As filed with the Securities and Exchange Commission on August 12, 1996
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
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 (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification Number)
or organization) Code Numbers)
4 Landmark Square
Stamford, Connecticut 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, Connecticut 06901
(203) 975-7110
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies of all communications to:
Frank W. Hogan, III, Esq.
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
(203) 348-2300
--------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.[ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of Registration
Securities to be Registered Registered<F1> Share<F2> Price<F2> Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exchangeable Preferred Stock 90,000 $1,000.00 $90,000,000 $31,035
====================================================================================================================================
<FN>
<F1> The amount of Exchangeable Preferred Stock, par value $.01 per share, of
the Registrant (the "New Preferred Stock"), to be registered is comprised
of the sum of (x) the maximum number of shares of New Preferred Stock that
may be issued pursuant to the offer of the Registrant to exchange its
outstanding Exchangeable Preferred Stock for an equal amount of New
Preferred Stock and (y) the maximum number of additional shares of New
Preferred Stock that may be issued to the holders of New Preferred Stock in
payment of dividends thereon pursuant to the Certificate of Designation
therefor.
<F2> Determined solely for the purposes of calculating the registration fee in
accordance with Rule 457(f)(2) promulgated under the Securities Act of
1933, as amended.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SILGAN HOLDINGS INC.
Cross Reference Sheet Pursuant to Rule 404(a) of the Securities Act of 1933
and Item 501(b) of Regulation S-K, showing the Location or Heading in the
Prospectus of the Information Required by Part I of Form S-4.
S-4 Item Number and Caption Location or Heading in Prospectus
- --------------------------- ---------------------------------
A. Information About the Transaction
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus......... Facing Page of Registration Statement;
Cross Reference Sheet; Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Available Information; Information
Incorporated by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Summary; Risk Factors; Capitalization;
Selected Historical and Pro Forma
Financial Information
4. Terms of the Transaction......... Summary; The Exchange Offer;
Description of New Preferred Stock;
Certain United States Federal Income
Tax Considerations
5. Pro Forma Financial Information.. Summary; Capitalization; Selected
Historical and Pro Forma Financial
Information; Management's Discussion
and Analysis of Financial Condition
and Results of Operations;
Consolidated Financial Statements
6. Material Contacts with the
Company Being Acquired........... Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters..................... Not Applicable
8. Interests of Named Experts and
Counsel.......................... Certain Transactions; Legal Matters;
Experts
9. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities....... Not Applicable
B. Information About the Registrant
10. Information With Respect to S-3
Registrants...................... Not Applicable
11. Incorporation of Certain
Information by Reference......... Not Applicable
12. Information With Respect to S-2
or S-3 Registrants............... Not Applicable
<PAGE>
S-4 Item Number and Caption Location or Heading in Prospectus
- --------------------------- ---------------------------------
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information With Respect to
Registrants Other Than S-3
or S-2 Registrants............... Facing Page of Registration Statement;
Cover Page of Prospectus; Available
Information; Information Incorporated
by Reference; Summary; Risk Factors;
The Exchange Offer; Capitalization;
Selected Historical and Pro Forma
Financial Information; 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 New Preferred Stock;
Description of Exchange Debentures;
Description of Certain Holdings
Indebtedness; Description of Certain
Silgan Indebtedness; Certain United
States Federal Income Tax
Consideration; Plan of Distribution;
Consolidated Financial Statements
C. Information About the Company
Being Acquired
15. Information With Respect to S-3
Companies........................ Not Applicable
16. Information With Respect to S-2
or S-3 Companies................. Not Applicable
17. Information With Respect to
Companies Other Than S-2 or
S-3 Companies.................... Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations are to be
Solicited........................ Not Applicable
19. Information if Proxies, Consents
or Authorizations are not to
be Solicited, or in an Exchange
Offer............................ Not Applicable
-2-
<PAGE>
Silgan Holdings Inc.
--------------------
OFFER TO EXCHANGE
ALL OUTSTANDING
EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2006
(EXCHANGEABLE AT THE OPTION OF HOLDINGS)
FOR
NEW EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2006
(EXCHANGEABLE AT THE OPTION OF HOLDINGS)
--------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________, 1996 UNLESS EXTENDED
--------------------
Silgan Holdings Inc., a Delaware corporation ("Holdings"), hereby
offers upon the terms and subject to the conditions set forth in this Prospectus
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to
exchange (the "Exchange Offer") its outstanding Exchangeable Preferred Stock
(the "Old Preferred Stock") for an equal amount of newly issued New Exchangeable
Preferred Stock (the "New Preferred Stock"). The form and terms of the New
Preferred Stock will be the same as the form and terms of the Old Preferred
Stock except that the New Preferred Stock will be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will not bear
legends restricting the transfer thereof. The New Preferred Stock will be
entitled to the benefits of the Silgan Holdings Inc. Certificate of Designation
of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of 13-1/4% Cumulative Exchangeable Redeemable Preferred Stock and
Qualifications, Limitations and Restrictions Thereof, filed with the Secretary
of State of the State of Delaware on July 22, 1996, governing the Preferred
Stock (the "Certificate of Designation"). The New Preferred Stock and the Old
Preferred Stock are sometimes referred to herein as the "Preferred Stock."
Dividends on the New Preferred Stock will be cumulative from the date
of issuance and are payable quarterly in cash or, on or prior to July 15, 2000,
at the option of Holdings, in additional shares of New Preferred Stock, on each
January 15, April 15, July 15 and October 15, commencing on October 15, 1996. If
additional shares of New Preferred Stock are issued in lieu of cash dividends,
such shares will be registered under the Securities Act. Holdings is required to
redeem the New Preferred Stock at the liquidation preference of $1,000 per
share, plus accrued and unpaid dividends on July 15, 2006. The New Preferred
Stock will be redeemable, in whole or in part, at the option of Holdings, at any
time on or after July 15, 2000. The New Preferred Stock will be exchangeable, in
whole but not in part, at the option of Holdings, into Subordinated Debentures
due July 15, 2006 (the "Exchange Debentures"). If issued, the Exchange
Debentures will be redeemable, in whole or in part, at the option of Holdings,
at any time on or after July 15, 2000.
(Continued on next page)
SEE "RISK FACTORS" AT PAGE 23 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY ELIGIBLE HOLDERS IN
EVALUATING THE EXCHANGE OFFER.
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
PROPSECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
Holdings will accept for exchange any and all shares of Old Preferred
Stock which are properly tendered in the Exchange Offer prior to 5:00 p.m., New
York City time, on _________________, 1996 (if and as extended, the "Expiration
Date"). Tenders of shares of Old Preferred Stock may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum number of shares of Old Preferred
Stock being tendered for exchange.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, Holdings believes that the shares of New Preferred Stock issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a broker-dealer who purchases
such shares of New Preferred Stock directly from Holdings to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of Holdings (within the meaning of Rule 405 under
the Securities Act)) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder or any other
such person is acquiring the shares of New Preferred Stock in its ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the shares
of New Preferred Stock. Holders of shares of Old Preferred Stock wishing to
accept the Exchange Offer must represent to Holdings that such conditions have
been met.
Each broker-dealer that receives shares of New Preferred Stock for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a Prospectus in connection with any resale of such shares of New Preferred
Stock. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter," within the meaning of the Securities Act, in connection with
resales of shares of New Preferred Stock received in exchange for shares of Old
Preferred Stock where such shares of Old Preferred Stock were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Holdings has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
Holdings believes that none of the registered holders of the shares of
Old Preferred Stock is an affiliate (as such term is defined in Rule 405 under
the Securities Act) of Holdings. Prior to this Exchange Offer, there has been no
public market for the shares of Old Preferred Stock. Holdings does not intend to
list the shares of New Preferred Stock on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active market for the shares of New Preferred Stock will
develop. To the extent that a market for the shares of New Preferred Stock does
develop, the market value of the shares of New Preferred Stock will depend on
market conditions (including yields on alternative investments), general
economic conditions, Holdings' financial condition and other conditions. Such
conditions may cause the New Preferred Stock, to the extent that it is actively
traded, to trade at a significant discount from its liquidation value. Holdings
has not entered into any arrangement or understanding with any person to
distribute the shares of New Preferred Stock to be received in the Exchange
Offer.
Holdings will not receive any proceeds from the Exchange Offer.
Holdings has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
The date of this Prospectus is ____________, 1996.
-------------------------
-2-
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST ADDRESSED TO SILGAN HOLDINGS INC., 4 LANDMARK SQUARE, STAMFORD, CT
06901, ATTENTION: CHIEF FINANCIAL OFFICER (TELEPHONE NUMBER (203) 975-7110). IN
ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
______________, 1996.
-------------------
TABLE OF CONTENTS
Page
----
Available Information.................................. 4
Information Incorporated by Reference.................. 4
Summary................................................ 6
Risk Factors........................................... 23
The Exchange Offer..................................... 32
Capitalization......................................... 40
Selected Historical and Pro Forma
Financial Information............................... 42
Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 49
Business............................................... 64
Management............................................. 77
Securities Ownership of Certain Beneficial
Owners and Management............................... 82
Certain Transactions................................... 83
Description of New Preferred Stock..................... 85
Description of Exchange Debentures..................... 113
Description of Certain Holdings Indebtedness........... 134
Description of Certain Silgan Indebtedness............. 134
Certain United States Federal Income Tax
Considerations...................................... 143
Plan of Distribution................................... 153
Legal Matters.......................................... 153
Experts................................................ 154
Index to Consolidated Financial Statements............. F-1
--------------------
-3-
<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 or the accompanying Letter of Transmittal, and, if given or
made, such information or representation must not be relied upon as having been
authorized by Holdings. Neither this Prospectus nor the accompanying Letter of
Transmittal or both together constitute an offer to sell or a solicitation of an
offer to buy any security other than the shares of New Preferred Stock offered
hereby, nor does it constitute an offer to sell or a solicitation of an offer to
buy any securities offered hereby to any person in any jurisdiction in which it
is unlawful to make such offer or solicitation to such person. Neither the
delivery of this Prospectus or the accompanying Letter of Transmittal or both
together, nor any sale made hereunder, shall under any circumstances imply that
the information contained herein is correct as of any date subsequent to the
date hereof.
AVAILABLE INFORMATION
Holdings has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the shares of New Preferred Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. For further information with respect to Holdings
and the shares of New Preferred Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. Holdings is and has
been subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Summary financial information with
respect to Holdings is contained in Holdings' Exchange Act reports. The
Registration Statement (and the exhibits and schedules thereto), as well as the
periodic reports and other information filed by Holdings with the Commission,
may be inspected and copied at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at 75 Park Place, New York,
New York 10007 and Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its public reference facilities in New York, New
York and Chicago, Illinois at the prescribed rates. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, such as Holdings, that file
electronically with the Commission. The address of such Web site is
"http://www.sec.gov". Statements contained in this Prospectus as to the contents
of any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by Holdings with the Commission
and are hereby incorporated by reference and made a part of this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1995 (File No.
33-28409).
2. Annual Report on Form 10-K/A-1 for the fiscal year ended December 31, 1995
(File No. 33- 28409).
3. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995
(File No. 33- 28409).
4. Current Report on Form 8-K dated August 14, 1995, as amended by Amendment
to Current Report on Form 8-K/A dated October 16, 1995 (File No. 33-28409).
5. Current Report on Form 8-K dated May 31, 1996 (File No. 33-28409).
6. Current Report on Form 8-K dated August 2, 1996 (File No. 33-28409).
-4-
<PAGE>
All documents subsequently filed by Holdings with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the
date of this Prospectus and prior to the termination of this offering, shall be
deemed to be incorporated by reference into the Registration Statement of which
this Prospectus is a part and to be a part hereof from the date of such filing.
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Holdings hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon oral or written request of such person,
a copy of any and all information that has been incorporated by reference into
this Prospectus (not including exhibits to the information unless such exhibits
are specifically incorporated by reference into such information). Requests for
information should be addressed to: Silgan Holdings Inc., 4 Landmark Square,
Stamford, CT 06901, Attention:
Chief Financial Officer (Telephone Number (203) 975-7110).
Until ______________, 1996 (90 days after the date of the Exchange
Offer), all dealers offering transactions in the shares of New Preferred Stock,
whether or not participating in the Exchange Offer, may be required to deliver a
Prospectus.
-5-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus as well as the information
appearing in the documents incorporated by reference herein. Unless the context
otherwise requires, the term "Company" means the combined business operations of
Holdings and its subsidiaries; and the term "Silgan" means Silgan Corporation, a
Delaware corporation and a wholly owned subsidiary of Holdings. Certain of the
information contained in this summary and elsewhere in this Prospectus,
including information under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and information with respect to the
Company's expected operations, cost savings, plans and strategy for its business
and related financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors."
The Company
The Company is a major manufacturer of a broad range of (i) steel and
aluminum containers for human and pet food and (ii) custom designed plastic
containers for health, personal care, food, beverage, pharmaceutical and
household chemical products in North America. Silgan has grown rapidly since its
inception in 1987 primarily as a result of strategic acquisitions, but also
through internally generated growth. In 1995, the Company had net sales of
approximately $1.1 billion and, on a pro forma basis after giving effect to the
acquisition of substantially all of the assets of the Food Metal and Specialty
business ("AN Can") of American National Can Company ("ANC"), would have had net
sales of approximately $1.4 billion. The Company operates through two operating
companies, Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics"). Management estimates that Containers is currently the
sixth largest can producer and the largest manufacturer of metal food containers
in North America. In 1995, Containers sold approximately 28% of all metal food
containers used in the United States, and on a pro forma basis after giving
effect to the acquisition of AN Can, would have sold approximately 36% of all
metal food containers sold in the United States. 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. The principal executive offices of Holdings are
located at 4 Landmark Square, Stamford, Connecticut 06901, telephone number
(203) 975-7110.
Metal Container Business. In 1995, Containers had net sales of
approximately $882.3 million (representing 80% of the Company's total net sales)
and, on a pro forma basis after giving effect to the acquisition of AN Can,
would have had net sales of approximately $1.2 billion (representing 84% of the
Company's total pro forma net sales). On a pro forma basis after giving effect
to the acquisition of AN Can, Containers has realized compound annual unit sales
growth in excess of 16% since 1987, despite the relative maturity of the U.S.
food can industry. Types of metal containers manufactured by Containers include
those for vegetables, fruit, meat, tomato based products, coffee, soup, seafood,
evaporated milk, infant formula and pet food. Containers has agreements (the
"Nestle Supply Agreements") with Nestle Food Company ("Nestle") pursuant to
which Containers supplies a majority of Nestle's metal container requirements,
and an agreement (the "DM Supply Agreement") with Del Monte Corporation ("Del
Monte") pursuant to which Containers supplies substantially all of Del Monte's
metal container requirements. In addition to Nestle and Del Monte, Containers
has multi-year supply arrangements with other customers. The Company estimates
that approximately 80% of Containers' sales in 1996 will be pursuant to such
supply agreements and arrangements. See "Business--Sales and Marketing."
Containers also manufacturers and sells certain specialty packaging items,
including metal caps and closures, plastic
-6-
<PAGE>
bowls and paper containers primarily used by processors and packagers in the
food industry. In 1995, on a pro forma basis after giving effect to the
acquisition of AN Can, the Company would have had net sales of specialty items
of approximately $83.6 million.
Containers' strategy has been growth through acquisition followed by
the integration and rationalization of the acquired businesses with Containers'
operations, realization of cost synergies as a result of such acquisitions, and
investment in the acquired assets, all aimed at achieving and maintaining a low
cost position. Since the acquisition in 1987 of Nestle's metal container
manufacturing division ("Nestle Can"), Containers has spent approximately $298
million for the acquisition of additional can manufacturing facilities and
equipment and has invested approximately $131 million in its acquired
manufacturing facilities. Containers acquired the U.S. metal container
manufacturing business ("DM Can") of Del Monte in December 1993 and AN Can from
ANC in August 1995, enabling the Company to diversify its customer base and
geographic presence in North America. See "Business--Company History."
Containers has achieved a low cost position, primarily through low production
costs and capital investments that have generated manufacturing and production
efficiencies and by exploiting the favorable geographic location of its plants.
To further enhance its low cost position, Containers has realized cost reduction
opportunities through plant rationalizations and cost synergies resulting from
its acquisitions. Since 1991, Containers has closed eight smaller, higher cost
metal container facilities, including five facilities that were closed in 1995
as a result of the integration of DM Can. The closure of the five facilities in
1995 resulted in a reduction in indirect costs of approximately $7.0 million.
The Company believes that the acquisition of AN Can will enable it to realize
further cost savings from plant rationalizations, from production and
manufacturing synergies from the combined operations and from the integration of
the selling and administrative operations of AN Can into Containers. As a result
of Containers' ability to integrate its acquired businesses and realize cost
savings and synergies from combining the acquired businesses with Containers'
operations, Containers has been able to successfully make acquisitions that have
allowed it to more than triple 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 36% in 1995, on a pro forma basis after giving effect to the
acquisition of AN Can.
Plastic Container Business. In 1995, Plastics had net sales of
approximately $219.6 million (representing 16% of the Company's pro forma net
sales). HDPE containers manufactured by Plastics include personal care
containers for shampoos, conditioners, hand creams, lotions, cosmetics and
toiletries, household chemical containers for scouring cleaners, cleaning agents
and lawn and garden chemicals and pharmaceutical containers for tablets,
laxatives and eye cleaning solutions. Plastics manufactures PET custom
containers for mouthwash, liquid soap, skin care lotions, gastrointestinal and
respiratory products, salad dressings, condiments, instant coffees, premium
water and liquor. Many of the containers manufactured by Plastics are
recyclable. 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 12%. See "Business--Company History." While many of Plastics' larger
competitors that manufacture extrusion blow-molded plastic containers employ
technology oriented to large bottles and long production runs, Plastics has
focused on mid-sized, extrusion blow-molded plastic containers requiring special
decoration and shorter production runs. Plastics emphasizes value-added 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. Management believes that PET custom containers are replacing glass
containers for products such as mouthwash, salad dressing, peanut butter and
liquor, and that Plastics is well positioned because of its technologically
advanced equipment to respond to opportunities for future growth in the rigid
plastic container market.
-7-
<PAGE>
Since 1993, Plastics' earnings before depreciation, interest, taxes and
amortization have increased 56% to $27.5 million in 1995. Plastics has achieved
this increase through a consolidation and rationalization program for its
facilities, significant capital investments to improve its manufacturing and
production efficiencies, increased unit sales volume, and lower selling, general
and administrative expenses. Management of Plastics intends to continue to focus
on expanding its market share and on improving its operating margins by pursuing
further cost reduction opportunities.
Operating Strategy. The Company's overall strategy is to continue to
improve its profitability by further lowering its operating costs and continuing
to increase its share of the North American packaging market through selective,
synergistic acquisitions and investments in internally generated opportunities.
The Company will continue to focus on lowering operating costs and improving its
margins, primarily by continuing to rationalize its operations, realize cost
synergies and manufacturing and production efficiencies, maintain low production
costs, reduce its general and administrative expenses as a percentage of sales,
invest in technologically advanced manufacturing and production processes and
exploit the favorable geographic locations of its plants. In pursuing its growth
strategy, the Company intends to focus particular attention on those rigid metal
and plastic container segments where it believes operating synergies are likely.
Financing Strategy. In order to improve its operating and financing
flexibility, the Company has been active in refinancing its higher cost
indebtedness with lower cost indebtedness. In 1995, the Company entered into a
new credit facility in connection with the AN Can acquisition. With borrowings
of $200 million thereunder, Holdings repurchased and redeemed an aggregate of
$204.1 million principal amount of Holdings' 13-1/4% Senior Discount Debentures
due 2002 (the "Discount Debentures"), which will result in $9.9 million of
annual cash interest savings and $18.3 million of current cash tax savings as a
result of the deduction by the Company of the accreted interest amount on the
retired Discount Debentures. In July 1996, Holdings completed a private offering
(the "Private Offering") of the Old Preferred Stock, for aggregate gross
proceeds of $50.0 million. A portion of the net proceeds from the Private
Offering (approximately $35.8 million) was used by Holdings to purchase its
Class B Common Stock, par value $.01 per share (the "Holdings Class B Stock"),
held by Mellon Bank N.A. ("Mellon"), as trustee for First Plaza Group Trust
("First Plaza"), at a lower cost than the cost at which Holdings could have
purchased such shares in the future. The remaining net proceeds from the Private
Offering will be used to redeem $12.0 million principal amount of Discount
Debentures on August 26, 1996. As a result of this redemption, the Company will
realize additional annual cash interest expense savings of $1.6 million and
current tax benefits of $1.2 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Capital Resources and
Liquidity."
-8-
<PAGE>
The Exchange Offer
The Exchange Offer................ Holdings is offering to exchange one
share of New Preferred Stock for each
share of Old Preferred Stock that is
properly tendered and accepted in the
Exchange Offer. Holdings will issue the
New Preferred Stock on or promptly after
the Expiration Date. There are 50,000
shares of Old Preferred Stock
outstanding. See "The Exchange Offer."
Resale of New Preferred Stock..... Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties,
including "Exxon Capital Holdings
Corporation" (available May 13, 1988),
"Morgan Stanley & Co. Incorporated"
(available June 5, 1991), "Mary Kay
Cosmetics, Inc." (available June 5,
1991), "Warnaco, Inc." (available October
11, 1991) and "K-III Communications
Corp." (available May 14, 1993), the
Company believes that shares of New
Preferred Stock issued pursuant to the
Exchange Offer in exchange for shares of
Old Preferred Stock may be offered for
resale, resold and otherwise transferred
by any holder thereof (other than any
such holder which is an "affiliate" of
the Company within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such shares
of New Preferred Stock are acquired in
the ordinary course of such holder's or
any other such person's business and that
such holder or any other such person has
no arrangement or understanding with any
person to participate in the distribution
of such shares of New Preferred Stock.
Under no circumstances may this
Prospectus be used for an offer to resell
or other retransfer of shares of New
Preferred Stock. In the event that the
Company's belief is inaccurate, holders
of shares of New Preferred Stock who
transfer shares of New Preferred Stock in
violation of the prospectus delivery
provisions of the Securities Act and
without an exemption from registration
thereunder may incur liability
thereunder. The Company does not assume
or indemnify holders against such
liability. The Exchange Offer is not
being made to, nor will Holdings accept
surrenders for exchange from, holders of
shares of Old Preferred Stock (i) in any
jurisdiction in which the Exchange Offer
or the
-9-
<PAGE>
acceptance thereof would not be in
compliance with the securities or blue
sky laws of such jurisdiction or (ii) if
any holder is engaged or intends to
engage in a distribution of the New
Preferred Stock. Each broker-dealer that
receives shares of New Preferred Stock
for its own account in exchange for
shares of Old Preferred Stock, where such
shares of Old Preferred Stock were
acquired by such broker-dealer as a
result of market-making activities or
other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any resale
of such shares of New Preferred Stock.
The Company has not entered into any
arrangement or understanding with any
person to distribute the shares of New
Preferred Stock to be received in the
Exchange Offer. See "Plan of
Distribution."
Expiration Date.................. The Exchange Offer will expire at 5:00
p.m., New York City time, on
______________, 1996 unless extended, in
which case the term "Expiration Date"
shall mean the latest date and time to
which the Exchange Offer is extended.
Holdings will accept for exchange any and
all Old Preferred Stock which are
properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time,
on the Expiration Date. The shares of New
Preferred Stock issued pursuant to the
Exchange Offer will be delivered on or
promptly after the Expiration Date.
Conditions to the Exchange Offer.. The Company may terminate the Exchange
Offer if it determines that its ability
to proceed with the Exchange Offer could
be materially impaired due to any legal
or governmental action, any new law,
statute, rule or regulation, any
interpretation by the staff of the
Commission of any existing law, statute,
rule or regulation or the failure to
obtain any necessary approvals of
governmental agencies or holders of
shares of Old Preferred Stock. The
Company does not expect any of the
foregoing conditions to occur, although
there can be no assurance that such
conditions will not occur.
Procedures for Tendering
Old Preferred Stock............... Each holder of Old Preferred Stock
wishing to participate in the Exchange
Offer must complete, sign and date the
Letter of Transmittal, or a facsimile
thereof, in accordance with the
instructions contained herein and
therein, and mail or otherwise deliver
such Letter of Transmittal, or such
facsimile,
-10-
<PAGE>
together with such Old Preferred Stock
and any other required documentation to
Fleet National Bank as transfer agent for
the Preferred Stock (the "Transfer
Agent") at the address set forth herein.
By executing the Letter of Transmittal,
each holder will represent to Holdings
that, among other things, the New
Preferred Stock acquired pursuant to the
Exchange Offer is being obtained in the
ordinary course of business of the person
receiving such New Preferred Stock,
whether or not such person has an
arrangement or understanding with any
person to participate in the distribution
of such New Preferred Stock, and that
neither the holder nor any such other
person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the
Company.
Special Procedures for
Beneficial Owners................. Any beneficial owner whose Old Preferred
Stock is registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and who wishes
to tender such Old Preferred Stock in the
Exchange Offer should contact such
registered holder promptly and instruct
such registered holder to tender such Old
Preferred Stock on such beneficial
owner's behalf. If such beneficial owner
wishes to tender such Old Preferred Stock
on such owner's own behalf, such owner
must, prior to completing and executing
the Letter of Transmittal and delivering
its Old Preferred Stock, either make
appropriate arrangements to register
ownership of the Old Preferred Stock in
such owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered
ownership may take considerable time and
may not be able to be completed prior to
the Expiration Date.
Guaranteed Delivery Procedures.... Holders of Old Preferred Stock who wish
to tender their Old Preferred Stock and
whose Old Preferred Stock is not
immediately available or who cannot
deliver their Old Preferred Stock or the
Letter of Transmittal to the Transfer
Agent prior to the Expiration Date, must
tender their Old Preferred Stock
according to the guaranteed delivery
procedures set forth in "The Exchange
Offer-- Guaranteed Delivery Procedures."
Withdrawal Rights................. Tenders of Old Preferred Stock may be
withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration
Date.
-11-
<PAGE>
Certain Federal Income Tax
Considerations.................... For a discussion of certain federal
income tax considerations relating to the
exchange of the New Preferred Stock for
the Old Preferred Stock, as well as the
ownership of the New Preferred Stock and,
if applicable, the Exchange Debentures,
see "Certain United States Federal Income
Tax Considerations."
Transfer Agent.................... Fleet National Bank is the Transfer Agent
for the Exchange Offer. Its telephone
number is (401) 278- 3760. The address of
the Transfer Agent is as set forth in
"The Exchange Offer--Transfer Agent."
The New Preferred Stock
Securities Offered................ 50,000 shares of New Exchangeable
Preferred Stock.
Dividends......................... Dividends are cumulative at 13-1/4% per
annum, and are payable quarterly in cash
or, on or prior to July 15, 2000 at the
sole option of Holdings, in additional
shares of New Preferred Stock, on January
15, April 15, July 15 and October 15,
commencing October 15, 1996. Dividends on
the New Preferred Stock will accrue and
be cumulative from the date of issuance
thereof. See "Certain United States
Federal Income Tax Considerations." If by
July 22, 1997 the New Preferred Stock has
not been exchanged for Exchange
Debentures, the dividend rate on the New
Preferred Stock will increase by 0.5% per
annum to 13-3/4% per annum of the
liquidation preference per share of New
Preferred Stock until such exchange
occurs.
Liquidation Preference............ $1,000 per share, plus accrued and unpaid
dividends.
Voting............................ Holders of the New Preferred Stock will
have no voting rights except as provided
by law and as provided in Holdings'
Restated Certificate of Incorporation
(the "Certificate of Incorporation") or
in the Certificate of Designation. In the
event that dividends are not paid for
four consecutive quarters or upon certain
other events (including failure to comply
with covenants and failure to pay the
mandatory redemption price when due),
then the number of directors constituting
Holdings' Board of Directors will be
adjusted to permit the holders of the
majority of the then outstanding
Preferred Stock, voting separately as a
class, to elect the number of
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<PAGE>
directors that is equal to the greater of
(i) one and (ii) the whole number
obtained (rounding down to the nearest
whole number) by (a) multiplying 1/6 by
the number of directors then in office
and (b) adding one. The Certificate of
Incorporation provides that even if a
majority of the directors of Holdings
vote in favor of an action, the directors
elected by either of the Holdings Class A
Stock (as defined in "Securities
Ownership of Certain Beneficial Owners
and Management--Certain Beneficial Owners
of Holdings' Capital Stock") or the
Holdings Class B Stock could block such
action. See "Description of New Preferred
Stock--Voting Rights."
Mandatory
Redemption........................ Holdings is required to redeem the New
Preferred Stock on July 15, 2006 (subject
to the legal availability of funds
therefor) at a redemption price equal to
the liquidation preference, plus accrued
and unpaid dividends to the redemption
date. See "Description of New Preferred
Stock--Mandatory Redemption."
Optional Redemption............... On or after July 15, 2000, the New
Preferred Stock is redeemable, at the
option of Holdings, in whole or in part,
at the redemption prices set forth
herein, plus accrued and unpaid dividends
to the redemption date. In addition, at
any time, or from time to time, on or
prior to July 15, 2000, Holdings may, at
its option, redeem all (but not less than
all) of the outstanding shares of
Preferred Stock at a redemption price
equal to 110% of the liquidation
preference thereof, plus accrued and
unpaid dividends to the redemption date,
with the proceeds of one or more sales of
common stock. See "Description of New
Preferred Stock--Optional Redemption."
Ranking........................... The Preferred Stock will rank (i) senior
to all common stock of Holdings and to
all other capital stock of Holdings
unless the terms of such stock expressly
provide that it ranks senior to or on a
parity with the Preferred Stock; (ii) on
a parity with any capital stock of
Holdings the terms of which expressly
provide that it will rank on a parity
with the Preferred Stock; and (iii)
junior to all capital stock of Holdings
the terms of which expressly provide that
such stock will rank senior to the
Preferred Stock. As of the date of this
Prospectus,
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<PAGE>
all outstanding capital stock of Holdings
ranks junior to the Preferred Stock. See
"Description of New Preferred
Stock--Ranking."
Optional Exchange
Feature........................... The Preferred Stock is exchangeable into
Exchange Debentures at any time at the
option of Holdings, in whole but not in
part, subject to (i) such exchange being
permitted under Holdings' and Silgan's
instruments and agreements governing
their indebtedness, including the Silgan
Credit Agreement (as defined in "Risk
Factors--High Leverage; Deficiency in
Stockholders' Equity") and the Discount
Debentures Indenture (as defined in "Risk
Factors--Ability of Holdings to Pay Cash
Dividends and Cash Interest"), and (ii)
the conditions therefor described in the
Certificate of Designation being
satisfied. See "Description of New
Preferred Stock-- Exchange" and
"Description of Exchange Debentures."
Certain
Covenants......................... The Certificate of Designation contains
certain covenants which, among other
things, will restrict the ability of
Holdings and its Restricted Subsidiaries
(as defined under "Description of New
Preferred Stock--Certain Definitions") to
incur additional indebtedness and issue
preferred stock; pay dividends or make
distributions in respect of their capital
stock; purchase, redeem or otherwise
acquire for value shares of capital
stock; make any voluntary or optional
principal payments or voluntary or
optional redemption, repurchase,
defeasance or other acquisition or
retirement for value of any securities
junior to the New Preferred Stock; make
investments in any affiliate or
Unrestricted Subsidiary (as defined under
"Description of New Preferred
Stock--Certain Definitions") of Holdings;
enter into transactions with shareholders
or affiliates; create restrictions on the
ability of Restricted Subsidiaries of
Holdings to make certain payments; issue
or sell stock of Restricted Subsidiaries;
engage in sales of assets; and engage in
mergers or consolidations. See
"Description of New Preferred
Stock--Certain Covenants."
Change of Control................. Upon a Change of Control (as defined in
"Description of New Preferred
Stock--Certain Definitions"), Holdings is
required to make an offer to purchase the
shares of Preferred Stock at a
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<PAGE>
purchase price equal to 101% of their
liquidation preference, plus accrued and
unpaid dividends to the date of purchase.
See "Description of New Preferred
Stock--Change of Control."
The Exchange Debentures
Exchange Debentures............... Subordinated Debentures due July 15, 2006
in an aggregate principal amount equal to
the aggregate liquidation preference of,
and accrued but unpaid dividends on, the
Preferred Stock outstanding on the
Exchange Date (as defined in "Description
of New Preferred Stock--Exchange").
Interest;
Interest Payment Dates............ Each Exchange Debenture will bear
interest at the dividend rate in effect
with respect to the New Preferred Stock
on the date the Exchange Debentures are
issued from the Exchange Date or from the
most recent interest payment date to
which interest has been paid or provided
for. Interest will be payable on January
15 and July 15 of each year, commencing
with the first of such dates to occur
after the Exchange Date. On or prior to
July 15, 2000, Holdings may pay interest
on the Exchange Debentures by issuing
additional Exchange Debentures.
Optional Redemption............... On or after July 15, 2000, the Exchange
Debentures will be redeemable, at the
option of Holdings, in whole or in part,
at the redemption prices set forth
herein, plus accrued and unpaid interest
to the redemption date. In addition, at
any time, or from time to time, on or
prior to July 15, 2000, Holdings may, at
its option, redeem all (but not less than
all) outstanding Exchange Debentures at a
redemption price equal to 110% of the
principal amount thereof, plus accrued
and unpaid interest to the redemption
date, with the proceeds of one or more
sales of common stock. See "Description
of Exchange Debentures--Optional
Redemption."
Ranking........................... The Exchange Debentures will be
subordinated indebtedness of Holdings,
subordinated to the prior payment when
due of the principal of, and premium, if
any, and accrued and unpaid interest on,
all existing and future Senior
Indebtedness (as defined in "Description
of Exchange Debentures-- Subordination")
of Holdings (including indebtedness
-15-
<PAGE>
under the Silgan Credit Agreement and the
Discount Debentures). In addition, the
Exchange Debentures will be effectively
subordinated to all liabilities
(including trade payables) of Holdings'
subsidiaries. As of March 31, 1996, on a
pro forma basis after giving effect to
the Refinancing (as defined in "Summary
Historical and Pro Forma Financial
Information"), Holdings would have had
$831.1 million of Senior Indebtedness
(which includes $646.2 million of
indebtedness of Holdings' subsidiaries
that is guaranteed by Holdings and
includes the 11-3/4% Notes (as defined in
"Risk Factors--Ability of Holdings to Pay
Cash Dividends and Cash Interest") which
would become Senior Indebtedness upon a
Holdings Merger (as defined in
"Description of New Preferred
Stock--Certain Definitions") or similar
transaction) and Holdings' subsidiaries
would have had $1,056.0 million of
indebtedness and other liabilities.
Certain Covenants................. The Exchange Debenture Indenture (as
defined in "Description of Exchange
Debentures") will contain certain
covenants which, among other things, will
restrict the ability of Holdings and its
Restricted Subsidiaries to incur
additional indebtedness; pay dividends or
make distributions in respect of their
capital stock; purchase, redeem, or
otherwise acquire for value shares of
their capital stock; make any voluntary
or optional principal payments or
voluntary or optional redemption,
repurchase, defeasance or other
acquisition or retirement for value of
any Indebtedness (as defined in
"Description of New Preferred
Stock--Certain Definitions") subordinated
to the Exchange Debentures; make
investments in any affiliate or
Unrestricted Subsidiary of Holdings;
enter into transactions with shareholders
or affiliates; create restrictions on the
ability of Restricted Subsidiaries of
Holdings to make certain payments; issue
or sell stock of Restricted Subsidiaries;
engage in sales of assets; and engage in
mergers or consolidations. See
"Description of Exchange
Debentures--Covenants."
Registration
Requirements...................... The Exchange Debentures may not be issued
unless such issuance is registered under
the Securities Act or is exempt from
registration.
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<PAGE>
Change of Control................. Upon a Change of Control, Holdings will
be required to make an offer to purchase
the Exchange Debentures at a purchase
price equal to 101% of their principal
amount on the date of purchase, plus
accrued and unpaid interest to the date
of purchase. See "Description of Exchange
Debentures - - Covenants - - Change of
Control."
Risk Factors
For a discussion of certain factors that should be considered in
evaluating an investment in the New Preferred Stock, see "Risk Factors."
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<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical and pro forma consolidated financial
information of Holdings were derived from, and should be read in conjunction
with, the historical financial statements and pro forma financial information of
Holdings, including the notes thereto, that appear elsewhere in this Prospectus.
The summary unaudited pro forma operating data and other data for the
three months ended March 31, 1996 give effect to (i) the Private Offering and
the use of the proceeds therefrom and (ii) the incurrence of $125 million of
additional B term loans in July 1996 and $17.4 million of working capital loans
in June 1996 under the Silgan Credit Agreement, as recently amended in May 1996,
and the use of such proceeds to redeem a portion of the Discount Debentures
(collectively, the "Refinancing"), as if such events had occurred as of January
1, 1996. Additionally, the summary unaudited pro forma balance sheet data at
March 31, 1996 give effect to the Refinancing as if it had occurred as of such
date.
The summary unaudited pro forma operating data and other data for the
fiscal year ended December 31, 1995 give effect to (i) the acquisition of AN
Can, (ii) proceeds received under the Silgan Credit Agreement (which was entered
into on August 1, 1995 and provided Silgan with $225 million of A term loans and
$225 million of B terms loans and provided Containers and Plastics with a
commitment of $225 million for working capital loans) which were used to finance
the acquisition of AN Can, repay in full amounts owing under the Company's
previous credit agreement and Silgan's Senior Secured Floating Rate Notes due
1997 (the "Secured Notes"), and repurchase $61.7 million principal amount at
maturity of Discount Debentures, (iii) the Private Offering and the use of the
proceeds therefrom and (iv) the incurrence of $125 million of additional B term
loans in July 1996 and $17.4 million of working capital loans in June 1996 under
the Silgan Credit Agreement and the use of such proceeds to redeem a portion of
the Discount Debentures, as if such events had occurred as of January 1, 1995.
The summary unaudited pro forma consolidated financial information for
the three months ended March 31, 1996 and for the fiscal year ended December 31,
1995 assume the Refinancing occurred at the beginning of the periods presented.
The amount necessary to purchase the Holdings Class B Stock held by Mellon
increased over time. Because the Refinancing did not occur at the beginning of
the periods presented and because the Discount Debentures accreted in value, the
aggregate principal amount of the Discount Debentures outstanding after the
Refinancing will be greater than the aggregate principal amount used to
calculate interest expense in the pro forma consolidated financial information.
Upon the completion of the Refinancing, there will be approximately $59.0
million aggregate principal amount of Discount Debentures that remain
outstanding. As a result, actual interest expense of the Company will be greater
than the interest expense reflected in the pro forma consolidated financial
information.
The unaudited pro forma financial information does not purport to
represent what the Company's financial position or results of operations would
actually have been if such events had in fact occurred as of such dates or at
the beginning of the periods presented, or to project the Company's financial
position or results of operations for any future date or period. The unaudited
pro forma adjustments are based upon available information and upon certain
assumptions that Holdings believes are reasonable. The unaudited pro forma
financial data and accompanying notes should be read in conjunction with the
unaudited pro forma condensed statements of operations and the historical
financial information of Holdings, including notes thereto, included elsewhere
in this Prospectus.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Three Months ended March 31,
----------------------------
Pro Forma
1996(a) 1996 1995
---- ------ -----
(Dollars in thousands)
(Unaudited)
Operating Data:
<S> <C> <C> <C>
Net sales............................................................ $279,860 $279,860 $203,264
Cost of goods sold................................................... 243,314 243,314 174,265
------- ------- -------
Gross profit......................................................... 36,546 36,546 28,999
Selling, general and administrative expenses......................... 12,830 12,830 10,168
-------- ------- -------
Income from operations............................................... 23,716 23,716 18,831
Interest expense and other related financing costs................... 20,556 22,573 17,251
--------- ------- -------
Income before income taxes........................................... 3,160 1,143 1,580
Income tax provision................................................. 900 1,000 3,000
--------- --------- --------
Net income (loss)(b)................................................. 2,260 143 (1,420)
Preferred stock dividend requirement................................. 1,656 -- --
-------- ----------- --------
Net income (loss) applicable to common
stockholders..................................................... $ 604 $ 143 $ (1,420)
========= ========== ==========
Ratio of earnings to fixed charges and preferred
stock dividends(c)............................................... 1.06 1.05 1.09
Balance Sheet Data (at end of period):
Fixed assets......................................................... $491,177 $491,177 $251,832
Total assets......................................................... 942,332 942,754 534,489
Total long-term debt................................................. 723,303 757,501 518,280
Cumulative exchangeable redeemable preferred
stock of Holdings ($50 million liquidation value)................ 50,000 -- --
Deficiency in stockholders' equity................................... (215,797) (179,661) (159,418)
Other Data:
EBDITA(d)............................................................ $ 40,102 $ 40,102 $ 28,033
EBDITA as a percentage of net sales.................................. 14.3% 14.3% 13.8%
Capital expenditures................................................. 18,558 18,558 8,359
Depreciation and amortization(e)..................................... 15,439 15,439 8,779
(footnotes follow)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Year Ended December 31,
-----------------------
Pro Forma
1995(a) 1995(f) 1994(g) 1993(g) 1992 1991(h)
------- ------- ------- ------- ---- -------
(Dollars in thousands)
Operating Data:
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $1,404,382 $1,101,905 $861,374 $645,468 $630,039 $678,211
Cost of goods sold..................... 1,234,862 970,491 748,290 571,174 554,972 605,185
--------- --------- ------- ------- ------- -------
Gross profit........................... 169,520 131,414 113,084 74,294 75,067 73,026
Selling, general and administrative
expenses........................... 57,360 46,848 37,997 32,495 32,809 33,733
Reduction in carrying value of assets(i) 14,745 14,745 16,729 -- -- --
---------- ------- -------- ---------- -------- ------
Income from operations................. 97,415 69,821 58,358 41,799 42,258 39,293
Interest expense and other related
financing costs.................... 77,925 80,710 65,789 54,265 57,091 55,996
Minority interest expense.............. -- -- -- -- 2,745 3,889
------------ --------- --------- ---------- -------- --------
Income (loss) before income taxes...... 19,490 (10,889) (7,431) (12,466) (17,578) (20,592)
Income tax provision................... 9,973 5,100 5,600 1,900 2,200 --
---------- --------- -------- -------- ------- -------
Income (loss) before extraordinary
charges and cumulative effect of
changes in accounting principles... 9,517 (15,989) (13,031) (14,366) (19,778) (20,592)
---------- ---------- -------- -------- ------- --------
Extraordinary charges relating to early
extinguishment of debt(b).......... -- (5,817) -- (1,341) (23,597) --
Cumulative effect of changes in
accounting principles(j)........... -- -- -- (6,276) -- --
---------- ---------- --------- -------- ------- -------
Net income (loss)...................... 9,517 (21,806) (13,031) (21,983) (43,375) (20,592)
Preferred stock dividend requirement... 6,962 -- -- -- -- --
--------- ---------- --------- ---------- ------ ------
Net income (loss) applicable to common
stockholders....................... $ 2,555 $ (21,806) $(13,031) $(21,983) $(43,375) $(20,592)
========== ========== ======== ======== ======== ========
Deficiency of earnings available to cover
fixed charges and preferred
stock dividends(c)................. $ -- $ 10,889 $ 7,431 $ 12,466 $ 17,578 $ 20,592
Ratio of earnings to fixed charges and
preferred stock dividends(c)....... 1.14 -- -- -- -- --
Balance Sheet Data (at end of period):
Fixed assets........................... -- $ 487,301 $251,810 $290,395 $223,879 $230,501
Total assets........................... -- 900,046 504,292 497,633 389,035 390,693
Total long-term debt................... -- 750,873 510,763 505,718 383,232 315,461
Redeemable preferred stock of Silgan
(minority interest of Holdings).... -- -- -- -- -- 27,878
Deficiency in stockholders' equity..... -- (179,804) (157,998) (144,967) (137,984) (94,609)
Other Data:
EBDITA(d).............................. $ 173,314 $ 132,428 $114,489 $ 76,095 $ 74,012 $ 72,141
EBDITA as a percentage of net sales.... 12.3% 12.0% 13.3% 11.8% 11.7% 10.6%
Capital expenditures................... $ 54,890 $ 51,897 $ 29,184 $ 42,480 $ 23,447 $ 21,834
Depreciation and amortization(e)....... $ 57,932 $ 45,388 $ 37,187 $ 33,818 $ 31,754 $ 32,848
Number of employees (at end of
period)(k)......................... 5,110 5,110 4,000 3,330 3,340 3,560
(footnotes follow)
</TABLE>
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<PAGE>
Notes to Summary Historical and Pro Forma Financial Information
(a) For a detailed presentation of the pro forma results of operations of
the Company for the three months ended March 31, 1996 and the year
ended December 31, 1995, see the unaudited pro forma condensed
statements of operations, including the notes thereto, included
elsewhere in this Prospectus. For purposes of the pro forma financial
information for the year ended December 31, 1995, balance sheet data is
not included.
(b) The pro forma consolidated operating data for the three months ended
March 31, 1996 and the year ended December 31, 1995 do not include an
extraordinary charge, net of tax, that the Company expects to incur in
the third quarter of 1996 of $1.7 million for the write-off of
unamortized deferred financing costs related to the early redemption of
the Discount Debentures. See "Capitalization." In addition, the pro
forma consolidated operating data for the year ended December 31, 1995
does not include the historical extraordinary charge, net of taxes,
incurred as a result of the early extinguishment of amounts owing under
the Company's debt facilities.
