<PAGE>
As filed with the Securities and Exchange Commission on July 8, 1997
Registration No. 333-______
================================================================================
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)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3441; 3085 06-1269834
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Numbers) Identification Number)
organization)
</TABLE>
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)
FRANK W. HOGAN, III, ESQ.
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:
G. WILLIAM SISLEY, 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 Amount of
TITLE OF EACH CLASS OF Amount to be Offering Price Aggregate Offering Registration
SECURITIES TO BE REGISTERED Registered Per Debenture(1) Price(1) Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9% Senior Subordinated Debentures
due 2009 $300,000,000 100% $300,000,000 $90,910
===================================================================================================================
</TABLE>
- ---------------
(1) 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.
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.
--------------
OFFER TO EXCHANGE
ALL OUTSTANDING
9% SENIOR SUBORDINATED DEBENTURES DUE 2009
FOR
NEW 9% SENIOR SUBORDINATED DEBENTURES DUE 2009
--------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________, 1997 UNLESS EXTENDED
--------------
Silgan Holdings Inc., a Delaware corporation (the "Company"), 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 9% Senior Subordinated Debentures due
2009 (the "Old Debentures"), of which an aggregate of $300,000,000 in principal
amount is outstanding as of the date hereof, for an equal principal amount of
newly issued 9% Senior Subordinated Debentures due 2009 (the "New Debentures").
The form and terms of the New Debentures will be the same as the form and terms
of the Old Debentures except that the New Debentures 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 Debentures will evidence the
same indebtedness as the Old Debentures (which they replace) and will be
entitled to the benefits of the Indenture, dated as of June 9, 1997, between the
Company (as successor to Silgan Corporation) and The First National Bank of
Chicago, as Trustee (the "Trustee"), as amended by the First Supplemental
Indenture thereto, dated as of June 24, 1997, among the Company, Silgan
Corporation and the Trustee (as so amended, the "Indenture"). The New Debentures
and the Old Debentures are sometimes referred to herein collectively as the
"Debentures").
The Old Debentures were originally issued by Silgan Corporation, formerly a
wholly owned subsidiary of the Company. On June 26, 1997, Silgan Corporation was
merged with and into the Company (the "Holdings Merger"), and, as a result, the
Old Debentures became obligations of the Company.
The New Debentures will bear interest at the same rate and on the same terms
as the Old Debentures. Consequently, the New Debentures will bear interest at
the rate of 9% per annum and the interest thereon will be payable semi-annually
on June 1 and December 1 of each year, commencing December 1, 1997. The New
Debentures will bear interest from the date of the last interest payment on the
Old Debentures or if no interest has been paid, from the date of original
issuance of the Old Debentures. Holders whose Old Debentures are accepted for
exchange will be deemed to have waived the right to receive any interest accrued
on the Old Debentures.
The New Debentures will be redeemable at the option of the Company, in whole
or in part, at any time after June 1, 2002, initially at 104.5% of their
principal amount, plus accrued interest, declining ratably to 100% of their
principal amount, plus accrued interest, on or after June 1, 2006. In addition,
at any time on or prior to June 1, 2000, up to 35% of the aggregate principal
amount of the Debentures may be redeemed, at the option of the Company, with the
proceeds of one or more public equity offerings by the Company of its common
stock at 109% of the principal amount thereof, plus accrued interest.
The New Debentures will be unsecured, senior subordinated indebtedness of
the Company, will be subordinated to all Senior Indebtedness (as defined herein)
of the Company, will be senior to all subordinated indebtedness of the Company,
and will be effectively subordinated to all existing and future liabilities of
the Company's subsidiaries. At May 31, 1997, on a pro forma basis after giving
effect to the Private Offering (as defined herein) and the use of the proceeds
therefrom, the Holdings Merger and the Preferred Stock Exchange (as defined
herein), the Company would have had outstanding indebtedness of approximately
$926.3 million, approximately $570.3 million of which would have constituted
Senior Indebtedness. In addition, the Company's subsidiaries had other
liabilities of approximately $268.3 million at March 31, 1997, all of which
would be effectively senior to the New Debentures.
(Continued on next page)
SEE "RISK FACTORS" AT PAGE 24 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
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
The Company will accept for exchange any and all Old Debentures which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on _________________, 1997 (if and as extended, the "Expiration Date"). Tenders
of Old Debentures may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. Old Debentures may only be tendered in integral
multiples of $1,000. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Debentures being tendered for exchange, but is
subject to certain customary conditions. See "The Exchange Offer--Conditions."
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, the Company believes that the New Debentures 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 receives such New Debentures
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that 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 the holder or any other such person is acquiring
the New Debentures 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 New Debentures. Holders of Old Debentures wishing to accept
the Exchange Offer must represent to the Company that such conditions have
been met. Holders of Old Debentures who tender their Old Debentures in the
Exchange Offer with the intention to participate in a distribution of New
Debentures may not rely upon such no-action letters.
Each broker-dealer that receives New Debentures for its own account pursuant
to the Exchange Offer, where such Old Debentures 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 New Debentures. 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. 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 Debentures
received in exchange for Old Debentures where such Old Debentures were acquired
by such broker-dealer 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 available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The Company believes that none of the registered holders of the Old
Debentures is an affiliate (as such term is defined in Rule 405 under the
Securities Act) of the Company. Prior to the Exchange Offer, there has been no
public market for the Debentures. The Company does not intend to list the New
Debentures 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 New Debentures will develop. To the extent that a market for the New
Debentures does develop, the market value of the New Debentures will depend on
market conditions (including yields on alternative investments), general
economic conditions, the Company's financial condition and other conditions.
Such conditions may cause the New Debentures, to the extent that they are
actively traded, to trade at a significant discount from their face value. The
Company has not entered into any arrangement or understanding with any person to
distribute the New Debentures to be received in the Exchange Offer. See "Risk
Factors--Absence of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
The New Debentures will be available initially only in book-entry form. The
Company expects that the New Debentures issued pursuant to the Exchange Offer
will be issued in the form of one or more fully registered global debentures
that will be deposited with, or on behalf of, the Depository Trust Company (the
"Depositary" or the "Book-Entry Transfer Facility") and registered in its name
or in the name of its nominee. Beneficial interests in the global debenture
representing the New Debentures will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. After the initial issuance of such global debenture, New
Debentures in certificated form will be issued in exchange for the global
debenture only in accordance with the terms and conditions set forth in the
Indenture. See "Description of Debentures--Book Entry; Delivery and Form."
The date of this Prospectus is ____________, 1997.
-------------------------
-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: GENERAL COUNSEL (TELEPHONE NUMBER (203) 975-7110). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ______________,
1997.
----------------
TABLE OF CONTENTS
Page
Available Information......................................... 4
Information Incorporated by Reference......................... 4
Summary....................................................... 6
Risk Factors.................................................. 24
The Exchange Offer............................................ 31
Capitalization................................................ 41
Selected Historical and Pro Forma
Financial Information....................................... 43
Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 48
Business...................................................... 66
Management.................................................... 79
Securities Ownership of Certain Beneficial
Owners and Management....................................... 83
Certain Transactions.......................................... 84
Description of Debentures..................................... 86
Description of Certain Indebtedness...........................118
Certain United States Federal Income Tax
Considerations..............................................125
Plan of Distribution..........................................130
Legal Matters.................................................131
Experts.......................................................131
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 THE COMPANY. 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 NEW DEBENTURES 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
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Debentures 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 the Company and
the New Debentures 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. The Company 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 the
Company is contained in the Company's Exchange Act reports. The Registration
Statement (and the exhibits and schedules thereto), as well as the periodic
reports and other information filed by the Company 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 the Company, 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 the Company 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 fiscal year ended December 31, 1996 (File
No. 000-22117).
2. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997
(File No. 000-22117).
3. Current Report on Form 8-K dated May 21, 1997 (File No. 000-22117).
4. Current Report on Form 8-K dated June 9, 1997 (File No. 000-22117).
-4-
<PAGE>
All documents subsequently filed by the Company 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.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the 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: General Counsel (Telephone Number (203) 975-7110).
--------------------
Until ______________, 1997 (90 days after the date of the Exchange
Offer), all dealers offering transactions in the shares of New Debentures,
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, and should be
read in conjunction with, the more detailed information and the consolidated
financial statements of the Company, including the notes thereto, contained
elsewhere in this Prospectus, as well as the information appearing in the
documents incorporated by reference herein. Unless otherwise indicated or unless
the context otherwise requires, all references to the "Company" are to Silgan
Holdings Inc., a Delaware corporation, and, where appropriate, its subsidiaries.
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 the important factors that could cause actual results to differ materially
from the forward- looking statements, see "Risk Factors."
THE COMPANY
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers for
human and pet food, (ii) custom designed plastic containers for personal care,
health, food, pharmaceutical and household chemical products and (iii) specialty
packaging items, including metal caps and closures, aluminum roll-on closures,
plastic bowls and paper containers used by processors in the food industry. The
Company is the largest manufacturer of metal food containers in North America,
with a unit sale market share for the twelve months ended December 31, 1996 of
36% in the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company's strategy is to grow its
existing businesses and expand into other segments by applying its expertise in
acquiring, financing, integrating and efficiently operating consumer goods
packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive
Officers. Since its inception, the Company has acquired thirteen businesses,
including the acquisitions of substantially all of the assets of the Food Metal
and Specialty business ("AN Can") of American National Can Company ("ANC") in
August 1995 for a purchase price of approximately $362.0 million (including net
working capital of approximately $156.0 million) and the U.S. metal container
manufacturing business ("DM Can") of Del Monte Corporation ("Del Monte") in
December 1993 for a purchase price of approximately $73.3 million (including net
working capital of approximately $21.9 million). Recently, the Company acquired
the North American aluminum roll-on closure business ("Roll-on Closures") of
Alcoa Closure Systems International, Inc. ("Alcoa"), and the North American
plastic container business of Rexam plc and Rexam Plastics Inc. for an aggregate
purchase price of $42.3 million and Finger Lakes Packaging Company, Inc., the
metal food container manufacturing subsidiary of Curtice Burns Foods, Inc. for a
purchase price of $29.9 million.
The Company's strategy has enabled it to rapidly increase its net sales
and Adjusted EBITDA (as defined herein). The Company's net sales have increased
from $630.0 million in 1992 to $1,405.7 million in 1996, representing a compound
annual growth rate of approximately 22%. During this period, the Company's
Adjusted EBITDA increased from $74.0 million in 1992 to $186.0 million in 1996,
representing a compound annual growth rate of approximately 26%, while the
Company's Adjusted EBITDA as a percentage of net sales increased 1.5 percentage
points from 11.7% to 13.2% over the same period.
-6-
<PAGE>
The principle executive offices of the Company are located at 4 Landmark
Square, Stamford, Connecticut 06901, telephone number (203) 975-7110.
BUSINESS STRATEGY
The Company's philosophy, which has contributed to its strong
performance since inception, is based on: (i) a significant equity ownership by
management and an entrepreneurial approach to business, (ii) its low cost
producer position and (iii) its long-term customer relationships. The Company
has achieved a low cost producer status through (i) the maintenance of a flat,
efficient organizational structure, resulting in low selling, general and
administrative expenses as a percentage of total net sales, (ii) purchasing
economies, (iii) significant capital investments that have generated
manufacturing and production efficiencies, (iv) plant consolidations and
rationalizations and (v) the proximity of its plants to its customers. The
Company's philosophy has also been to develop long-term customer relationships
by acting in partnership with its customers, providing reliable quality and
service and utilizing its low cost producer position. This philosophy has
resulted in numerous long-term supply contracts, high retention of customers'
business and recognition from its customers, as demonstrated by many quality and
service awards.
The Company intends to enhance its position as a leading supplier of
consumer goods packaging products by pursuing a strategy designed to achieve
future growth and to increase its profitability and cash flow. The key
components of this strategy are to (i) increase the Company's market share in
its current business lines through acquisitions and internal growth, (ii) expand
into complementary business lines by applying the Company's acquisition and
operating expertise to other areas of the North American consumer goods
packaging market and (iii) improve the profitability of acquired businesses
through integration, rationalization and capital investments to enhance their
manufacturing and production efficiency.
The Company has increased its revenues and market share in the metal
container, plastic container and specialty markets through acquisitions and
internal growth. As a result of this strategy, the Company has diversified its
customer base, geographic presence and product line. The Company has more than
tripled its overall share of the U.S. metal food container market from
approximately 10% in 1987 to approximately 36% for the twelve months ended
December 31, 1996. The Company's plastic container business has increased its
market position primarily through strategic acquisitions, from sales of $88.8
million in 1987 to $216.4 million in 1996. Management believes that certain
industry trends exist which will enable the Company to continue to acquire
attractive businesses in its existing markets. The Company also believes that
there will be opportunities to expand its specialty business, as evidenced by
its acquisition in April 1997 of the North American aluminum roll-on closure
business of Alcoa. The Company's specialty business generated net sales of $90.7
million in 1996.
The Company also expects to generate internal growth due to its
participation in certain higher growth segments of the consumer goods packaging
market. For example, due to increasing consumer preference for plastic as a
substitute for glass, the Company is aggressively pursuing opportunities for its
custom designed polyethylene terephthalate ("PET") and high density polyethylene
("HDPE") containers. These opportunities include producing PET containers for
regional bottled water companies, and HDPE and PET containers for products such
as shampoo, mouthwash, salad dressing and liquor.
The Company seeks to acquire businesses at reasonable cash flow
multiples and to enhance profitability by rationalizing plants, by improving
manufacturing and production efficiencies and through purchasing economies.
Since 1991, the Company has reduced costs by closing twelve smaller, higher cost
-7-
<PAGE>
facilities. Since its inception in 1987, the Company has invested approximately
$282.6 million to upgrade acquired manufacturing facilities, aimed at generating
manufacturing and production efficiencies and achieving a low cost producer
position. The AN Can acquisition illustrates the ability of the Company to
enhance the profitability of acquired businesses. The Company estimates that it
has reduced AN Can's operating costs from its historical 1994 level by at least
$21.0 million, through selling and administrative cost reductions, improved
manufacturing and production efficiencies and purchasing economies. The Company
expects to further reduce AN Can's operating costs over the next few years by an
aggregate of approximately $15.0 million (approximately half of which is
expected to be realized in 1997) through the elimination of transitional
administrative costs, the realization of additional manufacturing and production
synergies with its metal container business and plant rationalizations.
FINANCING STRATEGY
The Company's stable and predictable cash flow, generated largely as a
result of its long-term customer relationships, has supported its financial
strategy of generally using debt to support its growth. Management has
successfully operated its business and pursued its growth strategy while
managing the Company's indebtedness. As the Company's revenues, Adjusted EBITDA
and Adjusted EBITDA margin have increased and the Company's financial position
has improved, the Company has pursued a strategy to further improve its cash
flow and its operating and financial flexibility by refinancing its higher cost
indebtedness with lower cost indebtedness and equity and by extending the
maturity of its indebtedness.
Beginning in August 1995, the Company refinanced all of its 13-1/4%
Senior Discount Debentures due 2002 (the "Discount Debentures") with (i)
proceeds received from the Company's initial public offering (the "IPO") in
February 1997 of its common stock (the "Common Stock"), (ii) lower cost bank
indebtedness and (iii) a portion of the proceeds from the sale by the Company
(the "Preferred Stock Sale") of its Exchangeable Preferred Stock Mandatorily
Redeemable 2006 (the "Exchangeable Preferred Stock"). If the Discount Debentures
had remained outstanding, the Company's annual interest expense for the Discount
Debentures would have been $36.4 million. As a result of the refinancing in full
of the Discount Debentures with the proceeds referred to above and assuming a
bank borrowing rate of 8.5%, the Company's annual interest expense on its
indebtedness used to refinance the Discount Debentures will be $18.6 million, a
reduction in interest expense of $17.8 million. The refinancing of the Discount
Debentures has also permitted the Company to deduct accreted interest of $103.5
million thereon, which will reduce the Company's tax liability by $25.9 million
during 1996 and 1997.
In February 1997, the Company completed the IPO, raising net proceeds of
$67.2 million. The IPO significantly enhanced the Company's financial
flexibility and access to equity capital.
In June 1997, the Company issued and sold $300.0 million aggregate
principal amount of the Old Debentures in a private placement (the "Private
Offering") to "qualified institutional buyers" in reliance on Rule 144A under
the Securities Act and outside the United States to persons other than U.S.
persons in reliance on Regulation S under the Securities Act. The net cash
proceeds received by the Company were approximately $291.5 million after
deducting selling commissions and offering expenses. Approximately $148.6
million of the net cash proceeds were used by the Company to prepay Term Loans
(as defined herein) under the credit agreement dated as of August 1, 1995 among
the Company 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 "Credit Agreement"). The remaining net
cash proceeds from the Private Offering of approximately $142.9 million will be
used to redeem all of the Company's 11-3/4% Senior Subordinated Notes due 2002
(the "11-3/4% Notes") on July 16, 1997
-8-
<PAGE>
($135 million principal amount) at 105.875% of their principal amount. The
Private Offering further improved the Company's operating and financial
flexibility by enabling the Company to refinance its higher cost 11-3/4% Notes
and a portion of its variable rate bank Term Loans and by extending the
maturities of such indebtedness.
As a result of the refinancing of the 11-3/4% Notes with proceeds from
the Private Offering, the Company will have reduced its annual interest expense
(including reduced amortizable financing costs) on such indebtedness by $2.8
million. With the refinancing in full of the Discount Debentures and the 11-3/4%
Notes, the Company will have lowered its average annual interest cost (including
reduced amortizable financing costs) with respect to such indebtedness by an
aggregate of $20.7 million. As a result of the refinancing of a portion of its
variable rate bank term loans with proceeds from the Private Offering, on a pro
forma basis, the Company's interest expense for 1996 on the amount of
indebtedness used to refinance such bank Term Loans would have increased by $0.7
million.
In addition, on June 13, 1997 the Company exchanged (the "Preferred
Stock Exchange") its Exchangeable Preferred Stock for its 13-1/4% Subordinated
Debentures due 2006 (the "Exchange Debentures"). The principal amount of
Exchange Debentures issued in such exchange was $56.2 million. Due to such
exchange, the Company will further reduce its tax liability as a result of the
deductibility of interest paid on such Exchange Debentures.
On June 30, 1997, the Company and each of Bankers Trust, Bank of
America, Goldman Sachs Credit Partners L.P. ("GSCP") and Morgan Stanley Senior
Funding, Inc. ("MSSF", and together with Bankers Trust, Bank of America, and
GSCP, the "New Co-Arrangers") entered into a commitment letter pursuant to which
the New Co-Arrangers have committed to provide and to use their best efforts to
arrange a syndicate of lenders to provide for the refinancing in full of the
Credit Agreement (the "Bank Refinancing") pursuant to the terms of a new senior
secured credit facility (the "New Credit Agreement"). Under the terms of such
commitment letter, the New Credit Agreement will provide the Company with a
total senior secured credit facility of $1.0 billion, which will include $450.0
million of term loans and a revolving loan commitment of $550.0 million. The
Company intends to use the term loans and a portion of the revolving loans under
the New Credit Agreement to refinance in full outstanding amounts under the
Credit Agreement. Revolving loans under the New Credit Agreement will be
available to the Company for its working capital and general corporate purposes
(including permitted acquisitions). In addition to increasing the amount of
borrowings available to the Company, the Bank Refinancing will (i) lower the
interest rates on the Company's senior secured credit facility, resulting in a
reduction of approximately $8.0 million in the Company's annual interest expense
with respect to indebtedness outstanding under the Credit Agreement, (ii) extend
the maturities of the Company's senior secured credit facility by 3-4 years, and
(iii) change certain covenants under the Company's senior secured credit
facility to further improve the Company's operating and financial flexibility,
including changes to provide more flexibility under certain circumstances to
sell assets, engage in mergers and acquisitions, make capital expenditures,
incur indebtedness, create liens, pay dividends, repurchase stock, and refinance
existing indebtedness. Although there can be no assurance that the Bank
Refinancing will be completed, the Company expects the Bank Refinancing to occur
early in the third quarter of 1997.
BUSINESS SEGMENTS
The Company is a holding company that conducts its business through two
wholly owned operating companies, Silgan Containers Corporation ("Containers")
and Silgan Plastics Corporation ("Plastics").
-9-
<PAGE>
Containers. For 1996, Containers had net sales of $1,189.3 million (85%
of the Company's net sales) and income from operations of $106.1 million (85% of
the Company's income from operations) (without giving effect to corporate
expense). Containers manufactures metal containers for vegetables, fruit, pet
food, meat, tomato based products, coffee, soup, seafood and evaporated milk.
The Company estimates that approximately 80% of Containers' projected sales in
1997 will be pursuant to long-term supply arrangements. Containers also
manufactures certain specialty packaging items, including metal caps and
closures, aluminum roll-on closures, plastic bowls and paper containers used by
processors in the food industry. For 1996, Containers had net sales of specialty
packaging items of $90.7 million.
Plastics. For 1996, Plastics had net sales of $216.4 million (15% of the
Company's net sales) and income from operations of $18.4 million (15% of the
Company's income from operations) (without giving effect to corporate expense).
Plastics emphasizes value-added design, fabrication and decoration of custom
containers in its business. Plastics manufactures custom designed HDPE
containers for health and personal care products, including containers for
shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household chemical products, including containers for scouring cleaners,
cleaning agents and lawn and garden chemicals and pharmaceutical products,
including containers for tablets, antacids and eye cleaning solutions. Plastics
also manufactures PET custom designed containers for mouthwash, respiratory and
gastrointestinal products, liquid soap, skin care lotions, salad dressings,
condiments, instant coffee, bottled water and liquor.
RECENT DEVELOPMENTS
On April 1, 1997, Containers acquired substantially all of the assets of
Roll-on Closures, with a facility in Richmond, Indiana and net sales of
approximately $45 million for the fiscal year ended December 31, 1996. This
acquisition expanded the Company's specialty business into aluminum roll-on
closures. In addition, on April 1, 1997, Plastics and its Canadian subsidiary
acquired substantially all of the assets of the North American plastic container
business ("Rexam Plastics") of Rexam plc and Rexam Plastics Inc. (collectively,
"Rexam"), with one facility in each of Flora, Illinois and Scarborough, Ontario
and two facilities in Lachine, Quebec and net sales of approximately $35 million
for the fiscal year ended December 31, 1996. The Rexam Plastics acquisition
expands the Company's markets for injection blow- molded plastic containers and
expands its presence in Canada. The aggregate purchase price, net of cash
acquired, for these acquisitions was $42.3 million. The Company financed these
acquisitions through the incurrence of $50 million of B term loans under the
Credit Agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity."
The Company is continually evaluating and intends to continue to pursue
acquisition opportunities in the North American consumer goods packaging market.
Although the Company has no present agreements or commitments to make any
acquisition, the Company is currently in discussions with respect to a potential
acquisition that has annual net sales of approximately $250 million. The Company
will likely need to incur additional indebtedness to finance any such
acquisition and to fund any resulting increased operating needs. Any such
financing will have to be effected in compliance with the terms of the
agreements governing the Company's indebtedness. There can be no assurance that
the Company will be able to complete any such acquisition or effect any such
financing. See "--Financing Strategy" and "Risk Factors--Ability of the Company
to Incur Additional Indebtedness" and "--Risks Associated with Growth Strategy."
On June 9, 1997, the Company completed the Private Offering. With net
cash proceeds of approximately $291.5 million from the Private Offering, the
Company prepaid $148.6 million of Term
-10-
<PAGE>
Loans under the Credit Agreement, and, on July 16, 1997, the Company will redeem
all of the 11-3/4% Notes ($135 million aggregate principal amount) at 105.875%
of their principal amount. On June 13, 1997, the Company exchanged all of its
then outstanding Exchangeable Preferred Stock for $56.2 million principal amount
of Exchange Debentures.
On June 26, 1997, in order to simplify the Company's corporate structure
and to reduce administrative costs, the Company merged Silgan Corporation,
formerly a wholly-owned subsidiary of the Company, with and into the Company. As
a result of such merger, the Old Debentures became obligations of the Company.
-11-
<PAGE>
THE EXCHANGE OFFER
THE EXCHANGE OFFER.............. The Company is offering to exchange $1,000
principal amount of New Debentures for each
$1,000 principal amount of Old Debentures
that are properly tendered and accepted in
the Exchange Offer. The Company will issue
the New Debentures on or promptly after the
Expiration Date. As of the date hereof, there
is $300,000,000 aggregate principal amount of
Old Debentures outstanding. See "The Exchange
Offer."
RESALE OF NEW DEBENTURES........ Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties, the Company believes
that the New Debentures issued pursuant to
the Exchange Offer in exchange for the Old
Debentures may be offered for resale, resold
and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who
receives such New Debentures directly from
the Company to resell pursuant to Rule 144A
or any other available exemption under the
Securities Act or (ii) 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
Debentures 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 New Debentures.
Holders of Old Debentures who tender their
shares of Old Debentures in the Exchange
Offer with the intention to participate in a
distribution of the New Debentures may not
rely upon such no-action letters. Under no
circumstances may this Prospectus be used for
an offer to resell or other retransfer of New
Debentures. In the event that the Company's
belief is inaccurate, holders of New
Debentures who transfer shares of New
Debentures 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
-12-
<PAGE>
Debentures (i) 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 or (ii) if any holder is engaged
or intends to engage in a distribution of the
New Debentures. Each broker-dealer that
receives New Debentures for its own account
in exchange for Old Debentures, where such
Old Debentures 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 New
Debentures. The Company has not entered into
any arrangement or understanding with any
person to distribute the New Debentures to be
received in the Exchange Offer. See "Plan of
Distribution."
REGISTRATION RIGHTS
AGREEMENT....................... The Old Debentures were sold by the Company
on June 9, 1997 to Morgan Stanley & Co.
Incorporated (the "Placement Agent" or
"Morgan Stanley") pursuant to a Placement
Agreement, dated June 3, 1997, between the
Company and the Placement Agent (the
"Placement Agreement"). Pursuant to the
Placement Agreement, the Company and the
Placement Agent entered into a Registration
Rights Agreement, dated as of June 9, 1997
(the "Registration Rights Agreement"), which
grants the holders of the Old Debentures
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
rights, which will terminate upon the
consummation of the Exchange Offer. See "The
Exchange Offer--Termination of Certain
Rights."
EXPIRATION DATE................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ______________, 1997
unless extended, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended. The Company will accept for
exchange any and all Old Debentures which are
properly tendered in the Exchange Offer prior
to 5:00 p.m., New York City time, on the
Expiration Date. The New Debentures issued
pursuant to the Exchange Offer will be
delivered on or promptly after the Expiration
Date.
ACCRUED INTEREST ON THE NEW
DEBENTURES AND THE OLD
DEBENTURES...................... The New Debentures will bear interest from
the date of the last interest payment on the
Old Debentures or
-13-
<PAGE>
if no interest has been paid, from the date
of original issuance of the Old Debentures.
Holders whose Old Debentures are accepted for
exchange will be deemed to have waived the
right to receive any interest accrued on the
Old Debentures. See "The Exchange Offer--
Interest on the New Debentures."
CONDITIONS TO THE
EXCHANGE OFFER.................. The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Old
Debentures being tendered for exchange.
