam &
Roberts provides legal services to Holdings, Silgan and their subsidiaries.
DESCRIPTION OF THE DEBENTURES
The Debentures were issued under the Indenture, dated as of June 29,
1992, between Holdings and Shawmut Bank, N.A. (formerly The Connecticut National
Bank), as Trustee (the "Trustee"). A copy of the Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part and is
available as described under "Additional Information." The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part thereof by the Trust Indenture Act of 1939, as
amended. Wherever particular Sections or defined terms of the Indenture not
otherwise defined herein are referred to, such Sections or defined terms are
incorporated herein by reference. Capitalized terms used herein that are not
otherwise defined shall have the meanings assigned to them in the Indenture.
For federal income tax purposes, Holders are required to recognize
interest income in respect of the Debentures in the form of original issue
discount in advance of the receipt of cash payments attributable to interest
income on such Debentures. See "Certain Federal Income Tax Considerations" for
important information concerning the federal income tax considerations
associated with the Debentures.
-59-
<PAGE>
General
The Debentures are unsecured obligations of Holdings, limited to $275
million aggregate principal amount, and mature on December 15, 2002. Although
for federal income tax purposes a significant amount of original issue discount,
taxable as ordinary income, will be recognized by a Holder as such discount
accrues from the issue date of the Debentures, no interest is payable on the
Debentures prior to December 15, 1996. Interest on the Debentures will accrue at
the rate per annum shown on the front cover of this Prospectus from June 15,
1996 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semiannually (to Holders of record at the close of
business on June 1 or December 1 immediately preceding the Interest Payment
Date) on June 15 and December 15 of each year, commencing December 15, 1996.
Principal of, premium, if any, and interest on the Debentures are payable, and
the Debentures may be exchanged or transferred, at the office or agency of
Holdings in the Borough of Manhattan, The City of New York (which shall
initially be the office of Shawmut Trust Company, at 40 Broad Street, New York,
New York 10004 ); provided that, at the option of Holdings, payment of interest
may be made by check mailed to the address of the Holders as such address
appears in the Security Register. (Sections 2.01, 2.03 and 2.05)
The Debentures are issuable only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000.
(Section 2.02) No service charge shall be made for any registration of transfer
or exchange of Debentures, but Holdings may require payment of a sum sufficient
to cover any transfer tax or other similar governmental charge payable in
connection therewith. (Section 2.05)
Subordination upon Certain Events
The Debentures are senior indebtedness of Holdings, ranking pari passu
with Holdings' obligations under all other senior indebtedness of Holdings and
senior in right of payment to all existing and future subordinated indebtedness
of Holdings. However, since all of the operations of Holdings are conducted
through its subsidiaries, the liabilities of its subsidiaries are effectively
senior in right of payment to the Debentures. As of March 31, 1995, Silgan and
its subsidiaries had approximately $460.9 million of indebtedness and other
liabilities effectively senior to the Debentures. See "Capitalization."
In the event that the Debentures become obligations of any Successor
Corporation, whether as a result of (i) a Holdings Merger, (ii) the sale of all
or substantially all of the property and assets of Silgan or its successors to
Holdings, and the assumption by Holdings of all or substantially all of the
liabilities of Silgan or its successors or (iii) the assumption by Silgan or its
successors of Indebtedness represented by the Debentures, all Subordinated
Obligations, including the Debentures, will be subordinated in right of payment
to all Senior Indebtedness of such Successor Corporation existing on the date of
such transaction or assumed or incurred thereafter. As of March 31, 1995, if an
event as described in clause (i), (ii) or (iii) of the preceding sentence had
occurred on such date or if Silgan had assumed the Debentures at such date,
there would have been approximately $317.3 million of Indebtedness that would
have constituted Senior Indebtedness and approximately $460.9 million of
Indebtedness and other liabilities effectively senior to the Debentures. See
"Certain Risk Factors--Holding Company Structure and Subordination Upon Certain
Events." Other than as set forth in this paragraph, the Debentures are not
subordinated by their terms to any other existing or future Indebtedness of
Holdings or its successors.
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Successor Corporation, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then, if such
payment is recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Indebtedness or
part thereof originally intended
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to be satisfied shall be deemed to be reinstated and outstanding as if such
payment had not occurred. To the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligations so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligations
not been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes of the Indenture as if such declaration,
invalidity or setting aside had not occurred. Upon any payment or distribution
of assets or securities of the Successor Corporation of any kind or character,
whether in cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of the Successor Corporation,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Senior Indebtedness
(including any interest accruing subsequent to an event of bankruptcy, whether
or not such interest is an allowed claim enforceable against the debtor under
the United States Bankruptcy Code) shall first be paid in full, in cash or cash
equivalents before the Holders or the Trustee on behalf of the Holders shall be
entitled to receive any payment by the Successor Corporation on account of
Subordinated Obligations, or any payment to acquire any of the Debentures for
cash, property or securities, or any distribution with respect to the Debentures
of any cash, property or securities. Before any payment may be made by or on
behalf of the Successor Corporation of any Subordinated Obligations upon any
such dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities of the Successor Corporation of any kind or
character, whether in cash, property or securities, to which the Holders or the
Trustee on behalf of the Holders would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Successor Corporation or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person making such payment or distribution, or by the Holders or the Trustee if
received by them or it, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives, or to the trustee
or trustees under any indenture pursuant to which any such Senior Indebtedness
may have been issued, as their respective interests appear, to the extent
necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents after giving effect to any concurrent payment, distribution or
provision therefor, to or for the holders of such Senior Indebtedness.
No direct or indirect payment by or on behalf of the Successor
Corporation of Subordinated Obligations, whether pursuant to the terms of the
Debentures or upon acceleration or otherwise, shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
holders of such Senior Indebtedness. In addition, during the continuance of any
other event of default with respect to (i) the Silgan Credit Agreement or the
Secured Notes pursuant to which the maturity thereof may be accelerated and (a)
upon receipt by the Trustee of written notice from the Bank Agent or, if there
is no Silgan Credit Agreement in effect, from an authorized representative of
the Requisite Secured Noteholders or (b) if such event of default under the
Silgan Credit Agreement or the Secured Notes results from the acceleration of
the Debentures, from and after the date of such acceleration, no payment of
Subordinated Obligations may be made by or on behalf of the Successor
Corporation upon or in respect of the Debentures for a period (a "Payment
Blockage Period") commencing on the earlier of the date of receipt of such
notice or the date of such acceleration and ending 159 days thereafter (unless
such Payment Blockage Period shall be terminated by written notice to the
Trustee from the Bank Agent or, if there is no Silgan Credit Agreement in
effect, from an authorized representative of the Requisite Secured Noteholders
or such event of default has been cured or waived) or (ii) any other Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated,
upon receipt by the Trustee of written notice from the trustee or other
representative for the holders of such other Designated Senior Indebtedness (or
the holders of at least majority in principal amount of such other Designated
Senior Indebtedness then outstanding), no payment of Subordinated Obligations
may be made by or on behalf of the Successor Corporation upon or in respect of
the Debentures for a Payment Blockage Period commencing on the date of receipt
of such notice and ending 119 days thereafter (unless, in each case, such
Payment Blockage Period shall be terminated by written notice to the Trustee
from such trustee
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or other representatives for such holders). Not more than one Payment Blockage
Period may be commenced with respect to the Debentures during any period of 360
consecutive days; provided that, subject to the limitation contained in the next
sentence, the commencement of a Payment Blockage Period by the representatives
for, or the holders of, Designated Senior Indebtedness other than under the
Silgan Credit Agreement, the Secured Notes or under clause (i)(b) of this
paragraph shall not bar the commencement of another Payment Blockage Period by
the Bank Agent or, if there is no Silgan Credit Agreement in effect, by an
authorized representative of the Requisite Secured Noteholders within such
period of 360 consecutive days. Notwithstanding anything in the Indenture to the
contrary, there must be 180 consecutive days in any 360-day period in which no
Payment Blockage Period is in effect. No event of default (other than an event
of default pursuant to the financial maintenance covenants under the Silgan
Credit Agreement) that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose) on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis for the commencement of a second Payment Blockage Period by the
representative for, or the holders of, such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days. (Article Ten)
By reason of the subordination provisions described above, in the event
of liquidation or insolvency, creditors of the Successor Corporation who are not
holders of Senior Indebtedness or of the Debentures may recover less, ratably,
than holders of Senior Indebtedness and may recover more, ratably, than Holders
of the Debentures.
"Successor Corporation" is defined to mean (i) the surviving entity of
any Holdings Merger, (ii) Silgan, upon the assumption by Silgan of the
liabilities of Holdings represented by the Debentures or (iii) any successor
corporation to Silgan that becomes the successor obligor on the Debentures,
whether by merger, consolidation, sale of assets, assumption of liabilities or
otherwise. (Section 1.01)
"Senior Indebtedness" is defined to mean the following obligations of
the Successor Corporation: (i) all Indebtedness and other monetary obligations
of the Successor Corporation under the Silgan Credit Agreement, the Secured
Notes (including the Secured Notes Purchase Agreement), the 11-3/4% Notes
(including any agreement pursuant to which the 11-3/4% Notes are issued), any
Interest Rate Agreement or any Currency Agreement, (ii) all other Indebtedness
of the Successor Corporation (other than Indebtedness evidenced by the
Debentures), including principal and interest on such Indebtedness, unless such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Debentures and (iii) all fees, expenses
and indemnities payable in connection with the Silgan Credit Agreement, the
Secured Notes (including the Secured Notes Purchase Agreement), the 11-3/4%
Notes (including any agreement pursuant to which the 11-3/4% Notes are issued)
and, if applicable, Currency Agreements and Interest Rate Agreements; provided
that the term "Senior Indebtedness" shall not include (a) any Indebtedness of
the Successor Corporation that, when Incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code, was without
recourse to the Successor Corporation, (b) any Indebtedness of the Successor
Corporation to a Subsidiary of the Successor Corporation or to a joint venture
in which the Successor Corporation has an interest, (c) any Indebtedness of the
Successor Corporation (other than such Indebtedness already described in clause
(i) above) of the type described in clause (ii) above and not permitted by the
"Limitation on Indebtedness" covenant described in "--Covenants" below, (d) any
repurchase, redemption or other obligation in respect of Redeemable Stock, (e)
any Indebtedness to any employee or officer of the Successor Corporation or any
of its Subsidiaries, (f) any liability for federal, state, local or other taxes
owed or owing by the Successor Corporation or (g) any Trade Payables. "Senior
Indebtedness" also includes interest accruing subsequent to events of bankruptcy
of
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the Successor Corporation and its Subsidiaries at the rate provided for in the
document governing such Indebtedness, whether or not such interest is an allowed
claim enforceable against the debtor in a bankruptcy case under federal
bankruptcy law. (Section 1.01)
"Designated Senior Indebtedness" is defined to mean (i) Indebtedness
under the Silgan Credit Agreement and the Secured Notes (including the Secured
Notes Purchase Agreement), including refinancings thereof if it is specifically
designated by Holdings, Silgan or the Successor Corporation in the instrument
creating or evidencing such refinancing Indebtedness that such refinancing
Indebtedness constitutes "Designated Senior Indebtedness" and (ii) any other
Indebtedness constituting Senior Indebtedness that, at any date of
determination, has an aggregate principal amount of at least $25 million and is
specifically designated by Holdings, Silgan or the Successor Corporation in the
instrument creating or evidencing such Senior Indebtedness as "Designated Senior
Indebtedness." (Section 1.01)
Optional Redemption
The Debentures are redeemable at any time, at Holdings' option, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at a Redemption Price equal to 100% of their principal amount plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date). (Sections 3.01 and 3.04)
Selection. In the case of any partial redemption, selection of the
Debentures for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Debentures are listed or, if the Debentures are not listed on a national
securities exchange, on a pro rata basis, by lot or by such other method as the
Trustee in its sole discretion shall deem to be fair and appropriate; provided
that no Debenture of $1,000 in original principal amount or less shall be
redeemed in part. If any Debenture is to be redeemed in part only, the notice of
redemption relating to such Debenture shall state the portion of the principal
amount thereof to be redeemed. A new Debenture in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Debenture. (Sections 3.03 and 3.04)
The Holdings Guaranty (as defined in "Description of Certain Silgan
Indebtedness--Description of the Silgan Credit Agreement") contains a covenant
prohibiting the optional redemption of the Debentures. See "Description of
Certain Silgan Indebtedness--Description of the Silgan Credit Agreement."
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided. (Section
1.01)
"Accreted Value" is defined to mean an amount in respect of each
outstanding Debenture equal to the sum of (i) the issue price of such Debenture
as determined in accordance with Section 1273 of the Internal Revenue Code plus
(ii) the aggregate of the portions of the original issue discount (the excess of
the amounts considered as part of the "stated redemption price at maturity" of
such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue
Code or any successor provision, whether denominated as principal or interest,
over the issue price of such Debenture) that shall theretofore have accrued
pursuant to Section 1272 of the Internal Revenue Code (without regard to Section
1272(a)(7) of the Internal Revenue Code) from the date of issue of such
Debenture (a) for each six month or shorter period ending June 15 or December 15
prior to
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the date of determination and (b) for the shorter period, if any, from the end
of the immediately preceding six month period, as the case may be, to the date
of determination plus (iii) accrued interest to the date such Accreted Value is
paid (without duplication of any amount set forth in (ii) above), minus all
amounts theretofore paid in respect of such Debenture, which amounts are
considered as part of the "stated redemption price at maturity" of such
Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue Code
or any successor provision (whether such amounts paid were denominated principal
or interest).
"Adjusted Consolidated Net Income" is defined to mean, for any period,
the aggregate net income (or loss) of any Person and its consolidated
Subsidiaries for such period determined in conformity with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of such Person (other
than a Subsidiary of such Person) in which any other Person (other than such
Person or any of its Subsidiaries) has a joint interest, except to the extent of
the amount of dividends or other distributions actually paid to such Person or
any of its Subsidiaries by such other Person during such period; (ii) solely for
the purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described in "--Covenants" below (and in such case, except to
the extent includible pursuant to clause (i) above), the net income (or loss) of
such Person accrued prior to the date it becomes a Subsidiary of any other
Person or is merged into or consolidated with such other Person or any of its
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by such other Person or any of its Subsidiaries; (iii) the
net income (or loss) of any Subsidiary of any Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such net income is not at the time permitted by the operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Subsidiary; (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales; (v) any amounts paid
or accrued as dividends on Preferred Stock of such Person or Preferred Stock of
any Subsidiary of such Person; (vi) any amounts reducing Adjusted Consolidated
Net Income resulting from payments made to holders of stock options or stock
appreciation rights resulting from the 1989 Mergers; and (vii) all extraordinary
gains and extraordinary losses; provided that, solely for the purposes of
calculating the Interest Coverage Ratio (and in such case, except to the extent
includible pursuant to clause (i) above), "Adjusted Consolidated Net Income" of
Holdings shall include the amount of all cash dividends received by Holdings or
any Subsidiary of Holdings from an Unrestricted Subsidiary.
"Affiliate" is defined to mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person, is
defined to mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. For
purposes of this definition, neither the Bank Agent nor any Bank nor any
affiliate of any of them shall be deemed to be an Affiliate of Holdings or any
Subsidiary of Holdings.
"Asset Acquisition" is defined to mean (i) an investment by Holdings or
any of its Subsidiaries in any other Person pursuant to which such Person shall
become a Subsidiary of Holdings or any of its Subsidiaries or shall be merged
into or consolidated with Holdings or any of its Subsidiaries or (ii) an
acquisition by Holdings or any of its Subsidiaries of the property and assets of
any Person other than Holdings or any of its Subsidiaries that constitute
substantially all of an operating unit or business of such Person.
"Asset Disposition" is defined to mean the sale or other disposition by
Holdings or any of its Subsidiaries (other than to Holdings or another
Subsidiary of Holdings) of (i) all or substantially all of the Capital Stock of
any Subsidiary of Holdings or (ii) all or substantially all of the property and
assets that constitute an operating unit or business of Holdings or any of its
Subsidiaries.
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"Asset Sale" is defined to mean, with respect to any Person, any sale,
transfer or other disposition (including by way of merger, consolidation or
sale-leaseback transaction) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person other than
Holdings or any of its Subsidiaries of (i) all or any of the Capital Stock of
any Subsidiary of such Person, (ii) all or substantially all of the property and
assets of an operating unit or business of such Person or any of its
Subsidiaries or (iii) any other property and assets of such Person or any of its
Subsidiaries outside the ordinary course of business of such Person or such
Subsidiary and, in each case, that is not governed by the provisions in the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of Holdings; provided that sales or
other dispositions of inventory, receivables and other current assets shall not
be included within the meaning of such term.
"Average Life" is defined to mean, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the product of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bank Agent" is defined to mean Bankers Trust Company, as agent for the
Banks pursuant to the Silgan Credit Agreement, and any successor or successors
thereto.
"Banks" is defined to mean the lenders who are from time to time parties
to the Silgan Credit Agreement.
"Board of Directors" is defined to mean the Board of Directors of
Holdings or any committee of such Board of Directors duly authorized to act
under the Indenture.
"Business Day" is defined to mean any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock of such Person which is
outstanding or issued on or after the date of the Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" is defined to mean such time as (i) (a) a "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than MSLEF II, Mr. Silver, Mr. Horrigan and their respective
Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 35% of the total voting power of the then outstanding
Voting Stock of Holdings and (b) MSLEF II, Mr. Horrigan, Mr. Silver and their
respective Affiliates beneficially own, directly or indirectly, less than 25% of
the total voting power of the then outstanding Voting Stock of Holdings; (ii)
individuals who at the beginning of any period of two consecutive calendar years
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by Holdings'
shareholders was approved by a vote of at least two-thirds of the members of the
Board of Directors then still in office who either were members of the Board of
Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the
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Board of Directors then in office; (iii) (a) Holdings merges into or
consolidates with any other Person or sells, conveys, transfers, leases or
otherwise disposes of, all or substantially all of its property and assets to
any Person or (b) any Person merges into Holdings, in either case pursuant to a
transaction in which any Voting Stock of Holdings outstanding immediately prior
to the effectiveness thereof is reclassified or changes into or is exchanged for
cash, securities or other property; provided that any merger, consolidation,
sale, transfer, lease or other disposition (1) between Holdings and Silgan, (2)
between Holdings and any of its Subsidiaries or between Subsidiaries (including,
without limitation, the reincorporation of Holdings in another jurisdiction) or
(3) for the purpose of creating a public holding company for Holdings in which
all holders of the Capital Stock of Holdings would be entitled to receive (other
than cash in lieu of fractional shares) solely Capital Stock of the holding
company in amounts proportionate to their holdings of Capital Stock of Holdings
immediately prior to such transaction, shall be excluded from the operation of
this clause (iii); or (iv) Holdings shall not beneficially own, directly or
indirectly, at least a majority of the issued and outstanding Voting Stock of
Silgan other than as a result of a Holdings Merger.
"Closing Date" is defined to mean the date on which the Debentures are
originally issued under the Indenture.
"Common Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations and other equivalents (however designated,
whether voting or non-voting) of common stock of such Person which is
outstanding or issued on or after the date of the Indenture, including, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" is defined to mean, with respect to any Person for
any period, the sum of the amounts for such period of (i) Adjusted Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) income taxes (other than
income taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation expense,
(v) amortization expense and (vi) all other noncash items reducing Adjusted
Consolidated Net Income, less all noncash items increasing Adjusted Consolidated
Net Income, all as determined on a consolidated basis for such Person and its
Subsidiaries in conformity with GAAP; provided that, if a Person has any
Subsidiary that is not a Wholly Owned Subsidiary of such Person, Consolidated
EBITDA of such Person shall be reduced by an amount equal to (a) the Adjusted
Consolidated Net Income of such Subsidiary multiplied by (b) the quotient of (1)
the number of shares of outstanding Common Stock of such Subsidiary not owned on
the last day of such period by such Person or any Subsidiary of such Person
divided by (2) the total number of shares of outstanding Common Stock of such
Subsidiary on the last day of such period.
"Consolidated Interest Expense" is defined to mean, with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; and the net costs associated with
Interest Rate Agreements) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or accrued by such Person during such period; excluding, however, (i) any amount
of such interest of any Subsidiary of such Person if the net income (or loss) of
such Subsidiary is excluded in the calculation of Adjusted Consolidated Net
Income for such Person pursuant to clause (iii) of the definition thereof (but
only in the same proportion as the net income (or loss) of such Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income for such
Person pursuant to clause (iii) of the definition thereof), (ii) any premiums,
fees and expenses (and any amortization thereof) payable in connection with the
1989 Mergers and the Refinancing and (iii) amortization of any other deferred
financing costs, all as determined on a consolidated basis in conformity with
GAAP.
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"Consolidated Net Tangible Assets" is defined to mean the total amount
of assets of Holdings and its Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of Holdings and its consolidated Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recently available consolidated balance sheet of Holdings and
its consolidated Subsidiaries prepared in conformity with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of
determination, stockholders' equity as set forth on the most recently available
consolidated balance sheet of Holdings and its consolidated Subsidiaries (which
shall be as of a date not more than 60 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Capital Stock of Holdings or any of its Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect Holdings or any of its Subsidiaries against fluctuations in currency
values to or under which Holdings or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"GAAP" is defined to mean generally accepted accounting principles in
the United States of America as in effect as of the date of the Indenture
applied on a basis consistent with the principles, methods, procedures and
practices employed in the preparation of Holdings' audited financial statements,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP, except that calculations made for purposes of determining
compliance with the terms of the covenants described below and other provisions
of the Indenture shall be made without giving effect to (i) the amortization of
any expenses incurred in connection with the 1989 Mergers or the Refinancing,
(ii) except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17 and (iii) any
charges associated with the adoption of Financial Accounting Standard Nos. 106
and 109.
"Guarantee" is defined to mean any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" is defined to mean the registered holder of any Debenture.
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"Holdings Merger" is defined to mean the merger or consolidation of
Holdings and Silgan or either of their successors.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness; provided that neither the accrual of interest (whether such
interest is payable in cash or kind) nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any
date of determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (a) the fair market value of such asset at such date of
determination and (b) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person, (viii) all obligations of such Person in respect of
borrowed money under the Silgan Credit Agreement, the Secured Notes (including
the Secured Notes Purchase Agreement) and any Guarantees thereof and (ix) to the
extent not otherwise included in this definition, all obligations of such Person
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date; provided that the amount outstanding
at any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP.
"Interest Coverage Ratio" is defined to mean, with respect to any Person
on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated
EBITDA of such Person for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to such
Transaction Date to (ii) the aggregate Consolidated Interest Expense of such
Person during such four fiscal quarters. In making the foregoing calculation,
(a) pro forma effect shall be given to (1) any Indebtedness Incurred subsequent
to the end of the four-fiscal-quarter period referred to in clause (i) and prior
to the Transaction Date (other than Indebtedness Incurred under a revolving
credit or similar arrangement to the extent of the commitment thereunder (or
under any predecessor revolving credit or similar arrangement) on the last day
of such period), (2) any Indebtedness Incurred during such period to the extent
such Indebtedness is outstanding at the Transaction Date and (3) any
Indebtedness to be Incurred on the Transaction Date, in each case as if such
Indebtedness had been Incurred on the first day of such four-fiscal-quarter
period and after giving effect to the application of the proceeds thereof; (b)
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being Incurred) computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months) had been the applicable rate for the entire period; (c) there shall
be excluded from Consolidated Interest Expense any Consolidated Interest Expense
related to any amount of Indebtedness that was outstanding during such
four-fiscal-quarter period or thereafter but which is not outstanding or which
is to be repaid on the Transaction Date, except for Consolidated Interest
Expense accrued (as adjusted pursuant to clause (b)) during such
four-fiscal-quarter period under a revolving credit or similar arrangement to
the extent of the commitment
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thereunder (or under any successor revolving credit or similar arrangement) on
the Transaction Date; (d) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions that occur during such four-fiscal-quarter period or
thereafter and prior to the Transaction Date (including any Asset Acquisition to
be made with the Indebtedness Incurred pursuant to clause (i) above) as if they
had occurred on the first day of such four-fiscal-quarter period; (e) with
respect to any such four-fiscal-quarter period commencing prior to the
Refinancing, the Refinancing shall be deemed to have taken place on the first
day of such period; and (f) pro forma effect shall be given to asset
dispositions and asset acquisitions that have been made by any Person that has
become a Subsidiary of Holdings or has been merged with or into Holdings or any
Subsidiary of Holdings during the four-fiscal-quarter period referred to above
or subsequent to such period and prior to the Transaction Date and that would
have been Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Subsidiary of Holdings as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such period.
"Interest Rate Agreement" is defined to mean any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect Holdings or any of its Subsidiaries against
fluctuations in interest rates to or under which Holdings or any of its
Subsidiaries is a party or a beneficiary on the date of the Indenture or becomes
a party or a beneficiary thereafter.
"Investment" is defined to mean any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of any Person or its
Subsidiaries) or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase or acquisition of
Capital Stock, bonds, notes, debentures or other similar instruments issued by
any other Person. For purposes of the definition of "Unrestricted Subsidiary"
and the "Limitation on Restricted Payments" covenant described below, (i)
"Investment" shall include the fair market value of the net assets of any
Subsidiary of Holdings at the time that such Subsidiary of Holdings is
designated an Unrestricted Subsidiary and shall exclude the fair market value of
the net assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Subsidiary of Holdings and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Net Cash Proceeds" is defined to mean, with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to Holdings or any Subsidiary of
Holdings) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale computed without regard to the consolidated results of operations of
Holdings and its Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (a) is secured by a Lien on the property or assets sold or (b) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by Holdings or any Subsidiary of Holdings as a reserve against any
liabilities associated
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with such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Person" is defined to mean an individual, a corporation, a partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" is defined to mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of preferred or preference stock of
such Person which is outstanding or issued on or after the date of the
Indenture, including, without limitation, the Silgan Preferred Stock.
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the Debentures, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Debentures or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the
Debentures; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof giving holders thereof the right to require
Holdings to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or a "change of control" occurring prior to the Stated Maturity of
the Debentures shall not constitute Redeemable Stock if the "asset sale" or
"change of control" provision applicable to such Capital Stock is no more
favorable to the holders of such Capital Stock than the provisions contained in
the "Limitation on Asset Sales" and "Repurchase of Debentures upon Change of
Control" covenants described in "--Covenants" below and such Capital Stock
specifically provides that Holdings will not repurchase or redeem any such
Capital Stock pursuant to such provisions prior to Holdings' repurchase of
Debentures required to be repurchased by Holdings under the "Limitation on Asset
Sales" and "Repurchase of Debentures upon Change of Control" covenants described
below.
"Requisite Secured Noteholders" is defined to mean a majority in
aggregate principal amount of outstanding Secured Notes.
"Restricted Subsidiary" is defined to mean any Subsidiary of Holdings
other than an Unrestricted Subsidiary.
"Shareholder Subordinated Notes" shall have the same meaning given such
term in the Amended and Restated Credit Agreement (including the exhibits
thereto) as in effect on the date of the Indenture.
"Significant Subsidiary" is defined to mean, at any date of
determination, any Subsidiary of Holdings that, together with its Subsidiaries,
(i) for the most recent fiscal year of Holdings, accounted for more than 10% of
the consolidated revenues of Holdings or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of Holdings, all as
set forth on the most recently available consolidated financial statements of
Holdings and its consolidated Subsidiaries for such fiscal year prepared in
conformity with GAAP.
"Silgan Credit Agreement" is defined to mean the Credit Agreement dated
as of December 21, 1993, among Silgan, Containers, Plastics, the Banks party
thereto, Bank of America, as Co-Agent, and the Bank Agent, together with the
related documents thereof (including without limitation any Guarantees and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented, replaced or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing or otherwise restructuring (including, but not limited to, the
inclusion of additional
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borrowers thereunder that are Subsidiaries of Silgan whose obligations are
Guaranteed by Silgan thereunder and who are included as additional borrowers
thereunder) all or any portion of the Indebtedness under such agreement or any
successor agreement; provided that, with respect to any agreement providing for
the refinancing of Indebtedness under the Silgan Credit Agreement, such
agreement shall only be the Silgan Credit Agreement under the Indenture if a
notice to that effect is delivered by Holdings or Silgan to the Trustee and
there shall be at any time only one debt instrument that is the Silgan Credit
Agreement under the Indenture.
"Silgan Indebtedness" is defined to mean any Indebtedness of Silgan or
any of its Subsidiaries (including, without limitation, any undrawn commitments
under the Silgan Credit Agreement) that is permitted to be Incurred under the
Silgan Note Indenture.