(c) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends and the deficiency of earnings available to
cover fixed charges and preferred stock dividends, 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, such portion of rental expense that is
representative of the interest factor and preferred stock dividends.
(d) "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 $0.7 million and
$0.2 million for the three months ended March 31, 1996 and 1995,
respectively, and $1.7 million, $0.7 million and $0.5 million for the
years ended December 31, 1995, 1994 and 1993, respectively, (vi)
charges relating to the vesting of benefits under stock appreciation
rights ("SARs") of $0.2 million for each of the three months ended
March 31, 1996 and 1995, and $0.8 million and $1.5 million in 1995 and
1994, respectively, and (vii) the reduction in carrying value of assets
of $14.7 million and $16.7 million in 1995 and 1994, respectively.
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.
(e) Depreciation and amortization excludes amortization of debt financing
costs.
(f) On August 1, 1995, the Company acquired from ANC substantially all of
the assets of ANC's Food Metal and Specialty business for a purchase
price of $362.0 million (including the purchase from ANC of its St.
Louis facility in May 1996 for $13.2 million). 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 Note 3 to the Consolidated Financial Statements
for the year ended December 31, 1995 included elsewhere in this
Prospectus.
(g) 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 Consolidated Financial
Statements for the year ended December 31, 1995 included elsewhere in
this Prospectus.
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(h) 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."
(i) Based upon a review of its depreciable assets, the Company determined
that certain adjustments were necessary to properly reflect net
realizable values. In 1995, the Company recorded a write-down of $14.7
million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had
become underutilized due to excess capacity. In 1994, charges of $16.7
million were recorded which included $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 for technologically obsolete
and inoperable machinery and equipment.
(j) 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.
(k) The number of employees at December 31, 1995 includes approximately
1,400 employees who joined the Company on August 1, 1995 as a result of
the acquisition by Containers of AN Can. 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.
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RISK FACTORS
An investment in the New Preferred Stock offered hereby involves a high
degree of risk. The following risk factors, together with the other information
set forth in this Prospectus and appearing in the documents incorporated by
reference herein, should be considered when evaluating an investment in the New
Preferred Stock.
High Leverage; Deficiency in Stockholders' Equity
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 issuance by Holdings in 1992 of its Discount Debentures. See
"Business--Company History." Holdings has also guaranteed the obligations and
liabilities of Silgan and its subsidiaries under the credit agreement dated as
of August 1, 1995 among Silgan and certain of its subsidiaries, the lenders
named therein (the "Banks"), Bankers Trust Company ("Bankers Trust"), as
Administrative Agent and Co-Arranger, and Bank of America Illinois ("Bank of
America"), as Documentation Agent and Co-Arranger, as amended (the "Silgan
Credit Agreement"). See "Description of Certain Silgan Indebtedness--Description
of the Silgan Credit Agreement." At March 31, 1996, on a pro forma basis after
giving effect to the Refinancing (assuming that the Refinancing occurred as of
such date), Holdings would have had approximately $831.1 million of total
consolidated indebtedness and $50 million liquidation value of Preferred Stock.
See "Capitalization." Also, as of March 31, 1996, Holdings' deficiency in
stockholders' equity was $179.7 million and, on a pro forma basis after giving
effect to the Refinancing, would have been $215.8 million. See "Capitalization."
Additionally, Holdings' pro forma ratio of earnings to fixed charges and
preferred stock dividends for the three months ended March 31, 1996 and the year
ended December 31, 1995 were 1.06 and 1.14, respectively. A significant amount
of the Company's cash flow must be used to service the Company's debt and cannot
be used in the Company's business. Holdings' high level of indebtedness and
deficiency in stockholders' equity pose substantial risks to holders of the
Preferred Stock.
Ability of Holdings to Pay Cash Dividends and Cash Interest
Cash dividends on the Preferred Stock (and cash interest payments on
the Exchange Debentures, if issued) are payable commencing on October 15, 2000.
The Silgan Credit Agreement permits Silgan to pay cash dividends and to advance
funds to Holdings in order to enable Holdings to pay cash dividends on the
Preferred Stock or cash interest on the Exchange Debentures, if issued, on or
after the earlier of (i) the third anniversary of the issuance of the Old
Preferred Stock and (ii) the second anniversary of the issuance of the Old
Preferred Stock if Holdings has theretofore consummated a registered public
offering of its common stock, in each case so long as no default under the
Silgan Credit Agreement then exists or would result therefrom and the Company
meets an interest coverage ratio test under the Silgan Credit Agreement. See
"Description of Certain Silgan Indebtedness--Description of the Silgan Credit
Agreement."
In addition, under the indenture in respect of the Discount Debentures
(the "Discount Debentures Indenture"), Holdings is permitted to pay cash
dividends on the Preferred Stock only if amounts determined in accordance with
the Discount Debentures Indenture are available for such payments. On a pro
forma basis after giving effect to the Refinancing, as of March 31, 1996,
Holdings would not have had any amount available under the Discount Debentures
Indenture to pay cash dividends on the Preferred Stock. So long as Holdings does
not have any amount available to it under the Discount Debentures Indenture to
pay cash dividends, Holdings will be prohibited under the Discount Debentures
Indenture from paying cash dividends on the Preferred Stock. The ability of
Holdings to pay cash dividends on the Preferred Stock when required may depend
upon the ability of Holdings to refinance the remaining
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Discount Debentures. On a pro forma basis after giving effect to the
Refinancing, there will be approximately $59.0 million principal amount of
Discount Debentures outstanding. There can be no assurance that Holdings will be
able to refinance the remaining Discount Debentures or that Holdings will be
permitted to pay cash dividends on the Preferred Stock when required. The
Discount Debentures Indenture does not limit payments of cash interest on the
Exchange Debentures.
Under the indenture (the "11-3/4% Notes Indenture") in respect of
Silgan's 11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes"),
Silgan may pay cash dividends to Holdings (which would enable Holdings to pay
cash dividends on the Preferred Stock (subject to the matters described in the
preceding paragraph) or cash interest on the Exchange Debentures) only if
certain financial tests are met. On a pro forma basis after giving effect to the
Refinancing, as of March 31, 1996, the 11-3/4% Notes Indenture would not have
permitted Silgan to pay cash dividends to Holdings to fund Holdings' payment of
cash dividends (or interest) on the Preferred Stock (or, if issued, the Exchange
Debentures). Accordingly, so long as Silgan cannot pay cash dividends to
Holdings under the terms of the 11-3/4% Notes Indenture, Holdings may not be
able to pay cash dividends on the Preferred Stock or cash interest on the
Exchange Debentures. The ability of Silgan to pay cash dividends to Holdings to
enable Holdings to pay cash dividends on the Preferred Stock or cash interest on
the Exchange Debentures when required will depend upon the future performance of
Silgan and its subsidiaries and may depend upon the ability of Silgan to
refinance the remaining 11-3/4% Notes. There can be no assurance that Silgan
will be able to refinance the 11-3/4% Notes or that Silgan will be permitted to
pay cash dividends to Holdings to enable Holdings to pay cash dividends on the
Preferred Stock or cash interest on the Exchange Debentures when required.
Management believes that the cash dividend or cash interest obligations of
Holdings with respect to the Preferred Stock or Exchange Debentures 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."
Under Delaware law, dividends on capital stock may only be paid from
"surplus" or if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. The ability of Holdings to pay
cash dividends on the Preferred Stock will require the availability of adequate
"surplus," which is defined as the excess, if any, of Holdings' net assets
(total assets less total liabilities) over its capital (generally the par value
of its issued capital stock). There can be no assurance that adequate surplus
will be available to pay cash dividends on the Preferred Stock or that, even if
such surplus is available, Holdings will have sufficient cash to pay dividends
on the Preferred Stock.
Ability of Silgan to Provide Financial Support to Holdings
Holdings is not required to pay cash dividends on the Preferred Stock,
or cash interest on the Exchange Debentures, if issued, until October 15, 2000.
Since Holdings' only asset is its investment in Silgan, its ability to pay cash
dividends on the Preferred Stock and cash interest on the Exchange 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 then has sufficient funds available for such purpose and if it is then
permitted to make such funds available to Holdings under its instruments and
agreements governing its indebtedness. See "--Ability of Holdings to Pay Cash
Dividends and Cash Interest" above. If sufficient funds to pay such dividends or
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 Preferred Stock or the Exchange Debentures. There can
be no assurance that Holdings or Silgan will
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be able to borrow or otherwise finance such payments or refinance the Preferred
Stock or the Exchange Debentures.
Holding Company Structure; Subordination
Holdings is a holding company with no significant assets other than its
investment in Silgan. The operations of Holdings are conducted through Silgan's
operating subsidiaries, Containers and Plastics, each of which is a wholly owned
subsidiary of Silgan. Therefore, Holdings' ability to pay cash dividends on the
Preferred Stock when cash dividends are required to be paid, to redeem the
Preferred Stock as required and to pay interest on, and repay the principal
amount at maturity of, the Exchange Debentures, if issued, 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. Silgan and its subsidiaries are legally distinct from Holdings and
have no obligation, contingent or otherwise, to pay amounts due with respect to
the Preferred Stock or the Exchange Debentures or to make funds available for
such payments. Because Silgan and its subsidiaries do not guarantee the
obligations of Holdings under the Preferred Stock or the Exchange Debentures,
claims of holders thereof effectively will be subordinated to the claims of
creditors of Silgan and its subsidiaries, including claims of the Banks pursuant
to the Silgan Credit Agreement, which is guaranteed directly by all of the
operating subsidiaries of Silgan, claims of holders of 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. At March 31, 1996,
on a pro forma basis after giving effect to the Refinancing (assuming that the
Refinancing occurred as of such date), Silgan and its subsidiaries would have
had $1,056.0 million of indebtedness and other liabilities.
All existing and future liabilities of Holdings (including the Discount
Debentures) will generally have priority as to the assets of Holdings over the
claims of the holders of the Preferred Stock. The Exchange Debentures, if and
when issued, will be subordinate in right of payment to the prior payment in
full of the Discount Debentures and all other existing and future Senior
Indebtedness (including Holdings' guaranty of the Silgan Credit Agreement).
Consequently, in the event of Holdings' bankruptcy, insolvency, liquidation,
reorganization, dissolution or other winding up, or upon acceleration of certain
of Holdings' indebtedness, the holders of Holdings' indebtedness (or holders of
Senior Indebtedness in the case of the Exchange Debentures, including the Banks
and the holders of the Discount Debentures) must be paid in full before holders
of the Preferred Stock or the Exchange Debentures may be paid. Although the
Certificate of Designation and the Exchange Debenture Indenture impose certain
limitations on Holdings' and its subsidiaries' ability to incur additional
indebtedness, Holdings and its subsidiaries are not prohibited from incurring
additional indebtedness (including Senior Indebtedness). See "Description of New
Preferred Stock--Certain Covenants" and "Description of Exchange Debentures--
Covenants." At March 31, 1996, on a pro forma basis after giving effect to the
Refinancing (assuming that the Refinancing occurred as of such date), Holdings
would have had $1,108.1 million of total consolidated liabilities (excluding the
Preferred Stock) and $831.1 million of Senior Indebtedness (including the
11-3/4% Notes which would become Senior Indebtedness upon a Holdings Merger or
similar transaction).
In the event Holdings and Silgan are combined pursuant to a Holdings
Merger or any similar transaction between Holdings and Silgan, all existing and
future indebtedness of the resulting entity, including indebtedness under the
Silgan Credit Agreement, the 11-3/4% Notes and the Discount Debentures, will
generally have priority as to the assets of the resulting entity over claims of
the holders
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of the Preferred Stock and all Senior Indebtedness would have priority over the
Exchange Debentures. As a result, in the event of the resulting entity's
bankruptcy, insolvency, liquidation, reorganization, dissolution or other
winding up, or upon acceleration of certain indebtedness of the resulting
entity, holders of indebtedness (or Senior Indebtedness in the case of the
Exchange Debentures) must be paid in full before holders of the Preferred Stock
or Exchange Debentures may be paid. A Holdings Merger or any similar transaction
between Holdings and Silgan is not permitted under the Silgan Credit Agreement
so long as any of the Discount Debentures are outstanding.
Ability of the Company to Incur Additional Indebtedness
Although the Silgan Credit Agreement limits the incurrence by the
Company of additional indebtedness, the 11-3/4% Notes, the Discount Debentures,
the Preferred Stock and, if issued, the Exchange Debentures permit, subject to
certain limitations, the incurrence by Holdings and its subsidiaries of a
substantial amount of additional indebtedness, including additional Senior
Indebtedness and other indebtedness that would be effectively senior to the
Preferred Stock and the Exchange Debentures. The Preferred Stock and the
Exchange Debentures also permit Silgan and its subsidiaries to incur
indebtedness the holders of which would have priority as to the assets of Silgan
and its subsidiaries over claims of holders of the Preferred Stock and the
Exchange Debentures, if, after giving effect to the incurrence of such
indebtedness, Silgan's Interest Coverage Ratio (as defined under "Description of
the New Preferred Stock--Certain Definitions") is at least 1.75 to 1. For the
twelve month period ended March 31, 1996 on a pro forma basis after giving
effect to the Refinancing, Silgan's Interest Coverage Ratio would have been 2.4
to 1. See "Description of New Preferred Stock" and "Description of the Exchange
Debentures." The Company may make additional acquisitions in the future and may
finance such acquisitions with additional indebtedness, including Senior
Indebtedness, as permitted under its instruments and agreements governing its
indebtedness.
Refinancing Risk
Under the Silgan Credit Agreement, Containers and Plastics have
available to them up to $225 million of revolving loans which may be borrowed,
repaid and reborrowed from time to time until December 31, 2000, on which date
all such revolving loans mature and are payable in full. As of March 31, 1996,
on a pro forma basis after giving effect to the Refinancing (assuming that the
Refinancing occurred as of such date), there were $219.5 million of A term loans
outstanding under the Silgan Credit Agreement, which A term loans are payable in
installments through December 31, 2000, and there were $347.3 million of B term
loans outstanding under the Silgan Credit Agreement, which B term loans are
payable in installments through March 15, 2002. See "Description of Certain
Silgan Indebtedness-- Description of Silgan Credit Agreement." Additionally, the
11-3/4% Notes ($135 million) mature on June 15, 2002 and the Discount Debentures
that remain outstanding after the Refinancing (approximately $59.0 million)
mature on December 15, 2002.
The Company will have to refinance a substantial amount of its
indebtedness prior to December 31, 2000. The Company's ability to do so will
depend on, among other things, its financial condition at the time, the
restrictions in the instruments governing its indebtedness, including the Silgan
Credit Agreement, the Discount Debentures Indenture, the 11-3/4% Notes
Indenture, the Preferred Stock and, if applicable, the Exchange Debenture
Indenture, and other factors, including market conditions, which are beyond the
control of the Company. There can be no assurance that the Company will be able
to refinance any of such indebtedness, and if the Company is unable to effect
such refinancings, the Company's ability to make payments of cash dividends on,
or payments in respect of the mandatory redemption of, the Preferred Stock or
cash interest and principal payments on the Exchange Debentures, if issued,
would be adversely affected. In addition, the Preferred Stock and, if issued,
the Exchange
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Debentures, permit the Company to incur a substantial amount of additional
indebtedness, which may mature and need to be refinanced prior to the mandatory
redemption date for the Preferred Stock or the maturity date of the Exchange
Debentures, if issued.
Restrictive Covenants under Financing Agreements
In connection with the incurrence of their indebtedness, Holdings and
Silgan 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 under the Silgan
Credit Agreement become more restrictive over time in anticipation of scheduled
debt amortization and improved operating results. Such covenants also affect,
and in many respects 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 Holdings
Indebtedness" and "Description of Certain Silgan Indebtedness."
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 11-3/4% Notes, the Discount
Debentures, the Preferred Stock and, if issued, the Exchange 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 Preferred Stock or the Exchange Debentures, if issued. These factors
could also limit the ability of the Company to take advantage of business and
investment 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 dividends on, or the redemption price
of, the Preferred Stock and interest on, or the principal of, the Exchange
Debentures, if issued.
Supply Agreements with 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 1995, approximately 21% of the
Company's sales were to Nestle and approximately 15% of the Company's sales were
to Del Monte. On a pro forma basis after giving effect to the acquisition of AN
Can in 1995,
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approximately 17% and 11% of the Company's sales would have been to Nestle and
Del Monte, respectively. See "Business--Sales and Marketing."
Under the Nestle Supply Agreements that were extended through 2001
(representing approximately 70% of the Company's 1995 unit sales to Nestle),
Nestle has the right to receive competitive bids under narrowly limited
circumstances, and Containers has the right to match any such bids. If
Containers matches a competitive bid, it may result in reduced sales prices to
Nestle with respect to the cans that are the subject of such competitive bid. In
the event that Containers chooses not to match a competitive bid, Nestle may
purchase cans from the competitive bidder at the competitive bid price for the
term of the bid. The Company cannot predict the effect, if any, of such bids
upon its financial condition or results of operations. The Company is currently
engaged in discussions with Nestle regarding the extension beyond 2001 of the
term for a majority of the can requirements under these Nestle Supply Agreements
in return for certain price concessions by the Company. On a pro forma basis
after giving effect to the acquisition of AN Can, such can requirements would
have represented approximately 6% of the Company's 1995 sales. See
"Business--Sales and Marketing."
The term of the other Nestle Supply Agreements expires in August 1997
(representing approximately 30% of the Company's 1995 unit sales to Nestle). The
Company has commenced discussions with Nestle with respect to the continuation
beyond 1997 of the other Nestle Supply Agreements, which would have represented
approximately 6% of the Company's sales in 1995 on a pro forma basis after
giving effect to the acquisition of AN Can. Although the Company intends to make
every effort to extend these Nestle Supply Agreements on reasonable terms and
conditions, there can be no assurance that these Nestle Supply Agreements will
be extended or that they will be extended on terms favorable to the Company. See
"Business--Sales and Marketing."
Under the DM Supply Agreement, beginning in December 1998 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, which could result in lower sales
prices to Del Monte with respect to the containers that are the subject of such
competitive proposal. See "Business--Sales and Marketing."
Although the Nestle Supply Agreements require Nestle to purchase a
majority of its can requirements from the Company and the DM Supply Agreement
requires Del Monte to purchase substantially all of its can requirements from
the Company, 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."
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Potential Fraudulent Conveyance Liability
Various laws enacted for the protection of creditors may apply to the
purchase by Holdings of the Holdings Class B Stock held by Mellon, as trustee
for First Plaza, and the incurrence by Holdings of indebtedness from the
issuance of Exchange Debentures, if and when issued (together, the "Offering
Transactions"). 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, at the time of the closing of the Private
Offering or either Offering Transaction, Holdings (i) was insolvent or rendered
insolvent by reason of either or both of the Offering Transactions, (ii) was
engaged in a business or transaction for which the assets remaining with
Holdings constituted or constitute unreasonably small capital, (iii) intended
to, or believed that it would, incur debts beyond its ability to pay as such
debts matured or (iv) intended to hinder, delay or defraud its creditors, such
court could, under state or federal fraudulent conveyance law, avoid the
purchase by Holdings of the shares of Holdings Class B Stock held by Mellon and
void the Exchange Debentures and order all payments made by Holdings with
respect thereto be returned to it or to a fund for the benefit of its creditors.
The measure of insolvency for purposes of the foregoing would vary
depending upon the law of the jurisdiction being applied. Generally, however, a
company would be considered insolvent if the sum of such company's debts were
greater than all of such company's property at a fair valuation or if the
present saleable value of the company's assets were less than the amount that
would be required to pay its probable liability on its existing debts (including
contingent liabilities) as they become absolute and matured. Accordingly,
Holdings does not believe that the fact that its liabilities exceed the book
value of its assets, as reflected on its balance sheet (which is not based on
fair saleable value or fair value), would be a significant factor in any
fraudulent conveyance analysis.
Holdings believes that, on the date of this Prospectus and at the time
of each Offering Transaction, Holdings will not come within any of the clauses
(i) through (iv) above and that therefore each Offering Transaction will not
constitute fraudulent transfers. These beliefs are based on management's
analysis of, among other things, internal cash flow projections based on
Holdings' historical financial information and historical valuations of certain
assets and liabilities of Holdings. There can be no assurance, however, that a
court passing on such questions would agree with Holdings' analysis.
Certain Federal Income Tax Consequences for Holders of New Preferred Stock and
Exchange Debentures and the Company
Distributions of cash or, to the extent of their issue price,
distributions of additional shares of New Preferred Stock on the New Preferred
Stock will be treated as dividends taxable as ordinary income to holders thereof
to the extent of Holdings' current and accumulated earnings and profits as
determined under U.S. federal income tax principles. If the amount of a
distribution on the New Preferred Stock exceeds Holdings' current and
accumulated earnings and profits, such distribution to the extent of the excess
will be treated as a nontaxable return of capital and will be applied against
and reduce the adjusted tax basis of the New Preferred Stock in the hands of
each holder (but not below zero), thus increasing the amount of any gain (or
reducing the amount of any loss) which would otherwise be realized by such
holder upon the sale or other taxable disposition of such New Preferred Stock.
There can be no assurance that for any particular taxable year Holdings will
have current or accumulated earnings and profits.
Upon a redemption of New Preferred Stock in exchange for Exchange
Debentures, the holder will have capital gain or loss equal to the difference
between the issue price of the Exchange Debentures received and the holder's
adjusted basis in the New Preferred Stock redeemed, except to the extent all
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or a portion of the Exchange Debentures received is treated as a dividend
payment. Because of Holdings' option through July 15, 2000 to pay interest on
the Exchange Debentures by issuing additional Exchange Debentures, any Exchange
Debentures issued prior to that date will be treated as issued with original
issue discount ("OID") for U.S. federal income tax purposes, unless under
special rules for interest holidays the amount of OID is treated as de minimis.
Holders would have to accrue all such OID into income over the entire term of
the Exchange Debentures, but would not treat the receipt of stated interest on
the Exchange Debentures as interest income for U.S. federal income tax purposes.
An Exchange Debenture may be subject to the rules for "applicable high
yield discount obligations" ("AHYDOS"), in which case the Holdings' deduction
for OID on such Exchange Debentures will be substantially deferred, and a
portion of such deduction may be disallowed.
For a discussion of these and other tax issues, see "Certain United
States Federal Income Tax Considerations."
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 June 1999. See "Certain Transactions--Management Agreements."
Other Management Interests
In the future, Messrs. Silver and Horrigan, possibly together with
Morgan Stanley & Co. Incorporated ("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 50%
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"),
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and two of the directors of 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."
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 Preferred Stock or the Exchange Debentures.
For example, if the Company encounters financial difficulties, or is unable to
pay its debts as they mature, the interests of the holders of Holdings' common
stock might conflict with those of the holders of the Preferred Stock or the
Exchange Debentures. In addition, the holders of Holdings' common stock 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
Preferred Stock or the Exchange Debentures.
Absence of Public Market
The New Preferred Stock is, and the Exchange Debentures, if issued,
will be, a new issue of securities for which there is currently no active
trading market. No assurance can be given as to the liquidity of, or trading
market for, the New Preferred Stock. If the New Preferred Stock is traded after
its initial issuance, it may trade at a discount from its liquidation value,
depending upon the liquidity of such securities, the market for similar
securities and other factors, including general economic conditions and the
financial condition, performance of, and prospects for the Company.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Preferred Stock was sold by Morgan Stanley & Co. Incorporated
(the "Placement Agent") on July 22, 1996 to a limited number of institutional
investors (the "Purchasers"). In connection with the sale of the Old Preferred
Stock, the Company and the Placement Agent entered into the Registration Rights
Agreement, dated July 22, 1996, between Holdings and the Placement Agent (the
"Registration Rights Agreement"), which requires the Company, among other
things, to file with the Commission a registration statement under the
Securities Act covering the offer by Holdings to exchange all of the Old
Preferred Stock for the New Preferred Stock and to use its best efforts to cause
such registration statement to become effective under the Securities Act. The
Company is further obligated, upon the effectiveness of that registration
statement, to offer the holders of the Old Preferred Stock the opportunity to
exchange their Old Preferred Stock for a like number of shares of New Preferred
Stock, which will be issued without a restrictive legend and may be reoffered
and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Exchange Offer is being made pursuant to the Registration Rights Agreement to
satisfy the Company's obligations thereunder. The term "Holder" with respect to
the Exchange Offer means any person in whose name Old Preferred Stock is
registered on the Company's books or any other person who has obtained a
properly completed assignment from the registered holder.
In order to participate in the Exchange Offer, a Holder must represent
to the Company, among other things, that (i) the New Preferred Stock acquired
pursuant to the Exchange Offer is being obtained in the ordinary course of
business of the person receiving such New Preferred Stock, whether or not such
person is the Holder, (ii) neither the Holder nor any such other person is
engaging in or intends to engage in a distribution of such New Preferred Stock,
(iii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Preferred Stock, and (iv) neither the Holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under the Securities Act, of
the Company. In the event that any Holder of Old Preferred Stock cannot make the
requisite representations to the Company in order to participate in the Exchange
Offer, such Holder may be entitled to have such Holder's Old Preferred Stock
registered in a "shelf" registration statement on an appropriate form pursuant
to Rule 415 under the Securities Act.
Based on a previous interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, including "Exxon Capital
Holdings Corporation" (available May 13, 1988), "Morgan Stanley & Co.
Incorporated" (available June 5, 1991), "Mary Kay Cosmetics, Inc." (available
June 5, 1991), "Warnaco, Inc." (available October 11, 1991) and "K-III
Communications Corp." (available May 14, 1993), the Company believes that the
New Preferred Stock issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any Holder of such New Preferred
Stock (other than any such Holder which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Preferred Stock is acquired in the ordinary course of such
Holder's business and such Holder has no arrangement or understanding with any
person to participate in the distribution of such New Preferred Stock. Any
Holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Preferred Stock cannot rely on such interpretation by
the staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Under no circumstances may this Prospectus be used for an
offer to resell, a resale or other retransfer of the New Preferred Stock. In the
event that the Company's belief is inaccurate, Holders of the New Preferred
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Stock who transfer New Preferred Stock in violation of the prospectus delivery
provisions of the Securities Act and without an exemption from registration
thereunder may incur liability thereunder. The Company does not assume or
indemnify Holders against such liability. The Exchange Offer is not being made
to, nor will the Company accept surrenders for exchange from, Holders of Old
Preferred Stock in any jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance with the securities or blue sky
laws of such jurisdiction. Each broker-dealer that receives New Preferred Stock
for its own account in exchange for Old Preferred Stock, where such Old
Preferred Stock was acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Stock. The
Company has not entered into any arrangement or understanding with any person to
distribute the New Preferred Stock to be received in the Exchange Offer. See
"Plan of Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date.
The form and terms of the New Preferred Stock will be the same as the
form and terms of the Old Preferred Stock except that the New Preferred Stock
will be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The New Preferred Stock will evidence the same
rights, privileges and obligations as the Old Preferred Stock. The New Preferred
Stock will be issued under and entitled to the benefits of the Certificate of
Designation which also authorized the issuance of the Old Preferred Stock, such
that both series will be treated as a single class of equity securities under
the Certificate of Designation.
As of the date of this Prospectus, 50,000 shares of Old Preferred Stock
are outstanding. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered Holders of the Old Preferred Stock.
The Company intends to conduct the Exchange Offer in accordance with
the provisions of the Registration Rights Agreement and the applicable
requirements of the Act, and the rules and regulations of the Commission
thereunder. Old Preferred Stock that is not tendered for exchange under the
Exchange Offer will remain outstanding and will be entitled to the rights as set
forth in the Certificate of Designation.
The Company shall be deemed to have accepted validly tendered Old
Preferred Stock when, as and if the Company shall have given oral or written
notice thereof to the Transfer Agent. The Transfer Agent will act as agent for
the tendering Holders for the purposes of receiving the New Preferred Stock from
the Company.
If any tendered Old Preferred Stock is not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Preferred Stock
will be returned, without expense, to the tendering Holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender Old Preferred Stock in the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange
pursuant to the Exchange Offer. The Company will pay all charges and
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expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses" below.
Expiration Date; Extensions; Amendments
The term "Expiration Date," shall mean 5:00 p.m., New York City time on
__________, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Transfer Agent of any extension by oral or written notice and will mail to the
registered Holders an announcement thereof, prior to 9:00 a.m., New York City
time, on the next business day after the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Preferred Stock, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied by giving oral or written notice of such delay,
extension or termination to the Transfer Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptances, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered Holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Preferred Stock properly tendered and will issue the New Preferred Stock
promptly after acceptance of the Old Preferred Stock. See "--Conditions" below.
For purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Preferred Stock for exchange when, as and if the Company
shall have given oral or written notice thereof to the Transfer Agent.
In all cases, issuance of the New Preferred Stock for Old Preferred
Stock that are accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Transfer Agent of a properly completed and duly
executed Letter of Transmittal and all other required documents; provided,
however, that the Company reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer. If any
tendered Old Preferred Stock is not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if Old Preferred Stock is
submitted for a greater number of shares than the Holder desires to exchange,
then such unaccepted or non-exchanged Old Preferred Stock evidencing the
unaccepted portion, as appropriate, will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
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Conditions
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to exchange any New Preferred Stock for any Old Preferred Stock
and may terminate the Exchange Offer before the acceptance of any Old Preferred
Stock for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable judgment, might materially impair the ability
of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by the
staff of the Commission, which, in the Company's reasonable judgment, might
materially impair the ability of the Company to proceed with the Exchange Offer;
or
(c) any governmental approval or approval by Holders of the Old
Preferred Stock has not been obtained, which approval the Company shall, in its
reasonable judgment, deem necessary for the consummation of the Exchange Offer
as contemplated hereby.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Old
Preferred Stock and return all tendered Old Preferred Stock to the tendering
Holders, (ii) extend the Exchange Offer and retain all Old Preferred Stock
tendered prior to the expiration of the Exchange Offer, subject, however, to the
rights of Holders who tendered such Old Preferred Stock to withdraw their
tendered Old Preferred Stock or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Preferred
Stock which has not been withdrawn. If such waiver constitutes a material change
to the Exchange Offer, the Company will promptly disclose such waiver by means
of a prospectus supplement that will be distributed to the registered Holders,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Procedures for Tendering
To tender in the Exchange Offer, a Holder must complete, sign and date
the Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Transfer Agent prior
to the Expiration Date. In addition, either (i) certificates for such Old
Preferred Stock must be received by the Transfer Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of such Old Preferred Stock, if such procedure is available, into
the Transfer Agent's account at the Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below must be received by the Transfer Agent prior to the Expiration Date, or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, the Letter of Transmittal and other required
documents must be received by the Transfer Agent at the address set forth below
under "--Transfer Agent" prior to the Expiration Date.
The tender by a Holder of Old Preferred Stock that is not withdrawn
prior to the Expiration Date will constitute an agreement between such Holder
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
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THE METHOD OF DELIVERY OF OLD PREFERRED STOCK AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE TRANSFER AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE TRANSFER AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD PREFERRED STOCK SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Preferred Stock is registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender its Old Preferred Stock should contact the registered
Holder promptly and instruct such registered Holder to tender such Old Preferred
Stock on such beneficial owner's behalf. If such beneficial owner wishes to
tender its Old Preferred Stock on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Preferred Stock, either make appropriate arrangements to register
ownership of the Old Preferred Stock in such owner's name or obtain a properly
completed assignment from the registered Holder. The transfer of registered
ownership of Old Preferred Stock may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Preferred Stock tendered pursuant thereto is tendered (i) by a
registered Holder who has not completed the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule l7Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Preferred Stock listed therein, such Old Preferred
Stock must be endorsed or accompanied by a properly completed bond or stock
power, as the case may be, signed by such registered Holder as such registered
Holder's name appears on such Old Preferred Stock.
If the Letter of Transmittal or any Old Preferred Stock or bond or
stock powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Preferred Stock and withdrawal of tendered
Old Preferred Stock will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Preferred Stock not properly tendered or any Old
Preferred Stock the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of tender as to particular Old
Preferred Stock. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Preferred
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Stock must be cured within such time as the Company shall determine. Although
the Company intends to notify Holders of defects or irregularities with respect
to tenders of Old Preferred Stock, none of the Company, the Transfer Agent or
any other person shall incur any liability for failure to give such
notification. Tenders of Old Preferred Stock will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Preferred Stock received by the Transfer Agent that is not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Transfer Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Preferred Stock that remain outstanding
subsequent to the Expiration Date or, as set forth above under "--Conditions"
above, to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Old Preferred Stock in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
By tendering, each Holder will represent to the Company that, among
other things, (i) the New Preferred Stock acquired pursuant to the Exchange
Offer is being obtained in the ordinary course of business of the person
receiving such New Preferred Stock, whether or not such person is the Holder,
(ii) neither the Holder nor any such other person is engaging in or intends to
engage in a distribution of such New Preferred Stock, (iii) neither the Holder
nor any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Preferred Stock, and (iv) neither
the Holder nor any such other person is an "affiliate," as defined in Rule 405
of the Securities Act, of the Company.
In all cases, issuance of New Preferred Stock pursuant to the Exchange
Offer will be made only after timely receipt by the Transfer Agent of
certificates for such Old Preferred Stock or a timely Book- Entry Confirmation
of such Old Preferred Stock into the Transfer Agent's account at the Book-Entry
Transfer Facility, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Preferred Stock is not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Preferred Stock is submitted for a greater number of shares than
the Holder desires to exchange, such unaccepted or non-exchanged Old Preferred
Stock will be returned without expense to the tendering Holder thereof (or, in
the case of Old Preferred Stock tendered by book-entry transfer into the
Transfer Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Old Preferred
Stock will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
Book-Entry Transfer
The Transfer Agent will make a request to establish an account with
respect to the Old Preferred Stock at the Book-Entry Transfer Facility for the
purposes of the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Old
Preferred Stock by causing the Book- Entry Transfer to transfer such Old
Preferred Stock into the Transfer Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Old Preferred Stock may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and any
other required documents, must, in any case, be transmitted to and received by
the Transfer Agent at the address set forth below under "--Transfer Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
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Guaranteed Delivery Procedures
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock is not immediately available or (ii) who cannot deliver their
Old Preferred Stock, the Letter of Transmittal or any other required documents
to the Transfer Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Transfer Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the certificate number(s) of such Old Preferred
Stock and the number of shares of Old Preferred Stock tendered and stating that
the tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of Transmittal
(or facsimile thereof) together with the certificate(s) representing the Old
Preferred Stock and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Transfer Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered Old
Preferred Stock in proper form for transfer and other documents required by the
Letter of Transmittal are received by the Transfer Agent within five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Transfer Agent, a Notice of Guaranteed Delivery
will be sent to Holders who wish to tender their Old Preferred Stock according
to the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Preferred Stock may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Preferred Stock in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Transfer Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Preferred Stock to be withdrawn (the
"Depositor"), (ii) identify the Old Preferred Stock to be withdrawn (including
the certificate number), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Preferred
Stock was tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Transfer Agent
register the transfer of such Old Preferred Stock in the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Preferred
Stock is to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Preferred Stock so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Preferred Stock will be issued with respect thereto unless the Old
Preferred Stock so withdrawn is validly retendered. Any Old Preferred Stock that
has been tendered but that is not accepted for payment will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Preferred Stock may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
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Transfer Agent
Fleet National Bank has been appointed Transfer Agent of the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or the Letter of Transmittal and requests for a Notice of
Guaranteed Delivery with respect to the Old Preferred Stock should be addressed
to the Transfer Agent as follows:
By Registered Mail, Certified Mail or Overnight
Courier:
Fleet National Bank
Attention:
111 Westminster Street
Providence, RI 02903
By Telephone: (401) 278-3760
By Facsimile: (401) 751-9706
Fees and Expenses
The expenses of soliciting tenders in connection with the Exchange
Offer will be paid by the Company. The principal solicitation is being made by
mail; however, additional principal solicitation may be made by telecopier,
telephone or in person by officers and regular employees of the Company and its
affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Transfer Agent reasonable and customary fees for their services and will
reimburse them for their reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company and are estimated in the aggregate to be
approximately $ . Such expenses include registration fees, fees and expenses of
the Transfer Agent, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Preferred Stock pursuant to the Exchange Offer. If, however,
certificates representing Old Preferred Stock for shares not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of Old Preferred Stock tendered,
or, if tendered, the Old Preferred Stock is registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Old Preferred Stock
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such transfer
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
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CAPITALIZATION
The following table sets forth the unaudited consolidated
capitalization of Holdings as of March 31, 1996, and the unaudited pro forma
consolidated capitalization of Holdings as of March 31, 1996 after giving effect
to the Refinancing. This table should be read in conjunction with the historical
and pro forma consolidated financial information of Holdings included elsewhere
in this Prospectus.
March 31, 1996
--------------
Actual Pro Forma
------ ---------
(Dollars in thousands)
Short-term debt:
Current portion of term loans................. $ 27,192 $ 28,455
Working capital loans(a)...................... 60,150 79,354
-------- -------
Total short-term debt(b)....... $ 87,342 $107,809
======== ========
Long-term debt:
Term loans.................................... $414,610 $538,347
11-3/4% Senior Subordinated Notes due 2002.... 135,000 135,000
13-1/4% Senior Discount Debentures due 2002... 207,891 49,956(c)(d)
------- -------
Total long-term debt(b)........ 757,501 723,303
Preferred Stock offered hereby................ -- 50,000
Deficiency in stockholders' equity:
Common stock......................... 12 9
Additional paid-in capital........... 33,606 16,410(e)
Accumulated deficit.................. (213,279) (232,216)(e)(f)
------- -------
Total deficiency in
stockholders' equity......... (179,661) (215,797)
------- -------
Total capitalization.......................... $577,840 $557,506
======== ========
- --------------
(a) As is common in the packaging industry, the Company accesses its
working capital facility to build inventory and finance accounts
receivable to meet seasonal demands. As a result, the amount of working
capital loans outstanding at June 30, 1996 was $148.6 million. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Capital Resources and Liquidity."
(b) See "Description of Certain Holdings Indebtedness" and "Description of
Certain Silgan Indebtedness."
(c) For pro forma purposes, the redemption of the Discount Debentures in
connection with the Refinancing is assumed to have occurred as of March
31, 1996. Since the Discount Debentures will be redeemed after
accreting to their full face value on June 15, 1996, the amount of
proceeds that would have been required to redeem the Discount
Debentures at March 31, 1996 is $5.4 million less than the amount of
proceeds that will be required to redeem the Discount Debentures as
contemplated by the Refinancing. Additionally, the proceeds from the
Private Offering available to redeem Discount Debentures were less than
the amount described in footnote (d) below since the Private Offering
occurred after March 31, 1996. As a result, the pro forma balance of
Discount Debentures at March 31, 1996 is less than the amount of
Discount
-40-
<PAGE>
Debentures that will be outstanding after the Refinancing is completed
(approximately $59.0 million). See "Selected Historical and Pro Forma
Financial Information."
(d) For pro forma purposes, it is assumed that (i) the proceeds of the
Private Offering were used to purchase 250,000 shares of Holdings Class
B Stock for $32.3 million on March 31, 1996 and (ii) the proceeds
remaining from the Private Offering, after the purchase of such shares
of Holdings Class B Stock, net of $2.2 million in transaction costs, of
$15.5 million were used to redeem a portion of the Discount Debentures.
The price at which such shares of Holdings Class B Stock could be
purchased increased over time. Accordingly, the amount of proceeds that
would have been required to purchase such shares of Holdings Class B
Stock at March 31, 1996 is less than the amount of proceeds that were
actually required to purchase such shares (approximately $35.8
million).
(e) The pro forma increase in the deficiency in stockholders' equity
relates to the purchase of 250,000 shares of Holdings Class B Stock for
$32.3 million, its purchase price on March 31, 1996 and related
transaction costs. Additional paid in capital was reduced by the
proceeds from the original issuance of such Holdings Class B Stock of
$15.0 million less the par value of such shares and $2.2 million of
transaction fees. The remainder of the payment for the stock purchase
was applied to accumulated deficit.
(f) Includes an extraordinary charge, net of tax, of $1.7 million for the
write-off of unamortized deferred financing costs related to the
redemption of Discount Debentures. Such charge will be incurred in the
third quarter of 1996.
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Set forth below are selected historical consolidated financial data of
Holdings at March 31, 1996 and 1995 and for the three months then ended, and at
December 31, 1995, 1994, 1993, 1992 and 1991 and for the years then ended. Also
set forth below are unaudited pro forma consolidated financial data of Holdings
at March 31, 1996 and for the three months then ended, and for the fiscal year
ended December 31, 1995.
The selected historical consolidated financial data of Holdings for the
three months ended March 31, 1996 and 1995 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, 1995
and 1994 and for each of the three years in the period ended December 31, 1995
(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, 1993, 1992 and 1991 and for the years ended December 31, 1992
and 1991 were derived from the historical audited consolidated financial
statements of Holdings for such periods.
The selected unaudited pro forma operating data and other data for the
three months ended March 31, 1996 give effect to the Refinancing as if it had
occurred as of January 1, 1996. Additionally, the selected unaudited pro forma
balance sheet data at March 31, 1996 give effect to the Refinancing as if it had
occurred as of such date.
The selected unaudited pro forma operating data and other data for the
fiscal year ended December 31, 1995 give effect to (i) the acquisition of AN
Can, (ii) proceeds received under the Silgan Credit Agreement (which was entered
into on August 1, 1995 and provided Silgan with $225 million of A term loans and
$225 million of B term loans and provided Containers and Plastics with a
commitment of $225 million for working capital loans), which were used to
finance the acquisition of AN Can, repay in full amounts owing under the
Company's previous credit agreement and the Secured Notes and repurchase $61.7
million principal amount at maturity of Discount Debentures, (iii) the Private
Offering and the use of the proceeds therefrom and (iv) the incurrence of $125
million of additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement and the use of such
proceeds to redeem a portion of the Discount Debentures, as if such events had
occurred as of January 1, 1995.
The selected unaudited pro forma consolidated financial information for
the three months ended March 31, 1996 and for the fiscal year ended December 31,
1995 assume the Refinancing occurred at the beginning of the periods presented.
The amount necessary to purchase the Holdings Class B Stock held by Mellon
increased over time. Because the Refinancing did not occur at the beginning of
the periods presented and because the Discount Debentures accreted in value, the
aggregate principal amount of the Discount Debentures outstanding after the
Refinancing will be greater than the aggregate principal amount used to
calculate interest expense in the pro forma consolidated financial information.
After the Refinancing is completed, there will be approximately $59.0 million
aggregate principal amount of Discount Debentures that remain outstanding. As a
result, actual interest expense of the Company will be greater than the interest
expense reflected in the pro forma consolidated financial information.
The unaudited pro forma financial information does not purport to
represent what the Company's financial position or results of operations would
actually have been if such events had in fact occurred
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<PAGE>
as of such dates or at the beginning of the periods presented, or to project the
Company's financial position or results of operations for any future date or
period. The unaudited pro forma adjustments are based upon available information
and upon certain assumptions that Holdings believes are reasonable.