However, the Exchange Offer is subject to
certain customary conditions, all of which
may be waived by the Company. 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 Old Debentures. The Company
does not expect any of the foregoing
conditions to occur, although there can be no
assurance that such conditions will not
occur. See "The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING
OLD DEBENTURES.................. Brokers, dealers, commercial banks, trust
companies and other nominees who hold Old
Debentures through The Book-Entry Transfer
Facility may effect tenders by book-entry
transfer in accordance with the Book-Entry
Transfer Facility's Automated Tender Offer
Program ("ATOP"). Holders of such Old
Debentures registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender
Old Debentures. In order for Old Debentures
to be tendered by a holder by a means other
than by book-entry transfer, such holder 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, together with such Old Debentures
and any other required documentation to The
First National Bank of Chicago, as exchange
agent for the Exchange Offer (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal or by
-14-
<PAGE>
effecting a tender by book-entry transfer in
accordance with ATOP, each holder will
represent to the Company that, among other
things, the New Debentures acquired pursuant
to the Exchange Offer are being obtained in
the ordinary course of business of the person
receiving such New Debentures, whether or not
such person has an arrangement or
understanding with any person to participate
in the distribution of such New Debentures,
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, or a broker-dealer that receives
such New Debentures directly from the Company
to resell pursuant to Rule 144A or any other
available exemption under the Securities Act.
See "The Exchange Offer--Procedures for
Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............... Any beneficial owner whose Old Debentures are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Debentures in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender
such Old Debentures on such beneficial
owner's behalf. If such beneficial owner
wishes to tender such Old Debentures on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Old
Debentures, either make appropriate
arrangements to register ownership of the Old
Debentures 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. See "The Exchange Offer--
Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES...................... Holders of Old Debentures who wish to tender
their Old Debentures and whose Old Debentures
are not immediately available or who cannot
deliver their Old Debentures, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date,
or who cannot complete the procedures for
book-entry transfer on a timely basis, must
tender their Old Debentures according to the
guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
-15-
<PAGE>
ACCEPTANCE OF THE OLD
DEBENTURES AND DELIVERY OF
THE NEW DEBENTURES.............. Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Old
Debentures that are property tendered in the
Exchange Offer prior to the Expiration Date.
The New Debentures issued pursuant to the
Exchange Offer will be delivered on the
earliest practicable date following the
Expiration Date. See "The Exchange Offer--
Terms of the Exchange Offer."
WITHDRAWAL RIGHTS............... Tenders of Old Debentures may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. See "Exchange
Offer--Withdrawal of Tenders."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.................. For a discussion of certain federal income
tax considerations relating to the exchange
of the New Debentures for the Old Debentures,
as well as the ownership of the New
Debentures, see "Certain United States
Federal Income Tax Considerations."
EXCHANGE AGENT.................. The First National Bank of Chicago is the
Exchange Agent for the Exchange Offer. Its
telephone number is (212) 240-8801. The
address of the Exchange Agent is as set forth
in "The Exchange Offer-- Exchange Agent."
THE NEW DEBENTURES
DEBENTURES OFFERED............. $300,000,000 aggregate principal amount of
New Debentures.
MATURITY....................... June 1, 2009.
INTEREST....................... Interest on the New Debentures is payable
semiannually in cash on June 1 and December 1
of each year, commencing December 1, 1997.
OPTIONAL REDEMPTION............ The New Debentures are redeemable, at the
option of the Company, in whole or in part,
at any time on or after June 1, 2002,
initially at 104.5% of their principal
amount, plus accrued interest, declining
ratably to 100% of their principal amount,
plus accrued interest, on or after June 1,
2006.
In addition, at any time prior to June 1,
2000, the Company may redeem up to 35% of the
principal
-16-
<PAGE>
amount of the Debentures with the proceeds of
one or more public equity offerings by the
Company of its Common Stock, at any time or
from time to time in part, at a redemption
price (expressed as a percentage of principal
amount) of 109%, plus accrued interest;
provided that at least $195 million aggregate
principal amount of Debentures remains
outstanding after each such redemption. See
"Description of Debentures--Optional
Redemption."
CHANGE OF CONTROL.............. Upon a Change of Control (as defined in
"Description of Debentures--Certain
Definitions"), each holder of the Debentures
will have the right to require the Company to
purchase such holder's Debentures at a price
of 101% of the principal amount thereof plus
accrued interest, if any, to the date of
purchase. There can be no assurance that the
Company will have the financial resources
necessary to purchase the Debentures upon a
Change of Control. See "Description of
Debentures-- Repurchase of Debentures upon a
Change of Control."
RANKING........................ The Indebtedness evidenced by the Debentures
will be subordinated to all existing and
future Senior Indebtedness of the Company,
will rank pari passu in right of payment with
all senior subordinated indebtedness of the
Company and senior in right of payment to all
existing and future subordinated indebtedness
of the Company, including the Exchange
Debentures. After giving pro forma effect to
the Private Offering and the application of
the proceeds therefrom and the Preferred
Stock Exchange, as of May 31, 1997 the
Company and its subsidiaries would have had
approximately $926.3 million of indebtedness
outstanding, including approximately $570.3
million of Senior Indebtedness (all of which
would have been secured). See
"Capitalization." The Credit Agreement is
secured by substantially all of the assets of
the Company and its subsidiaries. In
addition, all existing and future liabilities
(including trade payables) of the Company's
subsidiaries will be effectively senior to
the Debentures. At March 31, 1997, the
Company's subsidiaries had approximately
$268.3 million of other liabilities
outstanding. See "Risk Factors-- Holding
Company Structure and Subordination" and "--
Secured Indebtedness" and "Capitalization."
-17-
<PAGE>
CERTAIN COVENANTS.............. The Indenture contains certain covenants for
the benefit of the holders of the Debentures
which, among other things, restrict the
ability of the Company and its Restricted
Subsidiaries (as defined in "Description of
Debentures--Certain Definitions") to: incur
or guarantee additional indebtedness; make
certain dividends, investments and other
restricted payments; create restrictions on
the ability of Restricted Subsidiaries to
make certain payments; issue or sell stock of
Restricted Subsidiaries; enter into
transactions with stockholders or affiliates;
create liens; sell assets; and, with respect
to the Company, consolidate, merge or sell
all or substantially all of its assets. See
"Description of Debentures--Covenants."
RISK FACTORS
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
EVALUATING AN INVESTMENT IN THE NEW DEBENTURES, SEE "RISK FACTORS."
-18-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical and pro forma consolidated financial
information of the Company were derived from, and should be read in conjunction
with, the historical financial statements and pro forma financial information of
the Company, 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, 1997 give effect to (i) the Private Offering and
the use of the proceeds therefrom to redeem all of the outstanding 11-3/4% Notes
($135 million aggregate principal amount) and prepay approximately $148.6
million of Term Loans, (ii) the use of the proceeds from the IPO to redeem the
then outstanding Discount Debentures ($59.0 million principal amount) and to
prepay approximately $8.9 million of Term Loans, and (iii) the Preferred Stock
Exchange, as if such events had occurred as of January 1, 1997.
The summary unaudited pro forma operating and other data for the fiscal
year ended December 31, 1996 give effect to (i) each of the events described in
the immediately preceding paragraph, (ii) the use of the proceeds from the
Preferred Stock Sale to (a) purchase in July 1996 the Company's Class B Common
Stock, par value $.01 per share (the "Class B Stock"), held by Mellon Bank N.A.
("Mellon"), as trustee for First Plaza Group Trust, and (b) redeem $12.0 million
principal amount of Discount Debentures, and (iii) the incurrence of $125.0
million of additional B term loans in July 1996 and $17.4 million of borrowings
under the Revolving Loan Facility (as defined herein) in June 1996, 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 (the events referred to in clauses
(ii) and (iii) of this paragraph are collectively referred to as the
"Refinancing").
The summary unaudited pro forma balance sheet data at March 31, 1997
give effect to the Private Offering and the use of the proceeds therefrom and
the Preferred Stock Exchange, as if such events had occurred as of such date.
The summary unaudited pro forma financial information does not reflect
(i) any anticipated interest rate reduction that may be realized as a result of
any refinancing of the Credit Agreement or (ii) the non-cash pre-tax
extraordinary charge of approximately $11.7 million that the Company expects to
incur as a result of the write-off of unamortized deferred financing costs in
connection with any such refinancing of the Credit Agreement. Although the
Company intends to complete negotiations to refinance the Credit Agreement,
there can be no assurance that the Company will be able to effect any such
refinancing.
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 the Company 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 the Company, including the notes thereto, included
elsewhere in this Prospectus.
-19-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Three Months ended March 31,
-------------------------------
Pro Forma
1997(a) 1997 1996
------- ------- -----
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING DATA:
Net sales................................................... $299.4 $299.4 $279.9
Cost of goods sold.......................................... 256.7 256.7 242.3
------- ------- -------
Gross profit................................................ 42.7 42.7 37.6
Selling, general and administrative expenses................ 14.0 14.0 13.7
Non-cash stock option charge(b)............................. 22.5 22.5 0.2
------- ------- -------
Income from operations...................................... 6.2 6.2 23.7
Interest expense and other related financing costs.......... 19.2 20.0 22.6
------- ------- -------
Income (loss) before income taxes........................... (13.0) (13.8) 1.1
Income tax provision (benefit)(c)........................... (24.7) (24.8) 1.0
------- ------- -------
Income before extraordinary charge.......................... 11.7 11.0 0.1
Extraordinary charge relating to early extinguishment of
debt, net of taxes(d)....................................... -- (0.7) --
------- ------- -------
Net income before preferred stock dividend requirement...... 11.7 10.3 0.1
Preferred stock dividend requirement........................ -- (1.8) --
------- ------- -------
Net income available to common stockholders................. $ 11.7 $ 8.5 $ 0.1
======= ======= =======
Ratio of earnings to fixed charges(e)....................... -- -- 1.05
Deficiency of earnings available to cover fixed charges(e).. $ 13.0 $ 13.8 $ --
SELECTED SEGMENT DATA:
Net sales:
Metal container business............................ $242.2 $242.2 $226.4
Plastic container business.......................... 57.2 57.2 53.5
Income from operations:(f)
Metal container business............................ 22.3 22.3 20.0
Plastic container business.......................... 6.8 6.8 4.2
OTHER DATA:
Adjusted EBITDA(g).......................................... $ 43.7 $ 43.7 $ 40.1
Adjusted EBITDA as a percentage of net sales................ 14.6% 14.6% 14.3%
Ratio of Adjusted EBITDA to interest expense................ 2.28 2.19 1.77
Capital expenditures........................................ $ 10.3 $ 10.3 $18.6
Depreciation and amortization(h)............................ 14.3 14.3 15.5
Cash flows used for operating activities.................... -- (44.9) (31.2)
Cash flows used for investing activities.................... -- (10.3) (17.1)
Cash flows provided by financing activities................. -- 60.0 52.1
BALANCE SHEET DATA (at end of period):
Total assets................................................ $992.2 $989.4 $942.8
Total long-term debt(i)..................................... 735.6 634.8 757.5
Exchangeable redeemable preferred stock..................... -- 54.7 --
Deficiency in stockholders' equity.......................... (98.5) (89.2) (179.7)
</TABLE>
(footnotes follow)
-20-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
Pro Forma
1996(a) 1996(j) 1995(j) 1994(k) 1993(k) 1992
-------- -------- -------- ------- ------- -----
(DOLLARS IN MILLIONS)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ $1,405.7 $1,405.7 $1,101.9 $ 861.4 $ 645.5 $ 630.0
Cost of goods sold....................... 1,223.6 1,223.6 970.5 748.3 571.2 555.0
-------- -------- --------- -------- -------- ---------
Gross profit............................. 182.1 182.1 131.4 113.1 74.3 75.0
Selling, general and administrative
expenses................................ 58.8 58.8 46.9 38.0 32.5 32.8
Reduction in carryina value of
assets(l)............................... -- -- 14.7 16.7 -- --
-------- -------- --------- -------- -------- ---------
Income from operations................... 123.3 123.3 69.8 58.4 41.8 42.2
Interest expense and other related
financing costs......................... 81.1 89.4 80.7 65.8 54.3 57.0
Minority interest expense................ -- -- -- -- -- 2.7
-------- -------- --------- -------- -------- ---------
Income (loss) before income taxes........ 42.2 33.9 (10.9) (7.4) (12.5) (17.5)
Income tax provision..................... 3.3 3.3 5.1 5.6 1.9 2.2
-------- -------- --------- -------- -------- ---------
Income (loss) before extraordinary
charges and cumulative effect of
changes in accounting principles........ 38.9 30.6 (16.0) (13.0) (14.4) (19.7)
Extraordinary charges relating to early
extinguishment of debt(d)............... -- (2.2) (5.8) -- (1.3) (23.6)
Cumulative effect of changes in
accounting principles(m)................ -- -- -- -- (6.3) --
-------- -------- --------- -------- -------- ---------
Net income (loss) before preferred stock
dividend requirement..................... 38.9 28.4 (21.8) (13.0) (22.0) (43.3)
Preferred stock dividend requirement..... -- (3.0) -- -- -- --
-------- -------- --------- -------- -------- ---------
Net income (loss) applicable to common
stockholders............................ $ 38.9 $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3)
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges(e).... 1.49 1.36 -- -- -- --
Deficiency of earnings available to
cover fixed charges(e).................... $ -- $ -- $ 10.9 $ 7.4 $ 12.5 $ 17.5
SELECTED SEGMENT DATA:
Net sales:
Metal container business......... $1,189.3 $1,189.3 882.3 $ 657.1 $ 459.2 $ 437.4
Plastic container business....... 216.4 216.4 219.6 204.3 186.3 192.6
Income (loss) from operations:(f)
Metal container business......... 106.1 106.1 58.2 59.8 42.3 40.7
Plastic container business....... 18.4 18.4 13.2 (0.1) 0.6 2.3
OTHER DATA:
Adjusted EBITDA(g)....................... $ 186.0 $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0
Adjusted EBITDA as a percentage of net
sales................................... 13.2% 13.2% 12.0% 13.3% 11.8% 11.7%
Ratio of Adjusted EBITDA to interest
expense................................. 2.29 2.08 1.64 1.74 1.40 1.30
Capital expenditures..................... $ 56.9 $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4
Depreciation and amortization(h)......... 58.6 58.6 45.4 37.2 33.8 31.8
Cash flows provided by operating
activities.............................. -- 125.2 209.6 47.3 48.1 15.4
Cash flows used for investing activities. -- (98.3) (397.1) (27.9) (116.1) (23.0)
Cash flows (used for) provided by
financing activities.................... -- (27.9) 186.9 (17.0) 65.3 8.6
Number of employees (at end of
period)(n).............................. -- 5,525 5,110 4,000 3,330 3,340
BALANCE SHEET DATA (at end of period):
Total assets............................. -- $ 913.5 $ 900.0 $ 504.3 $ 497.6 $ 389.0
Total long-term debt..................... -- 693.8 750.9 510.8 505.7 383.2
Exchangeable redeemable preferred stock.. -- 53.0 -- -- -- --
Deficiency in stockholders' equity....... -- (190.2) (179.8) (158.0) (145.0) (138.0)
</TABLE>
(footnotes follow)
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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, 1997 and the year ended
December 31, 1996, see the unaudited pro forma condensed statements of
operations, including the notes thereto, included elsewhere in this
Prospectus.
(b) In connection with the IPO, the Company recognized a non-cash charge of
$22.5 million at the time of the IPO in the Company's first quarter in 1997,
for the excess of fair market value over the grant price of certain stock
options, less $3.7 million previously accrued. See Note 22 to the
Consolidated Financial Statements for the year ended December 31, 1996
included elsewhere in this Prospectus.
(c) During the first quarter of 1997, the Company determined that a portion of
the future tax benefits arising from its net operating loss carryforward
would be realized in future years due to the Company's continued improvement
in earnings and increased probability of future taxable income. Accordingly,
in accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, the Company recognized an income tax benefit during the quarter ended
March 31, 1997 for a portion of its recoverable net operating loss
carryforward.
(d) The pro forma consolidated operating data for the three months ended March
31, 1997 do not include extraordinary charges, net of tax, of $9.3 million
that the Company expects to incur in connection with the Private Offering
for the write-off of premiums and unamortized deferred financing costs
related to the early redemption of the 11-3/4% Notes and the prepayment of a
portion of the Term Loans. See "Capitalization." In addition, the pro forma
consolidated operating data for the three months ended March 31, 1997 do not
include the historical extraordinary charge of $0.7 million, net of taxes,
incurred in connection with the early redemption of the remaining Discount
Debentures on March 26, 1997 with proceeds from the IPO, and the pro forma
consolidated operating data for the year ended December 31, 1996 do not
include the historical extraordinary charge, net of taxes, of $2.2 million
incurred in connection with the redemption of a portion of the Discount
Debentures in 1996.
(e) For purposes of computing the ratio of earnings to fixed charges and the
deficiency of earnings available to cover fixed charges, earnings consist of
income (loss) before income taxes plus fixed charges, excluding capitalized
interest, and fixed charges consist of interest, whether expensed or
capitalized, minority interest expense, amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized, and such portion of rental expense that is representative of
the interest factor.
(f) The selected segment data for the three months ended March 31, 1997 excludes
the historical non-cash pre- tax charge of $22.5 million for the excess of
fair market value over the grant price of stock options converted from stock
option plans of Containers and Plastics to the Silgan Holdings Inc. Fourth
Amended and Restated 1989 Stock Option Plan (the "Stock Option Plan") in
connection with the IPO. The selected segment data for all periods presented
also excludes corporate expense.
(g) "Adjusted EBITDA" 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 applicable period, without duplication, consolidated interest expense,
income tax expense and depreciation and amortization expense, and is
adjusted to add back expenses relating to postretirement health care costs
(which amounted to $0.7 million for each of the three months ended March 31,
1997 and 1996 and $2.6 million, $1.7 million, $0.7 million and $0.5 million
for the years ended December 31, 1996, 1995, 1994 and 1993, respectively),
the reduction in carrying value of assets (which were $14.7 million and
$16.7 million for the years ended December 31, 1995 and 1994, respectively)
and certain other non- cash charges (which included charges relating to the
excess of fair market value over the grant price of stock options converted
from stock option plans of the Company's subsidiaries to the Stock Option
Plan of $22.5 million for the three months ended March 31, 1997 and relating
to the vesting of benefits under
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Stock Appreciation Rights ("SARs") of $0.2 million for the three months
ended March 31, 1996 and $0.8 million for each of the years ended December
31, 1996 and 1995 and $1.5 million for the year ended December 31, 1994).
The Company has included information regarding Adjusted EBITDA because
management believes that many investors consider it to be important in
assessing a company's ability to service and incur debt. Accordingly, this
information has been disclosed herein to permit a more complete analysis of
the Company's financial condition. Adjusted EBITDA should not be considered
in isolation or as a substitute for net income or other consolidated
statement of operations or cash flows data prepared in accordance with
generally accepted accounting principles ("GAAP") as a measure of the
profitability or liquidity of the Company. See the consolidated statements
of operations and consolidated statements of cash flows of the Company,
including the notes thereto, included elsewhere in this Prospectus. Adjusted
EBITDA does not take into account the Company's debt service requirements
and other commitments and, accordingly, is not necessarily indicative of
amounts that may be available for discretionary uses. Additionally, Adjusted
EBITDA is not computed in accordance with GAAP and may not be comparable to
other similarly titled measures of other companies.
(h) Depreciation and amortization excludes amortization of debt financing costs.
(i) Pro forma total long-term debt at March 31, 1997 excludes $75.0 million of
Term Loans under the Credit Agreement that were incurred in April 1997 to
finance the acquisitions of Roll-on Closures and Rexam Plastics and to repay
$32.7 million under the Revolving Loan Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Capital Resources and Liquidity."
(j) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility in
May 1996 for $13.1 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 of the Company for the year ended December
31, 1996 included elsewhere in this Prospectus.
(k) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 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.
(l) 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 metal container business 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 $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment. See
Note 5 to the Consolidated Financial Statements of the Company for the year
ended December 31, 1996 included elsewhere in this Prospectus.
(m) 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.
(n) 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 Debentures 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
Debentures.
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. At May 31,
1997, on a pro forma basis after giving effect to the Private Offering and the
use of the proceeds therefrom and the Preferred Stock Exchange (assuming that
such events had occurred as of such date), the Company would have had
approximately $926.3 million of total consolidated indebtedness. The Company
will likely incur additional indebtedness in the future to finance acquisitions
that it may make and any resulting increased operating needs. See "--Ability of
the Company to Incur Additional Indebtedness" and "--Risks Associated with
Growth Strategy." The Company has entered into a commitment letter with the New
Co-Arrangers pursuant to which the New Co-Arrangers have committed to provide
and to use their best efforts to arrange a syndicate of lenders to provide for
the Bank Refinancing pursuant to the terms of the New Credit Agreement that will
provide the Company with a total senior secured credit facility of $1.0 billion.
Although there can be no assurance that the Bank Refinancing will be completed,
the Company expects the Bank Refinancing to occur early in the third quarter of
1997. See "--Secured Indebtedness." As of March 31, 1997, the Company's
deficiency in stockholders' equity was $89.2 million and, on a pro forma basis
after giving effect to the Private Offering and the use of the proceeds
therefrom and the Preferred Stock Exchange, such deficiency would have been
$98.5 million. See "Capitalization." Additionally, the Company's pro forma
deficiency of earnings available to cover fixed charges for the three months
ended March 31, 1997 was $13.0 million, and the Company's pro forma ratio of
earnings to fixed charges for the year ended December 31, 1996 was 1.49. See
"Selected Historical and Pro Forma Financial Information." A significant amount
of the Company's cash flow must be used to service the Company's debt and
therefore cannot be used in the Company's business. The Company's high level of
indebtedness and deficiency in stockholders' equity pose substantial risks to
holders of the Debentures.
SECURED INDEBTEDNESS
The indebtedness under the Credit Agreement is secured by substantially
all of the assets of the Company and the stock of the Company's subsidiaries. At
May 31, 1997, on a pro forma basis after giving effect to the Private Offering
and the use of the proceeds therefrom, approximately $570.3 million of the
Company's and its subsidiaries' indebtedness would have been secured by the
assets of the Company and its subsidiaries. The Indenture permits the Company to
incur certain additional secured indebtedness under certain circumstances. See
"--Ability of the Company to Incur Additional Indebtedness" and "Description of
Debentures." On June 30, 1997, the Company and each of the New Co-Arrangers
entered into a commitment letter pursuant to which the New Co-Arrangers
committed to provide and to use their best efforts to arrange a syndicate of
lenders to provide for the Bank Refinancing pursuant to the terms of the New
Credit Agreement. Under the terms of such commitment letter, the New Credit
Agreement will provide the Company with a total senior secured credit facility
of $1.0 billion, which will include $450.0 million of term loans and a revolving
loan commitment of $550.0 million. The Company intends to use the term loans and
a portion of the revolving loans under the New Credit Agreement to refinance in
full outstanding amounts under the Credit Agreement. Revolving loans under the
New Credit Agreement will be available to the Company for its working capital
and general corporate purposes (including permitted acquisitions). Although
there can be no assurance that the Bank
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<PAGE>
Refinancing will be completed, the Company expects the Bank Refinancing to occur
early in the third quarter of 1997. See "Description of Certain Indebtedness--
Description of Credit Agreement." Under the Credit Agreement, the Banks have
claims (and under the New Credit Agreement, the banks will have claims) with
respect to the assets of the Company constituting collateral and the stock of
the Company's subsidiaries that are prior to the claims of holders of the
Debentures. In addition, the Company's indebtedness under the Credit Agreement
is guaranteed by substantially all the Company's subsidiaries. In the event of a
default on the Debentures or a bankruptcy, insolvency, liquidation,
reorganization, dissolution or other winding up of the Company, or upon the
acceleration of any Senior Indebtedness, such assets and stock would be
available to satisfy obligations with respect to the indebtedness secured
thereby before any payment therefrom could be made on the Debentures. To the
extent such assets were not sufficient to repay all of the Senior Indebtedness,
the holders thereof would have a claim against the Company that is senior to any
claims of the holders of the Debentures. See "Description of Debentures--
Ranking" and "Description of Certain Indebtedness."
HOLDING COMPANY STRUCTURE AND SUBORDINATION
The Company is a holding company with no significant assets other than
its investments in and advances to its subsidiaries. The operations of the
Company are conducted principally through each of its wholly owned operating
subsidiaries, Containers and Plastics. Therefore, the Company's ability to make
interest and principal payments on the Debentures 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, cost of raw materials, legislative and
regulatory changes and other factors beyond the control of such operating
subsidiaries) affecting the business and operations of such operating
subsidiaries. Because the Company's subsidiaries do not guarantee the payment of
principal of or interest on the Debentures, claims of holders of the Debentures
effectively will be subordinated to the claims of creditors of such operating
subsidiaries, including trade creditors, except to the extent that the Company
may be a creditor with recognized claims against such operating subsidiaries. At
May 31, 1997, on a pro forma basis after giving effect to the Private Offering
and the use of the proceeds therefrom and the Preferred Stock Exchange (assuming
that such events had occurred as of such date), the Company's subsidiaries would
have had approximately $570.3 million of indebtedness (consisting of
indebtedness under the Credit Agreement) effectively senior to the Debentures.
See "--Secured Indebtedness" and "--Ability of the Company to Incur Additional
Indebtedness." In addition, the Company's subsidiaries had other liabilities of
approximately $268.3 million at March 31, 1997, all of which would be
effectively senior to the Debentures.
The payment of principal on the Debentures is expressly subordinate to
all existing and future Senior Indebtedness of the Company. Because of such
subordination, in the event of the Company's bankruptcy, insolvency,
liquidation, reorganization, dissolution or other winding up, or upon the
acceleration of any Senior Indebtedness, the Banks under the Credit Agreement
and any other holder of Senior Indebtedness must be paid in full before the
holders of the Debentures may be paid. Payments on the Debentures might not be
permitted if a default under any Senior Indebtedness exists or if such a default
would result from any such payment. In addition, although the Credit Agreement
and the Indenture impose certain limitations on the ability of the Company to
incur additional indebtedness, the Company is not prohibited under the Indenture
from incurring additional indebtedness, including additional Senior
Indebtedness, secured indebtedness and other indebtedness that is effectively
senior to or pari passu with the Debentures. At May 31, 1997, on a pro forma
basis after giving effect to the Private Offering and the use of the proceeds
therefrom and the Preferred Stock Exchange (assuming that such events had
occurred as of such date), the Company would have outstanding approximately
$570.3 million of Senior Indebtedness (consisting of indebtedness under the
Credit Agreement).
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<PAGE>
ABILITY OF THE COMPANY TO INCUR ADDITIONAL INDEBTEDNESS
The Indenture permits the Company to incur any indebtedness, including
Senior Indebtedness, secured indebtedness and other indebtedness that is
effectively senior to or pari passu with the Debentures, if after giving effect
to the incurrence of such indebtedness the Company's Interest Coverage Ratio (as
defined under "Description of Debentures--Certain Definitions") is at least 2.0
to 1. For the twelve month period ended March 31, 1997, the Company's Interest
Coverage Ratio was 2.16 to 1, and on a pro forma basis after giving effect to
the Private Offering and the use of the proceeds therefrom and the Preferred
Stock Exchange, the Company's Interest Coverage Ratio would have been 2.32 to 1.
The Indenture also permits certain specified additional indebtedness to be
incurred by the Company, including Senior Indebtedness, secured indebtedness and
other indebtedness that is effectively senior to the Debentures. The Company may
make additional acquisitions in the future and will likely finance such
acquisitions with the additional indebtedness, including Senior Indebtedness and
secured indebtedness, as permitted under its Financing Agreements (as defined
herein). The Company has entered into a commitment letter with the New
Co-Arrangers pursuant to which the New Co-Arrangers have committed to provide
and to use their best efforts to arrange a syndicate of lenders to provide for
the Bank Refinancing pursuant to the terms of the New Credit Agreement that will
provide the Company with a total senior secured credit facility of $1.0 billion.