"Silgan Note Indenture" is defined to mean the indenture, dated as of
June 29, 1992, between Silgan and Shawmut Bank, N.A., as trustee, relating to
the 11-3/4% Notes, as it may be amended or supplemented from time to time by one
or more indentures supplemental thereto entered into pursuant to the applicable
provisions thereof.
"Stated Maturity" is defined to mean, with respect to any debt security
or any installment of interest thereon, the date specified in such debt security
as the fixed date on which any principal of such debt security or any such
installment of interest is due and payable.
"Stock Based Plan" is defined to mean any stock option plan, stock
appreciation rights plan or other similar plan or agreement of Holdings or any
Subsidiary of Holdings relating to Capital Stock of Holdings or any Subsidiary
of Holdings established and in effect from time to time, including, without
limitation, the Holdings Organization Agreement or any stock option plan, stock
appreciation rights plan or other similar plan or agreement for the benefit of
employees of Holdings and its Subsidiaries.
"Subordinated Obligations" is defined to mean any principal of, premium,
if any, or interest on the Debentures payable pursuant to the terms of the
Debentures or upon acceleration, including any amounts received upon the
exercise of rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the
Debentures or amounts corresponding to such principal, premium, if any, or
interest on the Debentures.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by Holdings or by one
or more other Subsidiaries of Holdings, or by such Person and one or more other
Subsidiaries of such Person; provided that, except as the term "Subsidiary" is
used in the definition of "Unrestricted Subsidiary" described below, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of Holdings.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by Holdings or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of
Holdings that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided
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below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of Holdings (including any newly acquired
or newly formed Subsidiary of Holdings) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, Holdings or any other Subsidiary of Holdings that is not a
Subsidiary of the Subsidiary to be so designated; provided that either (a) the
Subsidiary to be so designated has total assets of $1,000 or less or (b) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
below. The Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary of Holdings; provided that immediately after giving effect to such
designation (1) Holdings could Incur $1.00 of additional Indebtedness under the
first paragraph in part (a) of the "Limitation on Indebtedness" covenant
described in "--Covenants" below and (2) no Event of Default, or any event that
is, or after the giving of notice or the passage of time or both would be an
Event of Default, shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing promptly with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" is defined to mean, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of directors of such Person.
"Wholly Owned Subsidiary" is defined to mean, (i) with respect to Silgan
and Holdings, Plastics and Containers, and (ii) with respect to any Person, any
Subsidiary of such Person if all of the Common Stock or other similar equity
ownership interests (but not including Preferred Stock) in such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) is owned directly or indirectly by such Person.
Covenants
Limitation on Indebtedness
(a) So long as any of the Debentures are outstanding, Holdings shall
not, and shall not permit any Subsidiary (other than Silgan and its
Subsidiaries) to, Incur any Indebtedness (other than the Debentures and
Indebtedness existing on the Closing Date) unless after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Interest Coverage Ratio of Holdings would be greater than 1.75:1.
Notwithstanding the foregoing, Holdings and its Subsidiaries (other than
Silgan and its Subsidiaries) may Incur each and all of the following: (i)
Indebtedness in an aggregate principal amount not to exceed $50 million
outstanding at any time; (ii) Indebtedness to Holdings or any Restricted
Subsidiary; (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to exchange, refinance or refund, outstanding Indebtedness, other
than Indebtedness Incurred under clauses (i) and (viii) and any refinancings
thereof, in an amount (or, if such new Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration thereof, with an original issue price) not to exceed the amount so
exchanged, refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
exchange, refinance or refund the Debentures or other Indebtedness that is
subordinated in right of payment to the Debentures shall only be permitted under
this clause (iii) if: (A) in case the Debentures are exchanged, refinanced or
refunded in part, such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
expressly made pari passu with, or subordinate in right of payment to, the
remaining Debentures, (B) in case the Indebtedness to be exchanged, refinanced
or refunded is subordinated in right of payment to the Debentures, such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is expressly made subordinate in
right of payment to the Debentures at least to the extent
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that the Indebtedness to be exchanged, refinanced or refunded is subordinated in
right of payment to the Debentures and (C) in case the Debentures are exchanged,
refinanced or refunded in part or the Indebtedness to be exchanged, refinanced
or refunded is subordinated in right of payment to the Debentures, such
Indebtedness (1) determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Debentures,
and the Average Life of such Indebtedness is at least equal to the remaining
Average Life of the Debentures and (2) by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is not
scheduled to pay interest in cash prior to the first Interest Payment Date; and
provided further that in no event may Indebtedness of Holdings that is pari
passu with, or subordinated in right of payment to, the Debentures be exchanged,
refinanced or refunded by means of Indebtedness of any Subsidiary of Holdings
pursuant to this clause (iii); (iv) Indebtedness issued in exchange for, or the
net proceeds of which are used to exchange, refinance or refund, Silgan
Indebtedness; provided that (A) the principal amount (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, the original issue price) of
such new Indebtedness shall not exceed the principal amount of Silgan
Indebtedness exchanged, refinanced or refunded (plus premiums, if any, accrued
interest, fees and expenses) and (B) the Average Life of such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, is at least
equal to the remaining Average Life of the Debentures; (v) Indebtedness Incurred
in connection with the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of Holdings, Silgan or any other
Restricted Subsidiary, options on any such shares or related stock appreciation
rights or similar securities held by officers or employees or former officers or
employees (or their estates or beneficiaries under their estates) and which were
issued pursuant to any Stock Based Plan, upon death, disability, retirement,
termination of employment or pursuant to the terms of such Stock Based Plan or
any other agreement under which such shares of Capital Stock, options, related
rights or similar securities were issued; provided that (A) such Indebtedness
(other than any Shareholder Subordinated Notes, which must be pari passu with,
or subordinated in right of payment to, the Debentures), by its terms or by the
terms of any agreement or instrument pursuant to which such Indebtedness is
issued, is expressly made subordinate in right of payment to the Debentures at
least to the extent that the Debentures are subordinated in right of payment to
Senior Indebtedness in the event of a Holdings Merger, (B) such Indebtedness, by
its terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, provides that no payments of principal of such
Indebtedness by way of sinking fund, mandatory redemption or otherwise
(including defeasance) may be made by Holdings (including, without limitation,
at the option of the holder thereof other than an option given to a holder
pursuant to an "asset sale" or a "change of control" provision that is no more
favorable to the holders of such Indebtedness than the provisions contained in
the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of
Control" covenants and such Indebtedness specifically provides that Holdings
will not repurchase or redeem such Indebtedness pursuant to such provisions
prior to Holdings' repurchase of the Debentures required to be repurchased by
Holdings under the "Limitation on Asset Sales" and "Repurchase of Debentures
upon a Change of Control" covenants) at any time prior to the Stated Maturity of
the Debentures and (C) the scheduled maturity of all principal of such
Indebtedness is beyond the Stated Maturity of the Debentures; (vi) Guarantees of
Indebtedness of Silgan and other Restricted Subsidiaries under the Silgan Credit
Agreement or the Secured Notes; (vii) Indebtedness (A) in respect of performance
bonds, bankers' acceptances and surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate Agreements;
provided that in the case of Currency Agreements that relate to other
Indebtedness, such Currency Agreements do not increase the Indebtedness of
Holdings outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of Holdings or any of its Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business, assets
or Subsidiary of Holdings, other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary of
Holdings for the purpose of financing such acquisition; and (viii) unsecured
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Indebtedness of Holdings; provided that such Indebtedness, (A) by its terms or
by the terms of any agreement or instrument pursuant to which such Indebtedness
is issued, is expressly made subordinate in right of payment to the Debentures
at least to the extent that the Debentures are subordinated in right of payment
to Senior Indebtedness in the event of a Holdings Merger, (B) determined as of
the date of Incurrence of such Indebtedness, does not mature prior to the Stated
Maturity of the Debentures, and the Average Life of such Indebtedness is greater
than the remaining Average Life of the Debentures, (C) by its terms or by the
terms of any agreement or instrument pursuant to which such Indebtedness is
issued, provides that no payments of principal of such Indebtedness by way of
sinking fund, mandatory redemption or otherwise (including defeasance) may be
made by Holdings (including, without limitation, at the option of the holder
thereof other than an option given to a holder pursuant to an "asset sale" or a
"change of control" provision that is no more favorable to the holders of such
Indebtedness than the provisions contained in the "Limitation on Asset Sales"
and "Repurchase of Debentures upon a Change of Control" covenants and such
Indebtedness specifically provides that Holdings will not repurchase or redeem
such Indebtedness pursuant to such provisions prior to Holdings' repurchase of
the Debentures required to be repurchased by Holdings under the "Limitation on
Asset Sales" and "Repurchase of Debentures upon a Change of Control" covenants)
at any time prior to the Stated Maturity of the Debentures and (D) by its terms
or the terms of any agreement or instrument pursuant to which such Indebtedness
is issued, is not scheduled to pay interest in cash prior to the first Interest
Payment Date.
(b) So long as any of the Debentures are outstanding, Holdings shall not
permit Silgan or any Subsidiary of Silgan to Incur any Indebtedness unless (i)
after giving effect to the Incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, the Interest Coverage Ratio of Silgan
would be greater than 2.1:1 or (ii) such Indebtedness so Incurred by Silgan or
such Subsidiary of Silgan constitutes Silgan Indebtedness; provided, however,
that any Indebtedness so Incurred pursuant to clause (i) or (ii) above may not
prohibit the payment of dividends to Holdings in amounts sufficient to make
mandatory interest and principal payments due on the Debentures at the times and
in the amount due and payable, except (A) in the event of a payment default on
such Indebtedness or certain events of bankruptcy of Silgan or such Subsidiary
of Silgan or (B) in the event of a non-payment default on such Indebtedness in
respect of which the maturity of such other Indebtedness may be accelerated, and
then until the earlier of (1) the cure or waiver of such non-payment or (2) a
period of 160 days has elapsed, unless such non-payment default has resulted in
the acceleration of such Indebtedness; and provided further, however, that in
the event the Debentures become obligations of a Successor Corporation, nothing
in this part (b) shall prohibit the Successor Corporation from assuming or
otherwise becoming liable for existing Indebtedness of Holdings or its
Subsidiaries.
(c) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, (i) the maximum amount of Indebtedness that Holdings,
Silgan or any of their respective Subsidiaries may Incur pursuant to this
"Limitation on Indebtedness" covenant shall not be deemed to be exceeded due
solely to the result of fluctuations in the exchange rates of currencies, (ii)
for purposes of calculating the amount of Indebtedness outstanding at any time
under clause (i) of the second paragraph in part (a) of this "Limitation on
Indebtedness" covenant, no amount of Indebtedness of Holdings, Silgan or any of
their respective Subsidiaries outstanding on the Closing Date shall be
considered to be outstanding and (iii) Holdings shall not Incur any Indebtedness
that is expressly subordinated to any other Indebtedness of Holdings unless such
Indebtedness, by its terms or the terms of any agreement or instrument pursuant
to which such Indebtedness is issued, is also expressly made subordinate to the
Debentures at least to the extent that it is subordinated to such other
Indebtedness.
(d) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, Guarantees of, or obligations
with respect to letters of credit supporting, Indebtedness otherwise included in
the determination of such particular amount shall not be included. For purposes
of determining compliance with this "Limitation on Indebtedness" covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the above clauses, Holdings, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the
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amount and type of such Indebtedness in one of such clauses and (ii) the amount
of Indebtedness issued at a price that is less than the principal amount thereof
shall be equal to the amount of the liability in respect thereof determined in
conformity with GAAP.
(e) Notwithstanding any of the foregoing, nothing in this "Limitation on
Indebtedness" covenant shall prohibit the occurrence of (i) a Holdings Merger,
(ii) the sale of all or substantially all of the property and assets of Silgan
or its successors to Holdings, and the assumption by Holdings of all or
substantially all of the liabilities of Silgan or its successors or (iii) the
assumption by Silgan or its successors of Indebtedness represented by the
Debentures. Immediately upon the occurrence of an event specified in clause (i),
(ii) or (iii) in this part (e), parts (a) and (c) (other than clause (i)) of
this "Limitation on Indebtedness" covenant shall be of no further force and
effect, all references to Silgan in part (b) of this "Limitation on
Indebtedness" covenant shall refer to the Successor Corporation and the Interest
Coverage Ratio of the Successor Corporation required by clause (i) in part (b)
of this "Limitation on Indebtedness" covenant shall be 1.75:1. (Section 4.03)
The Holdings Guaranty prohibits Holdings from Incurring Indebtedness
(other than a Guarantee under the Silgan Credit Agreement or the Shareholder
Subordinated Notes) other than the Debentures.
Limitation on Restricted Payments
So long as any of the Debentures are outstanding, Holdings will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on its Capital Stock (other
than dividends or distributions payable solely in shares of its or such
Restricted Subsidiary's Capital Stock (other than Redeemable Stock) of the same
class held by such holders or in options, warrants or other rights to acquire
such shares of Capital Stock) held by Persons other than Holdings or another
Restricted Subsidiary, (ii) purchase, redeem, retire or otherwise acquire for
value, any shares of Capital Stock of Holdings, any Restricted Subsidiary or any
Unrestricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by Persons other than Holdings or another
Restricted Subsidiary, (iii) make any voluntary or optional principal payment,
or voluntary or optional redemption, repurchase, defeasance or other acquisition
or retirement for value, of Indebtedness of Holdings that is subordinated in
right of payment to the Debentures or (iv) make any Investment in any Affiliate
(other than Holdings or a Restricted Subsidiary) or Unrestricted Subsidiary
(such payments or any other actions described in clauses (i) through (iv) being
collectively "Restricted Payments") if at the time of and after giving effect to
the proposed Restricted Payment: (A) an Event of Default or event that, after
the giving of notice or lapse of time or both would become an Event of Default,
shall have occurred and be continuing, (B) Holdings could not Incur at least
$1.00 of Indebtedness under the first paragraph in part (a) of the "Limitation
on Indebtedness" covenant or (C) the aggregate amount expended for all
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) after the date of the Indenture
(other than any Restricted Payments described in clauses (ii), (iii) and (iv) of
the second paragraph of this "Limitation on Restricted Payments" covenant) shall
exceed the sum of (1) 50% of the aggregate amount of Adjusted Consolidated Net
Income (or, if Adjusted Consolidated Net Income is a loss, minus 100% of such
amount) of Holdings (determined by excluding income resulting from the transfers
of assets received by Holdings or a Restricted Subsidiary from an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the month immediately following
the Closing Date and ending on the last day of the last fiscal quarter preceding
the Transaction Date plus (2) the aggregate net proceeds (including the fair
market value of noncash proceeds, as determined in good faith by the Board of
Directors) received by Holdings from the issuance and sale permitted by the
Indenture of its Capital Stock to any Person other than a Subsidiary of Holdings
(not including Redeemable Stock), including an issuance or sale permitted by the
Indenture for cash or other property upon the conversion of any Indebtedness of
Holdings subsequent to the Closing Date, or from the issuance of any options,
warrants or other rights to acquire Capital Stock of Holdings (in each case,
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exclusive of any Redeemable Stock or any options, warrants or other rights that
are redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Debentures) plus (3) an amount equal to the
net reduction in Investments in Unrestricted Subsidiaries resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to Holdings or any
Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed in the case of any
Unrestricted Subsidiary the amount of Investments previously made by Holdings or
any Restricted Subsidiary in such Unrestricted Subsidiary plus (4) $13 million.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at the date of declaration, such payment would comply with the foregoing
provision; (ii) (A) the declaration and payment in cash of stated dividends on
the Silgan Preferred Stock and the Containers Mirror Preferred Stock and
Plastics Mirror Preferred Stock (each as defined in the Amended and Restated
Credit Agreement) and (B) the redemption, repurchase or other acquisition for
value of the Silgan Preferred Stock, Containers Mirror Preferred Stock and
Plastics Mirror Preferred Stock, in each case in connection with the
Refinancing; (iii) the making of Investments in an Unrestricted Subsidiary in an
aggregate amount not to exceed $10 million outstanding at any time; provided
that the aggregate amount of Investments in all of the Unrestricted Subsidiaries
does not exceed $30 million outstanding at any time; (iv) the redemption,
repurchase, defeasance or other acquisition or retirement for value of
Indebtedness that is subordinated in right of payment to the Debentures,
including premium, if any, and accrued and unpaid interest, with the proceeds of
Indebtedness Incurred under clauses (iv) or (ix) of the second paragraph in part
(a) of the "Limitation on Indebtedness" covenant; (v) the declaration and
payment of dividends on the Common Stock of Holdings or Silgan, following an
initial public offering of the Common Stock of Holdings or Silgan, as the case
may be, of up to 6% per annum of the net proceeds received by Holdings or
Silgan, as the case may be, in such initial public offering; (vi) the purchase,
redemption, acquisition, cancellation or other retirement for value of shares of
Capital Stock of Holdings, Silgan or any other Restricted Subsidiary, options on
any such shares or related stock appreciation rights or similar securities held
by officers or employees or former officers or employees (or their estates or
beneficiaries under their estates) and which were issued pursuant to any Stock
Based Plan, upon death, disability, retirement, termination of employment or
pursuant to the terms of such Stock Based Plan or any other agreement under
which such shares of Capital Stock, options, related rights or similar
securities were issued; provided that the aggregate cash consideration paid for
such purchase, redemption, acquisition, cancellation or other retirement for
value of such shares of Capital Stock, options, related rights or similar
securities after the date of the Indenture does not exceed $13 million and that
any additional consideration in excess of such $13 million is in the form of
Indebtedness that would be permitted to be Incurred under clause (vi) of the
second paragraph in part (a) of the "Limitation on Indebtedness" covenant; (vii)
the repurchase of Common Stock of Holdings or Silgan followed immediately by the
reissuance thereof for consideration in an amount at least equal to the
consideration paid to acquire such stock, or the redemption, repurchase or other
acquisition for value of Capital Stock of Holdings or any Subsidiary of Holdings
in exchange for, or with the proceeds of a substantially concurrent offering of,
other shares of the Capital Stock of such entity (other than Redeemable Stock);
(viii) the acquisition of Indebtedness of Holdings that is subordinated in right
of payment to the Debentures in exchange for, or out of the proceeds of a
substantially concurrent issuance of, shares of the Capital Stock of Holdings or
Silgan (other than Redeemable Stock); and (ix) payments or distributions
pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of Holdings; provided that, in the case of clauses (iii), (v), (vi) and
(ix), no Event of Default, or event or condition that after the giving of notice
or lapse of time or both would become an Event of Default, shall have occurred
and be continuing or shall occur as a consequence thereof. (Section 4.04)
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Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
So long as any of the Debentures are outstanding, Holdings will not, and
will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions permitted by applicable law on any Capital Stock of
such Restricted Subsidiary owned by Holdings or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to Holdings or any other Restricted Subsidiary,
(iii) make loans or advances to Holdings or any other Restricted Subsidiary or
(iv) transfer, subject to certain exceptions, any of its property or assets to
Holdings or any other Restricted Subsidiary.
This covenant shall not restrict or prohibit any encumbrances or
restrictions existing: (i) in the Silgan Credit Agreement, the Secured Notes
(including the Secured Notes Purchase Agreement), the 11-3/4% Notes (including
any agreement pursuant to which the 11-3/4% Notes were issued), the Holdings
Reset Debentures (including any agreement pursuant to which the Holdings Reset
Debentures were issued), the Debentures (including any agreement pursuant to
which the Debentures were issued) or any other agreements in effect on the
Closing Date, including extensions, refinancings, renewals or replacements
thereof; provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any material
respect to the Holders than those encumbrances or restrictions that are then in
effect and that are being extended, refinanced, renewed or replaced; (ii) under
or by reason of applicable law, rule or regulation (including, without
limitation, applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances); (iii)
with respect to any Person or the property or assets of such Person acquired by
Holdings or any Restricted Subsidiary and existing at the time of such
acquisition, which encumbrances or restrictions are not applicable to any Person
or the property or assets of any Person other than such Person or the property
or assets of such Person so acquired; (iv) in the case of clause (iv) of the
first paragraph of this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of Holdings or any Restricted Subsidiary
not otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business and that do not, individually or in the aggregate,
detract from the value of the property or assets of Holdings or any Restricted
Subsidiary in any manner material to Holdings or such Restricted Subsidiary; or
(v) with respect to any Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary. Nothing contained in this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent Holdings or any Restricted Subsidiary from (1) entering into any
agreement permitting the incurrence of Liens otherwise permitted under the
Indenture or (2) restricting the sale or other disposition of property or assets
of Holdings or any of its Subsidiaries that secure Indebtedness of Holdings or
any of its Subsidiaries. (Section 4.05)
Limitation on Transactions with Shareholders and Affiliates
So long as any of the Debentures are outstanding, Holdings will not, and
will not permit any Subsidiary of Holdings to, directly or indirectly, enter
into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any holder (or any Affiliate of such holder) of 5% or more of any
class of Capital Stock of Holdings (other than the Bank Agent or any of its
Affiliates) or any Subsidiary of Holdings or with any Affiliate of Holdings or
any Subsidiary of Holdings, except upon fair and reasonable terms no less
favorable to Holdings or such Subsidiary of Holdings than could be obtained in a
comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
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The foregoing limitation does not limit, and shall not apply to: (i) any
transaction between Holdings and any Subsidiary of Holdings or between
Subsidiaries of Holdings; (ii) transactions (A) for which Holdings or any
Subsidiary of Holdings delivers to the Trustee a written opinion of a nationally
recognized investment banking firm stating that the transaction is fair to
Holdings or such Subsidiary of Holdings from a financial point of view or (B)
approved by a majority of the disinterested members of the Board of Directors;
(iii) the payment of fees pursuant to the Management Agreements or pursuant to
any similar management contracts entered into by Holdings or any Subsidiary of
Holdings; (iv) the payment of reasonable and customary regular fees to directors
of Holdings or any Subsidiary of Holdings who are not employees of Holdings or
such Subsidiary of Holdings; (v) any payments or other transactions pursuant to
any tax-sharing agreement between Holdings and Silgan or any other Person with
which Holdings is required or permitted to file a consolidated tax return or
with which Holdings is or could be part of a consolidated group for tax
purposes; (vi) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant; (vii) the payment of fees to Morgan Stanley, S&H
or their respective Affiliates for financial, advisory, consulting or investment
banking services that the Board of Directors deems to be advisable or
appropriate for Holdings or any Subsidiary of Holdings to obtain (including the
payment to Morgan Stanley of any underwriting discounts or commissions or
placement agency fees) in connection with the issuance and sale of any
securities by Holdings or any Subsidiary of Holdings; or (viii) any transaction
contemplated by any of the Stock Based Plans.
Notwithstanding any of the foregoing, nothing in this "Limitation on
Transactions with Shareholders and Affiliates" covenant shall prohibit the
occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all
of the property and assets of Silgan or its successors to Holdings, and the
assumption by Holdings of all or substantially all of the liabilities of Silgan
or its successors or (iii) the assumption by Silgan or its successors of
Indebtedness represented by the Debentures. Immediately upon the occurrence of
an event specified in clause (i), (ii) or (iii) of the preceding sentence, all
references to Holdings in this "Limitation on Transactions with Shareholders and
Affiliates" covenant shall refer to the Successor Corporation. (Section 4.06)
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
So long as any of the Debentures are outstanding, Holdings will not
permit any Restricted Subsidiary to, directly or indirectly, issue or sell any
shares of its Capital Stock (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to Holdings or another
Restricted Subsidiary that is a Wholly Owned Subsidiary of Holdings, (ii)
pursuant to options on such Capital Stock granted to officers and directors of
such Restricted Subsidiary, (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary or (iv) in connection with an initial public offering of
the Common Stock of such Restricted Subsidiary; provided that, within 12 months
after the date the Net Cash Proceeds of such initial public offering are
received by such Restricted Subsidiary, such Restricted Subsidiary shall (A)
apply an amount equal to such Net Cash Proceeds to repay unsubordinated
Indebtedness of Holdings or Indebtedness of such Restricted Subsidiary, in each
case owing to a Person other than Holdings or any of its Subsidiaries, (B) apply
an amount equal to such Net Cash Proceeds to the repurchase of Indebtedness
pursuant to mandatory repurchase or repayment provisions applicable to such
Indebtedness or (C) invest an equal amount, or the amount not so applied
pursuant to subclause (A) (or enter into a definitive agreement committing to so
invest within 12 months of the date of such agreement), in property or assets
that (as determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) are of a nature or type
or are used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the nature or
type of the property and assets of, or the business of, any Restricted
Subsidiary and its Subsidiaries existing on the date thereof.
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Notwithstanding any of the foregoing, nothing in this "Limitation on the
Issuance of Capital Stock of Restricted Subsidiaries" covenant shall prohibit
the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially
all of the property and assets of Silgan or its successors to Holdings, and the
assumption by Holdings of all or substantially all of the liabilities of Silgan
or its successors or (iii) the assumption by Silgan or its successors of
Indebtedness represented by the Debentures. Immediately upon the occurrence of
an event specified in clause (i), (ii) or (iii) of the preceding sentence, all
references to Holdings in this "Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries" covenant shall refer to the Successor Corporation.
(Section 4.07)
Repurchase of Debentures upon Change of Control
(a) In the event of a Change in Control, each Holder shall have the
right to require the repurchase of its Debentures by Holdings in cash pursuant
to the offer described below (the "Change of Control Offer") at a purchase price
equal to 101% of the Accreted Value, plus accrued interest (if any) to the date
of purchase (the "Change of Control Payment"). Prior to the mailing of the
notice to Holders provided for in the succeeding paragraph, but in any event
within 30 days following any Change of Control, Holdings covenants to, or to
cause Silgan to, (i) repay in full all Indebtedness under the Silgan Credit
Agreement, the Secured Notes, the 11-3/4% Notes and, upon the occurrence of an
event specified in clause (i), (ii) or (iii) of paragraph (e) of this
"Repurchase of Debentures upon Change of Control" covenant, any Senior
Indebtedness, or to offer to repay in full all such Indebtedness and to repay
the Indebtedness of each Bank and each holder of Secured Notes, 11-3/4% Notes
and, upon the occurrence of an event specified in clause (i), (ii) or (iii) of
paragraph (e) of this "Repurchase of Debentures upon Change of Control"
covenant, any Senior Indebtedness, who has accepted such offer or (ii) obtain
the requisite consents under the Silgan Credit Agreement, the Secured Notes and
the 11-3/4% Notes to permit the repurchase of the Debentures as provided for in
the succeeding paragraph. Holdings shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase Debentures pursuant
to this "Repurchase of Debentures upon Change of Control" covenant.
(b) Within 30 days of the Change of Control, Holdings shall mail a
notice to the Trustee and each Holder stating: (i) that a Change of Control has
occurred, that the Change of Control Offer is being made pursuant to this
"Repurchase of Debentures upon Change of Control" covenant and that all
Debentures validly tendered will be accepted for payment; (ii) the purchase
price and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the "Change of
Control Payment Date"); (iii) that any Debenture not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless Holdings defaults in
the payment of the Change of Control Payment, any Debenture accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (v) that Holders electing to have any Debenture
purchased pursuant to the Change of Control Offer will be required to surrender
such Debenture, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of such Debenture completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Debentures delivered for purchase and a statement that such
Holder is withdrawing his election to have such Debentures purchased; and (vii)
that Holders whose Debentures are being purchased only in part will be issued
new Debentures equal in principal amount to the unpurchased portion of the
Debentures surrendered; provided that each Debenture purchased and each new
Debenture issued shall be in an original principal amount of $1,000 or integral
multiples thereof.
(c) On the Change of Control Payment Date, Holdings shall: (i) accept
for payment Debentures or portions thereof tendered pursuant to the Change of
Control Offer; (ii) deposit with the Paying Agent money
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sufficient to pay the purchase price of all Debentures or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all
Debentures or portions thereof so accepted together with an Officers'
Certificate specifying the Debentures or portions thereof accepted for payment
by Holdings. The Paying Agent shall promptly mail, to the Holders of Debentures
so accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Debenture equal in
principal amount to any unpurchased portion of the Debentures surrendered;
provided that each Debenture purchased and each new Debenture issued shall be in
an original principal amount of $1,000 or integral multiples thereof. Holdings
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date. For purposes of this
"Repurchase of Debentures upon Change of Control" covenant, the Trustee shall
act as Paying Agent.
(d) Holdings will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs under
this "Repurchase of Debentures upon Change of Control" covenant and Holdings is
required to repurchase Debentures as described above.