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<PAGE>
The selected historical and pro forma consolidated financial
information of Holdings were derived from, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the unaudited pro forma condensed statements of operations and
the historical financial statements and pro forma financial information of
Holdings, including the notes thereto, that appear elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Three Months ended March 31,
---------------------------------------
Pro Forma
1996(a)(b) 1996 1995
---- ------ ------
(Dollars in thousands)
(Unaudited)
Operating Data:
<S> <C> <C> <C>
Net sales............................................................ $279,860 $279,860 $203,264
Cost of goods sold................................................... 243,314 243,314 174,265
------- ------- -------
Gross profit......................................................... 36,546 36,546 28,999
Selling, general and administrative expenses......................... 12,830 12,830 10,168
-------- ------- -------
Income from operations............................................... 23,716 23,716 18,831
Interest expense and other related financing costs................... 20,556 22,573 17,251
-------- ------- -------
Income before income taxes........................................... 3,160 1,143 1,580
Income tax provision................................................. 900 1,000 3,000
-------- ------- -------
Net income (loss)(c)................................................. 2,260 143 (1,420)
Preferred stock dividend requirement................................. 1,656 -- --
-------- ------- -------
Net income (loss) applicable to common
stockholders.................................................... $ 604 $ 143 $ (1,420)
======== ======== ========
Ratio of earnings to fixed charges and preferred
stock dividends(d).............................................. 1.06 1.05 1.09
Balance Sheet Data (at end of period):
Fixed assets......................................................... $491,177 $491,177 $251,832
Total assets......................................................... 942,332 942,754 534,489
Total long-term debt................................................. 723,303 757,501 518,280
Cumulative exchangeable redeemable preferred
stock of Holdings ($50 million liquidation value)............... 50,000 -- --
Deficiency in stockholders' equity................................... (215,797) (179,661) (159,418)
Other Data:
EBDITA(e)............................................................ $ 40,102 $ 40,102 $ 28,033
EBDITA as a percentage of net sales.................................. 14.3% 14.3% 13.8%
Capital expenditures................................................. 18,558 18,558 8,359
Depreciation and amortization(f)..................................... 15,439 15,439 8,779
(footnotes follow)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Year Ended December 31,
---------------------------------------------------------------------------------
Pro Forma
1995(a)(b)(g) 1995(h) 1994(i) 1993(i) 1992 1991(j)
------------- ------- ------- ------- ---- -------
(Dollars in thousands)
Operating Data:
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $1,404,382 $1,101,905 $861,374 $645,468 $630,039 $678,211
Cost of goods sold..................... 1,234,862 970,491 748,290 571,174 554,972 605,185
--------- --------- ------- ------- ------- -------
Gross profit........................... 169,520 131,414 113,084 74,294 75,067 73,026
Selling, general and administrative
expenses.......................... 57,360 46,848 37,997 32,495 32,809 33,733
Reduction in carrying value of assets(k) 14,745 14,745 16,729 -- -- --
---------- ---------- -------- -------- -------- ------
Income from operations................. 97,415 69,821 58,358 41,799 42,258 39,293
Interest expense and other related
financing costs................... 77,925 80,710 65,789 54,265 57,091 55,996
Minority interest expense.............. -- -- -- -- 2,745 3,889
---------- ---------- -------- -------- -------- -------
Income (loss) before income taxes...... 19,490 (10,889) (7,431) (12,466) (17,578) (20,592)
Income tax provision................... 9,973 5,100 5,600 1,900 2,200 --
---------- ---------- -------- -------- -------- ------
Loss before extraordinary charges and
cumulative effect of changes in
accounting principles............. 9,517 (15,989) (13,031) (14,366) (19,778) (20,592)
--------- ---------- -------- -------- ------- -------
Extraordinary charges relating to early
extinguishment of debt(c)......... -- (5,817) -- (1,341) (23,597) --
Cumulative effect of changes in
accounting principles(l).......... -- -- -- (6,276) -- --
--------- ---------- -------- -------- ------- ------
Net income (loss)...................... 9,517 (21,806) (13,031) (21,983) (43,375) (20,592)
Preferred stock dividend requirement... 6,962 -- -- -- -- --
--------- ---------- -------- -------- ------- ------
Net income (loss) applicable to common
stockholders...................... $ 2,555 $ (21,806) $(13,031) $(21,983) $(43,375) $(20,592)
========== ========== ======== ======== ======== ========
Deficiency of earnings available to cover
fixed charges and preferred
stock dividends(d)................ $ -- $ 10,889 $ 7,431 $ 12,466 $ 17,578 $ 20,592
Ratio of earnings to fixed charges and
preferred stock dividends(d)...... 1.14 -- -- -- -- --
Balance Sheet Data (at end of period):
Fixed assets........................... -- $ 487,301 $251,810 $290,395 $223,879 $230,501
Total assets........................... -- 900,046 504,292 497,633 389,035 390,693
Total long-term debt................... -- 750,873 510,763 505,718 383,232 315,461
Redeemable preferred stock of Silgan
(minority interest of Holdings)... -- -- -- -- -- 27,878
Deficiency in stockholders' equity..... -- (179,804) (157,998) (144,967) (137,984) (94,609)
Other Data:
EBDITA(e).............................. $ 173,314 $ 132,428 $114,489 $ 76,095 $ 74,012 $ 72,141
EBDITA as a percentage of net sales.... 12.3% 12.0% 13.3% 11.8% 11.7% 10.6%
Capital expenditures................... $ 54,890 $ 51,897 $ 29,184 $ 42,480 $ 23,447 $ 21,834
Depreciation and amortization(f)....... $ 57,932 $ 45,388 $ 37,187 $ 33,818 $ 31,754 $ 32,848
Number of employees (at end of
period)(m)........................ 5,110 5,110 4,000 3,330 3,340 3,560
(footnotes follow)
</TABLE>
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<PAGE>
Notes to Selected Historical and Pro Forma Financial Information
(a) For a detailed presentation of the pro forma results of operations of
the Company for the three months ended March 31, 1996 and the year
ended December 31, 1995, see the unaudited pro forma condensed
statements of operations, including the notes thereto, included
elsewhere in this Prospectus. For purposes of the pro forma financial
information for the year ended December 31, 1995, balance sheet data is
not included.
(b) Historical interest expense is reconciled to pro forma interest expense
for the three months ended March 31, 1996 and for the year ended
December 31, 1995 as follows:
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
March 31, 1996 December 31, 1995
-------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Historical interest expense............................................ $22,573 $80,710
Increase in interest expense to give effect to AN Can acquisition<F1>.. -- 9,127
Increase in interest expense related to bank borrowings used to fund
Discount Debenture repurchase/redemption<F1>....................... 3,108 17,147
Decrease in interest expense related to the repurchase/redemption of
a portion of the Discount Debentures<F2>........................... (5,114) (28,089)
Net change in amortization of deferred financing costs................. (11) (970)
------- -------
Pro forma interest expense............................................. $20,556 $77,925
======= =======
---------------
<FN>
<F1> For purpose of the above computations, the assumed interest
rate for borrowings under the Silgan Credit Agreement is based
upon the three month LIBOR of 5.688% per annum as of July 11,
1996 plus a fixed spread of 2-1/2% per annum for the A term
loans and working capital loans and 3% per annum for the B
term loans.
<F2> The adjustment in interest expense related to the Discount
Debentures has been calculated based upon the redemption of
$212.0 million principal amount of Discount Debentures as if
such redemption occurred at the beginning of the periods
presented with proceeds as follows (in millions):
</FN>
</TABLE>
Proceeds from August 1, 1995 bank financing.................... $ 75.0
Additional B term loans........................................ 125.0
Excess proceeds from the Private Offering...................... 12.0
------
Total.................................................... $212.0
======
(c) The pro forma consolidated operating data for the three months ended
March 31, 1996 and for the year ended December 31, 1995 do not include
an extraordinary charge, net of tax, that the Company expects to incur
in the third quarter of 1996 of $1.7 million for the write-off of
unamortized deferred financing costs related to the early redemption of
the Discount Debentures. See "Capitalization." In addition, the pro
forma consolidated operating data for the year ended December 31, 1995
does not include the historical extraordinary charge, net of taxes,
incurred as a result of the early extinguishment of amounts owing under
the Company's debt facilities.
(d) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends and the deficiency of earnings available to
cover fixed charges and preferred stock dividends, 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
-46-
<PAGE>
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 and preferred stock dividends.
(e) "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 $0.7 million and
$0.2 million for the three months ended March 31, 1996 and 1995,
respectively, and $1.7 million, $0.7 million and $0.5 million for the
years ended December 31, 1995, 1994 and 1993, respectively, (vi)
charges relating to the vesting of benefits under SARs of $0.2 million
for each of the three months ended March 31, 1996 and 1995, and $0.8
million and $1.5 million in 1995 and 1994, respectively, and (vii) the
reduction in carrying value of assets of $14.7 million and $16.7
million in 1995 and 1994, respectively. 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.
(f) Depreciation and amortization excludes amortization of debt financing
costs.
(g) The unaudited pro forma financial information for the year ended
December 31, 1995 includes the historical results of the Company and AN
Can and gives effect to certain pro forma adjustments including
purchase accounting adjustments which are based on preliminary
appraisals and valuations, the financing of the acquisition of AN Can
by the Company and the refinancing of the Company's debt obligations as
if these events had occurred as of the beginning of 1995. The purchase
price allocation will be finalized within one year of the closing of
the acquisition of AN Can and may differ from that used for the pro
forma data. Differences between actual and preliminary valuations,
actuarially computed employee benefit costs, and costs associated with
plant rationalizations and other matters may cause adjustments to the
AN Can purchase price allocation. Pro forma cost of goods sold includes
adjustments for (i) increased depreciation charges of $2.3 million
based upon the estimated fair values of property, plant and equipment
and applying an estimated useful life of 25 years for buildings and 5
to 11 years for machinery and equipment, (ii) increased amortization of
$0.4 million for the excess of fair value of net assets acquired over a
40-year period, (iii) increased employee benefits costs for pension and
post-retirement medical of $0.2 million, and (iv) decreased
manufacturing costs of $4.7 million resulting from the integration of
AN Can with the Company's existing can manufacturing operations. Pro
forma selling, general and administrative expenses include adjustments
for (i) increased depreciation charges of $0.1 million and (ii)
decreased administrative support costs of $7.6 million realized as a
result of integration of the Company's and AN Can's sales,
administrative and research functions.
(h) On August 1, 1995, the Company acquired from ANC substantially all of
the assets of ANC's Food Metal and Specialty business for a purchase
price of $362.0 million (including the purchase from ANC of its St.
Louis facility in May 1996 for $13.2 million). 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 Note 3 to the Consolidated Financial Statements
for the year ended December 31, 1995 included elsewhere in this
Prospectus.
(i) 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 Consolidated Financial
Statements for the year ended December 31, 1995 included elsewhere in
this Prospectus.
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<PAGE>
(j) 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."
(k) Based upon a review of its depreciable assets, the Company determined
that certain adjustments were necessary to properly reflect net
realizable values. In 1995, the Company recorded a write-down of $14.7
million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had
become underutilized due to excess capacity. In 1994, charges of $16.7
million were recorded which included $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 for technologically obsolete
and inoperable machinery and equipment.
(l) 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.
(m) The number of employees at December 31, 1995 includes approximately
1,400 employees who joined the Company on August 1, 1995 as a result of
the acquisition by Containers of AN Can. 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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements.
For a discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."
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 container
business, which had sales of $882 million in 1995, has realized compound annual
growth of 16% through both acquisitions of food can businesses and internal
growth. Since 1993, the Company has made two significant acquisitions. On August
1, 1995 the Company acquired AN Can and in December 1993 the Company acquired DM
Can. On a pro forma basis after giving effect to the acquisition of AN Can,
sales for the Company's metal container business would have been $1.2 billion in
1995. Since 1987, the Company, on a pro forma basis after giving effect to the
acquisition of AN Can, has realized compound annual sales growth in its metal
food container business in excess of 21%.
The Company believes that its investments have enabled it to achieve a
low cost position in the food can segment. To further enhance its low cost
position, the Company has realized cost reduction opportunities through plant
rationalizations and equipment investment as well as from improved production
scheduling and line reconfiguration. Since 1991, the Company has closed eight
smaller, higher cost metal container facilities, including five facilities that
were closed in 1995 as a result of the integration of the manufacturing
operations of DM Can. Because most of the facilities that were closed in 1995
were closed late in the year, the Company expects to realize the benefits from
the closings of such facilities in 1996. Management believes that the
acquisition of AN Can, which has seventeen manufacturing facilities, provides
the Company with further cost reduction opportunities not only through
production and manufacturing synergies which it will realize from the combined
operations but also through the integration of the selling, general and
administrative operations of AN Can into the Company's existing metal container
business. The Company anticipates it will fully realize the benefits of
integrating these selling and administrative functions and certain of the
manufacturing synergies by late 1996. On the other hand, benefits which may be
realized by rationalization of plant operations will not occur before 1997.
Because AN Can has higher labor costs than the Company's existing metal
container business and any benefits realized from plant rationalizations will
not occur until after 1996, the Company expects that the gross margin for its
metal container business in 1996 will decline modestly from its historical rate.
Although employee termination costs associated with plant
rationalizations and administrative workforce reductions and other plant exit
costs associated with the acquisition of AN Can have been accrued through
purchase accounting adjustments, the Company has incurred in 1995 and will be
incurring in 1996 other non-recurring costs which under current accounting
pronouncements will be charged against operating income. These costs, which
include redundant charges related to the integration of the administrative and
general functions as well as costs associated with plant rearrangement and
clean-up, were $3.2 million in 1995 and are expected to be approximately $4.0
million in 1996.
To enhance its competitive position, the Company believes that it 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
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<PAGE>
December 2003 and the arrangement to supply a majority of Nestle's domestic
metal container requirements under the Nestle Supply Agreements extends through
2001. Revenues from these two customers represented approximately 45% of net
sales by the Company's metal container business in 1995. The acquisition of AN
Can has enabled the Company to diversify its customer base and expand its
domestic geographic presence. Similar to the Company's existing metal container
business, AN Can has multi-year supply arrangements with many of its metal food
container customers. As a result, the Company estimates that approximately 80%
of its 1996 metal container sales will be subject to long term contracts.
Furthermore, on a pro forma basis after giving effect to the acquisition of AN
Can, for 1995 the Company's sales to Nestle and Del Monte would have declined to
33% of the Company's total metal container sales. The Company is negotiating the
extension of supply arrangements with many customers, including the supply
arrangements with Nestle that expire in 1997 representing approximately 6% of
the Company's sales in 1995 on a pro forma basis after giving effect to the
acquisition of AN Can. There can be no assurance that the Company will be
successful in its efforts to maintain this volume on the same terms and
conditions that currently exist. See "Risk Factors--Supply Agreements with
Customers."
A portion of Containers' sales is dependent upon the annual vegetable
and fruit pack, which may vary from year to year depending upon weather
conditions. The vegetable pack in 1994 was better than the below normal
vegetable pack in 1995, resulting in greater sales to vegetable pack customers
in 1994 as compared to 1995.
The plastic container business has grown from a sales base of $89
million in 1987 to $220 million in 1995. In 1989, the Company acquired four
plastic container manufacturers to improve its competitive position in the
plastic container segment. As a result of these acquisitions, the Company
implemented a 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. An
additional facility was closed in 1995. To gain further production efficiencies,
the Company has made significant capital investments in its plastic container
business over the past few years. In 1994, the Company began to realize the
benefits of the consolidation and rationalization program as well as the capital
investment program. Currently, 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.
Management believes that PET custom containers are replacing glass containers
for products such as mouthwash, salad dressing, peanut butter and liquor, and
that Plastics is well positioned because of its technologically advanced
equipment to respond to opportunities for future growth in the rigid plastic
container market.
In order to improve its operating and financing flexibility, the
Company has been active in refinancing its higher cost indebtedness with lower
cost indebtedness. In conjunction with the acquisition of AN Can in 1995,
Silgan, Containers and Plastics entered into the Silgan Credit Agreement with
various banks to finance the acquisition of AN Can and the resulting increased
seasonal working capital needs of the Company's metal container business, to
refinance in full amounts owing under the Company's previous credit facility,
and to repay the Secured Notes. See "Description of Certain Silgan
Indebtedness--Description of Silgan Credit Agreement." Although the Company
lowered its interest rate spread under the Silgan Credit Agreement by 1/2%, the
Company's total interest expense will increase significantly from historical
amounts because the acquisition of AN Can was financed entirely through bank
borrowings. With borrowings of $200 million under the Silgan Credit Agreement,
as recently amended in May 1996 to include an additional $125 million of B term
loans, Holdings repurchased and redeemed an aggregate of $204.1 million
principal amount of Discount Debentures, which will result in $9.9 million of
annual cash interest savings and $18.3 million of current cash tax savings as a
result of the deduction by the Company of the accreted interest amount on the
retired Discount Debentures. See "--Capital Resources and Liquidity" below. In
addition, the Private Offering (i) enabled Holdings to
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<PAGE>
purchase the Holdings Class B Stock held by Mellon, as trustee for First Plaza,
at a lower cost than Holdings could have purchased such Holdings Class B Stock
in the future and (ii) provided further additional annual cash interest expense
savings of $1.6 million and current tax benefits of $1.2 million to the Company
through the redemption of additional Discount Debentures.
Results of Operations--Three Months
Summary historical results for the Company's two business segments,
metal and plastic containers, for the three months ended March 31, 1996 and 1995
and summary pro forma results for the Company and AN Can for the three months
ended March 31, 1995 (after giving effect to the acquisition of AN Can as of the
beginning of 1995) are provided below.
The pro forma data includes the historical results of the Company and
AN Can and reflects the effect of purchase accounting adjustments based on
preliminary appraisals and valuations, the financing of the acquisition of AN
Can, the refinancing of certain of the Company's debt obligations, and certain
other adjustments as if these events occurred as of the beginning of the period
presented. The pro forma adjustments are based upon available information and
upon certain assumptions that the Company believes are reasonable. The purchase
price allocation will be finalized within one year of the closing of the
acquisition of AN Can and may differ from that used for the pro forma data.
Differences between actual and preliminary valuations, actuarially computed
employee benefit costs, and expenses associated with plant rationalizations may
cause adjustments to the AN Can purchase price allocation. The unaudited pro
forma combined financial data do not purport to represent what the Company's
financial position or results of operations would actually have been had these
transactions in fact occurred on the date or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations for any future date or period. The pro forma information presented
should be read in conjunction with the historical results of operations of the
Company for the quarters ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------------------------
Historical Pro Forma
----------------------------------------- ------------------------
1996 1995 1995
------ ------ -----
(Dollars in millions)
Net sales:
<S> <C> <C> <C>
Metal containers and other................ $226.4 $144.7 $253.3
Plastic containers........................ 53.5 58.6 58.6
------ ----- -----
Consolidated........................... $279.9 $203.3 $311.9
===== ===== =====
Operating profit:
Metal containers and other................ $ 19.8 $ 15.9 $ 24.4
Plastic containers........................ 4.2 4.3 4.3
Corporate expense......................... (0.3) (1.4) (1.4)
----- ----- -----
Consolidated........................... $ 23.7 $ 18.8 $ 27.3
===== ===== =====
</TABLE>
The discussion below should be read in conjunction with the selected
financial data, the historical statements of operations and the notes thereto
included elsewhere in this Prospectus.
-51-
<PAGE>
Historical Three Months Ended March 31, 1996 Compared with Historical
Three Months Ended March 31, 1995
Consolidated net sales increased $76.6 million, or 37.7%, to $279.9
million for the three months ended March 31, 1996, as compared to net sales of
$203.3 million for the same three months in the prior year. This increase
resulted primarily from net sales generated by the AN Can operations offset, in
part, by lower net sales of metal containers to the Company's existing customer
base and lower net sales of plastic containers.
Net sales for the metal container business (including net sales for its
specialty business of $22.6 million) were $226.4 million for the three months
ended March 31, 1996, an increase of $81.7 million from net sales of $144.7
million for the same period in 1995. Net sales of metal cans of $203.8 million
for the three months ended March 31, 1996 were $61.2 million greater than net
sales of metal cans of $142.6 million for the same period in 1995. This increase
resulted principally from net sales of metal cans generated by the AN Can
operations of $85.6 million during the first three months of 1996. The decline
in sales of metal containers to the Company's existing customers of $24.4
million during the first quarter of 1996 as compared to the first quarter of
1995 was primarily attributable to lower unit volume. Approximately half of the
decline reflects the expected production and shipment of vegetable pack cans in
the second and third quarters of 1996 as compared to the first quarter of 1995,
and the remainder of the decline relates to lower unit sales of containers other
than vegetable containers.
Sales of specialty items included in the metal container segment
increased $20.5 million to $22.6 million during the three months ended March 31,
1996 as compared to the same period in 1995, due to additional sales generated
in 1996 by the operations acquired from AN Can.
Net sales for the plastic container business of $53.5 million during
the three months ended March 31, 1996 decreased $5.1 million from net sales of
$58.6 million for the same period in 1995. This decline in net sales resulted
principally from the pass through of lower resin costs.
Cost of goods sold as a percentage of consolidated net sales was 86.9%
($243.3 million) for the three months ended March 31, 1996, an increase of 1.2
percentage points as compared to 85.7% ($174.3 million) for the same period in
1995. The increase in cost of goods sold as a percentage of net sales was
primarily attributable to the higher cost base of the AN Can operations and
increased per unit manufacturing costs resulting from lower can production
volumes, offset, in part, by improved operating efficiencies due to plant
consolidations and synergies realized from the AN Can acquisition.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.4 percentage points to 4.6% ($12.8 million)
for the three months ended March 31, 1996, as compared to 5.0% ($10.2 million)
for the three months ended March 31, 1995. The decrease in selling, general and
administrative expenses as a percentage of net sales reflects the expected lower
administrative expense realized from the integration of AN Can and the Company,
despite the incurrence of redundant costs during the integration, and lower
corporate legal and administrative costs. The Company expects that its selling,
general and administration costs as a percentage of sales will continue to
decline in 1996 as it completes the integration of the administrative functions
of its metal container business.
Income from operations as a percentage of consolidated net sales was
8.5% ($23.7 million) for the three months ended March 31, 1996, as compared with
9.2% ($18.8 million) for the same period in 1995. The decline in income from
operations as a percentage of consolidated net sales was primarily attributable
to the aforementioned decline in gross margin.
-52-
<PAGE>
Income from operations as a percentage of net sales for the metal
container business was 8.8% ($19.8 million) for the three months ended March 31,
1996, as compared to 11.0% ($15.9 million) for the same period in the prior
year. The decrease in income from operations as a percentage of net sales for
the metal container business principally resulted from higher per unit
manufacturing costs incurred as a result of lower production volume and lower
margins realized on sales made from AN Can facilities due to their higher cost
base.
Income from operations as a percentage of net sales for the plastic
container business was 7.9% ($4.2 million) for the three months ended March 31,
1996, as compared to 7.3% ($4.3 million) for the same period in 1995. The
operating performance of the plastic container business improved as a result of
production planning and scheduling efficiencies and benefits realized from
capital investment.
Interest expense increased $5.3 million to $22.6 million for the three
months ended March 31, 1996, principally as a result of increased borrowings to
finance the acquisition of AN Can, offset, in part, by the benefit realized from
the purchase of a portion of the Discount Debentures with proceeds from the
Company's lower cost credit facility and slightly lower average bank borrowing
rates.
The provisions for income taxes for the three months ended March 31,
1996 and 1995 are comprised of federal, state and foreign income taxes currently
payable.
As a result of the items discussed above, net income for the three
months ended March 31, 1996 was $0.1 million, $1.5 million greater than the loss
of $1.4 million for the three months ended March 31, 1995.
Historical Three Months Ended March 31, 1996 Compared with Pro Forma
Three Months Ended March 31, 1995
Consolidated net sales for the three months ended March 31, 1996
declined $32.0 million as compared to pro forma consolidated net sales for the
same period in the prior year. The decrease in net sales was attributable to a
decline in net sales to the Company's existing customers of $24.4 million due to
the expected production and shipment of vegetable pack cans in the second and
third quarters of 1996 as compared to the first quarter of 1995 and lower unit
sales of containers other than vegetable containers, lower sales from the AN Can
facilities of $4.9 million principally due to a customer shifting to self
manufacturing, and lower sales of plastic containers due to the pass through of
lower resin costs, offset, in part, by higher sales of specialty packaging
products.
Income from operations as a percentage of consolidated net sales for
the three months ended March 31, 1996 was 8.5% ($23.7 million) as compared to
pro forma income from operations as a percentage of consolidated net sales of
8.8% ($27.3 million) for the three months ended March 31, 1995. Management
believes that the decrease in income from operations for the three months ended
March 31, 1996 as compared to pro forma income from operations for the same
period in the prior year was attributable to increased per unit costs realized
on lower production and sales volumes offset by the realization of greater than
anticipated manufacturing synergies and slightly lower selling, general and
administrative expenses.
-53-
<PAGE>
Results of Operations--Year End
Summary historical results for the Company's two business segments,
metal and plastic containers, for the calendar years ended December 31, 1995,
1994 and 1993 and summary pro forma results for the Company and AN Can for the
calendar years ended December 31, 1995 and 1994 are provided below.
The pro forma data includes the historical results of the Company and
AN Can and reflects the effect of purchase accounting adjustments based on
preliminary appraisals and valuations, the financing of the acquisition of AN
Can, the refinancing of certain of the Company's debt obligations, and certain
other adjustments as if these events occurred as of the beginning of the period
presented. The pro forma adjustments are based upon available information and
upon certain assumptions that the Company believes are reasonable. The purchase
price allocation will be finalized within one year of the closing of the
acquisition of AN Can and may differ from that used for the pro forma data.
Differences between actual and preliminary valuations, actuarially computed
employee benefit costs, and expenses associated with plant rationalizations may
cause adjustments to the AN Can purchase price allocation. The unaudited pro
forma combined financial data do not purport to represent what the Company's
financial position or results of operations would actually have been had these
transactions in fact occurred on the date or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations for any future date or period. The pro forma information presented
should be read in conjunction with the historical results of operations of the
Company for the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Year Ended December 31,
Historical Pro Forma
------------------------------------------------ ---------------------------------
1995 1994 1993 1995 1994
------ ------ ------ ------ -----
(Dollars in millions)
Net Sales:
<S> <C> <C> <C> <C> <C>
Metal containers and other $ 882.3 $657.1 $459.2 $1,184.8 $1,253.7
Plastic containers 219.6 204.3 186.3 219.6 204.3
------- ----- ----- ------- -------
Consolidated $1,101.9 $861.4 $645.5 $1,404.4 $1,458.0
======= ===== ===== ======= =======
Operating Profit:
Metal containers and other $ 72.9 $ 67.0 $ 42.3 $ 100.4 $ 115.6
Plastic containers 13.2 9.4 0.6 13.2 9.4
Reduction in asset value <F1> (14.7) (16.7) - (14.7) (23.8)
Write-down of goodwill <F2> - - - - (26.7)
Restructuring expense <F3> - - - - (10.1)
Corporate expense (1.6) (1.3) (1.1) (1.5) (1.4)
------- ------ ------ ------- --------
Consolidated $ 69.8 $ 58.4 $ 41.8 $ 97.4 $ 63.0
========= ====== ====== ======== =========
- ---------------
<FN>
<F1> Included in the historical and pro forma income from operations of the
Company are charges incurred for the reduction of the carrying value of
certain underutilized equipment to net realizable value of $14.7
million in 1995 allocable to the metal container business, and of $16.7
million in 1994, of which $7.2 million was allocable to the metal
container business and $9.5 million to the plastic container business.
Additionally, pro forma income from operations for 1994 includes a
charge of $7.1 million for the write-down of certain technologically
obsolete equipment by AN Can.
<F2> Included in the historical financial information of AN Can as of
December 31, 1994 is a charge of $26.7 million for the write-down of
goodwill.
-54-
<PAGE>
<F3> Included in the pro forma income from operations for 1994 is a charge
incurred by AN Can of $10.1 million for shut down costs necessary to
realign the assets of the business more closely with the existing
customer base.
</FN>
</TABLE>
The discussion below should be read in conjunction with the selected
financial data, the historical statements of operations and the Notes thereto
included elsewhere in this Prospectus.
Historical Year Ended December 31, 1995 Compared with Historical Year
Ended December 31, 1994
Consolidated net sales increased $240.5 million, or 27.9%, to $1.1
billion for the year ended December 31, 1995, as compared to net sales of $861.4
million for the same period in 1994. This increase resulted from net sales of
$264.3 million generated by AN Can since its acquisition and a $15.3 million
increase in sales of plastic containers offset, in part, by a decline in sales
of metal containers to Silgan's existing customer base of $39.1 million.
Net sales for the metal container business (including its specialty
business) were $882.3 million for the year ended December 31, 1995, an increase
of $225.2 million from net sales of $657.1 million for the same period in 1994.
Excluding net sales of metal cans of $236.0 million generated by AN Can since
its acquisition, net sales of metal cans to the Company's customers were $609.5
million during the year ended December 31, 1995, as compared to $647.5 million
for the same period in 1994. Net sales to the Company's customers in 1995
decreased principally due to lower unit volume resulting from the below normal
1995 vegetable pack offset, in part, by slightly higher sales prices due to the
pass through of raw material cost increases.
Sales of specialty items included in the metal container segment
increased $27.2 million to $36.8 million during the year ended December 31, 1995
as compared to the same period in 1994, due to the acquisition of AN Can which
generated sales of $28.3 million of specialty items since its acquisition.
Net sales for the plastic container business of $219.6 million during
the year ended December 31, 1995 increased $15.3 million over net sales of
$204.3 million for the same period in 1994. This increase was attributable to
increased unit sales for new customer products and to higher average sales
prices due to the pass through of higher average resin costs.
Cost of goods sold as a percentage of consolidated net sales was 88.1%
($970.5 million) for the year ended December 31, 1995, an increase of 1.2
percentage points as compared to 86.9% ($748.3 million) for the same period in
1994. The increase in cost of goods sold as a percentage of net sales
principally resulted from increased per unit manufacturing costs resulting from
reduced can production volumes, lower margins realized on certain products due
to competitive market conditions and lower margins on sales made by AN Can,
offset, in part, by improved manufacturing operating efficiencies due to plant
consolidations and lower depreciation expense due to a change in the estimated
useful life of certain equipment.
Selling, general and administrative expenses as a percentage of
consolidated net sales declined 0.2 percentage points to 4.2% ($46.8 million)
for the year ended December 31, 1995 as compared to 4.4% ($38.0 million) for the
year ended December 31, 1994. The decrease in selling, general and
administrative expenses as a percentage of net sales resulted from the Company's
continued control of these expenses in respect of the Company's existing
business, offset partially by a temporarily higher level of expenses incurred
during the integration of AN Can. The Company expects that its selling, general
and administration costs as a percentage of sales will continue to decline in
1996 as it completes the integration of the administrative functions of its
metal container business.
-55-
<PAGE>
Income from operations as a percentage of consolidated net sales was
6.3% ($69.8 million) for the year ended December 31, 1995, as compared with 6.8%
($58.4 million) for the same period in 1994. Included in income from operations
were charges for the write-off of certain underutilized assets of $14.7 million
and $16.7 million in 1995 and 1994, respectively. Without giving effect to these
charges, income from operations as a percentage of consolidated net sales would
have declined 1.0% in 1995, primarily as a result of the aforementioned decline
in gross margin.
Income from operations as a percentage of net sales for the metal
container business (without giving effect to charges of $14.7 million and $7.2
million in 1995 and 1994, respectively, to adjust the carrying value of certain
assets) was 8.3% ($72.9 million) for the year ended December 31, 1995, as
compared to 10.2% ($67.0 million) for the same period in the prior year. The
decrease in income from operations as a percentage of net sales principally
resulted from higher per unit manufacturing costs realized on lower production
volume, lower margins realized on certain products due to competitive market
conditions, inefficiencies caused by work stoppages at two of the Company's
California facilities, and lower margins realized on sales made by AN Can.
Income from operations as a percentage of net sales attributable to the
plastic container business (without giving effect to the charge of $9.5 million
in 1994 to adjust the carrying value of certain assets) was 6.0% ($13.2 million)
for the year ended December 31, 1995, as compared to 4.6% ($9.4 million) for the
same period in 1994. The operating performance of the plastic container business
improved as a result of production planning and scheduling efficiencies and
benefits realized from capital investment, offset, in part, by increased unit
production costs incurred as a result of an inventory reduction program.
Interest expense, including amortization of debt financing costs,
increased by approximately $14.9 million to $80.7 million for the year ended
December 31, 1995, principally as a result of increased borrowings to finance
the acquisition of AN Can and to fund higher working capital needs as a result
of the increased seasonality of the Company's metal container business, and
higher average interest rates. Accretion of interest on the Discount Debentures
in 1995 approximated the prior year's accretion due to the repurchase of $61.7
million face amount of Discount Debentures in the third quarter of 1995.
The provisions for income taxes for the years ended December 31, 1995
and 1994 were comprised of federal, state and foreign income taxes currently
payable. The decrease in the provision for income taxes in 1995 reflects a
decrease in federal income taxes currently payable due to the deductibility of
accrued interest on the Discount Debentures that were repurchased in 1995.
As a result of the items discussed above, net loss before the
extraordinary charge for the year ended December 31, 1995 was $16.0 million, as
compared to a net loss of $13.0 million for the year ended December 31, 1994.
As a result of the early extinguishment of amounts owed under its
secured debt facilities, the Company incurred an extraordinary charge of $5.8
million (net of tax of $2.6 million) in 1995.
Historical Year Ended December 31, 1994 Compared with Historical 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.
-56-
<PAGE>
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, and an increase of $26.9 million in sales to
all other customers. 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 specialty items 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 as a percentage of consolidated net sales was 86.9%
($748.3 million) for the year ended December 31, 1994, a decrease of 1.6
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 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 0.6 percentage points to 4.4% of consolidated
net sales ($38.0 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 SARs.
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.
-57-
<PAGE>
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 Discount 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.
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.
Pro Forma Year Ended December 31, 1995 Compared with Pro Forma Year
Ended December 31, 1994
Consolidated net sales for the year ended December 31, 1995 declined
$53.6 million as compared to pro forma consolidated net sales for the prior
year. The decrease in net sales was primarily attributable to lower unit volume
resulting from the below normal 1995 vegetable pack.
Income from operations as a percentage of consolidated net sales
(before unusual charges) for the year ended December 31, 1995 was 8.0% ($112.1
million) as compared to pro forma income from operations as a percentage of
consolidated net sales (before unusual charges) for the year ended December 31,
1994 of 8.5% ($123.6 million). Management believes that the decrease in income
from operations was primarily attributable to lower demand in 1995 for vegetable
pack containers.
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.
On July 22, 1996, the Company completed the Private Offering. With net
proceeds of $47.8 million from the Private Offering, the Company purchased the
Holdings Class B Stock held by Mellon for $35.8 million and, on August 26, 1996,
will redeem $12.0 million principal amount of Discount Debentures.
On August 1, 1995, Silgan, Containers and Plastics entered into the
Silgan Credit Agreement (which originally provided Silgan with $225 million of A
term loans and $225 million of B term loans and provided Containers and Plastics
with a commitment of $225 million for working capital loans) to
-58-
<PAGE>
finance the acquisition by Containers of AN Can, to refinance and repay in full
all amounts owing under the credit agreement, dated as of December 21, 1993
among Silgan and certain of its subsidiaries, the lenders from time to time
party thereto, Bank of America National Trust and Savings Association ("Bank of
America National Trust"), as Co-Agent, and Bankers Trust, as Agent (the "Silgan
1993 Credit Agreement"), and under the Secured Notes. With the proceeds received
from the Silgan Credit Agreement, the Company (i) repaid $117.1 million of term
loans under the Silgan 1993 Credit Agreement, (ii) repaid in full $50.0 million
of its Secured Notes, (iii) acquired from ANC substantially all of the fixed
assets and working capital of AN Can for $362.0 million (including the purchase
from ANC of its St. Louis facility in May 1996 for $13.2 million), and (iv)
incurred debt issuance costs of $19.3 million. With borrowings of $200 million
under the Silgan Credit Agreement (as amended in May 1996 to include an
additional $125 million of B term loans), Holdings has repurchased and redeemed
an aggregate of $204.1 million principal amount of Discount Debentures since
1995.
The Silgan Credit Agreement provides the Company with improved
financial flexibility by (i) enabling Silgan to transfer funds to Holdings for
payment by Holdings of cash interest on the Discount Debentures and, as provided
in the Silgan Credit Agreement, cash dividends (or cash interest) on the
Preferred Stock (or, if issued, the Exchange Debentures), (ii) extending the
maturity of the Company's secured debt facilities until December 31, 2000, (iii)
lowering the interest rate spread on its floating rate borrowings by 1/2%, as
well as providing for further interest rate reductions in the event the Company
attains certain financial targets, and (iv) lowering the Company's average cost
of indebtedness by permitting Holdings to repurchase or redeem Discount
Debentures with $200 million of borrowings under the Silgan Credit Agreement.
Upon completion of the Refinancing, the Company will have outstanding
approximately $59.0 million principal amount of Discount Debentures and will
have redeemed or repurchased an aggregate of approximately $216.0 million
principal amount at maturity of Discount Debentures since 1995. By refinancing a
portion of the Discount Debentures with borrowings under the Silgan Credit
Agreement and proceeds from the Private Offering, the Company will lower its
average cost of indebtedness, realize $11.5 million of annual cash interest
savings, and realize $19.5 million of current cash tax savings as a result of
the deduction by the Company of the accreted interest on the retired Discount
Debentures. The Company may consider refinancing all or a portion of the
remaining Discount Debentures through debt and/or equity financings. Any such
financings will depend upon the market conditions existing at the time and will
have to be effected in compliance with the Company's agreements governing its
indebtedness.
For the first three months of 1996, net borrowings of working capital
loans of $53.1 million and proceeds of $1.5 million from the sale of assets were
used to fund $31.2 million of the Company's operating activities, capital
expenditures of $18.6 million, the repayment of $0.9 million of term loans, and
increase cash balances by $3.9 million. The Company's EBDITA for the three
months ended March 31, 1996 increased by $12.1 million to $40.1 million in
comparison to the same period in 1995. The increase in EBDITA principally
reflected the generation of additional cash earnings from the AN Can operations.
For the three months ended March 31, 1996, the operating cash flow of
the Company declined from the same period in the prior year primarily as a
result of the increased working capital needed, mainly for inventory, to support
the AN Can operations. Inventories increased due to the normal seasonal build
while accounts receivable declined from year-end as a result of lower sales
volume in 1996 and the payment by certain customers of amounts due at year-end
in early 1996. The decline in trade accounts payable is attributable to the
adoption by the Company of vendor payment terms similar to AN Can.
Management believes that the average working capital needs of the
combined operations of the Company and AN Can for 1996 as compared to the pro
forma combined operations in the prior year will
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<PAGE>
decline predominately as a result of carrying a lower amount of finished goods
inventory due to scheduling production closer to the summer seasonal peak and
the change in vendor payment terms referred to above.
During 1995, cash generated from operations of $209.6 million
(including cash of $112.0 million generated by AN Can since August 1, 1995),
proceeds of $3.5 million realized from the sale of assets and a decrease of $0.6
million in cash balances were used to repay $142.8 million of working capital
borrowings used to fund the acquisition of AN Can, fund capital expenditures of
$51.9 million, repay $9.7 million of term loans and $5.5 million of working
capital loans, and make payments to former shareholders of $3.8 million in full
settlement of outstanding litigation. The Company's EBDITA for the year ended
December 31, 1995 increased by $17.9 million to $132.4 million as compared to
1994. The increase in EBDITA reflected the generation of additional cash
earnings from AN Can since its acquisition on August 1, 1995, offset by a
decline in the cash earnings of the Company's existing business principally as a
result of lower unit volume due to the below normal 1995 vegetable pack.
For the year ended December 31, 1995, the operating cash flow of the
Company increased significantly from the prior year due to the generation of
cash by AN Can since its acquisition on August 1, 1995 and the adoption by
Silgan of similar year-end vendor payment terms to those of AN Can. At December
31, 1995, the trade receivable balance of AN Can was $44.2 million ($90.2
million on August 1, 1995), the inventory balance was $98.9 million ($137.9
million on August 1, 1995), and the trade payables balance was $58.2 million
($64.2 million on August 1, 1995).
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.
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 1993
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.
Because the Company sells metal containers used in vegetable and fruit
processing, its sales are seasonal. As a result, a significant portion of the
Company's revenues are generated in the first nine months of the year. As is
common in the packaging industry, the Company must access working capital to
build inventory and then carry accounts receivable for some customers beyond the
end of the summer and fall packing season. Seasonal accounts are generally
settled by year end. The acquisition of AN Can increased Silgan's seasonal metal
containers business, and as a result the Company increased the amount of working
capital loans available to it under its credit facility to $225.0 million. 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 $180 million of the working capital revolver under the Silgan
Credit Agreement, including letters of credit, will be utilized at its peak in
July 1996.
As of March 31, 1996, the outstanding principal amount of working
capital loans was $60.2 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 $140.7 million. As of June 30, 1996, the
outstanding principal amount of working capital loans was $148.6 million and,
subject to a
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borrowing base limitation and taking into account outstanding letters of credit,
the unused portion of working capital commitments at such date was $69.1
million.
In addition to its operating cash needs, the Company's cash
requirements over the next several years consist primarily of (i) annual capital
expenditures of $45.0 to $55.0 million, (ii) scheduled principal amortization
payments of term loans under the Silgan Credit Agreement of $28.5 million, $38.5
million, $53.4 million, $53.4 million and $126.1 million over the next five
years, respectively, (iii) expenditures of approximately $30.0 million over the
next three years associated with plant rationalizations and administrative
workforce reductions, other plant exit costs and employee relocation costs of AN
Can, (iv) the Company's interest requirements, including interest on working
capital loans, the principal amount of which will vary depending upon seasonal
requirements, and the bank term loans, most of which bear fluctuating rates of
interest, the 11-3/4% Notes and semi-annual cash interest payments of
approximately $4.0 million (based on $59.0 million principal amount of Discount
Debentures outstanding) on the Discount Debentures commencing in December 1996,
(v) payments of approximately $3.0 million for state tax liabilities in 1996 and
approximately $16.0 million for federal and state tax liabilities in 1997,
increasing annually thereafter (assuming the redemption of the remainder of the
Discount Debentures at maturity in 2002), and (vi) quarterly payments of cash
dividends (or cash interest) of up to approximately $2.8 million on the
Preferred Stock (or the Exchange Debentures) commencing on October 15, 2000
(assuming that the Company has not paid cash dividends (or cash interest) on the
Preferred Stock (or the Exchange Debentures) prior to such date). See "Risk
Factors--Refinancing Risk."
Since Holdings' only asset is its investment in Silgan, its ability to
pay interest on the Discount Debentures and dividends on the Preferred Stock
(and cash interest on the Exchange Debentures, if issued) 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 then has sufficient funds
available for such purpose. If sufficient funds to pay such interest and
dividends 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 Discount Debentures or the Preferred Stock. The Silgan Credit
Agreement, the Discount Debentures and the 11-3/4% Notes Indenture limit
Holdings' ability to pay cash dividends on the Preferred Stock (and cash
interest on the Exchange Debentures) and Silgan's ability to provide funds to
Holdings for such purpose. See "Risk Factors--Ability of Holdings to Pay Cash
Dividends and Cash Interest" and "--Ability of Silgan to Provide Financial
Support to Holdings."
The Discount Debentures represent AHYDOS within the meaning of Section
163(i) of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the tax deduction that would otherwise be available to Holdings for
accreted interest on the Discount Debentures during their noncash interest
period has been and will continue to be deferred until the retirement of the
Discount Debentures. During 1995, Holdings repurchased $61.7 million principal
amount of Discount Debentures, providing Holdings with an allowable deduction of
approximately $18.0 million for the amount of interest accreted on such Discount
Debentures. In 1996, after giving effect to the Refinancing, Holdings will have
redeemed $154.4 million principal amount of the Discount Debentures, providing
Holdings with an allowable deduction of approximately $58.0 million for the
amount of interest accreted on such amount of indebtedness. After the
Refinancing is completed, Holdings will have approximately $59.0 million
principal amount of Discount Debentures outstanding. Subject to alternative
minimum tax ("AMT"), Holdings will realize further tax benefits in the event
that it redeems any of the remaining Discount Debentures.
In 1993, Holdings became subject to 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 carryforwards. Accordingly, in
1995 Holdings incurred, and thereafter Holdings will incur, an AMT
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liability at a rate of 20% (or the applicable rate then in effect). As a result
of the allowable deduction of accreted interest on the Discount Debentures
redeemed in 1996, the Company expects that it will incur no AMT liability in
1996. To the extent that AMT is paid, it 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.
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,
debt service and preferred stock dividend requirements for the foreseeable
future.
The Silgan Credit Agreement and the 11-3/4% Notes Indenture, the
Discount Debentures, the Preferred Stock and the Exchange Debentures, if issued,
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 1996 with all such
covenants.
Effect of Interest Rate Fluctuations and Inflation
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.
Because the Company has indebtedness which bears interest at floating
rates, the Company's financial results will be sensitive to changes in
prevailing market rates of interest. As of March 31, 1996, the Company had
$844.8 million of indebtedness outstanding, of which $402.0 million bears
interest at floating rates. To mitigate the effect of interest rate
fluctuations, the Company entered into interest rate swap agreements during the
first quarter of 1996 whereby floating rate interest was exchanged for fixed
rates of interest ranging from 8.1% to 8.6%. The notional principal amounts of
these agreements totaled $100 million and mature in the year 1999. Depending
upon market conditions, the Company may enter into additional interest rate swap
agreements or other interest rate hedge agreements (with counterparties that, in
the Company's judgment, have sufficient creditworthiness) during 1996 to hedge
its exposure against interest rate volatility.
New Accounting Pronouncements
Long-Lived Asset Impairment. The Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," in the first quarter of 1996. Under SFAS No. 121, impairment
losses will be recognized when events or changes in circumstances indicate that
the undiscounted cash flows generated by assets are less than the carrying value
of such assets. Impairment losses are then measured by comparing the fair value
of assets to their carrying amount. There were no impairment losses recognized
during the first quarter of 1996 as a result of the adoption of SFAS No. 121.
See Note 5 to the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.
Stock-Based Compensation. In October 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation", effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be recognized
based on the fair value of the options at the date of grant using an option
pricing model.
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As permitted under SFAS No. 123, the Company may either adopt the new
pronouncement or follow the current accounting methods as prescribed under
Accounting Principles Board ("APB") No. 25. The Company has not elected to adopt
SFAS No. 123 and continues to recognize compensation expense in accordance with
APB No. 25. In addition, the Company will be required to include in its 1996
year end financial statements pro forma information regarding compensation
expense recognizable under SFAS No. 123. See Note 15 to the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
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BUSINESS
General
The Company is a major manufacturer of a broad range of (i) steel and
aluminum containers for human and pet food and (ii) custom designed plastic
containers for health, personal care, food, beverage, pharmaceutical and
household chemical products in North America. Silgan has grown rapidly since its
inception in 1987 primarily as a result of strategic acquisitions, but also
through internally generated growth. In 1995, the Company had net sales of
approximately $1.1 billion and, on a pro forma basis after giving effect to the
acquisition of substantially all of the assets of AN Can, would have had net
sales of approximately $1.4 billion. The Company operates through two operating
companies, Containers and Plastics. Management estimates that Containers is
currently the sixth largest can producer and the largest manufacturer of metal
food containers in North America. In 1995, Containers sold approximately 28% of
all metal food containers used in the United States, and on a pro forma basis
after giving effect to the acquisition of AN Can, would have sold approximately
36% of all metal food containers sold in the United States. Plastics is one of
the leading manufacturers of custom designed HDPE and PET containers sold in
North America for health and personal care products.