Although there can be no assurance that the Bank Refinancing will be completed,
the Company expects the Bank Refinancing to occur early in the third quarter of
1997. See "--Secured Indebtedness" and "Description of
Debentures--Covenants--Limitation on Indebtedness."
REFINANCING RISK
Under the Revolving Loan Facility of the Credit Agreement, Containers
and Plastics have available to them a commitment of up to $225 million, which
may be borrowed, repaid and reborrowed from time to time until December 31,
2000, on which date the Revolving Loan Facility matures and is payable in full.
As of May 31, 1997, on a pro forma basis after giving effect to the Private
Offering and the use of the proceeds therefrom and the Preferred Stock Exchange
(assuming that they had occurred as of such date), there were $146.4 million of
A term loans outstanding under the Credit Agreement, which A term loans are
payable in installments through December 31, 2000, and there were $309.4 million
of B term loans outstanding under the Credit Agreement, which B term loans are
payable in installments through March 15, 2002. See "Description of Certain
Indebtedness--Description of the Credit Agreement."
On June 30, 1997, the Company and each of the New Co-Arrangers
entered into a commitment letter pursuant to which the New Co-Arrangers have
committed to provide and to use their best efforts to arrange a syndicate of
lenders to provide for the Bank Refinancing pursuant to the terms of the New
Credit Agreement. Under the terms of such commitment letter, the New Credit
Agreement will provide the Company with a total senior secured credit facility
of $1.0 billion, which will include $450.0 million of term loans and a revolving
loan commitment of $550.0 million. The Company intends to use the term loans and
a portion of the revolving loans under the New Credit Agreement to refinance in
full outstanding amounts under the Credit Agreement. Revolving loans under the
New Credit Agreement will be available to the Company for its working capital
and general corporate purposes (including permitted acquisitions). Although
there can be no assurance that the Bank Refinancing will be completed, the
Company expects the Bank Refinancing to occur early in the third quarter of
1997. See "Description of Certain Indebtedness--Description of the Credit
Agreement."
The Company will have to refinance all of its indebtedness (including
indebtedness under the New Credit Agreement) prior to the maturity of the
Debentures. The Company's ability to do so will depend
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on, among other things, its financial condition at the time, the restrictions in
the instruments governing its then outstanding indebtedness, 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 the Credit
Agreement or any other indebtedness, and if the Company is unable to effect any
such refinancing, the Company's ability to make payments of cash interest and
principal on the Debentures would be adversely affected. In addition, the
Debentures permit the Company to incur a substantial amount of additional
indebtedness, which may mature and need to be refinanced prior to the maturity
date of the Debentures. See "--Ability of the Company to Incur Additional
Indebtedness."
RESTRICTIVE COVENANTS UNDER FINANCING AGREEMENTS
In connection with the incurrence of its indebtedness, the Company has
entered into instruments and agreements governing such indebtedness (the
"Financing Agreements"), which Financing Agreements contain numerous covenants,
including financial and operating covenants, certain of which are quite
restrictive. In particular, certain financial covenants become more restrictive
over time in anticipation of scheduled debt amortization and improved operating
results. Such covenants affect, and in many respects 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 Debentures" and "Description of Certain Indebtedness". The
Company expects that the Bank Refinancing will change certain covenants under
the Company's senior secured credit facility to further improve the Company's
operating and financial flexibility, including changes to provide more
flexibility under certain circumstances to sell assets, engage in mergers and
acquisitions, make capital expenditures, incur indebtedness, create liens, pay
dividends, repurchase stock, and refinance existing indebtedness. Although there
can be no assurance that the Bank Refinancing will be completed, the Company
expects the Bank Refinancing to occur early in the third quarter of 1997.
See "--Secured Indebtedness."
The ability of the Company to satisfy such covenants and its other
obligations (including scheduled reductions of its indebtedness under the Credit
Agreement and its obligations under the Debentures and the Exchange Debentures)
depends upon, among other things, the future performance of the Company, 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 the Company.
The factors described above could adversely affect the Company's ability
to meet its financial obligations, including obligations to holders of the
Debentures. 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 and other operating needs, it
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
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obligations of the Company. Such defaults could be expected to delay or preclude
payment of principal of and/or interest on the Debentures. See "--Secured
Indebtedness" and "--Holding Company Structure and Subordination."
RISKS ASSOCIATED WITH GROWTH STRATEGY
Historically, the Company has grown predominantly through acquisitions.
The Company's future growth will depend in large part on additional acquisitions
of consumer goods packaging businesses. To finance such acquisitions, the
Company will likely incur additional indebtedness, including Senior Indebtedness
and secured indebtedness, as permitted under the Financing Agreements. See
"--Ability of the Company to Incur Additional Indebtedness." In pursuing its
strategy of growth through acquisitions, the Company will face risks commonly
encountered with such a strategy. These risks include failing to assimilate the
operations and personnel of the acquired businesses, disrupting the Company's
ongoing business, dissipating the Company's limited management resources, and
impairing relationships with employees and customers of the acquired business as
a result of changes in ownership and management. Depending upon the size of the
acquisition, it can take up to two to three years to completely integrate an
acquired business into the Company's operations and systems and realize the full
benefit of the Company's strategies. During the early part of this integration
period, the operating results of an acquired business may decrease from results
attained prior to the acquisition. Moreover, additional indebtedness incurred to
make acquisitions could adversely affect the Company's liquidity and financial
stability.
RELIANCE ON MAJOR CUSTOMERS
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 with Del Monte (the "DM
Supply Agreement") pursuant to which Containers supplies substantially all of
Del Monte's metal container requirements. The Nestle Supply Agreements and the
DM Supply Agreement provide Containers with a potential market for a substantial
portion of its metal container output during the terms of these agreements.
Approximately 17% and 12% of the Company's sales in 1996 were to Nestle and Del
Monte, respectively. The Company has agreed with Nestle to extend the term of
certain of the Nestle Supply Agreements through 2004 (representing approximately
10% of the Company's 1996 sales) in return for certain price concessions by the
Company. The Company believes that these price concessions will not have a
material adverse effect on its results of operations. Under the Company's recent
agreement with Nestle, with respect to the remaining Nestle Supply Agreements
that expire in August and December 1997 (representing approximately 6% of the
Company's 1996 sales), the Company has the right to submit a bid to Nestle, and
to match any bid received by Nestle, for the 1998 supply year with respect to
the metal containers that are the subject of such Nestle Supply Agreements.
There can be no assurance that any such bid by the Company will be made at sales
prices equivalent to those currently in effect or otherwise on terms similar to
those currently in effect. In addition, the Company cannot predict the effect,
if any, on its results of operations of matching or not matching any such bids.
Under certain limited circumstances, Del Monte, beginning in December 1998, and
Nestle, beginning in January 2000 (with respect to all of the metal containers
supplied under the Nestle Supply Agreements that have been extended through
2004), may receive competitive bids, and Containers has the right to match any
such bids. If Containers matches a competitive bid, it may result in reduced
sales prices with respect to the metal containers that are the subject of such
competitive bid. In the event that Containers chooses not to match a competitive
bid, such metal containers may be purchased from the competitive bidder at the
competitive bid price for the term of the bid. See "Business- -Sales and
Marketing." The Company's results of operations could be adversely affected if
the Company loses significant unit sales to Nestle and/or Del Monte as a result
of a competitive bid or otherwise. Neither the Nestle Supply Agreements nor the
DM Supply Agreement require the purchase of minimum
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amounts, and should Nestle's or Del Monte's demand decrease, the Company's
consolidated sales could decrease. The loss by the Company of either Nestle or
Del Monte as a customer would have a material adverse effect on the Company's
results of operations.
DEPENDENCE ON AGRICULTURAL HARVEST; SEASONALITY
The Company's metal container business sales are dependent, in part,
upon the vegetable, tomato and fruit harvests in the midwest and western regions
of the United States. The size and quality of these harvests varies from year to
year, depending in large part upon the weather conditions in those regions, and
the Company's results of operations could be impacted accordingly. The Company's
results of operations could be materially adversely affected in a year in which
crop yields are substantially lower than normal in either of the prime
agricultural regions of the United States in which the Company operates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Overview--Agricultural Harvest and Seasonality."
Because the Company sells metal containers used in fruit and vegetable
pack processing, its sales are seasonal. As is common in the packaging industry,
the Company must access working capital to build inventory and then carry
accounts receivable for some customers beyond the end of the summer and fall
packing season. Seasonal accounts are generally settled by year end. Due to the
Company's seasonal requirements, the Company expects to incur short term
indebtedness under the Revolving Loan Facility to finance its working capital
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
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. In particular, price competition can be an
important factor and may affect the Company's results of operations. See
"Business--Competition."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services provided
by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer of
the Company, and D. Greg Horrigan, the President and Co-Chief Executive Officer
of the Company, could materially adversely affect the Company. However, the
Company's operations are conducted through Containers and Plastics, each of
which has its own independent management. S&H, Inc. ("S&H"), a company wholly
owned by Messrs. Silver and Horrigan, has agreed to provide certain general
management and administrative services to each of the Company, Containers and
Plastics pursuant to management services agreements. See "Certain
Transactions--Management Agreements."
CERTAIN INTERESTS OF STOCKHOLDERS
The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") owns
30.9% of the Common Stock. The general partner of MSLEF II and Morgan Stanley
are both wholly owned subsidiaries of Morgan Stanley, Dean Witter, Discover and
Co. ("Morgan Stanley Dean Witter"), and two directors of the Company are
employees of Morgan Stanley. As a result of these relationships and certain
agreements with Messrs. Silver and Horrigan, Morgan Stanley Dean Witter and its
affiliates will continue to have significant influence over the management
policies and corporate affairs of the Company. Morgan Stanley
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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 Common Stock
and the holders of the Debentures. For example, if the Company encounters
financial difficulties, or is unable to pay its debts as they mature, the
interests of the holders of Common Stock might conflict with those of the
holders of the Debentures. In addition, the holders of 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
Debentures.
ABSENCE OF PUBLIC MARKET
The New Debentures 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 for, the New Debentures. If the New Debentures are
traded after their initial issuance, they may trade at a discount from their
initial offering price, depending upon the liquidity of the New Debentures, 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 Debentures were sold by the Company to the Placement Agent on
June 9, 1997 pursuant to the terms of the Placement Agreement. The Placement
Agent subsequently sold the Old Debentures to "qualified institutional buyers"
in reliance on Rule 144A under the Securities Act and outside the United States
to non-U.S. persons in reliance on Regulation S under the Securities Act. In
connection with the sale of the Old Debentures, the Company and the Placement
Agent entered into 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 the Company to exchange all of the Old
Debentures for the New Debentures 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 Debentures the opportunity to exchange their Old
Debentures for an equal principal amount of New Debentures, which will be issued
without a restrictive legend and which 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 Debentures are 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 Debentures acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Debentures, 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 Debentures, (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 Debentures, 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, or a
broker-dealer who receives such New Debentures directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act.
RESALE OF NEW DEBENTURES
Based on a previous interpretation by the staff of the Commission set
forth in certain no-action letters issued to third parties, the Company believes
that the New Debentures issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any Holder of such New Debentures
(other than any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act or a broker-dealer who receives
such New Debentures directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Debentures are 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 Debentures. Any Holder who
tenders in the Exchange Offer with the intention of participating in a
distribution of the New Debentures cannot rely on such interpretation by the
staff of the Commission as set forth in such no-action letters 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
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Debentures. In the event that the Company's belief is inaccurate, Holders of the
New Debentures who transfer New Debentures 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 Debentures 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 Debentures for
its own account in exchange for Old Debentures, where such Old Debentures 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 New Debentures. The Company has not entered
into any arrangement or understanding with any person to distribute the New
Debentures 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 Debentures validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Debentures in exchange for each $1,000 principal amount of
outstanding Old Debentures surrendered pursuant to the Exchange Offer. Old
Debentures may be tendered only in integral multiples of $1,000.
The form and terms of the New Debentures will be the same as the form
and terms of the Old Debentures except that the New Debentures will be
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof. The New Debentures will evidence the same indebtedness as
the Old Debentures. The New Debentures will be issued under and entitled to the
benefits of the Indenture, which also authorized the issuance of the Old
Debentures, such that both series will be treated as a single class of debt
securities under the Indenture.
As of the date of this Prospectus, $300,000,000 aggregate principal
amount of Old Debentures are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered Holders of the Old
Debentures.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Old Debentures that are not tendered for exchange under the Exchange Offer will
remain outstanding and will be entitled to the rights and benefits such Holders
have under the Indenture.
The Company shall be deemed to have accepted validly tendered Old
Debentures when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering Holders for the purposes of receiving the New Debentures from the
Company.
If any tendered Old Debentures are 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 Debentures will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
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Holders who tender Old Debentures 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 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
__________, 1997, 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
Exchange 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 Debentures, 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 Exchange 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 Debentures
properly tendered and will issue the New Debentures promptly after acceptance of
the Old Debentures. See "--Conditions" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old
Debentures for exchange when, as and if the Company shall have given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of the New Debentures for Old Debentures that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of a properly completed and duly executed
Letter of Transmittal or a timely Book-Entry Confirmation (as defined herein) by
an Agent's Message (as defined herein) in lieu of a 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 Debentures are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Debentures are submitted for a greater principal amount than the
Holder desires to exchange, then such unaccepted or non-exchanged Old Debentures
evidencing the unaccepted portion, as
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appropriate, will be returned without expense to the tendering Holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
INTEREST ON NEW DEBENTURES
The New Debentures will bear interest from the date of the last interest
payment on the Old Debentures or, if no interest has been paid, from the date of
original issuance of the Old Debentures (June 9, 1997) to the date of Exchange
thereof for New Debentures. Holders whose Old Debentures are accepted for
exchange will be deemed to have waived the right to receive any interest accrued
on the Old Debentures.
CONDITIONS
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Debentures being tendered for exchange (provided,
however, that the New Debentures are issuable only in denominations of $1,000 in
principal amount and integral multiples of $1,000 in excess thereof). However,
notwithstanding any other term of the Exchange Offer, the Company will not be
required to exchange any New Debentures for any Old Debentures and may terminate
the Exchange Offer before the acceptance of any Old Debentures 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
Debentures 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
Debentures and return all tendered Old Debentures to the tendering Holders, (ii)
extend the Exchange Offer and retain all Old Debentures tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders who
tendered such Old Debentures to withdraw their tendered Old Debentures or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all properly tendered Old Debentures which have 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.
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PROCEDURES FOR TENDERING
Brokers, dealers, commercial banks, trust companies and other nominees
who hold Old Debentures through The Book-Entry Transfer Facility may effect
tenders by book-entry transfer in accordance with ATOP. Holders of such Old
Debentures registered in the name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact such person promptly if they wish
to tender Old Debentures. In order for Old Debentures to be tendered by a Holder
by a means other than by book-entry transfer, such Holder must complete, sign
and date the Letter of Transmittal, or a 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 Exchange
Agent prior to the Expiration Date. In addition, either (i) certificates for
such Old Debentures must be received by the Exchange Agent along with the Letter
of Transmittal prior to the Expiration Date, or (ii) a timely Book-Entry
Confirmation of such Old Debentures by an Agent's Message in lieu of a Letter of
Transmittal, if such procedure is available, into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the procedure for book-entry
transfer described below must be received by the Exchange 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 Exchange Agent
at the address set forth below under "--Exchange Agent" prior to the Expiration
Date.
The term "Book-Entry Confirmation" means a timely confirmation of a
book-entry transfer of Old Debentures into the Exchange Agent's account at the
Book-Entry Transfer Facility. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgement from the
tendering participant, which acknowledgement states that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such participant.
The tender by a Holder of Old Debentures 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.
THE METHOD OF DELIVERY OF OLD DEBENTURES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE 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 EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD DEBENTURES 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 Debentures are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender its Old Debentures should contact the registered Holder promptly and
instruct such registered Holder to tender such Old Debentures on such beneficial
owner's behalf. If such beneficial owner wishes to tender its Old Debentures on
such owner's own behalf, such owner must, prior to completing and executing the
Letter of Transmittal and delivering such owner's Old Debentures, either make
appropriate arrangements to register ownership of the Old Debentures in such
owner's name or obtain a properly completed assignment from the registered
Holder. The transfer of registered ownership of Old Debentures may take
considerable time.
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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 Debentures tendered pursuant thereto are 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 Debentures listed therein, such Old Debentures 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 Debentures.
If the Letter of Transmittal or any Old Debentures 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 Debentures and withdrawal of tendered Old
Debentures 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 Debentures not properly tendered or any Old Debentures
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 Debentures. 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 Debentures 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 Debentures, none of the
Company, the Exchange Agent or any other person shall incur any liability for
failure to give such notification. Tenders of Old Debentures will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Debentures received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange 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 Debentures 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 Debentures 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 Debentures acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Debentures, 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 Debentures, (iii) neither the Holder nor any such other
person has an arrangement or understanding with
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any person to participate in the distribution of such New Debentures, 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, or a broker-dealer who received
New Debentures directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act.
In all cases, issuance of New Debentures pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of certificates for
such Old Debentures or a timely Book-Entry Confirmation of such Old Debentures
by an Agent's Message, a properly completed and duly executed Letter of
Transmittal (unless such Old Debentures are tendered via a Book-Entry
Confirmation by an Agent's Message) and all other required documents. If any
tendered Old Debentures are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Debentures are submitted for a
greater number of shares than the Holder desires to exchange, such unaccepted or
non- exchanged Old Debentures will be returned without expense to the tendering
Holder thereof (or, in the case of Old Debentures tendered by Book-Entry
Confirmation pursuant to the book-entry transfer procedures described below,
such non-exchanged Old Debentures will be credited to an account maintained with
the Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Old Debentures 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
Debentures by causing the Book-Entry Transfer Facility to transfer such Old
Debentures into the Exchange 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 Debentures 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, or an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "--Exchange Agent" on or prior to the Expiration Date or
the guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Debentures and (i) whose Old
Debentures are not immediately available or (ii) who cannot deliver their Old
Debentures, the Letter of Transmittal or any other required documents to the
Exchange Agent prior to the Expiration Date or (iii) who cannot comply with the
book-entry transfer procedures on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange 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 Debentures
(if such Holder holds physical certificates representing such Old Debentures)
and the number of shares of Old Debentures 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, either (i) the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the Old
Debentures and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent or (ii) a timely
Book-Entry Confirmation of such Old Debentures by an Agent's Message in lieu of
a Letter of Transmittal, if such procedure is
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available, into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedure for book-entry transfer described herein, and any
required documents, will be received by the Exchange Agent; and
(c) Either (i) such properly completed and executed Letter of
Transmittal (or facsimile thereof), as well as the certificate(s) representing
all tendered Old Debentures in proper form for transfer and other documents
required by the Letter of Transmittal are received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date, or (ii)
such timely Book-Entry Confirmation of such Old Debentures by an Agent's Message
in lieu of a Letter of Transmittal, if such procedure is available, into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
procedure for book-entry transfer described herein, and any required documents,
are received by the Exchange Agent within five New York Stock Exchange trading
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their Old Debentures according to the
guaranteed delivery procedures set forth above.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including
registration rights) of holders of the Old Debentures eligible to participate in
the Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify such
holders (including any broker-dealers) and certain parties related to such
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Old Debenture held by a Qualified Institutional Buyer (as defined in Rule 144A),
the information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Old Debentures pursuant to Rule 144A, (iii) to use its
best efforts to keep the Registration Statement effective to the extent
necessary to ensure that it is available for resales of transfer-restricted Old
Debentures by broker-dealers for a period of up to 90 days from the Expiration
Date and (iv) to provide copies of the latest version of the Prospectus to
broker-dealers upon their request for a period of up to 90 days after the
Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Debentures 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 Debentures in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
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 Debentures to be withdrawn (the
"Depositor"), (ii) identify the Old Debentures 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 Debentures
were tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Exchange Agent register the
transfer of such Old Debentures in the name of the person withdrawing the tender
and (iv) specify the name in which any such Old Debentures are 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 Debentures so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no New Debentures will be issued with
respect thereto unless the Old Debentures so withdrawn are validly retendered.
Any Old
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<PAGE>
Debentures that have been tendered but that are 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 Debentures may be retendered by following one of
the procedures described above under "--Procedures for Tendering" at any time
prior to the Expiration Date.
EXCHANGE AGENT
The First National Bank of Chicago has been appointed Exchange Agent for
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 Debentures should be
addressed to the Exchange Agent as follows:
By Registered Mail, Certified Mail, Overnight
Courier or Hand Delivery:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
14 Wall Street
8th Floor, Window 2
New York, NY 100015
Attention: Corporate Trust Services Division
By Telephone: (212) 240-8801
By Facsimile: (212) 240-8938
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
Exchange 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 $250,000. Such expenses include registration fees, fees and
expenses of the Exchange 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 Debentures pursuant to the Exchange Offer. If, however,
certificates representing Old Debentures 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 Debentures tendered, or, if tendered,
the Old Debentures are 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 Debentures pursuant to the
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<PAGE>
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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<PAGE>
CAPITALIZATION
The following table sets forth (i) the unaudited actual consolidated
capitalization of the Company as of March 31, 1997 and (ii) the unaudited pro
forma consolidated capitalization of the Company as of March 31, 1997, giving
effect to the Private Offering and the use of the proceeds therefrom and the
Preferred Stock Exchange. This table should be read in conjunction with the
historical and pro forma consolidated financial information of the Company
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1997
------------------------
Actual Pro Forma
--------- ---------
(Unaudited)
(Dollars in thousands)
SHORT-TERM DEBT:
<S> <C> <C>
Current portion of term loans............................... $ 29,547 $ --
Revolving Loan Facility(a)(b)............................... 88,400 88,400
--------- ---------
Total short-term debt(c).................................. $ 117,947 $ 88,400
========= =========
LONG-TERM DEBT:
Term loans(b)............................................... $ 499,843 $ 380,820
11-3/4% Senior Subordinated Notes due 2002.................. 135,000 --
9% Senior Subordinated Debentures due 2009.................. -- 300,000
13-1/4% Subordinated Debentures due 2006(d)................. -- 54,748
--------- ---------
Total long-term debt(c)................................... $ 634,843 $ 735,568
========= =========
Cumulative exchangeable redeemable preferred stock............. $ 54,748 $ --
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 100,000,000 shares
authorized and 18,862,834 shares issued
and outstanding........................................... $ 189 $ 189
Additional paid-in capital.................................. 110,935 110,935
Accumulated deficit......................................... (200,274) (209,580)(e)(f)
--------- ---------
Total deficiency in stockholders' equity.................. (89,150) (98,456)
--------- ---------
Total capitalization...................................... $ 600,441 $ 637,112
========== =========
</TABLE>
- --------------
(a) As is common in the packaging industry, the Company accesses its Revolving
Loan Facility to build inventory and finance accounts receivable to meet
seasonal demands. As a result, the outstanding amount of the Revolving Loan
Facility as of May 31, 1997 was $114.5 million. Pursuant to the Credit
Agreement, the Banks have agreed to lend to Plastics and Containers up to
an aggregate of $225.0 million under the Revolving Loan Facility. Although
the Revolving Loan Facility is reflected as short-term debt, it currently
matures on December 31, 2000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources and
Liquidity."
(b) Excludes an additional $75.0 million of Term Loans under the Credit
Agreement incurred in April 1997, of which $42.3 million was used to
finance the acquisitions of Roll-on Closures and Rexam Plastics and $32.7
million was used to repay amounts borrowed under the Revolving Loan
Facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Capital Resources and Liquidity." The Company
has entered into a commitment letter with the New Co-Arrangers pursuant to
which the New Co-Arrangers have committed to provide and to use their best
efforts to arrange a syndicate of lenders to provide for the Bank
Refinancing pursuant to the terms of the New Credit Agreement that will
provide the Company with a total senior secured credit facility of $1.0
billion. Although there can be no assurance that the Bank Refinancing will
be completed, the Company expects the Bank Refinancing to occur early in
the third quarter of 1997. See "Risk Factors--Secured Indebtedness" and
"Description of Certain Indebtedness-- Description of the Credit
Agreement."
(c) See "Description of Debentures" and "Description of Certain Indebtedness."
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<PAGE>
(d) The actual principal amount of Exchange Debentures which were issued upon
the Exchange on June 13, 1997 was $56,206,000.
(e) Includes extraordinary charges (i) for premiums of $7.9 million related to
the redemption of the 11-3/4% Notes and (ii) $3.0 million and $2.7 million
for the write-off of unamortized deferred financing costs related to the
redemption of the 11-3/4% Notes and the prepayment of a portion of the Term
Loans, respectively, net of tax of $4.3 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Interest Expense and Extraordinary Charges."
(f) Excludes a non-cash pre-tax extraordinary charge of approximately $11.7
million for the write-off of unamortized deferred financing costs in
connection with the Bank Refinancing. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--
Interest Expense and Extraordinary Charges."
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following selected historical and pro forma consolidated financial
information of the Company were derived from, and should be read in conjunction
with, the historical financial statements and pro forma financial information of
the Company, including the notes thereto, that appear elsewhere in this
Prospectus.
The selected historical consolidated financial data of the Company for
the three months ended March 31, 1997 and 1996 is unaudited, but, in the opinion
of management, such information reflects all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the financial
data for the interim periods. The results for the interim periods presented are
not necessarily indicative of the results for the corresponding full years. The
selected historical consolidated financial data of the Company at December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 (with the exception of employee data) were derived from the historical
consolidated financial statements of the Company 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 the Company at December 31, 1994, 1993 and 1992 and for the years ended
December 31, 1993 and 1992 were derived from the historical audited consolidated
financial statements of the Company for such periods.
The selected unaudited pro forma operating data and other data for the
three months ended March 31, 1997 give effect to (i) the Private Offering and
the use of the proceeds therefrom to redeem all of the outstanding 11-3/4% Notes
(approximately $135 million aggregate amount) and prepay approximately $148.6
million of Term Loans, (ii) the use of the proceeds from the IPO to redeem the
then outstanding Discount Debentures ($59.0 million principal amount) and to
prepay approximately $8.9 million of Term Loans, and (iii) the Preferred Stock
Exchange, as if such events had occurred as of January 1, 1997.
The selected unaudited pro forma operating and other data for the fiscal
year ended December 31, 1996 give effect to each of the events described in the
immediately preceding paragraph and the Refinancing.
The selected unaudited pro forma balance sheet data at March 31, 1997
give effect to the Private Offering and the use of the proceeds therefrom and
the Preferred Stock Exchange, as if such events had occurred as of such date.
The selected unaudited pro forma financial information does not reflect
(i) any anticipated interest rate reduction that may be realized as a result of
any refinancing of the Credit Agreement or (ii) the non- cash pre-tax
extraordinary charge of approximately $11.7 million that the Company expects to
incur as a result of the write-off of unamortized deferred financing costs in
connection with any such refinancing of the Credit Agreement. Although the
Company intends to complete negotiations to refinance the Credit Agreement,
there can be no assurance that the Company will be able to effect any such
refinancing.
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 the Company 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 the Company, including the notes thereto, included
elsewhere in this Prospectus.