(e) Notwithstanding any of the foregoing, nothing in this "Repurchase of
Debentures upon Change of Control" covenant shall prohibit the occurrence of (i)
a Holdings Merger, (ii) the sale of all or substantially all of the property and
assets of Silgan or its successors to Holdings, and the assumption by Holdings
of all or substantially all of the liabilities of Silgan or its successors or
(iii) the assumption by Silgan or its successors of Indebtedness represented by
the Debentures. Immediately upon the occurrence of an event specified in clause
(i), (ii) or (iii) of the preceding sentence, all references to Holdings in this
"Repurchase of Debentures upon a Change of Control" covenant shall refer to the
Successor Corporation. (Section 4.08)
Limitation on Asset Sales
(a) In the event and to the extent that the Net Cash Proceeds received
by Holdings or any Restricted Subsidiary from one or more Asset Sales occurring
on or after the Closing Date in any period of 12 consecutive months (other than
Asset Sales by Holdings or any Restricted Subsidiary to Holdings or another
Restricted Subsidiary) exceed 15% of Consolidated Net Tangible Assets in any one
fiscal year (determined as of the date closest to the commencement of such
12-month period for which a consolidated balance sheet of Holdings and its
Subsidiaries has been prepared), then Holdings shall, or shall cause such
Restricted Subsidiary to, (i) within 12 months after the date Net Cash Proceeds
so received exceed 15% of Consolidated Net Tangible Assets in any one fiscal
year (determined as of the date closest to the commencement of such 12-month
period for which a consolidated balance sheet of Holdings and its Subsidiaries
has been prepared) (A) apply an amount equal to such excess Net Cash Proceeds to
repay unsubordinated Indebtedness of Holdings or Indebtedness of such Restricted
Subsidiary, in each case owing to a Person other than Holdings or any of its
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to subclause (A) (or enter into a definitive agreement committing to so
invest within 12 months of the date of such agreement), in property or assets
that (as determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) are of a nature or type
or are used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the nature or
type of the property and assets of, or the business of, Holdings and its
Subsidiaries existing on the date thereof and (ii) apply such excess Net Cash
Proceeds (to the extent not applied pursuant to clause (i)) as provided in the
following paragraphs of this "Limitation on Asset Sales" covenant. The amount of
such excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such 12-month period as set forth in subclause (A) or (B) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
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(b) If, as of the first day of any calendar month, the aggregate amount
of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $5 million, Holdings must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders on a pro rata basis an aggregate principal amount
of Debentures equal to the Excess Proceeds on such date, at a purchase price
equal to 101% of the Accreted Value, plus accrued interest (if any) to the date
of purchase (the "Excess Proceeds Payment"); provided, however, that if the
Debentures become obligations of a Successor Corporation no Excess Proceeds
Offer shall be required to be commenced with respect to the Debentures until the
Business Day following the dates that payments are made pursuant to similar
offers that are made to holders of the Secured Notes and the 11-3/4% Notes with
respect to the Secured Notes and the 11-3/4% Notes, respectively, and need not
be commenced if the Excess Proceeds remaining after application to the Secured
Notes and the 11-3/4% Notes purchased in the offers made to the holders of the
Secured Notes and the 11-3/4% Notes are less than $5 million; and provided
further, however, that no Debentures may be purchased under this "Limitation on
Asset Sales" covenant unless the Successor Corporation shall have purchased all
Secured Notes and 11-3/4% Notes tendered pursuant to the offers applicable
thereto.
(c) Holdings shall commence an Excess Proceeds Offer by mailing a notice
to the Trustee and each Holder stating: (i) that the Excess Proceeds Offer is
being made pursuant to this "Limitation on Asset Sales" covenant and that all
Debentures validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Excess Proceeds Payment Date"); (iii) that any Debenture not
tendered will continue to accrue interest pursuant to its terms; (iv) that,
unless Holdings defaults in the payment of the Excess Proceeds Payment, any
Debenture accepted for payment pursuant to the Excess Proceeds Offer shall cease
to accrue interest after the Excess Proceeds Payment Date; (v) that Holders
electing to have any Debenture purchased pursuant to the Excess Proceeds Offer
will be required to surrender the Debenture, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Debenture
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Excess
Proceeds Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Debentures delivered for purchase and a
statement that such Holder is withdrawing his election to have such Debentures
purchased; and (vii) that Holders whose Debentures are being purchased only in
part will be issued new Debentures equal in principal amount to the unpurchased
portion of the Debentures surrendered; provided that each Debenture purchased
and each new Debenture issued shall be in an original principal amount of $1,000
or integral multiples thereof.
(d) On the Excess Proceeds Payment Date, Holdings shall: (i) accept for
payment on a pro rata basis Debentures or portions thereof tendered pursuant to
the Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Debentures or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Debentures or
portions thereof so accepted, together with an Officers' Certificate specifying
the Debentures or portions thereof accepted for payment by Holdings. The Paying
Agent shall promptly mail to the Holders of Debentures so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders a new Debenture equal in principal amount to any
unpurchased portion of the Debenture surrendered; provided that each Debenture
purchased and each new Debenture issued shall be in an original principal amount
of $l,000 or integral multiples thereof. Holdings will publicly announce the
results of the Excess Proceeds Offer as soon as practicable after the Excess
Proceeds Payment Date. For purposes of this "Limitation on Asset Sales"
covenant, the Trustee shall act as the Paying Agent.
(e) Holdings will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that such Excess
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Proceeds are received by Holdings under this "Limitation on Asset Sales"
covenant and Holdings is required to repurchase Debentures as described above.
(f) Notwithstanding the foregoing, nothing in this "Limitation on Asset
Sales" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the
sale of all or substantially all of the property and assets of Silgan or its
successors to Holdings, and the assumption by Holdings of all or substantially
all of the liabilities of Silgan or its successors or (iii) the assumption by
Silgan or its successors of Indebtedness represented by the Debentures.
Immediately upon the occurrence of an event specified in clause (i), (ii) or
(iii) of the preceding sentence, all references to Holdings in this "Limitation
on Asset Sales" covenant shall refer to the Successor Corporation. (Section
4.09)
Events of Default
An "Event of Default" occurs with respect to the Debentures if: (i)
Holdings defaults in the payment of principal of (or premium, if any, on) any
Debenture when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise, whether or not such payment is prohibited by the
subordination provisions of the Indenture, if such provisions are then
applicable; (ii) Holdings defaults in the payment of interest on any Debenture
when the same becomes due and payable, and such default continues for a period
of 30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture, if such provisions are then applicable; (iii)
Holdings defaults in the performance of or breaches any other covenant or
agreement of Holdings in the Indenture or under the Debentures, and such default
or breach continues for a period of 30 consecutive days after written notice by
the Trustee or the Holders of 25% or more in aggregate principal amount of the
Debentures; (iv) there occurs with respect to any issue or issues of
Indebtedness of Holdings and/or any Significant Subsidiary having an outstanding
principal amount of $5 million or more individually or $10 million or more in
the aggregate for all such issues of Holdings and/or any Significant Subsidiary,
whether such Indebtedness now exists or shall hereafter be created, an event of
default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration; (v) any final judgment or order (not
covered by insurance) for the payment of money in excess of $5 million
individually or $10 million or more in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against
Holdings or any Significant Subsidiary and shall not be discharged, and there
shall be any period of 60 consecutive days following entry of the final judgment
or order in excess of $5 million individually or that causes the aggregate
amount for all such final judgments or orders outstanding against all such
Persons to exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; (vi) a court having jurisdiction in the premises enters a decree or
order for (a) relief in respect of Holdings or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (b) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of Holdings or
any Significant Subsidiary or for all or substantially all of the property and
assets of Holdings or any Significant Subsidiary or (c) the winding up or
liquidation of the affairs of Holdings or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; (vii) Holdings or any Significant Subsidiary (a)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (b) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of Holdings or any
Significant Subsidiary or for all or substantially all of the property and
assets of Holdings or any Significant Subsidiary or (c) effects any general
assignment for the benefit of creditors; (viii) Holdings and/or one or more
Significant Subsidiaries fails to make (a) at the final (but not any interim)
fixed maturity of any issue of Indebtedness a principal payment of $5 million or
more or (b) at the final (but not any interim) fixed maturity of more than one
issue of such
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Indebtedness principal payments aggregating $10 million or more and, in the case
of clause (a), such defaulted payment shall not have been made, waived or
extended within 30 days of the payment default and, in the case of clause (b),
all such defaulted payments shall not have been made, waived or extended within
30 days of the payment default that causes the amount described in clause (b) to
exceed $10 million; or (ix) there occurs the nonpayment of any two or more items
of Indebtedness that would constitute at the time of such nonpayments, but for
the individual amounts of such Indebtedness, an Event of Default under clause
(iv) or clause (viii) above, or both, and which items of Indebtedness aggregate
$10 million or more. (Section 6.01)
If an Event of Default (other than an Event of Default specified in
clause (vi) or (vii) above that occurs with respect to Holdings or Silgan)
occurs and is continuing under the Indenture, the Trustee thereunder or the
Holders of at least 25% of the aggregate principal amount of the Debentures then
outstanding, by written notice to Holdings (and to the Trustee if such notice is
given by the Holders (the "Acceleration Notice")), may, and the Trustee at the
request of the Holders of at least 25% in aggregate principal amount of the
Debentures then outstanding shall, declare the Default Amount to be immediately
due and payable. In the event any such declaration of acceleration occurs as a
result of (i) a Holdings Merger, (ii) the sale of all or substantially all of
the property and assets of Silgan or its successors to Holdings, and the
assumption by Holdings of all or substantially all of the liabilities of Silgan
or its successors or (iii) the assumption by Silgan or its successors of
Indebtedness represented by the Debentures, if the Silgan Credit Agreement
and/or the Secured Notes, or any agreement pursuant to which any Senior
Indebtedness that has refinanced the Indebtedness under the Silgan Credit
Agreement and/or the Secured Notes is in effect, such declaration shall not
become effective until the earlier of (A) five Business Days after receipt of
the Acceleration Notice by the Bank Agent, Holdings and the agent for the
holders of the Secured Notes (which shall be the Bank Agent unless and until the
holders of a majority in principal amount of Secured Notes designate another
agent in writing to Holdings and the Trustee) or (B) acceleration of the
Indebtedness under the Silgan Credit Agreement or the Secured Notes; provided
that such acceleration shall automatically be rescinded and annulled without any
further action required on the part of the Holders in the event that any and all
Events of Default specified in the Acceleration Notice under the Indenture shall
have been cured, waived or otherwise remedied as provided in the Indenture prior
to the expiration of the period referred to in the preceding clauses (A) and
(B). In the event of a declaration of acceleration because an Event of Default
set forth in clause (iv), (viii) or (ix) above has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if the event of default triggering such Event of Default pursuant to clause
(iv), (viii) or (ix) shall be remedied, cured by Holdings and/or such
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (vi) or (vii) above occurs with respect to
Holdings or Silgan, the Default Amount shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of at least a majority in aggregate principal amount of the
outstanding Debentures, by written notice to Holdings and to the Trustee, may
waive all past defaults and rescind and annul a declaration of acceleration and
its consequences if (1) all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on the Debentures
that have become due solely by such declaration of acceleration, have been cured
or waived and (2) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction. (Sections 6.02 and 6.04) For information
as to the waiver of defaults, see "--Modification and Waiver."
"Default Amount" is defined to mean an amount in respect of each
outstanding Debenture equal to the sum of (i) the issue price of such Debenture
as determined in accordance with Section 1273 of the Internal Revenue Code plus
(ii) the aggregate of the portions of the original issue discount (the excess of
the amounts considered as part of the "stated redemption price at maturity" of
such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue
Code or any successor provision, whether denominated as principal or interest,
over the issue price of such Debenture) that shall theretofore have accrued
pursuant to Section 1272 of the Internal Revenue Code (without regard to Section
1272(a)(7) of the Internal Revenue Code) from the date
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of issue of such Debenture (a) for each six month or shorter period ending June
15 or December 15 prior to the date of declaration of acceleration and (b) for
the shorter period, if any, from the end of the immediately preceding six month
period, as the case may be, to the date of declaration of acceleration plus
(iii) accrued interest to the date such Default Amount is paid (without
duplication of any amount set forth in clause (ii) above), less all amounts
theretofore paid in respect of such Debenture, which amounts are considered as
part of the "stated redemption price at maturity" of such Debenture within the
meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor
provision (whether such amounts paid were denominated principal or interest).
(Section 1.01)
The Holders of at least a majority in aggregate principal amount of the
outstanding Debentures may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that the Trustee is advised by counsel conflicts with law or the
Indenture, that may involve the Trustee in personal liability or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction. (Section 6.05) A Holder may
not pursue any remedy with respect to the Indenture or the Debentures unless:
(i) the Holder gives to the Trustee written notice of a continuing Event of
Default; (ii) the Holders of at least 25% in aggregate principal amount of
outstanding Debentures make a written request to the Trustee to pursue the
remedy; (iii) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any costs, liability or expense; (iv) the Trustee does
not comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the outstanding Debentures do not give the
Trustee a direction that is inconsistent with the request. (Section 6.06)
However, such limitations do not apply to the right of any Holder to receive
payment of the principal of, premium, if any, or interest on its Debentures, or
to bring suit for the enforcement of any such payment, on or after the
respective due dates expressed in its Debentures, which rights shall not be
impaired or affected without the consent of the Holder. (Section 6.07)
The Indenture requires certain officers of Holdings to certify, on or
before a date not more than 120 days after the end of each fiscal year, that a
review has been conducted of the activities of Holdings and its Subsidiaries and
Holdings' and its Subsidiaries' performance under the Indenture and that
Holdings has fulfilled all obligations thereunder, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
and the nature and status thereof. Holdings is also obligated to notify the
Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture. (Section 4.14)
Consolidation, Merger and Sale of Assets
Holdings shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially as an entirety in one
transaction or a series of related transactions) to, any Person (other than a
Restricted Subsidiary that is a Wholly Owned Subsidiary of Holdings; provided
that, in connection with any merger of Holdings with any Restricted Subsidiary
that is a Wholly Owned Subsidiary of Holdings, no consideration (other than
common stock in the surviving Person or Holdings) shall be issued or distributed
to the stockholders of Holdings) or permit any Person to merge with or into
Holdings, unless: (i) Holdings shall be the continuing Person, or the Person (if
other than Holdings) formed by such consolidation or into which Holdings is
merged or that acquired or leased such property and assets of Holdings shall be
a corporation organized and validly existing under the laws of the United States
of America or any jurisdiction thereof and shall expressly assume, by
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of Holdings on all of the
Debentures and under the Indenture; (ii) immediately after giving effect to such
transaction, no Event of Default, and no event that after the giving of notice
or lapse of time or both will become an Event of Default, shall have occurred
and be continuing; (iii) immediately after giving effect to such
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transaction on a pro forma basis, the Interest Coverage Ratio of Holdings (or
any Person becoming the successor obligor on the Debentures) is at least 1:1;
provided that if the Interest Coverage Ratio of Holdings before giving effect to
such transaction is within the range set forth in column (A) below, then the
Interest Coverage Ratio of Holdings (or any Person becoming the successor
obligor on the Debentures) shall be at least equal to the lesser of (1) the
ratio determined by multiplying the percentage set forth in column (B) below by
the Interest Coverage Ratio of Holdings prior to such transaction and (2) the
ratio set forth in column (C) below:
(A) (B) (C)
1.11:1 to 1.99:1...................................... 90% 1.5:1
2.00:1 to 2.99:1...................................... 80% 2.1:1
3.00:1 to 3.99:1...................................... 70% 2.4:1
4.00:1 or more........................................ 60% 2.5:1
and provided further that, if the Interest Coverage Ratio of Holdings (or any
Person becoming the successor obligor on the Debentures) is 3:1 or more, the
calculation in the preceding proviso shall be inapplicable and such transaction
shall be deemed to have complied with the requirements of this clause (iii);
(iv) immediately after giving effect to such transaction on a pro forma basis,
Holdings (or any Person that becomes the successor obligor on the Debentures)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of Holdings immediately prior to such transaction; and (v) Holdings
delivers to the Trustee an Officer's Certificate (attaching the arithmetic
computations to demonstrate compliance with clauses (iii) and (iv)) and an
Opinion of Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture comply with this provision and that all
conditions precedent provided for herein relating to such transaction have been
complied with; provided, however, that clause (iv) of this covenant does not
apply to, and the Interest Coverage Ratio required by clause (iii) of this
"Consolidation, Merger and Sale of Assets" covenant (A) shall be 1.75:1 with
respect to, (1) a Holdings Merger, (2) the sale of all or substantially all of
the property and assets of Silgan or its successors to Holdings, and the
assumption by Holdings of all or substantially all of the liabilities of Silgan
or its successors or (3) the assumption by Silgan or its successors of
Indebtedness represented by the Debentures and (B) does not apply if, in the
good faith determination of the Board of Directors, whose determination shall be
evidenced by a Board Resolution, the principal purpose of such transaction is to
change the state of incorporation of Holdings; and provided further, however,
that any such transaction shall not have as one of its purposes the evasion of
the limitations of this covenant. (Section 5.01)
Defeasance
Defeasance and Discharge. The Indenture provides that Holdings will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Debentures and the provisions of the Indenture will no longer be
in effect with respect to the Debentures on the 123rd day after the deposit
described below (except for, among other matters, certain obligations to
register the transfer or exchange of the Debentures, to replace stolen, lost or
mutilated Debentures, to maintain paying agencies and to hold monies for payment
in trust) if, among other things, (A) Holdings has deposited with the Trustee,
in trust, money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Debentures on the Stated Maturity of such payments
in accordance with the terms of the Indenture and the Debentures, (B) Holdings
has delivered to the Trustee (i) either an Opinion of Counsel to the effect that
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of Holdings' exercise of its option under this "Defeasance"
provision and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and
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discharge had not occurred, which Opinion of Counsel must be accompanied by a
ruling of the IRS to the same effect or a change in applicable federal income
tax law after the date of the Indenture or a ruling directed to the Trustee
received from the IRS to the same effect as the aforementioned Opinion of
Counsel and (ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and after
the passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, (C) immediately after giving
effect to such deposit on a pro forma basis, no Event of Default, or event that
after the giving of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing on the date of such deposit or
during the period ending on the 123rd day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which Holdings is a party or
by which Holdings is bound, (D) the Successor Corporation is not prohibited from
making payments in respect of the Debentures by the provisions described under
"Subordination Upon Certain Events," above and (E) if at such time the
Debentures are listed on a national securities exchange, Holdings has delivered
to the Trustee an Opinion of Counsel to the effect that the Debentures will not
be delisted as a result of such deposit, defeasance and discharge. (Section
8.02)
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clauses (iii) and (iv) under "Consolidation, Merger
and Sale of Assets" and all the covenants described under "Covenants," clause
(iii) under "Events of Default" with respect to such covenants and clauses (iii)
and (iv) under "Consolidation, Merger and Sale of Assets," and clauses (iv), (v)
and (viii) under "Events of Default" shall be deemed not to be Events of
Default, and the provisions described under "Subordination Upon Certain Events"
shall not apply, upon, among other things, the deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Debentures on the Stated Maturity of such payments
in accordance with the terms of the Indenture and the Debentures, the
satisfaction of the provisions described in clauses (B)(ii), (C), (D) and (E) of
the preceding paragraph and the delivery by Holdings to the Trustee of an
Opinion of Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred. (Section 8.03)
Defeasance and Certain Other Events of Default. In the event Holdings
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Debentures as described in the immediately
preceding paragraph and the Debentures are declared due and payable because of
the occurrence of an Event of Default that remains applicable, the amount of
money and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Debentures at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Debentures at the
time of the acceleration resulting from such Event of Default. However, Holdings
shall remain liable for such payments.
The Holdings Guaranty contains a covenant prohibiting defeasance of the
Debentures. See "Description of Certain Silgan Indebtedness--Description of the
Silgan Credit Agreement."
Modification and Waiver
Modifications and amendments of the Indenture may be made by Holdings
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Debentures; provided, however,
that no such modification or amendment may, without the consent of each Holder
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Debenture,
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(ii) reduce the principal amount of, premium, if any, or interest on, any
Debenture, (iii) change the place or currency of payment of principal of,
premium, if any, or interest on, any Debenture, (iv) impair the right to
institute suit for the enforcement of any payment on or after the Stated
Maturity (or, in the case of a redemption, on or after the Redemption Date) of
any Debenture, (v) modify the subordination provisions in a manner adverse to
the Holders, (vi) reduce the above-stated percentage of outstanding Debentures
the consent of whose Holders is necessary to modify or amend the Indenture,
(vii) waive a default in the payment of principal of, premium, if any, or
interest on the Debentures or (viii) reduce the percentage of aggregate
principal amount of outstanding Debentures the consent of whose Holders is
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults. (Section 9.02)
The Holders of a majority in aggregate principal amount of the
outstanding Debentures may waive compliance by Holdings with certain restrictive
provisions of the Indenture. (Section 9.02)
The Holdings Guaranty contains a covenant prohibiting Holdings from
consenting to any modification of the Indenture or waiver of any provision
thereof without the consent of a specified percentage of the lenders under the
Silgan Credit Agreement. See "Description of Certain Silgan
Indebtedness--Description of the Silgan Credit Agreement."
No Personal Liability of Incorporators, Shareholders, Officers, Directors or
Employees
The Indenture provides that no recourse for the payment of the
principal of, premium, if any, or interest on any of the Debentures, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of Holdings contained in the
Indenture or in any of the Debentures, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or past,
present or future shareholder, officer, director, employee or controlling person
of Holdings or of any Successor Corporation. Each Holder, by accepting such
Debenture, waives and releases all such liability. (Section 11.09)
Concerning the Trustee
Shawmut Bank, N.A. (formerly The Connecticut National Bank) acts as
Trustee under the Indenture.
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is continuing,
the Trustee will exercise such rights and powers vested in it under such
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. (Article Seven)
The provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference in the Indenture contain limitations on the rights of
the Trustee thereunder, should it become a creditor of Holdings, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
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DESCRIPTION OF HOLDINGS COMMON STOCK
General
Certain of the statements contained herein are summaries of the
detailed provisions of the Restated Certificate of Incorporation of Holdings
(the "Certificate of Incorporation") and are qualified in their entirety by
reference to the Certificate of Incorporation, a copy of which is filed
herewith.
Under the Certificate of Incorporation, Holdings has authority to issue
500,000 shares of Holdings Class A Stock, 667,500 shares of Holdings Class B
Stock and 1,000,000 shares of Holdings Class C Stock. Holdings has an aggregate
of 1,135,000 shares of common stock outstanding as follows: (i) 417,500 shares
of Holdings Class A Stock; (ii) 667,500 shares of Holdings Class B Stock; and
(iii) 50,000 shares of Holdings Class C Stock. Except as described below, the
rights, privileges and powers of Holdings Class A Stock and Holdings Class B
Stock are identical, with each share of each class being entitled to one vote on
all matters to come before the stockholders of Holdings.
Until the occurrence of a Change of Control (as defined in the
Certificate of Incorporation and as described below), the affirmative vote of
the holders of not less than a majority of the outstanding shares of Holdings
Class A Stock and Holdings Class B Stock, voting as separate classes, shall be
required for the approval of any matter to come before the stockholders of
Holdings, except that (i) the holders of a majority of the outstanding shares of
Holdings Class A Stock, voting as a separate class, have the sole right to vote
for the election and removal of three directors (the directors elected by the
holders of Holdings Class A Stock being referred to herein as "Class A
Directors"); (ii) the holders of a majority of the outstanding shares of
Holdings Class B Stock, voting as a separate class, have the sole right to vote
for the election and removal of all directors other than the Class A Directors
(the directors elected by the holders of Holdings Class B Stock being referred
to herein as "Class B Directors"); and (iii) the vote of not less than a
majority of the outstanding shares of Holdings Class B Stock shall be required
in certain circumstances set forth in the Certificate of Incorporation. The
holders of Holdings Class C Stock have no voting rights except as provided by
applicable law and except that such holders are entitled to vote as a separate
class on certain amendments to the Certificate of Incorporation as provided
therein. In the event Holdings sells shares of any class of its common stock to
the public, the distinctions between Holdings Class A Stock and Holdings Class B
Stock terminate, the powers, including voting powers, of Holdings Class A Stock
and Holdings Class B Stock shall be identical upon compliance with certain
provisions contained in the Certificate of Incorporation, and any Regulated
Stockholder (generally defined to mean banks) will be entitled to convert all
shares of Holdings Class C Stock held by such stockholder into the same number
of shares of Holdings Class B Stock (or Holdings Class A Stock to the extent
such Holdings Class C Stock was issued upon conversion of Holdings Class A
Stock).
After a Change of Control, the affirmative vote of the holders of not
less than a majority of the outstanding shares of Holdings Class A Stock and
Holdings Class B Stock, voting together as a single class, will be required for
the approval of any matter to come before the stockholders of Holdings, except
that the provisions described in clauses (i) and (ii) in the preceding paragraph
shall continue to apply from and after a Change of Control, and except as
otherwise provided in the Certificate of Incorporation with respect to its
amendment. Also, after a Change of Control, the number of Class B Directors will
be increased to five.
In the event that a vacancy among the Class A Directors or the Class B
Directors occurs at any time prior to the election of directors at the next
scheduled annual meeting of stockholders, the vacancy shall be filled, in the
case of the Class A Directors, by either (i) the vote of the holders of a
majority of the outstanding shares of Holdings Class A Stock, at a special
meeting of stockholders, or (ii) by written consent of the holders of a majority
of the outstanding shares of Holdings Class A Stock, and, in the case of the
Class B Directors, by either (i) the vote of the holders of a majority of the
outstanding shares of Holdings Class B Stock at a
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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 Silgan Credit Agreement
or the Debentures, as a result of the occurrence of an event of default
thereunder relating to a payment default or a financial covenant event of
default.
Description of the Holdings Organization Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. R. Philip Silver and D.
Greg Horrigan entered into the Amended and Restated Organization Agreement dated
as of December 21, 1993 (the "Holdings Organization Agreement") that provides
for the termination of the Organization Agreement dated as of June 30, 1989 by
and among Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan (except for
the indemnification provisions thereof, which provisions survive) and for the
investment by First Plaza in Holdings and the relationships among the
stockholders and between the stockholders and Holdings. Certain of the
statements contained herein are summaries of the detailed provisions of the
Holdings Organization Agreement and are qualified in their entirety by reference
to the Holdings Organization Agreement.
The Holdings Organization Agreement prohibits the disposition of
Holdings' common stock without the prior written consent of Messrs. Silver and
Horrigan and MSLEF II, except for (i) dispositions to affiliates (which, in the
case of First Plaza, includes any successor or underlying trust, and which, in
the case of MSLEF II, does not include any person which is not an Investment
Entity (as defined below)), (ii) dispositions to certain family members of
Messrs. Silver and Horrigan or trusts for the benefit of those family members,
(iii) dispositions to certain parties , subject to certain other rights of first
refusal discussed below, (iv) 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 (v) 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 (iv) and (v) 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.
Under the Holdings Organization Agreement, MSLEF II may effect a sale
of stock to an Investment Entity (generally defined as any person who (i) is
primarily engaged in the business of investing in securities of other companies
and not taking an active role in the management or operations of such companies
and (ii) does not permit the participation or involvement in any way in the
business or affairs of Holdings of a person who is engaged in a business not
described in clause (i)) or, in the event of certain defaults under the amended
and restated management services agreement by and between S&H, a company wholly
owned by Messrs. Silver and Horrigan, and Holdings (as described under "Certain
Transactions--Management Agreements"), to a third party, in each case, if it
first offers such stock to: (a) Holdings, (b) the Group (defined generally to
mean, collectively, Messrs. Silver and Horrigan and their respective affiliates
and certain related family transferees and estates, with Mr. Silver and his
affiliates and certain related family transferees and estates being deemed to be
collectively one member of the Group, and Mr. Horrigan and his affiliates and
certain related family transferees and estates being deemed to be collectively
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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. 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. 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.
Under the Holdings Organization Agreement, 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.
At any time prior to December 21, 1998, Holdings has the right and
option to purchase from First Plaza, and First Plaza shall have the obligation
to sell to Holdings, all (but not less than all) of the Holdings Stock for a
price per share equal to the greater of (i) $120 per share and (ii) the purchase
price necessary to yield on an annual basis a compound return on investment of
forty percent (40%). The number of shares subject to such call and the call
purchase price shall be proportionately adjusted to take into account any stock
dividend, stock split, combination of shares, subdivision or other
recapitalization of the capital stock of Holdings.