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
is a Delaware corporation formed in August 1987 as a holding company to acquire
interests in various packaging manufacturers. See "--Company History" below. The
principal executive offices of Holdings are located at 4 Landmark Square,
Stamford, Connecticut 06901, telephone number (203) 975- 7110.
Metal Container Business
In 1995, Containers had net sales of approximately $882.3 million
(representing 80% of the Company's total net sales) and, on a pro forma basis
after giving effect to the acquisition of AN Can, would have had net sales of
approximately $1.2 billion (representing 84% of the Company's total pro forma
net sales). On a pro forma basis, after giving effect to the acquisition of AN
Can, Containers has realized compound annual unit sales growth in excess of 16%
since 1987, despite the relative maturity of the U.S. food can industry. Types
of metal containers manufactured by Containers include those for vegetables,
fruit, meat, tomato based products, coffee, soup, seafood, evaporated milk,
infant formula and pet food. Containers has the Nestle Supply Agreements with
Nestle pursuant to which Containers supplies a majority of Nestle's metal
container requirements, and the DM Supply Agreement with Del Monte pursuant to
which Containers supplies substantially all of Del Monte's metal container
requirements. In addition to Nestle and Del Monte, Containers has multi-year
supply arrangements with other customers. The Company estimates that
approximately 80% of Containers' sales in 1996 will be pursuant to such supply
agreements and arrangements. See "--Sales and Marketing" below. Containers also
manufacturers and sells certain specialty packaging items, including metal caps
and closures, plastic bowls and paper containers primarily used by processors
and packagers in the food industry. In 1995, on a pro forma basis after giving
effect to the acquisition of AN Can, the Company would have had net sales of
specialty items of approximately $83.6 million.
Containers' strategy has been growth through acquisition followed by
the integration and rationalization of the acquired businesses with Containers'
operations, realization of cost synergies as a result of such acquisitions, and
investment in the acquired assets, all aimed at achieving and maintaining a low
cost position. Since the acquisition in 1987 of Nestle Can, Containers has spent
approximately $298
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million for the acquisition of additional can manufacturing facilities and
equipment and has invested approximately $131 million in its acquired
manufacturing facilities. Containers acquired DM Can from Del Monte in December
1993 and AN Can from ANC in August 1995, enabling the Company to diversify its
customer base and geographic presence in North America. See "--Company History"
below. Containers has achieved a low cost position, primarily through low
production costs and capital investments that have generated manufacturing and
production efficiencies, and by exploiting the favorable geographic location of
its plants. To further enhance its low cost position, Containers has realized
cost reduction opportunities through plant rationalizations and cost synergies
resulting from its acquisitions. Since 1991, Containers has closed eight
smaller, higher cost metal container facilities, including five facilities that
were closed in 1995 as a result of the integration of DM Can. The closure of the
five facilities in 1995 resulted in a reduction in indirect costs of
approximately $7.0 million. The Company believes that the acquisition of AN Can
will enable it to realize further cost savings from plant rationalizations, from
production and manufacturing synergies from the combined operations and from the
integration of the selling and administrative operations of AN Can into
Containers. As a result of Containers' ability to integrate its acquired
businesses and realize cost savings and synergies from combining the acquired
businesses with Containers' operations, Containers has been able to successfully
make acquisitions that have allowed it to more than triple 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 36% in 1995, on a pro forma basis after
giving effect to the acquisition of AN Can.
Plastic Container Business
In 1995, Plastics had net sales of approximately $219.6 million
(representing 16% of the Company's pro forma net sales). HDPE containers
manufactured by Plastics include personal care containers for shampoos,
conditioners, hand creams, lotions, cosmetics and toiletries, household chemical
containers for scouring cleaners, cleaning agents and lawn and garden chemicals
and pharmaceutical containers for tablets, laxatives and eye cleaning solutions.
Plastics manufactures PET custom containers for mouthwash, liquid soap, skin
care lotions, gastrointestinal and respiratory products, salad dressings,
condiments, instant coffees, premium water and liquor. Many of the containers
manufactured by Plastics are recyclable. 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 12%. See "--Company History" below. While many of Plastics' larger
competitors that manufacture extrusion blow-molded plastic containers employ
technology oriented to large bottles and long production runs, Plastics has
focused on mid-sized, extrusion blow-molded plastic containers requiring special
decoration and shorter production runs. Plastics emphasizes value-added 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. Management believes that PET custom containers are replacing glass
containers for products such as mouthwash, salad dressing, peanut butter and
liquor, and that Plastics is well positioned because of its technologically
advanced equipment to respond to opportunities for future growth in the rigid
plastic container market.
Since 1993, Plastics' earnings before depreciation, interest, taxes and
amortization have increased 56% to $27.5 million in 1995. Plastics has achieved
this increase through a consolidation and rationalization program for its
facilities, significant capital investments to improve its manufacturing and
production efficiencies, increased unit sales volume, and lower selling, general
and administrative expenses. Management of Plastics intends to continue to focus
on expanding its market share and on improving its operating margins by pursuing
further cost reduction opportunities.
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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, meat, tomato based products, coffee, soup, seafood,
evaporated milk and infant formula. The Company does not produce cans for use in
the beer or soft drink industries.
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 products
such as shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
liquid soap, gastrointestinal and respiratory products, 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, condiments, instant coffee, premium
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, 1995, Containers had approximately 80% of its
projected 1996 sales under multi-year contracts. Plastics has 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
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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 to utilize multi-layer container construction.
The Company's decorating methods for its plastic products include (1)
in-mold labeling which applies a paper or plastic film label to the bottle
during the blowing process and (2) post-mold decoration. Post-mold decoration
includes (i) silk screen decoration which enables the applications of images in
multiple colors to the bottle, (ii) pressure sensitive decoration which uses a
plastic film or paper label applied by pressure, (iii) heat transfer decoration
which uses a plastic film or plastic coated paper label applied by heat, and
(iv) hot stamping decoration which transfers images from a die using metallic
foils. 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, 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 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 comparable prices or terms. The Company believes that it will
be able to purchase sufficient quantities of steel and aluminum can sheet for
the foreseeable future.
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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
polyethylene 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. The Company believes that it will be able to purchase sufficient
quantities of resins for the foreseeable future.
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 1995, 1994 and 1993, the Company's metal container business
accounted for approximately 80%, 76% and 71%, respectively, of the Company's
total sales, and the Company's plastic container business accounted for
approximately 20%, 24% and 29%, respectively, of the Company's total sales. On a
pro forma basis after giving effect to the acquisition of AN Can, metal and
plastic containers in 1995 would have accounted for approximately 84% and 16% of
the Company's total sales, respectively. In 1995, 1994 and 1993, approximately
21%, 26% and 34%, respectively, of the Company's sales were to Nestle and in
1995 and 1994 approximately 15% and 21%, respectively, of the Company's sales
were to Del Monte. On a pro forma basis after giving effect to the acquisition
of AN Can, in 1995 approximately 17% and 11% of the Company's sales would have
been to Nestle and Del Monte, respectively. 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 the largest food can producer in North America. In 1995, Containers
sold approximately 28% of all metal food containers in the United States.
Containers has entered into multi-year supply arrangements with many of its
customers, including Nestle and Del Monte. The Company estimates that
approximately 80% of its metal container sales in 1996 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 1995, sales of metal cans
by the Company to Nestle were $236.0 million.
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.
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In 1993, the term of certain of the Nestle Supply Agreements
(representing approximately 70% of the Company's 1995 unit sales to Nestle) was
extended through 2001. Under these Nestle Supply Agreements, Nestle has the
right to receive competitive bids under narrowly limited circumstances, and
Containers has the right to match any such bids. In the event that Containers
chooses not to match a competitive bid, Nestle may purchase cans from the
competitive bidder at the competitive bid price for the term of the bid. The
Company cannot predict the effect, if any, of such bids upon its financial
condition or results of operations. The Company is currently engaged in
discussions with Nestle regarding the extension beyond 2001 of the term for a
majority of the can requirements under these Nestle Supply Agreements in return
for certain price concessions by the Company. On a pro forma basis after giving
effect to the acquisition of AN Can, such can requirements would have
represented approximately 6% of the Company's 1995 sales.
The term of the other Nestle Supply Agreements expires in August 1997.
The Company has also commenced discussions with Nestle with respect to the
continuation beyond 1997 of the other Nestle Supply Agreements, which would have
represented approximately 6% of the Company's sales in 1995 on a pro forma basis
after giving effect to the acquisition of AN Can. Although the Company intends
to make every effort to extend these Nestle Supply Agreements on reasonable
terms and conditions, there can be no assurance that these Nestle Supply
Agreements will be extended or that they will be extended on terms favorable to
the Company.
On December 21, 1993, Containers and Del Monte entered into the DM
Supply Agreement. Under the DM Supply Agreement, Del Monte has agreed to
purchase from Containers, and Containers has agreed to sell to Del Monte, 100%
of Del Monte's annual requirements for metal containers to be used for the
packaging of food and beverages in the United States and not less than 65% of
Del Monte's annual requirements of metal containers for the packaging of food
and beverages at Del Monte's Irapuato, Mexico facility, subject to certain
limited exceptions. In 1995, sales of metal containers by the Company to Del
Monte were $159.4 million.
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, beginning in December 1998, 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 and fruit processors 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 customers beyond
the end of the season. The acquisition of AN Can increased the Company's
seasonal metal container business. Consistent with industry practice, such
customers may return unused containers. Historically, such returns have been
minimal.
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<PAGE>
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., Andrew Jergens Inc., Chesebrough-Ponds USA Co., Dial
Corp., Warner-Lambert Company and Pfizer Inc. The Company also manufactures
plastic containers for food and beverage products, such as salad dressings,
condiments, instant coffee and premium water and liquor. 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.
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 May 31, 1996, the Company operated 46
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, Crown Cork and
Seal Company, Inc. and Ball Corporation are the Company's most significant
national competitors. As an alternative to purchasing cans from commercial can
manufacturers, customers have the ability to invest in equipment to
self-manufacture their cans.
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<PAGE>
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, 1995, the Company employed approximately 940
salaried and 4,170 hourly employees on a full-time basis, including
approximately 1,400 employees who joined the Company on August 1, 1995 as a
result of the acquisition of AN Can. Approximately 63% of the Company's hourly
plant employees are represented by a variety of unions.
The Company's labor contracts expire at various times between 1996 and
2008. Contracts covering approximately 7% of the Company's hourly employees
presently expire during 1996. 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. In 1989, the Company received notice that it is one of
many
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<PAGE>
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. In connection with
the acquisition of AN Can, subject to certain limitations, ANC has agreed to
indemnify the Company for a period of three years for the costs attributable to
any noncompliance by AN Can with any environmental law prior to the closing,
including costs attributable to the past waste disposal practices of AN Can.
The Company is subject to the Occupational Safety and Health Act and
other laws regulating noise exposure levels and other safety and health concerns
in the production areas of its plants.
Management does not believe that any of the matters described above
individually or in the aggregate will have a material effect on the Company's
capital expenditures, earnings, financial position or competitive position.
Research and Technology
Metal Container Business
The Company's research, product development and product engineering
efforts relating to its metal containers are currently conducted at its research
centers at Oconomowoc, Wisconsin; Neenah, Wisconsin and at other plant
locations. The Company is building a state-of-the-art research facility in
Oconomowoc, Wisconsin in order to consolidate its two main research centers into
one facility.
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 three 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
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<PAGE>
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, and from
Nestle its carton manufacturing division known as the Seaboard Carton Division.
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. In November 1991, Plastics sold its nonstrategic PET
carbonated beverage bottle business, exiting that commodity business.
In 1992, Holdings and Silgan completed a refinancing pursuant to a plan
to improve their financial flexibility. Such refinancing included the public
offering in June 1992 by Silgan of $135 million principal amount of 11-3/4%
Notes and the public offering in June 1992 by Holdings of the Discount
Debentures for an aggregate amount of proceeds of $165.4 million. 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 DM Can 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 1993 Credit Agreement
with the lenders from time to time party thereto, Bank of America National
Trust, as Co-Agent, and Bankers Trust, as Agent, and (ii) Holdings issued and
sold to Mellon, as trustee for First Plaza, 250,000 shares of Holdings Class B
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 1993 Credit Agreement to refinance and
repay in full all amounts owing under their previous credit agreement.
On August 1, 1995, Containers acquired from ANC substantially all of
the assets of AN Can for a purchase price of approximately $362.0 million and
the assumption of specific limited liabilities (including the purchase from ANC
of its St. Louis facility in May 1996 for $13.2 million). To finance the
acquisition, the Borrowers entered into the Silgan Credit Agreement with the
Banks, Bankers Trust, as Administrative Agent and Co-Arranger, and Bank of
America, as Documentation Agent and Co-Arranger. The Company used funds borrowed
under the Silgan Credit Agreement to finance in full the purchase price for its
acquisition of AN Can and to refinance and repay in full all amounts owing under
the Silgan 1993 Credit Agreement and the Secured Notes. Additionally, in 1995
Holdings used borrowings under the Silgan Credit Agreement to purchase $61.7
million principal amount of the Discount Debentures, which Discount Debentures
have been canceled, and in 1996 Holdings used borrowings under the Silgan Credit
Agreement, as amended in May 1996, to redeem an additional $142.4 million
principal amount of the Discount Debentures.
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<PAGE>
On July 22, 1996, the Company completed the Private Offering. With net
proceeds of $47.8 million from the Private Offering, the Company purchased the
Holdings Class B Stock held by Mellon for $35.8 million and, on August 26, 1996,
will redeem $12.0 million principal amount of Discount Debentures.
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 31 metal container
manufacturing facilities, 11 plastic container manufacturing facilities and 4
specialty packaging manufacturing facilities. Nineteen of these facilities are
owned and 27 are leased by the Company. The leases expire at various times
through 2020. Some of these leases provide renewal options.
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<PAGE>
Below is a list of the Company's operating facilities, including
attached warehouses, as of June 30, 1996 for its metal container business:
Approximate
Building Area
Location (square feet)
-------- -------------
City of Industry, CA............................. 50,000 (leased)
Kingsburgh, CA................................... 37,783 (leased)
Modesto, CA...................................... 35,585 (leased)
Modesto, CA...................................... 128,000 (leased)
Modesto, CA...................................... 150,000 (leased)
Riverbank, CA.................................... 167,000
San Leandro, CA.................................. 200,000 (leased)
Stockton, CA..................................... 243,500
Norwalk, CT...................................... 14,359 (leased)
Broadview, IL.................................... 85,000
Hoopeston, IL.................................... 323,000
Rochelle, IL..................................... 175,000
Waukegan, IL..................................... 40,000 (leased)
Woodstock, IL.................................... 160,000 (leased)
Evansville, IN................................... 188,000
Hammond, IN...................................... 160,000 (leased)
Laporte, IN...................................... 144,000 (leased)
Fort Madison, IA................................. 66,000
Ft. Dodge, IA.................................... 49,500 (leased)
Savage, MN....................................... 160,000
St. Paul, MN..................................... 470,000
West Point, MS................................... 25,000 (leased)
Mt. Vernon, MO................................... 100,000
Northtown, MO.................................... 112,000 (leased)
St. Joseph, MO................................... 173,725
St. Louis, MO.................................... 174,000 (leased)
Edison, NJ....................................... 280,000
Crystal City, TX................................. 26,045 (leased)
Toppenish, WA ................................... 98,000
Vancouver, WA.................................... 127,000 (leased)
Menomonee Falls, WI.............................. 116,000
Menomonie, WI.................................... 60,000 (leased)
Oconomowoc, WI................................... 105,200
Plover, WI....................................... 58,000 (leased)
Waupun, WI....................................... 212,000
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<PAGE>
Below is a list of the Company's operating facilities, including
attached warehouses, as of June 30, 1996 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............................... 477,000 (284,000) (leased)
Seymour, IN................................ 406,000
Franklin, KY............................... 122,000 (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. All of the Company's facilities are
subject to liens in favor of the Banks.
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
On October 17, 1989, the State of California, on behalf of the
California Department of Health Services ("DHS"), 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 Containers, that had sent amounts of solder dross to the facility for
recycling as "Potentially Responsible Parties" ("PRPs") under the Federal
Superfund statute. Containers is one of the 15 defendant can companies which
agreed to participate as a group in response to the DHS suit (the "PRP Group").
In the PRP Group agreement, Containers agreed with the other can company
defendants that its apportioned share of cleanup costs would be 6.72% of the
total cost of cleanup. The PRP Group has undertaken a feasibility study for the
purpose of developing, designing and implementing a final remedy for the site.
The feasibility study was approved by the California Department of Toxic
Substances Control ("DTSC") in June 1994. On March 14, 1995, the court approved
a settlement agreement and consent decree which ordered the PRP Group to submit
a draft Remedial Action Plan to the DTSC for approval, which the PRP Group
submitted to the DTSC on September 5, 1995. On September 13, 1995, the DTSC
notified the PRP Group by letter that the Remedial Action Plan had been adopted
for the Summer del Caribe site. According to the Remedial Action Plan, the
overall cost of site cleanup is estimated to be in a range of $2,000,000 to
$3,000,000. Since cleanup is ongoing, a more precise estimate is unavailable at
this time. However, based on the estimate, the Company believes that Containers'
apportioned share of liability will range from approximately $135,000 to
$200,000.
Other than the action mentioned above, there are no other material
pending legal proceedings 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
June 30, Five-Year Employment
Name and Position 1996 History and Other Directorships Held
----------------- ------ ------------------------------------
R. Philip Silver. . . . . . . . . 53 Prior to forming S&H in 1987,
Chairman of the President of Continental Can
Board and Co-Chief Company from June 1983 to
Executive Officer of August 1986; consultant to
Holdings and Silgan packaging industry from
since March 1994; August 1986 to August 1987;
formerly President of Vice Chairman of the Board
Holdings and Silgan; and Director of Sweetheart
Director of Holdings Holdings Inc. and Sweetheart
since April 1989 and Cup Company, Inc. from
of Silgan since September 1989 to January
August 1987; 1991; Chairman of the Board
Chairman of the and Director of Sweetheart
Board of Plastics Holdings Inc. and Sweetheart
since March 1994; Cup Company, Inc. from
Vice President of January 1991 through August
Containers since May 1993; Director, Johnstown
1995; Director of America Corporation.
Containers and
Plastics since August
1987.
D. Greg Horrigan. . . . . . . . . 53 Prior to forming S&H in 1987,
President and Co- Executive Vice President and
Chief Executive Operating Officer of
Officer of Holdings Continental Can Company
and Silgan since from 1984 to 1987; Chairman
March 1994; of the Board and Director of
formerly Chairman of Sweetheart Holdings Inc. and
the Board of Holdings Sweetheart Cup Company,
and Silgan; Director Inc. from September 1989 to
of Holdings since January 1991; Vice Chairman
April 1989 and of of the Board and Director of
Silgan since August Sweetheart Holdings Inc. and
1987; Chairman of Sweetheart Cup Company,
the Board of Inc. from January 1991
Containers since through August 1993.
August 1987;
Director of
Containers and
Plastics since August
1987.
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<PAGE>
Age at
June 30, Five-Year Employment
Name and Position 1996 History and Other Directorships Held
----------------- ------ ------------------------------------
James S. Hoch . . . . . . . . . . 36 Executive Director of Morgan
Director of Holdings Stanley & Co., Ltd. since
since January 1991; 1994; Principal of Morgan
Director of Silgan Stanley since 1993; Vice
since January 1991; President of Morgan Stanley
Director of from 1991 to 1993, Vice
Containers and President of the general
Plastics since January partner of MSLEF II since
1991. 1991 and Vice President of the
managing general partner of
the general partner of Morgan
Stanley Capital Partners III,
L.P. since 1994. Director of
Sullivan Communications, Inc.
and Sullivan Graphics, Inc.
from 1994 to 1996. Director
of Nokia Aluminium Oy,
Kabelmedia GmbH and SITA
Telecommunications Holdings
N.V.
Robert H. Niehaus . . . . . . . . 40 Managing Director of Morgan
Director of Holdings Stanley since 1990; joined
since April 1989; Morgan Stanley in 1982. Vice
Director of Silgan Chairman and director of the
since August 1987; general partner of MSLEF II,
Director of Inc. since January 1990; Vice
Containers and Chairman and Director of the
Plastics since August managing general partner of
1987. the general partner of Morgan
Stanley Capital Partners III,
L.P. since January 1994.
Director of American Italian
Pasta Company, Fort Howard
Corporation, Randall's Food
Markets, Inc. and Waterford
Crystal Ltd., and Chairman of
Waterford Wedgewood UK
plc.
Harley Rankin, Jr.. . . . . . . . 56 Prior to joining the Company,
Executive Vice Senior Vice President and
President and Chief Chief Financial Officer of
Financial Officer of Armtek Corporation; prior to
Holdings since April Armtek Corporation, Vice
1989; Treasurer of President and Chief Financial
Holdings since Officer of Continental Can
January 1992; Company from November
Executive Vice 1984 to August 1986. Vice
President and Chief President, Chief Financial
Financial Officer of Officer and Treasurer of
Silgan since January Sweetheart Holdings Inc. and
1989; Treasurer of Vice President of Sweetheart
Silgan since January Cup Company, Inc. from
1992; Vice President September 1989 to August
of Containers and 1993.
Plastics since January
1989; Treasurer of
Plastics from January
1994 to December
1994.
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<PAGE>
Age at
June 30, Five-Year Employment
Name and Position 1996 History and Other Directorships Held
----------------- ------ ------------------------------------
Harold J. Rodriguez, Jr.. . . . . 41 Employed by Ernst & Young
Vice President of from 1978 to 1987, last
Holdings and Silgan serving as Senior Manager
since March 1994; specializing in taxation.
Vice President of Controller, Assistant Secretary
Containers and and Assistant Treasurer of
Plastics since March Sweetheart Holdings Inc. and
1994; Controller and Assistant Secretary and
Assistant Treasurer of Assistant Treasurer of
Holdings and Silgan Sweetheart Cup Company,
since March 1990; Inc. from September 1989 to
Assistant Controller August 1993.
and Assistant
Treasurer of Holdings
from April 1989 to
March 1990;
Assistant Controller
and Assistant
Treasurer of Silgan
from October 1987 to
Glenn A. Paulson. . . . . . . . . 52 Employed by ANC from
Vice President of January 1990 to July 1995,
Holdings and Silgan last serving as Senior Vice
since January 1996; President and General
employed by Manager, Food Metal and
Containers to manage Specialty, North America;
the ANC transition prior to ANC, President of the
from August 1995 to beverage packaging operations
December 1995. of Continental Can Company.
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<PAGE>
Management 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
June 30, Five-Year Employment
Name and Position 1996 History and Other Directorships
----------------- ------ -------------------------------
Held
----
James D. Beam . . . . . . . . . . 53 Vice President - Marketing &
President and a Sales of Containers from
non-voting Director September 1987 to July 1990;
of Containers since Vice President and General
July 1990. Manager of Continental Can
Company, Western Food Can
Division, from March 1986 to
September 1987.
Gerald T. Wojdon. . . . . . . . . 60 General Manager of
Vice President - Manufacturing of the Can
Operations and Division of The Carnation
Assistant Secretary of Company from August 1982 to
Containers since August 1987.
September 1987.
Gary M. Hughes. . . . . . . . . . 54 Vice President, Sales and
Vice President - Sales Marketing of the Beverage
& Marketing of Division of Continental Can
Containers since July Company from February 1988 to
1990. July 1990; prior to February
1988, was employed by
Continental Can in various
regional sales positions.
Dennis Nerstad. . . . . . . . . . 58 Vice President of Containers from
Vice President - December 1993 to June 1994.
Production Services Vice President - Distribution and
of Containers since Container Manufacturing of Del
July 1994. 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.
Joseph A. Heaney. . . . . . . . . 43 Controller, Food Metal and
Vice President - Specialty Division of ANC from
Finance of Containers September 1990 to October 1995.
since October 1995. From August 1977 to August
1990, employed by ANC and
American Can Company in
various divisional, regional and
plant finance/accounting
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
June 30, Five-Year Employment
Name and Position 1996 History and Positions
----------------- ------ ---------------------
Russell F. Gervais. . . . . . . . 52 President and Chief Executive
President and non- Officer of Aim Packaging, Inc.
voting Director of from March 1984 to September
Plastics since 1989.
December 1992; Vice
President - Sales &
Marketing of Plastics
from September 1989
until December 1992.
Howard H. Cole. . . . . . . . . . 50 Manager of Personnel of Monsanto
Vice President and Engineered Products Division of
Assistant Secretary of the Monsanto Company from April
Plastics since 1986 to September 1987.
September 1987.
Charles Minarik . . . . . . . . . 58 President of Wheaton Industries
Vice President - Plastics Group from February
Operations and 1991 to August 1992; Vice
Commercial President - Marketing of Constar
Development of International, Inc. from March
Plastics since May 1983 to February 1991.
1993.
Alan H. Koblin. . . . . . . . . . 44 Vice President of Churchill
Vice President - Sales Industries from 1990 to 1992.
& Marketing of
Plastics since 1994,
Director of Sales &
Marketing of Plastics
from 1992 to 1994.
Colleen J. Jones. . . . . . . . . 36 Audit Manager, Arthur Young &
Vice President - Company from July 1982 to July
Finance and Chief 1989.
Financial Officer of
Plastics since
December 1994,
Assistant Secretary of
Plastics since
November 1993,
Corporate Controller
of Plastics from
October 1993 to
December 1994,
Manager - Finance of
Plastics from July
1989 to October
1993.
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<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners of Holdings' Capital Stock
The following table sets forth, as of July 31, 1996, certain
information with respect to the beneficial ownership by certain persons and
entities of outstanding shares of common stock of Holdings:
<TABLE>
<CAPTION>
Number of Shares of Each
Class of Holdings Percentage Ownership of
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% -- -- 25%
D. Greg Horrigan <F2>................ 208,750 -- -- 50% -- -- 25%
James S. Hoch <F3>................... -- -- -- -- -- -- --
Robert H. Niehaus <F3>............... -- -- -- -- -- -- --
Harley Rankin, Jr. <F4>.............. -- -- 12,400<F5> -- -- 18.08% --
James D. Beam <F6>................... -- -- -- -- -- -- --
Russell F. Gervais <F7>.............. -- -- -- -- -- -- --
The Morgan Stanley Leveraged
Equity Fund II, L.P. <F8>........ -- 417,500 -- -- 100% -- 50%
All officers and directors as a
group............................ 417,500 -- 18,600<F5> 100% -- 27.11%<F9> 50%
- ---------------
<FN>
<F1> This column reflects the percentage ownership of voting common stock
that would exist if Holdings Class A Common Stock, par value $.01 per
share (the "Holdings Class A Stock"), and Holdings Class B Stock were
treated as a single class. Holdings Class C Common Stock, par value
$.01 per share (the "Holdings Class C Stock"), generally does not have
voting rights and is not included in the percentage ownership reflected
in this column.
<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.
<F8> The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is
1221 Avenue of the Americas, New York, NY 10020.
<F9> Bankers Trust New York Corporation ("BTNY") beneficially owns 50,000
shares of Holdings Class C Stock.
</FN>
</TABLE>
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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 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
$77.5 million for the calendar year 1995 and increases by $6.0 million for each
year thereafter. The Maximum Amount is $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 a public offering of Holdings' common stock; (ii) June 30,
1999; (iii) at the option of each of the respective companies, the failure or
refusal of S&H to perform its obligations under the Management Agreements, if
such failure continues unremedied for more than 60 days after written notice of
its existence shall have been given; (iv) at the option of MSLEF II (a) if S&H
or Holdings is declared insolvent or bankrupt or a voluntary bankruptcy petition
is filed by either of them, (b) upon the occurrence of any of the following
events with respect to S&H or Holdings if not cured, dismissed or stayed within
45 days: the filing of an involuntary petition in bankruptcy, the appointment of
a trustee or receiver or the institution of a proceeding seeking a
reorganization, arrangement, liquidation or dissolution, (c) if S&H or Holdings
voluntarily seeks a reorganization or arrangement or makes an assignment for the
benefit of creditors or (d) upon the death or permanent disability of both of
Messrs. Silver and Horrigan; and (v) the occurrence of a Change of Control (as
defined in the Restated Certificate of Incorporation of Holdings).
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, 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)
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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 $2.0 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, 1995, 1994 and 1993, pursuant to the
arrangements described above, S&H earned aggregate fees, including reimbursable
expenses and fees payable to Morgan Stanley, of $5.4 million, $5.0 million and
$4.4 million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1995, 1994 and 1993 Morgan Stanley earned fees of $409,000, $383,000 and
$337,000, respectively.
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 refinancings of the Company's bank credit
agreement in 1995 and 1993, the banks thereunder (including Bankers Trust)
received certain fees amounting to $17.2 million and $8.1
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million in 1995 and 1993, respectively. In connection with a recent amendment to
the Silgan Credit Agreement in May 1996, the banks thereunder (including Bankers
Trust) received certain fees amounting to $1.6 million. In connection with the
Private Offering, the Placement Agent received certain fees amounting to $1.8
million. See "Securities Ownership of Certain Beneficial Owners and Management"
for a description of the ownership by MSLEF II, an affiliate of the Placement
Agent, of certain securities of Holdings.
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 NEW PREFERRED STOCK
The New Preferred Stock will be issued pursuant to the Certificate of
Designation. The summary contained herein of certain provisions of the New
Preferred Stock does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Certificate of Designation, the form of
which is available from Holdings upon request. The definitions of certain terms
used in the Certificate of Designation and in the following summary are set
forth under "--Certain Definitions" below.
General
Holdings is authorized to issue 1,000,000 shares of preferred stock,
$.01 par value per share. The Certificate of Incorporation of Holdings
authorizes the Board of Directors to issue classes of preferred stock from time
to time in one or more series, with such designations, voting powers,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions as may be determined by the Board of
Directors. Pursuant to the Certificate of Designation, up to 90,000 shares of
Preferred Stock with a liquidation preference of $1,000 are authorized for
issuance, which consist of the 50,000 shares of Old Preferred Stock issued in
the Private Offering plus additional shares of Preferred Stock which may be used
to pay dividends on the Preferred Stock if Holdings elects to pay dividends in
additional shares of Preferred Stock. The New Preferred Stock will be
exchangeable, at the option of Holdings, into the Exchange Debentures, at any
time. See "--Exchange" below. The New Preferred Stock, when issued by Holdings
pursuant to the Exchange Offer or to pay dividends on the Preferred Stock, will
be fully paid and nonassessable, and the holders thereof will not have any
subscription or preemptive rights related thereto. Fleet National Bank will be
transfer agent and registrar for the New Preferred Stock (the "Transfer Agent"
and "Registrar").
Ranking
The Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of Holdings, rank
(i) senior to all classes of common stock of Holdings and to each other class of
capital stock or series of preferred stock established after the date of this
Prospectus by the Board of Directors, the terms of which do not expressly
provide that it ranks senior to or on a parity with the Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up and
dissolution of Holdings (collectively referred to, together with all classes of
common stock of Holdings, as the "Junior Securities"); (ii) subject to certain
conditions, on a parity with any class of capital stock or series of preferred
stock issued by Holdings established after the date of this Prospectus by the
Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of Holdings (collectively referred to as "Parity Securities"); and (iii) subject
to certain conditions, junior to each class of capital stock or series of
preferred stock issued
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by Holdings established after the date of this Prospectus by the Board of
Directors, the terms of which expressly provide that such class or series will
rank senior to the Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution of Holdings
(collectively referred to as "Senior Securities"). The Preferred Stock will be
subject to the issuance of series of Junior Securities, Parity Securities and
Senior Securities, provided that Holdings may not issue any new class of Parity
Securities or Senior Securities without the approval of the holders of at least
a majority of the shares of Preferred Stock then outstanding, voting or
consenting, as the case may be, separately as one class, except that, without
the approval of holders of the Preferred Stock, Holdings may issue shares of
Parity Securities in exchange for, or the proceeds of which are used to redeem
or repurchase, any or all shares of Preferred Stock then outstanding or
indebtedness of Holdings, provided that, in the case of Parity Securities issued
in exchange for, or the proceeds of which are used to redeem or repurchase, less
than all shares of Preferred Stock then outstanding, (a) the aggregate
liquidation preference of such Parity Securities shall not exceed the aggregate
liquidation preference of, premium and accrued and unpaid dividends on, and
expenses in connection with the refinancing of, the Preferred Stock so
exchanged, redeemed or repurchased, (b) such Parity Securities shall not be
Redeemable Stock and (c) such Parity Securities shall not be entitled to the
payment of cash dividends prior to July 15, 2000.
Dividends
Holders of New Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends on the New Preferred Stock at a rate per annum equal to
13-1/4% of the liquidation preference per share of New Preferred Stock, payable
quarterly. However, if by one year after the Closing Date the New Preferred
Stock has not been exchanged for Exchange Debentures, the dividend rate on the
New Preferred Stock will increase by 0.5% per annum to 13-3/4% per annum of the
liquidation preference per share of New Preferred Stock until such exchange
occurs. All dividends will be cumulative, whether or not earned or declared, on
a daily basis from the date of issuance of the New Preferred Stock and will be
payable quarterly in arrears on January 15, April 15, July 15 and October 15 of
each year commencing on October 15, 1996. On and before July 15, 2000, Holdings
may pay dividends, at its option, in cash or in additional fully paid and
nonassessable shares of New Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends. After July 15, 2000, dividends
may be paid only in cash. However, the Discount Debentures Indenture restricts
the payment of cash dividends by Holdings, and future agreements may provide the
same. In addition, Silgan is limited in its ability to provide cash to Holdings.
See "Risk Factors--Ability of Holdings to Pay Cash Dividends and Cash Interest"
and "Description of Certain Holdings Indebtedness." If any dividend (or portion
thereof) payable on any dividend payment date after July 15, 2000 is not
declared or paid in full in cash on such dividend payment date, the amount of
such dividend that is payable and that is not paid in cash on such date will
increase at the rate of 0.5% per annum (1.0% per annum if the conditions
described in the second sentence of this paragraph are not satisfied) from such
dividend payment date until declared and paid in full.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously shall be declared and
paid in full or declared and, if payable in cash, a sum in cash shall be set
apart for such payment on the New Preferred Stock. If full dividends are not so
paid, the New Preferred Stock shall share dividends pro rata with the Parity
Securities. No dividends may be paid or set apart for such payment on Junior
Securities (except dividends on Junior Securities in additional shares of Junior
Securities) and no Junior Securities or Parity Securities may be repurchased,
redeemed or otherwise retired nor may funds be set apart for payment with
respect thereto (except under certain limited circumstances to permit the
redemption of Junior Securities owned by certain employees of Holdings or its
subsidiaries) if full cumulative dividends shall not have been paid on the New
Preferred Stock.
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Optional Redemption
The New Preferred Stock may be redeemed (subject to contractual and
other restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after July 15, 2000, at Holdings' option, in whole
or in part, upon not less than 30 nor more than 60 days' prior written notice
mailed by first-class mail to each holder's last address as it appears in the
Security Register, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below, plus an amount in cash equal to
all accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date), if redeemed during the
12-month period beginning July 15 of each of the years set forth below.
Year Percentage
---- ----------
2000................................................... 109.938%
2001................................................... 106.625%
2002................................................... 103.313%
2003 and thereafter ................................... 100.000%
In addition, on or prior to July 15, 2000, Holdings or a Successor
Corporation may redeem all (but not less than all) outstanding shares of
Preferred Stock, at a redemption price equal to 110% of the liquidation
preference, plus an amount in cash equal to a prorated dividend for the period
from the dividend payment date immediately prior to the redemption date to the
redemption date (subject to the right of holders of Preferred Stock on relevant
record dates to receive dividends due on relevant dividend payment dates), with
the proceeds of any sale of its common stock, provided that such redemption
occurs within 180 days after consummation of such sale.
No optional redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum set apart for
such payment on the Preferred Stock.
In the event of partial redemptions of Preferred Stock, the shares to
be redeemed will be determined pro rata or by lot, as determined by Holdings,
except that Holdings may redeem such shares held by any holder of fewer than 100
shares without regard to such pro rata redemption requirement. If any New
Preferred Stock is to be redeemed in part, the notice of redemption that related
to such New Preferred Stock shall state the portion of the liquidation
preference to be redeemed. New shares of New Preferred Stock having an aggregate
liquidation preference equal to the unredeemed portion will be issued in the
name of the holder thereof upon cancellation of the original share of New
Preferred Stock and, unless Holdings fails to pay the redemption price on the
redemption date, after the redemption date, dividends will cease to accrue on
the New Preferred Stock called for redemption. The Silgan Credit Agreement and
the Discount Debenture Indenture limit the optional redemption of the New
Preferred Stock. See "Description of Certain Holdings Indebtedness" and
"Description of Certain Silgan Indebtedness."
Mandatory Redemption
The New Preferred Stock will be subject to mandatory redemption
(subject to the legal availability of funds therefor) in whole on July 15, 2006
at a price equal to the liquidation preference thereof plus all accumulated and
unpaid dividends to the date of redemption.
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Change of Control
Upon the occurrence of a Change of Control, Holdings will be required
(subject to the legal availability of funds therefor), to make an offer (the
"Change of Control Offer") to each holder of New Preferred Stock to repurchase
all or any part of such holder's New Preferred Stock at a cash purchase price
equal to 101% of the liquidation preference thereof, plus accrued and unpaid
dividends (if any) to the date of purchase (the "Change of Control Payment").
The Change of Control Offer must be made within 30 days following a Change of
Control, must remain open for at least 30 and not more than 40 days and must
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
applicable securities laws and regulations. Notwithstanding the foregoing,
Holdings shall not make (or be required to make) a Change of Control Offer if
any Indebtedness outstanding upon the occurrence of a Change of Control is (or
may be) required to be repaid, redeemed or repurchased in full pursuant to the
terms thereof (or if any such Change of Control constitutes a default under such
Indebtedness) until such Indebtedness is repaid, redeemed or repurchased in
full, in which case the date on which all Indebtedness is so repaid, redeemed or
repurchased will, under the Certificate of Designation, be deemed to be the date
on which such Change of Control shall have occurred. In no event will Holdings
be required to commence a Change of Control Offer until all Indebtedness under
the Silgan Credit Agreement is paid in full or Holdings obtains the requisite
consent of the lenders thereunder.
None of the provisions in the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors.
Holdings could, in the future, enter into certain transactions, including
certain recapitalizations of Holdings, that would not constitute a Change of
Control, but would increase the amount of indebtedness outstanding at such time.
If a Change of Control were to occur, Holdings would be obligated to offer to
repurchase all Indebtedness prior to making an offer to repurchase shares of New
Preferred Stock, and there can be no assurance that Holdings would have
sufficient funds to pay the purchase price for all shares of New Preferred Stock
that Holdings would be required to purchase. In the event that Holdings were
required to purchase outstanding shares of New Preferred Stock pursuant to a
Change of Control Offer, Holdings expects that it would need to seek third-party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that Holdings would be able to
obtain such financing. In addition, Holdings' ability to purchase the New
Preferred Stock may be limited by other then-existing agreements and by
restrictions imposed by Delaware law.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of Holdings, holders of New Preferred Stock will be entitled to be
paid, out of the assets of Holdings available for distribution, $1,000 per
share, plus an amount in cash equal to accumulated and unpaid dividends thereon
to the date fixed for liquidation, dissolution or winding-up (including an
amount equal to a prorated dividend for the period from the last dividend
payment date to the date fixed for liquidation, dissolution or winding-up),
before any distribution is made on any Junior Securities, including, without
limitation, common stock of Holdings. If, upon any voluntary or involuntary
liquidation, dissolution or winding-up of Holdings, the amounts payable with
respect to the Preferred Stock and all other Parity Securities are not paid in
full, the holders of the Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of Holdings in proportion to
the full liquidation preference and accumulated and unpaid dividends to which
each is entitled. After payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends to which they are entitled, the
holders of shares of New Preferred Stock will not be entitled to any further
participation in any distribution of assets of Holdings. However, neither the
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
Holdings nor the consolidation or
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merger of Holdings with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up of Holdings.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the New Preferred
Stock, although such liquidation preference will be substantially in excess of
the par value of such shares of New Preferred Stock. In addition, Holdings is
not aware of any provision of Delaware law or any controlling decision of the
courts of the State of Delaware (the state of incorporation of Holdings) that
requires a restriction upon the surplus of Holdings solely because the
liquidation preference of the New Preferred Stock will exceed its par value.
Consequently, there will be no restriction upon the surplus of Holdings solely
because the liquidation preference of the New Preferred Stock will exceed the
par value and there will be no remedies available to holders of the New
Preferred Stock before or after the payment of any dividend, other than in
connection with the liquidation of Holdings, solely by reason of the fact that
such dividend would reduce the surplus of Holdings to an amount less than the
difference between the liquidation preference of the New Preferred Stock and its
par value.
Voting Rights
The holders of New Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designation. The Certificate of Designation provides that
if (a) dividends on the Preferred Stock are in arrears and unpaid (and if, after
July 15, 2000 such dividends are not paid in cash) for four consecutive
quarterly periods, (b) Holdings fails to discharge any redemption obligation
with respect to the Preferred Stock, (c) Holdings fails to make an offer to
purchase (and complete such purchase) all of the outstanding shares of Preferred
Stock following a Change of Control, if such offer to purchase is required by
the provisions set forth above under the caption "--Change of Control," (d) a
breach or violation of the provisions described under the caption "--Certain
Covenants" occurs and such breach or violation continues for a period of 30
consecutive days or more after notice thereof to Holdings by holders of 25% or
more of the liquidation preference of the Preferred Stock then outstanding or
(e) there occurs with respect to any issue or issues of Indebtedness of Holdings
and/or any Significant Subsidiary having an outstanding principal amount of $20
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, (i) 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 and/or (ii) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default, then the number of directors
constituting the Board of Directors will be adjusted to permit the holders of
the majority of the then outstanding Preferred Stock, voting separately as a
class, to elect the number of directors described in the immediately succeeding
paragraph. Such voting rights will continue until such time as all dividends in
arrears on the Preferred Stock are paid in full (and, in the case of dividends
payable after July 15, 2000, paid in cash) and any failure, breach or default
referred to in clause (b), (c), (d) or (e) is remedied, at which time the term
of any directors elected pursuant to the provisions of this paragraph shall
terminate. Each such event described in clauses (a) through (e) above is
referred to herein as a "Voting Rights Triggering Event." Within 15 days of the
time Holdings becomes aware of the occurrence of any default referred to in
clause (d) or (e) above, Holdings shall give written notice thereof to holders
of the Preferred Stock.
The Certificate of Designation provides that, upon the occurrence of a
Voting Rights Triggering Event, the number of directors constituting the Board
of Directors will be increased by the number of directors that the holders of
Preferred Stock are entitled to elect. The number of directors that the holders
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of Preferred Stock are entitled to elect shall be equal to the greater of (i)
one and (ii) the whole number obtained (rounding down to the nearest whole
number) by (a) multiplying 1/6 by the number of directors in office immediately
prior to the occurrence of a Voting Rights Triggering Event and (b) adding one.
Whenever the right of the holders of Preferred Stock to elect directors shall
cease, the number of directors constituting the Board of Directors will be
restored to the number of directors constituting the Board of Directors prior to
the time or event that entitled the holders of Preferred Stock to elect
directors.
Any vacancy occurring in the office of a director elected by the
holders of Preferred Stock may be filled by the remaining directors elected by
such holders unless and until such vacancy shall be filled by such holders.
Holdings' Certificate of Incorporation provides that, prior to a Change
of Control (as defined in the Certificate of Incorporation) or prior to Holdings
effecting a Public Offering (as defined in the Certificate of Incorporation), in
order for the Board of Directors of Holdings to take any action, such action
must be approved by (i) a majority of the Board of Directors and (ii) at least
one director elected by the holders of Holdings Class A Stock and at least one
director elected by the holders of Holdings Class B Stock. There are currently
two directors that have been elected by the holders of the Holdings Class A
Stock and two directors that have been elected by the holders of the Holdings
Class B Stock. As described above, upon the occurrence of a Voting Rights
Triggering Event the holders of the Preferred Stock will have the right to elect
at least one director. However, because of the provisions of Holdings'
Certificate of Incorporation described in this paragraph, even if a majority of
the directors voted in favor of any action, the directors elected by either of
the Holdings Class A Stock or the Holdings Class B Stock could block such
action.
The Certificate of Designation also provides that, except as stated
above under "--Ranking," Holdings will not authorize any class of Senior
Securities or Parity Securities without the affirmative vote or consent of the
holders of at least a majority of the shares of Preferred Stock then
outstanding, voting or consenting, as the case may be, separately as one class.
The Certificate of Designation also provides that Holdings may not amend the
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of the Preferred
Stock, or authorize the issuance of any additional shares of Preferred Stock,
without the affirmative vote or consent of the holders of at least a majority of
the outstanding shares of Preferred Stock, voting or consenting, as the case may
be, separately as one class. The holders of at least a majority of the
outstanding shares of Preferred Stock, voting or consenting, as the case may be,
separately as one class, may also waive compliance with any provision of the
Certificate of Designation. The Certificate of Designation also provides that,
except as set forth above, (a) the creation, authorization or issuance of any
shares of Junior Securities, Parity Securities or Senior Securities or (b) the
increase or decrease in the amount of authorized capital stock of any class,
including any preferred stock, shall not require the consent of the holders of
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of the holders of shares of Preferred
Stock.