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Three Months ended March 31,
------------------------------
Pro Form
1997(a) 1997 1996
-------- ------- -----
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING DATA:
Net sales................................................... $299.4 $299.4 $279.9
Cost of goods sold.......................................... 256.7 256.7 242.3
------ ------ ------
Gross profit................................................ 42.7 42.7 37.6
Selling, general and administrative expenses................ 14.0 14.0 13.7
Non-cash stock option charge(b)............................. 22.5 22.5 0.2
------ ------ ------
Income from operations...................................... 6.2 6.2 23.7
Interest expense and other related financing costs.......... 19.2 20.0 22.6
------ ------ ------
Income (loss) before income taxes........................... (13.0) (13.8) 1.1
Income tax provision (benefit)(c)........................... (24.7) (24.8) 1.0
------ ------ ------
Income before extraordinary charge.......................... 11.7 11.0 0.1
Extraordinary charge relating to early extinguishment of
debt, net of taxes(d)...................................... -- (0.7) --
------ ------ ------
Net income before preferred stock dividend requirement...... 11.7 10.3 0.1
Preferred stock dividend requirement........................ -- (1.8) --
------ ------ ------
Net income available to common stockholders................. $ 11.7 $ 8.5 $ 0.1
====== ====== ======
Ratio of earnings to fixed charges(e)....................... -- -- 1.05
Deficiency of earnings available to cover fixed charges(e).. $ 13.0 $ 13.8 $ --
SELECTED SEGMENT DATA:
Net sales:
Metal container business............................ $242.2 $242.2 $226.4
Plastic container business.......................... 57.2 57.2 53.5
Income from operations:(f)
Metal container business............................ 22.3 22.3 20.0
Plastic container business.......................... 6.8 6.8 4.2
OTHER DATA:
Adjusted EBITDA(g).......................................... $ 43.7 $ 43.7 $ 40.1
Adjusted EBITDA as a percentage of net sales................ 14.6% 14.6% 14.3%
Ratio of Adjusted EBITDA to interest expense................ 2.28 2.19 1.77
Capital expenditures........................................ $ 10.3 $ 10.3 $18.6
Depreciation and amortization(h)............................ 14.3 14.3 15.5
Cash flows used for operating activities.................... -- (44.9) (31.2)
Cash flows used for investing activities.................... -- (10.3) (17.1)
Cash flows provided by financing activities................. -- 60.0 52.1
BALANCE SHEET DATA (at end of period):
Total assets................................................ $992.2 $989.4 $942.8
Total long-term debt(i)..................................... 735.6 634.8 757.5
Exchangeable redeemable preferred stock..................... -- 54.7 --
Deficiency in stockholders' equity.......................... (98.5) (89.2) (179.7)
</TABLE>
(footnotes follow)
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
Pro Forma
1996(a) 1996(j) 1995(j) 1994(k) 1993(k) 1992
-------- -------- -------- ------- ------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................ $1,405.7 $1,405.7 $1,101.9 $ 861.4 $ 645.5 $ 630.0
Cost of goods sold....................... 1,223.6 1,223.6 970.5 748.3 571.2 555.0
-------- -------- -------- -------- -------- --------
Gross profit............................. 182.1 182.1 131.4 113.1 74.3 75.0
Selling, general and administrative
expenses................................ 58.8 58.8 46.9 38.0 32.5 32.8
Reduction in carrying value of assets(l). -- -- 14.7 16.7 -- --
-------- -------- -------- -------- -------- --------
Income from operations................... 123.3 123.3 69.8 58.4 41.8 42.2
Interest expense and other related
financing costs......................... 81.1 89.4 80.7 65.8 54.3 57.0
Minority interest expense................ -- -- -- -- -- 2.7
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ 42.2 33.9 (10.9) (7.4) (12.5) (17.5)
Income tax provision..................... 3.3 3.3 5.1 5.6 1.9 2.2
-------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
charges and cumulative effect of
changes in accounting principles........ 38.9 30.6 (16.0) (13.0) (14.4) (19.7)
Extraordinary charges relating to early
extinguishment of debt(d)............... -- (2.2) (5.8) -- (1.3) (23.6)
Cumulative effect of changes in
accounting principles(m)................. -- -- -- -- (6.3) --
-------- -------- -------- -------- -------- --------
Net income (loss) before preferred stock
dividend requirement..................... 38.9 28.4 (21.8) (13.0) (22.0) (43.3)
Preferred stock dividend requirement...... -- (3.0) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) applicable to common
stockholders............................. $ 38.9 $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3)
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges(e).... 1.49 1.36 -- -- -- --
Deficiency of earnings available to
cover fixed charges(e)................... $ -- -- 10.9 $ 7.4 $ 12.5 $ 17.5
SELECTED SEGMENT DATA:
Net sales:
Metal container business......... $1,189.3 $1,189.3 $ 882.3 $ 657.1 $ 459.2 $ 437.4
Plastic container business....... 216.4 216.4 219.6 204.3 186.3 192.6
Income (loss) from operations:(f)
Metal container business......... 106.1 106.1 58.2 59.8 42.3 40.7
Plastic container business....... 18.4 18.4 13.2 (0.1) 0.6 2.3
OTHER DATA:
Adjusted EBITDA(g)....................... $ 186.0 $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0
Adjusted EBITDA as a percentage of net
sales................................... 13.2% 13.2% 12.0% 13.3% 11.8% 11.7%
Ratio of Adjusted EBITDA to interest
expense................................. 2.29 2.08 1.64 1.74 1.40 1.30
Capital expenditures..................... $ 56.9 $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4
Depreciation and amortization(h)......... 58.6 58.6 45.4 37.2 33.8 31.8
Cash flows provided by operating
activities.............................. -- 125.2 209.6 47.3 48.1 15.4
Cash flows used for investing activities. -- (98.3) (397.1) (27.9) (116.1) (23.0)
Cash flows (used for) provided by
financing activities.................... -- (27.9) 186.9 (17.0) 65.3 8.6
Number of employees (at end of period)(n) -- 5,525 5,110 4,000 3,330 3,340
BALANCE SHEET DATA (at end of period):
Total assets............................. -- $ 913.5 $ 900.0 $ 504.3 $ 497.6 $ 389.0
Total long-term debt..................... -- 693.8 750.9 510.8 505.7 383.2
Exchangeable redeemable preferred stock.. -- 53.0 -- -- -- --
Deficiency in stockholders' equity....... -- (190.2) (179.8) (158.0) (145.0) (138.0)
</TABLE>
(footnotes follow)
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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, 1997 and the year ended
December 31, 1996, see the unaudited pro forma condensed statements of
operations, including the notes thereto, included elsewhere in this
Prospectus.
(b) In connection with the IPO, the Company recognized a non-cash charge of
$22.5 million at the time of the IPO in the Company's first quarter in 1997,
for the excess of fair market value over the grant price of certain stock
options, less $3.7 million previously accrued. See Note 22 to the
Consolidated Financial Statements for the year ended December 31, 1996
included elsewhere in this Prospectus.
(c) During the first quarter of 1997, the Company determined that a portion of
the future tax benefits arising from its net operating loss carryforward
would be realized in future years due to the Company's continued improvement
in earnings and increased probability of future taxable income. Accordingly,
in accordance with SFAS No. 109, the Company recognized an income tax
benefit during the quarter ended March 31, 1997 for a portion of its
recoverable net operating loss carryforward.
(d) The pro forma consolidated operating data for the three months ended March
31, 1997 do not include extraordinary charges, net of tax, of $9.3 million
that the Company expects to incur in connection with the Private Offering
for the write-off of premiums and unamortized deferred financing costs
related to the early redemption of the 11-3/4% Notes and the prepayment of a
portion of the Term Loans. See "Capitalization." In addition, the pro forma
consolidated operating data for the three months ended March 31, 1997 do not
include the historical extraordinary charge of $0.7 million, net of taxes,
incurred in connection with the early redemption of the remaining Discount
Debentures on March 26, 1997 with proceeds from the IPO, and the pro forma
consolidated operating data for the year ended December 31, 1996 do not
include the historical extraordinary charge, net of taxes, of $2.2 million
incurred in connection with the redemption of a portion of the Discount
Debentures in 1996.
(e) For purposes of computing the ratio of earnings to fixed charges and the
deficiency of earnings available to cover fixed charges, earnings consist of
income (loss) before income taxes plus fixed charges, excluding capitalized
interest, and fixed charges consist of interest, whether expensed or
capitalized, minority interest expense, amortization of debt expense and
discount or premium relating to any indebtedness, whether expensed or
capitalized, and such portion of rental expense that is representative of
the interest factor.
(f) The selected segment data for the three months ended March 31, 1997 excludes
the historical non-cash pre- tax charge of $22.5 million for the excess of
fair market value over the grant price of stock options converted from stock
option plans of Containers and Plastics to the Stock Option Plan in
connection with the IPO. The selected segment data for all periods presented
also excludes corporate expense.
(g) "Adjusted EBITDA" 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 applicable period, without duplication, consolidated interest expense,
income tax expense and depreciation and amortization expense, and is
adjusted to add back expenses relating to postretirement health care costs
(which amounted to $0.7 million for each of the three months ended March 31,
1997 and 1996 and $2.6 million, $1.7 million, $0.7 million and $0.5 million
for the years ended December 31, 1996, 1995, 1994 and 1993, respectively),
the reduction in carrying value of assets (which were $14.7 million and
$16.7 million for the years ended December 31, 1995 and 1994, respectively)
and certain other non- cash charges (which included charges relating to the
excess of fair market value over the grant price of stock options converted
from stock option plans of the Company's subsidiaries to the Stock Option
Plan of $22.5 million for the three months ended March 31, 1997 and relating
to the vesting of benefits under SARs of $0.2 million for the three months
ended March 31, 1996 and $0.8 million for each of the years ended December
31, 1996 and 1995 and $1.5 million for the year ended December 31, 1994).
The Company has included information regarding Adjusted EBITDA because
management believes that many investors consider it to be important in
assessing a company's ability to service and incur debt.
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<PAGE>
Accordingly, this information has been disclosed herein to permit a more
complete analysis of the Company's financial condition. Adjusted EBITDA
should not be considered in isolation or as a substitute for net income or
other consolidated statement of operations or cash flows data prepared in
accordance with GAAP as a measure of the profitability or liquidity of the
Company. See the consolidated statements of operations and consolidated
statements of cash flows of the Company, including the notes thereto,
included elsewhere in this Prospectus. Adjusted EBITDA does not take into
account the Company's debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary uses. Additionally, Adjusted EBITDA is not computed in
accordance with GAAP and may not be comparable to other similarly titled
measures of other companies.
(h) Depreciation and amortization excludes amortization of debt financing costs.
(i) Pro forma total long-term debt at March 31, 1997 excludes $75.0 million of
Term Loans under the Credit Agreement that were incurred in April 1997 to
finance the acquisitions of Roll-on Closures and Rexam Plastics and to repay
$32.7 million under the Revolving Loan Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Capital Resources and Liquidity."
(j) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility in
May 1996 for $13.1 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 of the Company for the year ended December
31, 1996 included elsewhere in this Prospectus.
(k) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 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.
(l) 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 metal container business 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 $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment. See
Note 5 to the Consolidated Financial Statements of the Company for the year
ended December 31, 1996 included elsewhere in this Prospectus.
(m) 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.
(n) 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
Certain information contained in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere in
this Registration Statement on Form S-4, including information with respect to
the Company's expected operations, expected financial results, cost savings and
plans and strategy for its business and related financing, includes
"forward-looking statements" within the meaning of the securities laws. Such
"forward-looking statements" involve uncertainties and risks. The Company's
actual operations, financial results, cost savings and plans and strategy for
its business and related financing may differ from such "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."
OVERVIEW
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers for
human and pet food, (ii) custom designed plastic containers for personal care,
health, food, pharmaceutical and household chemical products and (iii) specialty
packaging items, including metal caps and closures, aluminum roll-on closures,
plastic bowls and paper containers used by processors in the food industry. The
Company is the largest manufacturer of metal food containers in North America,
with a unit sale market share for the twelve months ended December 31, 1996 of
36% in the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company has focused on growth
through acquisitions, followed by plant rationalizations and consolidations and
investment in the acquired businesses to gain manufacturing and production
efficiencies and to provide for internal growth. Since its inception, the
Company has acquired thirteen businesses, including the acquisitions of AN Can
in August 1995 for a purchase price of approximately $362.0 million (including
net working capital of approximately $156.0 million) and DM Can in December 1993
for a purchase price of approximately $73.3 million (including net working
capital of approximately $21.9 million). In addition, the Company recently
completed acquisitions of (i) Roll-on Closures, the North American aluminum
roll-on closures business of Alcoa, for a purchase price of approximately $17.0
million, (ii) Rexam Plastics, the North American plastic container business of
Rexam, for a purchase price of approximately $25.3 million and (iii) Finger
Lakes Packaging Company, Inc. ("Finger Lakes"), the metal food container
manufacturing subsidiary of Curtice Burns Foods, Inc. ("Curtice Burns"), for a
purchase price of approximately $29.9 million. The Company's future growth will
depend in large part on additional acquisitions of consumer goods packaging
businesses. See "Summary--Recent Developments."
The Company is continually evaluating and intends to continue to pursue
acquisition opportunities in the North American consumer goods packaging market.
Although the Company has no present agreements or commitments to make any
acquisition, the Company is currently in discussions with respect to a potential
acquisition that has annual net sales of approximately $250 million. The Company
will likely need to incur additional indebtedness to finance any such
acquisition and to fund any resulting increased operating needs. Any such
financing will have to be effected in compliance with the terms of the Company's
indebtedness. There can be no assurance that the Company will be able to
complete any such acquisition or effect any such financing. See "Risk
Factors--Ability of the Company to Incur Additional Indebtedness" and "--Risks
Associated with Growth Strategy."
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<PAGE>
Cost Reductions and Investments Following Acquisitions
The Company believes that its acquisitions and investments have enabled
it to achieve a low cost position in the metal food container segment. To
further enhance its low cost position, the Company has realized cost reduction
opportunities through plant rationalizations and capital improvements, as well
as from improved production scheduling and line reconfiguration. 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 the manufacturing operations of DM Can. Because most of the
facilities that were closed in 1995 were closed late in the year, the Company
began to realize the benefits from the closing of such facilities in 1996. From
1991 through 1993, Plastics closed three manufacturing facilities and
consolidated the technical and administrative functions of its plastic container
businesses. An additional facility was closed in 1995. In 1994, Plastics began
to realize the benefits of this consolidation and rationalization program, as
well as from its capital investment program. In the fourth quarter of 1996, the
Company initiated further downsizing and rationalizations of certain of its
facilities. Management expects that these actions, along with improved
production scheduling, will enable the Company to achieve lower manufacturing
costs in 1997 as compared to 1996.
AN Can Acquisition
Since the acquisition of AN Can, the Company has realized cost
reductions through purchasing economies, certain manufacturing synergies
realized from the combined operations, and the integration of the selling,
general and administrative operations of AN Can into the Company's existing
metal container business. In 1997 and 1998, the Company expects to realize
approximately $15.0 million of further cost reductions through the completion in
1997 of the integration of the selling, general and administrative functions and
through the rationalization of certain plant operations. The Company will not
realize the full annualized benefit of the integration of the selling, general
and administrative functions until 1998. The Company has begun to realize
benefits from the rationalization of certain plant operations in 1997.
Although employee termination costs in connection with plant
rationalizations, administrative workforce reductions and other plant exit costs
associated with the acquisition of AN Can have been accrued through purchase
accounting adjustments, the Company incurred in 1995 and in 1996 other non-
recurring costs which in accordance with current accounting pronouncements were
charged against operating income. These costs, which include transitional
charges related to the integration of selling and administrative functions, as
well as costs associated with plant rearrangement and clean-up, were $3.2
million in 1995 and were approximately $3.5 million in 1996. The Company expects
that it will eliminate the redundant charges related to the integration of
selling and administrative functions in 1997.
Net Sales
Long-term Contracts. The Company seeks to develop and maintain long-term
relationships with its customers. The Company estimates that approximately 80%
of Containers' projected sales in 1997 will be pursuant to long-term supply
arrangements. Containers has agreements with Nestle pursuant to which Containers
supplies a majority of Nestle's metal container requirements, and an agreement
with Del Monte pursuant to which Containers supplies substantially all of Del
Monte's U.S. metal container requirements. Revenues from these two customers
represented approximately 29% of net sales by Containers in 1996. In addition to
Nestle and Del Monte, Containers has multi-year supply arrangements with several
other customers, including contracts which AN Can had with many of its
customers. The
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<PAGE>
Company has agreed with Nestle to extend the term of certain of the Nestle
Supply Agreements through 2004 (representing approximately 10% of the Company's
1996 sales) in return for certain price concessions by the Company. The Company
believes that these price concessions will not have a material adverse effect on
its results of operations. Under the Company's recent agreement with Nestle,
with respect to the remaining Nestle Supply Agreements that expire in August and
December 1997 (representing approximately 6% of the Company's 1996 sales), the
Company has the right to submit a bid to Nestle, and to match any bid received
by Nestle, for the 1998 supply year with respect to the metal containers that
are the subject of such Nestle Supply Agreements. There can be no assurance that
any such bid by the Company will be made at sales prices equivalent to those
currently in effect or otherwise on terms similar to those currently in effect.
The loss by the Company of either Nestle or Del Monte as a customer would have a
material adverse effect on the Company's results of operations. See "Risk
Factors--Reliance on Major Customers" and "Business--Sales and Marketing."
The Company's long-term supply contracts generally provide for pricing
changes in accordance with cost change formulas, thereby significantly reducing
the exposure of the Company's results from operations to the volatility of raw
material costs. In addition, the terms of the Company's long-term supply
contracts limit the Company's ability to increase margins.
Agricultural Harvest and Seasonality. The Company's metal container
business sales are dependent, in part, upon the vegetable, tomato and fruit
harvests in the midwest and western regions of the United States. The size and
quality of these harvests varies from year to year, depending in large part upon
the weather conditions in those regions. The fruit and vegetable pack harvest in
1994 was better than the below normal fruit and vegetable pack harvest in 1995,
resulting in greater sales to fruit and vegetable pack processing customers in
1994 as compared to 1995. The 1996 midwest vegetable harvest was better than in
1995, but, due to cool wet weather during the 1996 planting season, was less
than the harvest in 1994.
Because the Company sells metal containers used in fruit and vegetable
pack processing, its sales are seasonal. As is common in the packaging industry,
the Company must access working capital to build inventory and then carry
accounts receivable for some customers beyond the end of the summer and fall
packing season. Seasonal accounts are generally settled by year end. Due to the
Company's seasonal requirements, the Company expects to incur short term
indebtedness under the Revolving Loan Facility to finance its working capital
requirements. See "Risk Factors--Dependence on Agricultural Harvest;
Seasonality."
Interest Expense and Extraordinary Charges
As the Company's revenues, Adjusted EBITDA and Adjusted EBITDA margin
have increased and the Company's financial position has improved, the Company
has further improved its cash flow and its operating and financial flexibility
by refinancing its higher cost indebtedness with lower cost indebtedness and
equity and by extending the maturity of its indebtedness.
In 1995, the Company refinanced its secured debt facilities and
increased the amounts borrowed thereunder to finance the AN Can acquisition,
resulting in an increase in the Company's interest expense. Since the
acquisition of AN Can, the Company has pursued a strategy to refinance its
higher cost indebtedness with lower cost indebtedness and equity. Beginning in
1995, with proceeds of $200.0 million from bank borrowings, $12.0 million from
the Preferred Stock Sale and $59.0 million from the IPO, the Company refinanced
in full $275.0 million of its Discount Debentures. If the Discount Debentures
had remained outstanding, the Company's annual interest expense for the Discount
Debentures would have
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been $36.4 million. As a result of the refinancing in full of the Discount
Debentures with the proceeds referred to above and assuming a bank borrowing
rate of 8.5%, the Company's annual interest expense on its indebtedness used to
refinance the Discount Debentures will be $18.6 million, a reduction in interest
expense of $17.8 million.
In addition, as a result of the refinancing of the 11-3/4% Notes with
proceeds from the Private Offering, the Company will reduce its annual interest
expense on such indebtedness by $2.8 million. With the refinancing in full of
the Discount Debentures and the 11-3/4% Notes, the Company will have lowered its
average annual interest expense on such indebtedness by $20.7 million.
The refinancing of the Discount Debentures has also permitted the
Company to deduct accreted interest of $103.5 million thereon, which will reduce
the Company's tax liability by $25.9 million during 1996 and 1997. Due to the
exchange of the Exchangeable Preferred Stock for Exchange Debentures, the
Company will further reduce its tax liability as a result of the deductibility
of interest paid on such Exchange Debentures.
In addition to refinancing its higher cost 11-3/4% Notes with proceeds
from the Private Offering, the Company also used a portion of the proceeds from
the Private Offering to refinance a portion of its variable rate Term Loans
under the Credit Agreement. As a result, on a pro forma basis, the Company's
interest expense for 1996 on the amount of indebtedness used to refinance such
Term Loans would have increased by $0.7 million.
On June 30, 1997, the Company and each of the New Co-Arrangers entered
into a commitment letter pursuant to which the New Co-Arrangers have committed
to provide and to use their best efforts to arrange a syndicate of lenders to
provide for the Bank Refinancing pursuant to the terms of the New Credit
Agreement. Under the terms of such commitment letter, the New Credit Agreement
will provide the Company with a total senior secured credit facility of $1.0
billion, which will include $450.0 million of term loans and a revolving loan
commitment of $550.0 million. The Bank Refinancing will, among other things,
lower the interest rates on the Company's senior secured credit facility,
resulting in a reduction of approximately $8.0 million in the Company's annual
interest expense with respect to indebtedness outstanding under the Credit
Agreement. Although there can be no assurance that the Bank Refinancing will be
completed, the Company expects the Bank Refinancing to occur early in the third
quarter of 1997. See "Description of Certain Indebtedness--Description of the
Credit Agreement."
As a result of the early redemption of the 11-3/4% Notes and the
prepayment of a portion of the Term Loans with the proceeds from the Private
Offering, the Company expects to incur in the second quarter of 1997 pre-tax
extraordinary charges for the write-off of $5.7 million of unamortized deferred
financing costs and $7.9 million of premiums related thereto. In the event the
Company refinances the Credit Agreement, the Company expects to incur in the
third quarter of 1997 a non-cash pre-tax extraordinary charge of approximately
$11.7 million for the write-off of unamortized deferred financing costs in
connection with such refinancing.
Charges Relating to Stock Options and Discount Debenture Redemption
Concurrent with the IPO, all outstanding stock options issued under the
stock option plans of Containers and Plastics were converted to stock options
under the Stock Option Plan. In accordance with Accounting Principles Bulletin
("APB") No. 25, options granted under such plans are considered variable options
with a final measurement date at the time of conversion. The Company recognized
a non-cash
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charge of approximately $22.5 million, net of $3.7 million previously accrued,
at the time of the IPO in the Company's first quarter in 1997, for the excess of
fair market value over grant price of these options less amounts previously
accrued.
In connection with the redemption by the Company of the remaining
Discount Debentures on March 26, 1997 with proceeds from the IPO, the Company
recognized an extraordinary charge, net of tax, in the first quarter of 1997 of
$0.7 million.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented, and should be read in conjunction with the consolidated financial
statements of the Company and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1996 1995 1994
----- ------ ------ ------ -----
Operating Data:
Net sales:
<S> <C> <C> <C> <C> <C>
Metal container business............... 80.9% 80.9% 84.6% 80.1% 76.3%
Plastic container business............. 19.1 19.1 15.4 19.9 23.7
------ ------ ------ ------ ------
Total.................... 100.0 100.0 100.0 100.0 100.0
Cost of goods sold............................. 85.7 86.6 87.0 88.1 86.9
------ ------ ------ ------ ------
Gross profit................................... 14.3 13.4 13.0 11.9 13.1
Selling, general and administrative expenses... 4.7 4.9 4.2 4.3 4.4
Non-cash stock option charge................... 7.5 -- -- -- --
Reduction in carrying value of assets.......... -- -- -- 1.3 1.9
------ ------ ------ ------ ------
Income from operations......................... 2.1 8.5 8.8 6.3 6.8
Interest expense and other related financing
costs......................................... 6.7 8.1 6.4 7.3 7.6
------ ------ ------ ------ ------
Income (loss) before income taxes.............. (4.6) 0.4 2.4 (1.0) (0.8)
Income tax provision (benefit)................. (8.3) 0.3 0.2 0.5 0.7
----- ----- ----- ------ ------
Income (loss) before extraordinary charges..... 3.7 0.1 2.2 (1.5) (1.5)
Extraordinary charges relating to early
extinguishment of debt........................ (0.3) -- (0.2) (0.5) --
------ ------ ------ ------ ------
Net income (loss) before preferred stock
dividend requirement.......................... 3.4 0.1 2.0 (2.0) (1.5)
Preferred stock dividend requirement........... (0.6) -- (0.2) -- --
------ ------ ------ ------ ------
Net income (loss) applicable to common
stockholders.................................. 2.8% 0.1% 1.8% (2.0)% (1.5)%
====== ====== ====== ====== ======
</TABLE>
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<PAGE>
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, 1997 and 1996
are provided below.
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
---------------
1997 1996
---- ----
(In millions)
Net sales:
<S> <C> <C>
Metal containers and specialty.................. $242.2 $226.4
Plastic containers.............................. 57.2 53.5
------ ------
Consolidated............................... $299.4 $279.9
====== ======
Operating Profit:
Metal containers and specialty.................. $ 22.3 $ 20.0
Plastic containers.............................. 6.8 4.2
Non-cash stock option charge.................... (22.5) (0.2)
Corporate expense............................... (0.4) (0.3)
------- -------
Consolidated............................... $ 6.2 $ 23.7
======= =======
</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 Three Months Ended March 31, 1997 Compared with Historical
Three Months Ended March 31, 1996
Net Sales. Consolidated net sales increased $19.5 million, or 7.0%, to
$299.4 million for the three months ended March 31, 1997, as compared to net
sales of $279.9 million for the same three months in the prior year. This
increase resulted primarily from an increase in unit sales by both the metal
container business and the plastic container business.
Net sales for the metal container business (including net sales of its
specialty business of $19.0 million) were $242.2 million for the three months
ended March 31, 1997, an increase of $15.8 million (7.0%) from net sales of
$226.4 million for the same period in 1996. Net sales of metal cans of $223.2
million for the three months ended March 31, 1997 were $19.4 million (9.5%)
greater than net sales of metal cans of $203.8 million for the same period in
1996. This increase resulted from greater unit sales, of which $7.6 million
related to net sales from Finger Lakes which was acquired by the Company in
October 1996.
Sales of specialty items included in the metal container segment
declined $3.6 million to $19.0 million during the three months ended March 31,
1997, as compared to $22.6 million in the same period in 1996, due to lower unit
sales volume.
Net sales for the plastic container business of $57.2 million during the
three months ended March 31, 1997 increased $3.7 million (6.9%) from net sales
of $53.5 million for the same period in 1996. This increase in net sales
resulted from higher unit sales, offset, in part, by the pass through of lower
average resin costs.
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<PAGE>
Cost of Goods Sold. Cost of goods sold as a percentage of consolidated
net sales was 85.7% ($256.7 million) for the three months ended March 31, 1997,
a decrease of 0.9 percentage points as compared to 86.6% ($242.2 million) for
the same period in 1996. The decrease in cost of goods sold as a percentage of
net sales was primarily attributable to improved operating efficiencies achieved
as a result of higher production volumes.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales decreased 0.2
percentage points to 4.7% ($14.0 million) for the three months ended March 31,
1997, as compared to 4.9% ($13.7 million) for the three months ended March 31,
1996. The decrease in selling, general and administrative expenses as a
percentage of net sales principally related to the increase in net sales revenue
in 1997, and to a lesser extent to the expected elimination of redundant costs
incurred as a result of the integration of AN Can, which was acquired by the
Company from ANC in August 1995.