The Holdings Organization Agreement provides that at any time after
June 15, 1996, the holders of a majority of the issued and outstanding shares of
Holdings Class A Stock and Holdings Class B Stock (considered together as a
class) may by written notice to Holdings require Holdings to pursue the first
public offering of Holdings' common stock pursuant to an effective registration
statement (an "IPO") on the terms and conditions provided in the Holdings
Organization Agreement. In addition to the portion of the IPO which shall
consist of shares of Holdings' common stock to be sold by Holdings, the IPO may
also include a secondary tranche consisting of shares of Holdings' common stock
to be sold by stockholders of Holdings.
Pursuant to the provisions of the Holdings Organization Agreement, each
of MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan has agreed to
take all action (including voting its shares of Holdings' common stock) to
approve the adoption of the Restated Certificate of Incorporation of Holdings,
as amended, the Amended and Restated By-laws of Holdings, and the Amended and
Restated Management Services Agreement (the "Post-IPO Management Services
Contract"), in each case substantially in the form agreed to pursuant to the
Holdings Organization Agreement and in each case to become effective at the time
an IPO is completed. The Post-IPO Management Services Contract provides, among
other things, for the payment to S&H of management fees of $2.0 million annually
plus reimbursement of expenses. See "Certain Transactions--Management
Agreements."
Pursuant to the provisions of the Holdings Organization Agreement,
MSLEF II has agreed that it will not vote its shares of Holdings Class B Stock
in favor of any changes in the Certificate of Incorporation or By-laws of
Holdings which would adversely affect the rights of First Plaza, unless First
Plaza has consented in writing to such change. In addition, so long as First
Plaza shall hold not less than 18.73% of the issued and
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outstanding shares of Holdings Class B Stock, First Plaza shall have the right
to nominate one of the Class B Directors to be elected at each annual meeting of
stockholders in accordance with the provisions of the Certificate of
Incorporation, and the holders of Holdings Class B Stock parties to the Holdings
Organization Agreement have agreed to vote their shares of Holdings Class B
Stock in favor of such nominee.
In addition, in the event that First Plaza, MSLEF II or BTNY shall
purchase any shares of Holdings Class A Stock, such purchaser has agreed that it
will vote such shares in accordance with the directions of the "holders of a
majority of the shares of Class A Stock held by the Group" (defined generally to
mean the holders of a majority of the aggregate of 417,500 shares of Holdings
Class A Stock held by Messrs. Silver and Horrigan at December 21, 1993, which at
the time of any such determination have been continuously and are held by the
Group) until such time as a Change of Control has occurred. In the event that
Messrs. Silver or Horrigan shall purchase any shares of Holdings Class B Stock,
such purchaser agrees that it will vote such shares in accordance with the
directions of MSLEF II, unless MSLEF II and First Plaza (together with their
respective affiliates) shall hold directly or indirectly less than one-half of
the aggregate number of shares of Holdings Class B Stock held by MSLEF II and
First Plaza immediately following the issuance and sale of the Holdings Stock to
First Plaza on December 21, 1993.
Pursuant to the terms of the Holdings Organization Agreement, Holdings
entered into an amended and restated management services agreement with S&H, a
corporation wholly owned by Messrs. Silver and Horrigan. See "Certain
Transactions--Management Agreements."
The Holdings Organization Agreement terminates upon the earlier of (i)
the mutual agreement of the parties, (ii) such time as it becomes unlawful,
(iii) the completion of an IPO, and (iv) June 30, 1999. The parties may agree to
extend the term of the Holdings Organization Agreement.
Description of the Holdings Stockholders Agreement
Concurrently with the issuance and sale to First Plaza of the Holdings
Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan
entered into a Stockholders Agreement dated as of December 21, 1993 (the
"Stockholders Agreement") that provides for certain prospective rights and
obligations among the stockholders and between the stockholders and Holdings.
The operative provisions of the Stockholders Agreement do not take effect until
after the occurrence of an IPO, at which time the Holdings Organization
Agreement will have terminated in accordance with its terms as described above
under "--Description of the Holdings Organization Agreement." Certain of the
statements contained herein are summaries of the detailed provisions of the
Stockholders Agreement and are qualified in their entirety by reference to the
Stockholders Agreement.
The Stockholders Agreement provides that for a period of eight years
after the IPO, each of MSLEF II and First Plaza shall have the right to demand
two separate registrations of its shares of Holdings' common stock (equalling a
total of four separate demand registrations); provided, however, that such
demand right will terminate as to MSLEF II or First Plaza, as the case may be,
at such time as MSLEF II or First Plaza, as the case may be, together with its
affiliates, owns less than five percent of the issued and outstanding shares of
Holdings' common stock at any time. If, at any time or from time to time for a
period of eight years after the IPO, Holdings shall determine to register
Holdings' common stock (other than in connection with certain non-underwritten
offerings), Holdings will offer each of MSLEF II, BTNY, First Plaza and Messrs.
Silver and Horrigan the opportunity to register shares of Holdings' common stock
it holds in a "piggyback registration."
The Stockholders Agreement prohibits the transfer prior to June 30,
1999 (or, in the case of any restriction applicable to First Plaza, December 21,
1998) by MSLEF II, First Plaza or Messrs. Silver or Horrigan of Holdings' common
stock without the prior written consent of Messrs. Silver and Horrigan and
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MSLEF II, except for (i) transfers made in connection with a public offering or
a Rule 144 Open Market Transaction (as defined in the Stockholders Agreement),
(ii) transfers made to an affiliate, which, in the case of a transfer by First
Plaza or MSLEF II to an affiliate, must be an Investment Entity (defined
generally to be any person who is primarily engaged in the business of investing
in securities of other companies and not taking an active role in the management
or operations of such companies), (iii) transfers made to certain family members
of Messrs. Silver and Horrigan or trusts for the benefit of those family
members, (iv) certain transfers by First Plaza to a third party that comply with
certain rights of first refusal of the Group and MSLEF II set forth in the
Stockholders Agreement, (v) certain transfers by MSLEF II to an Investment
Entity or, in the event of certain defaults under the amended and restated
management services agreement between S&H and Holdings, to a third party, that
comply with certain rights of first refusal of the Group set forth in the
Stockholders Agreement, (vi) certain transfers by either member of the Group to
a third party that comply with certain rights of first refusal of the other
member of the Group and MSLEF II set forth in the Stockholders Agreement, and
(vii) in the case of MSLEF II, a distribution of all or substantially all of the
shares of Holdings' common stock then owned by MSLEF II to the partners of MSLEF
II (a "MSLEF Distribution"). Notwithstanding the foregoing, MSLEF II may pledge
its shares of Holdings' common stock to a lender or lenders reasonably
acceptable to Holdings to secure a loan or loans to MSLEF II. In the event of
any proposed foreclosure of such pledge, such shares will be subject to certain
rights of first refusal of the Group set forth in the Stockholders Agreement.
The Stockholders Agreement provides that until December 21, 1998, for
so long as MSLEF II and its affiliates (excluding the limited partners of MSLEF
II who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF
Distribution) shall hold at least one-half of the number of shares of Holdings'
common stock held by MSLEF II on December 21, 1993 (as adjusted, if necessary,
to take into account any stock dividend, stock split, combination of shares,
subdivision or recapitalization of the capital stock of Holdings), the parties
and their Restricted Voting Transferees (as defined in the Stockholders
Agreement) shall use their best efforts (including to vote any shares of
Holdings' common stock owned or controlled by such person or otherwise) to cause
the nomination and election of two (2) members of the Board of Directors of
Holdings to be chosen by MSLEF II; provided, however, that each such nominee
shall be (i) either an employee of Morgan Stanley whose primary responsibility
is managing investments for MSLEF II (or a successor or related partnership) or
(ii) a person reasonably acceptable to the Group not engaged in (as a director,
officer, employee, agent or consultant or as a holder of more than five percent
of the equity securities of) a business competitive with that of Holdings.
In addition, until December 21, 1998, for so long as the Group shall
hold at least one-half of the number of shares of Holdings' common stock held by
it in the aggregate on December 21, 1993 (as adjusted, if necessary, to take
into account any stock dividend, stock split, combination of shares, subdivision
or recapitalization of the capital stock of Holdings), the parties and their
Restricted Voting Transferees shall use their best efforts (including to vote
any shares of Holdings' common stock owned or controlled by such person or
otherwise) to cause the nomination and election of two (2) individuals nominated
by the "holders of a majority of the shares of [c]ommon [s]tock held by the
Group" (as such phrase is defined in the Stockholders Agreement) as members of
the Board of Directors of Holdings; provided, however, that at least one (1) of
such nominees shall be Mr. Silver or Mr. Horrigan and the other person, if not
Mr. Silver or Mr. Horrigan, shall be a person reasonably acceptable to MSLEF II,
so long as MSLEF II and its affiliates (other than any affiliate which is not an
Investment Entity and excluding the limited partners of MSLEF II who may acquire
shares of Holdings' common stock from MSLEF II in a MSLEF distribution) shall
hold at least one-half of the number of shares of Holdings' common stock held by
MSLEF II at December 21, 1993 (as adjusted, if necessary, to take into account
any stock dividend, stock split, combination of shares, subdivision or
recapitalization of the capital stock of Holdings).
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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 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), First
Plaza and its Restricted Voting Transferees shall vote all shares of Holdings'
common stock held by them in favor of any other directors standing for election
to Holdings' Board of Directors for whom the holders of a majority of the shares
of Holdings' common stock held by the Group shall direct First Plaza to vote.
The Stockholders Agreement further provides that until December 21,
1998, MSLEF II and its Restricted Voting Transferees shall vote all shares of
Holdings' common stock held by them against any unsolicited merger, or sale of
Holdings' business or its assets, if such transaction is opposed by the holders
of a majority of the shares of common stock held by the Group, unless as of the
applicable record date for such vote, the Group holds less than ninety percent
(90%) of the number of shares of Holdings' common stock held by it in the
aggregate at December 21, 1993 (as adjusted, if necessary, to take into account
any stock dividend, stock split, combination of shares, subdivision or
recapitalization of the capital stock of Holdings). Until December 21, 1998,
First Plaza and its Restricted Voting Transferees shall vote all shares of
common stock held by them against any unsolicited merger, or sale of Holdings'
business or its assets, if such transaction is opposed by the holders of a
majority of the shares of common stock held by the Group; provided, however,
that First Plaza and its Restricted Voting Transferees shall not be required to
vote their shares of Holdings' common stock in accordance with the foregoing if
(i) in connection with such merger or sale, (x) First Plaza and its Restricted
Voting Transferees propose to sell or otherwise transfer all of their shares of
Holdings' common stock to a third party for aggregate cash consideration of less
than $10 million and (y) the Group and/or MSLEF II has not exercised their right
of first refusal in respect of such sale or transfer by First Plaza or such
right of first refusal in respect of the shares of Holdings' common stock held
by First Plaza shall have terminated, or (ii) as of the applicable record date
for such vote, the Group holds less than ninety percent (90%) of the number of
shares of Holdings' common stock held by it in the aggregate at December 21,
1993 (as adjusted, if necessary, to take into account any stock dividend, stock
split, combination of shares, subdivision or recapitalization of the capital
stock of Holdings).
DESCRIPTION OF CERTAIN SILGAN INDEBTEDNESS
Description of the Silgan Credit Agreement
The following is a summary of the terms of the Silgan Credit Agreement.
The Available Credit Facility. Pursuant to the Silgan Credit Agreement,
an aggregate of (i) $39.0 million of term loans designated as A Term Loans (the
"A Term Loans") and (ii) $78.1 million of term loans designated as B Term Loans
(the "B Term Loans," together with the A Term Loans, the "Term Loans") are
outstanding and owing to the Banks by Silgan, and the Banks have agreed to lend
to Containers and Plastics up to an aggregate of $70.0 million of working
capital loans (the "Working Capital Loans").
To secure the obligations of the Borrowers under the Silgan Credit
Agreement: (i) Silgan pledged to the Banks all of the capital stock of
Containers and Plastics held by Silgan; (ii) Containers pledged to the Banks all
of the capital stock of California-Washington Can Corporation ("CW Can") held by
Containers; (iii) Plastics pledged to the Banks 65% of the capital stock of
827599 Ontario Inc. ("Canadian Holdco") held by Plastics; (iv) Silgan,
Containers, Plastics and CW Can each granted to the Banks security interests in
substantially all of their respective real and personal property; and (v)
Holdings pledged to the Banks all of the capital stock of Silgan held by
Holdings. Such collateral (other than the collateral described in (v)) also
secures on an equal and ratable basis the Secured Notes, subject to
intercreditor arrangements. Holdings and each of the Borrowers
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have guaranteed on a secured basis all of the obligations of the Borrowers
under the Silgan Credit Agreement.
The aggregate amount of Working Capital Loans which may be outstanding
at any time is, subject to a borrowing base limitation, the sum of (i) 85% of
eligible accounts receivable and (ii) 50% of eligible inventory of Containers,
Plastics and CW Can.
Each of the Term Loans and each of the Working Capital Loans, at the
respective Borrower's election, consists of loans designated as Eurodollar rate
loans or as base rate loans. Subject to certain conditions, each of the Term
Loans and each of the Working Capital Loans can be converted from a base rate
loan into a Eurodollar rate loan and vice versa.
As of March 31, 1995, the outstanding principal amount of the A Term
Loans, the B Term Loans and the Working Capital Loans under the Silgan Credit
Agreement were $39.0 million, $78.1 million and $15.2 million, respectively.
Payment of Loans. Generally, the Working Capital Loans can be borrowed,
repaid and reborrowed from time to time until September 15, 1996, on which date
all Working Capital Loans mature. Amounts repaid under the Term Loans cannot be
reborrowed.
The B Term Loans mature on September 15, 1996 and are payable in full
on such date. The remaining outstanding principal amount of the A Term Loans is
payable in installments as follows:
<TABLE>
<CAPTION>
A Term Loan
Scheduled Repayment Date Amount
<S> <C>
September 30, 1995.........................................$ 4,878,400
December 31, 1995..........................................$14,635,200
September 15, 1996.........................................$19,513,600
</TABLE>
The Term Loans and Working Capital Loans may be prepaid, without
penalty or premium, at any time. The Term Loans are required to be prepaid, and
the working capital commitment may be required to be reduced, upon the
occurrence of, among other things, certain asset sales and certain sales of
equity by Silgan or Holdings and to the extent of 75% of Excess Cash Flow (as
defined in the Silgan Credit Agreement).
Interest and Fees. Interest on the Term Loans and the Working Capital
Loans is payable at certain margins over certain rates as summarized below.
Interest on base rate loans accrues at floating rates of the Applicable
Margin (as defined in the Silgan Credit Agreement) plus the highest of (i) 1/2
of 1% in excess of a formula rate based on the offering rate for negotiable
certificates of deposit with a three-month maturity, (ii) 1/2 of 1% in excess of
the Federal Funds Rate, and (iii) Bankers Trust's then applicable prime lending
rate. Interest on Eurodollar rate loans accrues at floating rates of the
Applicable Margin over a formula rate determined with reference to the rate
offered by Bankers Trust for dollar deposits in the New York interbank
Eurodollar market.
Each of Containers and Plastics has agreed to jointly and severally pay
to the Banks, on a quarterly basis, a commitment commission calculated as 0.50%
per annum on the daily average unused portion of the Banks' working capital
commitment in respect of the Working Capital Loans until such working capital
commitment is terminated.
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Containers and Plastics are required to pay to the Banks, on a
quarterly basis, a letter of credit fee of 3.0% per annum on the daily average
stated amount of each letter of credit issued for the account of Containers or
Plastics. Containers and Plastics are also required to pay to Bankers Trust, on
a quarterly basis, a facing fee of 1/4 of 1% per annum on the daily average
stated amount of each letter of credit issued for the account of Containers or
Plastics.
Certain Covenants. The Silgan Credit Agreement contains numerous
financial and operating covenants, under which the Company must operate. Failure
to comply with any of such covenants permits the Banks to accelerate, subject to
the terms of the Silgan Credit Agreement, the maturity of all amounts
outstanding under the Silgan Credit Agreement.
The Silgan Credit Agreement restricts or limits each of the Borrowers'
and their respective subsidiaries' abilities: (i) to create certain liens; (ii)
to consolidate, merge or sell its assets and to purchase assets; (iii) to pay
dividends on, or repurchase shares of, its capital stock, except that, among
other things: (a) Silgan may pay dividends to Holdings under certain
circumstances; (b) Containers and Plastics may pay dividends to Silgan as long
as they remain wholly owned subsidiaries of Silgan, CW Can may pay dividends to
Containers, Canadian Holdco may pay dividends to Plastics and Express may pay
dividends to Canadian Holdco; and (c) Silgan may repurchase or redeem stock
options or SARs, issued to management of Containers and Plastics under certain
circumstances; (iv) to lease real and personal property; (v) to create
additional indebtedness, except for, among other things: (a) certain
indebtedness existing on the date of the Silgan Credit Agreement; (b)
indebtedness of Containers to Plastics or Plastics to Containers; and (c)
Silgan's indebtedness represented by the Secured Notes, the 11-3/4% Notes and by
the intercompany notes; (vi) to make certain advances, investments and loans,
except for, among other things: (a) loans from Silgan to each of Containers and
Plastics represented by intercompany notes; (b) loans from Containers to
Plastics or from Plastics to Containers; and (c) loans from Containers and/or
Plastics to Silgan not exceeding $15 million in aggregate principal amount
outstanding at any time; (vii) to enter into transactions with affiliates;
(viii) to make certain capital expenditures, except for, among other things,
capital expenditures which do not exceed in the aggregate for the Borrowers,
such amounts, during such periods, as set forth below:
<TABLE>
<CAPTION>
Period Amount
<S> <C>
Calendar year ended December 31, 1995...................... $30,000,000
Calendar year ended December 31, 1996...................... $30,000,000
</TABLE>
; provided, however, that to the extent capital expenditures made during any
period set forth above are less than the amounts set forth opposite such period
such amount may be carried forward and utilized to make capital expenditures in
the immediately succeeding calendar year (accordingly, additional capital
expenditures of $9.8 million that were permitted to be made in 1994 may be
carried forward and utilized in 1995); (ix) to make any voluntary payments,
prepayments, acquire for value, redeem or exchange, among other things, any
11-3/4% Notes or Secured Notes, or to make certain amendments to the 11-3/4%
Notes, the Secured Notes, the Borrowers' or their respective subsidiaries'
respective certificates of incorporation and by-laws, or to certain other
agreements; (x) with certain exceptions, to have any subsidiaries other than
Containers and Plastics with respect to Silgan, CW Can with respect to
Containers, and Canadian Holdco and Express with respect to Plastics; (xi) with
certain exceptions, to permit its respective subsidiaries to issue capital
stock; (xii) to permit its respective subsidiaries to create limitations on the
ability of any such subsidiary to (a) pay dividends or make other distributions,
(b) make loans or advances, or (c) transfer assets; and (xiii) to engage in any
business other than the packaging business.
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The Silgan Credit Agreement requires that Silgan own not less than 90%
of the outstanding common stock of Containers and Plastics and 100% of all other
outstanding capital stock of Containers and Plastics.
The Silgan Credit Agreement requires that the ratio of Consolidated
Current Assets (as defined below) to Consolidated Current Liabilities (as
defined below) of any of the Borrowers may not, at any time, be less than 2:1
and that the ratio of Bank EBITDA (as defined below) to Interest Expense (as
defined below) for any of the Borrowers may not be, for any period of four
consecutive fiscal quarters (taken as one accounting period) ending during a
period set forth below, less than the ratio set forth opposite such period
below:
<TABLE>
<CAPTION>
Period Ratio
<S> <C>
January 1, 1995 to and including December 31, 1995................ 3.00:1
January 1, 1996 to and including September 30, 1996............... 3.40:1
</TABLE>
In addition, the ratio of Total Indebtedness (as defined below) to Consolidated
Net Worth (as defined below) of any of the Borrowers is not permitted to exceed
on any date set forth below the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Period Ratio
<S> <C>
December 31, 1995................................................. 3.25:1
August 31, 1996................................................... 2.75:1
</TABLE>
"Bank EBITDA" means for any period, EBIT, adjusted by adding thereto the
amount of all depreciation and amortization of intangibles (including covenants
not to compete), goodwill and loan fees that were deducted in arriving at EBIT
for such period.
"Consolidated Current Assets" means the current assets of Silgan and its
subsidiaries determined on a consolidated basis, provided that the unused
amounts of commitments for Working Capital Loans shall also be included as a
current asset of Silgan in making such determination.
"Consolidated Current Liabilities" means the current liabilities of
Silgan and its subsidiaries determined on a consolidated basis, provided that
the current portion of loans, and accrued interest thereon, under the Silgan
Credit Agreement, the current portion of any loans made by Silgan to Containers
or Plastics, the current portion of, and accrued interest on, the Secured Notes
and the 11-3/4% Notes from the last interest payment date shall not be
considered current liabilities for the purposes of making such determination.
"Consolidated Net Worth" means the Net Worth of Silgan and its
subsidiaries determined on a consolidated basis, and "Net Worth" of any person
means the sum of its capital stock, capital in excess of par or stated value of
shares of its capital stock, retained earnings (without giving effect to any
noncash adjustments resulting from changes in value of employee stock options),
and any other account which, in accordance with generally accepted accounting
principles, constitutes stockholders' equity, less treasury stock.
"EBIT" means for any period, the consolidated net income of Silgan and
its subsidiaries, before interest expense and provision for taxes and without
giving effect to any extraordinary noncash gains or extraordinary noncash losses
and gains from sales of assets (other than sales of inventory in the ordinary
course of business), any noncash adjustments resulting from changes in value of
employee stock options.
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"Indebtedness" means, as to any person, without duplication, (i) all
indebtedness (including principal, interest, fees and charges) of such person
for borrowed money or for the deferred purchase price of property or services,
(ii) the face amount of all letters of credit issued for the account of such
person and all drafts drawn thereunder, (iii) all liabilities secured by any
lien on any property owned by such person, whether or not such liabilities have
been assumed by such person, (iv) the aggregate amount required to be
capitalized under leases under which such person is the lessee and (v) all
contingent obligations of such person.
"Interest Expense" means, for any period, the total consolidated
interest expense of Silgan and its subsidiaries for such period.
"Total Indebtedness" means the aggregate Indebtedness of Silgan and its
subsidiaries determined on a consolidated basis, provided that there shall be
excluded, in making such determination, indebtedness consisting of capitalized
lease obligations existing as of the effective date of the Silgan Credit
Agreement.
For purposes of all computations to determine compliance with the
financial covenants under the Silgan Credit Agreement, such computations are to
be made utilizing the accounting principles and policies in conformity with
those used to prepare Silgan's audited financial statements for the fiscal year
ended December 31, 1992. For purposes of determining the Net Worth of Silgan, no
effect is given to the Allowed Reduction (as defined in the Silgan Credit
Agreement).
The ability of Holdings to take certain actions is restricted or limited
pursuant to the terms of the Silgan Holdings Guaranty, dated as of June 30,
1989, as amended, made by Holdings in favor of the Banks and Bankers Trust, as
agent (the "Holdings Guaranty"). The Holdings Guaranty restricts or limits
Holdings' ability to, among other things: (i) create certain liens, (ii) incur
additional indebtedness, (iii) consolidate, merge or sell its assets and to
purchase or lease assets, (iv) pay dividends, (v) make loans or advances and
(vi) engage in any business other than holding Silgan's common stock and making
certain investments.
Events of Default. Events of default under the Silgan Credit Agreement
include, with respect to each of the Borrowers, as the case may be, among
others: (i) the failure to pay any principal on the Term Loans or the Working
Capital Loans, the failure to reimburse drawings under any letters of credit
when due or the failure to pay within two business days after the date such
payment is due interest on the Term Loans, the Working Capital Loans or any
unpaid drawings under any letter of credit or any fees or other amounts owing
under the Silgan Credit Agreement (collectively, a "Payment Default"); (ii) any
failure to pay amounts due under certain other agreements or any defaults that
result in or permit the acceleration of certain other indebtedness; (iii)
subject to certain limited exceptions, the breach of any covenants,
representations or warranties contained in the Silgan Credit Agreement or any
related document; (iv) certain events of bankruptcy, insolvency or dissolution;
(v) the occurrence of certain judgments, writs of attachment or similar process
against any of the Borrowers or any of their respective subsidiaries; (vi) the
occurrence of certain ERISA related liabilities; (vii) a default under or
invalidity of the guarantees (including an event of default under the Holdings
Guaranty) or of the security interests granted to the Banks pursuant to the
Silgan Credit Agreement; (viii) the failure of Holdings to own 100% of the
capital stock of Silgan (other than Silgan Preferred Stock); and (ix) a Change
of Control (as defined in the Holdings Guaranty, the Secured Notes Purchase
Agreement (as defined below), the indenture relating to the 11-3/4% Notes or the
Indenture) shall occur; and (x) the requirement that Silgan repurchase 25% or
more of the aggregate principal amount of the Secured Notes then outstanding or
any 11-3/4% Note or Debenture as a result of a Change of Control (as defined in
the agreements and indentures relating thereto).
Upon the occurrence of any event of default under the Silgan Credit
Agreement, the Banks are permitted, among other things, to accelerate the
maturity of the Term Loans and Working Capital Loans and
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of all outstanding indebtedness under the Silgan Credit Agreement and terminate
their commitment to make any further Working Capital Loans or to issue any
letters of credit.
Description of the Secured Notes
The Secured Notes, which were issued on June 29, 1992 pursuant to a
secured notes purchase agreement (as such agreement may be amended from time to
time, the "Secured Notes Purchase Agreement"), constitute senior indebtedness of
Silgan, are limited to an aggregate principal amount of $50 million, and mature
on June 30, 1997. The Secured Notes are secured by a first lien (subject to
permitted liens) on substantially all of the assets of Silgan and its
subsidiaries. Such collateral also secures on an equal and ratable basis,
subject to certain intercreditor arrangements, all other Secured Obligations (as
defined in the Secured Notes Purchase Agreement), including indebtedness of
Silgan and its subsidiaries under the Silgan Credit Agreement. In addition, the
obligations of Silgan under the Secured Notes and the Secured Notes Purchase
Agreement are guaranteed by Containers and Plastics.
The Secured Notes bear interest at a rate of three-month LIBOR plus 300
basis points.
The Secured Notes are redeemable at the option of Silgan at par plus
accrued and unpaid interest to the redemption date. Net cash proceeds from (i)
certain asset sales and (ii) the issuance of capital stock by any Restricted
Subsidiary (as defined in the Secured Notes Purchase Agreement) of Silgan, are
required to be applied to prepay the Secured Notes and indebtedness under the
Silgan Credit Agreement on a pro rata basis, subject to certain exceptions. In
the event of a Change of Control (as defined in the Secured Notes Purchase
Agreement), each holder of a Secured Note has the right to require Silgan to
repurchase such holder's Secured Notes at a purchase price equal to 100% of the
principal amount thereof plus accrued interest.
The Secured Notes contain certain restrictive covenants including,
subject to certain exceptions, the following: (i) limitations on the ability of
Silgan and its Restricted Subsidiaries to grant liens on any property; (ii)
limitations on the ability of Silgan and its Restricted Subsidiaries to incur
indebtedness; (iii) limitations on payments of dividends and purchases of the
capital stock of Silgan and its Restricted Subsidiaries; (iv) restrictions on
repayments of subordinated indebtedness; (v) limitations on investments by
Silgan or any Restricted Subsidiary in affiliates of Silgan or in any
Unrestricted Subsidiary (as defined in the Secured Notes Purchase Agreement);
(vi) limitations on the incurrence by Silgan and its Restricted Subsidiaries of
any restriction on the ability of any Restricted Subsidiaries to pay dividends
or repay any indebtedness owed to, or transfer any property or assets to, Silgan
or any Restricted Subsidiary; (vii) limitations on transactions with affiliates;
and (viii) limitations on Silgan's ability to effect certain mergers,
consolidations and transfers of assets. The covenants referred to in clauses
(ii) through (viii) above are substantially similar to the comparable covenants
that are contained in the indenture relating to the 11-3/4% Notes, except that
the covenant referred to in clause (ii) above is more restrictive than the
comparable covenant contained in such indenture and becomes even more
restrictive over the term of the Secured Notes. However, none of the covenants
relating to the Secured Notes are more restrictive upon Silgan or any Restricted
Subsidiary than the corresponding restrictive covenant in the Silgan Credit
Agreement. See "--Description of the Silgan Credit Agreement" and "--Description
of the 11-3/4% Notes."