Under Delaware law, holders of preferred stock will be entitled to vote
as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the certificate of incorporation, if
the amendment would increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely.
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Certain Definitions
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Certificate of Designation and
Exchange Debenture Indenture. Reference is made to the Certificate of
Designation and the Exchange Debenture Indenture for the full definitions of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"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 (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; and (vi) 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
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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.
"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 "Consolidation, Merger
and Sale of Assets" covenant described below; 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 co-arranger
and administrative agent for the Banks pursuant to the Silgan Credit Agreement,
and any successor or successors thereto.
"Banks" is defined to mean the lenders which 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 successor to Holdings) or any committee of such Board of
Directors.
"Business Day" is defined to mean any day except a Saturday or 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 nonvoting) of capital stock of such Person, including, without
limitation, all Common Stock and New Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" is defined to mean such time as (i) (a) a "person"
or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), other than MSLEF II, Mr. Horrigan, Mr. Silver and their respective
Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 40% 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
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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 Board of Directors then in office; or (iii) 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 Old Preferred
Stock was originally issued under the Amended and Restated Certificate of
Incorporation of Holdings.
"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 nonvoting) of common stock of such Person 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 nonrecurring 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 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
Refinancing and (iii) amortization of any other deferred financing costs, all as
determined on a consolidated basis in conformity with GAAP. For purposes of the
Certificate of Designation, Consolidated Interest Expense shall include all
amounts paid or accrued as dividends on Preferred Stock of any Person or any
Subsidiary of such Person.
"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,
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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 Exchange Debenture 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 Closing Date 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 Certificate of Designation or Exchange Debenture 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 Certificate of Designation or Exchange
Debenture Indenture shall be made without giving effect to (i) the amortization
of any expenses incurred in connection with the Refinancing, and (ii) except as
otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"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.
"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,
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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 11-3/4% Notes, the
Discount Debentures 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
and, in clarification of this definition, any unused commitment under the Silgan
Credit Agreement or any other agreement relating to Indebtedness shall not be
treated as outstanding.
"Interest Coverage Ratio" is defined to mean, with respect to any
Person on any Transaction Date, the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the four fiscal quarters for which
financial information in respect thereof is available immediately prior to such
Transaction Date to (ii) the aggregate Consolidated Interest Expense of such
Person during such four fiscal quarters. In making the foregoing calculation,
(a) pro forma effect shall be given to (1) any Indebtedness Incurred subsequent
to the end of the four-fiscal-quarter period referred to in clause (i) and prior
to the Transaction Date (other than Indebtedness incurred under a revolving
credit or similar arrangement) to the extent of the commitment thereunder (or
under any predecessor revolving credit or similar arrangement on the last day of
such period), (2) any Indebtedness Incurred during such period to the extent
such Indebtedness is outstanding at the Transaction Date and (3) any
Indebtedness to be Incurred on the Transaction Date, in each case as if such
Indebtedness had been incurred on the first day of such four-fiscal-quarter
period and after giving effect to the application of the proceeds thereof; (b)
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being Incurred) computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months) had been the applicable rate for the entire period; (c) there shall
be excluded from Consolidated Interest Expense any Consolidated Interest Expense
related to any amount of Indebtedness that was outstanding during such
four-fiscal-quarter period or thereafter but which is not outstanding or which
is to be repaid on the Transaction Date, except for Consolidated Interest
Expense accrued (as adjusted pursuant to clause (b)) during such
four-fiscal-quarter period under a revolving credit or similar arrangement to
the extent of the commitment thereunder (or under any successor revolving credit
or similar arrangement) on the
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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 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
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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 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, including, without limitation, the New 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 Exchange Debentures or the
mandatory redemption date of the Preferred Stock, as the case may be, (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 Exchange Debentures or the
mandatory redemption date of the Preferred Stock, as the case may be, 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 Exchange Debentures or the mandatory redemption date of the
Preferred Stock, as the case may be; 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 Exchange Debentures or the mandatory redemption
date of the Preferred Stock, as the case may be, 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 applicable "Limitation on Asset Sales" and "Change
of Control" covenants 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 Exchange Debentures or Preferred Stock required
to be repurchased by Holdings under the "Limitation on Asset Sales" and "Change
of Control" covenants.
"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 Silgan Credit Agreement (including the exhibits thereto) as in
effect on the Closing Date.
"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 August 1, 1995, as amended, among Silgan, Containers, Plastics, the
Banks party thereto and the Bank Agent and Bank of America Illinois, as
co-arranger and as documentation agent, together with the related documents
thereof (including without limitation any Guarantees and security documents), in
each case as such
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agreements may be amended (including any amendment and restatement thereof),
supplemented, replaced or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing or otherwise restructuring
(including, but not limited to, the inclusion of additional borrowers thereunder
that are Subsidiaries of 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 Exchange Debenture 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 Exchange Debenture Indenture.
"Silgan Indebtedness" is defined to mean any of the following
Indebtedness of Silgan and/or any of its Subsidiaries: (i) Indebtedness
outstanding at any time in an aggregate principal amount not to exceed the sum
of (a) the aggregate outstanding Indebtedness and unutilized commitments on the
Closing Date under the Silgan Credit Agreement plus (b) an aggregate amount not
to exceed $200 million outstanding at any time; (ii) Indebtedness issued in
exchange for or the net proceeds of which are used directly or indirectly to
refinance, redeem or repurchase all (but not less than all) of the outstanding
Preferred Stock or Exchange Debentures; (iii) $150 million outstanding at any
time of Capitalized Lease Obligations; (iv) Indebtedness in respect of letters
of credit (other than letters of credit issued pursuant to the Silgan Credit
Agreement) in an aggregate amount not to exceed $30 million outstanding at any
time; (v) Indebtedness in an aggregate amount not to exceed $50 million
outstanding at any time; provided that such Indebtedness (a) by its terms or by
the terms of any agreement or instrument pursuant to which such Indebtedness is
issued, is expressly made subordinate in right of payment to the Exchange
Debentures at least to the extent that the Exchange Debentures are subordinated
to Senior Indebtedness (as defined under "Description of Exchange
Debentures--Subordination"), (b) does permit or require payments of interest in
cash prior to July 15, 2000, (c) does not mature prior to July 15, 2006, (d) the
Average Life of such Indebtedness (determined as of the date of Incurrence of
such Indebtedness) is greater than the remaining Average Life of the Preferred
Stock or Exchange Debentures, as the case may be, and (e) 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 Silgan (including, without limitation, at the option of the holder
thereof other than an option given to a holder pursuant to an "asset sale" or
"change of control" provision that is no more favorable to the holders of such
Indebtedness than the provisions contained in the "Limitation on Asset Sales"
and "Change of Control" covenants and such Indebtedness specifically provides
that Silgan will not repurchase or redeem such Indebtedness pursuant to such
provisions prior to Silgan's repurchase of the Preferred Stock or Exchange
Debentures required to be repurchased by Silgan under the "Limitation on Asset
Sales" and "Change of Control" covenants) at any time prior to July 15, 2006;
and (vi) any Indebtedness of Silgan or any of its Subsidiaries that is permitted
to be Incurred under the 11-3/4% Notes Indenture as in effect on the date hereof
(other than under clauses (i), (ix) and (x) of the second paragraph of part (a)
of Section 4.03 of the 11-3/4% Notes Indenture (which clauses are similar to
clauses (i), (iv) and (v) above other than the dollar amounts)).
"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 Amended and Restated Organization Agreement, dated as of
December 21, 1993 by and
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among Holdings, MSLEF II, BTNY, First Plaza and Messrs. R. Philip Silver and D.
Greg Horrigan, 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 Exchange Debentures payable pursuant to the
terms of the Exchange 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 Exchange Debentures or amounts corresponding to such
principal, premium, if any, or interest on the Exchange 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 or the issuance of Redeemable Stock by Holdings or any of
its Subsidiaries, the date such Indebtedness is to be Incurred or such
Redeemable Stock is to be issued 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 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, such designation would be permitted under the
"Limitation on Restricted Payments" covenant 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 and (2) no Event of Default, or event
or condition that through the giving of notice or the lapse of time or both
would become 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 Officer's 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.
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"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.
Certain Covenants
Limitation on Indebtedness
(a) Under the terms of the Certificate of Designation, Holdings shall
not, and shall not permit any Subsidiary (other than Silgan and its
Subsidiaries) to, Incur any Indebtedness (other than the Discount Debentures,
the Exchange Debentures and Indebtedness existing on the Closing Date) or issue
any Redeemable Stock unless, after giving effect to the Incurrence of such
Indebtedness or issuance of Redeemable Stock 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 $100 million
outstanding at any time; (ii) Indebtedness to Holdings or any Restricted
Subsidiary; (iii) Indebtedness or Redeemable Stock issued in exchange for, or
the net proceeds of which are used to exchange, refinance or refund, outstanding
Indebtedness or Redeemable Stock, 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 exchanged, refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness or
Redeemable Stock the proceeds of which are used to exchange, refinance or refund
Redeemable Stock, determined as of the date of Incurrence of such new
Indebtedness or issuance of such Redeemable Stock, does not mature prior to the
Stated Maturity or have a mandatory redemption date prior to the Redeemable
Stock to be exchanged, refinanced or refunded, and the Average Life of such
Indebtedness or Redeemable Stock is at least equal to the remaining Average Life
of the Redeemable Stock to be exchanged, refinanced or refunded; (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 Silgan Indebtedness being exchanged, refinanced or refunded; (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 or 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 Exchange 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 Exchange Debentures at
least to the extent that the Exchange Debentures would
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be subordinated in right of payment to Senior Indebtedness, (B) such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, provides that no payments of
principal of such Indebtedness by way of sinking fund, mandatory redemption or
otherwise (including defeasance) may be made by 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" covenant and as stated above under "--Change
of Control," and such Indebtedness specifically provides that Holdings will not
repurchase or redeem such Indebtedness pursuant to such provisions prior to
Holdings' repurchase of the Preferred Stock required to be repurchased by
Holdings under the "Limitation on Asset Sales" and as stated above under
"--Change of Control") at any time prior to the mandatory redemption date of the
Preferred Stock and (C) the scheduled maturity of all principal of such
Indebtedness is beyond the mandatory redemption date of the Preferred Stock;
(vi) Guarantees of Indebtedness of Silgan and other Restricted Subsidiaries
under the Silgan Credit Agreement; (vii) Indebtedness (A) in respect of
performance bonds, bankers' acceptances and surety or appeal bonds provided in
the ordinary course of business, (B) under (or in respect of) 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 and its Subsidiaries 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 options, 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 Indebtedness of Holdings;
provided that such Indebtedness (A) determined as of the date of Incurrence of
such Indebtedness, does not mature prior to the mandatory redemption date of the
Preferred Stock, and the Average Life of such Indebtedness is greater than the
remaining Average Life of the Preferred Stock, (B) 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"
covenant and as stated above under "--Change of Control" and such Indebtedness
specifically provides that Holdings will not repurchase or redeem such
Indebtedness pursuant to such provisions prior to Holdings' repurchase of the
Preferred Stock required to be repurchased by Holdings under the "Limitation on
Asset Sales" covenant and as stated above under "--Change of Control") at any
time prior to the mandatory redemption date of the Preferred Stock and (C) 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 date on which dividends on the Preferred Stock are required to be paid in
cash.
(b) Holdings shall not permit Silgan or any Subsidiary of Silgan to
Incur any Indebtedness or issue any Redeemable Stock unless (i) after giving
effect to the Incurrence of such Indebtedness or issuance of Redeemable Stock
and the receipt and application of the proceeds therefrom, the Interest Coverage
Ratio of Silgan would be greater than 1.75:l or (ii) such Indebtedness so
Incurred by Silgan or such Subsidiary of Silgan constitutes Silgan Indebtedness;
provided, however, that any Indebtedness or Redeemable Stock so Incurred or
issued pursuant to clause (i) or (ii) above may not prohibit the payment of
dividends to Holdings (but any such Indebtedness may condition such payments on
the absence of any defaults or events of defaults thereunder and on compliance
with financial tests) in
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amounts sufficient to make mandatory interest and principal payments due on the
Exchange Debentures at the times and in the amount due and payable; and provided
further, however, that, in the event the Preferred Stock is changed or exchanged
into securities 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 and
(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.
(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 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
change or exchange of the New Preferred Stock into preferred stock of Silgan
having the same rights and privileges as the New Preferred Stock. Immediately
upon the occurrence of an event specified in clause (i), (ii) or (iii) in this
part (e), (1) parts (a) and (e) (other than clause (i)) of this "Limitation on
Indebtedness" covenant shall be of no further force and effect and (2) all
references to Silgan in part (b) of this "Limitation on Indebtedness" covenant
shall refer to the Successor Corporation.
The Second Amended and Restated Guaranty, dated as of June 30, 1989, as
amended and restated as of June 18, 1992, as further amended and restated as of
December 21, 1993, as further amended and restated as of August 1, 1995, and as
further amended as of May 31, 1996, made by Holdings in favor of the Banks,
Bankers Trust, as Administrative Agent and as a Co-Arranger, and Bank of
America, as Documentation Agent and as a Co-Arranger (as subsequently further
amended, the "Holdings Guaranty"), prohibits Holdings from Incurring
Indebtedness other than a Guarantee under the Silgan Credit Agreement, the
Discount Debentures, the Shareholder Subordinated Notes, the Exchange Debentures
or refinancings of the Exchange Debentures or Discount Debentures.
Limitation on Restricted Payments
Under the terms of the Certificate of Designation, Holdings shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on its Junior Securities
(other than dividends or distributions payable solely in shares of its Junior
Securities 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 Junior Securities
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or Capital Stock) held by Persons other than Holdings or another Restricted
Subsidiary (other than in respect of the repurchase or redemption of the
Holdings Class B Stock with the proceeds of the Old Preferred Stock), (ii)
purchase, redeem, retire or otherwise acquire for value any Junior Securities
(other than in respect of the repurchase or redemption of the Holdings Class B
Stock with the proceeds of the Old Preferred Stock) or any shares of Capital
Stock of any Restricted Subsidiary or any Unrestricted Subsidiary (including
options, warrants or other rights to acquire such shares of Junior Securities or
Capital Stock) held by Persons other than Holdings or another Restricted
Subsidiary or (iii) 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 (iii) being, collectively, "Restricted
Payments") if at the time of and after giving effect to the proposed Restricted
Payment: (A) a Voting Rights Triggering Event shall have occurred and be
continuing, (B) Holdings (in the case Holdings or its Restricted Subsidiaries
will make the Restricted Payment) could not Incur at least $1.00 of Indebtedness
under the first paragraph in part (a) of the "Limitation on Indebtedness"
covenant or Silgan (in the case Silgan or its Restricted Subsidiaries will make
the Restricted Payment) could not Incur at least $1.00 of Indebtedness under
clause (i) of part (b) of the "Limitation on Indebtedness" covenant, (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 Closing Date (other than any Restricted Payments described in clauses
(ii) or (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 cash
proceeds received by Holdings from the issuance and sale of Junior Securities of
Holdings (other than Redeemable Stock) to any Person other than a Subsidiary of
Holdings, including an issuance or sale permitted by the Certificate of
Designation 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 Junior Securities of Holdings (in each case,
exclusive of any Redeemable Stock or any options, warrants or other rights that
are redeemable at the option of the holder, or are required to be redeemed,
prior to the mandatory redemption date of the Preferred Stock) 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) $25 million,
or (D) all dividends in respect of the Preferred Stock shall not have been
declared and paid in full as provided in the Certificate of Designation.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at the date of declaration, such payment would comply with the foregoing
provision; (ii) the making of Investments in Unrestricted Subsidiaries in an
aggregate amount not to exceed $75 million outstanding at any time; (iii) 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; (iv)
the repurchase, redemption, refinancing or other payment or prepayment of Junior
Securities with the proceeds of Indebtedness incurred under clause (i), (iii) or
(viii) of the second paragraph of part (a) of the "Limitation on
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Indebtedness" covenant; (v) the purchase, redemption, acquisition, cancellation
or other retirement for value of Junior Securities 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 or termination of employment or pursuant to the terms of
such Stock Based Plan or any other agreement under which such Junior Securities,
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 Junior Securities,
options, related rights or similar securities after the Closing Date does not
exceed $25 million and that any additional consideration in excess of such $25
million is in the form of Indebtedness that would be permitted to be Incurred
under clause (v) of the second paragraph in part (a) of the Limitation on
Indebtedness covenant; (vi) the repurchase of Junior Securities of Holdings or
Capital Stock of 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
Common Stock of Holdings or Capital Stock of any Subsidiary of Holdings in
exchange for, or with the proceeds of a substantially concurrent offering of,
other Common Stock or shares of the Capital Stock, as the case may be, of such
entity (other than Redeemable Stock); and (vii) payments or distributions
pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with the provisions of the Exchange Debenture 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 (ii),
(iii), (iv), (v) and (vii), no Voting Rights Triggering Event shall have
occurred and be continuing or shall occur as a consequence thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
Holdings shall not, and shall 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 Silgan Notes, the
Discount Debentures (including any agreement pursuant to which the Silgan Notes
or the Discount 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
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Subsidiary not otherwise prohibited by the Certificate of Designation 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
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.
Limitation on Transactions with Shareholders and Affiliates
Holdings shall not, and shall 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.
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 Transfer Agent 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 issuance by Silgan or its successors of
preferred stock in exchange for or in replacement of the New Preferred Stock
having the same rights and privileges as the New Preferred Stock. 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.
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Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
Holdings shall 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 an 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 Indebtedness
or Senior Securities of Holdings or Indebtedness of a 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 or Senior Securities pursuant to mandatory repurchase or repayment
provisions applicable to such Indebtedness or Senior Securities or (C) invest an
equal amount, or the amount not so applied pursuant to subclause (A) or (B) (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.
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 issuance by Silgan or its
successors of preferred stock having the same rights and privileges as the New
Preferred Stock in exchange or replacement for the New Preferred Stock.
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.
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 the 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 Indebtedness or Senior Securities of Holdings or
Indebtedness of a 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
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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."
(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 $10 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 liquidation value
of shares of Preferred Stock equal to the Excess Proceeds on such date, at a
redemption price equal to 101% of the liquidation preference thereof, plus
accrued and unpaid dividends to the date of redemption (the "Excess Proceeds
Payment"); provided, however, that no Excess Proceeds Offer shall be required to
be commenced with respect to the Preferred Stock until the Business Day
following the dates that payments are made pursuant to similar offers that are
made to holders of Indebtedness and need not be commenced if the Excess Proceeds
remaining after application to Indebtedness purchased in the offers made to the
holders of Indebtedness are less than $10 million; provided further, however,
that no Preferred Stock may be purchased under this "Limitation on Asset Sales"
covenant unless Holdings shall have purchased all Indebtedness tendered pursuant
to the offers applicable thereto and shall have obtained the consent required
under the Silgan Credit Agreement to make such an Excess Proceeds Offer.
(c) Holdings shall commence an Excess Proceeds Offer by mailing a
notice to the Transfer Agent and each holder stating: (i) that the Excess
Proceeds Offer is being made pursuant to this "Limitation on Asset Sales"
covenant and that all New Preferred Stock validly tendered will be accepted for
payment on a pro rata basis; (ii) the redemption price and the date of
redemption or 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 share of New Preferred Stock not
tendered will continue to accumulate and pay dividends pursuant to its terms;
(iv) that, unless Holdings defaults in the payment of the Excess Proceeds
Payment, any share of New Preferred Stock accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accumulate dividends or accrue interest
after the Excess Proceeds Payment Date; (v) that holders electing to have any
share of New Preferred Stock purchased pursuant to the Excess Proceeds Offer
will be required to surrender such New Preferred Stock, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
share of New Preferred Stock completed, to the Transfer 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 liquidation preference of the
shares of New Preferred Stock delivered for redemption and a statement that such
holder is withdrawing his election to have such New Preferred Stock redeemed;
and (vii) that holders whose New Preferred Stock is being redeemed or being
purchased only in part will be issued new shares of New Preferred Stock equal in
liquidation preference to the unredeemed New Preferred Stock surrendered.
(d) On the Excess Proceeds Payment Date, Holdings shall: (i) accept for
payment on a pro rata basis Preferred Stock or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Transfer Agent
money sufficient to pay the redemption price of all Preferred Stock or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Transfer Agent all Preferred Stock or
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portions thereof so accepted, together with an Officer's Certificate specifying
the shares of Preferred Stock or portions thereof accepted for payment by
Holdings. The Transfer Agent shall promptly mail to the holders of Preferred
Stock so accepted payment in an amount equal to the redemption price, and the
Trustee shall promptly authenticate and mail to such holders new shares of
Preferred Stock equal in liquidation preference to any unredeemed portion of the
Preferred Stock surrendered. 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 Transfer
Agent 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 Proceeds are received
by Holdings under this "Limitation on Asset Sales" covenant and Holdings is
required to redeem New Preferred Stock as described above.
(f) Notwithstanding the foregoing, nothing in this "Limitation on Asset
Sales" covenant shall prohibit the occurrence of (i) a Holdings Merger or (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. Immediately upon the
occurrence of an event specified in clause (i) or (ii) of the preceding
sentence, all references to Holdings in this "Limitation on Asset Sales"
covenant shall refer to the Successor Corporation.
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 the New Preferred Stock shall be
converted or exchanged for and shall become shares of such successor company
having in respect of the successor company the same rights and privileges that
the New Preferred Stock had immediately prior to such transaction; (ii)
immediately after giving effect to such transaction, no Voting Rights Triggering
Event, and no event that after the giving of notice or lapse of time or both
would become a Voting Rights Triggering Event, shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis, the Interest Coverage Ratio of Holdings (or any Person becoming the
successor issuer of the New Preferred Stock) 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 issuer of the New
Preferred Stock) 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:
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(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 issuer of the New Preferred Stock) 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 issuer of the
New Preferred Stock) 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 Registrar 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 "Consolidation, Merger and Sale of Assets" 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 issuance by Silgan or its successors of preferred stock complying with
clause (i) above 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.
Reports
So long as any shares of New Preferred Stock are outstanding, Holdings
shall file with the Commission and send to the holders of the New Preferred
Stock the annual reports, quarterly reports and the information, documents and
other reports required to be filed by Holdings with the Commission pursuant to
Section 13 or 15 of the Exchange Act, whether or not Holdings has or is required
to have a class of securities registered under the Exchange Act, at the time it
is or would be required to file the same with the Commission and, within 15 days
after Holdings is or would be required to file such reports, information or
documents with the Commission.
Exchange
Holdings may exchange all, but not less than all, of the outstanding
shares of Preferred Stock, including any shares of Preferred Stock issued as
payment for dividends, into Exchange Debentures at any time. In order to effect
such exchange, Holdings shall (a) if necessary to satisfy the condition set
forth in clause (B) in the following paragraph based upon the written advice of
counsel to Holdings, file a registration statement with the Commission relating
to the exchange, and (b) if a registration statement is filed with the
Commission pursuant to clause (a), use its best efforts to cause such
registration statement to be declared effective as soon as practicable by the
Commission unless the opinion referred to in clause (B) in the following
paragraph shall have been subsequently delivered.
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In order to effectuate such exchange, Holdings shall send a written
notice of exchange by mail to each holder of record of shares of Preferred
Stock, which notice shall state (i) that Holdings is exchanging the Preferred
Stock into Exchange Debentures pursuant to the Certificate of Designation and
(ii) the date fixed for exchange (the "Exchange Date"), which date shall not be
less than 15 days nor more than 60 days following the date on which such notice
is mailed (except as provided in the last sentence of this paragraph). On the
Exchange Date, if the conditions set forth in clauses (A) through (E) below are
satisfied Holdings shall issue Exchange Debentures in exchange for the Preferred
Stock as provided in the next paragraph, provided that on the Exchange Date: (A)
there shall be legally available funds sufficient therefor (including, without
limitation, legally available funds sufficient therefor under Delaware law); (B)
a registration statement relating to the Exchange Debentures shall have been
declared effective under the Securities Act prior to such exchange and shall
continue to be effective on the Exchange Date or Holdings shall have obtained a
written opinion of counsel that an exemption from the registration requirements
of the Securities Act is available for such exchange and that upon receipt of
such Exchange Debentures pursuant to such exchange made in accordance with such
exemption, each holder of an Exchange Debenture that is not an Affiliate of
Holdings will not be subject to any restrictions imposed by the Securities Act
upon the resale of such Exchange Debenture, and such exemption is relied upon by
Holdings for such exchange; (C) the Exchange Debenture Indenture and the trustee
thereunder shall have been qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"); (D) immediately after giving effect to such
exchange, no Default or Event of Default (each as defined in the Exchange
Debenture Indenture) would exist under the Exchange Debenture Indenture; and (E)
Holdings shall have delivered to the Trustee under the Exchange Debenture
Indenture a written opinion of counsel, dated the date of exchange, regarding
the satisfaction of the conditions set forth in clauses (A), (B) and (C). In the
event that (i) the issuance of the Exchange Debentures is not permitted on the
Exchange Date or (ii) any of the conditions set forth in clauses (A) through (E)
of the preceding sentence are not satisfied on the Exchange Date, Holdings shall
use its best efforts to satisfy such conditions and effect such exchange as soon
as practicable.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding shares of New Preferred Stock will be entitled to receive a
principal amount of Exchange Debentures for shares of New Preferred Stock, the
liquidation preference of which, plus the amount of accumulated and unpaid
dividends (including a prorated dividend for the period from the immediately
preceding dividend payment date to the date of exchange) with respect to which,
equals such principal amount; provided that the Company at its option may pay
cash for any or all accrued and unpaid dividends in lieu of issuing Exchange
Debentures in respect of such dividends. The Exchange Debentures will be issued
in registered form, without coupons. Exchange Debentures issued in exchange for
New Preferred Stock will be in principal amounts of $1,000 and integral
multiples thereof to the extent practicable, and will also be issued in
principal amounts less than $1,000 so that each holder of New Preferred Stock
will receive certificates representing the entire principal amount of Exchange
Debentures to which its shares of New Preferred Stock entitle it, provided that
Holdings may, subject to the restrictions in the Discount Debentures, Holdings'
guarantee under the Silgan Credit Agreement and any of its other then-existing
Indebtedness, pay cash in lieu of issuing an Exchange Debenture in a principal
amount less than $1,000. On and after the date of exchange, dividends will cease
to accrue on the outstanding shares of New Preferred Stock, and all rights of
the holders of New Preferred Stock (except the right to receive the Exchange
Debentures, an amount in cash, to the extent applicable, equal to the accrued
and unpaid dividends to the Exchange Date, and, if Holdings so elects, cash in
lieu of any Exchange Debenture which is in an amount that is not an integral
multiple of $1,000) will terminate. The person entitled to receive the Exchange
Debentures issuable upon such exchange will be treated for all purposes as the
registered holder of such Exchange Debentures.
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Holdings will comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
New Preferred Stock Book Entry; Delivery and Form
So long as DTC or its nominee is the registered owner or holder of a
Global New Preferred Stock Certificate, DTC or such nominee, as the case may be,
will be considered the sole owner or holder of the New Preferred Stock
represented by such Global New Preferred Stock Certificate for all purposes
under the Certificate of Designation and the New Preferred Stock. No beneficial
owner of an interest in the Global New Preferred Stock Certificate will be able
to transfer that interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Certificate of Designation.
Payments made with respect to the Global New Preferred Stock
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither Holdings nor the Placement Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global New
Preferred Stock Certificate or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Holdings expects that DTC or its nominee, upon receipt of any payments
made with respect to the Global New Preferred Stock Certificate, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Global New Preferred Stock
Certificate as shown on the records of DTC or its nominee. Holdings also expects
that payments by participants to owners of beneficial interest in such Global
New Preferred Stock Certificate held through such participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
The Company understands that DTC will take any action permitted to be
taken by a holder of New Preferred Stock (including the presentation of New
Preferred Stock for exchange, see "--Exchange" above) only at the direction of
one or more participants to whose account the DTC interests in the Global New
Preferred Stock is credited and only in respect of such portion of the aggregate
liquidation preference of New Preferred Stock as to which such participant or
participants has or have given such direction.
Holdings understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interest in the Global New Preferred Stock Certificate
among participants of DTC, it is under no
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obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither Holdings nor the Placement
Agent will have any responsibility for the performance by DTC or its respective
participants or indirect participants of its respective obligations under the
rules and procedures governing their operations.
Certificated New Preferred Stock
If DTC is at any time unwilling or unable to continue as a depositary
for the Global New Preferred Stock and a successor depositary is not appointed
by Holdings within 90 days, Holdings will issue Certificated New Preferred Stock
in exchange for the Global New Preferred Stock Certificate.
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DESCRIPTION OF EXCHANGE DEBENTURES
The summary contained herein of certain provisions of the Exchange
Debentures does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Indenture in respect of the Exchange
Debentures (the "Exchange Debenture Indenture"), the form of which is available
from Holdings upon request. The definitions of certain terms used in the
Exchange Debentures and the Exchange Debenture Indenture and in the following
summary are set forth above under "Description of New Preferred Stock--Certain
Definitions."
The Exchange Debentures
The Exchange Debentures, if issued, will be issued under the Exchange
Debenture Indenture between Holdings and Fleet National Bank, as trustee (the
"Trustee"). The terms of the Exchange Debentures include those stated in the
Exchange Debenture Indenture and those made part of the Exchange Debenture
Indenture by reference to the Trust Indenture Act. The Exchange Debentures will
be subject to all such terms, and prospective holders of the Exchange Debentures
are referred to the Exchange Debenture Indenture and the Trust Indenture Act for
a statement of such terms. The following summary of certain provisions of the
Exchange Debenture Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act and to
all of the provisions of the Exchange Debenture Indenture, including the
definitions of certain terms therein and those terms made a part of the Exchange
Debenture Indenture by reference to the Trust Indenture Act.
General
The Exchange Debentures will be subordinated, unsecured obligations of
Holdings, will be limited in aggregate principal amount to the aggregate
liquidation preference of the Preferred Stock (including any Preferred Stock
issued in payment of dividends), plus accrued and unpaid dividends, on the date
of exchange of the Preferred Stock into Exchange Debentures (plus any additional
Exchange Debentures issued in lieu of cash interest as described herein). The
Exchange Debentures will be issued in fully registered form only in
denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures may be presented for registration
of transfer or exchange, at the office of the Paying Agent and Registrar. At
Holdings' option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. Holdings may change any Paying Agent and Registrar
without prior notice to Holders or the Exchange Debentures. Holders of the
Exchange Debentures must surrender Exchange Debentures to the Paying Agent to
collect principal payments.
The Exchange Debentures will mature on July 15, 2006. Each Exchange
Debenture will bear interest at the same rate in effect with respect to the
Preferred Stock on the date the Exchange Debentures are issued from the Exchange
Debenture Issue Date or from the most recent interest payment date to which
interest has been paid or provided for. Interest will be payable semi-annually
in cash (or, on or prior to July 15, 2000, in additional Exchange Debentures, at
the option of Holdings) in arrears on each of January 15 and July 15 commencing
with the first such date after the Exchange Debenture Issue Date. Interest on
the Exchange Debentures will be computed on the basis of a 360-day year of 12
30-day months and the actual number of days elapsed.
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Because of Holdings' option through July 15, 2000 to pay interest on
the Exchange Debentures by issuing additional Exchange Debentures, any Exchange
Debentures issued prior to that date will be treated as issued with OID, unless
under special rules for interest holidays the amount of OID is treated as de
minimis. See "Certain United States Federal Income Tax Considerations."
Subordination
The Exchange Debentures will be subordinated indebtedness of Holdings,
subordinated in right of payment to all Senior Indebtedness, including pursuant
to the Silgan Credit Agreement and the Discount Debentures. In addition, since
all of the operations of Holdings are conducted through its subsidiaries, the
liabilities of its subsidiaries will be effectively senior to the Exchange
Debentures. After giving pro forma effect to the Refinancing as of March 31,
1996, Silgan and its subsidiaries would have had approximately $1,056.0 million
of indebtedness and other liabilities effectively senior to the Exchange
Debentures. See "Capitalization."
In the event that the Exchange 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 Exchange Debentures,
the Exchange 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. After giving pro forma effect to
the Refinancing as of March 31, 1996, 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
$831.1 million of Indebtedness that would have constituted Senior Indebtedness
and approximately $1,106.0 million of Indebtedness and other liabilities
effectively senior to the Exchange Debentures. See "Risk Factors--Holding
Company Structure; Subordination."
To the extent any payment of Senior Indebtedness (whether by or on
behalf of Holdings, a 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 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 Exchange Debenture Indenture as if such declaration, invalidity
or setting aside had not occurred. Upon any payment or distribution of assets or
securities of Holdings or a 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 Holdings or a 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 or on behalf of Holdings or
a Successor Corporation on account of Subordinated
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Obligations, or any payment to acquire any of the Exchange Debentures for cash,
property or securities, or any distribution with respect to the Exchange
Debentures of any cash, property or securities. Before any payment may be made
by or on behalf of Holdings or a Successor Corporation of any Subordinated
Obligations upon any such dissolution, winding-up, liquidation or
reorganization, any payment or distribution of assets or securities of Holdings
or a 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 Exchange
Debenture Indenture, shall be made by Holdings or a 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 Holdings or a
Successor Corporation of Subordinated Obligations, whether pursuant to the terms
of the Exchange 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 pursuant to which the maturity thereof may be accelerated and (a) upon
receipt by the Trustee of written notice from the Bank Agent or (b) if such
event of default under the Silgan Credit Agreement results from the acceleration
of the Exchange Debentures, from and after the date of such acceleration, no
payment of Subordinated Obligations may be made by or on behalf of Holdings or a
Successor Corporation upon or in respect of the Exchange 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 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 Holdings or a
Successor Corporation upon or in respect of the Exchange 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 or other
representatives for such holders). Not more than one Payment Blockage Period may
be commenced with respect to the Exchange 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 or under clause (i)(b) of this paragraph shall not bar
the commencement of another Payment Blockage Period by the Bank Agent within
such period of 360 consecutive days. Notwithstanding anything in the Exchange
Debenture 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
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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 representatives 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.
By reason of the subordination provisions described above, in the event
of liquidation or insolvency, creditors of Holdings or a Successor Corporation
who are not holders of Senior Indebtedness or of the Exchange Debentures may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than holders of the Exchange 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 Exchange Debentures or (iii) any
successor corporation to Silgan that becomes the successor obligor on the
Exchange Debentures, whether by merger, consolidation, sale of assets,
assumption of liabilities or otherwise.
"Senior Indebtedness" is defined to mean the following obligations of
Holdings or a Successor Corporation: (i) all Indebtedness and other monetary
obligations of Holdings or a Successor Corporation under (or in respect of) the
Silgan Credit Agreement, the Discount Debentures and, in the event of a Holdings
Merger or similar transaction, the Silgan Notes (including any agreement
pursuant to which the Silgan Notes or the Discount Debentures were issued), any
Interest Rate Agreement or any Currency Agreement, (ii) all other Indebtedness
of Holdings or a Successor Corporation (other than Indebtedness evidenced by the
Exchange 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 Exchange Debentures and (iii) all fees,
expenses and indemnities payable in connection with the Silgan Credit Agreement,
the 11-3/4% Notes (including any agreement pursuant to which the Silgan 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 Holdings or a 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 Holdings or a Successor Corporation,
(b) any Indebtedness of Holdings or a Successor Corporation to a Subsidiary of
Holdings or a Successor Corporation or to a joint venture in which Holdings or a
Successor Corporation has an interest, (c) any Indebtedness of Holdings or a
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 below, (d) any repurchase, redemption or
other obligation in respect of Redeemable Stock, (e) any Indebtedness to any
employee or officer of Holdings or a Successor Corporation or any of its
Subsidiaries, (f) any liability for federal, state, local or other taxes owed or
owing by Holdings or a Successor Corporation or (g) any Trade Payables. "Senior
Indebtedness" will also include interest accruing subsequent to events of
bankruptcy of Holdings or a 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.
"Designated Senior Indebtedness" is defined to mean (i) Indebtedness
under the Silgan Credit Agreement, including refinancings thereof and (ii) any
other Indebtedness constituting Senior Indebtedness that, at any date of
determination, has an aggregate principal amount of at least $50 million and is
specifically designated by Holdings or the Successor Corporation in the
instrument creating or evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
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Optional Redemption
The Exchange Debentures will be redeemable at any time on or after July
15, 2000, at Holdings' option, in whole or in part, upon not less than 30 nor
more than 60 days' prior written notice mailed by first-class mail to each
holder's last address as it appears in the Security Register, at the redemption
prices (expressed as a percentage of the principal amount thereof) set forth
below, plus an amount in cash equal to all accumulated and unpaid interest
thereon to the redemption date), subject to the right of holders of record on
the relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the redemption date, if redeemed during the 12-month
period beginning July 15 of each of the years set forth below.
Year Percentage
---- ----------
2000.................................................. 109.938%
2001.................................................. 106.625%
2002.................................................. 103.313%
2003 and thereafter .................................. 100.000%
In addition, on or prior to July 15, 2000, Holdings or a Successor
Corporation may redeem all (but not less than all) outstanding Exchange
Debentures, at a redemption price equal to 110% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, out of the net proceeds
of any sale of its common stock, provided that such redemption occurs within 180
days after consummation of such sale.
The Silgan Credit Agreement and the Discount Debentures Indenture limit
the optional redemption or prepayment of the Exchange Debentures.
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 Exchange
Debentures are listed or, if the Exchange 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 Exchange Debenture of $1,000 in original principal
amount or less shall be redeemed in part. If any Exchange Debenture is to be
redeemed in part only, the notice of redemption relating to such Exchange
Debenture shall state the portion of the principal amount thereof to be redeemed
in part only, the notice of redemption relating to such Exchange Debenture shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
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
Exchange Debenture.
Covenants
Limitation on Indebtedness
(a) So long as any of the Exchange 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 Exchange Debentures
(including any Exchange Debentures issued in payment of interest) and
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Indebtedness existing on the date the Exchange Debentures are issued) 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 $100 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
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 Exchange Debentures or other Indebtedness that
is subordinated in right of payment to the Exchange Debentures shall only be
permitted under this clause (iii) if: (A) in case the Exchange 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 Exchange Debentures, (B) in case the Indebtedness to be
exchanged, refinanced or refunded is subordinated in right of payment to the
Exchange 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 Exchange Debentures at
least to the extent that the Indebtedness to be exchanged, refinanced or
refunded is subordinated in right of payment to the Exchange Debentures and (C)
in case the Exchange 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 Exchange Debentures, such Indebtedness determined as of
the date of Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness being refinanced, and the Average Life of
such Indebtedness is at least equal to the remaining Average Life of the
Indebtedness being refinanced; and provided further that in no event may
Indebtedness of Holdings that is pari passu with, or subordinated in right of
payment to, the Exchange 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 indebtedness being refinanced; (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 Exchange 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
Exchange Debentures at least to the extent that the Exchange 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
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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 "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 Exchange Debentures required to
be repurchased by Holdings under the "Limitation on Asset Sales" and "Change of
Control" covenants) at any time prior to the Stated Maturity of the Exchange
Debentures and (C) the scheduled maturity of all principal of such Indebtedness
is beyond the Stated Maturity of the Exchange Debentures; (vi) Guarantees of
Indebtedness of Silgan and other Restricted Subsidiaries under the Silgan Credit
Agreement; (vii) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided in the ordinary course of
business, (B) under (or in respect of) 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 and its Subsidiaries 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 options,
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 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 Exchange Debentures at least to the extent that the
Exchange 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
Exchange Debentures, and the Average Life of such Indebtedness is greater than
the remaining Average Life of the Exchange 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 "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 Exchange Debentures required to
be repurchased by Holdings under the "Limitation on Asset Sales" and "Change of
Control" covenants) at any time prior to the Stated Maturity of the Exchange
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 date on which interest on the Exchange Debentures is
required to be paid in cash.
(b) So long as any of the Exchange 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 1.75:l 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 (but any such Indebtedness
may condition such payments on the absence of any defaults or events of default
thereunder
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and on compliance with financial tests) in amounts sufficient to make mandatory
interest and principal payments due on the Exchange Debentures at the times and
in the amount due and payable; and provided further, however, that in the event
the Exchange 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)
solely for purposes of calculating the amount of Indebtedness outstanding at any
time under this "Limitation on Indebtedness" covenant, all Indebtedness of
Holdings, Silgan or any of their respective Subsidiaries outstanding on the date
the Exchange Debentures are issued 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 Exchange 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 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
Exchange Debentures. Immediately upon the occurrence of an event specified in
clause (i), (ii) or (iii) in this part (e), parts (a) and (e) (other than clause
(i)) of this "Limitation on Indebtedness" covenant shall be of no further force
and effect, and all references to Silgan in part (b) of this "Limitation on
Indebtedness" covenant shall refer to the Successor Corporation.
The Holdings Guaranty will prohibit Holdings from Incurring
Indebtedness other than a Guarantee under the Silgan Credit Agreement, the
Discount Debentures or the Shareholder Subordinated Notes, the Exchange
Debentures or refinancings of the Exchange Debentures or Discount Debentures.
Limitation on Restricted Payments
So long as any of the Exchange 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
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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 Exchange 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 (in the
case Holdings or its Restricted Subsidiaries will make the Restricted Payment)
could not Incur at least $1.00 of Indebtedness under the first paragraph in part
(a) of the "Limitation on Indebtedness" covenant or Silgan (in the case Silgan
or its Restricted Subsidiaries will make the Restricted Payment) could not Incur
at least $1.00 of Indebtedness under clause (i) of part (b) 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 Closing Date (other
than any Restricted Payments described in clauses (ii) and (iii) 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 received by Holdings from the issuance
and sale of Capital Stock of Holdings (other than Redeemable Stock) to any
Person other than a Subsidiary of Holdings, including an issuance or sale
permitted by the Exchange Debenture 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, 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
Exchange 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) $25 million.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at the date of declaration, such payment would comply with the foregoing
provision; (ii) the making of Investments in Unrestricted Subsidiaries in an
aggregate amount not to exceed $75 million outstanding at any time; (iii) the
redemption, repurchase, defeasance or other acquisition or retirement for value
of Indebtedness that is subordinated in right of payment to the Exchange
Debentures, including premium, if any, and accrued and unpaid interest, with the
proceeds of Indebtedness Incurred under clauses (iii) or (viii) of the second
paragraph in part (a) of the "Limitation on Indebtedness" covenant; (iv) 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; (v) 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
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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 or termination of employment or pursuant to
the terms of such Stock Based Plan or any other agreement under which such
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
Closing Date does not exceed $25 million and that any additional consideration
in excess of such $25 million is in the form of Indebtedness that would be
permitted to be Incurred under clause (v) of the second paragraph in part (a) of
the "Limitation on Indebtedness" covenant; (vi) the repurchase of Capital Stock
of Holdings or any Subsidiary of Holdings 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, Capital
Stock, as the case may be, of such entity (other than Redeemable Stock); and
(vii) payments or distributions pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions of
the Exchange Debenture 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 (ii), (iv), (v) and (vii), no Event of
Default shall have occurred and be continuing or shall occur as a consequence
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
So long as any of the Exchange 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 Silgan Notes, the
Discount Debentures (including any agreement pursuant to which the Silgan Notes
or the Discount 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 Exchange Debenture 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
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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 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.
Limitation on Transactions with Shareholders and Affiliates
So long as any of the Exchange 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.
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 issuance by Silgan or its successors of
securities in exchange for or in replacement of the New Preferred Stock.
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.
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
So long as any of the Exchange 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,
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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 Senior
Indebtedness of Holdings or Indebtedness of a 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 Senior
Indebtedness pursuant to mandatory repurchase or repayment provisions applicable
to such Senior Indebtedness or (C) invest an equal amount, or the amount not so
applied pursuant to subclause (A) or (B) (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.
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 Exchange 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.
Change of Control
(a) In the event of a Change in Control, each holder shall have the
right to require the repurchase of its Exchange 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 principal amount, 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 and all other Senior Indebtedness required to be redeemed or
repurchased pursuant to the terms thereof, or to offer to repay in full all
Indebtedness under the Silgan Credit Agreement and all such other Senior
Indebtedness and to repay the indebtedness of each holder of Senior Indebtedness
who has accepted such offer or (ii) obtain the requisite consents under the
Silgan Credit Agreement and such other Senior Indebtedness to permit the
repurchase of the Exchange 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 the Exchange Debentures
pursuant to this "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
"Change of Control" covenant and that all Exchange 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 Exchange Debenture not tendered will continue to accrue interest
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pursuant to its terms; (iv) that, unless Holdings defaults in the payment of the
Change of Control Payment, any Exchange 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 Exchange
Debenture purchased pursuant to the Change of Control Offer will be required to
surrender such Exchange Debenture, together with the form entitled "Option of
the Holder to Elect Purchase" on the reverse side of such Exchange 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 Exchange Debentures delivered for purchase
and a statement that such holder is withdrawing his election to have such
Exchange Debentures purchased; and (vii) that holders of Exchange Debentures
being purchased only in part will be issued new Exchange Debentures equal in
principal amount to the unpurchased portion of the Exchange Debentures
surrendered; provided that each Exchange Debenture purchased and each new
Exchange 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 Exchange Debentures or portions thereof tendered pursuant to the
Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of the Exchange Debentures or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all
Exchange Debentures or portions thereof so accepted together with an Officers'
Certificate specifying the Exchange Debentures or portions thereof accepted for
payment by Holdings. The Paying Agent shall promptly mail, to the holders of the
Exchange Debentures so accepted, payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such holders new
Exchange Debentures equal in principal amount to any unpurchased portion of the
Exchange Debentures surrendered; provided that each Exchange Debenture purchased
and each new Exchange 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 "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 "Change of Control" covenant and Holdings is required to repurchase
Exchange Debentures as described above.