Income from Operations. Income from operations as a percentage of
consolidated net sales was 2.1% ($6.2 million) for the three months ended March
31, 1997, as compared with 8.5% ($23.7 million) for the same period in the prior
year. Included in income from operations for the three months ended March 31,
1997 was a non-cash stock option charge of $22.5 million. Excluding this charge,
income from operations as a percentage of consolidated net sales for the three
months ended March 31, 1997 would have increased 1.1 percentage points to 9.6%
($28.7 million), primarily as a result of the gross margin improvement.
In conjunction with the IPO, stock options issued under the stock option
plans of the Company's subsidiaries were converted to stock options under the
Stock Option Plan. In accordance with GAAP, the Company recorded a charge of
$22.5 million at the time of the IPO for the excess of the fair market value of
the stock options issued under the subsidiary stock option plans over the grant
price of the options, less amounts previously accrued. The Company will not
recognize any future charges for these stock options.
Income from operations as a percentage of net sales for the metal
container business improved to 9.2% ($22.3 million) for the three months ended
March 31, 1997, from 8.8% ($20.0 million) for the same period in the prior year.
The increase in income from operations as a percentage of net sales resulted
from lower selling, general and administrative expenses, improved operating
efficiencies realized from plant rationalizations and capital investment, and
the incurrence of lower depreciation expense related to the former AN Can
operations which reflected the completion of the AN Can purchase accounting in
the second quarter of 1996, offset to a limited extent by price adjustments on
certain long- term contracts.
Income from operations as a percentage of net sales for the plastic
container business improved to 11.9% ($6.8 million) for the three months ended
March 31, 1997, as compared to 7.9% ($4.2 million) for the same period in 1996.
The improved operating performance of the plastic container business was
attributable to continued manufacturing efficiencies and lower per unit
manufacturing costs realized as a result of higher unit sales to both new and
existing customers.
Interest Expense. Interest expense declined $2.6 million to $20.0
million for the three months ended March 31, 1997 principally as a result of the
refinancing of the Discount Debentures in the third quarter of 1996 with lower
cost bank borrowings, offset, in part, by increased borrowings used to finance
the purchase of Finger Lakes and by higher average bank borrowing rates.
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<PAGE>
Income Taxes. During the first quarter of 1997 the Company determined
that a portion of the future tax benefits arising from its net operating loss
carryforward would be realized due to the Company's continued improvement in
earnings and increased probability of future taxable income. In accordance with
SFAS No. 109, the Company reduced its valuation allowance and recognized an
income tax benefit of $23.2 million.
The Company will provide for income taxes during interim reporting
periods in 1997 based upon an estimate of its annual effective tax rate taking
into consideration various factors, such as operating results, benefits of net
operating loss carryforwards and levels of taxable income. Due to the pretax
loss realized by the Company during the first quarter of 1997 and as a result of
uncertainties inherent in the factors mentioned above, the Company has provided
an income tax benefit for the first quarter at a relatively low effective tax
rate. For future interim periods in 1997 management believes that the effective
tax rate may increase over the first quarter rate, but that the effective tax
rate will be less than the statutory rate due to benefits arising from the
recognition of the net operating loss carryforward.
The provision for income taxes for the three months ended March 31, 1996
of $1.0 million provided for federal, state and foreign taxes currently payable
and included the benefit of cash tax savings realized from the deduction of
accreted interest on the retired Discount Debentures.
Net Income. As a result of the items discussed above, net income of
$11.0 million (before the extraordinary charge of $0.7 million and the preferred
stock dividend requirement of $1.8 million) increased $10.9 million for the
three months ended March 31, 1997, as compared to net income of $0.1 million for
the three months ended March 31, 1996.
During the first quarter of 1997 the Company incurred an extraordinary
charge of $0.7 million, net of taxes, for the writeoff of unamortized debt cost
associated with the redemption of the remaining outstanding Discount Debentures.
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, 1996,
1995 and 1994 and summary pro forma results for these business segments for the
calendar year ended December 31, 1995 (after giving effect to the acquisition of
AN Can as of the beginning of such period) are provided below.
The unaudited pro forma financial data includes the historical results
of the Company and AN Can and reflects the effect of purchase accounting
adjustments based on 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 periods presented. The unaudited pro forma 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 at the beginning of
the periods indicated, or to project the Company's financial position or results
of operations for any future date or period. The unaudited pro forma financial
data do not give effect to adjustments for decreased costs from manufacturing
synergies resulting from the integration of AN Can with Containers' existing can
manufacturing operations and benefits the Company may realize as a result of its
planned rationalization of plant operations. The pro forma information presented
should be read in conjunction with the historical results of operations of the
Company included elsewhere in this Prospectus.
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<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
Historical Pro Forma
-------------------------- ------------------------
1996 1995 1994 1995
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales:
Metal container business............... $1,189.3 $ 882.3 $ 657.1 $1,184.8
Plastic container business............. 216.4 219.6 204.3 219.6
--------- --------- --------- ---------
Consolidated........................ $1,405.7 $1,101.9 $ 861.4 $1,404.4
========= ========= ========= =========
Income from operations:
Metal container business............... $ 106.1 $ 72.9 $ 67.0 $ 95.7
Plastic container business............. 18.4 13.2 9.4 13.2
Reduction in asset value(1)............ -- (14.7) (16.7) (14.7)
Corporate expense...................... (1.2) (1.6) (1.3) (1.5)
--------- --------- --------- ---------
Consolidated........................ $ 123.3 $ 69.8 $ 58.4 $ 92.7
========= ========= ========= =========
</TABLE>
- -------------
(1) Included in the historical and pro forma income from operations of the
Company in 1995 are charges incurred for the reduction of the carrying value
of certain underutilized equipment to net realizable value of $14.7 million
allocable to the metal container business. Included in the historical income
from operations of the Company in 1994 are charges incurred for the
reduction of the carrying value of certain underutilized and obsolete
equipment to net realizable value 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.
Historical Year Ended December 31, 1996 Compared with Historical Year
Ended December 31, 1995
Net Sales. Consolidated net sales increased $303.8 million, or 27.6%, to
$1.4 billion for the year ended December 31, 1996, as compared to net sales of
$1.1 billion for the same period in 1995. This increase resulted predominantly
from net sales generated by the former AN Can operations.
Net sales for the metal container business (including net sales of its
specialty business of $90.7 million) were $1,189.3 million for the year ended
December 31, 1996, an increase of $307.0 million from net sales of $882.3
million for the same period in 1995. Net sales of metal cans of $1,098.6 million
for the year ended December 31, 1996 were $253.1 million greater than net sales
of metal cans of $845.5 million for the same period in 1995. This increase
resulted from the inclusion of a full year of sales generated from the former AN
Can operations, including net sales of approximately $236.0 million during the
first seven months of 1996, and increased unit sales due to a better vegetable
pack harvest in 1996 as compared to 1995, offset to a limited extent by volume
losses with certain customers.
Sales of specialty items included in the metal container segment
increased $53.9 million to $90.7 million during the year ended December 31, 1996
as compared to the same period in 1995, due predominantly to additional sales
generated by the former AN Can operations.
Net sales for the plastic container business of $216.4 million during
the year ended December 31, 1996 decreased $3.2 million from net sales of $219.6
million for the same period in 1995. Despite an increase in unit sales, net
sales of plastic containers declined as a result of the pass through of lower
resin costs.
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<PAGE>
Cost of Goods Sold. Cost of goods sold as a percentage of consolidated
net sales was 87.0% ($1.2 billion) for the year ended December 31, 1996, a
decrease of 1.1 percentage points as compared to 88.1% ($970.5 million) for the
same period in 1995. The decrease in cost of goods sold as a percentage of net
sales was principally attributable to synergies realized from the AN Can
acquisition, improved operating efficiencies due to can plant consolidations as
well as the improved manufacturing performance by the plastic container
business, offset, in part, by the higher cost base of the former AN Can
operations and the realization of higher per unit costs due to the Company's
one-time planned reduction in finished goods inventory. The additional
production capacity provided by AN Can has enabled the Company to produce its
product closer to the time of sale and, as a result, during 1996 the Company
reduced the amount of finished goods that it carries.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of consolidated net sales decreased 0.1
percentage points to 4.2% ($58.8 million) for the year ended December 31, 1996,
as compared to 4.3% ($46.9 million) for the year ended December 31, 1995. This
decrease in selling, general and administrative expenses as a percentage of net
sales reflects the expected lower administrative expenses realized as a result
of the integration of the administrative functions of AN Can with the Company,
despite the incurrence of certain redundant costs, estimated to be $3.5 million,
associated with the integration of the AN Can operations. In 1997, the Company
expects to eliminate all of these redundant costs as it completes its
integration of the administrative functions of AN Can with the Company.
Income from Operations. Income from operations as a percentage of
consolidated net sales increased 2.5 percentage points to 8.8% ($123.3 million)
for the year ended December 31, 1996, as compared with 6.3% ($69.8 million) for
the same period in the prior year. Included in income from operations for 1995
was a charge of $14.7 million for the write-off of certain underutilized assets.
Without giving effect to this charge, income from operations as a percentage of
consolidated net sales would have increased 1.1 percentage points in 1996 as
compared to 1995, primarily as a result of the aforementioned improvement in
gross margin.
Income from operations as a percentage of net sales for the metal
container business improved to 8.9% ($106.1 million) for the year ended December
31, 1996, from 8.3% ($72.9 million) (without giving effect to the charge of
$14.7 million to adjust the carrying value of certain assets) for the same
period in 1995. This increase in income from operations as a percentage of net
sales for the metal container business was principally attributable to synergies
resulting from the acquisition of AN Can, improved operating efficiencies due to
plant consolidations and the benefit of cost reductions provided by the
Company's capital investment program, offset, in part, by the higher cost base
of the AN Can operations and the negative impact of the Company's one-time
planned reduction in the amount of finished goods inventory.
Income from operations as a percentage of net sales for the plastic
container business improved to 8.5% ($18.4 million) for the year ended December
31, 1996, from 6.0% ($13.2 million) for the same period in 1995. The improvement
in the operating performance of the plastic container business was principally
attributable to increased production volumes as well as the benefits realized
through capital investment and improved production planning and scheduling
efficiencies.
Interest Expense. Interest expense increased $8.7 million to $89.4
million for the year ended December 31, 1996, principally as a result of
increased borrowings to finance the acquisition of AN Can in August 1995,
offset, in part, by the benefit realized from the redemption of $154.4 million
of the Discount Debentures with lower cost bank borrowings (additional B term
loans of $125.0 million and
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<PAGE>
amounts borrowed under the Revolving Loan Facility of $17.4 million) and with
$12.0 million of the proceeds from the Preferred Stock Sale, and by lower
average bank borrowing rates.
As of March 26, 1997, the Company had refinanced all of the Discount
Debentures with lower cost borrowings and proceeds from the Preferred Stock Sale
and the IPO. Since a substantial portion of the Discount Debentures were
refinanced in the third quarter of 1996, the Company expects that its interest
expense will decline significantly in the second quarter of 1997 as compared to
the same quarter in the prior year.
Income Taxes. The provisions for income taxes for the years ended
December 31, 1996 and 1995 provide for federal, state and foreign taxes
currently payable. The decrease in the provision for income taxes of $1.8
million for the year ended December 31, 1996 as compared to the same period in
1995 reflects the benefit of the current cash tax savings realized from the
deduction of accreted interest on the retired Discount Debentures.
Net Income. As a result of the items discussed above, net income of
$30.6 million (before extraordinary charges of $2.2 million and the preferred
stock dividend requirement of $3.0 million) increased $46.6 million for the year
ended December 31, 1996, as compared to a net loss of $16.0 million (before
extraordinary charges, net of taxes, of $5.8 million) for the year ended
December 31, 1995.
During 1996, the Company incurred an extraordinary charge of $2.2
million for the write-off of unamortized debt costs associated with the early
redemption of Discount Debentures. In 1995, the Company incurred an
extraordinary charge of $5.8 million, net of taxes, for the write-off of
unamortized debt costs related to the refinancing of its secured debt facilities
to fund the AN Can acquisition, the repurchase of a portion of the Discount
Debentures, and premiums paid on the repurchase of a portion of such Discount
Debentures.
Historical Year Ended December 31, 1996 Compared with Pro Forma Year
Ended December 31, 1995
Net Sales. Consolidated net sales for the year ended December 31, 1996
of $1.4 billion were comparable to pro forma consolidated net sales for the same
period in 1995. Increased unit sales of metal containers due to a better
vegetable pack harvest in 1996 as compared to 1995 offset the loss of an AN Can
customer whose product line was acquired by a company that manufactured its own
cans and volume losses with certain other customers. Although the plastic
container business had increased unit volume in 1996, net sales declined $3.2
million due to the pass through of lower resin costs.
Income from Operations. Income from operations as a percentage of
consolidated net sales for the year ended December 31, 1996 increased 1.2
percentage points to 8.8% ($123.3 million), as compared to pro forma income from
operations as a percentage of pro forma consolidated net sales of 7.6% ($107.4
million) (without giving effect to the charge to adjust the carrying value of
certain assets of $14.7 million) for the year ended December 31, 1995. The
increase in income from operations for the year ended December 31, 1996 as
compared to pro forma income from operations for the same period in 1995 was
attributable to more efficient production planning, the realization of can
manufacturing synergies resulting from the acquisition of AN Can, the benefits
realized from plant consolidations and capital investments, and the improved
operating performance of the plastic container business, offset, in part, by
redundant costs associated with the AN Can operations and the negative impact of
the Company's one-time planned reduction of the amount of finished goods
inventory.
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Historical Year Ended December 31, 1995 Compared with Historical Year
Ended December 31, 1994
Net Sales. 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 in August 1995
and a $15.3 million increase in sales of plastic containers offset, in part, by
a decline in sales of metal containers to the Company'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. 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. Selling, general and
administrative expenses as a percentage of consolidated net sales declined 0.1
percentage points to 4.3% ($46.9 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
decline in 1997 after it completes the integration of the administrative
functions of its metal container business.
Income from Operations. 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
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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,
offset, in part, by operating efficiencies due to plant consolidations.
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. 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 principal amount at maturity of Discount
Debentures in the third quarter of 1995.
Income Taxes. 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.
Net Income. 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.
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 borrowings under the Revolving Loan
Facility.
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On June 30, 1997, the Company and each of the New Co-Arrangers entered
into a commitment letter pursuant to which the New Co-Arrangers have committed
to provide and to use their best efforts to arrange a syndicate of lenders to
provide for the Bank Refinancing pursuant to the terms of the New Credit
Agreement. Under the terms of such commitment letter, the New Credit Agreement
will provide the Company with a total senior secured credit facility of $1.0
billion, which will include $450.0 million of term loans and a revolving loan
commitment of $550.0 million. The Company intends to use the term loans and a
portion of the revolving loans under the New Credit Agreement to refinance in
full outstanding amounts under the Credit Agreement. Revolving loans under the
New Credit Agreement will be available to the Company for its working capital
and general corporate purposes (including permitted acquisitions). In addition
to increasing the amount of borrowings available to the Company, the Bank
Refinancing will (i) lower the interest rates on the Company's senior secured
credit facility, resulting in a reduction of approximately $8.0 million in the
Company's annual interest expense with respect to indebtedness outstanding
under the Credit Agreement, (ii) extend the maturities of the Company's senior
secured credit facility by 3-4 years, and (iii) change certain covenants under
the Company's senior secured credit facility to further improve the Company's
operating and financial flexibility, including changes to provide more
flexibility under certain circumstances to sell assets, engage in mergers and
acquisitions, make capital expenditures, incur indebtedness, create liens, pay
dividends, repurchase stock, and refinance existing indebtedness. Although there
can be no assurance that the Bank Refinancing will be completed, the Company
expects the Bank Refinancing to occur early in the third quarter of 1997.
On June 9, 1997, the Company completed the Private Offering. With net
proceeds of $291.5 million from the Private Offering, the Company prepaid $148.6
million of Term Loans under the Credit Agreement and, on July 16, 1997, will
redeem all of the Company's 11-3/4% Notes ($135 million principal amount) at
105.875% of their principal amount. As a result of the refinancing of the
11-3/4% Notes with proceeds from the Private Offering, the Company will have
reduced its annual interest expense on such indebtedness by $2.8 million. In
addition, by refinancing a portion of its variable rate Term Loans with a
portion of the proceeds from the Private Offering, the Company's interest
expense on a pro forma basis for 1996 with respect to such indebtedness would
have increased by $0.7 million.
In April 1997, the Company acquired Roll-on Closures and Rexam Plastics
for an aggregate purchase price of approximately $42.3 million. The Company used
additional borrowings of $25.0 million of A term loans and $50.0 million of B
term loans under the Credit Agreement to finance the acquisitions and repay
$32.7 million under the Revolving Loan Facility. In October 1996, the Company
increased its borrowings under the Revolving Loan Facility by $29.9 million to
finance the acquisition of Finger Lakes.
On February 20, 1997, the Company completed the IPO, raising proceeds to
the Company of approximately $74.0 million before deducting estimated fees and
expenses. The Company used the net proceeds received by it in the IPO to prepay
approximately $5.4 million and $3.5 million principal amount of A term loans and
B term loans, respectively, under the Credit Agreement, and used the remaining
net proceeds received by it from the IPO to redeem all of the remaining
outstanding Discount Debentures (approximately $59.0 million principal amount).
As a result of the refinancing of all of the Discount Debentures during
the period from August 1995 to March 1997 with proceeds from lower cost bank
borrowings, the Preferred Stock Sale and the IPO, the Company has reduced its
required annual cash interest payments by $17.8 million. In addition, the amount
of cash taxes payable by the Company for 1996 and 1997 has declined by
approximately $25.9 million as a result of the deductibility of accreted
interest on the retired Discount Debentures.
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For the first three months of 1997, net borrowings under the Revolving
Loan Facility of $60.6 million and net proceeds from the IPO of $67.2 million
were used to fund cash used by operations of $44.9 million for the Company's
seasonal working capital needs, capital expenditures of $10.3 million, the
redemption of $59.0 million of Discount Debentures, the repayment of $8.9
million of Term Loans under the Credit Agreement, and an increase in cash
balances of $4.7 million.
For the three months ended March 31, 1997, net cash used by operating
activities increased from the same period in the prior year primarily as a
result of an increase in trade receivables reflecting greater sales volume in
the first quarter of 1997 as compared to 1996 and an increase in the Company's
raw material inventory.
The Company's Adjusted EBITDA for the three months ended March 31, 1997
as compared to the same period in the prior year increased $3.6 million to $43.7
million, primarily due to increased sales.
During 1996, cash generated from operations of $125.2 million,
borrowings of $125.0 million of B term loans under the Credit Agreement, net
proceeds of $47.8 million from the Preferred Stock Sale, net borrowings under
the Revolving Loan Facility of $20.7 million, proceeds of $1.6 million from the
sale of assets and $1.1 million of cash balances were used to fund capital
expenditures of $56.9 million, the purchase of Finger Lakes for $29.9 million
and the purchase of ANC's St. Louis facility for $13.1 million, the redemption
of $154.4 million of Discount Debentures, the repayment of $29.5 million of Term
Loans under the Credit Agreement, the payment of $1.8 million of financing costs
associated with the borrowing of additional B term loans under the Credit
Agreement, and the purchase of Class B Stock held by Mellon for $35.8 million.
The Company's Adjusted EBITDA for the year ended December 31, 1996 in
comparison to 1995 increased by $53.6 million to $186.0 million. The increase in
Adjusted EBITDA resulted primarily from increased cash earnings generated by
both the metal container business (including earnings from the AN Can
operations) and the plastic container business. During 1996, cash flow from
operations declined by $84.4 million as compared to 1995 due to the acquisition
of AN Can in 1995 at its seasonal peak. The Company incurred greater cash
interest expense in 1996 due to the refinancings of Discount Debentures (for
which no cash interest was required through June 15, 1996) with bank borrowings,
and in 1995 the Company adopted similar year-end vendor payment terms to those
of AN Can.
During 1995, cash generated from operations of $209.6 million (including
cash of $112.0 million generated by AN Can during the five month period from its
acquisition on 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 borrowings under the Revolving Loan Facility 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 amounts borrowed under the Revolving
Loan Facility, and make payments to former shareholders of $3.8 million in full
settlement of outstanding litigation. The Company's Adjusted EBITDA for the year
ended December 31, 1995 as compared to 1994 increased by $17.9 million to $132.4
million. The increase in Adjusted EBITDA reflected the generation of additional
cash flow from AN Can since its acquisition on August 1, 1995, partially 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 the
Company 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
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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).
Because the Company sells metal containers used in fruit and vegetable
pack processing, its sales are seasonal. As is common in the packaging industry,
the Company must access working capital to build inventory and then carry
accounts receivable for some customers beyond the end of the summer and fall
packing season. Seasonal accounts are generally settled by year end. The
acquisition of AN Can increased the Company's seasonal metal container business.
The Company's average outstanding trade receivables increased in 1996 as
compared to 1995 due to the acquisition of AN Can which had more seasonal sales
than the Company. As a result, the Company increased the amount of working
capital loans available to it under its Revolving Loan 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. After
taking into account the repayment of amounts borrowed under the Revolving Loan
Facility in April 1997, it is estimated that approximately $150.0 million of the
Revolving Loan Facility under the Credit Agreement, including letters of credit,
will be utilized at its peak in July 1997.
As of May 31, 1997, the outstanding principal amount of borrowings under
the Revolving Loan Facility was $114.5 million and, taking into account
outstanding letters of credit, the unused portion of the Revolving Loan Facility
under the Credit Agreement at such date was $102.8 million.
In addition to its operating cash needs, the Company believes its cash
requirements over the next several years consist primarily of (i) annual capital
expenditures of $55.0 to $65.0 million, (ii) scheduled principal amortization
payments of Term Loans under the Credit Agreement (after giving effect to the
use of a portion of the net proceeds from the Private Offering to prepay $148.6
million of Terms Loans and before the anticipated refinancing of the Credit
Agreement to, among other things, extend the maturities of borrowings
thereunder) of approximately $42.3 million, $42.3 million, $119.8 million,
$143.5 million and $107.9 million from 1998 through 2002, respectively, (iii)
expenditures of approximately $30.0 million over the next three years associated
with plant rationalizations, employee severance and administrative workforce
reductions, other plant exit costs and employee relocation costs of AN Can, (iv)
the Company's interest requirements, including interest on amounts borrowed
under the Revolving Loan Facility, the principal amount of which will vary
depending upon seasonal requirements, the Term Loans, most of which bear
fluctuating rates of interest, the Debentures and the Exchange Debentures, and
(v) payments of approximately $5.0 million (based on the Company's current
estimate of its 1997 net income) for federal and state tax liabilities in 1997.
Beginning in 1998, the Company expects to incur federal tax liability at the
alternative minimum tax rates then in effect.
Management believes that cash generated by operations and funds from the
Revolving Loan Facility under the Credit Agreement will be sufficient to meet
the Company's expected operating needs, planned capital expenditures, debt
service and tax obligations for the foreseeable future. The Company is
continually evaluating and intends to continue to pursue acquisition
opportunities in the North American consumer goods packaging market. Although
the Company has no present agreements or commitments to make any acquisition,
the Company is currently in discussions with respect to a potential acquisition
that has annual net sales of approximately $250 million. The Company will likely
need to incur additional indebtedness to finance any such acquisition and to
fund any resulting increased operating needs. Any such financing will have to be
effected in compliance with the terms of the Company's indebtedness. There can
be no assurance that the Company will be able to complete any such acquisition
or effect any such financing. See "Risk Factors--Ability of the Company to Incur
Additional Indebtedness" and "--Risks Associated with Growth Strategy."
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The Credit Agreement, the Indenture and the indenture with respect to
the Exchange Debentures (the "Exchange Debenture Indenture") contain restrictive
covenants that, among other things, limit the Company's abilities 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 1997 with all such covenants.
EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS
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. See "--Overview--Net Sales--Long-term Contracts."
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 May 31, 1997, on a pro forma basis
after giving effect to the Private Offering and the use of the proceeds
therefrom and the Preferred Stock Exchange and including amounts borrowed under
the Revolving Loan Facility of $114.5 million, the Company had approximately
$926.3 million of indebtedness outstanding, of which approximately $370.3
million bore interest at floating rates, taking into account interest rate swap
agreements entered into by the Company to mitigate the effect of interest rate
fluctuations. Under these agreements, floating rate interest was exchanged for
fixed rates of interest ranging from 5.6% to 6.2% plus the Company's incremental
margin, which currently ranges from 2.5% to 3.0%. The notional principal amounts
of these agreements totaled $200.0 million, including interest rate swap
agreements entered into during the fourth quarter of 1996 with a notional amount
of $100.0 million, and mature in the year 1999. Depending upon market
conditions, the Company may enter into additional interest rate swap or hedge
agreements (with counterparties that, in the Company's judgment, have sufficient
creditworthiness) 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 1996. See Note 2 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. As permitted under
SFAS No. 123, the Company may either adopt the new pronouncement or follow the
current accounting methods as
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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.
In addition, the Company is required to include in its 1996 year end financial
statements pro forma information regarding compensation expense recognizable
under SFAS No. 123. See Note 17 to the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.
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BUSINESS
GENERAL
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers for
human and pet food, (ii) custom designed plastic containers for personal care,
health, food, pharmaceutical and household chemical products and (iii) specialty
packaging items, including metal caps and closures, aluminum roll-on closures,
plastic bowls and paper containers used by processors in the food industry. The
Company is the largest manufacturer of metal food containers in North America,
with a unit sale market share for the twelve months ended December 31, 1996 of
36% in the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company's strategy is to grow its
existing businesses and expand into other segments by applying its expertise in
acquiring, financing, integrating and efficiently operating consumer goods
packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive
Officers. Since its inception, the Company has acquired thirteen businesses,
including the acquisitions of AN Can in August 1995 for a purchase price of
approximately $362.0 million (including net working capital of approximately
$156.0 million) and DM Can in December 1993 for a purchase price of
approximately $73.3 million (including net working capital of approximately
$21.9 million). Recently, the Company acquired the North American aluminum
roll-on closure business of Alcoa and the North American plastic container
business of Rexam for an aggregate purchase price of $42.3 million, and Finger
Lakes, the metal food container manufacturing subsidiary of Curtice Burns, for a
purchase price of $29.9 million.
The Company's strategy has enabled it to rapidly increase its net sales
and Adjusted EBITDA. The Company's net sales have increased from $630.0 million
in 1992 to $1,405.7 million in 1996, representing a compound annual growth rate
of approximately 22%. During this period, the Company's adjusted EBITDA
increased from $74.0 million in 1992 to $186.0 million in 1996, representing a
compound annual growth rate of approximately 26%, while the Company's Adjusted
EBITDA as a percentage of net sales increased 1.5 percentage points from 11.7%
to 13.2% over the same period.
COMPANY HISTORY
The Company is a Delaware corporation organized in April 1989 that, in
June 1989, through a merger acquired all of the outstanding stock of Silgan
Corporation. Silgan Corporation was a Delaware corporation formed in August 1987
as a holding company to acquire interests in various packaging manufacturers. On
June 26, 1997, Silgan Corporation was merged with and into the Company, with the
Company being the surviving corporation. Since its inception in 1987, the
Company has completed the following acquisitions:
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<TABLE>
<CAPTION>
ACQUIRED BUSINESS Year Products
- ----------------- ---- --------
<S> <C> <C>
Metal Container Manufacturing division of Nestle....... 1987 Metal food containers
Monsanto Company's plastic container business.......... 1987 Plastic containers
Fort Madison Can Company of The Dial Corporation....... 1988 Metal food containers
Seaboard Carton Division of Nestle..................... 1988 Paper containers
Aim Packaging, Inc..................................... 1989 Plastic containers
Fortune Plastics Inc................................... 1989 Plastic containers
Express Plastic Containers Limited..................... 1989 Plastic containers
Amoco Container Company................................ 1989 Plastic containers
Del Monte's U.S. can manufacturing operations.......... 1993 Metal food containers
Food Metal and Specialty business of ANC............... 1995 Metal food containers, metal
caps and closures and Omni
plastic containers
Finger Lakes, a subsidiary of Curtice Burns............ 1996 Metal food containers
Alcoa's North American aluminum roll-on closure
business............................................... 1997 Metal caps and closures
Rexam's North American plastic container business...... 1997 Plastic containers and closures
</TABLE>
The principal executive offices of the Company are located at 4 Landmark
Square, Stamford, Connecticut 06901, telephone number (203) 975-7110.