Events of default under the Secured Notes include: (i) failure to pay
principal or premium, if any, when due, or to pay interest within 30 days of
when due; (ii) failure by Silgan to comply with any of its covenants or
agreements under the Secured Notes and the continuance of such failure for 30
days after written notice; (iii) an acceleration of certain other indebtedness
of Silgan; (iv) certain events of bankruptcy of Silgan or any Significant
Subsidiaries (as defined in the Secured Notes Purchase Agreement); and (v) a
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judgment is rendered against Silgan or certain Subsidiaries for an amount in
excess of $5 million which is not discharged within 60 days.
Description of the 11-3/4% Notes
Silgan sold the 11-3/4% Notes in a public offering on June 29, 1992. The
11-3/4% Notes bear interest at a rate of 11-3/4% per annum. The 11-3/4% Notes
are redeemable at any time on and after June 15, 1997 at the option of Silgan,
in whole or in part, at 105.875% of their principal amount plus accrued
interest, declining to 100% of their principal amount plus accrued interest on
or after June 15, 1999. In the event of a Change of Control, each holder of the
11-3/4% Notes may require Silgan to repurchase its 11-3/4% Notes at 101% of the
principal amount plus accrued interest. The indenture relating to the 11-3/4%
Notes (the "11-3/4% Notes Indenture") contains certain covenants that, among
other things, direct the application of the proceeds from certain asset sales,
limit the ability of Silgan and its subsidiaries to incur indebtedness, make
certain payments with respect to their capital stock, make prepayments of
certain indebtedness, make loans or investments to entities other than
Restricted Subsidiaries (as defined in the 11-3/4% Notes Indenture), enter into
transactions with affiliates, engage in mergers or consolidations, and, with
respect to Silgan's subsidiaries, issue stock.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
consequences associated with the purchase, ownership and disposition of the
Debentures but does not purport to be a complete analysis of all the potential
tax effects of such purchase, ownership and disposition. This summary is based
on laws, Treasury regulations, proposed regulations, rulings and judicial
decisions in effect at the time the Debentures were originally issued in June
1992. The proposed OID regulations in effect at that time were issued in 1986
(and amended in 1989 and 1991) (the "1986 Proposed Regulations"). The 1986
Proposed Regulations were withdrawn as of December 21, 1992 and replaced by new
proposed OID regulations issued on that date (the "1992 Proposed Regulations").
The 1992 Proposed Regulations, which substantially revised the 1986 Proposed
Regulations, were replaced by final OID regulations issued on January 27, 1994
(the "Final Regulations"), which generally followed the 1992 Proposed
Regulations .
This summary deals only with investors who will hold the Debentures as
"capital assets" within the meaning of Section 1221 of the Code (generally
property held for investment). It does not address all aspects of the federal
income tax consequences of holding Debentures that may be relevant to a
particular investor in the context of such investor's individual investment
circumstance or to investors in special tax situations, such as life insurance
companies, banks, tax-exempt organizations, dealers in securities and foreign
persons or foreign entities. This summary does not discuss tax consequences
under state, local, or foreign tax laws. Persons considering the purchase of
Debentures should consult their own tax advisors concerning the application of
United States federal income tax laws, as well as the laws of any state, local
or foreign taxing jurisdictions, to their particular situations.
The following discussion, subject to the qualifications stated herein,
describes the material federal income tax considerations relevant to the
purchase, ownership and disposition of the Debentures and constitutes the
opinion of Winthrop, Stimson, Putnam & Roberts, counsel to Holdings. Such
opinion represents its best legal judgment, but it will not be binding on the
IRS or the courts. Holdings adopted the positions described below as reflecting
the appropriate federal income tax treatment of the Debentures. Holdings has not
sought, nor does it intend to seek, a ruling from the IRS that its position as
reflected in the following discussion will be accepted by the IRS.
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Certain provisions of the Code applicable to the issuance, purchase,
ownership and disposition of the Debentures were added or substantially modified
by legislation enacted at or about the time the Debentures were issued. Although
the 1986 Proposed Regulations addressed some aspects of these provisions, final
regulations, rulings or judicial decisions providing definitive guidance as to
the interpretation of certain relevant provisions did not exist at the time the
Debentures were originally issued. Moreover, the 1986 Proposed Regulations were
ambiguous in certain respects, and their potential application to the Debentures
was unclear in certain respects. While the Final Regulations resolve certain
issues raised by the 1986 Proposed Regulations, they are generally not
retroactive. Instead, the IRS has stated that it will allow taxpayers to treat
the 1986 Proposed Regulations as authority under Code Section 6662 for debt
instruments issued prior to December 22, 1992, and, accordingly, the discussion
below remains applicable to the Debentures to that extent. However, the Final
Regulations apply to sales and exchanges that occur on or after April 4, 1994,
and may be relied upon for sales and exchanges that occur on or after December
22, 1992.
The discussion set forth below with respect to the tax treatment of the
holder relating to OID, market discount and premium assumes that the Debentures
are subject to the Applicable High Yield Discount Rules (as described below),
but that no portion of the tax deduction for OID will be disqualified and
treated as dividend income because their yield does not exceed six percentage
points plus the applicable Federal rate in effect as of the date of original
issue. For a discussion of the special tax treatment of holders of the
Debentures and Holdings because the Debentures are subject to such rules, see
the discussion below under "Applicable High Yield Discount Rules."
Original Issue Discount on the Debentures. The Debentures were issued
with "OID" within the meaning of Section 1273 of the Code. Holders of the
Debentures (including holders who are cash basis taxpayers) will be required to
include such OID in income as interest on a constant yield to maturity basis
prior to the receipt of cash attributable to such income as described below.
OID is the difference between a Debenture's "stated redemption price at
maturity" and its "issue price." The issue price of a Debenture is the initial
offering price to the public (excluding underwriters or wholesalers) at which
price a substantial amount of such Debentures were sold. The 1986 Proposed
Regulations state that the stated redemption price at maturity of a debt
instrument is the sum of its principal amount plus all other payments required
thereunder, other than "qualified periodic interest payments." The interest
payments on the Debentures do not constitute "qualified periodic interest
payments," and thus will be included along with principal in the stated
redemption price at maturity of the Debentures. As a result, each Debenture was
issued with OID in an amount equal to the excess of (i) the sum of its principal
amount and all stated interest payments over (ii) its issue price.
The Debentures had an issue price (for each $1,000 principal amount) of
$601.58. Based upon the discussion in the preceding paragraph, the stated
redemption price at maturity of the Debentures is $1,861.25 (for each $1,000
principal amount). Therefore, subject to the discussion below, the Debentures
had OID at original issue (for each $1,000 principal amount) in the amount of
$1,259.67.
A holder of a Debenture must include in income as interest the OID on
the Debenture as it accrues, but (except as discussed below with respect to
market discount) such holder will not be required to include in income any cash
payments received by such holder on the Debenture even if such payment is
denominated as interest. The amount required to be included in a holder's income
as OID in a taxable year will be determined by allocating to each day during
such taxable year on which the holder holds the Debenture a pro rata portion of
the OID on the Debenture attributable to the accrual period (that is, the
six-month period that ends on a day of the calendar year corresponding to the
maturity date or the date six months before such maturity date) in which such
day is included. The amount of OID attributable to an accrual period is the
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product of (i) the adjusted issue price at the beginning of such accrual period
(that is, the issue price plus OID attributable to prior accrual periods
(disregarding any reduction on account of an Acquisition Premium (as defined
below)) less any cash payments during such prior accrual periods) multiplied by
(ii) their yield to maturity of 13.25% (divided by the number of accrual periods
per year). If a holder pays an Acquisition Premium (as defined below) for a
Debenture, the amount of such premium will reduce the amount of OID that such
holder must include in income with regard to that Debenture. Further, if a
holder purchases a Debenture on or after April 4, 1994, such holder may be
entitled to elect to treat all interest on the Debenture as OID (the "Constant
Yield Election"). For this purpose, "interest" includes stated interest, OID,
market discount (as such may be adjusted by amortization of premium and
Acquisition Premium; see "--Acquisition Premium" below). Once made, the election
cannot be revoked without IRS consent, and in certain circumstances may cause
deemed elections for all of such holder's debt instruments purchased at a market
discount or premium. See "--Market Discount" and "--Acquisition Premium" below.
Holders are urged to consult with their tax advisors with regard to the
advisability of making such an election.
Holdings' option to redeem the Debentures at any time after issuance at
100% of their principal amount plus accrued and unpaid interest to the
redemption date will be treated as a "call option" within the meaning of the
1986 Proposed Regulations. As a result, Holdings will be presumed under the 1986
Proposed Regulations to exercise its option to redeem the Debentures if, by
utilizing the date of exercise of the call option as the maturity date and the
amount for which the Debentures could be redeemed in accordance with the terms
of the redemption feature as the stated redemption price at maturity, the yield
on the Debentures would be lower than such yield would be if the option were not
exercised. Under this rule, Holdings' option to redeem the Debentures should not
be presumed exercised since the Debentures should have a yield of 13.25%,
compounded semi-annually, regardless of when they are called.
A holder's initial tax basis in a Debenture will be equal to the price
paid for such Debenture. A holder's basis in a Debenture will be increased by
the amount of any OID includible in the holder's income under the rules
discussed above (and by any market discount includible in the holder's income
under the rules described below) and decreased by any cash payments (other than
qualified periodic interest payments) received by such holder with respect to
the Debenture.
Additional Original Issue Discount Considerations. If a holder owns both
the Debentures and either the 11-3/4% Notes or the Secured Notes, or possibly if
a holder owns only the Debentures, but the Debentures are not traded on an
established securities market, the 1986 Proposed Regulations could, under
certain circumstances, be interpreted to require that such debt instruments be
aggregated and treated as a single debt instrument for purposes of computing
OID, which treatment could result in a distortion in the amount of OID included
in income by holders of the Debentures. In any event, a holder of the Debentures
who does not also hold either the 11-3/4% Notes or the Secured Notes should not
be subject to these aggregation rules if the Debentures are treated as
separately traded on an established securities market. Moreover, absent further
clarification of the 1986 Proposed Regulations, Holdings does not intend to
treat any of the Debentures as being subject to these aggregation rules.
If Holdings is considered to have issued the Debentures with an
intention to call them prior to maturity, then any gain realized on the sale or
redemption of such Debentures would be treated as ordinary income to the extent
that the entire OID on the Debentures exceeded the OID previously includible in
the income of any holder (disregarding any reduction on account of an
Acquisition Premium). The 1986 Proposed Regulations do not describe what
constitutes an intention to call prior to maturity. Under the 1986 Proposed
Regulations the existence of provisions such as the optional call feature could
be interpreted by the IRS as indicating such an intention.
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Disposition of Debentures. Generally any sale or redemption of
Debentures will result in taxable gain or loss equal to the difference between
the amount of cash or other property received and the holder's adjusted tax
basis in the Debentures. Generally, a holder's adjusted tax basis will equal the
amount paid for the Debenture, adjusted as described above under the OID rules
and as described below under the rules relating to market discount and premium.
Except to the extent that the market discount rules described below apply, such
gain or loss generally would be capital gain or loss if the Debentures were held
as a capital asset and if at the time the Debentures were issued Holdings did
not have an intention to call the Debentures before maturity. Any capital gain
or loss would be long-term gain or loss if the Debentures were held for the
applicable long-term holding period (currently, more than one year).
Market Discount. The sale of the Debentures may be affected by the
market discount provisions of the Code. Generally, market discount will exist to
the extent a holder's purchase price for a Debenture is less than the revised
issue price of the Debenture. Under a statutory de minimis rule, however, market
discount on a debt instrument will be considered to be zero for purposes of the
rules discussed below if such market discount is less than 0.25% of the stated
redemption price of the debt instrument at maturity (or possibly, in the case of
the Debentures, their revised issue price when acquired) multiplied by the
number of complete years (that is, rounding down for partial years) to maturity
(after the holder acquires the instrument). The revised issue price for a
Debenture equals the issue price plus the amount of OID includible in the income
of all holders for periods prior to a holder's acquisition (disregarding any
deduction on account of an Acquisition Premium), presumably less any cash
payments on the Debentures.
Generally, a holder of a Debenture who acquires the Debenture with
market discount will be required to treat any gain realized upon the sale or
other disposition of such Debenture as ordinary income to the extent of the
market discount that accrued (but was not previously included in income) during
the period such holder held the Debenture. Market discount on a debt instrument
generally accrues on a straight-line basis in equal daily portions or, at the
election of the holder, under a constant interest method. If a holder disposes
of a Debenture in any transaction other than a sale, exchange or involuntary
conversion (for example, as a gift), that holder generally is treated as having
an amount realized equal to the fair market value of the Debenture and will be
required to recognize as ordinary income any gain on disposition to the extent
of the accrued and previously unrecognized market discount. As a result of this
rule, a holder may be required to recognize ordinary income on the disposition
of a Debenture, even though the disposition would not otherwise be taxable.
If principal is paid in more than one installment, any partial principal
payment must be included in gross income as ordinary income to the extent such
payment does not exceed accrued market discount on the instrument. This rule
presumably would apply to a holder of a Debenture with market discount if such
Debenture were redeemed in part. Furthermore, if a cash payment that is
denominated as an interest payment is received, the holder must include in
income at the time such cash payment is received the portion of the unrecognized
market discount that accrued prior to the receipt of such cash payment (up to
the amount of such payment).
Generally, a holder of a Debenture who has acquired the Debenture with
market discount will also be required to defer deduction of a portion of
interest on debt incurred or continued to purchase or carry the Debenture until
disposition of the Debenture in a taxable transaction. If a holder incurs or
continues indebtedness to purchase or carry a Debenture acquired at a market
discount, "net direct interest expense" arising from the indebtedness is allowed
as a current deduction only to the extent it exceeds the portion of market
discount allocable to the days during the year on which the Debenture was held
by the holder. Net direct interest expense is the excess, if any, of the amount
of interest paid or accrued during the taxable year on such indebtedness over
the aggregate amount of interest (including OID) includible in gross income for
the taxable year with respect to the Debenture. Net direct interest expense that
exceeds the amount currently
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deductible is allowable as a deduction in any subsequent year, to the extent it
does not exceed net interest income (that is, interest income on the Debenture,
including OID, less interest on indebtedness incurred or continued to purchase
or carry the Debenture) for such year, if a proper election is made. Disallowed
interest deductions, if any, remaining at the time of any taxable disposition of
the Debenture would be treated as interest paid or accrued in the year of
disposition.
A holder may elect to include market discount in income as such discount
accrues with a corresponding increase in the holder's tax basis in the
Debenture. If a holder so elects, the foregoing rules regarding the treatment as
ordinary income of gain upon a disposition of the Debenture and upon receipt of
certain cash payments, and regarding the deferral of interest deductions on
indebtedness related to a Debenture, would not apply. Once made, such an
election applies to all debt obligations of the holder that are purchased at a
market discount on or after the first day of the taxable year for which the
election is made, and all subsequent taxable years of the holder, unless the IRS
consents to a revocation of the election. Holders are urged to consult their own
tax advisors with regard to the advisability of making such an election, or any
of the other elections with respect to market discount (including the Constant
Yield Election) described above.
The market discount rules of the Code do not completely address the
treatment of market discount on a debt instrument having the deferred interest
feature of the Debentures, and Treasury regulations implementing the market
discount rules have not been promulgated. Therefore, the treatment of the
Debentures under those market discount rules is not entirely clear and holders
are urged to consult their own tax advisors in respect of such treatment.
Acquisition Premium. A purchaser of a Debenture who acquires such
Debenture at a cost in excess of its adjusted issue price and less than or equal
to (x) in the case of Debentures purchased before December 22, 1992, its stated
redemption price at maturity, reduced by the amount of any payment previously
made on the Debenture, and (y) in the case of Debentures purchased on or after
December 22, 1992, the sum of all amounts payable on the Debenture after the
purchase date, will be considered to have purchased such Debenture at an
"Acquisition Premium." Under the Acquisition Premium rules contained in the
Code, generally, such purchaser will be entitled to a reduction in the amount of
OID otherwise includible in income with respect to such Debenture. If a holder
purchases a Debenture for a cost in excess of (x) in the case of Debentures
purchased before December 22, 1992, its stated redemption price at maturity,
reduced by the amount of any payment previously made on the Debenture, and (y)
in the case of Debentures purchased on or after December 22, 1992, the sum of
all amounts payable on the Debenture after the purchase date, such holder should
consult a tax advisor to determine the advisability of an election, if
available, to amortize as an offset to interest income such excess as bond
premium pursuant to Code Section 171 (with a corresponding reduction to the
holder's tax basis in the Debenture). An election to amortize bond premium
applies to all taxable debt obligations then owned and thereafter acquired by
the holder and may be revoked only with the permission of the IRS. Holders are
urged to consult with their own tax advisors as to the advisability of making
such an election (or the Constant Yield Election described above).
Applicable High Yield Discount Rules. Holdings will not be entitled to
an interest deduction in respect of a Debenture in the same amount and at the
same time that a taxable holder of Debentures would be required to include OID
in its gross income because the Debentures represent AHYDOs within the meaning
of Section 163(i) of the Code. Generally, an AHYDO is defined as a corporate
debt instrument with (i) a maturity date in excess of five years from its issue
date, (ii) a yield to maturity equal to, or in excess of, five percentage points
plus the "applicable federal rate" ("AFR") in effect for the month in which the
debt instrument is issued, and (iii) "significant OID." The AFR is a Treasury
related interest rate that changes from month to month and is published by the
IRS for long-term, mid-term, and short-term debt instruments, in each case,
about two weeks before becoming effective for a particular month.
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Under Section 163(e)(5) and (i) of the Code, a corporate issuer of an
AHYDO generally is not allowed a deduction for the disqualified portion of the
OID on the obligation, and the remainder of the OID is not allowable as a
deduction until paid in cash or property (other than stock or debt of the issuer
or a related party). The "disqualified portion" of the OID is the lesser of (i)
the amount of the OID on the instrument or (ii) the portion of the total return
on such instrument that bears the same ratio to the total return as the
"disqualified yield" bears to the yield to maturity on the instrument. The term
"disqualified yield" means the portion of the yield that exceeds the AFR plus
six percentage points. A holder of an AHYDO must include OID in income under the
general OID provisions of the Code regardless of the deferral or disallowance of
the interest deduction to the issuer, except that, for purposes of the dividends
received deduction, corporate holders of AHYDOs would be treated as receiving
distributions with respect to the stock of the issuer (rather than interest) to
the extent of the disqualified portion of the OID and to the extent that such
distribution would have been treated as a dividend.
The Debentures have a term in excess of five years, a yield to maturity
of 13.25%, which exceeds five percentage points plus 7.74% (the AFR in effect
for June 1992) and bear significant OID. Thus, the Debentures will be treated as
AHYDOs and Holdings and holders of the Debentures will be subject to the rules
summarized above except that there will be no "disqualified portion" of OID
since their yield does not exceed the AFR plus six percentage points. As a
result, a portion of the tax deductions that would otherwise be available to
Holdings in respect of the Debentures will be deferred (until their maturity or
sooner upon early repayment in cash or qualified property) which, in turn, might
reduce the after-tax cash flows of Holdings and its subsidiaries. Holdings
expects to utilize the net operating loss carryforwards available to the Company
to offset (but not eliminate) the effect of such deferral, subject to otherwise
applicable limitations on the utilization of such carryforwards. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity."
As explained above, because the Debentures' yield is less than the AFR
plus six percentage points, tax deductions for OID on the Debentures will be
deferred until paid in cash or qualified property, but should not be disallowed
under the AHYDO rules. Prospective purchasers should be aware, however, that the
IRS has broad authority to issue regulations under the AHYDO rules with
retroactive effect which may affect the timing or availability of tax deductions
for OID on the Debentures.
Backup Withholding. Under Section 3406 of the Code and applicable
Treasury regulations, a holder of a Debenture may be subject to backup
withholding at a rate of 31% of certain amounts paid or deemed paid (including
OID) to the holder unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, provides proof of such
exemption or (ii) provides a correct taxpayer identification number, certifies
that he has not lost exemption from backup withholding, and has met the
requirements for the reporting of previous income set forth in the backup
withholding rules. Holders of Debentures should consult their tax advisors as to
their qualification for exemption from withholding and the procedure for
obtaining such an exemption. Amounts paid as backup withholding do not
constitute an additional tax and will be credited against the holder's federal
income tax liability.
EXCEPT AS DISCUSSED ABOVE, NO INFORMATION IS PROVIDED HEREIN AS TO THE
TAX TREATMENT OF HOLDERS OF THE DEBENTURES UNDER APPLICABLE UNITED STATES OR
OTHER TAX LAWS. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY
NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. FOR EXAMPLE,
THE DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO HOLDERS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES. THEREFORE, PROSPECTIVE PURCHASERS OF
DEBENTURES ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE
-104-
<PAGE>
DEBENTURES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.
MARKET-MAKING ACTIVITIES OF
MORGAN STANLEY
The Prospectus is to be used by Morgan Stanley in connection with offers
and sales of the Debentures in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. Morgan Stanley may act
as principal or agent in such transactions. Morgan Stanley has no obligation to
make a market in the Debentures, and may discontinue its market-making
activities at any time without notice, in its sole discretion.
Morgan Stanley acted as underwriter in connection with the original
offering of the Debentures and received an underwriting discount of $5,790,208
in connection therewith.
As of the date of this Prospectus, MSLEF II owns 38.48% of the
outstanding voting common stock of Holdings. See "Securities Ownership of
Certain Beneficial Owners and Management--Certain Beneficial Owners of Holdings'
Capital Stock." Morgan Stanley also acted as the underwriter for the Silgan
Notes Offering and the purchaser for the private placement of the Secured Notes,
for which it was paid an aggregate of $5,742,500. For a description of certain
transactions between Holdings, and Morgan Stanley and affiliates of Morgan
Stanley, see "Certain Transactions."
In connection with the original offering of the Debentures, Holdings
agreed to indemnify Morgan Stanley, as the underwriter, and A.G. Edwards & Sons,
Inc., as a "qualified independent underwriter," against certain liabilities,
including liabilities under the Securities Act.
Morgan Stanley has provided, and continues to provide, investment
banking services to Holdings and its affiliates.
LEGAL MATTERS
The legality of the Debentures has been passed on for Holdings by
Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street,
Stamford, Connecticut 06901. G. William Sisley, a partner in Winthrop, Stimson,
Putnam & Roberts, is Secretary of Holdings and Silgan. Winthrop, Stimson, Putnam
& Roberts from time to time represents Morgan Stanley in connection with certain
legal matters unrelated to its representation of Holdings.
-105-
<PAGE>
EXPERTS
The consolidated financial statements of Silgan Holdings Inc. at
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Silgan Corporation at December
31, 1994 and 1993, and for each of the three years in the period ended December
31, 1994 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
-106-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SILGAN HOLDINGS INC.:
Report of Independent Auditors..............................................F-2
Consolidated Balance Sheets at December 31, 1994 and 1993...................F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992.........................................F-4
Consolidated Statements of Deficiency in Stockholders'
Equity for the years ended December 31, 1994, 1993 and 1992............F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992...................................F-6
Notes to Consolidated Financial Statements..................................F-8
Condensed Unaudited Consolidated Balance Sheets at
March 31, 1995 and 1994..................................................F-32
Condensed Unaudited Consolidated Statements of Operations for
the three months ended March 31, 1995 and 1994.........................F-33
Condensed Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 1995 and 1994.....................F-34
Notes to Condensed Unaudited Consolidated Financial Statements..............F-35
SILGAN CORPORATION:
Report of Independent Auditors..............................................F-37
Consolidated Balance Sheets at December 31, 1994 and 1993...................F-38
Consolidated Statements of Operations for the years ended
December 31, 1994, 1993 and 1992.......................................F-39
Consolidated Statements of Common Stockholder's Equity for the years
ended December 31, 1994, 1993 and 1992.................................F-40
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992....................................................F-41
Notes to Consolidated Financial Statements..................................F-43
F-1
<PAGE>
F-2
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan
Holdings Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of operations, deficiency in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Silgan Holdings Inc. at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 6 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income taxes,
postemployment benefits and postretirement benefits other than pensions.
Ernst & Young LLP
Stamford, CT
March 17, 1995
F-2<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS 1994 1993
Current assets:
Cash and cash equivalents $ 2,682 $ 224
Accounts receivable, less allowances for
doubtful accounts of $1,557 and $1,084 for
1994 and 1993, respectively 65,229 44,409
Inventories 122,429 108,653
Prepaid expenses and other current assets 8,044 3,676
Total current assets 198,384 156,962
Property, plant and equipment, at cost:
Land 3,707 4,469
Buildings and improvements 51,665 56,087
Machinery and equipment 346,061 352,409
Construction in progress 18,124 19,894
419,557 432,859
Less accumulated depreciation and amortization (167,747) (142,464)
Net property, plant and equipment 251,810 290,395
Goodwill, net of amortization 30,009 24,175
Other assets 24,618 26,101
$504,821 $497,633
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 36,845 $ 31,913
Accrued payroll and related costs 26,019 20,523
Accrued interest payable 1,713 783
Accrued expenses and other current liabilities 22,505 21,385
Bank working capital loans 12,600 2,200
Current portion of long-term debt 21,968 20,000
Total current liabilities 121,650 96,804
Long-term debt 510,763 505,718
Deferred income taxes 6,836 6,836
Other long-term liabilities 23,570 33,242
Deficiency in stockholders' equity:
Common stock ($0.01 par value per share;
2,167,500 shares authorized, 1,135,000
shares issued and outstanding) 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (191,616) (178,585)
Total deficiency in stockholders' equity (157,998) (144,967)
$504,821 $497,633
See accompanying notes.
F-3<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $861,374 $645,468 $630,039
Cost of goods sold 747,457 571,174 554,972
Gross profit 113,917 74,294 75,067
Selling, general and
administrative expenses 38,830 32,495 32,809
Reduction in carrying value of assets 16,729 - -
Income from operations 58,358 41,799 42,258
Interest expense and other
related financing costs 65,789 54,265 57,091
Minority interest expense - - 2,745
Loss before income taxes (7,431) (12,466) (17,578)
Income tax provision 5,600 1,900 2,200
Loss before extraordinary
charges and cumulative effects of
changes in accounting principles (13,031) (14,366) (19,778)
Extraordinary charges relating to early
extinguishment of debt - (1,341) (23,597)
Cumulative effect of changes in accounting
principles - (6,276) -
Net loss $(13,031) $(21,983) $(43,375)
See accompanying notes.
F-4<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Total
Additional deficiency in
Common paid-in Accumulated stockholders'
stock capital deficit equity
Balance at December 31, 1991 $ 9 $18,609 $(113,227) $ (94,609)
Net loss - - (43,375) (43,375)
Balance at December 31, 1992 9 18,609 (156,602) (137,984)
Issuance of 250,000 shares of
Class B Common Stock 3 14,997 - 15,000
Net loss - - (21,983) (21,983)
Balance at December 31, 1993 12 33,606 (178,585) (144,967)
Net loss - - (13,031) (13,031)
Balance at December 31, 1994 $ 12 $33,606 $(191,616) $(157,998)
See accompanying notes.
F-5<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities:
Net loss $(13,031)$ (21,983) $(43,375)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 35,392 31,607 29,538
Amortization 7,075 5,488 5,097
Accretion of discount on discount
debentures 27,477 24,167 11,116
Minority interest expense - - 2,745
Reduction in carrying value of assets 16,729 - -
Other items 792 342 1,215
Extraordinary charges relating
to early extinguishment of debt - 1,341 23,597
Cumulative effect of changes in
accounting principles - 6,276 -
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable (21,293) 707 (8,705)
(Increase) decrease in inventories (16,741) (4,316) 5,541
Increase (decrease) in trade
accounts payable 4,478 3,757 (4,330)
Other, net 6,455 749 (6,999)
Total adjustments 60,364 70,118 58,815
Net cash provided by operating
activities 47,333 48,135 15,440
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets 519 (73,865) -
Capital expenditures (29,184) (42,480) (23,447)
Proceeds from sale of assets 765 262 429
Net cash used in investing activities (27,900) (116,083) (23,018)
Continued on following page.
F-6<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from financing activities:
Borrowings under working capital loans $393,250 $328,050 $316,050
Repayments under working capital loans (382,850) (366,250) (296,850)
Proceeds from issuance of long-term debt - 140,000 350,435
Proceeds from issuance of common stock - 15,000 -
Reduction of long-term debt (20,464) (42,580)
(300,365)
Premium paid on early retirement of debt - - (10,678)
Redemption of Silgan preferred stock - - (31,508)
Cash dividends paid on preferred stock - - (1,137)
Payments to former shareholders of Silgan (6,911) - -
Debt financing costs - (8,935) (17,300)
Net cash provided (used) by financing
activities (16,975) 65,285 8,647
Net increase (decrease) in cash and
cash equivalents 2,458 (2,663) 1,069
Cash and cash equivalents at
beginning of year 224 2,887 1,818
Cash and cash equivalents at
end of year $ 2,682 $ 224 $ 2,887
Supplementary data:
Interest paid $ 30,718 $ 25,733 $ 46,757
Income taxes paid, net of refunds 2,588 722 1,206
See accompanying notes.