(e) Notwithstanding any of the foregoing, nothing in this "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 Exchange 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 "Change of
Control" covenant shall refer to the Successor Corporation.
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
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(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 the 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 Senior
Indebtedness of Holdings or Indebtedness of a 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."
(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 $10 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 Exchange Debentures equal to the Excess Proceeds on such date, at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest (if
any) to the date of purchase (the "Excess Proceeds Payment"); provided, however,
that no Excess Proceeds Offer shall be required to be commenced with respect to
the Exchange Debentures until the Business Day following the dates that payments
are made pursuant to similar offers that are made to holders of Senior
Indebtedness, and need not be commenced if the Excess Proceeds remaining after
application to the Senior Indebtedness purchased in the offers made to the
holders of the Senior Indebtedness are less than $10 million; provided further,
however, that no Exchange Debentures may be purchased under this "Limitation on
Asset Sales" covenant unless Holdings shall have purchased all Senior
Indebtedness tendered pursuant to the offers applicable thereto.
(c) Holdings shall commence an Excess Proceeds Offer by mailing a
notice to the Transfer Agent and each holder stating: (i) that the Excess
Proceeds Offer is being made pursuant to this "Limitation on Asset Sales"
covenant and that all Exchange 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 Exchange Debenture not tendered will continue to accumulate interest
pursuant to its terms; (iv) that, unless Holdings defaults in the payment of the
Excess Proceeds Payment, any Exchange 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 Exchange Debentures
purchased pursuant to the Excess Proceeds Offer will be required to surrender
such Exchange Debentures, together with the form entitled "Option of the Holder
to Elect Purchase" on the reverse side of the Exchange 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
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principal amount of Exchange Debentures delivered for purchase and a statement
that such holder is withdrawing his election to have such Exchange Debentures
purchased; and (vii) that holders of Exchange Debentures being purchased only in
part will be issued new Exchange Debentures equal in principal amount to the
unpurchased portion of the Exchange Debentures surrendered; provided that each
Exchange Debenture purchased and each new Exchange 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 Exchange 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 Exchange Debentures or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee, all Exchange Debentures or portions thereof so accepted, together with
an Officer's Certificate specifying the Exchange Debentures or portions thereof
accepted for payment by Holdings. The Paying Agent shall promptly mail to the
holders of Exchange Debentures so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to such
holders new Exchange Debentures equal in principal amount to any unpurchased
portion of the Exchange Debentures surrendered; provided that each Exchange
Debenture purchased and each new Exchange Debenture issued shall be in an
original principal amount of $1,000 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 Proceeds are received
by Holdings under this "Limitation on Asset Sales" covenant and Holdings is
required to repurchase Exchange 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 Exchange 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.
Events of Default
An "Event of Default" occurs with respect to the Exchange Debentures
if: (i) Holdings defaults in payment of principal of (or premium, if any, on)
any Exchange 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 Exchange Debenture Indenture, if such
provisions are then applicable; (ii) Holdings defaults in the payment of
interest on any Exchange 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 Exchange Debenture 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
Exchange Debenture Indenture or under the Exchange 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
Exchange 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 $20 million or more in the aggregate for all such issues of
Holdings and/or any Significant Subsidiary, whether such Indebtedness now exists
or shall
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hereafter be created, (I) 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 and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (v) any final judgment or order (not
covered by insurance) for the payment of money in excess of $10 million
individually or $20 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 $10 million individually or that causes the aggregate
amount for all such final judgments or orders outstanding against all such
Persons to exceed $20 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; and (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.
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 Exchange Debenture Indenture, the Trustee
thereunder or the holders of at least 25% of the aggregate principal amount of
the Exchange 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 Exchange Debentures then outstanding shall, declare the
principal of and all accrued and unpaid interest on the Exchange Debentures to
be immediately due and payable. Any such declaration of acceleration 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 Silgan Notes and the Discount Debentures or (B) acceleration of
the Indebtedness under the Silgan Credit Agreement, the Silgan Notes or the
Discount Debentures; 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 Exchange Debenture Indenture shall have been
cured, waived or otherwise remedied as provided in the Exchange Debenture
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) 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)
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 principal of and all accrued and unpaid interest on the Exchange
Debentures 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
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of at least a majority in aggregate principal amount of the outstanding Exchange
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 Exchange 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. For information as to the waiver of
defaults, see "--Modification and Waiver" below.
The holders of at least a majority in aggregate principal amount of the
outstanding Exchange 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 Exchange Debenture 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. A holder
may not pursue any remedy with respect to the Exchange Debenture Indenture or
the Exchange 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 Exchange 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 Exchange Debentures do not give the Trustee a direction that is
inconsistent with the request. 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 Exchange Debentures, or to bring suit for the enforcement of any
such payment, on or after the respective due dates expressed in its Exchange
Debentures, which rights shall not be impaired or affected without the consent
of the holder.
The Exchange Debenture Indenture will require 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
Exchange Debenture 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 will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Exchange Debenture
Indenture.
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
Exchange Debentures and under the Exchange Debenture Indenture; (ii) immediately
after giving
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effect to such transaction, no Event of Default, and no event that after the
giving of notice or lapse of time or both will become an Event of Default, shall
have occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Interest Coverage Ratio of Holdings (or
any Person becoming the successor obligor on the Exchange 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 Exchange 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 Exchange 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
Exchange 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 Exchange 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.
Defeasance
Defeasance and Discharge
The Exchange Debenture Indenture will provide that Holdings will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Exchange Debentures and the provisions of the Exchange Debenture
Indenture will no longer be in effect with respect to the Exchange 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
Exchange Debentures, to replace stolen, lost or mutilated Exchange Debentures,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) Holdings has deposited with the Indenture Trustee, in trust,
money and/or U.S. Government Obligations that through the payment of interest
and principal in respect thereof in
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accordance with their terms will provide money in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on the Exchange
Debentures on the Stated Maturity of such payments in accordance with the terms
of the Exchange Debenture Indenture and the Exchange Debentures, (B) Holdings
has delivered to the Indenture Trustee (i) either (x) 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 discharge had not occurred, which Opinion of
Counsel must be accompanied by a ruling of the Internal Revenue Service to the
same effect or a change in applicable federal income tax law after the date of
the Exchange Debenture Indenture or, a ruling directed to the Trustee received
from the Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (ii) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment Company Act of
1940 and after the passage of 123 days following the deposit, the trust fund
will not be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law, (C) immediately
after giving effect to such deposit on a pro forma basis, no Event of Default,
or event that after the giving of notice or lapse of time or both would become
an Event of Default, shall have occurred and be continuing on the date of such
deposit or during the period ending on the 123rd day after the date of such
deposit, and such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which Holdings
is a party or by which Holdings is bound, (D) the Successor Corporation is not
prohibited from making payments in respect of the Exchange Debentures by the
provisions described under "Subordination," above and (E) if at such time the
Exchange Debentures are listed on a national securities exchange, Holdings has
delivered to the Trustee an Opinion of Counsel to the effect that the Exchange
Debentures will not be delisted as a result of such deposit, defeasance and
discharge.
Defeasance of Certain Covenants and Certain Events of Default
The Exchange Debenture Indenture will provide that the provisions of
the Exchange Debenture Indenture will no longer be in effect with respect to
clauses (iii) and (iv) under "--Consolidation, Merger and Sales of Assets" and
all the covenants described herein under "--Covenants," clause (iii) under
"--Events of Default" with respect to such covenants and clauses (iii) and (iv)
under "--Consolidation, Merger and Sales of Assets" and clauses (iv) and (v)
under "--Events of Default" shall be deemed not to be Events of Default, and, if
the defeasance is permitted by the Silgan Credit Agreement, the provisions
described herein under "--Subordination" shall not apply, upon, among other
things, the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Exchange Debentures on the Stated Maturity of such payments in accordance with
the terms of the Exchange Debenture Indenture and the Exchange 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.
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Defeasance and Certain Other Events of Default
In the event Holdings exercises its option to omit compliance with
certain covenants and provisions of the Exchange Debenture Indenture with
respect to the Exchange Debentures as described in the immediately preceding
paragraph and the Exchange 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 Exchange Debentures at the time of their
Stated Maturity but may not be sufficient to pay amounts due on the Exchange
Debentures at the time of the acceleration resulting from such Event of Default.
However, Holdings shall remain liable for such payments.
Modification and Waiver
Modifications and amendments of the Exchange Debenture 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 Exchange
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 Exchange
Debenture, (ii) reduce the principal amount of, premium, if any, or interest on,
any Exchange Debenture, (iii) change the place or currency of payment of
principal of, premium, if any, or interest on, any Exchange 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 Exchange Debenture, (v) modify the subordination
provisions in a manner adverse to the holders in any material respect, (vi)
reduce the above-stated percentage of outstanding Exchange Debentures the
consent of whose holders is necessary to modify or amend the Exchange Debenture
Indenture, (vii) waive a default in the payment of principal of, premium, if
any, or interest on the Exchange Debentures or (viii) reduce the percentage of
aggregate principal amount of outstanding Exchange Debentures the consent of
whose holders is necessary for waiver of compliance with certain provisions of
the Exchange Debenture Indenture or for waiver of certain defaults.
The holders of a majority in aggregate principal amount of the
outstanding Exchange Debentures may waive compliance by Holdings with certain
restrictive provisions of the Exchange Debenture Indenture.
The Silgan Credit Agreement contains a covenant prohibiting Holdings
from consenting to any modification of the Exchange Debenture 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
Indebtedness--Description of the Silgan Credit Agreement."
No Personal Liability of Incorporators, Shareholders, Officers, Directors or
Employees
The Exchange Debenture Indenture will provide that no recourse for the
payment of the principal of, premium, if any, or interest on any of the Exchange
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 Exchange Debenture Indenture or in any of the Exchange
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 Exchange Debenture, waives
and releases all such liability.
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Concerning the Trustee
Fleet National Bank will act as Trustee under the Exchange Debenture
Indenture.
The Exchange Debenture 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 Exchange Debenture Indenture. If an Event of
Default has occurred and is continuing, the Trustee will exercise those rights
and powers vested in it under such Exchange Debenture Indenture and use the same
degree of care and skill in its exercise of such rights and powers as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
The Exchange Debenture Indenture and provisions of the Trust Indenture
Act of 1939, as amended, incorporated by reference in the Exchange Debenture
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 engaged 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 CERTAIN HOLDINGS INDEBTEDNESS
Holdings sold 13-1/4% Senior Discount Debentures due 2002 in a public
offering on June 29, 1992. The Discount Debentures were offered at a substantial
discount from their principal amount and there was no payment of interest on the
Discount Debentures prior to December 15, 1996. From and after June 15, 1996,
the Discount Debentures bear interest, payable in cash, at a rate of 13-1/4% per
annum. The gross proceeds to Holdings from the offering of the Discount
Debentures were $165.4 million. 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 (if any) to the redemption date. After giving
effect to the Refinancing, Holdings will have repurchased and redeemed
approximately $216 million principal amount of Discount Debentures, and there
will be approximately $59 million principal amount of Discount Debentures
outstanding. In the event of a Change of Control (as defined in the Discount
Debenture Indenture), each holder of Discount Debentures may require Holdings to
repurchase such Discount Debentures at 101% of the Accreted Value (as defined in
the Discount Debenture Indenture) plus accrued interest (if any).
The Discount Debenture Indenture contains certain covenants that, among
other things, direct the application of proceeds from certain asset sales, limit
the ability of Holdings and its subsidiaries to incur indebtedness, make certain
payments with respect to their capital stock, make prepayments of certain
indebtedness, make loans or investments in entities other than Restricted
Subsidiaries (as defined in the Discount Debenture Indenture), enter into
transactions with affiliates, engage in mergers or consolidations, and the
ability of the Restricted Subsidiaries to issue stock.
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,
the Banks loaned to Silgan (i) $225 million of term loans designated as "A Term
Loans" and (ii) $350 million of term loans designated as "B Term Loans"
(together with the A Term Loans, the "Term Loans"), and agreed to lend to
Containers or Plastics up to an aggregate of $225 million of revolving loans
(the "Revolving Loans"). As part of the Revolving Loans, Bankers Trust agreed to
lend to Containers or Plastics up to an aggregate of $10 million of revolving
loans (the "Swingline Loans") and to issue to Containers or Plastics for the
account of Containers or Plastics up to an aggregate of $20 million of letters
of credit, such Swingline Loans and letters of credit outstanding being deducted
from the amount of Revolving Loans available to be borrowed by Containers or
Plastics.
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) Plastics pledged to the Banks 65%
of the capital stock of 827599 Ontario Inc. ("Canadian Holdco") held by
Plastics; (iii) Containers pledged to the Banks all of the capital stock of SCCW
Can Corporation ("SCCW Can"), a California corporation and a wholly owned
subsidiary of Containers, held by Containers; (iv) Containers pledged to the
Banks all of the capital stock of California-Washington Can Corporation ("C-W
Can"), a California corporation and a wholly owned subsidiary of Containers,
held by Containers; (iv) Silgan, Containers, Plastics, C-W Can and SCCW 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.
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The aggregate amount of Revolving Loans which may be outstanding at any
time is subject to a borrowing base limitation of the sum of (i) 85% of eligible
accounts receivable of Containers and its subsidiaries and Plastics and (ii) 50%
of eligible inventory of Containers and its subsidiaries and Plastics.
Each of the Term Loans and each of the Revolving Loans, at the
respective Borrower's election, consists of loans designated as Eurodollar rate
loans or as Base Rate (as defined in the Silgan Credit Agreement) loans. Subject
to certain conditions, each of the Term Loans and each of the Revolving Loans
can be converted from a Base Rate loan into a Eurodollar rate loan and vice
versa.
As of March 31, 1996, the outstanding principal amounts of A Term
Loans, B Term Loans and the Revolving Loans under the Silgan Credit Agreement
were $219.5 million, $222.3 million and $60.2 million, respectively. As of June
30, 1996, the outstanding principal amounts of A Term Loans, B Term Loans and
Revolving Loans under the Silgan Credit Agreement were $219.5 million, $222.3
million (increasing to $347.3 million after the Refinancing) and $148.6 million,
respectively.
Payment of Loans. Generally, the Revolving Loans can be borrowed,
repaid and reborrowed from time to time until December 31, 2000, on which date
all Revolving Loans mature and are payable in full. Amounts repaid under the
Term Loans cannot be reborrowed.
The A Term Loans mature on December 31, 2000 and are payable in
installments as follows:
A Term Loan
Installment Repayment Date Principal Amount
-------------------------- ----------------
December 31, 1996.................................. $24,946,471
December 31, 1997.................................. 34,925,059
December 31, 1998.................................. 49,892,942
December 31, 1999.................................. 49,892,942
December 31, 2000.................................. 59,871,530
The B Term Loans mature on March 15, 2002 and are payable in
installments as follows (after giving effect to the recent amendment to the
Silgan Credit Agreement to include an additional $125 million of B Term Loans):
B Term Loan
Installment Repayment Date Principal Amount
-------------------------- ----------------
December 31, 1996.................................. $3,507,813
December 31, 1997.................................. 3,507,813
December 31, 1998.................................. 3,507,813
December 31, 1999.................................. 3,507,813
December 31, 2000.................................. 66,258,608
December 31, 2001.................................. 155,902,607
March 15, 2002..................................... 111,080,589
Under the Silgan Credit Agreement, Silgan is required to repay the
Terms Loans (pro rata for each tranche of Term Loans) in an amount equal to 50%
of Silgan's Excess Cash Flow (as defined in the Silgan Credit Agreement) in any
fiscal year during the Silgan Credit Agreement (beginning with the 1996 fiscal
year). Additionally, Silgan is required to repay the Term Loans (pro rata for
each tranche of Term
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Loans) in an amount equal to 80% of the net sale proceeds received from certain
asset sales (increasing to 100% of such net sale proceeds under certain
circumstances as described in the Silgan Credit Agreement) and 100% of the net
equity proceeds received from certain sales of equity (subject to certain
exceptions permitting Silgan and/or Holdings to use net equity proceeds to repay
certain of their other indebtedness or to repurchase certain outstanding capital
stock of Holdings), decreasing to 50% of net equity proceeds received after the
occurrence of certain events as described in the Silgan Credit Agreement, all as
provided in the Silgan Credit Agreement.
Interest and Fees. Interest on the Term Loans and the Revolving Loans
is payable at certain margins over certain rates as summarized below.
Interest on Term Loans maintained as Base Rate loans accrues at
floating rates of 1.5% less the then applicable Interest Reduction Discount (as
defined below) (in the case of A Term Loans) and 2% (in the case of B Term
Loans) over the Base Rate. Interest on Term Loans maintained as Eurodollar rate
loans accrues at floating rates of 2.5% less the then applicable Interest
Reduction Discount (in the case of A Term Loans) and 3% (in the case of B Term
Loans) over a formula rate (the "Eurodollar Rate") determined with reference to
the rate offered by Bankers Trust for dollar deposits in the New York interbank
Eurodollar market. Interest on Revolving Loans maintained as (i) Base Rate loans
accrues at floating rates of 1.5%, less the then applicable Interest Reduction
Discount, plus the Base Rate or (ii) Eurodollar Rate loans accrues at floating
rates of 2.5%, less the then applicable Interest Reduction Discount, plus the
Eurodollar Rate.
Under the Silgan Credit Agreement, Silgan agreed to pay to the Banks,
on a quarterly basis, a commitment commission calculated as 1/2 of 1% per annum
on the daily average term loan commitment of the Banks until such commitment is
terminated. Each of Containers and Plastics has agreed to jointly and severally
pay to the Banks, on a quarterly basis, a commitment commission calculated as
1/2 of 1% (decreasing to 3/8 of 1% under certain circumstances, as set forth in
the Silgan Credit Agreement) per annum on the daily average unused portion of
the Banks' revolving commitment in respect of the Revolving Loans until such
revolving commitment is terminated. Additionally, Containers and Plastics are
required to pay to the Banks, on a quarterly basis in arrears, a letter of
credit fee at a rate per annum of 2.5% less the then applicable Interest
Reduction Amount, and to pay to Bankers Trust a facing fee of 1/4 of 1% per
annum, each on the average daily stated amount of each letter of credit issued
for the account of Containers or Plastics, respectively.
Certain Covenants. The Silgan Credit Agreement contains numerous
financial and operating covenants, under which Silgan and its subsidiaries must
operate. Failure to comply with any of such covenants permits the Banks to
accelerate, subject to the terms of the 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, except that
Holdings and Silgan may merge under certain limited circumstances and Silgan and
its subsidiaries may make certain purchases of assets and/or stock, all as
provided in the Silgan Credit Agreement; (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, including (1)
dividends in amounts to allow Holdings to pay cash dividends on the Preferred
Stock (or interest on the Exchange Debentures) on and after the earlier of the
third anniversary of the issuance of the Old Preferred Stock or the second
anniversary of the issuance of the Old Preferred Stock if Holdings has
theretofore consummated a registered public offering of its common stock, so
long as the Company meets an interest coverage ratio test under the Silgan
Credit Agreement (which treats such dividends to be then paid as
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interest expense), (2) dividends in amounts to allow Holdings to pay interest
due on the Discount Debentures, (3) dividends with the proceeds from Retained
Excess Cash Flow (as defined in the Silgan Credit Agreement) provided that such
dividends are used by Holdings to pay cash dividends on the Preferred Stock (or
interest on the Exchange Debentures), (4) dividends with the proceeds of
Retained Excess Cash Flow, Refinancing Indebtedness (as defined herein) issued
by Silgan, or any registered public equity offering by Silgan, provided that
such dividends are used by Holdings to repurchase, redeem or repay the Discount
Debentures or any Refinancing Indebtedness issued by Holdings, (5) dividends
under certain circumstances as provided in the Silgan Credit Agreement to enable
Holdings to repurchase certain of its outstanding capital stock, and (6)
dividends in amounts and at the times as provided in the Silgan Credit Agreement
after the consummation of a registered public equity offering by Holdings; (b)
Containers and Plastics may pay dividends to Silgan as long as they remain
wholly owned subsidiaries of Silgan, Canadian Holdco may pay dividends to
Plastics, and Express may pay dividends to Canadian Holdco; (c) Containers and
Plastics may repurchase or redeem its respective stock options (or common stock
issuable upon exercise thereof) or SARs issued to its management under certain
circumstances; and (d) Silgan may pay dividends to the holders of its common
stock in amounts and at the times as provided in the Silgan Credit Agreement
after the consummation of a registered public equity offering by Silgan; (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 (including Silgan's indebtedness represented by the
11-3/4% Notes and by intercompany notes); (b) indebtedness of Containers to
Plastics or Plastics to Containers; (c) unsecured subordinated indebtedness of
Silgan, the proceeds of which are used to refinance, repay or redeem 11-3/4%
Notes; and (d) under certain limited circumstances, unsecured subordinated
indebtedness of Silgan, the proceeds of which are used by Silgan to pay a
dividend to Holdings, which dividend is then used by Holdings to refinance,
redeem or repay the Discount Debentures or any Refinancing Indebtedness of
Holdings; (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; (c) loans from Containers and/or Plastics to Silgan not
exceeding $25 million in aggregate principal amount outstanding at any time, (d)
advances from Silgan to Holdings to the same extent that Silgan is permitted to
pay dividends to Holdings for the purpose of enabling Holdings to pay cash
dividends on the Preferred Stock (or interest on the Exchange Debentures); and
(e) certain limited acquisitions and investments as provided in the Silgan
Credit Agreement; (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 $65 million
for each calendar year during the term of the Silgan Credit Agreement; provided,
however, that to the extent capital expenditures made during any period are less
than the amounts that are permitted to be made during such period, such amount
may be carried forward and utilized to make capital expenditures in the
immediately succeeding calendar year (except that no more than $10 million of
capital expenditures can be carried forward from 1995 to 1996), with any such
amount being deemed utilized first in such succeeding calendar year; (ix) except
as otherwise permitted under the Silgan Credit Agreement, to make any voluntary
payments, prepayments, acquire for value, redeem or exchange, among other
things, any 11-3/4% Notes, any of the Discount Debentures, any Refinancing
Indebtedness, any of the Preferred Stock (or Exchange Debentures) or to make
certain amendments to the 11-3/4% Notes, the Borrowers' or their respective
subsidiaries' respective certificates of incorporation and by-laws, or to
certain other agreements; (x) with certain exceptions, to have any subsidiaries
other than Containers and Plastics with respect to Silgan, C-W Can and SCCW 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; (xiii)
to engage in any business other than the packaging business; and (xiv) to
designate indebtedness as "Designated
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Senior Indebtedness" for purposes of the 11-3/4% Notes or any Refinancing
Indebtedness issued by Silgan.
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) may not, at any time, be less than 1.75:1, and that the ratio of
EBITDA (as defined below) to Interest Expense (as defined below) may not be, for
any period of four consecutive fiscal quarters (in each case, taken as one
accounting period) ended during a period set forth below, less than the ratio
set forth opposite such period below:
Period Ratio
------ -----
Fiscal quarter ending September 30, 1996................... 1.75:1
Fiscal quarter ending December 31, 1996.................... 1.80:1
Fiscal quarter ending March 31, 1997....................... 1.80:1
Fiscal quarter ending June 30, 1997........................ 1.80:1
Fiscal quarter ending September 30, 1997................... 1.80:1
Fiscal quarter ending December 31, 1997.................... 1.90:1
Fiscal quarter ending March 31, 1998....................... 1.90:1
Fiscal quarter ending June 30, 1998........................ 1.90:1
Fiscal quarter ending September 30, 1998................... 1.90:1
Fiscal quarter ending December 31, 1998.................... 2.00:1
Fiscal quarter ending March 31, 1999....................... 2.00:1
Fiscal quarter ending June 30, 1999........................ 2.00:1
Fiscal quarter ending September 30, 1999................... 2.00:1
Fiscal quarter ending December 31, 1999.................... 2.20:1
Fiscal quarter ending March 31, 2000....................... 2.20:1
Fiscal quarter ending June 30, 2000........................ 2.20:1
Fiscal quarter ending September 30, 2000................... 2.20:1
Fiscal quarter ending December 31, 2000.................... 2.40:1
Fiscal quarter ending March 31, 2001....................... 2.40:1
Fiscal quarter ending June 30, 2001........................ 2.40:1
Fiscal quarter ending September 30, 2001................... 2.40:1
Fiscal quarter ending December 31, 2001 and each
fiscal quarter thereafter................................ 2.50:1
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In addition, the Silgan Credit Agreement requires that the Leverage
Ratio (as defined below) for any Test Period (as defined below) ended on the
last day of a fiscal quarter set forth below is not permitted to exceed the
ratio set forth opposite such fiscal quarter below:
Date Ratio
Fiscal quarter ending September 30, 1996................... 5.10:1
Fiscal quarter ending December 31, 1996.................... 4.60:1
Fiscal quarter ending March 31, 1997....................... 4.60:1
Fiscal quarter ending June 30, 1997........................ 4.60:1
Fiscal quarter ending September 30, 1997................... 4.60:1
Fiscal quarter ending December 31, 1997.................... 4.30:1
Fiscal quarter ending March 31, 1998....................... 4.30:1
Fiscal quarter ending June 30, 1998........................ 4.30:1
Fiscal quarter ending September 30, 1998................... 4.30:1
Fiscal quarter ending December 31, 1998.................... 4.00:1
Fiscal quarter ending March 31, 1999....................... 4.00:1
Fiscal quarter ending June 30, 1999........................ 4.00:1
Fiscal quarter ending September 30, 1999................... 4.00:1
Fiscal quarter ending December 31, 1999.................... 3.75:1
Fiscal quarter ending March 31, 2000....................... 3.75:1
Fiscal quarter ending June 30, 2000........................ 3.75:1
Fiscal quarter ending September 30, 2000................... 3.75:1
Fiscal quarter ending December 31, 2000.................... 3.50:1
Fiscal quarter ending March 31, 2001....................... 3.50:1
Fiscal quarter ending June 30, 2001........................ 3.50:1
Fiscal quarter ending September 30, 2001................... 3.50:1
Fiscal quarter ending December 31, 2001 and each
fiscal quarter thereafter................................ 3.00:1
"Consolidated Current Assets" means the current assets of Holdings and
its subsidiaries determined on a consolidated basis, provided that the unused
amounts of commitments for Revolving Loans are included as current assets of
Holdings in making such determination.
"Consolidated Current Liabilities" means the current liabilities of
Holdings and its subsidiaries determined on a consolidated basis, provided that
the current portion of loans under the Silgan Credit Agreement, the current
portion of any loans made by Silgan to Containers or Plastics, and accrued
interest on the current portion of loans under the Silgan Credit Agreement, the
11-3/4% Notes, the Discount Debentures or any Refinancing Indebtedness from the
last regularly scheduled interest payment date shall not be considered current
liabilities for the purposes of making such determination.
"EBIT" means for any period the consolidated net income of Holdings 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 or losses from sales of assets (other than sales of inventory in the
ordinary course of business), or any noncash adjustments resulting from changes
in value of employee stock options.
"EBITDA" means for any period, EBIT, adjusted by adding thereto the
amount of all depreciation and all amortization of intangibles (including
covenants not to compete), goodwill and loan fees that were deducted in arriving
at EBIT for such period.
"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
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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 Holdings and its subsidiaries for such period (without
giving effect to any amortization of up-front fees and expenses in connection
with any debt issuance).
"Interest Reduction Discount" means initially zero, and, from and after
September 30, 1996, the percentage set forth in clause (A), (B), (C), (D), (E)
or (F) below to the extent applicable:
(A) 1/4 of 1% if, but only if, the Modified Leverage Ratio for
the current Test Period is less than or equal to 3.75:1.00 and none of
the conditions set forth in clauses (B) through (F) below are
satisfied;
(B) 1/2 of 1% if, but only if, the Modified Leverage Ratio for
the current Test Period is less than or equal to 3.375:1.00 and none of
the conditions set forth in clauses (C) through (F) below are
satisfied;
(C) 3/4 of 1% if, but only if, the Modified Leverage Ratio for
the current Test Period is less than or equal to 3.00:1.00 and none of
the conditions set forth in clauses (D) through (F) below are
satisfied;
(D) 1% if, but only if, the Modified Leverage Ratio for the
current Test Period is less than or equal to 2.625:1.00 and neither of
the conditions set forth in clause (E) or (F) below is satisfied;
(E) 1-1/4% if, but only if, the Modified Leverage Ratio for
the current Test Period is less than or equal to 2.25:1.00 and the
condition set forth in clause (F) below is not satisfied; or
(F) 1-1/2% if, but only if, the Modified Leverage Ratio for
the current Test Period is less than or equal to 1.875:1.00.
Notwithstanding anything to the contrary above in this definition, (i)
if Silgan's long-term Indebtedness receives a stated "senior implied" rating of
at least BBB- from Standard & Poor's Ratings Group or at least Baa3 from Moody's
Investors Service, Inc., then from the date that is the first business day of
the fiscal quarter of Silgan following the fiscal quarter containing the first
date that either such rating is announced and for so long as such rating remains
in effect, the Interest Reduction Discount will be 1-1/2% and (ii) the Interest
Reduction Discount will be reduced to zero at all times when a default or an
event of default under the Silgan Credit Agreement exists.
"Letter of Credit Outstandings" means, at any time, the sum of (i) the
aggregate stated amount of all outstanding letters of credit issued under the
Silgan Credit Agreement and (ii) the amount of all unpaid drawings for letters
of credit issued under the Silgan Credit Agreement.
"Leverage Ratio" means, for any period, the ratio of (x) the sum of (I)
Total Indebtedness (excluding Revolving Outstandings) as of the last day of such
period plus (II) the Revolving Outstandings on the December 31st immediately
preceding the last day of such period (or, in the case of a Test Period
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ended on December 31 in any fiscal year, the Revolving Outstandings on such
December 31) to (y) EBITDA for the then most recently ended Test Period.
"Modified Leverage Ratio" means, at any time, the ratio of (x) the sum
of (I) Total Consolidated Term Debt at such time plus (II) the Revolving
Outstandings on the December 31st immediately preceding the last day of the
applicable period (or, in the case of a Test Period ended on December 31 in any
fiscal year, the Revolving Outstandings on such December 31) to (y) EBITDA for
the then most recently ended Test Period.
"Refinancing Indebtedness" means (i) any Indebtedness incurred as
permitted by the Silgan Credit Agreement the proceeds of which are used to
refinance, redeem or repay outstanding 11-3/4% Notes, Discount Debentures and/or
any Refinancing Indebtedness previously issued by Holdings or (ii) any
Indebtedness of Holdings incurred pursuant to the Holdings Guaranty the proceeds
of which are used to refinance, redeem or repay outstanding Discount Debentures.
"Revolving Outstandings" means, at any time, the sum of the aggregate
principal amount of Revolving Loans and Swingline Loans then outstanding plus
the aggregate amount of all Letter of Credit Outstandings at such time.
"Test Period" shall mean each period of four consecutive fiscal
quarters of Holdings (in each case taken as one accounting period), provided
that the first Test Period shall end on December 31, 1995.
"Total Consolidated Term Debt" means, at any time, the sum of (1) the
aggregate principal amount of Term Loans then outstanding, (2) the aggregate
accreted principal amount of Discount Debentures then outstanding, (3) the
aggregate principal amount of 11-3/4% Notes then outstanding, (4) the aggregate
principal amount (or accreted amount if issued at a discount) of all Refinancing
Indebtedness then outstanding, (5) the aggregate principal amount of all
Indebtedness then outstanding that was assumed in connection with an acquisition
permitted under the Silgan Credit Agreement, (6) the aggregate principal amount
of certain promissory notes then outstanding that were issued by Holdings
pursuant to the Holdings Guaranty (as defined herein) which notes provide for
the current payment of interest in cash, and (7) the aggregate principal amount
of Exchange Debentures then outstanding.
"Total Indebtedness" means the aggregate Indebtedness of Holdings and
its subsidiaries determined on a consolidated basis, provided that, in making
such determination, Indebtedness consisting of capitalized lease obligations
existing as of the effective date of the Silgan Credit Agreement or permitted to
be incurred pursuant to the Silgan Credit Agreement are excluded.
For purposes of the various computations under the Silgan Credit
Agreement, including the ratio of EBITDA to Interest Expense and the Leverage
Ratio, (i) all computations utilize accounting principles in conformity with
those used to prepare the statements of consolidated and consolidating financial
condition of Holdings and its subsidiaries and Silgan and its subsidiaries at
December 31, 1994 and the related consolidated and consolidating statements of
income and cash flow of Holdings and its subsidiaries and Silgan and its
subsidiaries for the fiscal year ended December 31, 1994, as audited by Ernst &
Young LLP, and (ii) no effect is given to certain other matters as provided in
the Silgan Credit Agreement.
The ability of Holdings to take certain actions is restricted or
limited pursuant to the terms of the Holdings Guaranty. The Holdings Guaranty
restricts or limits Holdings' ability to, among other things: (i) create certain
liens, (ii) incur additional indebtedness, except that, among other things,
Holdings may incur unsecured subordinated Indebtedness the proceeds of which are
used to refinance, redeem or repay the Discount Debentures or any Refinancing
Indebtedness of Holdings and Holdings may exchange the
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Preferred Stock for the Exchange Debentures on or after the earlier of the third
anniversary of the issuance of the Old Preferred Stock or the consummation by
Holdings of a registered public offering of its common stock in an amount equal
to or greater than the principal amount of the Exchange Debentures, (iii)
consolidate, merge or sell its assets and purchase or lease assets, except that
Holdings may merge with Silgan to the extent that such merger is permitted under
the Silgan Credit Agreement, (iv) pay cash dividends, except that, among other
things, Holdings may pay cash dividends on the Preferred Stock to the extent
that Silgan is permitted to pay cash dividends or make advances to Holdings
under the Silgan Credit Agreement for such purpose and dividends to the holders
of its common stock in amounts and at the times as provided in the Silgan Credit
Agreement after the consummation of a registered public equity offering by
Holdings, (v) repurchase any of its capital stock, except that Holdings is
permitted to purchase the Holdings Class B Stock held by Mellon, as trustee for
First Plaza, with proceeds from the Private Offering, (vi) make loans or
advances, except that, among other things, Holdings may make advances to Silgan
as permitted under the Silgan Credit Agreement, and (vii) engage in any business
other than holding Silgan's common stock and certain other limited matters
permitted by the Holding Guaranty.
Events of Default. Events of default under the 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 Revolving
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 Revolving Loans or any unpaid drawings under any
letter of credit or any fees or other amounts owing under the Silgan Credit
Agreement; (ii) subject to certain limited exceptions, 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; (ix) a
Change of Control (as defined in the Silgan Credit Agreement) shall occur; and
(x) the requirement that Silgan repurchase any 11-3/4% Note or that Holdings
repurchase any Discount Debenture, in any case as a result of a Change of
Control (as defined in the agreements and indentures relating thereto).
Upon the occurrence of any event of default under the Silgan Credit
Agreement, the Banks are permitted, among other things, to accelerate the
maturity of the Term Loans and the Revolving Loans and all other outstanding
indebtedness under the Silgan Credit Agreement and terminate their commitment to
make any further Revolving Loans or to issue any letters of credit.
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 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
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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 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal United States
federal income tax consequences of the purchase, ownership and disposition of
the New Preferred Stock and the Exchange Debentures, but does not purport to be
a complete analysis of all of the potential tax effects of such purchase,
ownership or disposition. This summary deals only with New Preferred Stock and
Exchange Debentures held as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended by U.S. Holders (as defined
below). It does not address all aspects of the U.S. federal income tax
consequences of holding the New Preferred Stock or the Exchange 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, financial institutions, tax-exempt
organizations, dealers in securities and currencies, persons holding New
Preferred Stock or Exchange Debentures as a part of a hedging or conversion
transaction or a straddle, U.S. Holders whose "functional currency" is not the
U.S. dollar or Non-U.S. Holders (as defined below). This summary also does not
discuss tax consequences under state, local, or foreign tax laws. Holders of the
New Preferred Stock 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 jurisdiction, to their particular situation.
Furthermore, the discussion below is based upon the provisions of the Code and
existing and proposed Treasury regulations, administrative rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified, possibly with retroactive effect, so as to result
in U.S. federal income tax consequences different from those discussed below.
As used herein, a "U.S. Holder" means a beneficial owner that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. An
individual may, subject to certain exceptions, be deemed to be a resident (as
opposed to a non-resident alien) of the United States for certain purposes by
virtue of being present in the United States on at least 31 days in the calendar
year and for an aggregate of at least 183 days during a three-year period ending
in the current calendar year (counting for such purposes all of the days present
in the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year). A "Non-
U.S. Holder" is a holder that is not a U.S. Holder.
ALL PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF THE NEW PREFERRED STOCK OR THE EXCHANGE DEBENTURES.
Exchange of Old Preferred Stock for New Preferred Stock
An exchange of the Old Preferred Stock for the New Preferred Stock
should not constitute a taxable event for federal income tax purposes because
the New Preferred Stock should not be considered to differ materially in kind or
extent from the Old Preferred Stock. Rather, the New Preferred Stock received by
a U.S. Holder should be treated as a continuation of the Old Preferred Stock in
the hands
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of such U.S. Holder. As a result, U.S. Holders who exchange their Old Preferred
Stock for New Preferred Stock should not recognize any income, gain or loss for
federal income tax purposes with respect to such exchange. The following
discussion assumes that an exchange of Old Preferred Stock for New Preferred
Stock will not be treated as an exchange for federal income tax purposes.
Distributions on the New Preferred Stock
Distributions of cash or, under Section 305(b)(4) of the Code, of
additional shares of New Preferred Stock on the New Preferred Stock will be
treated as dividends taxable as ordinary income to U.S. Holders to the extent of
Holdings' current and accumulated earnings and profits as determined under U.S.
federal income tax principles. The amount of a distribution of additional shares
of New Preferred Stock will equal the fair market value of the shares of New
Preferred Stock distributed as of the date of such distribution. To the extent
that the amount of a distribution on the New Preferred Stock exceeds Holdings'
current and accumulated earnings and profits, such distribution will be treated
as a nontaxable return of capital and will be applied against and reduce the
adjusted tax basis of the New Preferred Stock in the hands of each U.S. Holder
(but not below zero), thus increasing the amount of any gain (or reducing the
amount of any loss) which would otherwise be realized by such U.S. Holder upon
the sale or other taxable disposition of such New Preferred Stock. The amount of
any such distribution which exceeds the adjusted tax basis of the New Preferred
Stock in the hands of the U.S. Holder will be treated as capital gain and will
be either long-term or short-term capital gain depending on the U.S. Holder's
holding period for the New Preferred Stock. There can be no assurance that for
any particular taxable year Holdings will have current or accumulated earnings
and profits.
Under Section 243 of the Code, corporate U.S. Holders generally will be
able to deduct 70% of the amount of any distribution qualifying as a dividend.
There are, however, many exceptions and restrictions relating to the
availability of such dividends-received deduction. Section 246A of the Code
reduces the dividends-received deduction allowed to a corporate U.S. Holder that
has incurred indebtedness "directly attributable" to its investment in portfolio
stock. Section 246(c) of the Code requires that, in order to be eligible for the
dividends-received deduction, a corporate U.S. Holder must generally hold the
shares of New Preferred Stock for a 46-day minimum holding period or a 91-day
period in certain circumstances. A taxpayer's holding period for these purposes
is suspended during any period in which a U.S. Holder has certain options or
contractual obligations with respect to substantially identical stock or holds
one or more other positions with respect to substantially identical stock that
diminishes the risk of loss from holding the New Preferred Stock. A recent
legislative proposal would (i) reduce the dividends-received deduction from 70%
to 50% and (ii) modify the manner in which the 46- or 91-day minimum holding
period is determined. It is unclear whether and in what form such proposal will
be enacted.
Under Section 1059 of the Code, a corporate U.S. Holder is required to
reduce its tax basis (but not below zero) in the New Preferred Stock by the
non-taxed portion of any "extraordinary dividend" if such stock has not been
held for more than two years before the earliest of the date such dividend is
declared, announced or agreed to. Generally, the non-taxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction provisions of Section 243 of the Code. An
extraordinary dividend on the Preferred Stock generally would be a dividend that
(i) equals or exceeds 5% of the corporate U.S. Holder's adjusted tax basis in
the Preferred Stock, treating all dividends received and all dividends having
ex-dividend dates within an 85-day period as one dividend, or (ii) exceeds 20%
of the corporate U.S. Holder's adjusted tax basis in such Preferred Stock,
treating all dividends received and all dividends having ex-dividend dates
within a 365-day period as one dividend. In determining whether a dividend paid
on the New Preferred Stock is an extraordinary dividend, a corporate U.S. Holder
may elect to substitute the fair market value of the New Preferred
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Stock for such U.S. Holder's tax basis for purposes of applying these tests,
provided such fair market value is established to the satisfaction of the
Secretary of Treasury (the "Secretary") as of the day before the ex-dividend
date. An extraordinary dividend also includes any amount treated as a dividend
in the case of a redemption that is either non-pro rata as to all stockholders
or in partial liquidation of a company, regardless of the stockholder's holding
period and regardless of the size of the dividend, including a redemption
pursuant to Holding's right to redeem the New Preferred Stock for cash or
exchange the New Preferred Stock for Exchange Debentures. If any part of the
non-taxed portion of an extraordinary dividend is not applied to reduce the
corporate U.S. Holder's tax basis as a result of the limitation on reducing such
basis below zero, such part will be treated as gain upon the sale or exchange of
the New Preferred Stock. However, recently introduced legislation would require
gain on the non-taxed portion of an extraordinary dividend to be recognized in
the taxable year in which the extraordinary dividend is received rather than at
the time of the sale or exchange of the New Preferred Stock. It is unclear
whether and in what form such legislation will be enacted. Corporate U.S.
Holders are urged to consult their tax advisors with respect to the possible
application of Section 1059 to their ownership and disposition of the New
Preferred Stock.
A corporate U.S. Holder's liability for alternative minimum tax may be
affected by the portion of the dividends received which such corporate U.S.
Holder deducts in computing taxable income. This results from the fact that
corporate stockholders are required to increase alternative minimum taxable
income by 75% of the excess of the current earnings and profits (with certain
adjustments) over alternative minimum taxable income (determined without regard
to earnings and profit adjustments or the alternative tax net operating loss
deduction).
Redemption Premium
Under Section 305(c) of the Code and the applicable Treasury
regulations thereunder, if the redemption price of New Preferred Stock exceeds
its issue price, the difference ("redemption premium") may be taxable as a
constructive distribution of additional New Preferred Stock to the U.S. Holder
(treated as a dividend to the extent of Holdings' current and accumulated
earnings and profits and otherwise subject to the treatment described above for
distributions) over a certain period.
Because the New Preferred Stock provides for optional rights of
redemption by Holdings at prices in excess of the issue price, U.S. Holders
could be required to recognize such redemption premium under a constant yield
method similar to that described below for accruing OID (see "--Interest and OID
on the Exchange Debentures--Original Issue Discount" below) if, based on all of
the facts and circumstances, the optional redemption is more likely than not to
occur. If stock may be redeemed at more than one time, the time and price at
which such redemption is most likely to occur must be determined based on all of
the facts and circumstances. Applicable Treasury regulations provide a "safe
harbor" under which a right to redeem will not be treated as more likely than
not to occur if (i) the issuer and the holder are not related within the meaning
of the Treasury regulations; (ii) there are no plans, arrangements or agreements
that effectively require or are intended to compel the issuer to redeem the
stock (disregarding, for this purpose, a separate mandatory redemption); and
(iii) exercise of the right to redeem would not reduce the yield of the stock,
as determined under the Treasury regulations. Further, the Treasury regulations
provide that such redemption premium is not taxable as a constructive
distribution if it is solely in the nature of a penalty for premature
redemption. A redemption premium is solely in the nature of a penalty for
premature redemption if it is paid as a result of changes in economic or market
conditions over which neither the issuer nor the holder has control. Regardless
of whether the optional redemption is more likely than not to occur, or whether
the redemption premium is solely in the nature of a penalty for premature
redemption, constructive dividend treatment will not result if the redemption
premium does not exceed a de minimis amount. Based on the Treasury regulations,
Holdings intends to take the position
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that the existence of Holdings' optional redemption rights do not result in a
constructive distribution to the U.S. Holders.
Further, because the New Preferred Stock provides for an optional right
of the U.S. Holders to require Holdings to acquire the New Preferred Stock at a
price equal to 101% of the liquidation value upon a Change in Control, U.S.
Holders could be required to recognize such redemption premium under the
constant yield method discussed above unless, very generally, the likelihood of
redemption is remote. Here, too, regardless of whether the likelihood of
redemption is remote, constructive dividend treatment will not result if the
redemption premium does not exceed a de minimis amount of 1/4 of 1% of the
stated redemption price at maturity multiplied by the number of complete years
to maturity. Since the premium is 1% and the New Preferred Stock has a term of
ten years, Holdings intends to take the position that the existence of U.S.
Holders' optional redemption right does not result in a constructive
distribution to the Holders.