BUSINESS STRATEGY
The Company's philosophy, which has contributed to its strong
performance since inception, is based on: (i) a significant equity ownership by
management and an entrepreneurial approach to business, (ii) its low cost
producer position and (iii) its long-term customer relationships. The Company
has achieved a low cost producer status through (i) the maintenance of a flat,
efficient organizational structure, resulting in low selling, general and
administrative expenses as a percentage of total net sales, (ii) purchasing
economies, (iii) significant capital investments that have generated
manufacturing and production efficiencies, (iv) plant consolidations and
rationalizations and (v) the proximity of its plants to its customers. The
Company's philosophy has also been to develop long-term customer relationships
by acting in partnership with its customers, providing reliable quality and
service and utilizing its low cost producer position. This philosophy has
resulted in numerous long-term supply contracts, high retention of customers'
business and recognition from its customers, as demonstrated by many quality and
service awards.
The Company intends to enhance its position as a leading supplier of
consumer goods packaging products by pursuing a strategy designed to achieve
future growth and to increase its profitability and cash flow. The key
components of this strategy are to (i) increase the Company's market share in
its current business lines through acquisitions and internal growth, (ii) expand
into complementary business lines by applying the Company's acquisition and
operating expertise to other areas of the North American consumer goods
packaging market and (iii) improve the profitability of acquired businesses
through integration, rationalization and capital investments to enhance their
manufacturing and production efficiency.
The Company has increased its revenues and market share in the metal
container, plastic container and specialty markets through acquisitions and
internal growth. As a result of this strategy, the Company has diversified its
customer base, geographic presence and product line. The Company has more than
tripled its overall share of the U.S. metal food container market from
approximately 10% in 1987 to
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approximately 36% for the twelve months ended December 31, 1996. The Company's
plastic container business has increased its market position primarily through
strategic acquisitions, from sales of $88.8 million in 1987 to $216.4 million in
1996. Management believes that certain industry trends exist which will enable
the Company to continue to acquire attractive businesses in its existing
markets. The Company also believes that there will be opportunities to expand
its specialty business, as evidenced by its acquisition in April 1997 of Roll-on
Closures, the North American aluminum roll-on closure business of Alcoa. The
Company's specialty business generated net sales of $90.7 million in 1996.
The Company also expects to generate internal growth due to its
participation in certain higher growth segments of the consumer goods packaging
market. For example, due to increasing consumer preference for plastic as a
substitute for glass, the Company is aggressively pursuing opportunities for its
custom designed PET and HDPE containers. These opportunities include producing
PET containers for regional bottled water companies, and HDPE and PET containers
for products such as shampoo, mouthwash, salad dressing and liquor.
The Company seeks to acquire businesses at reasonable cash flow
multiples and to enhance profitability by rationalizing plants, by improving
manufacturing and production efficiencies and through purchasing economies.
Since 1991, the Company has reduced costs by closing twelve smaller, higher cost
facilities. Since its inception in 1987, the Company has invested approximately
$282.6 million to upgrade acquired manufacturing facilities, aimed at generating
manufacturing and production efficiencies and achieving a low cost producer
position. The AN Can acquisition illustrates the ability of the Company to
enhance the profitability of acquired businesses. The Company estimates that it
has reduced AN Can's operating costs from its historical 1994 level by at least
$21.0 million, through selling and administrative cost reductions, improved
manufacturing and production efficiencies and purchasing economies. The Company
expects to further reduce AN Can's operating costs over the next few years by an
aggregate of approximately $15.0 million (approximately half of which is
expected to be realized in 1997) through the elimination of transitional
administrative costs, the realization of additional manufacturing and production
synergies with its metal container business and plant rationalizations.
BUSINESS SEGMENTS
The Company is a holding company that conducts its business through two
wholly owned operating companies, Containers and Plastics. For certain financial
information with respect to the Company's two business segments, see Note 21 to
the Consolidated Financial Statements for the years ended December 31, 1996,
1995 and 1994 included elsewhere in this Prospectus.
Containers.
For 1996, Containers had net sales of $1,189.3 million (85% of the
Company's net sales) and income from operations of $106.1 million (85% of the
Company's income from operations) (without giving effect to corporate expense).
Containers has realized compound annual unit sales growth in excess of 24% since
1992, despite the relative maturity of the U.S. food can industry. Containers 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. Containers
manufactures metal containers for vegetables, fruit, pet food, meat, tomato
based products, coffee, soup, seafood and evaporated milk. The Company estimates
that approximately 80% of Containers' projected sales in 1997 will be pursuant
to long-term supply arrangements. 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
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requirements. In addition to Nestle and Del Monte, Containers has multi-year
supply arrangements with several other major food processors.
Containers also manufactures certain specialty packaging items,
including metal caps and closures, aluminum roll-on closures, plastic bowls and
paper containers used by processors in the food industry. For 1996, Containers
had net sales of specialty packaging items of $90.7 million.
Plastics.
For 1996, Plastics had net sales of $216.4 million (15% of the Company's
net sales) and income from operations of $18.4 million (15% of the Company's
income from operations) (without giving effect to corporate expense). Plastics
is aggressively pursuing opportunities in custom designed PET and HDPE
containers. Plastics emphasizes value-added design, fabrication and decoration
of custom containers in its business. Plastics manufactures custom designed HDPE
containers for health and personal care products, including containers for
shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household chemical products, including containers for scouring cleaners,
cleaning agents and lawn and garden chemicals and pharmaceutical products,
including containers for tablets, antacids and eye cleaning solutions. Plastics
also manufactures PET custom designed containers for mouthwash, respiratory and
gastrointestinal products, liquid soap, skin care lotions, salad dressings,
condiments, instant coffee, bottled water and liquor. 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. 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.
MANUFACTURING AND PRODUCTION
As is the practice in the industry, most of the Company's can and
plastic container customers provide it with quarterly or 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. Containers estimates that approximately 80% of its
projected 1997 sales will be pursuant to 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's manufacturing operations include cutting, coating,
lithographing, fabricating, assembling and packaging finished cans. Three basic
processes are used 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. High integrity of the side seam is 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
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process, the Company manufactures steel and aluminum two-piece cans, the height
of which does not exceed the diameter. For cans the height of which is greater
than the diameter, the Company manufactures steel two-piece cans by using a
drawing and ironing process. Quality and stackability of such cans are
comparable to that of the shallow two-piece cans described above. Can bodies and
ends are manufactured from thin, high-strength aluminum alloys and steels by
utilizing proprietary tool and die designs and selected can making equipment.
Plastic Container Business
The Company utilizes two basic processes to produce plastic bottles. In
the extrusion blow molding process, pellets of plastic resin are heated and
extruded into a tube of plastic. A two-piece metal mold is then closed around
the plastic tube and high pressure air is blown into it causing a bottle to form
in the mold's shape. In the injection blow molding process, pellets of plastic
resin are heated and injected into a mold, forming a plastic 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 with an adhesive, (iii) heat transfer decoration
which uses a plastic coated 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 country.
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 in accordance with the
Company's long-term supply arrangements and otherwise, any 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 will 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
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Company believes that it will be able to purchase sufficient quantities of steel
and aluminum can sheet for the foreseeable future.
Plastic Container Business
The raw materials used by the Company for the manufacture of plastic
containers are primarily resins in pellet form such as recycled PET, 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's philosophy has been to develop long-term customer
relationships by acting in partnership with its customers, providing reliable
quality and service and utilizing its low cost producer position. The Company
markets its products in most areas of North America primarily by a direct sales
force and for its plastic container business, to a lesser extent, through a
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."
In 1996, 1995 and 1994, approximately 17%, 21% and 26%, respectively, of
the Company's sales were to Nestle, and approximately 12%, 15% and 21%,
respectively, of the Company's sales were to Del Monte. No other customer
accounted for more than 10% of the Company's total sales during such years.
Metal Container Business
The Company is the largest manufacturer of metal food can containers in
North America, with a unit sale market share for the twelve months ended
December 31, 1996 of approximately 36% 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 projected metal container sales in 1997 will be pursuant to such
arrangements.
In 1987, the Company, through Containers, and Nestle entered into nine
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 1996, sales of metal cans
by the Company to Nestle were $240.6 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
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Agreement, Nestle may terminate such Nestle Supply Agreement but the other
Nestle Supply Agreements would remain in effect.
The Company has agreed with Nestle to extend the term of certain of the
Nestle Supply Agreements through 2004 (representing approximately 10% of the
Company's estimated 1996 sales) in return for certain price concessions by the
Company. The Company believes that these price concessions will not have a
material adverse effect on its results of operations. Under certain limited
circumstances, Nestle, beginning in January 2000 (with respect to all of the
containers supplied under the Nestle Supply Agreements that have been extended
through 2004), may receive competitive bids, and Containers has the right to
match any such bids. If Containers matches a competitive bid, it may result in
reduced sales prices with respect to the metal containers that are the subject
of such competitive bid. In the event that Containers chooses not to match a
competitive bid, such metal containers may be purchased from the competitive
bidder at the competitive bid price for the term of the bid.
Under the Company's recent agreement with Nestle, with respect to the
remaining Nestle Supply Agreements that expire in August and December 1997
(representing approximately 6% of the Company's estimated 1996 sales), the
Company has the right to submit a bid to Nestle, and to match any bid received
by Nestle, for the 1998 supply year with respect to the metal containers that
are the subject of such Nestle Supply Agreements. There can be no assurance that
any such bid by the Company will be made at sales prices equivalent to those
currently in effect or otherwise on terms similar to those currently in effect.
In addition, the Company cannot predict the effect, if any, on its results of
operations of matching or not matching any such bids.
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,
substantially all of Del Monte's annual requirements for metal containers to be
used for the packaging of food and beverages in the United States, subject to
certain limited exceptions. In 1996, sales of metal containers by the Company to
Del Monte were $168.0 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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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. Management believes that the Company is
a leading manufacturer of plastic containers in North America for personal care
products. 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 largest customers in these product
segments include the Helene Curtis and Chesebrough-Ponds USA divisions of
Unilever United States, Inc., Procter & Gamble Co., Avon Products, Inc., Andrew
Jergens Inc., The Dial Corporation, 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 bottled water and
liquor. Customers in these product segments include Procter & Gamble Co., Kraft
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 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, competitive pricing and its ability to meet customer requirements
for delivery, performance and technical assistance. The Company also pursues
market niches such as the manufacture of easy-open ends and special feature
cans, which may differentiate the Company's products from its competitors'
products.
Because of the high cost of transporting empty containers, the Company
generally sells to customers within a 300 mile radius of its manufacturing
plants. Strategically located existing plants give the Company an advantage over
competitors from other areas, and the Company would be disadvantaged by the loss
or relocation of a major customer. As of April 30, 1997, the Company operated 53
manufacturing facilities, geographically dispersed throughout the United States
and Canada, that serve the distribution needs of its customers.
Metal Container Business
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
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their cans. However, 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.
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
technology for the manufacturing of plastic bottles.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 1,080
salaried and 4,445 hourly employees on a full-time basis. Approximately 64% of
the Company's hourly plant employees are represented by a variety of unions.
The Company's labor contracts expire at various times between 1997 and
2008. Contracts covering approximately 8% of the Company's hourly employees
presently expire during 1997. 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
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entire cleanup cost at a particular site. Other state statutes may impose
proportionate rather than joint and several liability. The federal Environmental
Protection Agency or a state agency may also issue orders requiring responsible
parties to undertake removal or remedial actions at certain sites. Pursuant to
the agreement relating to the acquisition in 1987 of the can operations of
Nestle ("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 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 exceeded $100,000. See "--Legal Proceedings."
Pursuant to the agreement relating to the acquisition in 1987 from
Monsanto Company ("Monsanto") of substantially all of the business and related
fixed assets and inventory of Monsanto's plastic containers business ("Monsanto
Plastic Containers"), Monsanto has agreed to indemnify the Company for
substantially all of the costs attributable to the past waste disposal practices
of Monsanto Plastic Containers. In connection with the acquisition of 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 PRODUCT DEVELOPMENT
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 and Neenah, Wisconsin. The Company has recently
completed the building of its state-of-the-art research facility in Oconomowoc,
Wisconsin into which it will consolidate its two main research centers.
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 allow for an exchange of technology among these manufacturers. Pursuant to
these arrangements, the Company licenses its blow molding technology to such
manufacturers.
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PROPERTIES
The Company'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 33 metal container manufacturing
facilities, 15 plastic container manufacturing facilities and 5 specialty
packaging manufacturing facilities. Twenty-three of these facilities are owned
and 30 are leased by the Company. The leases expire at various times through
2020. Some of these leases provide renewal options.
Below is a list of the Company's operating facilities, including
attached warehouses, as of April 30, 1997 for its metal container business:
<TABLE>
<CAPTION>
APPROXIMATE
BUILDING AREA
LOCATION (SQUARE FEET)
- -------- -------------
<S> <C>
City of Industry, CA.................................. 50,000 (leased)
Kingsburg, 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)
Richmond, IN.......................................... 475,000
Fort Madison, IA...................................... 66,000
Ft. Dodge, IA......................................... 49,500 (leased)
Benton Harbor, MI..................................... 20,246 (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
Lyons, NY............................................. 145,000
Crystal City, TX...................................... 26,045 (leased)
Toppenish, WA......................................... 98,000
Vancouver, WA......................................... 127,000 (leased)
</TABLE>
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<TABLE>
<S> <C>
Menomonee Falls, WI................................... 116,000
Menomonie, WI......................................... 60,000 (leased)
Oconomowoc, WI........................................ 105,200
Plover, WI............................................ 58,000 (leased)
Waupun, WI............................................ 212,000
</TABLE>
Below is a list of the Company's operating facilities, including
attached warehouses, as of April 30, 1997 for its plastic container business:
<TABLE>
<CAPTION>
APPROXIMATE
BUILDING AREA
LOCATION (SQUARE FEET)
- -------- -------------
<S> <C>
Anaheim, CA........................................... 127,000 (leased)
Deep River, CT........................................ 140,000
Monroe, GA............................................ 117,000
Norcross, GA.......................................... 59,000 (leased)
Flora, IL............................................. 56,400 (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)
Scarborough, Ontario.................................. 117,000
Lachine, Quebec....................................... 113,000 (leased)
Lachine, Quebec....................................... 78,000 (leased)
</TABLE>
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. Substantially 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
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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 $3,000,000. In late 1996, DTSC certified site cleanup as
complete, but determined that monitoring would be required for approximately one
year. Monitoring has been ongoing for about six months with no problems
identified. The PRP Group has assessed approximately $201,264 as Containers'
share of the total cleanup cost, which amount has been paid. The expenses for
the final six months of monitoring represent a very small portion of the total
expense of cleanup. The Company believes that any additional expenditures on its
behalf are unlikely.
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MANAGEMENT
Directors and Executive Officers of the Company
The following table sets forth certain information (ages as of April 30,
1997) concerning the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ---------
<S> <C> <C>
R. Philip Silver......................... 54 Chairman of the Board, Co-Chief
Executive Officer and Director
D. Greg Horrigan......................... 53 President, Co-Chief Executive Officer
and Director
Robert H. Niehaus........................ 41 Director
Leigh J. Abramson........................ 28 Director
Thomas M. Begel.......................... 54 Director
Jeffrey C. Crowe......................... 50 Director
Harley Rankin, Jr. ...................... 57 Executive Vice President, Chief Financial
Officer and Treasurer
Harold J. Rodriguez, Jr.................. 41 Vice President, Controller and Assistant
Treasurer
Glenn A. Paulson......................... 53 Vice President
Frank W. Hogan, III...................... 36 Vice President, General Counsel
and Secretary
</TABLE>
EXECUTIVE OFFICERS OF CONTAINERS
The following table sets forth certain information (ages as of April 30,
1997) concerning the executive officers of Containers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ---------
<S> <C> <C>
James D. Beam............................ 54 President
Gerald T. Wojdon......................... 61 Vice President--Operations and Assistant
Secretary
Gary M. Hughes........................... 55 Vice President--Sales & Marketing
H. Dennis Nerstad........................ 59 Vice President--Production Services
Joseph A. Heaney......................... 44 Vice President--Finance
</TABLE>
EXECUTIVE OFFICERS OF PLASTICS
The following table sets forth certain information (ages as of April 30,
1997) concerning the executive officers of Plastics.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ---------
<S> <C> <C>
Russell F. Gervais....................... 53 President
Howard H. Cole........................... 51 Vice President and Assistant Secretary
Charles Minarik.......................... 59 Vice President--Operations and
Commercial Development
Alan H. Koblin........................... 45 Vice President--Sales & Marketing
Colleen J. Jones......................... 37 Vice President--Finance, Chief Financial
Officer and Assistant Secretary
</TABLE>
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Mr. Silver has been Chairman of the Board and Co-Chief Executive Officer
of the Company since March 1994. Mr. Silver is one of the founders of the
Company and was formerly President of the Company. Mr. Silver has been a
Director of the Company since its inception. Mr. Silver has been a Director of
Containers since its inception in August 1987 and Vice President of Containers
since May 1995. Mr. Silver has been a Director of Plastics since its inception
in August 1987 and Chairman of the Board of Plastics since March 1994. Prior to
founding the Company in 1987, Mr. Silver was a consultant to the packaging
industry. Mr. Silver was President of Continental Can Company from June 1983 to
August 1986. From September 1989 through August 1993, Mr. Silver held various
positions with Sweetheart Holdings Inc. and Sweetheart Cup Company, Inc.,
including Chairman of the Board and Director. Mr. Silver is a Director of
Johnstown America Corporation.
Mr. Horrigan has been President and Co-Chief Executive Officer of the
Company since March 1994. Mr. Horrigan is one of the founders of the Company and
was formerly Chairman of the Board of the Company. Mr. Horrigan has been a
Director of the Company since its inception. Mr. Horrigan has been Chairman of
the Board of Containers and a Director of Containers and Plastics since their
inception in August 1987. Mr. Horrigan was Executive Vice President and
Operating Officer of Continental Can Company from 1984 to 1987. From September
1989 through August 1993, Mr. Horrigan held various positions with Sweetheart
Holdings Inc. and Sweetheart Cup Company, Inc., including Chairman of the Board
and Director.
Mr. Niehaus has been a Director of the Company, Containers and Plastics
since their inception. Mr. Niehaus joined Morgan Stanley in 1982 and has been a
Managing Director of Morgan Stanley since 1990. Mr. Niehaus has been a Vice
Chairman and a Director of Morgan Stanley Leveraged Equity Fund II, Inc. ("MSLEF
II, Inc.") since January 1990 and a Vice Chairman and a Director of the managing
general partner of the general partner of Morgan Stanley Capital Partners III,
L.P. ("MSCP III") since January 1994. Mr. Niehaus is also a Director of American
Italian Pasta Company, Fort Howard Corporation and Waterford Crystal Ltd., and
Chairman of Waterford Wedgwood UK plc.
Mr. Abramson has been a Director of the Company, Containers and Plastics
since September 1996. He has been an Associate of Morgan Stanley since 1994 and
a Vice President of MSLEF II, Inc. and of the managing general partner of the
general partner of MSCP III since 1995. Mr. Abramson has been with Morgan
Stanley since 1990, first in the Corporate Finance Division and, since 1992, in
the Merchant Banking Division. Mr. Abramson is also a Director of PageMart
Wireless, Inc., PageMart, Inc. and Jefferson Smurfit Corporation.
Mr. Begel has been a Director of the Company since May 1997. Mr. Begel
has been Chairman and Chief Executive Officer of TMB Industries since 1988 and
has been Chairman, President, Chief Executive Officer and a Director of
Johnstown America Industries, Inc. since 1991. Mr. Begel was Chairman, President
and Chief Executive Officer of The Pullman Company until its acquisition in
1988. From 1981 to 1983, Mr. Begel was Senior Vice President of the Engineered
Products Group of the Signal Companies, Inc. and Senior Vice President of
Wheelabrator-Frye, Inc.
Mr. Crowe has been a Director of the Company since May 1997. Mr. Crowe
has been Chairman, President, Chief Executive Officer and a Director of Landstar
System, Inc. ("Landstar") since 1989. From 1982 to 1989, Mr. Crowe was President
of Independent Freightway, Inc. (Landstar Inway), a subsidiary of Landstar.
Prior to joining Landstar, Mr. Crowe was Vice President-Operations of All-States
Trucking and at Pacific Intermountain Express as region manager.
Mr. Rankin has been Executive Vice President and Chief Financial Officer
of the Company since January 1989 and Treasurer of the Company since January
1992. Mr. Rankin has been Vice President
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of Containers and Plastics since January 1989 and was Treasurer of Plastics from
January 1994 to December 1994. Prior to joining the Company, Mr. Rankin was
Senior Vice President and Chief Financial Officer of Armtek Corporation. Mr.
Rankin was Vice President and Chief Financial Officer of Continental Can Company
from November 1984 to August 1986. From September 1989 to August 1993, Mr.
Rankin was Vice President, Chief Financial Officer and Treasurer of Sweetheart
Holdings Inc. and Vice President of Sweetheart Cup Company, Inc.
Mr. Rodriguez has been Vice President of the Company since March 1994
and Controller and Assistant Treasurer of the Company since March 1990. From
October 1987 to March 1990, Mr. Rodriguez was Assistant Controller and Assistant
Treasurer of the Company. Mr. Rodriguez has been Vice President of Containers
and Plastics since March 1994. From September 1989 to August 1993, Mr. Rodriguez
was Controller, Assistant Secretary and Assistant Treasurer of Sweetheart
Holdings Inc. and Assistant Secretary and Assistant Treasurer of Sweetheart Cup
Company, Inc. From 1978 to 1987, Mr. Rodriguez was employed by Ernst & Young
LLP, last serving as Senior Manager specializing in taxation.
Mr. Paulson has been Vice President of the Company since January 1996.
Mr. Paulson was employed by Containers to manage the transition of AN Can from
August 1995 to December 1995. From January 1989 to July 1995, Mr. Paulson was
employed by ANC, last serving as Senior Vice President and General Manager, Food
Metal and Specialty, North America. Prior to his employment with ANC, Mr.
Paulson was President of the beverage packaging operations of Continental Can
Company.
Mr. Hogan has been Vice President, General Counsel and Secretary of the
Company since June 1997. From September 1995 until June 1997, Mr. Hogan was a
partner at the law firm of Winthrop, Stimson, Putnam & Roberts in Stamford,
Connecticut. From April 1988 to September 1995, Mr. Hogan was an associate at
such firm.
Mr. Beam has been President of Containers since July 1990. From
September 1987 to July 1990, Mr. Beam was Vice President--Marketing & Sales of
Containers. Mr. Beam was Vice President and General Manager of Continental Can
Company, Western Food Can Division, from March 1986 to September 1987.
Mr. Wojdon has been Vice President--Operations and Assistant Secretary
of Containers since September 1987. From August 1982 to August 1987, Mr. Wojdon
was General Manager of Manufacturing of the Can Division of the Carnation
Company.
Mr. Hughes has been Vice President--Sales & Marketing of Containers
since July 1990. From February 1988 to July 1990, Mr. Hughes was Vice President,
Sales and Marketing of the Beverage Division of Continental Can Company. Prior
to February 1988, Mr. Hughes was employed by Continental Can Company in various
regional sales positions.
Mr. Nerstad has been a Vice President of Containers since December 1993.
From August 1989 to December 1993, Mr. Nerstad was Vice President--Distribution
and Container Manufacturing of Del Monte and was Director of Container
Manufacturing of Del Monte from November 1983 to July 1989. Prior to 1983, Mr.
Nerstad was employed by Del Monte in various regional and plant positions.
Mr. Heaney has been Vice President--Finance of Containers since October
1995. From September 1990 to October 1995, Mr. Heaney was Controller, Food Metal
and Specialty Division of ANC. From August 1977 to August 1990, Mr. Heaney was
employed by ANC and American Can Company in various divisional, regional and
plant finance/accounting positions.
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Mr. Gervais has been President of Plastics since December 1992. From
September 1989 to December 1992, Mr. Gervais was Vice President--Sales &
Marketing of Plastics. From March 1984 to September 1989, Mr. Gervais was
President and Chief Executive Officer of Aim Packaging, Inc.
Mr. Cole has been Vice President and Assistant Secretary of Plastics
since September 1987. From April 1986 to September 1987, Mr. Cole was Manager of
Personnel of the Monsanto Engineered Products Division of Monsanto.
Mr. Minarik has been Vice President--Operations and Commercial
Development of Plastics since May 1993. From February 1991 to August 1992, Mr.
Minarik was President of Wheaton Industries Plastics Group. Mr. Minarik was Vice
President--Marketing of Constar International, Inc. from March 1983 to February
1991.
Mr. Koblin has been Vice President--Sales & Marketing of Plastics since
1994. From 1992 to 1994, Mr. Koblin was Director of Sales & Marketing of
Plastics. From 1990 to 1992, Mr. Koblin was Vice President of Churchill
Industries.
Ms. Jones has been Vice President--Finance and Chief Financial Officer
of Plastics since December 1994 and Assistant Secretary of Plastics since
November 1993. From October 1993 to December 1994, Ms. Jones was Corporate
Controller of Plastics and from July 1989 to October 1993, she was Manager--
Finance of Plastics. From July 1982 to July 1989, Ms. Jones was an Audit Manager
for Ernst & Young LLP.
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<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 1997, certain
information with respect to the beneficial ownership by certain persons of
outstanding shares of capital stock of the Company. Except as otherwise
described below, each of the persons named in the table has sole voting and
investment power with respect to the securities beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OWNERSHIP
COMMON STOCK OWNED OF COMMON STOCK(1)
------------------- -----------------------
<S> <C> <C>
R. Philip Silver (2).......................... 3,576,545 18.96%
D. Greg Horrigan (2).......................... 3,576,545 18.96%
Robert H. Niehaus (3)......................... -- --
Leigh J. Abramson (3)......................... -- --
Thomas M. Begel (4)........................... 2,000 *
Jeffrey C. Crowe (5).......................... 2,000 *
Harley Rankin, Jr. (6)........................ 233,012 1.22%
James D. Beam (7)............................. 584,809 3.01%
Russell F. Gervais (8)........................ 80,728 *
The Morgan Stanley Leveraged Equity Fund II,
L.P. (9)................................... 5,835,842 30.94%
All officers and directors as a group......... 8,739,191 42.75%
</TABLE>
- --------------
(1) An asterisk denotes beneficial ownership of 1% or less of the Common Stock.
(2) Director of the Company, Containers and Plastics. 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. In
addition, Messrs. Silver and Horrigan share voting and investment power
with respect to one (1) share of Common Stock, which share of Common Stock
is owned by S&H. The address for such person is 4 Landmark Square,
Stamford, CT 06901.
(3) Director of the Company, Containers and Plastics. The address for such
person is c/o Morgan Stanley & Co. Incorporated, 1221 Avenue of the
Americas, New York, NY 10020.
(4) Director of the Company. The address for such person is 980 N. Michigan
Avenue, Suite 1000, Chicago, IL 60611.