F-7<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
1. Basis of Presentation
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiary, "the Company"), a company controlled by Silgan management and
The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), an
affiliate of Morgan Stanley & Co. Incorporated ("MS & Co."), own all the
outstanding common stock of Silgan Corporation ("Silgan"). Silgan has two
operating subsidiaries, Silgan Containers Corporation ("Containers") and
Silgan Plastics Corporation ("Plastics").
The Company, a North American packaging manufacturer, is engaged in 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 health, personal care,
food, beverage, pharmaceutical and household chemical products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. 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.
Cash and cash equivalents
Cash equivalents represent investments with maturities of three months or
less from the time of purchase and are carried at cost which approximates
fair value due to the short maturities of those instruments.
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.
F-8<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market (net realizable
value) and are principally accounted for by the last-in, first-out method
(LIFO). The components of inventories at December 31, 1994 and 1993
consist of the following (in thousands):
1994 1993
Raw materials and supplies $ 40,196 $ 26,458
Work-in-process 19,045 17,105
Finished goods 63,409 65,072
122,650 108,635
Adjustment to value inventory
at cost on the LIFO method (221) 18
$122,429 $108,653
The amount of inventory recorded on the first-in first-out method at
December 31, 1994 and 1993 was $6.5 million and $7.4 million, respectively.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost and are
depreciated on the straight-line method over their estimated useful lives.
Major renewals and betterments are capitalized and maintenance and repair
expenditures are charged to expense as incurred. The total amount of
repairs and maintenance expense was $19.9 million in 1994; $17.1 million in
1993; and $15.0 million in 1992.
The principal estimated useful lives are 35 years for buildings and range
between 3 to 18 years for machinery and equipment. Effective October 1,
1994, the Company extended the estimated useful lives of certain fixed
assets to more properly reflect the true economic lives of the assets and
to better align the Company's depreciable lives with the predominate
practice in industry. The change had the effect of decreasing depreciation
expense and increasing net income for the fourth quarter and the year by
approximately $1.3 million.
F-9<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Property, plant and equipment (continued)
Based upon a review of its depreciable assets, the Company determined, in
the fourth quarter of 1994, that certain adjustments were necessary to
properly reflect net realizable values. These adjustments include $2.6
million to write-down the excess carrying value over estimated realizable
value of various plant facilities held for sale and $14.1 million to reduce
the carrying value of certain technologically obsolete and inoperable
equipment.
Goodwill
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is being amortized
on a straight-line basis over periods ranging between 20 and 40 years. The
Company periodically evaluates the existence of goodwill impairment to
assess whether goodwill is fully recoverable from projected, undiscounted
net cash flows of the related business unit. Impairments would be
recognized in operating results if a permanent diminution in value were to
occur. Goodwill amortization charged to operations was $1.2 million in
1994; $0.5 million in 1993; and $0.5 million in 1992. Accumulated
amortization of goodwill at December 31, 1994 and 1993 was $3.7 million and
$2.5 million, respectively.
Other Assets
Other assets consist principally of debt issuance costs which are being
amortized straight-line over the terms of the related debt agreements (3 to
10 years). The charge incurred for amortization of debt issuance cost was
$5.3 million in 1994; $3.3 million in 1993; and $2.9 million in 1992.
Other intangible assets are amortized over their expected useful lives
using the straight-line method.
Other assets at December 31, 1994 and 1993 consist of the following (in
thousands):
1994 1993
Debt issuance costs $25,142 $25,213
Other 8,275 3,789
33,417 29,002
Less: accumulated amortization (8,799) (2,901)
$24,618 $26,101
F-10<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the
customer. As is common in the packaging industry, the Company must
manufacture containers for its seasonal pack customers throughout the year.
Revenue is recognized for such customers at the time insurable risk has
passed to the customer.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes". Under SFAS No. 109, the liability method is used to
calculate 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". There was no
effect for the difference in methods at the date of adoption. See Note 7 -
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 $1.3 million. There
was no tax effect of the charge due to the net operating loss position of
the Company.
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.
F-11<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments (continued)
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.
Derivatives
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. On occasion, the Company has
used interest rate hedge agreements to reduce the impact of increases in
interest rates on floating-rate long-term debt. During 1994 and 1993, the
Company was not party to any interest rate hedge agreements. In addition,
during 1994 and 1993, the Company did not use derivative instruments to
hedge its commodity and foreign exchange risks.
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 Del Monte's container manufacturing business in the United States ("DM
Can"). The final purchase price for the assets acquired and the assumption
of certain specified liabilities, including related transaction costs, was
$73.3 million. 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. During 1994, the Company finalized its purchase
price accounting, adjusting the fair value of assets acquired and
liabilities assumed to the amounts determined based upon final appraisals
and valuations. The excess of the purchase price over the fair value of
net assets acquired was allocated to goodwill. The aggregate purchase cost
and its allocation to the assets and liabilities is as follows (in
thousands):
Net working capital acquired $21,944
Property, plant and equipment 47,167
Goodwill 13,729
Other liabilities assumed (9,494)
$73,346
F-12<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
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 include the combined historical results of
DM Can and the Company after giving effect to certain pro forma
adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in the supply agreement with Del Monte, the
effect of purchase accounting adjustments based upon appraisals and
valuations, 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 (in
thousands):
1993 1992
Net sales $818,614 $819,579
Income from operations 50,669 56,747
Loss before income taxes (8,134) (8,102)
Loss before extraordinary charges
and cumulative effect of accounting changes (10,380) (11,060)
Net loss (17,997) (34,657)
4. Short-Term Borrowings and Long-Term Debt
1994 1993
(in thousands)
Short-term borrowings are as follows:
Bank Working Capital Loans $ 12,600 $ 2,200
Long-term debt consists of the following:
Bank A Term Loans $ 39,845 $ 60,000
Bank B Term Loans 79,691 80,000
Senior Secured Floating Rate Notes due
June 30, 1997 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002 135,000 135,000
13 1/4% Senior Discount Debentures due
December 15, 2002 228,195 200,718
532,731 525,718
Less: Amounts due within one year 21,968 20,000
$510,763 $505,718
F-13<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
The aggregate annual maturities of long-term debt at December 31, 1994 are
as follows (in thousands):
1995 $ 21,968
1996 97,568
1997 50,000
1998 -
1999 -
2000 and thereafter 363,195
$532,731
Bank Credit Agreement
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") entered into a new credit agreement (the "Credit Agreement"),
with a group of banks to refinance in full amounts owing under the former
bank credit facility, which included $41.6 million of term loans, and to
finance, in part, the acquisition of DM Can. As a result of the early
extinguishment of debt, the Company incurred a charge of $1.3 million.
Pursuant to the Credit Agreement, the Company borrowed $60.0 million of A
Term Loans and $80.0 million of B Term Loans. The A Term Loans are payable
each year in scheduled installments with the final payment due September
15, 1996. The B Term Loans are payable in full on September 15, 1996.
Additionally, further repayments are required at the time of certain asset
sales or the issuance of equity. During 1994, in addition to the $20.0
million mandatory payment, a repayment of $0.5 million was made upon the
sale of certain assets.
The Credit Agreement also provides Containers and Plastics, together, with
a revolving credit facility of $70.0 million for working capital needs (the
"Working Capital Loans"). The aggregate amount of Working Capital Loans
which may be outstanding at anytime is limited to 85% of Containers' and
Plastics' eligible accounts receivable and 50% of Containers' and Plastics'
eligible inventory. In lieu of Working Capital Loans, Containers and
Plastics may request the issuance of up to $15.0 million of letters of
credit. At December 31, 1994, commitments under the revolving credit
facility of $51.9 million were available after taking into account
outstanding letters of credit of $5.5 million. The Working Capital Loans
can be borrowed, repaid and reborrowed from time-to-time until final
maturity on September 15, 1996.
F-14<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Bank Credit Agreement (continued)
The borrowings under the Credit Agreement may be designated by the
respective Borrowers as Base Rate or Eurodollar Rate borrowings. The Base
Rate is the highest of (i) 1/2 of 1% in excess of Adjusted Certificate of
Deposit Rate, (ii) 1/2 of 1% in excess of the Federal Funds Rate or (iii)
Bankers Trust Company's prime lending rate. Base Rate borrowings bear
interest at the Base Rate plus 1.75%, in the case of A Term Loans; 2.0%, in
the case of Working Capital Loans; and 2.25%, in the case of B Term Loans.
Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus 2.75%
in the case of A Term Loans; 3.0%, in the case of Working Capital Loans;
and 3.25%, in the case of B Term Loans. At December 31, 1994 the interest
rate for Base Rate borrowings ranged between 10 1/4% and 10 1/2% and for
Eurodollar Rate borrowings ranged between 8 5/8% and 10%.
For 1994, 1993 and 1992, respectively, the average amount of borrowings
under the Working Capital Loans was $14.4 million, $51.9 million and $44.5
million; the average annual interest rate paid on borrowings was 8.4%, 6.0%
and 6.3%; and the highest amount of such borrowings at any month-end was
$43.9 million, $80.3 million and $80.8 million.
The Credit Agreement provides for the payment of a commitment fee of 0.5%
per annum on the daily average unused portion of commitments available
under the Working Capital Loans as well as a 3 1/4% per annum fee on
outstanding Letters of Credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of the Borrowers and secured by a security interest in substantially
all of the respective real and personal property of the Borrowers. Such
security interest also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, the Senior Secured Notes.
Additionally, the stock of Silgan and the stock of principally all of its
subsidiaries have been pledged to the lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, indebtedness, liens, dividends, leases, capital
expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
F-15<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Senior Secured Floating Rate Notes
The 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,
1994 was 9.44%.
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 under the Credit Agreement.
11 3/4% Senior Subordinated Notes
The 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.
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 under the Credit Agreement and the Secured
Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1994, based
upon quoted market prices, was $140.4 million.
F-16<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
13 1/4% Senior Discount Debentures
The 13 1/4% Senior Discount Debentures (the "Discount Debentures"), which
are due on December 15, 2002, represent unsecured general obligations of
Holdings, subordinate in right of payment to the obligations of Silgan and
its subsidiaries. The original issue discount is being amortized through
June 15, 1996 with a yield to maturity of 13 1/4%. The carrying amount at
December 31, 1994 of the Discount Debentures represents the principal
amount less an unamortized discount of $46.8 million. From and after June
15, 1996, interest on the Discount Debentures will accrue on the principal
amount at the rate of 13 1/4% and be payable in cash semiannually. The
Discount Debentures are redeemable at any time, at the option of Holdings,
in whole or in part, at 100% of their principal amount plus accrued
interest to the redemption date.
The Discount Debenture Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement, the Secured
Notes and the 11 3/4% Notes.
The estimated fair value of the Discount Debentures at December 31, 1994
was $235.1 million.
1992 Refinancing
Effective June 29, 1992, Holdings and Silgan refinanced a significant
portion of their indebtedness (the "Refinancing"). The Refinancing
included a private placement by Silgan of $50.0 million principal amount of
its Secured Notes, a public offering of $135.0 million principal amount of
Silgan's 11 3/4% Notes and a public offering by Holdings of its Discount
Debentures for proceeds of $165.4 million. The aggregate proceeds from the
debt offerings, net of $17.3 million of transaction fees and expenses, were
used, in part, to redeem Silgan's 14% Senior Subordinated Notes (the "14%
Notes"), Silgan's 15% Cumulative Exchangeable Redeemable Preferred Stock
(the "Preferred Stock") and Holdings' Senior Reset Debentures due 2004 (the
"Holdings Reset Debentures"). 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 ($85.0 million aggregate principal
amount) were redeemed on August 28, 1992 at a redemption price of 105% of
the principal amount thereof plus accrued interest. The Holdings Reset
Debentures were redeemed on July 29, 1992 ($175.2 million aggregate
principal amount) at a redemption price of 103.67% of the principal amount
thereof plus accrued interest. In addition, the Company paid cash interest
of $15.3 million at a rate of 17 1/2% on the principal amount of the
Holdings Reset Debentures for the period January 1 to June 30, 1992.
F-17<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
1992 Refinancing (continued)
In conjunction with the Refinancing, the credit agreement among various
bank lenders was amended to, among other things, permit the Refinancing,
and the Company repaid $30.0 million of term loans thereunder.
As a result of the Refinancing, unamortized deferred financing costs
relating to the 14% Notes, the Preferred Stock, the repayment of bank term
loans and Holdings Reset Debentures totaling $11.0 million in the aggregate
were written off in 1992 and, along with the redemption premiums of $12.6
million, are reflected as an extraordinary charge. There was no tax effect
on this charge due to the net operating loss position of the Company.
5. Retirement Plans
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining
agreements. The pension 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. It is the Company's policy to fund accrued
pension and defined contribution costs in compliance with ERISA
requirements. Assets of the plans consist primarily of equity and bond
funds.
F-18<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status as of December 31 (in
thousands):
Plans in which
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1994 1993 1994 1993
Actuarial present value of
benefit obligations:
Vested benefit obligations $9,182 $6,771 $19,876 $12,325
Non-vested benefit obligations 871 579 1,889 521
Accumulated benefit obligations 10,053 7,350 21,765 12,846
Additional benefits due to
future salary levels 5,358 5,733 3,557 4,092
Projected benefit obligations 15,411 13,083 25,322 16,938
Plan assets at fair value 11,612 9,040 17,249 9,287
Projected benefit obligation
in excess of plan assets 3,799 4,043 8,073 7,651
Unrecognized actuarial gain (loss) 504 (798) 3,916 800
Unrecognized prior service costs (665) - (2,461)
(2,093)
Additional minimum liability - - 1,677 2,107
Unfunded pension liability
recognized in the balance sheet $ 3,638 $ 3,245 $11,205 $ 8,465
As required by SFAS No. 87, "Employers' Accounting for Pensions" the
Company recognized an additional pension liability and related intangible
asset of $1.7 million and $2.1 million for pension plans with accumulated
benefits in excess of plan assets as of December 31, 1994 and 1993,
respectively.
During 1994, Del Monte transferred fund assets of $8.9 million to the
Company, as calculated using a discount rate of 9%, in accordance with the
terms of the DM Can purchase agreement. In connection with the acquisition
of DM Can, the Company assumed defined benefit plan obligations, as
calculated using its 1993 discount rate of 7.5%, of $10.9 million.
F-19<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
1994 1993 1992
Discount rate 8.5% 7.5% 8.5%
Weighted average rate of
compensation increase 4.5% 4.5% 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 for defined benefit plans are as
follows (in thousands):
1994 1993 1992
Service cost $2,947 $1,809 $1,722
Interest cost 3,334 2,144 2,101
Net amortization and deferrals (2,702) 500 75
Actual loss (return) on assets 539 (1,784) (891)
Other (gains) 4 (183) (183)
Net pension cost of defined
benefit plans $4,122 $2,486 $2,824
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees.
The contributions to multi-employer plans were $2.7 million in 1994; $2.0
million in 1993; and $2.2 million in 1992. The Company also sponsors
defined contribution plans covering substantially all employees. Company
contributions to these plans are based upon employee contributions and, in
certain situations, are based upon operating profitability. Contributions
charged to income for these plans were $2.5 million in 1994; $1.5 million
in 1993; and $1.9 million in 1992.
F-20<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and other insurance benefits to conform to the
provisions of SFAS No. 106 "Employers' Accounting for Post Retirement
Benefits Other Than Pensions", which requires accrual of these benefits
over the period during which active employees become eligible for such
benefits. Previously, the Company recognized the cost of providing such
benefits on the pay-as-you-go basis. The Company elected to immediately
recognize a cumulative charge of $5.0 million for this change in accounting
principle which represents the accumulated postretirement benefit
obligation existing as of January 1, 1993. The postretirement benefit cost
for 1992 has not been restated.
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 these plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31 (in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,183 $1,209
Fully eligible active plan participants 1,521 1,197
Other active plan participants 2,577 2,127
Total accumulated postretirement
benefit obligation 5,281 4,533
Unrecognized net gain or (loss) (219) (462)
Unrecognized prior service costs (79) -
Accrued postretirement benefit liability $4,983 $4,071
F-21<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions (continued)
Net periodic postretirement benefit cost include the following components
(in thousands):
1994 1993
Service cost $ 321 $ 152
Interest cost 412 326
Deferred loss 24 -
Other (gains) (38) -
Net periodic postretirement benefit cost $ 719 $ 478
The actuarial assumptions used in determining the accrued postretirement
benefit liability as of December 31 are as follows:
1994 1993
Discount rate 8.5% 7.5%
Weighted average rate of compensation
increase 4.5% 4.5%
The assumed health care cost trend used in measuring the accumulated
postretirement benefit obligation was 14% in 1994 and 15% in 1993,
ultimately declining to 6% in 2003 and remaining at that level thereafter.
A 1% increase in the trend rate assumption would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by approximately
$0.1 million and increase the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for 1994 by
approximately $0.02 million.
7. 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". There was no effect for
the difference in methods at the date of adoption.
F-22<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
The income tax provision consists of the following (in thousands):
1994 1993 1992
Current
Federal $2,500 $ 300 $ -
State 3,200 1,900 1,705
Foreign (100) (400) 31
5,600 1,800 1,736
Deferred
Federal - - -
State - 100 464
Foreign - - -
- 100 464
$5,600 $1,900 $2,200
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following (in thousands):
1994 1993 1992
Income tax provision
at the U.S. federal
income tax rate $(2,601) $(4,363) $(5,977)
State and foreign tax expense
net of federal income taxes 2,015 1,235 1,452
Nondeductible items:
Amortization of goodwill 576 154 154
Minority interest expense - - 933
Losses for which no benefit
is available 5,610 4,874 5,638
$ 5,600 $ 1,900 $ 2,200
F-23<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. 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 (in thousands):
1994 1993
Deferred tax liabilities:
Tax over book depreciation $21,900 $20,700
Book over tax basis of assets acquired 21,400 24,000
Other 4,100 3,600
Total deferred tax liabilities 47,400 48,300
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 24,800 20,700
Deferred interest on high yield obligations 21,300 12,300
Net operating loss carryforwards 26,200 37,300
Other 4,100 3,400
Total deferred tax assets 76,400 73,700
Valuation allowance for deferred tax assets 35,836 32,236
Net deferred tax assets 40,564 41,464
Net deferred tax liabilities $ 6,836 $ 6,836
The Company files a consolidated federal income tax return. At December
31, 1994, the Company had net operating loss carryforwards of approximately
$75.0 million which are available to offset future consolidated taxable
income of the group and expire from 2001 through 2008. The Company had an
alternative minimum tax liability of $1.5 million in 1994 and $0.3 million
in 1993. At December 31, 1994, the Company had $3.4 million of alternative
minimum tax credits which are available indefinitely to reduce future tax
payments for regular federal income tax purposes.
8. Stock Option Plans
Holdings, Containers and Plastics have established 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.
F-24<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
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, Holdings has reserved 24,000
shares of its Class C Common Stock and Containers and Plastics have each
reserved 1,200 shares of their common stock for issuance under their
respective plans. Containers has 13,764 shares and Plastics has 13,800
shares of $0.01 par value common stock currently issued, and all such
shares are owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment to the holders of the options of an amount in cash equal to the
excess of, in the case of Holdings' and Containers' plans, the pro forma
book value, as defined, of a share of common stock (or in the event of a
public offering or a change in control (as defined), 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 rights not
paid at the time of the recapitalization in June, 1989; or, in the case of
the Plastics plan, in the event of a public offering or a change in control
(as defined), the fair market value of a share of common stock over the
exercise price of the option.
Prior to a public offering or change in control, should an employee leave
the Company, Holdings and Containers have the right to repurchase, and the
employee has the right to require Holdings or Containers, as the case may
be, to repurchase, his common stock at the then pro forma book value.
At December 31, 1994, there were outstanding options for 24,000 shares
under the Holdings plan, 1,056 shares under the Containers plan and 900
shares under the Plastics plan. The exercise prices per share range from
$35 to $61 for the Holdings options, range from $2,122 to $4,933 for the
Containers options and are $126 for the Plastics options. The stock
options and SARs generally become exercisable ratably over a five year
period. At December 31, 1994, there were 15,000 options/SARs exercisable
under the Holdings plan and 720 options/SARs exercisable under the
Containers plan. At December 31, 1994, no options/SARs were exercisable
under the Plastics plan. The Company incurred charges relating to the
vesting and payment of benefits under the stock option plans of $1.5
million in 1994; $0.2 million in 1993; and $0.4 million in 1992.
F-25<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
In the event of a public offering of any of Holdings capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans, or (ii) any stock issued upon exercise of
such options issued by Containers are convertible into either stock options
or common stock of Holdings, as the case may be. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding indebtedness of
Holdings allocable to each such subsidiary.
9. Deficiency in Stockholders' Equity
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value) and preferred stock:
Shares Shares Issued and Outstanding
Class Authorized December 31, 1994 and 1993
A 500,000 417,500
B 667,500 667,500
C 1,000,000 50,000
2,167,500 1,135,000
Preferred Stock 1,000,000 -
During 1993, Holdings increased its authorized Class B Common Stock from
500,000 shares to 667,500 shares and on December 21, 1993, Holdings sold
250,000 shares of its Class B Common Stock for a purchase price of $60.00
per share and an aggregate purchase price of $15.0 million. Holdings
contributed the proceeds to Silgan in conjunction with the acquisition of
DM Can.
The minority interest represented shares of Preferred Stock issued by
Silgan. As of August 16, 1992, Silgan redeemed its Preferred Stock. Until
such redemption, 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 Silgan, paid in
additional shares of Preferred Stock. During 1992, Silgan issued 21,301
shares of Preferred Stock at $100 per share, representing its Preferred
Stock dividend requirement for the two quarters ended May 15, 1992. A cash
dividend payment of $1.1 million was made for the quarter ended August 15,
1992.
F-26<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
9. Deficiency in Stockholders' Equity (continued)
The rights, privileges and powers of the Class A Common Stock and the Class
B Common Stock are identical, with shares of each class being entitled to
one vote on all matters to come before the stockholders of Holdings. The
Class C common stockholders do not have voting rights except in certain
circumstances.
Pursuant to an organization agreement, each of the holders of the Class A
Common Stock, upon death or permanent disablement, had the right to require
Holdings to acquire his shares at fair market value. Since this option
expired on June 30, 1994, the financial statements have been retroactively
adjusted, for all periods presented, to reflect the reclassification of the
put option liability to equity.
10. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Certain operating
leases have renewal options. Minimum future rental payments under these
operating leases are (in thousands):
1995 $ 7,923
1996 6,856
1997 5,577
1998 4,006
1999 2,556
Thereafter 6,174
$33,092
Rental expense was approximately $9.1 million in 1994; $8.0 million in
1993; and $8.0 million in 1992.
F-27<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
11. Related Party Transactions
Pursuant to various management services agreements 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. In consideration for its 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 Agreements 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 Agreements, plus reimbursement for all related out-
of-pocket expenses. The total amount incurred under the Management
Agreements was $5.0 million in 1994, $4.4 million in 1993, and $4.2 million
in 1992 and was allocated, based upon EBDIT, as a charge to operating
income of each business segment. Included in accounts payable at December
31, 1994 and 1993, was $0.1 million and $0.6 million, payable to S&H,
respectively.
Under the terms of the Management Agreements, the Company has 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 Agreements.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8.1 million.
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 $11.5 million.
F-28<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of Silgan
for $6.50 per share (the "Merger"). Contemporaneous with the Merger,
certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware ("Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the Merger. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the
action upon the conclusion of the appraisal proceeding described below.
The second action was dismissed following settlement.
The same Silgan stockholders also sought appraisal of the value of their
shares pursuant to Section 262 of the Delaware General Corporation Law.
Following discovery and settlement with the holders of 650,000 shares for
$6.9 million, including interest, trial of the appraisal with respect to
the remaining 400,000 shares of Class B common stock was conducted during
the week of November 28, 1994. Post-trial briefing is scheduled to be
completed on April 17, 1995.
Management believes that the consideration offered in the Merger fully
reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect on
the financial condition or results of operations of the Company.
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, among
other things, that the general partners of MSLEF breached duties owed to
the limited partners by selling MSLEF's investment in Silgan at a grossly
inadequate price. 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.
Because this complaint continues against certain other defendants, the
plaintiff's right to appeal the dismissal of the claims against Silgan and
Holdings has not yet expired.
Management believes that there is no factual basis for the allegations and
claims contained in the complaint. Management also believes that the
lawsuit is without merit and they intend to defend the lawsuit vigorously.
In addition, management believes that the ultimate resolution of these
matters will not have a material effect on the financial condition or
results of operations of the Company.
F-29<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation (continued)
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.
13. Business Segment Information
The Company is engaged in the packaging industry and operates principally
in two business segments. Both segments operate in North America. There
are no intersegment sales. Presented below is a tabulation of business
segment information for each of the past three years (in millions):
Net Oper. Identifiable Dep. & Capital
Sales Profit Assets Amort. Expend.
1994
Metal container & other(1) $657.1 $67.0(2) $335.9 $23.1 $16.9
Plastic container 204.3 9.4(2) 162.8 14.1 12.3
Consolidated $861.4 $76.4 $498.7 $37.2 $29.2
1993
Metal container & other(1) $459.2 $42.3 $324.5 $17.3 $25.3
Plastic container 186.3 0.6 165.9 16.5 17.2
Consolidated $645.5 $42.9 $490.4 $33.8 $42.5
1992
Metal container & other(1) $437.4 $40.7 $218.7 $16.4 $14.5
Plastic container 192.6 2.3 161.2 15.4 9.0
Consolidated $630.0 $43.0 $379.9 $31.8 $23.5
(1) Includes folding carton sales which are not significant enough to be
reported as a separate segment.
(2) Excludes charge for reduction in carrying value of assets of $7.2
million for metal container segment and $9.5 million for plastic
container segment.
F-30<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
13. Business Segment Information (continued)
Operating profit is reconciled to income before tax as follows (in
millions):
1994 1993 1992
Operating profit $76.4 $42.9 $43.0
Reduction in carrying
value of assets 16.7 - -
Interest and other
corporate expense 67.1 55.4 60.6
Loss before income taxes $(7.4) $(12.5) $(17.6)
Identifiable assets are reconciled to total assets as follows (in
millions):
1994 1993 1992
Identifiable assets $498.7 $490.4 $379.9
Corporate assets 6.1 7.2 9.1
Total assets $504.8 $497.6 $389.0
Metal container and other segment sales to Nestle accounted for 25.9%,
34.1% and 36.5%, of net sales during the years ended December 31, 1994,
1993 and 1992, respectively. Similarly, sales to Del Monte accounted for
21.4% of net sales during the year ended December 31, 1994. At December
31, 1994 and 1993, 12.6% and 12.6% of the accounts receivable balance was
due from Nestle and at December 31, 1994, 21.9% of the accounts receivable
balance was due from Del Monte.
F-31<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31, Dec. 31,
1995 1994 1994
(unaudited)(unaudited)(audited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,352 $ 2,687 $ 2,682
Accounts receivable, net 75,205 68,188 65,229
Inventories 148,501 124,009 122,429
Prepaid expenses and other current
assets 5,225 3,598 8,044
Total current assets 230,283 198,482 198,384
Property, plant and equipment, net 251,832 285,738 251,810
Goodwill, net 29,699 23,878 30,009
Other assets 22,675 25,007 24,618
$534,489 $533,105 $504,821
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 50,416 $ 48,665 $ 36,845
Accrued payroll and related costs 28,207 25,263 26,019
Accrued interest payable 5,713 6,250 1,713
Accrued expenses and other current
liabilities 25,136 21,391 22,505
Bank working capital loans 15,200 5,800 12,600
Current portion of long-term debt 19,514 20,000 21,968
Total current liabilities 144,186 127,369 121,650
Long-term debt 518,280 512,328 510,763
Deferred income taxes 7,060 7,319 6,836
Other long-term liabilities 24,381 33,300 23,570
Deficiency in stockholders' equity:
Common stock 12 12 12
Additional paid-in capital 33,606 33,606 33,606
Accumulated deficit (193,036) (180,829) (191,616)
Total deficiency in stockholders'
equity (159,418) (147,211) (157,998)
$534,489 $533,105 $504,821
See accompanying notes.