Moreover, the New Preferred Stock provides for a mandatory redemption
at a redemption price equal to the liquidation value of the New Preferred Stock,
plus accrued and unpaid dividends. If at the time of issuance of preferred
stock, there is no intention for dividends to be paid currently, the IRS may
treat the payment of such dividends on redemption as disguised redemption
premium subject to the constant yield rules discussed above. Dividends on the
New Preferred Stock are payable in cash or, on or prior to July 15, 2000, in
additional shares of New Preferred Stock. Holdings intends to pay all such
dividends currently. Thus, while the appropriate treatment of unpaid cumulative
dividends has not yet been addressed in Treasury regulations and no assurance
can be given as to the outcome of such guidance, Holdings intends to take the
position that the terms of the mandatory redemption should not result in a
constructive distribution to the U.S. Holders.
Finally, in the event that additional New Preferred Stock is
distributed on the New Preferred Stock as dividends and such additional New
Preferred Stock has an issue price at the time of distribution that is less than
its redemption price, such additional New Preferred Stock would have a
redemption premium that may be taxable as a constructive distribution of
additional stock to a U.S. Holder (treated as a dividend to the extent of
Holdings current and accumulated earnings and profits) under the constant yield
method (discussed above) over the term of such additional New Preferred Stock.
Redemption, Sale or Exchange of New Preferred Stock
Exchange or Distribution Characterization
The sale of the New Preferred Stock by a U.S. Holder will be a taxable
transaction. Likewise, a redemption of shares of the New Preferred Stock for
cash or an exchange of the New Preferred Stock for Exchange Debentures will be a
taxable transaction. For U.S. federal income tax purposes, the exchange of the
New Preferred Stock for Exchange Debentures will be treated as if Holdings made
a distribution of the Exchange Debentures in redemption of the New Preferred
Stock. Under Section 302(b) of the Code, such a redemption for cash or the
Exchange Debentures will be treated as a sale or exchange transaction on which a
U.S. Holder will generally recognize capital gain or loss (except to the extent
of amounts received on the exchange that are attributable to declared dividends,
which will be treated in the same manner as distributions described above)
provided that the redemption (i) results in complete termination of the holder's
stock interest in Holdings under Section 302(b)(3) of the Code; (ii) is
"substantially disproportionate" with respect to the stockholder under Section
302(b)(2) of the Code or (iii) is not "essentially equivalent to a dividend"
under Section 302(b)(1) of the Code because it results in a "meaningful
reduction" in a U.S. Holder's stock interest in Holdings. Whether a redemption
will result in a meaningful reduction depends on the particular holder's facts
and circumstances. In
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determining whether any of these tests have been met, the holder is deemed,
under the constructive ownership rules of Section 302(c) of the Code, to own any
shares of Holdings stock that are owned, or deemed owned, by certain related
persons and entities and any shares that such holder, or related person or
entity, has the right to acquire by exercise of an option.
Distribution Treatment
If the redemption of the New Preferred Stock does not result in a
complete termination or meaningful reduction and is not substantially
disproportionate, the transaction will be treated as a distribution of cash or
Exchange Debentures, as the case may be. The amount of such distribution will be
measured by the amount of cash received by the U.S. Holder or the "issue price,"
as defined below, of the Exchange Debentures received by the U.S. Holder, and
such distribution will be treated in the same manner as distributions described
above. However, corporate U.S. Holders should be aware that to the extent such
distribution is treated as a dividend it may be treated as an extraordinary
dividend under Section 1059 of the Code. A U.S. Holder's aggregate tax basis in
the Exchange Debentures will be equal to the issue price of the Exchange
Debentures received by the U.S. Holder.
Sale or Exchange Treatment
If a U.S. Holder sells the New Preferred Stock, or the redemption of
the New Preferred Stock results in a complete termination or meaningful
reduction or is substantially disproportionate, the gain or loss recognized on
such sale or exchange will generally be equal to the difference between the
amount realized by the U.S. Holder and such U.S. Holder's adjusted tax basis in
the New Preferred Stock surrendered. In the case of a sale or redemption for
cash, the amount realized will be the cash received on such sale or redemption.
In the case of an exchange of New Preferred Stock for Exchange Debentures, the
amount realized on receipt of the Exchange Debenture will be equal to the "issue
price" of the Exchange Debenture. Thus, the amount realized on the exchange will
be equal to the issue price of the Exchange Debentures plus any cash received on
the exchange (other than amounts received with respect to declared dividends).
If, as of the exchange date, the Exchange Debentures or the New Preferred Stock
are traded on an established securities market on or at any time during the
60-day period ending 30 days after the exchange date, the issue price of an
Exchange Debenture would be equal to the fair market value of the traded
instrument. If neither the New Preferred Stock nor the Exchange Debentures are
so traded, the issue price of the Exchange Debentures would be the stated
principal amount of the Exchange Debentures provided that the yield on the
Exchange Debentures is equal to or greater than the "applicable federal rate" in
effect at the time the Exchange Debenture is issued. If the yield on the
Exchange Debentures is less than such applicable Federal rate, its issue price
under Section 1274 of the Code would be equal to the present value, as of the
issue date, of all payments to be made on the Exchange Debentures, discounted at
the applicable federal rate. It cannot be determined at the present time whether
the New Preferred Stock or the Exchange Debentures will be, at the relevant
time, traded on an established securities market within the meaning of the OID
Regulations or whether the yield on the Exchange Debentures will equal or exceed
the applicable federal rate, as discussed above. However, Holdings does not
expect a public market for the New Preferred Stock (or the Exchange Debentures)
to develop in the foreseeable future. A U.S. Holder's adjusted tax basis in the
New Preferred Stock surrendered in the redemption will equal the amount paid for
such stock plus any amount included in gross income pursuant to an actual
distribution of additional New Preferred Stock or a constructive distribution of
redemption premium, in each case under Section 305 of the Code, as described in
"-- Distributions on the New Preferred Stock" and "--Redemption Premium," and
reduced by the amount of any distribution treated as a nontaxable return of
capital that reduced the adjusted tax basis of the New Preferred Stock, as
described in "--Distributions on the New Preferred Stock." Such gain or loss
will be
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either long-term or short-term capital gain depending on the U.S. Holder's
holding period for the New Preferred Stock at the time of redemption, sale,
exchange or retirement of the New Preferred Stock.
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding New Preferred Stock because, for example, payments
of interest on the Exchange Debentures will not be eligible for any
dividends-received deduction that may be available to corporate U.S. Holders.
Interest and OID on the Exchange Debentures
The tax treatment of the Exchange Debentures will turn on whether or
not they are issued with original issue discount. Exchange Debentures issued on
or before July 15, 2000 will be issued with OID. Exchange Debentures issued
after July 15, 2000 will not be issued with OID unless their stated redemption
price at maturity, as defined below, exceeds their issue price, as defined
above. Exchange Debentures issued with OID will be referred to as "OID
Debentures." Prospective investors are urged to consult their own tax advisors
as to the consequences of owning Exchange Debentures.
Stated Interest
Payments of interest on a debt instrument generally will be includible
in a U.S. Holder's income as ordinary income under the holder's method of
accounting for U.S. federal income tax purposes. However, because Holdings has
the option through July 15, 2000 to pay interest on the Exchange Debentures by
issuing additional Exchange Debentures, Exchange Debentures issued prior to that
date may be treated as issued with OID, and stated interest on such Exchange
Debentures would not be treated as interest for U.S. federal income tax
purposes, but instead will be subject to the OID rules described below. If the
Exchange Debentures are not issued with OID, then interest on an Exchange
Debenture generally will be includible in a U.S. Holder's income as ordinary
income under the U.S. Holder's method of accounting. Exchange Debentures issued
after July 15, 2000 may also be issued with OID.
Original Issue Discount
U.S. Holders of OID Debentures will be subject to special tax
accounting rules, as described in greater detail below. U.S. Holders of such OID
Debentures should be aware that they generally must include OID in gross income
for U.S. federal income tax purposes on an annual basis under a constant yield
accrual method. As a result, such U.S. Holders will include OID in income in
advance of the receipt of cash attributable to that income. However, U.S.
Holders of OID Debentures generally will not be required to include separately
in income cash payments received on such OID Debentures, even if denominated as
interest, to the extent such payments do not constitute qualified stated
interest (as defined below). Holdings will report to U.S. Holders of any OID
Debentures on a timely basis the reportable amount of OID and interest income
based on its understanding of applicable law.
The amount of OID, if any, on a debt instrument is the excess of its
"stated redemption price at maturity" over its "issue price," subject to a
statutorily defined de minimis exception. 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 payments of "qualified stated
interest." For this purpose, "qualified stated interest" means stated interest
that is unconditionally payable in cash or in property (other than the debt
instruments of the issuer), at least annually at a single fixed rate during the
entire term of the debt instrument that appropriately takes into account the
length of intervals between payments). The "issue price" of an Exchange
Debenture will be determined as described under "-- Redemption, Sale or Exchange
of New Preferred Stock" above.
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As noted above, because Holdings has the option through July 15, 2000
to pay interest on the Exchange Debentures by issuing additional Exchange
Debentures, any Exchange Debentures issued prior to that date will be treated as
OID Debentures, and none of the stated interest on such OID Debentures will be
treated as qualified stated interest unless, under special rules for interest
holidays, the amount of OID is treated as de minimis. Any OID Debentures so
issued would be treated as having been issued with OID equal to the excess of
their stated redemption price at maturity (which will be equal to the sum of the
principal amount plus all payments of stated interest) over their issue price
(which will be as described under "--Redemption, Sale or Exchange of New
Preferred Stock" above). Any additional OID Debentures issued in lieu of cash
would not be treated as debt instruments separate from the OID Debentures upon
which they were issued, but instead are aggregated with such OID Debentures.
The right to issue additional Exchange Debentures in lieu of paying
cash interest through July 15, 2000 is treated for purposes of the OID
provisions of the Code as an option to defer the interest payments on the
Exchange Debentures until maturity. Treasury regulations provide that in the
case of a debt instrument that provides the issuer with an unconditional option
or options exercisable during the term of the debt instrument that, if
exercised, require payments to be made on the debt instrument under an
alternative payment schedule, the yield and maturity of such debt instrument for
purposes of calculating OID are determined by assuming the issuer exercises or
does not exercise the option in a manner that minimizes the yield on the debt
instrument.
If the issue price of the Exchange Debentures is at least equal to
their principal amount, the yield to maturity of the Exchange Debentures if the
option to pay interest with additional Exchange Debentures is exercised will be
no less than the yield to maturity if the option is not exercised. Accordingly,
for purposes of calculating OID, it would be assumed that Holdings will not
exercise the option because exercise of the option will not minimize the yield.
If the option was in fact subsequently exercised and additional Exchange
Debentures were issued by Holdings in lieu of cash, such additional Exchange
Debentures would be aggregated with the Exchange Debentures upon which they were
issued, and OID would be calculated for the remainder of the term of the
Exchange Debentures based upon an adjusted issue price which includes the
principal amount of the additional Exchange Debentures. As a result of such
exercise, U.S. Holders of Exchange Debentures would include OID in income in
advance of the receipt of cash, regardless of such U.S. Holders' regular methods
of accounting.
If the issue price of the Exchange Debentures is less than their
principal amount, the yield to maturity of the Exchange Debentures, if the
option to pay interest with additional Exchange Debentures is exercised, will be
less than the yield to maturity if the option is not exercised. Accordingly, for
purposes of calculating OID, it would be assumed that Holdings will exercise the
option because to do so will minimize the yield. If Holdings does in fact
exercise its option and issues additional Exchange Debentures in lieu of cash,
U.S. Holders of Exchange Debentures will include OID in income in advance of the
receipt of cash, regardless of such U.S. Holders' regular method of accounting.
If Holdings subsequently makes a cash payment instead of exercising its option
and issuing an additional Exchange Debenture, the cash payment made will be
treated as a prepayment of the Exchange Debentures, partially retiring such
Exchange Debentures on a pro rata basis on the date of such payment. Such
retirement would be a taxable exchange to a U.S. Holder of the Exchange
Debenture.
If the Exchange Debentures are issued after July 15, 2000, Holdings
will not have the option to pay interest with additional Exchange Debentures. In
such event, (i) all interest payments on any Exchange Debenture issued will be
qualified stated interest, (ii) the redemption price at maturity of any Exchange
Debenture will be equal to its principal amount, and (iii) any Exchange
Debenture will therefore be issued with OID only to the extent its principal
amount exceeds its issue price (provided that such excess is not de minimis). As
described under "--Redemption, Sale or Exchange of New Preferred
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<PAGE>
Stock" above, however, the issue price of the Exchange Debentures cannot be
determined at the present time.
The amount of OID includible in income by an initial U.S. Holder of an
OID Debenture is the sum of the "daily portions" of OID with respect to the OID
Debenture for each day during the taxable year or portion of the taxable year in
which such U.S. Holder holds such Debenture ("accrued OID"). The daily portion
is determined by allocating to each day in any "accrual period" a pro rata
portion of the OID allocable to that accrual period. The "accrual period" for an
OID Debenture may be of any length and may vary in length over the term of the
OID Debenture, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occur on the first day or the
final day of an accrual period. The amount of OID allocable to any accrual
period is an amount equal to the excess, if any, of (a) the product of the OID
Debenture's adjusted issue price at the beginning of such accrual period and its
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of any qualified stated interest allocable to the accrual period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity (other than a payment of qualified stated interest) and the
adjusted issue price at the beginning of the final accrual period. Special rules
will apply for calculating OID for an initial short accrual period. The
"adjusted issue price" of an OID Debenture at the beginning of any accrual
period is equal to its issue price increased by the accrued OID for each prior
accrual period (determined without regard to the amortization of any acquisition
or bond premium, as described below) and reduced by any payments made on such
Debenture (other than qualified stated interest) on or before the first day of
the accrual period.
The Exchange Debentures may be redeemed prior to their stated maturity
at the option of Holdings. For purposes of computing the yield of such
instruments, Holdings will be deemed to exercise or not exercise its option to
redeem the OID Debentures in a manner that minimizes the yield on the OID
Debentures. It is not anticipated that Holdings' ability to redeem prior to
stated maturity would affect the yield of an OID Debenture.
In the event of a change of control, Holdings will be required to offer
to repurchase all of the Exchange Debentures. The right of holders to require
repurchase upon a Change of Control will not affect the yield or maturity date
of (i) the Exchange Debentures issued prior to August 13, 1996 unless, based on
all the facts and circumstances as of the issue date, it is more likely than not
that such an event giving rise to the repurchase will occur or (ii) the Exchange
Debentures issued on or after August 13, 1996, provided that, based on all the
facts and circumstances as of the issue date, the payment schedule on such
Exchange Debentures that does not reflect a change of control is significantly
more likely than not to occur. Holdings does not intend to treat the change of
control provisions of the Exchange Debentures as affecting the computation of
the yield to maturity of any Exchange Debentures.
U.S. Holders may elect to treat all interest on any Exchange Debenture
as OID and calculate the amount includible in gross income under the constant
yield method described above. For the purposes of this election, interest
includes stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. The election is to be made for
the taxable year in which the U.S. Holder acquired the Exchange Debenture, and
may not be revoked without the consent of the Internal Revenue Service (the
"IRS"). United States Holders should consult with their own tax advisors about
this election.
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Market Discount on Exchange Debentures
If a U.S. Holder acquires an Exchange Debenture (other than an OID
Debenture) for an amount less than its stated redemption price at maturity or,
in the case of an OID Debenture for an amount that is less than its adjusted
issue price, the amount of the difference will be treated as "market discount"
for federal income tax purposes, unless such difference is less than a specified
de minimis amount. Under the market discount rules, a U.S. Holder will be
required to treat any principal payment on an Exchange Debenture, or any gain on
the sale, exchange, retirement or other disposition of, an Exchange Debenture as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Exchange
Debenture at the time of such payment or disposition. In addition, the U.S.
Holder may be required to defer, until the maturity of the Exchange Debenture or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such Exchange Debenture.
Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Exchange
Debenture, unless the U.S. Holder elects to accrue on a constant interest
method. A U.S. Holder of an Exchange Debenture may elect to include market
discount in income currently as it accrues (on either a ratable or constant
interest method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations acquired
on or after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Acquisition Premium; Amortizable Bond Premium
A U.S. Holder that acquires an Exchange Debenture with OID for an
amount that is greater than its adjusted issue price but equal to or less than
the sum of all amounts payable on the Exchange Debenture after the purchase
date, other than qualified stated interest, will be considered to have purchased
such Exchange Debenture at an "acquisition premium." Under the acquisition
premium rules, the amount of OID, if any, which such U.S. Holder must include in
its gross income with respect to such Exchange Debenture for any taxable year
will be reduced by the portion of such acquisition premium properly allocable to
such year.
If at the time the New Preferred Stock is exchanged for Exchange
Debentures or at the time a subsequent U.S. Holder acquires Exchange Debentures,
the U.S. Holder's tax basis in any such Exchange Debenture exceeds the sum of
all amounts payable on the Exchange Debenture after the exchange date or
purchase date, other than qualified stated interest, such excess may constitute
"premium" and such U.S. Holder will not be required to include any OID in
income. A U.S. Holder generally may elect to amortize bond premium over the
remaining term of the Exchange Debenture on a constant yield method. The amount
amortized in any year will be treated as a reduction of the U.S. Holder's
interest income, including OID, from the Exchange Debenture. Bond premium on an
Exchange Debenture held by a U.S. Holder that does not make such an election
will decrease the gain or increase the loss otherwise recognized on disposition
of the Exchange Debenture. The election to amortize bond premium on a constant
yield method, once made, applies to all debt obligations held or subsequently
acquired by the electing U.S. Holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS.
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Redemption, Sale or Exchange of Exchange Debentures
Upon the redemption, sale, exchange or retirement of an Exchange
Debenture, a U.S. Holder will recognize gain or loss equal to the difference
between the amount realized upon the redemption, sale, exchange or retirement
(less any accrued qualified stated interest, not previously taken into account,
which will be taxable as such) and the adjusted tax basis of the Exchange
Debenture. The adjusted tax basis of a U.S. Holder who received Exchange
Debentures in exchange for New Preferred Stock will, in general, be equal to the
issue price of such Exchange Debentures, increased by OID and market discount
previously included in income by the U.S. Holder and reduced by any amortized
premium and any cash payments on the Exchange Debentures other than qualified
stated interest. Such gain or loss will be either long-term or short-term
capital gain depending on the U.S. Holder's holding period for the Exchange
Debenture at the time of redemption, sale, exchange or retirement of the
Exchange Debenture.
Applicable High Yield Discount Obligations
If (x) the term of the OID Debentures is more than five years, (y) the
yield-to-maturity of the OID Debentures, computed as of their issue date, equals
or exceeds the sum of (A) the "applicable federal rate" (as determined under
Section 1274(d) of the Code) in effect for the month in which the OID Debentures
are issued (the "AFR") and (B) 5%, and (z) the OID on such OID Debentures is
"significant," the OID Debentures will be considered AHYDOS under Section 163(i)
of the Code. If the OID Debentures are AHYDOS, Holdings would not be allowed to
take a deduction for interest (including OID) accrued on the OID Debentures for
U.S. federal income tax purposes until such time as Holdings actually paid such
interest (including OID) in cash or in other property (other than stock or debt
of Holdings or a person deemed to be related to Holdings under Section 453(f)(1)
of the Code).
Moreover, if the yield-to-maturity on the OID Debenture were to exceed
the sum of the AFR and 6% (such excess shall be referred to hereinafter as the
"Disqualified Yield"), the deduction for interest (including OID) accrued on the
OID Debentures would be permanently disallowed for U.S. federal income tax
purposes (regardless of whether Holdings actually paid such interest or OID in
cash or in other property) to the extent such interest or OID is attributable to
such Disqualified Yield ("Dividend- Equivalent Interest"). For purposes of the
dividends-received deduction, such Dividend-Equivalent Interest will be treated
as a dividend to the extent it is deemed to have been paid out of Holdings'
current or accumulated earnings and profits.
Because the amount of OID, if any, attributable to the OID Debentures
will be determined at such time such OID Debentures are issued and the AFR at
the time such OID Debentures are issued in exchange for New Preferred Stock is
not predictable, it is impossible to determine at the present time whether an
OID Debenture will be treated as an AHYDO.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the proceeds
of sales of Exchange Debentures and New Preferred Stock made to U.S. Holders
other than certain exempt recipients (such as corporations). A 31% backup
withholding tax will apply to such payments if the U.S. Holder fails to provide
a correct taxpayer identification number or certification of exempt status or,
with respect to certain payments, the U.S. Holder fails to report in full
dividend and interest income and the IRS notifies the payor of such
underreporting.
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Any amounts withheld under the backup withholding rules will be allowed
as a credit against such U.S. Holder's U.S. federal income tax liability and may
entitle such U.S. Holder to a refund, provided the required information is
furnished to the IRS.
PLAN OF DISTRIBUTION
The New Preferred Stock will be offered by Holdings to the holders of
the Old Preferred Stock in exchange for the Old Preferred Stock pursuant to the
Exchange Offer.
Except as described below, a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the New Preferred Stock.
Each broker-dealer that receives New Preferred Stock for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Stock. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Preferred Stock received in
exchange for Old Preferred Stock where such Old Preferred Stock was acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 90 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 1996
all dealers effecting transactions in the New Preferred Stock may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of New
Preferred Stock by broker-dealers. New Preferred Stock received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the counter market, in
negotiated transactions, through the writing of options on the New Preferred
Stock or a combination of such methods of resale, at market prices prevailing at
the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such New Preferred Stock. Any broker or dealer that participates in a
distribution of such New Preferred Stock may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
New Preferred Stock and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange
Offer other than commissions or concessions of any brokers or dealers and
expenses of counsel for the holders of the New Preferred Stock and will
indemnify the holders of the New Preferred Stock (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the New Preferred Stock offered hereby will be passed
upon for Holdings by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695
East Main Street, Stamford, Connecticut 06904-6760. 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 the Placement
Agent in connection with certain legal matters unrelated to its representation
of Holdings.
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EXPERTS
The consolidated financial statements of Silgan Holdings Inc. at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 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 financial statements of American National Can Company's Food Metal
& Specialty Division as of December 31, 1994 and 1993, and for each of the three
years in the period ended December 31, 1994, incorporated by reference in this
Prospectus and Registration Statement have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors........................................ F-2
Consolidated Balance Sheets at December 31, 1995 and 1994............. F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993............................. F-4
Consolidated Statements of Deficiency in Stockholders' Equity
for the years ended December 31, 1995, 1994 and 1993......... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993....................... F-6
Notes to Consolidated Financial Statements............................ F-8
Condensed Consolidated Balance Sheets (Unaudited) at
March 31, 1996 and 1995...................................... F-39
Condensed Consolidated Statements of Operations (Unaudited) for the
three months ended March 31, 1996 and 1995................... F-40
Condensed Consolidated Statements of Cash Flows (Unaudited) for the
three months ended March 31, 1996 and 1995................... F-41
Notes to Condensed Consolidated Financial Statements (Unaudited)...... F-42
Unaudited Pro Forma Condensed Statements of Operations for the
three months ended March 31, 1996 and for the year
ended December 31, 1995...................................... F-45
Notes to Unaudited Pro Forma Condensed Statements of Operations....... F-49
F-1
<PAGE>
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, 1995 and 1994, 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,
1995. 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, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 12 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, Connecticut
March 8, 1996
F-2
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 2,102 $ 2,682
Accounts receivable, less allowances for
doubtful accounts of $4,832 and $1,557 for
1995 and 1994, respectively 109,929 64,700
Inventories 210,471 122,429
Prepaid expenses and other current assets 5,801 8,044
Total current assets 328,303 197,855
Property, plant and equipment, net 487,301 251,810
Goodwill, net 53,562 30,009
Other assets 30,880 24,618
$900,046 $504,292
Liabilities and deficiency in stockholders' equity
Current liabilities:
Trade accounts payable $138,195 $ 36,845
Accrued payroll and related costs 32,805 26,019
Accrued interest payable 4,358 1,713
Other accrued expenses 43,457 21,976
Bank working capital loans 7,100 12,600
Current portion of long-term debt 28,140 21,968
Total current liabilities 254,055 121,121
Long-term debt 750,873 510,763
Deferred income taxes 6,836 6,836
Other long-term liabilities 68,086 23,570
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 (213,422) (191,616)
Total deficiency in stockholders' equity (179,804) (157,998)
$900,046 $504,292
See accompanying notes.
F-3
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
Net sales $1,101,905 $861,374 $645,468
Cost of goods sold 970,491 748,290 571,174
Gross profit 131,414 113,084 74,294
Selling, general and
administrative expenses 46,848 37,997 32,495
Reduction in carrying value of assets 14,745 16,729 -
Income from operations 69,821 58,358 41,799
Interest expense and other
related financing costs 80,710 65,789 54,265
Loss before income taxes (10,889) (7,431) (12,466)
Income tax provision 5,100 5,600 1,900
Loss before extraordinary
charges and cumulative effect of
changes in accounting principles (15,989) (13,031) (14,366)
Extraordinary charges relating to early
extinguishment of debt (5,817) - (1,341)
Cumulative effect of changes in accounting
principles - - (6,276)
Net loss $(21,806) $(13,031) $(21,983)
See accompanying notes.
F-4
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
Total
Additional deficiency in
Common paid-in Accumulated stockholders'
stock capital deficit equity
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)
Net loss - - (21,806) (21,806)
Balance at December 31, 1995 $ 12 $33,606 $(213,422) $(179,804)
See accompanying notes.
F-5
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
Cash flows from operating activities:
Net loss $(21,806) $(13,031) $(21,983)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 42,217 35,392 31,607
Amortization 8,083 7,075 5,488
Accretion of discount on discount
debentures 28,672 27,477 24,167
Reduction in carrying value of assets 14,745 16,729 -
Extraordinary charges relating
to early extinguishment of debt 6,301 - 1,341
Cumulative effect of changes in
accounting principles - - 6,276
Changes in assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in accounts
receivable (1,011) (21,267) 707
Decrease (increase) in inventories 10,852 (16,741) (4,316)
Increase in trade accounts payable 43,108 4,478 3,757
Working capital provided by AN Can
since acquisition date 85,213 - -
Other, net (decrease) increase (6,745) 7,221 1,091
Total adjustments 231,435 60,364 70,118
Net cash provided by operating
activities 209,629 47,333 48,135
Cash flows from investing activities:
Acquisition of ANC's Food Metal &
Specialty business (348,762) - -
Acquisition of Del Monte Can
manufacturing assets - 519 (73,865)
Capital expenditures (51,897) (29,184) (42,480)
Proceeds from sale of assets 3,541 765 262
Net cash used in investing activities $(397,118) $(27,900)$(116,083)
Continued on following page.
F-6
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
Cash flows from financing activities:
Borrowings under working capital loans $669,260 $393,250 $328,050
Repayments under working capital loans (674,760) (382,850) (366,250)
Proceeds from issuance of long-term debt 450,000 - 140,000
Proceeds from issuance of common stock - - 15,000
Repayments of long-term debt (234,506) (20,464) (42,580)
Debt financing costs (19,290) - (8,935)
Payments to former shareholders of Silgan (3,795) (6,911) -
Net cash provided (used) by financing
activities 186,909 (16,975) 65,285
Net increase (decrease) in cash and
cash equivalents (580) 2,458 (2,663)
Cash and cash equivalents at
beginning of year 2,682 224 2,887
Cash and cash equivalents at
end of year $ 2,102 $ 2,682 $ 224
Supplementary data:
Interest paid $ 45,293 $ 30,718 $25,733
Income taxes paid, net of refunds 8,967 2,588 722
See accompanying notes.
F-7
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. Basis of Presentation
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiary, the "Company") 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"). Holdings owns
all of the outstanding common stock of Silgan Corporation ("Silgan").
Since 1993, Silgan has made two significant acquisitions. Silgan acquired
the U. S. metal container manufacturing business of Del Monte Corporation
("Del Monte") in 1993 and it acquired the Food Metal and Specialty business
from American National Can Company ("ANC") in 1995. Both acquisitions were
accounted for using the purchase method of accounting (see Note 3 -
Acquisitions).
The Company, together with its wholly-owned operating subsidiaries Silgan
Containers Corporation ("Containers") and Silgan Plastics Corporation
("Plastics"), is predominantly engaged in the manufacture and sale of steel
and aluminum containers for human and pet food products and also
manufactures custom designed plastic containers used for health and
personal care products. Principally, all of the Company's businesses are
based in the United States. Foreign subsidiaries are not significant to
the consolidated results of operations or financial position of the
Company.
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 statement amounts are translated
at the average of monthly exchange rates.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation.
F-8
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
2. Summary of Significant Accounting Policies (continued)
Cash and cash equivalents
Cash equivalents represent short-term, highly liquid investments having
original maturities of three months or less from the time of purchase. The
carrying values of these assets approximate their fair values. As a result
of the Company's cash management system, checks issued and presented to the
banks for payment may create negative cash balances. Checks outstanding in
excess of related cash balances totaling approximately $30.0 million at
December 31, 1995 and $5.4 million at December 31, 1994 are included in
trade accounts payable.
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).
Property, Plant, and Equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation. Major renewals and betterments that extend the
life of an asset are capitalized and repairs and maintenance expenditures
are charged to expense as incurred. Depreciation is computed using the
straight-line method over their estimated useful lives. The principal
estimated useful lives are 35 years for buildings and range between 3 to 18
years for machinery and equipment. Leasehold improvements are amortized
over the shorter of the life of the related asset or the life of the lease.
Goodwill
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is stated at cost
less accumulated amortization. Amortization is computed on a straight-line
basis over periods ranging from 20 to 40 years. The Company periodically
evaluates the existence of goodwill impairment to access 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 reduction in values were to occur.
F-9
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
2. Summary of Significant Accounting Policies (continued)
Other Assets
Other assets consist principally of debt issuance costs which are being
amortized on a straight-line basis over the terms of the related debt
agreements (5 to 10 years). Other intangible assets are amortized over
their expected useful lives using the straight-line method.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard ("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.
Postemployment Benefits
During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". SFAS No. 112 requires accrual accounting for
employee benefits that are paid between the termination of active
employment but prior to retirement. Such benefits include salary
continuation, disability, severance, and health care. 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 for this charge due to the
net operating loss position of the Company.
Fair Values of Financial Instruments
The carrying amounts for cash, accounts receivable, accounts payable, and
other accrued liabilities are reflected in the financial statements and
reasonably approximate fair value due to the short maturity of these items.
The carrying value for short and long-term debt also approximates fair
value but may vary due to changing market conditions. Methods and
assumptions used to estimate fair value and the fair value of the Company's
debt instruments are disclosed in Note 9.
F-10
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities,
revenues and expenses, as well as footnote disclosures in the financial
statements. Actual results may differ from those estimates.
3. Acquisitions
During the three years ended December 31, 1995, the Company made two
acquisitions, as discussed below. Both were accounted for using the
purchase method of accounting and the results of operations have been
included with the Company's results from the respective acquisition dates.
The excess of the purchase price over the fair value of net assets acquired
was allocated to goodwill.
Fiscal year 1995 acquisition
On August 1, 1995, Containers acquired from ANC substantially all of the
fixed assets and working capital, and assumed certain specified limited
liabilities, of ANC's Food Metal & Specialty business ("AN Can"), which
manufactures, markets and sells metal food containers and rigid plastic
containers for a variety of food products and metal caps and closures for
food and beverage products. The purchase price for the assets acquired and
the assumption of certain specified liabilities, including related
transaction costs, was $364.0 million (including $15.2 million for the
operations of ANC's St. Louis, MO facility which the Company intends to
purchase by mid-1996 upon completion of a rationalization project
undertaken at that location).
F-11
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
3. Acquisitions (continued)
Fiscal year 1995 acquisition (continued)
The purchase price was allocated to the tangible and identifiable assets
acquired and liabilities assumed based upon their estimated fair values as
determined from preliminary appraisals and valuations which management
believes are reasonable. The purchase price allocation will be finalized
within one year of the acquisition date. Differences between actual and
preliminary valuations will cause adjustments to the AN Can purchase price
allocation as shown below. Estimated items subject to change include
employee benefit costs and termination costs associated with plant
rationalization and administrative workforce reductions and other plant
exit costs. The aggregate purchase price and its preliminary allocation to
the assets and liabilities is as follows for AN Can (dollars in thousands):
Net working capital acquired $155,967
Property, plant and equipment 240,079
Goodwill 24,832
Other liabilities assumed (56,916)
$363,962
Set forth below are the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1995 and 1994. The pro forma
results include the historical results of the Company and AN Can and
reflect the effect of purchase accounting adjustments based on preliminary
appraisals and valuations, the financing of the acquisition, the
refinancing of the Company's debt obligations, and certain other
adjustments as if these events occurred as of the beginning of the periods
presented. The pro forma data does not purport to represent what the
Company's results of operations actually would have been if the operations
were combined as of January 1, 1995 or 1994, or to project the Company's
results of operations for any future period.
1995 1994
(Dollars in thousands)
Net sales $1,404,382 $1,457,968
Income from operations 97,415 (1) 62,893 (2)
Income (loss) before income taxes 8,730 (26,629)
Net income (loss) 1,530 (29,329)
F-12
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
3. Acquisitions (continued)
Fiscal year 1995 acquisition (continued)
(1)Included in pro forma income from operations for the year ended
December 31, 1995 is a charge incurred by the Company of $14.7 million
to adjust the carrying value of certain underutilized machinery and
equipment at Silgan facilities (existing prior to the AN Can
acquisition) to net realizable value.
(2)Included in pro forma income from operations for the year ended
December 31, 1994 are charges incurred by AN Can of $10.1 million for
shut down costs necessary to realign the assets of the business more
closely with the existing customer base, $16.7 million related to
Silgan and $7.1 million related to AN Can to adjust the carrying value
of certain technologically obsolete and inoperable equipment to
realizable value, and $26.7 million for the write-down of goodwill by
AN Can.
Fiscal year 1993 acquisition
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 ("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 detail of the assets acquired is as follows (dollars in
thousands):
Net working capital $ 21,944
Property, plant and equipment 47,167
Goodwill 13,729
Other liabilities assumed (9,494)
$ 73,346
F-13
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
4. Inventories
The components of inventories at December 31, 1995 and 1994 consist of the
following:
1995 1994
(Dollars in thousands)
Raw materials $ 46,027 $ 38,575
Work-in-process 24,869 19,045
Finished goods 135,590 63,409
Spare parts and other 6,344 1,621
212,830 122,650
Adjustment to value inventory
at cost on the LIFO method (2,359) (221)
$210,471 $122,429
The amount of inventory recorded on the first-in first-out method at
December 31, 1995 and 1994 was $14.9 million and $6.5 million,
respectively.
5. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
1995 1994
(Dollars in thousands)
Land $ 6,355 $ 3,707
Buildings and improvements 68,860 51,665
Machinery and equipment 584,526 346,061
Construction in progress 33,764 18,124
693,505 419,557
Accumulated depreciation and amortization (206,204) (167,747)
Property, plant and equipment, net $487,301 $251,810
For the years ended December 31, 1995, 1994, and 1993, depreciation expense
was $42.2 million, $35.4 million, and $31.6 million respectively. The
total amount of repairs and maintenance expense was $26.9 million in 1995,
$19.9 million in 1994, and $17.1 million in 1993.
F-14
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
5. Property, Plant, and Equipment (continued)
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 the industry. The change had the effect of
decreasing depreciation expense and increasing net income in 1994 by
approximately $1.3 million.
Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable
values. In 1995, the Company recorded a write-down of $14.7 million for
the excess of carrying value over estimated realizable value of machinery
and equipment at existing facilities which have become underutilized due to
excess capacity. In 1994, charges of $16.7 million were recorded which
included $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 for technologically obsolete and inoperable machinery and
equipment.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which is
effective for the 1996 fiscal year. As required by this standard,
impairment losses will be recognized when events or changes in
circumstances indicate that the fair value of identified assets is less
than the carrying amount. In making such a determination, the Company will
compare the undiscounted cash flows generated by specified assets to the
carrying value of such assets. The Company will adopt SFAS No. 121 in 1996
and believes the effect of adoption will not be material.
6. Goodwill
Goodwill amortization charged to operations was $1.3 million in 1995; $1.2
million in 1994; and $0.5 million in 1993. Accumulated amortization of
goodwill at December 31, 1995, 1994, and 1993 was $5.0 million; $3.7
million; and $2.5 million, respectively.
F-15
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
7. Other Assets
Other assets at December 31, 1995 and 1994 consist of the following:
1995 1994
(Dollars in thousands)
Debt issuance costs $30,148 $25,142
Other 8,027 8,275
38,175 33,417
Less: accumulated amortization (7,295) (8,799)
$30,880 $24,618
During 1995, as part of the acquisition of AN Can and the related
refinancing of its secured debt facilities and its Discount Debentures, the
Company wrote off $6.3 million of unamortized debt issuance costs and
capitalized $19.3 million in new debt issuance costs. Amortization expense
relating to debt issuance for the years ended December 31, 1995, 1994, and
1993 was $4.9 million, $5.3 million, and $3.3 million, respectively.
8. Short-Term Borrowings and Long-Term Debt
The Company has a working capital revolving credit facility which it uses
to finance its seasonal liquidity needs. As of December 31, 1995 and 1994,
the Company had $7.1 million and $12.6 million of working capital loans
outstanding, respectively.
Long-term debt consists of the following:
1995 1994
(Dollars in thousands)
Bank A Term Loans $220,000 $ 39,845
Bank B Term Loans 222,750 79,691
Senior Secured Floating Rate Notes due
June 30, 1997 - 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002 135,000 135,000
13 1/4% Senior Subordinated Debentures due
December 15, 2002 201,263 228,195
779,013 532,731
Less: Amounts due within one year 28,140 21,968
$750,873 $510,763
F-16
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
8. Short-Term Borrowings and Long-Term Debt (continued)
The aggregate annual maturities of long-term debt at December 31, 1995 are
as follows (dollars in thousands):
1996 $ 28,140
1997 37,170
1998 52,138
1999 52,138
2000 102,281
2001 and thereafter 507,146
$779,013
1995 Bank Credit Agreement
Effective August 1, 1995, Silgan, Containers, and Plastics entered into a
$675.0 million credit agreement (the "Credit Agreement") with various banks
to finance the acquisition by Containers of AN Can, to refinance and repay
in full all amounts owing under the previous bank credit agreement and the
Senior Secured Notes and to repurchase up to $75.0 million of its 13 1/4%
Senior Discount Debentures ("Discount Debentures"). In connection with
the refinancing of the Credit Agreement, the Company incurred a charge of
$5.8 million (net of taxes of $2.6 million) in 1995 for the early
extinguishment of amounts owed under existing secured debt facilities and
for the repurchase of a portion of its Discount Debentures.
The Credit Agreement provided the Company with (i) $225.0 million of A Term
Loans, (ii) $225.0 million of B Term Loans, and (iii) a working capital
revolving credit facility of up to $225.0 million ("Working Capital
Loans"). The Company used proceeds from the Credit Agreement to repay
$117.1 million of term loans under the previous bank credit agreement,
repay in full $50.0 million of its Senior Secured Notes due 1997, acquire
AN Can for $348.8 million (excluding $15.2 million for the St. Louis
operations which the Company expects to purchase by mid-1996), repurchase
$57.6 million of its Discount Debentures, and incur debt issuance costs of
$19.3 million. The Company is currently permitted under the debt
facilities to make additional repurchases of its Discount Debentures prior
to June 30, 1996.
F-17
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
8. Short-Term Borrowings and Long-Term Debt (continued)
1995 Bank Credit Agreement (continued)
The A Term Loans mature on December 31, 2000, and the B Term Loans mature
on March 15, 2002. During 1995, principal repayments of $5.0 million were
made on the A Term Loans and $2.3 million on the B Term Loans. Principal
is to be repaid on each term loan in installments in accordance with the
Credit Agreement until maturity.
As defined in the Credit Agreement, the Company is required to repay the
term loans (ratably allocated between the A Term Loans and the B Term
Loans) in an amount equal to 80% of the net sale proceeds from certain
asset sales and up to 100% of the net equity proceeds from certain sales of
equity. Effective for the year ended December 31, 1996 and each year
thereafter during the term of the Credit Agreement, the Company is required
to pre-pay the term loans (ratably allocated between the A Term Loans and
the B Term Loans) in an amount equal to 50% of the Company's excess cash
flow. Amounts repaid under the term loans cannot be reborrowed.
The Credit Agreement provides Containers and Plastics, together, a
revolving credit facility of $225.0 million for working capital needs. The
commitment under the Credit Agreement for Working Capital Loans was
initially $150.0 million. This initial commitment will increase at the time
and by the amount the Company repurchases its Discount Debentures (up to a
maximum commitment of $225.0 million). As of December 31, 1995, Holdings
had repurchased $57.6 million of Discount Debentures, thereby increasing
the commitment under the revolving credit facility to $207.6 million.
After taking into account outstanding letters of credit of $6.6 million and
Working Capital Loans of $7.1 million, the borrowings available under the
revolving credit facility were $193.9 million at December 31, 1995. In
addition to borrowings of Working Capital Loans, the Company may utilize up
to a maximum of $20.0 million in letters of credit as long as the aggregate
amount of borrowings and letters of credit do not exceed the amount of the
commitment. The aggregate amount of Working Capital Loans and letters of
credit which may be outstanding at any time is also limited to the
aggregate of 85% of eligible accounts receivable and 50% of eligible
inventory. Working Capital Loans may be borrowed, repaid, and reborrowed
over the life of the Credit Agreement until final maturity on December 31,
2000.
F-18
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
8. Short-Term Borrowings and Long-Term Debt (continued)
1995 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 higher of (i) 1/2 of 1% in excess of Adjusted Certificate of
Deposit Rate, or (ii) Bankers Trust Company's prime lending rate. Base
Rate borrowings bear interest at the Base Rate plus 1.50%, in the case of A
Term Loans and Working Capital Loans; and 2.0%, in the case of B Term
Loans. Eurodollar Rate borrowings bear interest at the Eurodollar Rate
plus 2.50% in the case of A Term Loans and Working Capital Loans; and 3.0%,
in the case of B Term Loans. At December 31, 1995, the interest rate for
Base Rate borrowings was 10.0 % and the interest rate for Eurodollar Rate
borrowings ranged between 8.1875% and 8.9375%.
For 1995, 1994 and 1993, respectively, the average amount of borrowings of
Working Capital Loans was $67.6 million, $14.4 million and $51.9 million;
the average annual interest rate paid on such borrowings was 8.9%, 8.4%,
and 6.0%; and the highest amount of such borrowings at any month-end was
$184.0 million, $43.9 million, and $80.3 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 revolving credit facility as well as a 2.75% 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 real and personal property of the Borrowers. 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, investments, 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-19
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
8. Short-Term Borrowings and Long-Term Debt (continued)
1993 Bank Credit Agreement
Effective December 21, 1993, Silgan, Containers, and Plastics entered into
a credit agreement with a group of banks for $140.0 million in term loans
and $70.0 million in working capital loans to finance in part the
acquisition of DM Can and repay $41.6 million of term loans owed under a
previous bank credit agreement. In addition, Holdings issued and sold
250,000 shares of its Class B Common Stock for $15.0 million and, in turn,
contributed such amount to Silgan. As a result of the early extinguishment
of debt, the Company incurred a net charge of $1.3 million.
According to the terms of this bank credit agreement, 80% of amounts
received from the sale or disposal of assets was to be used to repay term
loans. Prior to the refinancing and repayment of this bank facility, an
additional principal payment of $2.5 million was made early in 1995 from
net proceeds received from asset sales.
Senior Secured Floating Rate Notes
The Company redeemed its Senior Secured Notes on August 30, 1995 for a
premium of $0.1 million.
11 3/4% Senior Subordinated Notes
The Company's 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes") which
mature on June 15, 2002, represent unsecured general obligations,
subordinate in right of payment to obligations of the Company under the
Credit Agreement 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%
F-20
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
8. Short-Term Borrowings and Long-Term Debt (continued)
11 3/4% Senior Subordinated Notes (continued)
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the terms of the existing Credit
Agreement.
13 1/4% Senior Discount Debentures
The 13 1/4% Senior 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%. During the year ended December 31, 1995, the Company
repurchased $61.7 million face amount of its Discount Debentures for $57.6
million, including a premium of $2.0 million. The carrying amount at
December 31, 1995 of the Discount Debentures represents the face amount
less an unamortized discount of $12.1 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 Debentures Indenture contains covenants which are comparable
to or less restrictive than those under the Credit Agreement and the 11
3/4% Notes.
9. Fair Value 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 fair value due to the
short duration of those investments.
F-21
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
9. Fair Value 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.
The following table presents the carrying amounts and fair values of the
Company's financial instruments recorded at December 31, 1995 and 1994,
respectively (dollars in thousands):
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Working Capital Facility $ 7,100 $ 7,100 $ 12,600$ 12,600
Current Portion of long-term
debt 28,140 28,140 21,968 21,968
Bank A Term Loans 220,000 220,000 39,845 39,845
Bank B Term Loans 222,750 222,750 79,691 79,691
Senior Secured Floating Rate
Notes due June 30, 1997 - - 50,000 50,000
11 3/4% Senior Subordinated
Notes due June 15, 2002 135,000 144,500 135,000 140,400
13 1/4% Senior Subordinated
Debentures due
December 15, 2002 201,263 205,873 228,195 235,100
The Company has had limited involvement with derivative financial
instruments and does not use them for trading purposes. During 1995 and
1994, the Company was not party to any interest rate hedge agreements, nor
did it use derivative instruments to hedge commodity or foreign exchange
risks.