(5) Director of the Company. The address for such person is 4160 Woodcock
Drive, Jacksonville, FL 32207.
(6) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 4 Landmark Square, Stamford, CT 06901.
(7) Includes 584,609 shares that may be acquired through the exercise of vested
stock options granted pursuant to the Stock Option Plan. The address for
such person is 21800 Oxnard Street, Woodland Hills, CA 91367.
(8) Includes 80,678 shares that may be acquired through the exercise of vested
stock options granted pursuant to the Stock Option Plan. The address for
such person is 14515 N. Outer Forty, Chesterfield, MO 63017.
(9) The address for The Morgan Stanley Leveraged Equity Fund II, L.P. is 1221
Avenue of the Americas, New York, NY 10020.
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<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS
The Company, 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 then existing management services agreement, as amended, with S&H. Pursuant
to the Management Agreements, S&H provided the Company, Containers and Plastics
and their respective subsidiaries with general management and administrative
services (the "Services"). The Management Agreements provided 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 the Company
("Company EBDIT"), for such calendar month until Company 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 Company EBDIT for such
calendar month to the extent that Company 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 Company EBDIT for such calendar
quarter until Company EBDIT for the calendar year shall have reached the
Scheduled Amount and 1.65% of Company EBDIT for such calendar quarter to the
extent that Company 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 $83.5 million for the
calendar year 1996, and the Maximum Amount was $98.101 million for the calendar
year 1996. The Management Agreements provided that upon receipt by the Company
of a notice from Bankers Trust that certain events of default under the Credit
Agreement have occurred, the Quarterly Management Fee shall continue to accrue,
but shall not be paid to S&H until the fulfillment of certain conditions, as set
forth in the Management Agreements.
Additionally, the Management Agreements provided that the Company,
Containers, Plastics and their respective subsidiaries 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 were credited against amounts paid
to S&H under the other Management Agreements. Under the terms of the Management
Agreements, the Company, Containers and Plastics 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 provided that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H retained Morgan Stanley to
render financial advisory services to S&H. In connection with such retention,
S&H agreed to pay Morgan Stanley a fee equal to 9.1% of the fees paid to S&H
under the Management Agreements.
Concurrent with the IPO, each of the Company, Containers and Plastics
entered into an amended and restated management services agreement
(collectively, the "New Management Agreements") with S&H to replace in their
entirety the Management Agreements. The New Management Agreements contain
substantially the same terms as the Management Agreements, except that after the
initial term of the New Management Agreements (which continues until June 30,
1999), the New Management Agreements will be automatically renewed for
successive one-year terms unless either party gives written notice at least 180
days prior to the end of the then current term of its election not to renew. The
independent directors of the Company will determine on behalf of the companies
whether to give such written notice not to
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renew. The New Management Agreements may be terminated (i) at the option of each
of the respective companies upon the failure or refusal of S&H to perform its
obligations under the New Management Agreements, if such failure or refusal
continues unremedied for more than 60 days after written notice of its existence
shall have been given; (ii) at the option of S&H upon the failure or refusal of
any of the respective companies to perform its obligations under the New
Management Agreements, if such failure or refusal continues unremedied for more
than 60 days after written notice of its existence shall have been given; (iii)
at the option of S&H or the respective companies (a) if S&H or one of the
companies is declared insolvent or bankrupt or a voluntary bankruptcy petition
is filed by any of them, (b) upon the occurrence of any of the following events
with respect to S&H or one of the companies 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 one of
the companies 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; (iv) upon at least 180 days
prior written notice at the option of each of the respective companies for any
reason; (v) upon at least 180 days prior written notice at the option of S&H for
any reason other than Cause or a Change of Control (each as defined in the New
Management Agreements); (vi) at the option of S&H after a Change of Control;
(vii) at the option of the respective companies in the event of criminal conduct
or gross negligence by S&H in the performance of the Services; or (viii) at the
option of S&H or the respective companies upon the termination of any of the New
Management Agreements for Cause. The New Management Agreements prohibit S&H from
competing with the Company during the term thereof and, only if S&H terminates
the New Management Agreements pursuant to clause (v) above, for a period of one
year after such termination. The New Management Agreements provide that, in the
event that they are terminated pursuant to clause (iv) above, each of the
respective companies will be required to pay to S&H the present value of the
amount of the payments that would have been payable to S&H thereunder through
the end of the initial term or renewed term, as the case may be, thereof. In
addition, under the New Management Agreements the Scheduled Amount is $89.5
million, $95.5 million and $101.5 million for the calendar years 1997, 1998 and
1999, respectively, and the Maximum Amount is $100.504 million, $102.964 million
and $105.488 million for the calendar years 1997, 1998 and 1999, respectively.
For the calendar year 2000, the Scheduled Amount and the Maximum Amount is
$108.653 million, and for each calendar year thereafter the Scheduled Amount and
Maximum Amount increases by 3% from that of the previous year.
The Company believes that it is difficult to determine whether the
Management Agreements were, and whether the New Management Agreements are, on
terms no less favorable than those available from unaffiliated parties because
of the personal nature of the services provided thereunder and the expertise and
skills of the individuals providing such services. The Company believes that
arrangements under the Management Agreements were, and that the arrangements
under the New Management Agreements are, fair to both parties.
For the years ended December 31, 1996, 1995 and 1994, under the Management
Agreements, S&H earned aggregate fees, including reimbursable expenses and fees
payable to Morgan Stanley, of $5.3 million, $5.4 million and $5.0 million,
respectively, from the Company, Containers and Plastics, and during 1996, 1995
and 1994 Morgan Stanley earned fees of $425,000, $409,000 and $383,000,
respectively.
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<PAGE>
OTHER
In connection with the Preferred Stock Sale, Morgan Stanley, which acted as
the placement agent in connection therewith, received certain fees amounting to
$1.8 million. Morgan Stanley acted as one of the several underwriters in
connection with the IPO and received fees of approximately $1.2 million in
connection therewith. In connection with the Private Offering, Morgan Stanley
acted as the placement agent for the Debentures and received certain fees
amounting to $7.9 million. In connection with the New Credit Agreement,
MSSF, who will act as a Co-Arranger and Co-Documentation Agent, will receive
certain fees. See "Securities Ownership of Certain Beneficial Owners and
Management" for a description of the ownership by MSLEF II, an affiliate of
Morgan Stanley and MSSF, of certain securities of the Company.
Messrs. Silver and Horrigan, Bankers Trust New York Corporation ("BTNY"),
MSLEF II and the Company are parties to the Stockholders Agreement dated as of
December 21, 1993 (as amended, the "Stockholders Agreement"), which provides for
certain rights and obligations among them and between them and the Company. The
Stockholders Agreement provides that for a period of eight years after the IPO,
MSLEF II has the right to demand two separate registrations of its shares of
Common Stock; provided, however, that such demand right terminates at such time
as MSLEF II, together with its affiliates, owns less than five percent of the
issued and outstanding shares of Common Stock. If, at any time or from time to
time for a period of eight years after the IPO, the Company determines to
register additional shares of Common Stock (other than in connection with
certain non-underwritten offerings), the Company will offer each of MSLEF II,
BTNY and Messrs. Silver and Horrigan the opportunity to register shares of
Common Stock it holds in a "piggyback registration."
In the event that the Company enters into any future transactions with any
of its affiliates, the Company expects to enter into any such transactions on
terms no less favorable than those available from unaffiliated parties.
DESCRIPTION OF DEBENTURES
The Old Debentures are, and the New Debentures will be, issued under the
Indenture. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. The Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Whenever
particular defined terms of the Indenture not otherwise defined herein are
referred to, such defined terms are incorporated herein by reference. For
definitions of certain capitalized terms used in the following summary, see
"-- Certain Definitions."
GENERAL
The Old Debentures are, and the New Debentures will be, unsecured senior
subordinated obligations of the Company, initially limited to $300 million
aggregate principal amount, and will mature on June 1, 2009. Each Debenture will
initially bear interest at 9% per annum from June 9, 1997 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually (to Holders of record at the close of business on the May
15 or November 15 immediately preceding the Interest Payment Date) on June 1 and
December 1 of each year, commencing December 1, 1997.
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<PAGE>
Principal of, premium, if any, and interest on the Debentures are and will
be payable, and the Debentures may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, the City of New York (which
initially will be the corporate trust office of the Trustee c/o First Chicago
Trust Company of New York at 14 Wall Street, 8th Floor, Window 2, New York, New
York 10005); provided that, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses as they appear in
the Security Register.
The Debentures are and will be issued only in fully registered form,
without coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. See "--Book-Entry; Delivery and Form." No service charge will
be made for any registration of transfer or exchange of Debentures, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
Subject to the covenants described below under "Covenants" and applicable
law, the Company may issue additional Debentures under the Indenture. The
Debentures offered hereby and any additional Debentures subsequently issued
would be treated as a single class for all purposes under the Indenture.
OPTIONAL REDEMPTION
The Old Debentures are, and the New Debentures will be, redeemable at the
Company's option, in whole or in part, at any time and from time to time, on or
after June 1, 2002 and prior to maturity, upon not less than 30 nor more than 60
days' prior notice mailed by first class mail to each Holder's last address as
it appears in the Security Register, at the following Redemption Prices
(expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing June 1, of the years set forth below:
<TABLE>
<CAPTION>
YEAR Redemption Price
---- -----------------
<S> <C>
2002................. 104.500%
2003................. 103.375
2004................. 102.250
2005................. 101.125
2006 and thereafter.. 100.000
</TABLE>
In addition, at any time prior to June 1, 2000, the Company may redeem
up to 35% of the principal amount of the Debentures with the proceeds of one or
more public equity offerings of Common Stock of the Company or the Successor
Corporation, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 109%, plus accrued and unpaid
interest to the Redemption Date (subject to the rights of Holders of record on
the relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date); provided that at least $195 million
aggregate principal amount of Debentures remains outstanding after each such
redemption.
In the case of any partial redemption, selection of the Debentures for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Debentures are
listed or, if the Debentures are not listed on a national securities exchange,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Debenture of
$1,000 in principal amount or less shall be redeemed
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in part. If any Debenture is to be redeemed in part only, the notice of
redemption relating to such Debenture shall state the portion of the principal
amount thereof to be redeemed. A new Debenture in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Debenture.
SINKING FUND
There will be no sinking fund payments for the Debentures.
RANKING
The Indebtedness evidenced by the Debentures is and will be
subordinated to all existing and future Senior Indebtedness of the Company, will
rank pari passu in right of payment with all senior subordinated indebtedness of
the Company and senior in right of payment to all existing and future
subordinated indebtedness of the Company. After giving pro forma effect to the
Private Offering and the application of the proceeds thereof and the Preferred
Stock Exchange, at May 31, 1997, the Company would have had outstanding
approximately $926.3 million of Indebtedness, including approximately $570.3
million of Senior Indebtedness (all of which would have been secured) and
including the Exchange Debentures which were issued on June 13, 1997 and are
subordinate in right of payment to the Debentures. In addition, all existing and
future liabilities (including trade payables) of the Company's subsidiaries will
be effectively senior to the Debentures. At March 31, 1997, the Company's
subsidiaries had other liabilities of approximately $268.3 million. See "Risk
Factors--Secured Indebtedness" and "--Holding Company Structure and
Subordination" and "Capitalization."
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, 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 Indenture as if such declaration, invalidity or setting aside
had not occurred. Upon any payment or distribution of assets or securities of
the Company 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 the Company 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 the Company or a Successor
Corporation on account of Senior Subordinated Obligations, or any payment to
acquire any of the Debentures for cash, property or securities, or any
distribution with respect to the Debentures of any cash, property or securities.
Before any payment may be made by or on behalf
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<PAGE>
of the Company or a Successor Corporation of any Senior Subordinated Obligations
upon any such dissolution, winding-up, liquidation or reorganization, any
payment or distribution of assets or securities of the Company 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 Indenture, shall be made by the
Company 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 the Company or a
Successor Corporation of Senior Subordinated Obligations, whether pursuant to
the terms of the Debentures or upon acceleration or otherwise, shall be made if,
at the time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Senior Indebtedness and such default shall not
have been cured or waived or the benefits of this sentence waived by or on
behalf of the holders of such Senior Indebtedness. In addition, during the
continuance of any other event of default with respect to (i) the 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 Credit Agreement results from the acceleration of the
Debentures, from and after the date of such acceleration, no payment of Senior
Subordinated Obligations may be made by or on behalf of the Company or a
Successor Corporation upon or in respect of the Debentures for a period (a
"Payment Blockage Period") commencing on the earlier of the date of receipt of
such notice or the date of such acceleration and ending 159 days thereafter
(unless such Payment Blockage Period shall be terminated by written notice to
the Trustee from the Bank Agent or such event of default has been cured or
waived) or (ii) any other Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, upon receipt by the Trustee of written
notice from the trustee or other representative for the holders of such other
Designated Senior Indebtedness (or the holders of at least a majority in
principal amount of such other Designated Senior Indebtedness then outstanding),
no payment of Senior Subordinated Obligations may be made by or on behalf of the
Company or a Successor Corporation upon or in respect of the Debentures for a
Payment Blockage Period commencing on the date of receipt of such notice and
ending 119 days thereafter (unless, in each case, such Payment Blockage Period
shall be terminated by written notice to the Trustee from such trustee or other
representatives for such holders). Not more than one Payment Blockage Period may
be commenced with respect to the Debentures during any period of 360 consecutive
days; provided that, subject to the limitation contained in the next sentence,
the commencement of a Payment Blockage Period by the representatives for, or the
holders of, Designated Senior Indebtedness other than under the 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 Indenture to the contrary,
there must be 180 consecutive days in any 360-day period in which no Payment
Blockage Period is in effect. No event of default (other than an event of
default pursuant to the financial maintenance covenants under the Credit
Agreement) that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose) on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis for the commencement of a second Payment Blockage Period by the
representatives for, or the holders of, such Designated Senior
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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 the Company or a Successor
Corporation who are not holders of Senior Indebtedness or of the Debentures may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than holders of the Debentures.
"Successor Corporation" is defined to mean any successor corporation
to the Company that becomes the successor obligor on the Debentures, whether by
merger, consolidation, sale of assets, assumption of liabilities or otherwise.
"Senior Indebtedness" is defined to mean the following obligations of
the Company or a Successor Corporation: (i) all Indebtedness and other monetary
obligations of the Company or a Successor Corporation under (or in respect of)
the Credit Agreement, any Interest Rate Agreement or any Currency Agreement,
(ii) all other Indebtedness of the Company or a Successor Corporation (other
than Indebtedness evidenced by the Debentures or 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 Debentures and (iii) all fees, expenses and indemnities payable
in connection with the Credit Agreement, Currency Agreements and Interest Rate
Agreements; provided that the term "Senior Indebtedness" shall not include (a)
any Indebtedness of the Company 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 the Company or a Successor Corporation,
(b) any Indebtedness of the Company or a Successor Corporation to a Subsidiary
of the Company or a Successor Corporation or to a joint venture in which the
Company or a Successor Corporation has an interest, (c) any Indebtedness of the
Company 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 the Company or a Successor
Corporation or any of its Subsidiaries, (f) any liability for federal, state,
local or other taxes owed or owing by the Company or a Successor Corporation or
(g) any Trade Payables. "Senior Indebtedness" will also include interest
accruing subsequent to events of bankruptcy of the Company 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 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 the Company or the Successor Corporation in the
instrument creating or evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
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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 Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted 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 any Person (other than net income
(or loss) attributable to a Restricted Subsidiary) in which any Person (other
than the Company or any of its Restricted Subsidiaries) has a joint interest and
the net income (or loss) of any Unrestricted Subsidiary, except to the extent of
the amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such other Person or such Unrestricted
Subsidiary during such period; (ii) solely for the purposes of calculating the
amount of Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of the "Limitation on Restricted Payments" covenant described
below (and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) the net income (or loss) of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted 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 Restricted Subsidiary; (iv) any gains or losses (on an after-
tax basis) attributable to Asset Sales; (v) except for purposes of calculating
the amount of Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of the "Limitation on Restricted Payments" covenant described
below, any amount paid or accrued as dividends on Preferred Stock of the Company
or any Restricted Subsidiary owned by Persons other than the Company and any of
its Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses; provided further that for purposes of clause (iv) of the first paragraph
of the "Limitation on Restricted Payments" covenant, in connection with any
Investment in a business, "Adjusted Consolidated Net Income" during the period
commencing with the first day of the fiscal quarter in which the Closing Date
occurs and ending on the last day of the last fiscal quarter preceding the
Transaction Date shall not be less than $100 million, unless actual Adjusted
Consolidated Net Income for such period is a loss, in which case Adjusted
Consolidated Net Income for such period shall be $100 million minus the amount
of such loss.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets after the Closing Date (excluding
write-ups in connection with accounting for acquisitions in conformity with
GAAP), after deducting therefrom (i) all current liabilities of the Company and
its Restricted Subsidiaries (excluding intercompany items) and
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(ii) all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles, all as set forth on the most recent
quarterly or annual consolidated balance sheet of the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP and filed with the Commission or
provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means 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.
"Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division, operating unit or line of business of such Person; provided that the
property and assets acquired are related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary of the Company or (ii) all or substantially all of the
assets that constitute a division, operating unit or line of business of the
Company or any of its Restricted Subsidiaries.
"Asset Sale" means 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 the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by the provisions
of the Indenture applicable to mergers, consolidations and sales of assets of
the Company; provided that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales or
other dispositions of assets for consideration at least equal to the fair market
value of the assets sold or disposed of, to the extent that the consideration
received would satisfy clause (B) of the "Limitation on Asset Sales" covenant,
(c) any Restricted Payments permitted by the "Limitation on Restricted Payments"
covenant, (d) sales, transfers or other dispositions of obsolete or worn out
equipment or spare parts or (e) during each fiscal year of the Company, other
sales, transfers or dispositions of assets having a fair market value not in
excess of $1,000,000.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products 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.
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"Bank Agent" means Bankers Trust Company, or its successor as agent
for the lenders under the Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, 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.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means 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 ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), of more than 40% of the total voting power of the Voting Stock of the
Company and (b) MSLEF II, Mr. Horrigan, Mr. Silver and their respective
Affiliates and any spouse, parent, brother, sister or lineal descendant of Mr.
Horrigan or Mr. Silver beneficially own, directly or indirectly, less than 18%
of the total voting power of the Voting Stock of the Company; (ii) individuals
who on the Closing Date constitute the Board of Directors (together with any new
directors whose election by the Board of Directors or whose nomination by the
Board of Directors for election by the Company's stockholders was approved by a
vote of at least a majority of the members of the Board of Directors then in
office who either were members of the Board of Directors on the Closing Date 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) the Company shall not beneficially own, directly or
indirectly, at least a majority of the outstanding Voting Stock of Silgan
Corporation other than as a result of the merger of Silgan Corporation with and
into the Company.
"Closing Date" means the date on which the Old Debentures were
originally issued under the Indenture.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other non-cash items reducing Adjusted Consolidated Net Income, less all
non-cash items increasing Adjusted Consolidated Net Income, all as determined on
a consolidated basis for the Company and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the
extent not otherwise reduced in accordance with GAAP) by an amount equal to (A)
the amount of the Adjusted Consolidated Net Income attributable to such
Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares
of outstanding Common Stock of such Restricted Subsidiary not owned on the last
day of such period by the Company or any of its Restricted Subsidiaries divided
by (2) the total number of shares of outstanding Common Stock of such Restricted
Subsidiary on the last day of such period.
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"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof).
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Subsidiaries
(which shall be as of a date not more than 135 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified 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 the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Credit Agreement" means the credit agreement dated as of August 1,
1995, as amended, among the Company and certain of its subsidiaries, the lenders
named therein, the Bank Agent, as Administrative Agent and Co-Arranger, and Bank
of America Illinois, as Documentation Agent and Co-Arranger, together with the
related documents thereof (including without limitation any Guarantees and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented, renewed, extended,
substituted, replaced or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing or otherwise restructuring
(including, but not limited to, the inclusion of additional borrowers thereunder
that are Subsidiaries of the Company) all or any portion of the Indebtedness
under such agreement or any successor agreement, as such agreement may be
amended, renewed, extended, substituted, replaced, restated and otherwise
modified from time to time; and "Credit Agreement Amount" means $1.2 billion.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Debentures, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Debentures or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Debentures; provided that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the
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Debentures shall not constitute Disqualified Stock if the "asset sale" or
"change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained in
the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of
Control" covenants described below and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Debentures as are required
to be repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of
Debentures upon a Change of Control" covenants described below.
"11-3/4% Notes" means the 11-3/4% Senior Subordinated Notes due 2002
of the Company (as successor to Silgan Corporation).
"Exchange Debentures" means the 13-1/4% Subordinated Debentures which
were issued in exchange for the 13-1/4% Preferred Stock.
"fair market value" means the price that would be paid in an arm's-
length transaction between an informed and willing seller under no compulsion to
sell and an informed and willing buyer under no compulsion to buy, as determined
(except with respect to amounts less than $1,000,001) in good faith by the Board
of Directors, whose determination shall be conclusive if evidenced by a Board
Resolution. Notwithstanding the foregoing, in the event that (1) the Company or
any of its Restricted Subsidiaries shall dedicate assets substantially to
products sold to any principal customer and (2) such customer shall require that
the Company or such Restricted Subsidiary grant such customer an option to
purchase such assets (or the entity owning such assets), then "fair market
value" shall, for purposes of the "Limitation on Asset Sales" covenant, be
deemed to be the price paid by such customer for such assets or such entity.
"GAAP" means 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 the Company's audited financial statements, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession. All ratios and computations
contained or referred to in the Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to (i) the
amortization or write off of unamortized deferred financing costs and any
premiums, fees or expenses incurred in connection with the offering, redemption
or early extinguishment of the Debentures, the 13-1/4% Preferred Stock, the 11-
3/4% Notes, the 13-1/4% Debentures and the Credit Agreement (but not any fees or
expenses with respect to the Indebtedness Incurred or Capital Stock issued after
the date hereof to effect any such redemption or early extinguishment) and (ii)
except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness 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 of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), 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
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Indebtedness 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.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, 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, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (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 Capitalized
Lease Obligations, (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 and
(viii) to the extent not otherwise included in this definition, obligations
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, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided (A) 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 the time of its issuance
as determined in conformity with GAAP, (B) that money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be "Indebtedness,"
(C) that Indebtedness shall not include any liability for federal, state, local
or other taxes and (D) in clarification of this definition, any unused
commitment under the Credit Agreement or any other agreement relating to
Indebtedness shall not be treated as outstanding.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters prior to such Transaction Date for which reports have been filed
with the Commission pursuant to the "Commission Reports and Reports to Holders"
covenant (the "Four Quarter Period") to (ii) the aggregate Consolidated Interest
Expense during such Four Quarter Period. In making the foregoing calculation,
(A) pro forma effect shall be given to any Indebtedness Incurred or repaid
during the period (the "Reference Period") commencing on the first day of the
Four Quarter Period and ending on the Transaction Date (other than Indebtedness
Incurred or repaid under a revolving credit or similar arrangement to the extent
of the commitment thereunder (or under any predecessor revolving credit or
similar arrangement) in effect on the last day of such Four Quarter Period
unless any portion of such Indebtedness is projected, in the reasonable judgment
of the
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senior management of the Company, to remain outstanding for a period in excess
of 12 months from the date of the Incurrence thereof) and any Indebtedness to be
repaid within 60 days of the Transaction Date (except to the extent such
repayment will be financed by Incurring Indebtedness after the Transaction
Date), in each case as if such Indebtedness had been Incurred or repaid on the
first day of such Reference Period; (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 a date that is no more than 75
days prior to the Transaction Date (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 or, if shorter, at least equal to the
remaining term of such Indebtedness) had been the applicable rate for the entire
period; (C) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during such Reference Period as if they had
occurred and such proceeds had been applied on the first day of such Reference
Period; provided that (x) with respect to Asset Acquisitions, pro forma effect
shall be given to any cost reductions the Company anticipates if the Company
delivers to the Trustee an Officers' Certificate executed by the Chief Financial
Officer of the Company certifying to and describing and quantifying with
reasonable specificity the cost reductions expected to be attained within the
first year after such Asset Acquisition and (y) at the Company's election, in
connection with any Asset Acquisition with respect to which an income statement
for the acquired assets for the preceding four fiscal quarters is not available,
the Company shall, in good faith, prepare an estimated income statement for such
four quarters and shall deliver to the Trustee an Officers' Certificate and a
certificate of an investment bank or accounting firm of national standing
expressly stating that, in their opinion, such estimated income statement
reasonably reflects the results that would have occurred had such assets been
purchased by the Company or a Restricted Subsidiary on the first day of the Four
Quarter Period and (D) pro forma effect shall be given to asset dispositions and
asset acquisitions (including giving pro forma effect to the application of
proceeds of any asset disposition) that have been made by any Person that has
become a Restricted Subsidiary or has been merged with or into the Company or
any Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such Reference Period; provided that to the
extent that clause (C) or (D) of this sentence requires that pro forma effect be
given to an Asset Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately preceding the
Transaction Date of the Person, or division, operating unit or line of business
of the Person, that is acquired or disposed for which financial information is
available.
"Interest Rate Agreement" means 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, option or future contract or other
similar agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted Subsidiaries)
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, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted
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by clause (iii) of the "Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant; provided that the fair market value of the
Investment remaining in any Person that has ceased to be a Restricted Subsidiary
shall not exceed the aggregate amount of Investments previously made in such
Person valued at the time such Investments were made less the net reduction of
such Investments as a result of any payments or transfers of assets by such
Person to the Company or its Restricted Subsidiaries. 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 assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Lien" means 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 or any
agreement to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"MSLEF II" means The Morgan Stanley Leveraged Equity Fund II, L.P., a
Delaware limited partnership.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) 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 without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary 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 and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
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"Offer to Purchase" means an offer to purchase Debentures by the
Company from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made and
that all Debentures validly tendered will be accepted for payment on a pro rata
basis; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Payment Date"); (iii) that any Debenture not tendered
will continue to accrue interest pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the purchase price, any Debenture accepted
for payment pursuant to the Offer to Purchase shall cease to accrue interest on
and after the Payment Date; (v) that Holders electing to have a Debenture
purchased pursuant to the Offer to Purchase will be required to surrender the
Debenture, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Debenture completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
Business Day immediately preceding the 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
Payment Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Debentures delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Debentures purchased; and (vii) that Holders whose Debentures are being
purchased only in part will be issued new Debentures equal in principal amount
to the unpurchased portion of the Debentures surrendered; provided that each
Debenture purchased and each new Debenture issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Debentures or portions thereof
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Debentures or portions thereof
so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Debentures or portions thereof so accepted together with an Officers'
Certificate specifying the Debentures or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail to the Holders of
Debentures so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Debenture
equal in principal amount to any unpurchased portion of the Debenture
surrendered; provided that each Debenture purchased and each new Debenture
issued shall be in a principal amount of $1,000 or integral multiples thereof.
The Company will publicly announce the results of an Offer to Purchase as soon
as practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. the Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Debentures pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
satisfaction of judgments or in settlement of claims; (v) Investments, to the
extent the consideration therefor consists solely of the Common Stock of the
Company; (vi) Currency Agreements and Interest Rate Agreements entered into to
protect against currency or interest rate fluctuations (but not Currency
Agreements and Interest Rate Agreements entered into for speculation); (vii)
Guarantees of Indebtedness of Restricted Subsidiaries permitted under the
"Limitation on Indebtedness" covenant; and (viii) loans to employees of the
Company or its Restricted Subsidiaries, not to exceed $3 million at any one time
outstanding.