F-32<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
March 31, March 31,
1995 1994
Net sales $203,264 $186,243
Cost of goods sold 174,265 163,520
Gross profit 28,999 22,723
Selling, general and administrative expenses 10,168 8,745
Income from operations 18,831 13,978
Interest expense and other related
financing costs 17,251 15,647
Income (loss) before income taxes 1,580 (1,669)
Income tax provision 3,000 575
Net loss $ (1,420) $ (2,244)
See accompanying notes.
F-33<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31, March 31,
1995 1994
Cash flows from operating activities:
Net loss $ (1,420) $ (2,244)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 8,333 9,376
Amortization 1,766 1,774
Other items 35 276
Accretion of discount on discount debentures 7,517 6,610
Changes in assets and liabilities:
(Increase) in accounts receivable (10,025) (23,878)
(Increase) in inventories (26,072) (15,356)
Increase in trade accounts payable 13,571 16,752
Increase in accrued interest payable 4,000 5,467
Other, net 5,960 6,507
Total adjustments 5,085 7,528
Net cash provided by operating activities 3,665 5,284
Cash flows from investing activities:
Capital expenditures (8,359) (4,896)
Proceeds from sale of assets 3,218 -
Net cash used in investing activities (5,141) (4,896)
Cash flows from financing activities:
Borrowings under working capital loans 89,710 33,750
Repayments under working capital loans (87,110) (30,150)
Repayment of term loans (2,454) -
Payments to former shareholders of Silgan - (1,525)
Net cash provided by financing activities 146 2,075
Net increase (decrease) in cash and cash equivalents (1,330) 2,463
Cash and cash equivalents at beginning of year 2,682 224
Cash and cash equivalents at end of period $ 1,352 $ 2,687
Supplementary data:
Interest paid $ 4,304 $ 1,786
Income taxes paid 2,648 138
See accompanying notes.
F-34<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1995 and 1994 and for the
three months then ended is unaudited)
(Dollars in thousands)
1. Basis of Presentation
The accompanying condensed unaudited consolidated financial statements of
Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity
with generally accepted accounting principles. All adjustments of a
normal recurring nature have been made, including appropriate estimates
for reserves and provisions which are normally determined or settled at
year end. In the opinion of the Company, however, the accompanying
financial statements contain all adjustments (consisting solely of a
normal recurring nature) necessary to present fairly Holdings' financial
position as of March 31, 1995 and 1994 and December 31, 1994, the results
of operations for the three months ended March 31, 1995 and 1994, and the
statements of cash flows for the three months ended March 31, 1995 and
1994.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in Holdings' Annual Report on Form 10-K for the year ended
December 31, 1994.
Effective October 1, 1994, the Company extended the estimated useful lives
of certain fixed assets to more properly reflect the true economic lives
of such assets and to better align the Company's depreciable lives with
the predominate practice in its industry. The change had the effect of
decreasing depreciation expense for the first quarter of 1995 by $1.5
million and increasing net income by $1.3 million.
Pursuant to an organization agreement, each of the holders of the Class A
Common Stock, upon death or permanent disablement, had the right to
require Holdings to acquire his shares at fair market value. Since this
option expired on June 30, 1994, the financial statements at March 31,
1994 have been retroactively adjusted to reflect the reclassification of
the put option liability to equity.
F-35<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1995 and 1994 and for the
three months then ended is unaudited)
(Dollars in thousands)
2. Inventories
Inventories consisted of the following:
March 31, March 31, Dec. 31,
1995 1994 1994
Raw materials and supplies $ 32,446 $ 27,274 $ 40,196
Work-in-process 24,890 20,481 19,045
Finished goods 96,462 74,444 63,409
153,798 122,199 122,650
Adjustment to value inventory
at cost on the LIFO Method (5,297) 1,810 (221)
$148,501 $124,009 $122,429
F-36<PAGE>
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, 1994 and 1993, 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, 1994. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Silgan Corporation at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 6 to the consolidated financial statements,
in 1993 the Company changed its method of accounting for income taxes,
postemployment benefits and postretirement benefits other than pensions.
Ernst & Young LLP
Stamford, CT
March 17, 1995
F-37<PAGE>
SILGAN CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS 1994 1993
Current assets:
Cash and cash equivalents $ 2,665 $ 205
Accounts receivable, less allowances for
doubtful accounts of $1,557 and $1,084 for
1994 and 1993, respectively 65,229 44,409
Inventories 122,429 108,653
Prepaid expenses and other current assets 8,044 3,562
Total current assets 198,367 156,829
Property, plant and equipment, at cost:
Land 3,707 4,469
Buildings and improvements 51,665 56,087
Machinery and equipment 346,061 352,409
Construction in progress 18,124 19,894
419,557 432,859
Less accumulated depreciation and amortization (167,747) (142,464)
Net property, plant and equipment 251,810 290,395
Goodwill, net of amortization 30,009 24,175
Other assets 20,491 20,665
$500,677 $492,064
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $ 36,845 $ 31,913
Accrued payroll and related costs 26,019 20,523
Accrued interest payable 1,713 783
Accrued expenses and other current liabilities 17,542 11,094
Bank working capital loans 12,600 2,200
Current portion of long-term debt 21,968 20,000
Total current liabilities 116,687 86,513
Long-term debt 282,568 305,000
Deferred income taxes 13,017 13,017
Other long-term liabilities 25,060 34,731
Stockholder's equity:
Common stock ($0.01 par value per share;
3,000 shares authorized, 2 shares issued) - -
Additional paid-in capital 69,535 64,135
Retained earnings (deficit) (6,190) (11,332)
Total common stockholder's equity 63,345 52,803
$500,677 $492,064
See accompanying notes.
F-38<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $861,374 $645,468 $630,039
Cost of goods sold 747,457 571,174 554,972
Gross profit 113,917 74,294 75,067
Selling, general and
administrative expenses 37,993 31,821 32,274
Reduction in carrying value of assets 16,729 - -
Income from operations 59,195 42,473 42,793
Interest expense and other
related financing costs 36,142 27,928 26,916
Income before income taxes 23,053 14,545 15,877
Income tax provision 11,000 6,300 2,200
Income before extraordinary
charges and cumulative effects of
changes in accounting principles 12,053 8,245 13,677
Extraordinary charges relating to early
extinguishment of debt, net of taxes - (841) (9,075)
Cumulative effect of changes in accounting
principles, net of taxes - (9,951) -
Net income (loss) 12,053 (2,547) 4,602
Preferred stock dividend requirements - - 2,745
Net income (loss) applicable to
common stockholder $ 12,053 $ (2,547) $ 1,857
See accompanying notes.
F-39<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Total
Additional Retained common
Common paid-in Earnings stockholder's
stock capital (deficit) equity
Balance at December 31, 1991 $ - $41,560 $ 5,082 $46,642
Preferred stock dividend
requirements - - (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
Tax benefit realized
from Parent - 5,400 - 5,400
Net income - - 12,053 12,053
Payments to former shareholders - - (6,911) (6,911)
Balance at December 31, 1994 $ - $69,535 $(6,190) $63,345
See accompanying notes.
F-40<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ 12,053 $ (2,547) $ 4,602
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation 35,392 31,607 29,538
Amortization 6,404 4,817 4,424
Reduction in carrying value of assets 16,729 - -
Other items 792 (136) 1,215
Contribution by Parent for federal
income tax provision 5,400 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 (21,293) 707 (8,705)
(Increase) decrease in inventories (16,741) (4,316) 5,541
Increase (decrease) in trade
accounts payable 4,478 3,757 (4,330)
Other, net 4,121 (750) (7,000)
Total adjustments 35,282 50,878 29,758
Net cash provided by operating
activities 47,335 48,331 34,360
Cash flows from investing activities:
Acquisition of Del Monte Can
Manufacturing Assets 519 (73,865) -
Capital expenditures (29,184) (42,480) (23,447)
Proceeds from sale of assets 765 262 429
Net cash used in investing activities (27,900) (116,083) (23,018)
Continued on following page.
F-41<PAGE>
SILGAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from financing activities:
Borrowings under working capital loans $393,250 $328,050 $316,050
Repayments under working capital loans (382,850) (366,250) (296,850)
Proceeds from issuance of long-term debt - 140,000 185,000
Reduction of long-term debt (20,464) (42,580) (125,205)
Premium paid on early retirement of debt - - (4,250)
Repayment of advance from Parent - - (25,200)
Capital contribution by Parent - 15,000 -
Payments to former shareholders (6,911) - -
Dividend to Parent - - (15,724)
Redemption of preferred stock - - (31,508)
Cash dividends paid on preferred stock - - (1,137)
Debt financing costs - (8,935) (10,250)
Net cash provided (used) by financing
activities (16,975) 65,285 (9,074)
Net increase (decrease) in cash and
cash equivalents 2,460 (2,467) 2,268
Cash and cash equivalents at
beginning of year 205 2,672 404
Cash and cash equivalents at
end of year $ 2,665 $ 205 $ 2,672
Supplementary data:
Interest paid $ 30,718 $ 25,733 $ 29,046
Income taxes paid, net of refunds 2,588 722 1,206
Additional preferred stock issued
in lieu of dividend - - 2,130
See accompanying notes.
F-42<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
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 The Morgan Stanley Leveraged Equity
Fund II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co.,
Incorporated ("MS & Co.").
The Company, a North American packaging manufacturer, is engaged in 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 health, personal care,
food, beverage, pharmaceutical and household chemical products.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. 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.
Cash and cash equivalents
Cash equivalents represent investments with maturities of three months or
less from the time of purchase and are carried at cost which approximates
fair value due to the short maturities of those instruments.
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.
F-43<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost or market (net realizable
value) and are principally accounted for by the last-in, first-out method
(LIFO). The components of inventories at December 31, 1994 and 1993
consist of the following (in thousands):
1994 1993
Raw materials and supplies $ 40,196 $ 26,458
Work-in-process 19,045 17,105
Finished goods 63,409 65,072
122,650 108,635
Adjustment to value inventory
at cost on the LIFO method (221) 18
$122,429 $108,653
The amount of inventory recorded on the first-in first-out method at
December 31, 1994 and 1993 was $6.5 million and $7.4 million, respectively.
Property, plant and equipment
Property, plant and equipment are recorded at historical cost and are
depreciated on the straight-line method over their estimated useful lives.
Major renewals and betterments are capitalized and maintenance and repair
expenditures are charged to expense as incurred. The total amount of
repairs and maintenance expense was $19.9 million in 1994; $17.1 million in
1993; and $15.0 million in 1992.
The principal estimated useful lives are 35 years for buildings and range
between 3 to 18 years for machinery and equipment. Effective October 1,
1994, the Company extended the estimated useful lives of certain fixed
assets to more properly reflect the true economic lives of the assets and
to better align the Company's depreciable lives with the predominate
practice in industry. The change had the effect of decreasing depreciation
expense for the fourth quarter and the year by approximately $1.3 million
and increasing net income by $0.8 million.
F-44<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Property, plant and equipment (continued)
Based upon a review of its depreciable assets, the Company determined, in
the fourth quarter of 1994, that certain adjustments were necessary to
properly reflect net realizable values. These adjustments include $2.6
million to write-down the excess carrying value over estimated realizable
value of various plant facilities held for sale and $14.1 million to reduce
the carrying value of certain technologically obsolete and inoperable
equipment.
Goodwill
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is being amortized
on a straight-line basis over periods ranging between 20 and 40 years. The
Company periodically evaluates the existence of goodwill impairment to
assess whether goodwill is fully recoverable from projected, undiscounted
net cash flows of the related business unit. Impairments would be
recognized in operating results if a permanent diminution in value were to
occur. Goodwill amortization charged to operations was $1.2 million in
1994; $0.5 million in 1993; and $0.5 million in 1992. Accumulated
amortization of goodwill at December 31, 1994 and 1993 was $3.7 million and
$2.5 million, respectively.
Other Assets
Other assets consist principally of debt issuance costs which are being
amortized straight-line over the terms of the related debt agreements (3 to
10 years). The charge incurred for amortization of debt issuance cost was
$4.6 million in 1994; $2.6 million in 1993; and $2.2 million in 1992.
Other intangible assets are amortized over their expected useful lives
using the straight-line method.
Other assets at December 31, 1994 and 1993 consist of the following (in
thousands):
1994 1993
Debt issuance costs $18,092 $18,163
Other 9,519 4,396
27,611 22,559
Less: accumulated amortization (7,120) (1,894)
$20,491 $20,665
F-45<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to the
customer. As is common in the packaging industry, the Company must
manufacture containers for its seasonal pack customers throughout the year.
Revenue is recognized for such customers at the time insurable risk has
passed to the customer.
Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes". Under SFAS No. 109, the liability method is used to
calculate 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 a result of this change, effective January 1, 1993,
the Company recorded a cumulative charge to earnings and a credit to paid-
in-capital of $6 million for the difference in methods up to the date of
adoption. As permitted by SFAS No. 109, the 1992 financial statements have
not been restated. See Note 7 - 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 $0.8 million (after
related income taxes of $0.5 million).
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.
F-46<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
2. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments (continued)
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.
Derivatives
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. On occasion, the Company has
used interest rate hedge agreements to reduce the impact of increases in
interest rates on floating-rate long-term debt. During 1994 and 1993, the
Company was not party to any interest rate hedge agreements. In addition,
during 1994 and 1993, the Company did not use derivative instruments to
hedge its commodity and foreign exchange risks.
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 Del Monte's container manufacturing business in the United States ("DM
Can"). The final purchase price for the assets acquired and the assumption
of certain specified liabilities, including related transaction costs, was
$73.3 million. 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. During 1994, the Company finalized its purchase
price accounting, adjusting the fair value of assets acquired and
liabilities assumed to the amounts determined based upon final appraisals
and valuations. The excess of the purchase price over the fair value of
net assets acquired was allocated to goodwill. The aggregate purchase cost
and its allocation to the assets and liabilities is as follows (in
thousands):
Net working capital acquired $21,944
Property, plant and equipment 47,167
Goodwill 13,729
Other liabilities assumed (9,494)
$73,346
F-47<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
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 include the combined historical results of
DM Can and the Company after giving effect to certain pro forma
adjustments.
The pro forma adjustments to the historical results of operations reflect
the sales prices set forth in the supply agreement with Del Monte, the
effect of purchase accounting adjustments based upon appraisals and
valuations, 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 (in
thousands):
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. Short-Term Borrowings and Long-Term Debt
1994 1993
(in thousands)
Short-term borrowings are as follows:
Bank Working Capital Loans $ 12,600 $ 2,200
Long-term debt consists of the following:
Bank A Term Loans $ 39,845 $ 60,000
Bank B Term Loans 79,691 80,000
Senior Secured Floating Rate Notes due
June 30, 1997 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002 135,000 135,000
304,536 325,000
Less: Amounts due within one year 21,968 20,000
$282,568 $305,000
F-48<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
The aggregate annual maturities of long-term debt at December 31, 1994 are
as follows (in thousands):
1995 $ 21,968
1996 97,568
1997 50,000
1998 -
1999 -
2000 and thereafter 135,000
$304,536
Bank Credit Agreement
On December 21, 1993, the Company, Containers and Plastics (the
"Borrowers") entered into a new credit agreement (the "Credit Agreement"),
with a group of banks to refinance in full amounts owing under the former
bank credit facility, which included $41.6 million of term loans, and to
finance, in part, the acquisition of DM Can. As a result of the early
extinguishment of debt, the Company incurred a charge of $0.8 million (net
of $0.5 million of taxes). Pursuant to the Credit Agreement, the Company
borrowed $60.0 million of A Term Loans and $80.0 million of B Term Loans.
The A Term Loans are payable each year in scheduled installments with the
final payment due September 15, 1996. The B Term Loans are payable in full
on September 15, 1996. Additionally, further repayments are required at
the time of certain asset sales or the issuance of equity. During 1994, in
addition to the $20.0 million mandatory payment, a repayment of $0.5
million was made upon the sale of certain assets.
The Credit Agreement also provides Containers and Plastics, together, with
a revolving credit facility of $70.0 million for working capital needs (the
"Working Capital Loans"). The aggregate amount of Working Capital Loans
which may be outstanding at anytime is limited to 85% of Containers' and
Plastics' eligible accounts receivable and 50% of Containers' and Plastics'
eligible inventory. In lieu of Working Capital Loans, Containers and
Plastics may request the issuance of up to $15.0 million of letters of
credit. At December 31, 1994, commitments under the revolving credit
facility of $51.9 million were available after taking into account
outstanding letters of credit of $5.5 million. The Working Capital Loans
can be borrowed, repaid and reborrowed from time-to-time until final
maturity on September 15, 1996.
F-49<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Bank Credit Agreement (continued)
The borrowings under the Credit Agreement may be designated by the
respective Borrowers as Base Rate or Eurodollar Rate borrowings. The Base
Rate is the highest of (i) 1/2 of 1% in excess of Adjusted Certificate of
Deposit Rate, (ii) 1/2 of 1% in excess of the Federal Funds Rate or (iii)
Bankers Trust Company's prime lending rate. Base Rate borrowings bear
interest at the Base Rate plus 1.75%, in the case of A Term Loans; 2.0%, in
the case of Working Capital Loans; and 2.25%, in the case of B Term Loans.
Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus 2.75%
in the case of A Term Loans; 3.0%, in the case of Working Capital Loans;
and 3.25%, in the case of B Term Loans. At December 31, 1994 the interest
rate for Base Rate borrowings ranged between 10 1/4% and 10 1/2% and for
Eurodollar Rate borrowings ranged between 8 5/8% and 10%.
For 1994, 1993 and 1992, respectively, the average amount of borrowings
under the Working Capital Loans was $14.4 million, $51.9 million and $44.5
million; the average annual interest rate paid on borrowings was 8.4%, 6.0%
and 6.3%; and the highest amount of such borrowings at any month-end was
$43.9 million, $80.3 million and $80.8 million.
The Credit Agreement provides for the payment of a commitment fee of 0.5%
per annum on the daily average unused portion of commitments available
under the Working Capital Loans as well as a 3 1/4% per annum fee on
outstanding Letters of Credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of the Borrowers and secured by a security interest in substantially
all of the respective real and personal property of the Borrowers. Such
security interest also secures on an equal and ratable basis, subject to
certain intercreditor arrangements, the Senior Secured Notes.
Additionally, the stock of Silgan and the stock of principally all of its
subsidiaries have been pledged to the lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, indebtedness, liens, dividends, leases, capital
expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
F-50<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
Senior Secured Floating Rate Notes
The 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,
1994 was 9.44%.
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 under the Credit Agreement.
11 3/4% Senior Subordinated Notes
The 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.
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 under the Credit Agreement and the Secured
Notes.
The estimated fair value of the 11 3/4% Notes at December 31, 1994, based
upon quoted market prices, was $140.4 million.
F-51<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
4. Short-Term Borrowings and Long-Term Debt (continued)
1992 Refinancing
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 $50.0 million principal
amount of its Secured Notes and a public offering of $135.0 million
principal amount of the Company's 11 3/4% Notes. The proceeds from the
debt offerings, net of $10.3 million 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 ($85.0 million 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 credit agreement among various
bank lenders was amended to, among other things, permit the Refinancing,
and the Company repaid $30.0 million of term loans thereunder. In
addition, the Company repaid the $25.2 million advance from Holdings and
advanced $16.0 million to Holdings. Upon completion of the redemption of
the 14% Notes, the Company paid a $15.7 million 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 from 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 $165.4 million, were used by Holdings to redeem its
Senior Reset Debentures due 2004 (the "Holdings Reset Debentures") on July
29, 1992.
As a result of the Refinancing, unamortized deferred financing costs
relating to the 14% Notes, the Preferred Stock and the repayment of bank
term loans totaling $3.3 million in the aggregate were written off in 1992
and, along with the redemption premiums of $5.8 million, 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.
F-52<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining
agreements. The pension 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. It is the Company's policy to fund accrued
pension and defined contribution costs in compliance with ERISA
requirements. Assets of the plans consist primarily of equity and bond
funds.
Based on the latest actuarial information available, the following table
sets forth the defined benefit plans funded status as of December 31 (in
thousands):
Plans in which
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1994 1993 1994 1993
Actuarial present value of
benefit obligations:
Vested benefit obligations $9,182 $6,771 $19,876 $12,325
Non-vested benefit obligations 871 579 1,889 521
Accumulated benefit obligations 10,053 7,350 21,765 12,846
Additional benefits due to
future salary levels 5,358 5,733 3,557 4,092
Projected benefit obligations 15,411 13,083 25,322 16,938
Plan assets at fair value 11,612 9,040 17,249 9,287
Projected benefit obligation
in excess of plan assets 3,799 4,043 8,073 7,651
Unrecognized actuarial gain (loss) 504 (798) 3,916 800
Unrecognized prior service costs (665) - (2,461)
(2,093)
Additional minimum liability - - 1,677 2,107
Unfunded pension liability
recognized in the balance sheet $ 3,638 $ 3,245 $11,205 $ 8,465
As required by SFAS No. 87, "Employers' Accounting for Pensions" the
Company recognized an additional pension liability and related intangible
asset of $1.7 million and $2.1 million for pension plans with accumulated
benefits in excess of plan assets as of December 31, 1994 and 1993,
respectively.
F-53<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
5. Retirement Plans (continued)
During 1994, Del Monte transferred fund assets of $8.9 million to the
Company, as calculated using a discount rate of 9%, in accordance with the
terms of the DM Can purchase agreement. In connection with the acquisition
of DM Can, the Company assumed defined benefit plan obligations, as
calculated using its 1993 discount rate of 7.5%, of $10.9 million.
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
1994 1993 1992
Discount rate 8.5% 7.5% 8.5%
Weighted average rate of
compensation increase 4.5% 4.5% 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 for defined benefit plans are as
follows (in thousands):
1994 1993 1992
Service cost $2,947 $1,809 $1,722
Interest cost 3,334 2,144 2,101
Net amortization and deferrals (2,702) 500 75
Actual loss (return) on assets 539 (1,784) (891)
Other (gains) 4 (183) (183)
Net pension cost of defined
benefit plans $4,122 $2,486 $2,824
In addition, the Company participates in several multi-employer pension
plans which provide defined benefits to certain of its union employees.
The contributions to multi-employer plans were $2.7 million in 1994; $2.0
million in 1993; and $2.2 million in 1992. The Company also sponsors
defined contribution plans covering substantially all employees. Company
contributions to these plans are based upon employee contributions and, in
certain situations, are based upon operating profitability. Contributions
charged to income for these plans were $2.5 million in 1994; $1.5 million
in 1993; and $1.9 million in 1992.
F-54<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and other insurance benefits to conform to the
provisions of SFAS No. 106 "Employers' Accounting for Post Retirement
Benefits Other Than Pensions", which requires accrual of these benefits
over the period during which active employees become eligible for such
benefits. Previously, the Company recognized the cost of providing such
benefits on the pay-as-you-go basis. The Company elected to immediately
recognize a cumulative charge of $3.1 million (after related income taxes
of $1.9 million) for this change in accounting principle which represents
the accumulated postretirement benefit obligation existing as of January 1,
1993. The postretirement benefit cost for 1992 has not been restated.
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 these plans.
The following table presents the plan's funded status and amounts
recognized in the Company's balance sheet as of December 31 (in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $1,183 $1,209
Fully eligible active plan participants 1,521 1,197
Other active plan participants 2,577 2,127
Total accumulated postretirement
benefit obligation 5,281 4,533
Unrecognized net gain or (loss) (219) (462)
Unrecognized prior service costs (79) -
Accrued postretirement benefit liability $4,983 $4,071
F-55<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
6. Postretirement Benefits Other than Pensions (continued)
Net periodic postretirement benefit cost include the following components
(in thousands):
1994 1993
Service cost $ 321 $ 152
Interest cost 412 326
Deferred loss 24 -
Other (gains) (38) -
Net periodic postretirement benefit cost $ 719 $ 478
The actuarial assumptions used in determining the accrued postretirement
benefit liability as of December 31 are as follows:
1994 1993
Discount rate 8.5% 7.5%
Weighted average rate of compensation
increase 4.5% 4.5%
The assumed health care cost trend used in measuring the accumulated
postretirement benefit obligation was 14% in 1994 and 15% in 1993,
ultimately declining to 6% in 2003 and remaining at that level thereafter.
A 1% increase in the trend rate assumption would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by approximately
$0.1 million and increase the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for 1994 by
approximately $0.02 million.
7. Income Taxes
The income tax provision for 1994 and 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 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-56<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
The income tax provision consists of the following (in thousands):
1994 1993 1992
Current
Federal $2,500 $ 300 $ -
State 3,200 1,900 1,705
Foreign (100) (400) 31
5,600 1,800 1,736
Deferred
Federal 5,400 4,100 -
State - 400 464
Foreign - - -
5,400 4,500 464
$11,000 $6,300 $2,200
The aggregate income tax provision varied from that computed by using the
U.S. statutory rate as a result of the following (in thousands):
1994 1993 1992
Income tax provision
at the U.S. federal
income tax rate $ 8,069 $5,091 $5,398
Income tax benefit realized
from Holdings - - (4,804)
State and foreign tax expense
net of federal income benefit 2,015 1,235 1,452
Amortization of goodwill 576 154 154
Other 340 (180) -
$11,000 $6,300 $2,200
F-57<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. 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 (in thousands):
1994 1993
Deferred tax liabilities:
Tax over book depreciation $21,900 $20,700
Book over tax basis of assets acquired 21,400 24,000
Other 4,100 6,392
Total deferred tax liabilities 47,400 51,092
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 24,600 20,700
Net operating loss carryforwards 3,800 7,800
Benefit taken for Holdings' losses 5,500 7,575
Other 483 2,000
Total deferred tax assets 34,383 38,075
Net deferred tax liabilities $13,017 $13,017
The Company files a consolidated Federal income tax return with Holdings.
In accordance with the tax allocation agreement, 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. The Company's share of Holdings' federal tax liability, for
alternative minimum tax, aggregated $1.5 million in 1994 and $0.3 million
in 1993.
F-58<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
7. Income Taxes (continued)
On a consolidated basis, the Company and Holdings have net operating loss
carryforwards at December 31, 1994 of approximately $75.0 million 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, 1994, have $3.4 million of alternative minimum tax
credits which are available indefinitely to reduce future tax payments for
regular federal income tax purposes.
At December 31, 1994 the Company, if reporting on a separate company basis,
would have had net operating loss carryforwards for federal tax purposes of
approximately $9.0 million, which are subject to limitation under the
consolidated return regulations, and expire from 2001 to 2007.
8. Stock Option Plans
Containers and Plastics have established 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 for issuance under their
respective plans. Containers has 13,764 shares and Plastics has 13,800
shares of $0.01 par value common stock currently issued, and all such
shares are owned by Silgan.
The SARs extend to all of the shares covered by the options and provide for
the payment to the holders of the options of an amount in cash equal to the
excess of, in the case of Containers' plan, the pro forma book value, as
defined, of a share of common stock (or in the event of a public offering
or a change in control (as defined), 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 rights not paid at
the time of the recapitalization in June, 1989; or, in the case of the
Plastics plan, in the event of a public offering or a change in control (as
defined), the fair market value of a share of common stock over the
exercise price of the option.
F-59<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
8. Stock Option Plans (continued)
Prior to a public offering or change in control, should an employee leave
the Company, Containers has the right to repurchase, and the employee has
the right to require Containers to repurchase, his common stock at the then
pro forma book value.
At December 31, 1994, there were outstanding options for 1,056 shares under
the Containers' plan and 900 shares under the Plastics' plan. The exercise
prices per share range from $2,122 to $4,933 for the Containers' options
and are $126 for the Plastics' options. The stock options and SARs
generally become exercisable ratably over a five year period. There were
720 options/SARs exercisable at December 31, 1994 under the Containers'
plan. At December 31, 1994, no options/SARs were exercisable under the
Plastics' plan. The Company incurred charges relating to the vesting and
payment of benefits under the stock option plans of $1.5 million in 1994;
$0.2 million in 1993; and $0.4 million in 1992.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans, or (ii) any stock issued upon exercise of
such options issued by Containers are convertible into either stock options
or common stock of Holdings, as the case may be. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding indebtedness of
Holdings allocable to each such subsidiary.
9. Stockholder's Equity
Stockholder's equity includes the following classes of common stock ($.01
par value) and preferred stock:
Shares Shares Issued and Outstanding
Class Authorized December 31, 1994 and 1993
A 1,000 1
B 1,000 1
C 1,000 -
3,000 2
Preferred Stock 1,000 -
The outstanding shares are issued to Holdings.