F-22
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
9. Fair Value of Financial Instruments (continued)
Subsequent to December 31, 1995, the Company entered into interest rate
swap agreements in order to manage its exposure to interest rate
fluctuations. These agreements effectively convert interest rate exposure
from variable rate to a fixed rate without the exchange of the underlying
principal amounts. The Company has agreed to pay fixed rates of interest
ranging from 8.1% to 8.6% on notional principal amounts totaling $100.0
million which mature in the year 1999. Net payments or receipts under
these agreements will be recorded as adjustments to interest expense.
Concentration of Credit Risk
The Company derives a significant portion of its revenue from multi-year
supply agreements with many of its customers. Revenues from its two
largest customers accounted for approximately 36.0% of sales in 1995 and
47.3% in 1994. The receivable balances from these customers collectively
represented 28.2% and 34.4% of accounts receivable before allowances at
December 31, 1995 and 1994, respectively. As is common in the packaging
industry, the Company provides extended payment terms for some of its
customers due to the seasonality of the vegetable and fruit pack business.
Exposure to losses is dependent on each customer's financial position. The
Company performs ongoing credit evaluations of its customer's financial
condition and its receivables are not collateralized. The Company
maintains an allowance for doubtful accounts which management believes is
adequate to cover potential credit losses based on customer credit
evaluations, collection history, and other information.
F-23
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
10. Commitments
The Company has a number of noncancelable operating leases for office and
plant facilities, equipment and automobiles that expire at various dates
through 2020. Certain operating leases have renewal options. Minimum
future rental payments under these leases are (dollars in thousands):
1996 $13,442
1997 10,768
1998 7,973
1999 5,778
2000 4,928
2001 and thereafter 7,159
$50,048
Rent expense was approximately $10.8 million in 1995; $9.1 million in 1994;
and $8.0 million in 1993.
11. 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. Pension benefits are provided 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-24
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
11. Retirement Plans (continued)
The following table sets forth the funded status of the Company's
retirement plans as of December 31:
Plans in which Plans in which
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1995 1994 1995 1994
(Dollars in thousands)
Actuarial present value of
benefit obligations:
Vested benefit obligations $12,135 $ 9,182 $31,465 $19,876
Non-vested benefit obligations 547 871 3,158 1,889
Accumulated benefit obligations 12,682 10,053 34,623 21,765
Additional benefits due to
future salary levels 5,667 5,358 7,132 3,557
Projected benefit obligations 18,349 15,411 41,755 25,322
Plan assets at fair value 12,988 11,612 23,535 17,249
Projected benefit obligation
in excess of plan assets 5,361 3,799 18,220 8,073
Unrecognized actuarial gain (loss) (165) 504 1,237 3,916
Unrecognized prior service costs (615) (665) (2,128) (2,461)
Additional minimum liability - - 1,990 1,677
Accrued pension liability
recognized in the balance sheet $ 4,581 $ 3,638 $19,319 $11,205
As of the AN Can acquisition date, the Company assumed an accrued pension
liability of $6.8 million related to the active employee population
transferred to the Company from AN Can. Under the terms of the
acquisition, ANC retained the liability for the retired population as of
August 1, 1995.
F-25
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
11. Retirement Plans (continued)
For certain pension plans with accumulated benefits in excess of plan
assets at December 31, 1995 and December 31, 1994, the balance sheet
reflects an additional minimum pension liability and related intangible
asset of $2.0 million and $1.7 million, respectively,
The components of net periodic pension costs for defined benefit plans are
as follows:
1995 1994 1993
(Dollars in thousands)
Service cost $ 3,067 $ 2,947 $ 1,809
Interest cost 3,887 3,334 2,144
Actual loss (return) on assets (7,284) 539 (1,784)
Net amortization and deferrals 5,008 (2,698) 317
Net periodic pension cost $ 4,678 $ 4,122 $ 2,486
During 1995, the Company recognized settlement and curtailment losses of
$0.4 million from the termination of participation in certain plans as a
result of plant closings and changes in pension benefit provisions. The
Company participates in several multi-employer pension plans which provide
defined benefits to certain of its union employees. The composition of
total pension cost for 1995, 1994, and 1993 in the Consolidated Statements
of Operations is as follows:
1995 1994 1993
(Dollars in thousands)
Net periodic pension cost $ 4,678 $ 4,122 $ 2,486
Settlement and curtailment losses, net 418 - -
Contributions to multi-employer
union plans 2,708 2,700 2,000
Total pension costs $ 7,804 $ 6,822 $ 4,486
F-26
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
11. Retirement Plans (continued)
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
1995 1994 1993
Discount rate 7.5% 8.5% 7.5%
Weighted average rate of
compensation increase 4.0% 4.5% 4.5%
Expected long-term rate of
return on plan assets 8.5% 8.5% 8.5%
The Company also sponsors defined contribution pension and profit sharing
plans covering substantially all employees. Company contributions to these
plans are based upon employee contributions and operating profitability.
Contributions charged to income for these plans were $1.7 million in 1995;
$2.5 million in 1994; and $1.5 million in 1993. The decline in defined
contributions in 1995 as compared to 1994 resulted from lower profit-
sharing contributions made for Company employees since target financial
objectives were not achieved. This decrease was partially offset by an
increase in the contribution base attributable to additional employee
participation as a result of the acquisition of AN Can.
12. 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.
F-27
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
12. Postretirement Benefits Other than Pensions (continued)
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. Retiree
health benefits are paid as covered expenses are incurred.
The following table presents the funded status of the postretirement plans
and amounts recognized in the Company's balance sheet as of December 31:
1995 1994
(Dollars in thousands)
Accumulated postretirement benefit obligation:
Retirees $ 1,587 $ 1,183
Fully eligible active plan participants 11,647 1,521
Other active plan participants 14,770 2,577
Total accumulated postretirement
benefit obligation 28,004 5,281
Unrecognized net gain (2,929) (219)
Unrecognized prior service costs (298) (79)
Accrued postretirement benefit liability $24,777 $ 4,983
As of the AN Can acquisition date, the Company assumed a postretirement
benefit liability in the amount of $19.6 million for the active population
transferred to the Company from AN Can. Under the terms of the
acquisition, ANC retained the liability for the retired population as of
August 1, 1995.
Net periodic postretirement benefit cost include the following components:
1995 1994
(Dollars in thousands)
Service cost $ 372 $ 321
Interest cost 1,097 412
Net amortization and deferral 42 (14)
Net periodic postretirement benefit cost $1,511 $ 719
F-28
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
12. Postretirement Benefits Other than Pensions (continued)
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation as of December 31, 1995 and 1994 were
7.5% and 8.5%, respectively. The net periodic postretirement benefit costs
were calculated using a discount rate ranging from 7.5% to 8.5% for 1995
and 8.5% for 1994. The assumed health care cost trend rate used in
measuring the accumulated postretirement benefit obligation ranged from
7.14% to 10.0% in 1995 and was 14% in 1994, declining to a rate ranging
from 5.0% to 6.0% in the year 2003 and thereafter.
A 1% increase in the health care cost trend rate assumption would increase
the accumulated postretirement benefit obligation as of December 31, 1995
by approximately $3.7 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost
for 1995 by approximately $0.2 million.
13. Income Taxes
The components of income tax expense are as follows:
1995 1994 1993
(Dollars in thousands)
Current
Federal $ 500 $2,500 $ 300
State 1,900 3,200 1,900
Foreign 100 (100) (400)
2,500 5,600 1,800
Deferred
Federal - - -
State - - 100
Foreign - - -
- - 100
$2,500 $5,600 $1,900
F-29
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
13. Income Taxes (continued)
Income tax expense is included in the financial statements as follows:
1995 1994 1993
(Dollars in thousands)
Income before
extraordinary charges $ 5,100 $ 5,600 $ 1,900
Extraordinary charges (2,600) - -
$ 2,500 $ 5,600 $ 1,900
The income tax provision varied from that computed by using the U.S.
statutory rate as a result of the following:
1995 1994 1993
(Dollars in thousands)
Income tax benefit
at the U.S. Federal
income tax rate $(3,811) $(2,601) $(4,363)
State and foreign tax expense
net of Federal income benefit 1,820 2,015 1,235
Amortization of goodwill 471 576 154
Losses with no benefit 6,620 5,610 4,874
$ 5,100 $ 5,600 $ 1,900
F-30
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
13. Income Taxes (continued)
Deferred income taxes reflect the net tax effect 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:
1995 1994
(Dollars in thousands)
Deferred tax liabilities:
Tax over book depreciation $27,800 $21,900
Book over tax basis of assets acquired 41,700 21,400
Other 3,900 4,100
Total deferred tax liabilities 73,400 47,400
Deferred tax assets:
Book reserves not yet deductible
for tax purposes 56,300 24,800
Deferred interest on high yield obligations 25,100 21,300
Net operating loss carryforwards 35,600 26,200
Other 1,200 4,100
Total deferred tax assets 118,200 76,400
Valuation allowance for deferred tax assets 51,636 35,836
Net deferred tax assets 66,564 40,564
Net deferred tax liabilities $ 6,836 $ 6,836
The Company files a consolidated Federal income tax return. At December
31, 1995, the Company has net operating loss carryforwards of approximately
$100.0 million which are available to offset future consolidated taxable
income of the group and expire from 2001 through 2010. The Company had an
alternative minimum tax liability of $0.5 million in 1995 and $1.5
million in 1994. At December 31, 1995, the Company had $3.9 million of
alternative minimum tax credits which are available indefinitely to reduce
future tax payments for regular federal income tax purposes.
F-31
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
14. Acquisition Reserves
In connection with the acquisition of AN Can, the Company plans to improve
operating efficiencies through production and facility consolidation and
through workforce reductions. As part of its preliminary purchase price
allocation, the Company established a reserve for $25.0 million which
primarily consists of $20.5 million for severance and $4.5 million of
facility exit costs. The provision for severance includes employee
termination benefits, such as, salary continuation, pension, and medical.
Plant exit costs include planned expenditures relating to facility shut
down, equipment removal, and compliance with environmental regulations.
During the year, $0.9 million of costs were expended for severance. As of
December 31, 1995, $7.1 million remained in other accrued expenses for
costs expected to be paid within one year and $17.0 million remained in
long term liabilities. Management believes that the operating improvements
will not be fully implemented until 1997 and the remaining reserve balance
will be adequate to cover anticipated costs.
15. 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.
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.
F-32
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
15. Stock Option Plans (continued)
The SARs extend to the shares covered by the options for the Containers and
Plastics plans 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' 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
Containers, Containers has the right to repurchase, and the employee has
the right to require Containers to repurchase, the common stock at the
then pro forma book value.
At December 31, 1995, there were outstanding options for 24,000 shares
under the Holdings plan, 936 shares under the Containers plan and 1,200
shares under the Plastics plan. The exercise prices per share range from
$35 to $61 for the Holdings options, range from $2,122 and $4,933 for the
Containers options and $126 to $943 for the Plastics options. The stock
options and SARs generally become exercisable ratably over a five-year
period. At December 31, 1995, there were 16,800 options exercisable under
the Holdings plans, 840 options/SARs exercisable under the Containers plan
and 180 options/SARs exercisable under the Plastics plan. The Company
incurred charges relating to the vesting and payment of benefits under the
stock option plans of $0.8 million in 1995; $1.5 million in 1994; and $0.2
million in 1993.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans and (ii) any stock issued upon exercise of
such options issued by Containers are convertible into either stock options
or common stock of Holdings, as the case may be. The conversion of such
options or shares will be based upon a valuation of Holdings and an
allocation of such value among the subsidiaries after giving affect to,
among other things, that portion of the outstanding indebtedness of
Holdings allocable to each such subsidiary.
F-33
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
15. Stock Option Plans (continued)
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant
using an option pricing model. As permitted under SFAS No. 123, the
Company may either adopt the new pronouncement or may continue to follow
the current accounting method as prescribed under APB. Opinion No. 25,
"Accounting for Stock Issued to Employees". The Company does not intend to
adopt SFAS No. 123 for expense recognition purposes in 1996.
16. Deficiency in Stockholders' Equity
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value) and preferred stock:
Shares
Shares Issued and Outstanding
Class Authorized December 31, 1995 and 994
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 -
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.
F-34
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
17. 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 Messr. Silver, the Chairman and Co-Chief Executive Officer
and Messr. Horrigan, the President and Co-Chief Executive Officer, of
Holdings and Silgan, S&H provides Holdings, Silgan 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 $5.4 million in
1995, $5.0 million in 1994, and $4.4 million in 1993 and was allocated,
based upon EBDIT, as a charge to operating income of each business segment.
Included in accounts payable at December 31, 1995 and 1994, was $0.1
million payable to S&H.
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 refinancings and bank credit agreements entered into
during 1995 and 1993, the banks thereunder (including Bankers Trust
Company) received fees totaling $17.2 million in 1995 and $8.1 million in
1993.
F-35
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
18. Litigation
In connection with the acquisition by Holdings of Silgan as of June 30,
1989 (the "Merger"), a decision was rendered in 1995 by the Delaware Court
of Chancery with respect to appraisal proceedings filed by certain former
stockholders of 400,000 shares of stock of Silgan. Pursuant to that
decision, these former holders were awarded $5.94 per share, plus simple
interest at a rate of 9.5%. This award was less than the amount, $6.50 per
share, that these former holders would have received in the Merger. The
right of these former holders to appeal the Chancery Court's decision has
expired, and the Company has tendered payment of $3.8 million to these
former holders. In 1994, prior to the trial for appraisal, the Company and
the former holders of an additional 650,000 shares of stock of Silgan
agreed to a settlement in respect of their appraisal rights, and the
Company made a payment of $6.9 million, including interest, in respect of
the settlement.
With respect to a complaint filed by limited partners of The Morgan Stanley
Leveraged Equity Fund, L.P. against a number of defendants, including
Silgan and Holdings, all claims against Silgan and Holdings related to this
action were dismissed on January 14, 1993. The plaintiff's time to appeal
the dismissal of the claims against Holdings and Silgan expired following
the dismissal of the claims against certain other defendants in June 1995.
Other than the actions mentioned above, there are no other pending legal
proceedings to which the Company is a party or to which any of its
properties are subject which would have a material effect on the Company's
financial position.
F-36
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
20. 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.
1995
Metal container
& specialty(1) $ 882.3 $72.9(2) $736.7 $31.6 $32.5
Plastic container 219.6 13.2 159.4 13.8 19.4
Consolidated $1,101.9 $86.1 $896.1 $45.4 $51.9
1994
Metal container
& specialty(1) $657.1 $67.0(3) $335.3 $23.1 $16.9
Plastic container 204.3 9.4(3) 162.8 14.1 12.3
Consolidated $ 861.4 $76.4 $498.1 $37.2 $29.2
1993
Metal container
& specialty(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
(1)Specialty packaging sales include closures, plastic bowls, and paper
containers used by processors and packagers in the food industry and
are not significant enough to be reported as a separate segment.
(2)Excludes charge for reduction in carrying value of assets of $14.7
million for the metal container segment.
(3)Excludes charges for reduction in carrying value of assets of $7.2
million for the metal container segment and $9.5 million for the
plastic container segment, respectively.
F-37
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
20. Business Segment Information (continued)
Operating profit is reconciled to income before tax as follows (in
millions):
1995 1994 1993
Operating profit $ 86.1 $ 76.4 $ 42.9
Reduction in carrying
value of assets 14.7 16.7 -
Interest expense 80.7 65.8 54.3
Corporate 1.5 1.3 1.1
Loss before income taxes $(10.8) $ (7.4) $(12.5)
Identifiable assets are reconciled to total assets as follows (in
millions):
1995 1994 1993
Identifiable assets $896.1 $498.1 $490.4
Corporate assets 3.9 6.2 7.2
Total assets $900.0 $504.3 $497.6
Metal container and other segment sales to Nestle Food Company accounted
for 21.4%, 25.9% and 34.1%, of net sales of the Company during the years
ended December 31, 1995, 1994 and 1993, respectively. Similarly, sales to
Del Monte accounted for 14.5% and 21.4% of net sales of the Company during
the years ended December 31, 1995 and 1994, respectively.
F-38
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
March 31, March 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 5,991 $ 1,352
Accounts receivable, net 98,177 75,205
Inventories 254,092 148,501
Prepaid expenses and other current
assets 10,957 5,225
Total current assets 369,217 230,283
Property, plant and equipment, net 491,177 251,832
Goodwill, net 53,204 29,699
Other assets 29,156 22,675
$942,754 $534,489
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $113,674 $ 50,416
Accrued payroll and related costs 40,613 28,207
Accrued interest payable 8,340 5,713
Other accrued expenses 38,903 25,136
Bank working capital loans 60,150 15,200
Current portion of long-term debt 27,192 19,514
Total current liabilities 288,872 144,186
Long-term debt 757,501 518,280
Deferred income taxes 6,836 7,060
Other long-term liabilities 69,206 24,381
Deficiency in stockholders' equity:
Common stock 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (213,279) (193,036)
Total deficiency in stockholders'
equity (179,661) (159,418)
$942,754 $534,489
See accompanying notes.
F-39
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31, March 31,
1996 1995
Net sales $279,860 $203,264
Cost of goods sold 243,314 174,265
Gross profit 36,546 28,999
Selling, general and administrative expenses 12,830 10,168
Income from operations 23,716 18,831
Interest expense and other related
financing costs 22,573 17,251
Income before income taxes 1,143 1,580
Income tax provision 1,000 3,000
Net income (loss) $ 143 $ (1,420)
See accompanying notes.
F-40
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31, March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 143 $(1,420)
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating activities:
Depreciation 14,589 8,333
Amortization 1,958 1,766
Accretion of discount on discount debentures 6,628 7,517
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 11,713 (10,025)
(Increase) in inventories (43,621) (26,072)
(Decrease) increase in trade accounts payable (24,521) 13,571
Other, net 1,961 9,995
Total adjustments (31,293) 5,085
Net cash (used) provided by operating activities (31,150) 3,665
Cash flows from investing activities:
Capital expenditures (18,558) (8,359)
Proceeds from sale of assets 1,495 3,218
Net cash used in investing activities (17,063) (5,141)
Cash flows from financing activities:
Borrowings under working capital loans 210,350 89,710
Repayments under working capital loans (157,300) (87,110)
Repayment of term loans (948) (2,454)
Net cash provided by financing activities 52,102 146
Net increase in cash and cash equivalents 3,889 (1,330)
Cash and cash equivalents at beginning of year 2,102 2,682
Cash and cash equivalents at end of period $ 5,991 $ 1,352
Supplementary data:
Interest paid $ 10,864 $ 4,304
Income taxes paid 214 2,648
See accompanying notes.
F-41
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for
the three months then ended is unaudited)
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, 1996 and 1995, the results of operations for the three
months ended March 31, 1996 and 1995, and the statements of cash flows for the
three months ended March 31, 1996 and 1995.
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, 1995.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long- lived
Assets to be Disposed of" in the first quarter of 1996. Under SFAS No. 121,
impairment losses will be recognized when events or changes in circumstances
indicate that the undiscounted cash flows generated by the assets are less than
the carrying value of such assets. Impairment losses are then measured by
comparing the fair value of assets to their carrying amount. There were no
impairment losses recognized during the first quarter of 1996 as a result of the
adoption of SFAS NO. 121.
F-42
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for the
three months then ended is unaudited)
1. Basis of Presentation (continued)
The Company also adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" for 1996. Under SFAS No. 123, compensation expense for all
stock-based compensation plans would be recognized based on the fair value
of the options at the date of grant using an option pricing model. As
permitted under SFAS No. 123, the Company may either adopt the new
pronouncement or follow the current accounting methods as prescribed under
APB No. 25. The Company has not elected to adopt SFAS No. 123 and
continues to recognize compensation expense in accordance with APB No. 25.
2. Inventories
Inventories consisted of the following (dollars in thousands):
March 31, March 31,
1996 1995
Raw materials $ 44,771 $ 31,063
Work-in-process 21,638 24,890
Finished goods 178,863 96,462
Spare parts and other 7,823 1,383
253,095 153,798
Adjustment to value inventory
at cost on the LIFO Method 997 (5,297)
$254,092 $148,501
F-43
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1996 and 1995 and for the
three months then ended is unaudited)
3. Acquisitions
Set forth below is the Company's summary unaudited pro forma results of
operations for the three months ended March 31, 1995. The unaudited pro
forma results of operations of the Company for the three months ended March
31, 1995 include the historical results of the Company and the Food Metal &
Specialty business of American National Can ("AN Can") for such period and
give effect to certain pro forma adjustments. The pro forma adjustments
made to the historical results of operations for March 31, 1995 reflect the
effect of purchase accounting adjustments based upon preliminary appraisals
and valuations, the financing of the acquisition by the Company, the
refinancing of the Company's debt obligations, and certain other
adjustments as if these events had occurred as of the beginning of 1995.
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 January 1, 1995, or to
project the Company's results of operations for any future period (dollars
in thousands):
Pro forma
March 31,
1995
Net sales $311,868
Income from operations 27,308
Income before income taxes 4,728
Net income 1,078
4. Subsequent Events
On May 31, 1996, Silgan entered into an amendment to its Credit Agreement
pursuant to which certain lenders have agreed to lend to Silgan an additional
$125.0 million of B term loans. The Credit Agreement permits Silgan to fund such
proceeds to Holdings in order for Holdings to redeem $125.0 million of its
Senior Discount Debentures ("Discount Debentures") due 2002. The Company will
redeem $125.0 million principal amount of Discount Debentures on July 5, 1996.
In addition, the Company redeemed $17.4 million face value of its Discount
Debentures on June 15, 1996.
F-44
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
Introductory Note
Set forth below is the Company's unaudited pro forma condensed
statements of operations for the three months ended March 31, 1996 and the year
ended December 31, 1995. The unaudited pro forma results of operations of the
Company include the historical results of the Company for such periods and give
effect to certain pro forma adjustments.
The unaudited pro forma condensed statement of operations for the three
months ended March 31, 1996 gives effect to (i) the sale of $50 million of Old
Preferred Stock pursuant to the Private Offering and the use of such proceeds to
purchase the Holdings Class B Stock held by Mellon and to redeem a portion of
the Discount Debentures and (ii) the incurrence of $125 million of additional B
term loans in July 1996 and $17.4 million of working capital loans in June 1996
under the Silgan Credit Agreement, as recently amended in May 1996, and the use
of such proceeds to redeem a portion of the Discount Debentures (collectively,
the "Refinancing"), as if such events had occurred as of January 1, 1996.
The unaudited pro forma condensed statement of operations for the
fiscal year ended December 31, 1995 gives effect to (i) the acquisition of AN
Can, (ii) proceeds received under the Silgan Credit Agreement which were used to
finance the acquisition of AN Can, repay in full amounts owing under the
Company's previous credit agreement and the Secured Notes and repurchase $61.7
million principal amount at maturity of Discount Debentures, (iii) the sale of
$50 million of Old Preferred Stock pursuant to the Private Offering and the use
of such proceeds to purchase the Holdings Class B Stock held by Mellon and to
redeem a portion of the Discount Debentures, and (iv) the incurrence of $125
million of additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement and the use of such
proceeds to redeem a portion of the Discount Debentures, as if such events had
occurred as of January 1, 1995. Specifically, pro forma adjustments have been
made to reflect manufacturing cost savings resulting from the combination of the
Company's and AN Can's manufacturing operations, as well as reduced selling,
general and administrative expenditures realized as a result of the integration
of sales, administrative and research functions of the Company and AN Can.
Depreciation, goodwill amortization, and interest expense (including debt
amortization) have also been adjusted for the allocated cost of the acquisition
of AN Can, its related financing, and the effects of the Refinancing. As
required, the Company has not given pro forma effect to the anticipated benefits
it will realize as a result of the planned rationalization of its plant
operations. The Company will not begin to realize these benefits until late
1996.
The unaudited pro forma condensed statements of operations for the
three months ended March 31, 1996 and for the fiscal year ended December 31,
1995 assume the Refinancing occurred at the beginning of the periods presented.
The amount necessary to purchase the Holdings Class B Stock held by Mellon
increased over time. Because the Refinancing did not occur at the beginning of
the periods presented and because the Discount Debentures accreted in value, the
aggregate principal amount of the Discount Debentures outstanding after the
Refinancing will be greater than the aggregate principal amount used to
calculate interest expense in the pro forma condensed statements of operations.
After the Refinancing is completed, there will be approximately $59.0 million
aggregate principal amount of
F-45
<PAGE>
Discount Debentures that remain outstanding. As a result, actual interest
expense of the Company will be greater than the interest expense reflected in
the pro forma condensed statements of operations.
The pro forma adjustments are based upon available information and upon
certain assumptions that the Company believes are reasonable. The purchase price
allocation will be finalized within one year of the closing of the acquisition
of AN Can and may differ from that used for the pro forma data. Differences
between the actual and preliminary valuations, actuarially computed employee
benefit costs and costs associated with plant rationalizations and other matters
may cause adjustments to the AN Can purchase price allocation. The pro forma
financial data do not purport to represent what the Company's financial position
or results of operations would actually have been had such transactions been
completed at the beginning of the periods presented, or to project the Company's
financial position or results of operations at any future date or for any future
period.
F-46
<PAGE>
<TABLE>
<CAPTION>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(Dollars in thousands)
Pro Forma
Adjustments
for the
Historical Refinancing Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Net sales.......................................................... $279,860 -- $279,860
Cost of goods sold................................................. 243,314 -- 243,314
-------- ---------- --------
Gross profit.................................................. 36,546 -- 36,546
Selling, general and administrative expenses....................... 12,830 -- 12,830
-------- ---------- --------
Income from operations........................................ 23,716 -- 23,716
Interest expense and other related financing costs (a)............. 22,573 (2,017) 20,556
-------- ---------- --------
Income before income taxes.................................... 1,143 2,017 3,160
Income tax provision............................................... 1,000 (100)(b) 900
-------- ---------- --------
Income before extraordinary item (c).......................... $ 143 $ 2,117 $ 2,260
======== ========== ========
</TABLE>
F-47
<PAGE>
<TABLE>
<CAPTION>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
Historical Pro Forma Adjustments
----------------------------- -----------------------------
ANC Food
Silgan Metal & AN Can
Holdings Inc. Specialty Acquisition Refinancing Pro Forma
------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............................. $1,101,905 $302,477 -- $ -- $1,404,382
Cost of goods sold.................... 970,491 266,156 ( 1,785)(d) -- 1,234,862
---------- -------- -------- ----------- ----------
Gross profit..................... 131,414 36,321 1,785 169,520
Selling, general and administrative
expenses......................... 46,848 17,982 ( 7,470)(e) 57,360
Reduction in asset carrying value..... 14,745 -- -- -- 14,745
---------- -------- -------- ----------- ----------
Income from operations........... 69,821 18,339 9,255 -- 97,415
Interest expense and other related
financing costs(a)............... 80,710 7,476 829 (11,090) 77,925
---------- -------- -------- ----------- ----------
Income (loss) before income
taxes........................ (10,889) 10,863 8,426 11,090 19,490
Income tax provision ................. 5,100 4,023 ( 1,923)(b) 2,773(b) 9,973
---------- -------- -------- ----------- ----------
Income (loss) before extraordinary
item (c)..................... $ (15,989) $ 6,840 $ 10,349 $ 8,317 $ 9,517
========== ======== ======== =========== ==========
</TABLE>
F-48
<PAGE>
<TABLE>
<CAPTION>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
(a) Pro forma adjustments made to the historical data as of March 31, 1996
and December 31, 1995 consist of the following:
For the three For the
months ended year ended
March 31, 1996<F1> December 31, 1995<F2>
----------------- --------------------
<S> <C> <C>
Historical interest expense......................................... $22,573 $80,710
Increase in interest expense related to additional bank
borrowings used to finance the acquisition of AN Can at current
borrowing rates(3)............................................... -- 9,127
Increase in interest expense related to additional bank
borrowings of B term loans and working capital loans used to fund
the repurchase/redemption of Discount Debentures at current
borrowing rates<F3>.............................................. 3,108 17,147
Decrease in interest expense due to the repurchase/
redemption of a portion of the Discount Debentures<F4>........... (5,114) (28,089)
Net decrease in deferred financing costs related to amortization
of new indebtedness less retired debt costs...................... (11) (970)
------- -------
Pro forma interest expense.......................................... $20,556 $77,925
======= =======
- --------------
<FN>
<F1> Pro forma interest expense for the three months ended March 31, 1996
gives effect to (i) the Private Offering and the use of the proceeds to
purchase the Holdings Class B Stock held by Mellon and to redeem a
portion of the Discount Debentures and (ii) the incurrence of $125.0
million of B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement and the
use of such proceeds to redeem a portion of the Discount Debentures, as
if such events had occurred as of January 1, 1996.
<F2> Pro forma interest expense for the year ended December 31, 1995 gives
effect to (i) proceeds received under the Silgan Credit Agreement
which were used to finance the acquisition of AN Can, repay in full
amounts owing under the Company's previous credit agreement and the
Secured Notes, (ii) the Private Offering and the use of the proceeds
to purchase the Holdings Class B Stock held by Mellon and to redeem a
portion of the Discount Debentures and (iii) the incurrence of $125.0
million of additional B term loans in July 1996 and $75.0 million of
working capital loans (including $17.4 million of working capital
loans incurred in June 1996) under the Silgan Credit Agreement and the
use of such amounts to repurchase or redeem Discount Debentures, as if
such events had occurred as of January 1, 1995.
<F3> For the computations above, the assumed interest rates for borrowings
under the Silgan Credit Agreement is based upon the three month LIBOR
of 5.688% per annum as of July 11, 1996 plus a fixed spread of 2-1/2%
per annum for the A term loans and working capital loans and 3% per
annum for the B term loans.
<F4> The adjustment in interest expense related to the Discount Debentures
has been calculated based upon the redemption of $212.0 million
principal amount of Discount Debentures as if such redemption occurred
at the beginning of the periods presented with proceeds as follows (in
millions):
Proceeds from August 1, 1995 bank financing.......... $ 75.0
Additional B term loans.............................. 125.0
Excess proceeds from the Private Offering............ 12.0
------
Total........................................... $212.0
======
</FN>
</TABLE>
F-49
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
(b) The income tax provision is comprised of federal, state and foreign
income taxes currently payable. The income tax provision for the three
months ended March 31, 1996 has been adjusted to reflect the federal
income tax benefit realized from the current deduction of the accreted
interest on the Discount Debentures redeemed in 1996, and the
estimated effect of state income tax applied to the increase in pro
forma income before tax. The increase in the income tax provision for
the year ended December 31, 1995 results from the application of the
federal alternative minimum tax rate and the estimated state tax rate
to pro forma income before income taxes. The income tax provision for
the year ended December 31, 1995 does not reflect the federal income
tax benefit of the deduction of accreted interest on the Discount
Debentures redeemed in 1996 since such redemption occurred in the
subsequent tax period.
(c) The pro forma consolidated operating data for the three months ended
March 31, 1996 and for the year ended December 31, 1995 do not include
an extraordinary charge, net of tax, that the Company expects to incur
in the third quarter of 1996 of $1.7 million for the write-off of
unamortized deferred financing costs related to the early redemption
of the Discount Debentures.
(d) Pro forma adjustments to cost of good sold reflects adjustments for
(i) increased depreciation charges of $2.282 million from historical
amounts based upon the estimated fair values of property, plant and
equipment acquired, applying an estimated useful life of 25 years for
buildings and 5 to 11 years for machinery and equipment, (ii)
increased charge for amortization of goodwill of $0.361 million from
the historical amount for the estimated excess of fair value of net
assets acquired over a 40-year period, (iii) increased employee
benefits costs for pension and post-retirement medical expense of
$0.239 million to reflect change to Containers' employee benefit
plans, and (iv) decreased manufacturing costs of $4.667 million
resulting from the integration of AN Can with Containers' existing can
manufacturing operations.
(e) Pro forma adjustments to selling, general and administrative expenses
reflects adjustments for (i) increased depreciation charges of $0.074
million from historical amounts for the reasons described in footnote
(d) above, (ii) increased employee benefits costs for pension and
post-retirement medical expense of $0.039 million to reflect change to
Containers' employee benefit plans, and (iii) decreased administrative
support costs of $7.583 million realized as a result of the
integration of Containers' and AN Can's sales, administrative and
research functions.
F-50
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law makes provision for
the indemnification of officers and directors in terms sufficiently broad to
indemnify officers and directors of the Company under certain circumstances from
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. The Certificate of Incorporation (as amended) and By-laws of the
Company provide for indemnification of officers and directors against costs and
expenses incurred in connection with any action or suit to which such person is
a party to the fullest extent permitted by the Delaware General Corporation Law.
See item 22 of this Registration Statement regarding the position of
the Securities and Exchange Commission on indemnification for liabilities
arising under the Securities Act.
Item 21. 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 August 2, 1996, Commission File No.
33-28409).
3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of Holdings, dated July 19, 1996 (incorporated by
reference to Exhibit 2 filed with Holdings' Current Report on
Form 8-K, dated August 2, 1996, Commission File No. 33-28409).
3.5 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
Discount Debentures (incorporated by reference to Exhibit 1
filed with Holdings' Current Report on Form 8-K dated July 15,
1992, Commission File No. 33-47632).
II-1
<PAGE>
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 Silgan Holdings Inc. Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other
Special Rights of 13-1/4% Cumulative Exchangeable Redeemable
Preferred Stock and Qualifications, Limitations and
Restrictions Thereof (incorporated by reference to Exhibit 3
filed with Holdings' Current Report on Form 8-K dated August 2,
1996, Commission File No. 33-28409).
*4.4 Indenture dated as of July 22, 1996, between Holdings and Fleet
National Bank, as Trustee, with respect to the 13-1/4%
Subordinated Debentures due July 15, 2006.
4.5 Form of Holdings' 13-1/4% Senior Discount Debentures Due 2002
(incorporated by reference to Exhibit 4.4 filed with Holdings'
Annual Report on Form 10-K for the year ended December 31,
1992, Commission File No. 33-28409).
4.6 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).
4.7 Form of Holdings' 13-1/4% Cumulative Exchangeable Redeemable
Preferred Stock Certificate (the Old Preferred Stock
Certificate) (incorporated by reference to Exhibit 4 filed with
Holdings's Current Report on Form 8-K dated August 2, 1996,
Commission File No. 33-28409).
*4.8 Form of Holdings' 13-1/4% Subordinated Debentures due July 15,
2006.
4.9 Registration Rights Agreement, dated July 22, 1996, between
Holdings and Morgan Stanley & Co. Incorporated (incorporated by
reference to Exhibit 5 filed with Holdings' Current Report on
Form 8-K dated August 2, 1996, Commission File No. 33-28409).
*4.10 Form of Holdings' 13-1/4% Cumulative Exchangeable Redeemable
Preferred Stock Certificate (the New Preferred Stock
Certificate).
*4.11 Form of Letter of Transmittal with respect to the Exchange
Offer.
*5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the
legality of the New Preferred Stock.
*8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax
matters.
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).
II-2
<PAGE>
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 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).
10.8 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).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
II-3
<PAGE>
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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 Registration
Statement on Form S-1, dated January 11, 1988, Registration
Statement No. 33-18719).
10.18 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).
10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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
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<PAGE>
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).
10.24 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).
10.25 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).
10.26 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 January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.27 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).
10.28 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).
10.29 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).
10.30 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).
10.31 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).
10.32 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).
10.33 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
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<PAGE>
January 11, 1988, Registration Statement No. 33-18719)
(Portions of this Exhibit are subject to confidential treatment
pursuant to order of the Commission).
10.34 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).
10.35 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 January 11,
1988, Registration Statement No. 33-18719) (Portions of this
Exhibit are subject to confidential treatment pursuant to order
of the Commission).
10.36 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).
10.37 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).
10.38 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).
10.39 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).
10.40 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).
10.41 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).
10.42 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).
10.43 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
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<PAGE>
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).
10.44 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 January
11, 1988, Registration Statement No. 33-18719) (Portions of
this Exhibit are subject to confidential treatment pursuant to
order of the Commission).
10.45 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).
10.46 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).
10.47 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).
10.48 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).
10.49 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).
10.50 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).
10.51 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).
10.52 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).
10.53 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).
II-7
<PAGE>
10.54 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).
10.55 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).
10.56 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).
10.57 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).
10.58 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).
10.59 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).
10.60 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).
10.61 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).
10.62 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).
10.63 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).
10.64 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).
II-8
<PAGE>
10.65 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).
10.66 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).
10.67 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).
10.68 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).
10.69 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).
10.70 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).
10.71 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).
10.72 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).
10.73 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).
10.74 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).
10.75 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).
II-9
<PAGE>
10.76 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).
10.77 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).
10.78 Underwriting Agreement, dated June 22, 1992, between Holdings
and Morgan Stanley with respect to the Discount 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).
10.79 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).
10.80 Silgan Containers Corporation Second Amended and Restated 1989
Stock Option Plan (incorporated by reference to Exhibit 10.100
filed with Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form S-1, dated May 11, 1994,
Commission File No. 33-46499).
10.81 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).
10.82 Silgan Plastics Corporation 1994 Stock Option Plan
(incorporated by reference to Exhibit 10.102 filed with
Post-Effective Amendment No. 2 to the Company's Registration
Statement on Form S-1, dated May 11, 1994, Commission File No.
33-46499).
10.83 Form of Plastics Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to
Exhibit 10.103 filed with Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-1, dated May 11,
1994, Commission File No. 33-46499).
10.84 Silgan Holdings Inc. Third Amended and Restated 1989 Stock
Option Plan (incorporated by reference to Exhibit 10.84 filed
with Holdings' Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File No. 33-28409).
10.85 Form of Holdings Nonstatutory Restricted Stock Option and Stock
Appreciation Right Agreement (incorporated by reference to
Exhibit 10.124 filed with Holdings' Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 33-
28409).
10.86 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).
II-10
<PAGE>
10.87 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).
10.88 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).
10.89 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).
10.90 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).
10.91 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).
10.92 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).
10.93 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).
10.94 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).
10.95 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.)
10.96 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.)
10.97 Credit Agreement, dated as of August 1, 1995, among Silgan,
Containers, Plastics, the lenders from time to time party
thereto, Bankers Trust Company, as Administrative Agent and as
a Co-Arranger, and Bank of America Illinois, as Documentation
Agent and as a
II-11
<PAGE>
Co-Arranger (incorporated by reference to Exhibit 2 filed with
Holdings' Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.98 Amended and Restated Holdings Guaranty, dated as of August 1,
1995, made by Holdings (incorporated by reference to Exhibit 4
filed with Holdings' Current Report on Form 8-K, dated August
14, 1995, Commission File No. 33-28409).
10.99 Amended and Restated Borrowers Guaranty, dated as of August 1,
1995, made by Silgan, Containers, Plastics, California-
Washington Can Corporation and SCCW Can Corporation
(incorporated by reference to Exhibit 3 filed with Holdings'
Current Report on Form 8-K, dated August 14, 1995, Commission
File No. 33-28409).
10.100 Asset Purchase Agreement, dated as of June 2, 1995, between ANC
and Containers (incorporated by reference to Exhibit 1 filed
with Holdings' Current Report on Form 8-K, dated August 14,
1995, Commission File No. 33-28409).
10.101 Placement Agreement between Holdings and Morgan Stanley & Co.
Incorporated, dated July 17, 1996 (incorporated by reference to
Exhibit 6 filed with Holdings's Current Report on Form 8-K
dated August 2, 1996, Commission File No. 33-28409).
12.1 Computations of Holdings' Ratio of Earnings to Fixed Charges
for the three months ended March 31, 1996 and 1995
(incorporated by reference to Exhibit 12.1 filed with Holdings'
Post-Effective Amendment No. 7 to Registration Statement on
Form S-1, dated May 29, 1996, Registration Statement No.
33-47632).
12.2 Computations of Holdings' Ratio of Earnings to Fixed Charges
for the years ended December 31, 1995, 1994, 1993, 1992 and
1991 (incorporated by reference to Exhibit 12.2 filed with
Holdings' Post-Effective Amendment No. 7 to Registration
Statement on Form S-1, dated May 29, 1996, Registration
Statement No. 33-47632).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 filed with Holdings' Annual Report on Form 10-K for
the year ended December 31, 1995, Commission File No.
33-28409).
**23.1 Consent of Ernst & Young LLP.
**23.2 Consent of Price Waterhouse LLP.
*23.3 Consent of Winthrop, Stimson, Putnam & Roberts (included in
Exhibit 5).
**24 Power of Attorney (included on signature page).
*25 Statement of Eligibility of Trustee with respect to the
Exchange Debentures.
- -------------------------
* To be filed by amendment.
** Filed herewith.
II-12
<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, 1995 and 1994.. S-2
Condensed Statement of Operations for the years ended
December 31, 1995, 1994 and 1993.................. S-3
Condensed Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.................. S-4
II. Schedules of Valuation and Qualifying Accounts for the
years ended December 31, 1995, 1994 and 1993........... S-5
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-13
<PAGE>
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail
II-14
<PAGE>
or other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stamford,
State of Connecticut, on August 12, 1996.
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
- --------- ----- ----
/s/ R. Philip Silver Chairman of the Board and
________________________ Co-Chief Executive Officer
(R. Philip Silver) (Principal Executive Officer) August 12, 1996
/s/ D. Greg Horrigan President, Co-Chief Executive
________________________ Officer and Director August 12, 1996
(D. Greg Horrigan)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ James S. Hoch Director August 12, 1996
________________________
(James S. Hoch)
/s/ Robert H. Niehaus Director August 12, 1996
________________________
(Robert H. Niehaus)
/s/ Harley Rankin, Jr. Executive Vice President, Chief
________________________ Financial Officer and Treasurer
(Harley Rankin, Jr.) (Principal Financial Officer) August 12, 1996
/s/ Harold J. Rodriguez, Jr. Vice President, Controller and
________________________ Assistant Treasurer
(Harold J. Rodriguez, Jr.) (Principal Accounting Officer) August 12, 1996
<PAGE>
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, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, and have issued our
report thereon dated March 8, 1996 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedules
listed in Item 21(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, Connecticut
March 8, 1996
S-1
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
ASSETS
1995 1994
Current assets:
Cash and cash equivalents $ 10 $ 17
Other current assets 70 -
Total current assets 80 17
Investment in and other amounts due
from subsidiary 76,636 69,526
Notes receivable-subsidiary 1,489 1,489
Debt issuance costs 3,418 5,372
$81,623 $76,404
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 393 $ 4,963
Amount payable to subsidiary 59,771 1,244
Total current liabilities 60,164 6,207
Discount debentures 201,263 228,195
Deficiency in stockholders' equity:
Common stock 12 12
Additional paid-in capital 33,606 33,606
Accumulated deficit (213,422) (191,616)
Total deficiency in stockholders'
equity (179,804) (157,998)
$ 81,623 $ 76,404
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Registration Statement.
S-2
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Selling, general and administrative
expenses 1,113 837 674
Loss from operations (1,113) (837) (674)
Equity in earnings of consolidated
subsidiaries 6,806 12,053 (2,547)
Interest expense and other related
financing costs (28,248) (29,647) (26,339)
Interest income - - 2
Loss before income taxes (22,555) (18,431) (29,558)
Income tax benefit 4,100 5,400 7,575
Loss before extraordinary charges (18,455) (13,031) (21,983)
Extraordinary charges relating to
early extinguishment of debt (3,351) - -
Net loss $(21,806) $(13,031) $(21,983)
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Registration Statement.
S-3
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
Cash flows from operating activities: $ (7) $ (2) $ (196)
Cash flows from investing activities:
Investment in subsidiary - - (15,000)
Cash dividend received from subsidiary 3,795 6,911
Net cash provided (used) by
investing activities 3,795 6,911 (15,000)
Cash flows from financing activities:
Advance from subsidiary 57,596 - -
Proceeds from issuance of common stock - - 15,000
Repayment of long-term debt (57,596) - -
Payments to former shareholders
of Silgan (3,795) (6,911) -
Net cash provided (used) by
financing activities (3,795) (6,911) 15,000
Net decrease in cash and cash
equivalents (7) (2) (196)
Cash and cash equivalents at
the beginning of year 17 19 215
Cash and cash equivalents at
end of year $ 10 $ 17 $ 19
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere in this Registration Statement.
S-4
<PAGE>
SCHEDULE II
SILGAN HOLDINGS INC.
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1995, 1994 and 1993
(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, 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
For the year ended
December 31, 1995:
Allowance for
doubtful accounts
receivable $1,557 $ 295 $3,872 (2) $ 881 $4,843
(1) Uncollectible accounts written off, net of recoveries.
(2) Represents allowance for doubtful accounts receivable assumed upon the
acquisition of AN Can.
S-5
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
24 Power of Attorney (included on signature page).
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the references to our firm under the captions "Selected Historical
and Pro Forma Financial Information" and "Experts" and to the use of our report
dated March 8, 1996 with respect to the consolidated financial statements of
Silgan Holdings Inc. included in the Registration Statement (Form S-4,
No. 33-_______) and related Prospectus of Silgan Holdings Inc. for the
registration of 90,000 shares of its exchangeable preferred stock and to the
incorporation by reference therein of our reports dated March 8, 1996 with
respect to the consolidated financial statements and schedules of Silgan
Holdings Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
August 9, 1996
<PAGE>
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Silgan Holdings
Inc. of our report dated September 14, 1995 relating to the financial
statements of the Food Metal & Specialty Division of American National Can
Company, as of December 31, 1994 and 1993 and for each of the three years in the
period ended December 31, 1994, which appears in the Current Report on form
8-K/A of Silgan Holdings Inc. dated October 16, 1995. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
August 9, 1996
<PAGE>