F-60<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
9. Stockholder's Equity (continued)
In conjunction with the acquisition of DM Can in 1993, Holdings contributed
$15.0 million to the Company.
As of August 16, 1992, the Company redeemed its Preferred Stock. Until
such redemption, 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, the Company issued
21,301 shares of Preferred Stock at $100 per share, representing its
Preferred Stock dividend requirement for the two quarters ended May 15,
1992. A cash dividend payment of $1.1 million was made for the quarter
ended August 15, 1992.
10. Commitments
The Company is committed under certain noncancelable operating leases for
office and plant facilities, equipment and automobiles. Certain operating
leases have renewal options. Minimum future rental payments under these
operating leases are (in thousands):
1995 $ 7,923
1996 6,856
1997 5,577
1998 4,006
1999 2,556
Thereafter 6,174
$33,092
Rental expense was approximately $9.1 million in 1994; $8.0 million in
1993; and $8.0 million in 1992.
F-61<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
11. Related Party Transactions
Pursuant to various management services agreements 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 and Silgan, respectively, S&H provides Holdings and
the Company and its subsidiaries with general management, supervision and
administrative services. In consideration for its 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 Agreements 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 Agreements, plus reimbursement for all related out-
of-pocket expenses. The total amount incurred under the Management
Agreements was $5.0 million in 1994, $4.4 million in 1993, and $4.2 million
in 1992 and was allocated, based upon EBDIT, as a charge to operating
income of each business segment. Included in accounts payable at December
31, 1994 and 1993, was $0.1 million and $0.6 million, payable to S&H,
respectively.
Under the terms of the Management Agreements, the Company has 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 Agreements.
In connection with the Credit Agreement entered into in 1993, the Banks
(including Bankers Trust) received certain fees amounting to $8.1 million.
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 $11.5 million.
F-62<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation
On June 30, 1989, Holdings acquired all of the outstanding shares of Silgan
for $6.50 per share (the "Merger"). Contemporaneous with the Merger,
certain holders of 1,050,000 shares of Silgan Class B common stock filed
two actions in the Court of Chancery of the State of Delaware ("Chancery
Court") alleging that Silgan and certain affiliates, officers and directors
breached fiduciary duties in implementing the Merger. One of the actions
was voluntarily dismissed without prejudice of the right to reinstate the
action upon the conclusion of the appraisal proceeding described below.
The second action was dismissed following settlement.
The same Silgan stockholders also sought appraisal of the value of their
shares pursuant to Section 262 of the Delaware General Corporation Law.
Following discovery and settlement with the holders of 650,000 shares for
$6.9 million, including interest, trial of the appraisal with respect to
the remaining 400,000 shares of Class B common stock was conducted during
the week of November 28, 1994. Post-trial briefing is scheduled to be
completed on April 17, 1995.
Management believes that the consideration offered in the Merger fully
reflected the value of Silgan's Class B common stock and that the ultimate
resolution of the appraisal proceeding will not have a material effect on
the financial condition or results of operations of the Company or
Holdings.
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, among
other things, that the general partners of MSLEF breached duties owed to
the limited partners by selling MSLEF's investment in Silgan at a grossly
inadequate price. 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.
Because this complaint continues against certain other defendants, the
plaintiff's right to appeal the dismissal of the claims against Silgan and
Holdings has not yet expired.
Management believes that there is no factual basis for the allegations and
claims contained in the complaint. Management also believes that the
lawsuit is without merit and they intend to defend the lawsuit vigorously.
In addition, management believes that the ultimate resolution of these
matters will not have a material effect on the financial condition or
results of operations of Silgan or Holdings.
F-63<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
12. Litigation (continued)
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.
13. Business Segment Information
The Company is engaged in the packaging industry and operates principally
in two business segments. Both segments operate in North America. There
are no intersegment sales. Presented below is a tabulation of business
segment information for each of the past three years (in millions):
Net Oper. Identifiable Dep. & Capital
Sales Profit Assets Amort. Expend.
1994
Metal container & other(1) $657.1 $67.0(2) $335.9 $23.1 $16.9
Plastic container 204.3 9.4(2) 162.8 14.1 12.3
Consolidated $861.4 $76.4 $498.7 $37.2 $29.2
1993
Metal container & other(1) $459.2 $42.3 $324.5 $17.3 $25.3
Plastic container 186.3 0.6 165.9 16.5 17.2
Consolidated $645.5 $42.9 $490.4 $33.8 $42.5
1992
Metal container & other(1) $437.4 $40.7 $218.7 $16.4 $14.5
Plastic container 192.6 2.3 161.2 15.4 9.0
Consolidated $630.0 $43.0 $379.9 $31.8 $23.5
(1) Includes folding carton sales which are not significant enough to be
reported as a separate segment.
(2) Excludes charge for reduction in carrying value of assets of $7.2
million for metal container segment and $9.5 million for plastic
container segment.
F-64<PAGE>
SILGAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
13. Business Segment Information (continued)
Operating profit is reconciled to income before tax as follows (in
millions):
1994 1993 1992
Operating profit $76.4 $42.9 $43.0
Reduction in carrying
value of assets 16.7 - -
Interest and other
corporate expense 36.6 28.3 27.1
Income before income taxes $23.1 $14.6 $15.9
Identifiable assets are reconciled to total assets as follows (in
millions):
1994 1993 1992
Identifiable assets $498.7 $490.4 $379.9
Corporate assets 2.0 1.7 2.3
Total assets $500.7 $492.1 $382.2
Metal container and other segment sales to Nestle accounted for 25.9%,
34.1% and 36.5%, of net sales during the years ended December 31, 1994,
1993 and 1992, respectively. Similarly, sales to Del Monte accounted for
21.4% of net sales during the year ended December 31, 1994. At December
31, 1994 and 1993, 12.6% and 12.6% of the accounts receivable balance was
due from Nestle and at December 31, 1994, 21.9% of the accounts receivable
balance was due from Del Monte.
F-65<PAGE>
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
Exhibit
Number Description
3.1 Restated Certificate of Incorporation of Silgan, as amended
(incorporated by reference to Exhibit 3.1 filed with
Silgan's Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-11200).
3.2 By-laws of Silgan (incorporated by reference to Exhibit
3(ii) filed with Silgan'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 Silgan'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 Holdings and
The Connecticut National Bank, as trustee, with respect to
the 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).
4.2 Indenture dated as of June 29, 1992, between Silgan and
Shawmut Bank, N.A., as Trustee, with respect to the 11-3/4%
Notes (incorporated by reference to Exhibit 1 filed with
Silgan's Current Report on Form 8-K dated July 15, 1992,
Commission File No. 33-46499).
4.3 Secured Notes Purchase Agreement dated as of June 29, 1992,
between Silgan and Morgan Stanley (incorporated by reference
to Exhibit 2 filed with Silgan's Current Report on Form 8-K
dated July 15, 1992, Commission File No. 33-46499).
4.4 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).
4.5 Form of Silgan'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).
II-1
<PAGE>
Exhibit
Number Description
5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the
legality of the Debentures (incorporated by reference to
Exhibit 5 filed with Amendment No. 3 to Holdings'
Registration Statement on Form S-1, dated June 19, 1992,
Registration Statement No.
33-47632).
8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax
matters (incorporated by reference to Exhibit 8 filed with
Post-Effective Amendment No. 1 to Holdings' Registration
Statement on Form S-1, dated June 18, 1993, Registration
Statement No. 33-47632).
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 Silgan's Registration Statement on Form S-1,
dated January 11, 1988, Registration Statement No.
33-18719).
10.2 First Amendment to Agreement for Purchase and Sale of
Assets, dated as of July 15, 1987, between Carnation Company
and Canaco Corporation (Containers) (incorporated by
reference to Exhibit 2(ii) filed with Silgan'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 Silgan'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
Plastics Corporation (Plastics) and Monsanto Company
(incorporated by reference to Exhibit 2(iv) filed with
Silgan'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 Plastics Corporation (Plastics) and
Monsanto Company (incorporated by reference to Exhibit 2(v)
filed with Silgan'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 Silgan'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 Silgan's
Current Report on Form 8-K, dated October 17, 1988).
II-2
<PAGE>
Exhibit
Number Description
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 Silgan'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 Silgan'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
Silgan (incorporated by reference to Exhibit 1 filed with
Silgan's Current Report on Form 8-K, dated March 15, 1989).
10.11 Assignment and Assumption, dated as of March 1, 1989,
between Silgan and InnoPak Plastics Corporation (Plastics)
(incorporated by reference to Exhibit 2 filed with Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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
Silgan's
II-3
<PAGE>
Exhibit
Number Description
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 Silgan'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
Silgan, InnoPak Plastics Corporation (Plastics), Russell F.
Gervais and Aim (incorporated by reference to Exhibit 5
filed with Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan's Registration Statement on Form S-1, dated
II-4
<PAGE>
Exhibit
Number Description
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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan's Registration Statement on Form S-1,
dated
II-5
<PAGE>
Exhibit
Number Description
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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan'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 Silgan's Registration Statement on Form
S-1, dated
II-6
<PAGE>
Exhibit
Number Description
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 Silgan'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 Silgan'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 Silgan'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 Silgan'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
Silgan'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 Silgan'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 Silgan's Registration
Statement on Form S-1, dated September 14, 1988,
Registration Statement No. 33-18719).
10.53 Assignment of Raw Materials Agreement, dated as of August
31, 1987, by and between Carnation and Alcoa (incorporated
by reference to Exhibit 10(xl) filed with Silgan'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 Silgan'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).
II-7
<PAGE>
Exhibit
Number Description
10.55 InnoPak Plastics Corporation (Plastics) Pension Plan for
Salaried Employees (incorporated by reference to Exhibit
10.32 filed with Silgan's Annual Report on Form 10-K for the
year ended December 31, 1988, Commission File No.33-18719).
10.56 Containers Pension Plan for Salaried Employees (incorporated
by reference to Exhibit 10.34 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1988,
Commission File No. 33-18719).
10.57 Non-Competition Agreement, dated as of January 1, 1989,
among Silgan, Aim, and certain shareholders of Aim
(incorporated by reference to Exhibit 4 filed with Silgan's
Current Report on Form 8-K, dated March 15, 1989).
10.58 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 Silgan's Post-Effective
Amendment No. 4 to its Registration Statement on Form S-1,
dated September 14, 1988, Registration No. 33-18719).
II-8
<PAGE>
Exhibit
Number Description
10.59 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).
10.60 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).
10.61 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).
10.62 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).
10.63 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).
10.64 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).
10.65 Agreement and Plan of Merger, dated as of April 28, 1989,
among Holdings, Acquisition and Silgan (incorporated by
reference to Exhibit 2.6 to Holdings' Registration Statement
on Form S-1, dated May 1, 1989, Registration No. 33-28409).
10.66 Lease between Containers and Riverbank Venture dated May 1,
1990 (incorporated by reference to Exhibit 10.99 filed with
Silgan's Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. 33-18719).
II-9
<PAGE>
Exhibit
Number Description
10.67 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 Silgan's Annual
Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 33-18719).
10.68 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 Silgan's Annual Report on Form 10-K for
the year ended December 31, 1989, Commission File No.
33-18719).
10.69 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 Silgan's Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. 33-18719).
10.70 Containers Master Equipment Lease with Decimus Corporation,
dated as of October 11, 1989 (incorporated by reference to
Exhibit 10.103 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File
No. 33-18719).
10.71 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).
10.72 Amended and Restated Tax Allocation Agreement by and among
Holdings, Silgan, 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 Silgan's
Registration Statement on Form S-1, dated August 20, 1990,
Registration Statement No. 33-18719).
10.73 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 Silgan's Registration Statement on Form S-1, dated August
20, 1990, Registration Statement No. 33-18719).
10.74 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 Silgan's Registration
Statement on Form S-1, dated August 20, 1990, Registration
Statement No. 33-18719).
10.75 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 Silgan's Current Report on Form 8-K, dated July
1990).
II-10
<PAGE>
Exhibit
Number Description
10.76 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 Silgan's
Current Report on Form 8-K, dated December 2, 1991).
10.77 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 Silgan's Current Report on Form 8-K, dated
December 2, 1991).
10.78 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 Silgan's Current
Report on Form 8-K, dated December 2, 1991).
10.79 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 Silgan's Current Report on Form 8-K, dated
December 2, 1991).
10.80 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 Silgan's Current Report on Form 8-K, dated
December 2, 1991).
10.81 Containers Deferred Incentive Savings Plan (incorporated by
reference to Exhibit 10.144 filed with Silgan's Registration
Statement on Form S-1, dated March 18, 1992, Registration
Statement No. 33-46499).
10.82 Amended and Restated Pledge Agreement dated as of June 18,
1992, made by Silgan (incorporated by reference to Exhibit 5
filed with Silgan's Current Report on Form 8-K, dated July
15, 1992, Commission File No. 33-46499).
10.83 Amended and Restated Pledge Agreement dated as of June 18,
1992, made by Containers and Plastics (incorporated by
reference to Exhibit 6 filed with Silgan's Current Report on
Form 8-K, dated July 15, 1992, Commission File No.
33-46499).
10.84 Amended and Restated Pledge Agreement dated as of June 18,
1992, made by Holdings (incorporated by reference to Exhibit
7 filed with Silgan's Current Report on Form 8-K, dated July
15, 1992, Commission File No. 33-46499).
10.85 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 Silgan's
Current Report on Form 8-K, dated July 15, 1992, Commission
File No. 33-46499).
II-11
<PAGE>
Exhibit
Number Description
10.86 Subsidiaries Guarantee, dated as of June 29, 1992, of
Containers and Plastics (incorporated by reference to
Exhibit 11 filed with Silgan's Current Report on Form 8-K,
dated July 15, 1992, Commission File No. 33-46499).
10.87 Underwriting Agreement, dated June 22, 1992, between
Holdings and Morgan Stanley with respect to the Debentures
(incorporated by reference to Exhibit 2 filed with Holdings'
Current Report on Form 8-K, dated July 15, 1992, Commission
File No. 33-47632).
10.88 Underwriting Agreement, dated June 22, 1992, between Silgan
and Morgan Stanley with respect to the 11-3/4% Notes
(incorporated by reference to Exhibit 3 filed with Silgan's
Current Report on Form 8-K, dated July 15, 1992, Commission
File No. 33-46499).
10.89 Silgan Containers Corporation Second Amended and Restated
1989 Stock Option Plan (incorporated by reference to Exhibit
10.100 filed with Post-Effective Amendment No. 2 to Silgan's
Registration Statement on Form S-1, dated May 11, 1994,
Commission File No.
33-46499).
10.90 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).
10.91 Silgan Plastics Corporation 1994 Option Plan (incorporated
by reference to Exhibit 10.102 filed with Post-Effective
Amendment No. 2 to Silgan's Registration Statement on Form
S-1, dated May 11, 1994, Commission File No. 33-46499).
10.92 Form of Plastics Nonstatutory Restricted Stock Option and
Stock Appreciation Right Agreement (incorporated by
reference to Exhibit 10.103 filed with Post-Effective
Amendment No. 2 to Silgan's Registration Statement on Form
S-1, dated May 11, 1994, Commission File No. 33-46499).
10.93 Silgan Holdings Inc. Second Amended and Restated 1989 Stock
Option Plan (incorporated by reference to Exhibit 10.104
filed with Post-Effective Amendment No. 2 to Silgan's
Registration Statement on Form S-1, dated May 11, 1994,
Commission File No. 33-46499).
10.94 Form of Holdings Nonstatutory Restricted Stock Option and
Stock Appreciation Right Agreement (incorporated by
reference to Exhibit 10.124 filed with Holdings' Annual
Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 33-28409).
II-12
<PAGE>
Exhibit
Number Description
10.95 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).
10.96 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).
10.97 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).
10.98 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).
10.99 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).
10.100 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).
10.101 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).
10.102 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).
10.103 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).
10.104 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).
II-13
<PAGE>
Exhibit
Number Description
10.105 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).
10.106 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).
10.107 Supply Agreement, dated as of September 3, 1993, between
Containers and Del Monte (incorporated by reference to
Exhibit 10.118 filed with Silgan's Annual Report on Form
10-K for the year ended December 31, 1993, Commission File
No. 1-11200). (Portions of this Exhibit are subject to an
application for confidential treatment filed with the
Commission).
10.108 Amendment to Supply Agreement, dated as of December 21,
1993, between Containers and Del Monte (incorporated by
reference to Exhibit 10.119 filed with Silgan's Annual
Report on Form 10-K for the year ended December 31, 1993,
Commission File No. 1-11200). (Portions of this Exhibit are
subject to an application for confidential treatment filed
with the Commission).
*12.1 Computations of Holdings' Ratio of Earnings to Fixed Charges
for the three months ended March 31, 1995 and 1994.
*12.2 Computations of Holdings' Ratio of Earnings to Fixed Charges
for the years ended December 31, 1994, 1993, 1992, 1991 and
1990 .
21 Subsidiaries of the Registrant (incorporated by reference
to Exhibit 22 filed with Holdings' Annual Report on Form
10-K for the year ended December 31, 1993, Commission File
No. 33-28409).
*23 Consent of Ernst & Young LLP.
II-14
<PAGE>
Exhibit
Number Description
*24 Power of Attorney (included on signature page).
25 Statement of Eligibility of Trustee (incorporated by
reference to Exhibit 26 filed with Amendment No. 2 to
Holdings' Registration Statement on Form S-1, dated June 8,
1992, Registration Statement No. 33-47632).
-------------------------
* Filed herewith.
II-15
<PAGE>
(b) Financial Statement Schedules:
SILGAN HOLDINGS INC.
Report of Independent Auditors........................................S-1
I. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheet at December 31, 1994 and 1993.........S-2
Condensed Statement of Operations for the years ended
December 31, 1994, 1993 and 1992............................S-3
Condensed Statement of Cash Flows for the years ended
December 31, 1994, 1993 and 1992............................S-4
SILGAN CORPORATION
Report of Independent Auditors........................................S-5
I. Condensed Financial Information of Silgan Corporation:
Condensed Balance Sheets at December 31, 1994 and 1993...... S-6
Condensed Statements of Operations for the years ended
December 31, 1994, 1993 and 1992...........................S-7
Condensed Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992.......................... S-8
II. Schedules of Valuation and Qualifying Accounts for the
years ended December 31, 1994, 1993 and 1992....................S-9
All other financial statement 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.
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut, on May 24, 1995.
SILGAN HOLDINGS INC.
By /s/ R. Philip Silver
R. Philip Silver
Chairman of the Board and
Co-Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose
signature appears below constitutes and appoints R. Philip Silver, D. Greg
Horrigan and Robert H. Niehaus, and each or any of them, his true and lawful
attorney-in-fact and to act for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Chairman of the Board and
Co-Chief Executive Officer
/s/ R. Philip Silver (Principal Executive Officer) May 24, 1995
R. Philip Silver)
President, Co-Chief Executive May 24, 1995
/s/ D. Greg Horrigan Officer and Director
(D. Greg Horrigan)
<PAGE>
Vice President, Assistant
/s/ James S. Hoch Secretary and Director May 24, 1995
------------------
(James S. Hoch)
Vice President, Assistant
/s/ Robert H. Niehaus Secretary and Director May 24, 1995
---------------------
(Robert H. Niehaus)
Executive Vice President, Chief
Financial Officer and Treasurer
/s/ Harley Rankin, Jr. (Principal Financial Officer) May 24, 1995
----------------------
(Harley Rankin, Jr.)
Vice President, Controller and
Assistant Treasurer
/s/ Harold J. Rodriguez, Jr. (Principal Accounting Officer) May 24, 1995
----------------------------
Harold J. Rodriguez, Jr.)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated financial statements of
Silgan Holdings Inc. as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, and have issued our
report thereon dated March 17, 1995 (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedules listed in Item 16(b) of this Registration Statement. These
schedules are the responsibility of the Company's management. Our
responsibilty is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Stamford, CT
March 17, 1995
S-1<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS
1994 1993
Current assets:
Cash and cash equivalents $ 17 $ 19
Other current assets - 114
Total current assets 17 133
Investment in and other amounts due
from subsidiary 69,526 58,983
Notes receivable-subsidiary 1,489 1,489
Debt issuance costs 5,372 6,043
$76,404 $66,648
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 4,963 $ 10,291
Amount payable to subsidiary 1,244 606
Total current liabilities 6,207 10,897
Discount debentures 228,195 200,718
Deficiency in stockholders' equity:
Common stock 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (191,616) (178,585)
Total deficiency in stockholders'
equity (157,998) (144,967)
$ 76,404 $ 66,648
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Prospectus.
S-2<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 838 674 536
Loss from operations (838) (674) (536)
Equity in earnings of consolidated
subsidiaries 17,454 5,028 1,857
Interest expense and other related
financing costs (29,647) (26,339) (30,710)
Interest income - 2 536
Loss before income taxes (13,031) (21,983) (28,853)
Income tax provision - - -
Loss before extraordinary charges (13,031) (21,983) (28,853)
Extraordinary charges relating to
early extinguishment of debt - - (14,522)
Net loss $(13,031) $(21,983) $(43,375)
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Prospectus.
S-3<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities: $ (2) $ (196) $(18,921)
Cash flows from investing activities:
Investment in subsidiary - (15,000) -
Cash dividend received from subsidiary 6,911 - 15,724
Net cash provided (used) by
investing activities 6,911 (15,000) 15,724
Cash flows from financing activities:
Proceeds from issuance of common stock - 15,000 -
Proceeds from issuance of discount
debentures - - 165,435
Redemption of reset debentures - - (181,588)
Repayment of advance to subsidiary - - 25,200
Payments to former shareholders
of Silgan (6,911) - -
Debt financing costs - - (7,050)
Net cash provided (used) by
financing activities (6,911) 15,000 1,997
Net decrease in cash and cash
equivalents (2) (196) (1,200)
Cash and cash equivalents at
the beginning of year 19 215 1,415
Cash and cash equivalents at
end of year $ 17 $ 19 $ 215
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Prospectus.
S-4<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Silgan Corporation
We have audited the accompanying consolidated financial statements of
Silgan Corporation as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, and have issued our
report thereon dated March 17, 1995 (included elsewhere in this
Registration Statement). Our audits also included the financial statement
schedules listed in Item 16(b) of this Registration Statement. These
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Stamford, CT
March 17, 1995
S-5<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
ASSETS
1994 1993
Current assets:
Cash and cash equivalents $ 155 $ 61
Notes receivable-subsidiaries 21,968 39,850
Interest receivable-subsidiaries 1,699 810
Other current assets - 214
Total current assets 23,822 40,935
Investment in and other amounts due
from subsidiaries 70,947 37,104
Notes receivable-subsidiaries 286,640 305,072
Amount receivable from parent 1,244 607
Other assets 793 950
$383,446 $384,668
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of term loans $ 21,968 $ 20,000
Accrued interest payable 1,699 763
Accrued expenses 356 1,268
Total current liabilities 24,023 22,031
Long-term debt 282,568 305,000
Amounts payable to subsidiaries 11,148 3,123
Other long-term liabilities 2,362 1,711
Stockholder's equity:
Common stock - -
Additional paid-in capital 69,535 64,135
Retained earnings (deficit) (6,190) (11,332)
Total stockholder's equity 63,345 52,803
$383,446 $384,668
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Prospectus.
S-6<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 543 368 239
Loss from operations (543) (368) (239)
Equity in earnings (losses) of
consolidated subsidiaries 13,445 (7,570) 6,148
Other income (expense) (651) 1,480 832
Interest expense and other related
financing costs (30,039) (19,899) (21,429)
Interest income-subsidiaries 29,841 23,940 19,313
Income (loss) before income taxes 12,053 (2,417) 4,625
Income tax provision - - -
Income (loss) before extraordinary
charges 12,053 (2,417) 4,625
Extraordinary charges relating to
early extinguishment of debt - (130) (23)
Net income (loss) 12,053 (2,547) 4,602
Preferred stock dividend requirements - - 2,745
Net income (loss) applicable
to common stockholder $12,053 $(2,547) $ 1,857
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Prospectus.
S-7<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
1994 1993 1992
Cash flows from operating activities: $ 7,005 $ 359 $ 1,825
Cash flows from investing activities:
(Increase) decrease in notes
receivable-subsidiaries 35,462 (117,515) (39,323)
(Increase) decrease in investment
in subsidiaries (14,998) - 30,008
Cash dividends received from
subsidiaries - - 16,861
Net cash provided (used) by
investing activities 20,464 (117,515) 7,546
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 140,000 185,000
Reduction of long-term debt (20,464) (37,985) (120,827)
Repayment of advance from Parent - - (25,200)
Capital contribution by Parent - 15,000 -
Payments to former shareholders (6,911) - -
Dividend to Parent - - (15,724)
Redemption of preferred stock - - (30,008)
Cash dividends paid on preferred stock - - (1,137)
Debt financing costs - - (1,301)
Net cash provided (used) by
financing activities (27,375) 117,015 (9,197)
Net increase (decrease) in cash
and cash equivalents 94 (141) 174
Cash and cash equivalents at
the beginning of year 61 202 28
Cash and cash equivalents at
end of year $ 155 $ 61 $ 202
See Notes to Consolidated Financial Statements for Silgan Corporation
appearing elsewhere in this Prospectus.
S-8<PAGE>
SCHEDULE II
SILGAN CORPORATION
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
Column A Column B Column C Column D Column E
Additions
Charged
Balance at Charged to to other Balance
beginning costs and accounts Deductions at end of
Description of period expenses describe describe(1) period
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 $1,084
For the year ended
December 31, 1994:
Allowance for
doubtful accounts
receivable $1,084 $ 621 $ 58 $ 206 $1,557
(1) Uncollectible accounts written off, net of recoveries.
S-9<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
12.1 Computations of Holdings' Ratio of Earnings to Fixed
Charges for the three months ended March 31, 1995 and
1994.
12.2 Computations of Holdings' Ratio of Earnings to Fixed
Charges for the years ended December 31, 1994, 1993, 1992,
1991 and 1990.
23 Consent of Ernst & Young LLP.
24 Power of Attorney (included on signature page).
EXHIBIT 12.1
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
The following table reflects Silgan Holdings Inc.'s computations of ratio of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
----------------------- ---------------------
(Dollars in thousands)
<S> <C> <C>
Income (loss) before income taxes.......................... $1,580 $ (1,669)
Add:
Interest expense and amortization
of debt expense................................ 17,251 15,647
Rental expense representative of
the interest factor............................ 660 747
-------- -------
Income as adjusted................................ $ 19,491 $ 14,725
======== =======
Fixed charges:
Interest expense and amortization
of debt expense................................ $17,251 $ 15,647
Rental expense representative of
the interest factor............................ 660 747
------- -------
Total fixed charges............................... $17,911 $ 16,394
======= =======
Ratio of earnings to fixed charges......................... 1.09 --
======= =======
Deficiency of earnings available to
cover fixed charges............................... -- $ 1,669
======= =======
</TABLE>
EXHIBIT 12.2
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
The following table reflects Silgan Holdings Inc.'s computations of ratio of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
--------- -------- ------------ ------------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
(Loss) before income taxes............. $(7,431) $(12,466) $(17,578) $(20,592) $(20,887)
Add:
Interest expense and amortization
of debt expense........... 65,789 54,265 57,091 55,996 55,115
Minority interest expense..... -- -- 2,745 3,889 3,356
Rental expense representative of
the interest factor........ 3,047 2,666 2,659 2,701 2,312
------ ------ ------ ------ ------
Income as adjusted............ $61,405 $44,465 $44,917 $ 41,994 $39,896
====== ====== ====== ======= ======
Fixed charges:
Interest expense and amortization
of debt expense............ $65,789 $54,265 $57,091 $55,996 $55,115
Minority interest expense..... -- -- 2,745 3,889 3,356
Rental expense representative of
the interest factor........ 3,047 2,666 2,659 2,701 2,312
------ ------ ------ ------ ------
Total fixed charges........... $68,836 $56,931 $ 62,495 $62,586 $60,783
====== ====== ======= ====== ======
Deficiency of earnings available to
cover fixed charges........... $ 7,431 $12,466 $17,578 $20,592 $20,887
====== ====== ====== ====== ======
</TABLE>
EXHIBIT 23
Consent of Independent Auditors
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated March 17, 1995 with
respect to the consolidated financial statements of Silgan Holdings Inc. and
Silgan Corporation included in the Post-Effective Amendment No. 6 to the
Registration Statement (Form S-1, No. 33-47632) and related Prospectus of Silgan
Holdings Inc. for the registration of its Senior Discount Debentures Due 2002.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
May 22, 1995