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"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens (including a bank's unexercised right of set-off) arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made; (iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; (iv) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory or regulatory obligations,
bankers' acceptances, surety and appeal bonds, government contracts, performance
and return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other irregularities that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (vi) Liens (including extensions
and renewals thereof) upon real or personal property acquired after the Closing
Date; provided that (a) such Lien is created solely for the purpose of securing
Indebtedness Incurred, in accordance with the "Limitation on Indebtedness"
covenant described below, to finance the cost (including the cost of improvement
or construction) of the item of property or assets subject thereto and such Lien
is created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property, (b) the principal amount of the Indebtedness secured
by such Lien does not exceed 100% of such cost and (c) any such Lien shall not
extend to or cover any property or assets other than such item of property or
assets and any improvements on such item; (vii) leases or subleases granted to
others that do not materially interfere with the ordinary course of business of
the Company and its Restricted Subsidiaries, taken as a whole; (viii) Liens
encumbering property or assets under construction arising from progress or
partial payments by a customer of the Company or its Restricted Subsidiaries
relating to such property or assets; (ix) any interest or title of a lessor in
the property subject to any Capitalized Lease or operating lease; (x) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of Capital Stock or Indebtedness
of, any Person existing at the time such Person becomes, or becomes a part of,
the Company or any Restricted Subsidiary; provided that such Liens do not extend
to or cover any property or assets of the Company or any Restricted Subsidiary
other than the property or assets acquired; (xii) Liens in favor of the Company
or any Restricted Subsidiary; (xiii) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary that does not
give rise to an Event of Default; (xiv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xv)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are within the general parameters customary in the industry and
incurred in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward contracts,
options, future contracts, futures options or similar agreements or arrangements
designed solely to protect the Company or any of its Restricted Subsidiaries
from fluctuations in interest rates, currencies or the price of commodities;
(xvii) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business in accordance
with the past practices of the Company and its Restricted Subsidiaries prior to
the Closing Date; (xviii) Liens consisting of escrows or deposits in connection
with acquisitions or potential acquisitions; and (xix) Liens on or sales of
receivables.
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"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary .
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"S&H" means S&H, Inc. and its successors.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according
to S&P, and (v) securities with maturities of one year or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or
Moody's.
"13-1/4% Preferred Stock" means the 13-1/4% Exchangeable Preferred
Stock Mandatorily Redeemable 2006 of the Company.
"13-1/4% Debentures" means the 13-1/4% Senior Discount Debentures due
2002 of the Company.
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"Trade Payables" means, 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" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that (i) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be Incurred
for all purposes of the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
COVENANTS
Limitation on Indebtedness
(a) the Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Debentures and
Indebtedness existing on the Closing Date); provided that the Company and its
Restricted Subsidiaries may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Interest Coverage Ratio would be greater than 2.0:1.
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Notwithstanding the foregoing, the Company and any Restricted
Subsidiary may Incur each and all of the following: (i) Indebtedness in an
aggregate principal amount not to exceed, at any one time outstanding, the
Credit Agreement Amount, less any amount of such Indebtedness permanently repaid
as provided under the "Limitation on Asset Sales" covenant described below; (ii)
Indebtedness owed (A) to the Company evidenced by a promissory note or (B) to
any of its Restricted Subsidiaries; provided that any event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or another
Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness issued in exchange for, or the net proceeds of which are used to
refinance or refund, then outstanding Indebtedness (other than Indebtedness
Incurred under clause (i), (ii), (iv), (vii), (ix) or (x) of this paragraph) and
any refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Debentures or Indebtedness that is pari passu with, or subordinated in right of
payment to, the Debentures shall only be permitted under this clause (iii) if
(A) in case the Debentures are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Debentures, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Debentures, (B) in case the Indebtedness
to be refinanced is subordinated in right of payment to the Debentures, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Debentures remaining
outstanding at least to the extent that the Indebtedness to be refinanced is
subordinated to the Debentures and (C) such new Indebtedness, determined as of
the date of Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and the
Average Life of such new Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced or refunded; provided, however, that
with respect to the refinancing of the Exchange Debentures, the requirements of
clauses (B) and (C) of this clause (iii) and the next subsequent proviso of this
clause (iii) shall not be applicable if, pro forma for such refinancing, the
Company would be permitted to Incur $1.00 of Indebtedness under the first
paragraph of this "Limitation on Indebtedness" covenant; and provided further
that in no event may Indebtedness of the Company that is pari passu with, or
subordinated to, the Debentures be refinanced by means of any Indebtedness of
any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements, Interest Rate Agreements and
commodity hedging agreements; provided that such agreements (a) are designed
solely to protect the Company or its Restricted Subsidiaries against
fluctuations in foreign currency exchange rates, interest rates or commodity
prices and (b) do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency exchange
rates, interest rates or by reason of fees, indemnities and compensation payable
thereunder; and (C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any obligations of
the Company or any of its Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business, assets
or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal amount
not to exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition; (v) Indebtedness of
the Company, to the extent the net proceeds thereof are promptly (A) used to
purchase Debentures tendered in an Offer to Purchase made as a result of a
Change in Control or (B) deposited to defease the Debentures as described below
under "Defeasance"; (vi) the issuance of Exchange Debentures in satisfaction of
payment-in-kind interest obligations on outstanding Exchange Debentures; (vii)
Guarantees of Indebtedness of the Company and Restricted Subsidiaries to the
extent
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such Indebtedness is otherwise permitted to be Incurred under this "Limitation
of Indebtedness" covenant, provided that in the case of a Guarantee by a
Restricted Subsidiary, such Restricted Subsidiary complies with the "Limitation
on Issuance of Guarantees by Restricted Subsidiaries" covenant described below
to the extent applicable; (viii) obligations in respect of letters of credit not
to exceed $30 million outstanding at any one time; and (ix) other Indebtedness
in an aggregate principal amount not to exceed $25 million outstanding at any
one time.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded with respect to any outstanding
Indebtedness solely as a result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, (1) Indebtedness Incurred
under the Credit Agreement on or prior to the Closing Date shall be treated as
Incurred pursuant to clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant, (2) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (3) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses. The Company shall not Incur any
Indebtedness that is expressly subordinated to any other Indebtedness of the
Company unless such Indebtedness, by its terms or the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is also expressly made
subordinate to the Debentures at least to the extent that it is subordinated to
such other Indebtedness.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, (i) declare or pay any dividend or make any
distribution on or with respect to its Capital Stock (other than (x) dividends
or distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiaries' net income from the first day of the
fiscal quarter beginning immediately following the Closing Date) held by Persons
other than the Company or any of its Restricted Subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of (A)
the Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Debentures or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) above being collectively "Restricted Payments") if, at the time of, and
after giving effect to, the proposed Restricted Payment: (A) a Default or Event
of Default shall have occurred and be
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continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant or (C) the
aggregate amount of all Restricted Payments (the amount, 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) made after the Closing
Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter in
which the Closing Date occurs and ending on the last day of the last fiscal
quarter preceding the Transaction Date for which reports have been filed with
the Commission or provided to the Trustee pursuant to the "Commission Reports
and Reports to Holders" covenant plus (2) the aggregate Net Cash Proceeds
received by the Company after the Closing Date from capital contributions or
from the issuance and sale permitted by the Indenture of its Capital Stock
(other than Disqualified Stock) to a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by the Indenture of
Indebtedness of the Company for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other than Disqualified
Stock) of the Company, or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Debentures) plus (3) an amount equal to the net reduction in Investments (other
than reductions in Permitted Investments and Investments made pursuant to the
next paragraph) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary plus (4) $25 million.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend or the consummation of any irrevocable redemption within
60 days after the date of declaration of such dividend or the giving of any
notice of irrevocable redemption, as the case may be, if, at said date of
declaration or the giving of such notice, as the case may be, such payment or
redemption, as the case may be, would comply with the foregoing paragraph; (ii)
the redemption, repurchase, defeasance or other acquisition or retirement for
value of Indebtedness that is subordinated in right of payment to the Debentures
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the "Limitation on Indebtedness" covenant; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company (or
options, warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company (or options,
warrants or other rights to acquire such Capital Stock); (iv) the making of any
principal payment or the repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness of the Company which is subordinated in
right of payment to the Debentures in exchange for, or out of the proceeds of a
substantially concurrent offering of, shares of Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock), in an amount not to exceed 100% of the net cash
proceeds of such offering that are contributed to the Company or the Successor
Corporation, plus the amount of any premiums applicable thereto; (v) payments or
distributions, to dissenting stockholders pursuant to applicable law, pursuant
to or in connection with a consolidation, merger or transfer of assets that
complies with the
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provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of the Company; (vi) the
purchase, redemption, acquisition, cancellation or other retirement for value of
shares of Capital Stock of the Company or any Restricted Subsidiary, options on
any such shares or related stock appreciation rights or similar securities held
by officers or employees or former officers or employees (or their estates or
beneficiaries under their estates) and which were issued pursuant to any Stock
Based Plan, upon death, disability, retirement 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 $3 million; (vii) Investments, not to exceed $25
million at any one time outstanding; (viii) the declaration and payment of
dividends on Common Stock in an amount not to exceed 6% per annum of the
aggregate of the net proceeds received by the Company in its initial public
offering and the next $35 million of proceeds received upon the issuance of
Common Stock of the Company or a Successor Corporation; or (ix) the issuance of
the Exchange Debentures in exchange for the 13-1/4% Preferred Stock; provided
that, except in the case of clauses (i), (ii), (iii), (v) and (ix), no Default
or Event of Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof, an Investment referred to in clause (vii) thereof
and the Restricted Payment specified in clause (ix) thereof), and the Net Cash
Proceeds from any issuance of Capital Stock referred to in clauses (iii) and
(iv), shall be included in calculating whether the conditions of clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Debentures, or Indebtedness
that is pari passu with the Debentures, then the Net Cash Proceeds of such
issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make
loans or advances to the Company or any other Restricted Subsidiary or (iv)
transfer any of its property or assets to the Company or any other Restricted
Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and any
modifications, extensions, refinancings, renewals, substitutions or replacements
of such agreements; provided that the encumbrances and restrictions in any such
modifications, extensions, refinancings, renewals, substitutions 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
modified, substituted, extended, refinanced, renewed or replaced; (ii) existing
under or by reason of applicable law;
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(iii) existing with respect to any Person or the property or assets of such
Person acquired by the Company or any Restricted Subsidiary, existing at the
time of such acquisition and not incurred in contemplation thereof, 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) existing by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or assets
of the Company or any Restricted Subsidiary in any manner material to the
Company or any Restricted Subsidiary; (v) with respect to a 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; (vi) agreements with
principal customers restricting the transfer of assets (or entities owning
assets) substantially dedicated to products sold to such customers; (vii) with
respect to any Restricted Subsidiary that is intended to be a special purpose
financing entity and into which the Company and the other Restricted
Subsidiaries do not make any material Investment of assets other than accounts
receivable and, to the extent required by the financing agreements of such
Restricted Subsidiary, cash; or (viii) contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was issued (in
each case by a Restricted Subsidiary in compliance with the "Limitation on
Indebtedness" covenant) if (A) the encumbrance or restriction applies only in
the event of a payment default or a default with respect to a financial covenant
contained in such Indebtedness or agreement, (B) the encumbrance or restriction
is not materially more disadvantageous to the Holders of the Debentures than is
customary in comparable financings (as determined by the Company), (C) the
Company determines that any such encumbrance or restriction will not materially
affect its ability to make principal or interest payments on the Debentures, (D)
such encumbrance or restriction expressly states that such Restricted Subsidiary
shall be entitled to take the actions referred to in clauses (i) through (iv) of
the first paragraph of this covenant in an amount not to exceed 50% of the
consolidated net income of such Restricted Subsidiary (after making adjustments
thereto in the nature of the adjustments referred to in the definition of
"Adjusted Consolidated Net Income") and (E) the Investments made by the Company
and its Restricted Subsidiaries in such Restricted Subsidiary are reasonably
related to the business of such Restricted Subsidiary. Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Company or any Restricted Subsidiary
from (1) creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "Limitation on Liens" covenant or (2) restricting the sale or
other disposition of property or assets of the Company or any of its Restricted
Subsidiaries that secure Indebtedness of the Company or any of its Restricted
Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Company will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Company or a Wholly
Owned Restricted Subsidiary; (ii) issuances of director's qualifying shares or
sales to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made under the "Limitation on Restricted Payments"
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covenant if made on the date of such issuance or sale; or (iv) issuances or
sales of Common Stock of Restricted Subsidiaries the Net Cash Proceeds of which
(if any) are applied as provided in clause (A) or (B) of the "Limitation on
Asset Sales" covenant.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Debentures ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Debentures by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives, and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee until such time as the Debentures have
been paid in full in cash; provided that this paragraph shall not be applicable
to any Guarantee of any Restricted Subsidiary that existed at the time such
Person became a Restricted Subsidiary and was not Incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is (A) pari passu with the Debentures, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Debentures,
then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Debentures.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, 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)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors, (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
between the Company and any of its Restricted Subsidiaries or between Restricted
Subsidiaries; (iii) the payment of reasonable and customary regular fees to
directors
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of the Company who are not employees of the Company; (iv) any payments or other
transactions pursuant to any tax-sharing agreement between the Company and any
other Person with which the Company files a consolidated tax return or with
which the Company is part of a consolidated group for tax purposes; (v) any
Restricted Payments not prohibited by the "Limitation on Restricted Payments"
covenant; (vi) the payment of fees pursuant to the Management Agreements or
pursuant to any similar management contracts entered into by the Company or any
Subsidiary of the Company; and (vii) the payment of fees to Morgan Stanley, S&H
or their respective Affiliates for financial, advisory, consulting or investment
banking services that the Board of Directors deems to be advisable or
appropriate for the Company or any Subsidiary of the Company to obtain
(including, without limitation, the payment to Morgan Stanley of any
underwriting discounts or commissions or placement agency fees in connection
with the issuance and sale of any securities by the Company or any Subsidiary of
the Company). Notwithstanding the foregoing, any transaction or series of
related transactions covered by the first paragraph of this "Limitation on
Transactions with Shareholders and Affiliates" covenant and not covered by
clauses (ii) through (vii) of this paragraph, (a) the aggregate amount of which
exceeds $5 million in value, must be approved or determined to be fair in the
manner provided for in clause (i)(A) or (B) above and (b) the aggregate amount
of which exceeds $8 million in value, must be determined to be fair in the
manner provided for in clause (i)(B) above.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Debentures and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Debentures, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date, including Liens existing on the Closing Date securing obligations
under the Credit Agreement; (ii) Liens granted after the Closing Date on any
assets or Capital Stock of the Company or its Restricted Subsidiaries created in
favor of the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted
Subsidiary to secure Indebtedness owing to the Company or such other Restricted
Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause (iii) of the
second paragraph of the "Limitation on Indebtedness" covenant; provided that
such Liens do not extend to or cover any property or assets of the Company or
any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens on any property or assets of a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
permitted under the "Limitation on Indebtedness" covenant; (vi) Liens securing
Senior Indebtedness (including Interest Rate Agreements and Currency
Agreements); or (vii) Permitted Liens.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale, unless (i) the consideration received by the
Company or such Restricted Subsidiary is at least equal to the fair market value
of the assets sold or disposed of and (ii) at least 75% of the consideration
received consists of cash or Temporary Cash Investments. In the event and to the
extent that the Net Cash Proceeds received by the Company or any of its
Restricted Subsidiaries from one or more Asset Sales
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occurring on or after the Closing Date in any period of 12 consecutive months
exceed 15% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission pursuant to the "Commission Reports and Reports to Holders"
covenant), then the Company shall or shall cause the relevant Restricted
Subsidiary to (i) within twelve months after the date Net Cash Proceeds so
received exceed 15% of Adjusted Consolidated Net Tangible Assets (A) apply an
amount equal to such excess Net Cash Proceeds to permanently repay Senior
Indebtedness of the Company or any Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its Restricted
Subsidiaries, or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in property or assets
(other than current assets) of a nature or type or that 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, the Company and its Restricted Subsidiaries existing on
the date of such investment and (ii) apply (no later than the end of the 12-
month period referred to in clause (i)) such excess Net Cash Proceeds (to the
extent not applied pursuant to clause (i)) as provided in the following
paragraph 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 clause (i) of the preceding
sentence and not applied as so required by the end of such period shall
constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $10 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Debentures equal to the Excess Proceeds on such
date, at a purchase price equal to 100% of the principal amount of the
Debentures, plus, in each case, accrued interest (if any) to the Payment Date
provided, however, that no Excess Proceeds Offer shall be required to be
commenced with respect to the Debentures until the Business Day following the
dates that payments are made pursuant to similar offers that are made to holders
of 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 Debentures may be purchased under this
"Limitation on Asset Sales" covenant unless the Company shall have purchased all
Senior Indebtedness tendered pursuant to the offers applicable thereto.
REPURCHASE OF DEBENTURES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Debentures then
outstanding, at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest (if any) to the Payment Date. Prior to the mailing of the
notice to Holders provided for above, but in any event within 30 days following
any Change of Control, the Company covenants to (i) repay in full all
Indebtedness under the Credit Agreement and 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 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 Credit Agreement and such other Senior Indebtedness to permit the
repurchase of Debentures as provided for in the succeeding paragraph. The
Company shall first comply with the covenant in the preceding sentence before it
shall be required to repurchase the Debentures pursuant to this "Change of
Control" covenant.
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There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Debentures) required by the foregoing covenant (as
well as may be contained in other securities of the Company which might be
outstanding at the time). The above covenant requiring the Company to repurchase
the Debentures will, unless consents are obtained, require the Company to repay
all indebtedness then outstanding which by its terms would prohibit such
Debenture repurchase, either prior to or concurrently with such Debenture
repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is then required to file reports with the
Commission, the Company shall file with the Commission all such reports and
other information as it would be required to file with the Commission by
Sections 13(a) or 15(d) under the Exchange Act, if it were subject thereto. The
Company shall supply the Trustee and each Holder or shall supply to the Trustee
for forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Debenture when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment is prohibited
by the subordination provisions described above under "--Ranking;" (b) default
in the payment of interest on any Debenture when the same becomes due and
payable, and such default continues for a period of 30 days, whether or not such
payment is prohibited by the subordination provisions described above under "--
Ranking;" (c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to make or
consummate an Offer to Purchase in accordance with the "Limitation on Asset
Sales" or "Repurchase of Debentures upon a Change of Control" covenant, whether
or not such payment is prohibited by the subordination provisions described
above under "--Ranking;" (d) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Debentures (other than a default specified in clause (a), (b) or (c)
above) and such default or breach continues for a period of 30 consecutive days
after written notice to the Company by the Trustee or the Holders of 25% or more
in aggregate principal amount of the Debentures; (e) there occurs with respect
to any issue or issues of Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of $10 million or more in the
aggregate for all such issues of all such Persons, 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; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any period of
60 consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be
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in effect; (g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant Subsidiary in
an involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or (h) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in
clause (g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Debentures then outstanding, by written notice
(the "Acceleration Notice") to the Company (and to the Trustee if such notice is
given by the Holders), may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, and accrued interest on the
Debentures to be immediately due and payable. Upon a declaration of
acceleration, such principal of, premium, if any, and accrued interest shall 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 and the Company and (B) acceleration
of the Indebtedness under the Credit Agreement; provided that such acceleration
shall automatically be rescinded and annulled without any further action
required on the part of the Holders in the event that any and all Events of
Default specified in the Acceleration Notice under the Indenture shall have been
cured, waived or otherwise remedied as provided in the Indenture prior to the
expiration of the period referred to in the preceding clauses (A) and (B). In
the event of a declaration of acceleration because an Event of Default set forth
in clause (e) 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 (e) shall be
remedied or cured by the Company or the relevant 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 (g) or (h) above occurs with respect to the Company, the
principal of, premium, if any, and accrued interest on the Debentures then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount of the outstanding Debentures
by written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul such declaration of acceleration and its consequences if
(i) all existing Events of Default, other than the nonpayment of the principal
of, premium, if any, and interest on the Debentures that have become due solely
by such declaration of acceleration, have been cured or waived and (ii) 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."
The Holders of at least a majority in aggregate principal amount of
the outstanding Debentures may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Debentures not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Debentures. A
Holder may not
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pursue any remedy with respect to the Indenture or the Debentures unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Debentures make a written request to the Trustee to pursue the remedy; (iii)
such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liabilities or expenses; (iv) the Trustee does not comply
with the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Debentures do not give the Trustee
a direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Debenture to receive payment of the
principal of, premium, if any, or interest on, such Debenture or to bring suit
for the enforcement of any such payment, on or after the due date expressed in
the Debentures, which right shall not be impaired or affected without the
consent of the Holder.
The Indenture requires certain officers of the Company to certify, on
or before a date not more than 120 days after the end of each fiscal year, that
a review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will 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 an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company unless: (i) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, all of the obligations of the Company on
all of the Debentures and under the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iii) immediately after giving effect to such transaction on
a pro forma basis, the Company or any Person becoming the successor obligor of
the Debentures shall have a Consolidated Net Worth (without giving effect to any
non-cash charges resulting from such consolidation, merger, sale, conveyance,
transfer, lease or other disposition) equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Interest
Coverage Ratio of the Company (or any Person becoming the successor obligor on
the Debentures) is at least 1:1; provided that if the Interest Coverage Ratio of
the Company before giving effect to such transaction is within the range set
forth in column (A) below, then the pro forma Interest Coverage Ratio of the
Company (or any Person becoming the successor obligor on the Debentures) shall
be at least equal to the lesser of (1) the ratio determined by multiplying the
percentage set forth in column (B) below by the Interest Coverage Ratio of the
Company prior to such transaction and (2) the ratio set forth in column (C)
below:
(A) (B) (C)
--- --- -----
1.11:1 to 1.99:1... 90% 1.5:1
2.00:1 to 2.99:1... 80% 2.1:1
3.00:1 to 3.99:1... 70% 2.4:1
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4.00:1 or more..... 60% 2.5:1
and provided further that, if the pro forma Interest Coverage Ratio of the
Company (or any Person becoming the successor obligor on the Debentures) is 3:1
or more, the calculation in the preceding proviso shall be inapplicable and such
transaction shall be deemed to have complied with the requirements of this
clause (iv); provided that this clause (iv) shall not apply to a consolidation
or merger with or into a Restricted Subsidiary; provided that, in connection
with any such merger or consolidation, no consideration (other than Capital
Stock (other than Disqualified Stock) in the surviving Person, the Company)
shall be issued or distributed to the stockholders of the Company; and (v) the
Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and (iv))
and Opinion of Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with; provided, however, that clauses (iii) and (iv) of this
covenant do not apply if, in the good faith determination of the Board of
Directors of the Company, whose determination shall be evidenced by a Board
Resolution, the principal purpose of such transaction is to change the state of
incorporation of the Company; and provided further that any such transaction
shall not have as one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Debentures on the 123rd day after the deposit referred to below,
and the provisions of the Indenture will no longer be in effect with respect to
the Debentures (except for, among other matters, certain obligations to replace
stolen, lost or mutilated Debentures, to maintain paying agencies and to hold
monies for payment in trust) if, among other things, (A) the Company has
deposited with the Trustee, in trust, money and/or U.S. Government Obligations
that through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, premium, if any, and accrued interest on the Debentures on the
Stated Maturity of such payments in accordance with the terms of the Indenture
and the Debentures, (B) the Company has delivered to the 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 the Company's exercise of
its option under this "Defeasance" provision and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred, which Opinion of Counsel must be based upon (and accompanied by a copy
of) a ruling of the Internal Revenue Service to the same effect unless there has
been a change in applicable federal income tax law after the Closing Date such
that a ruling is no longer required or (y) 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 giving
effect to such deposit and defeasance, 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 material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any
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of its Subsidiaries is bound, (D) the Company is not prohibited from making
payments in respect of the Debentures by the provisions described under "--
Ranking" and (E) if at such time the Debentures are listed on a national
securities exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Debentures will not be delisted as a result of
such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clauses (iii) and (iv) under "Consolidation, Merger
and Sale of Assets" and all the covenants described herein under "Covenants,"
clauses (c) and (d) under "Events of Default" with respect to such clauses (iii)
and (iv) under "Consolidation, Merger and Sale of Assets" and such covenants and
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default and the provisions described herein under "--Ranking" with respect to
assets held by the Trustee shall not apply upon, among other things, the deposit
with the Trustee, in trust, of money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the principal
of, premium, if any, and accrued interest on the Debentures on the Stated
Maturity of such payments in accordance with the terms of the Indenture and the
Debentures, the satisfaction of the provisions described in clauses (B)(ii), (C)
and (D) of the preceding paragraph and the delivery by the Company to the
Trustee of an Opinion of Counsel to the effect that, among other things, the
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain covenants and Events of
Default and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such deposit
and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Debentures as described in the immediately
preceding paragraph and the Debentures are declared due and payable because of
the occurrence of an Event of Default that remains applicable, the amount of
money and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Debentures at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Debentures at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Debentures; provided, however,
that no such modification or amendment may, without the consent of each Holder
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Debenture, (ii) reduce the principal amount of,
or premium, if any, or interest on, any Debenture, (iii) change the place or
currency of payment of principal of, or premium, if any, or interest on, any
Debenture, (iv) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a redemption, on or
after the Redemption Date) of any Debenture, (v) reduce the above-stated
percentage of outstanding Debentures the consent of whose Holders is necessary
to modify or amend the Indenture, (vi) waive a default in the payment of
principal of, premium, if any, or interest on the Debentures, (vii) reduce the
percentage or aggregate principal amount of outstanding Debentures the consent
of whose Holders is necessary for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults or (viii) modify the
subordination provisions in a manner adverse to the Holders.
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NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Debentures or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Debentures or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, stockholder, officer, director,
employee or controlling person of the Company or of any successor Person
thereof. Each Holder, by accepting the Debentures, waives and releases all such
liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
So long as DTC, or its nominee, is the registered owner or holder of a
Global Debenture, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the New Debentures represented by such Global
Debenture for all purposes under the Indenture and the New Debentures. No
beneficial owner of an interest in a Global Debenture will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Indenture and, if applicable, those of Euroclear
and Cedel Bank.
Payments of the principal of, and interest on, a Global Debenture will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying 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 a Global Debenture
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Debenture, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Debenture
as shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Debenture held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts
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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. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
The Company expects that DTC will take any action permitted to be taken by
a holder of New Debentures (including the presentation of New Debentures for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in a Global Debenture is credited and only in
respect of such portion of the aggregate principal amount of New Debentures as
to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the New Debentures, DTC will
exchange the applicable Global Debenture for Certificated Debentures, which it
will distribute to its participants and which may be legended as set forth under
the heading "Transfer Restrictions."
The Company understands that 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, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Debenture
among participants of DTC, Euroclear and Cedel Bank, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Debentures and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Debentures in exchange for
the Global Debentures. Holders of an interest in a Global Debenture may receive
Certificated Debentures in accordance with the DTC's rules and procedures in
addition to those provided for under the Indenture.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
DESCRIPTION OF THE CREDIT AGREEMENT
The following is a summary of the terms of the Credit Agreement. On
June 30, 1997, the Company and each of the New Co-Arrangers entered into a
commitment letter pursuant to which the New Co-Arrangers have committed to
provide and to use their best efforts to arrange a syndicate of lenders to
provide for the Bank Refinancing pursuant to the terms of the New Credit
Agreement. Under the terms of such commitment letter, the New Credit Agreement
will provide the Company with a total senior secured credit facility of $1.0
billion, which will include $450.0 million of term loans and a revolving loan
commitment of $550.0 million. The Company intends to use the term loans and a
portion of the revolving loans under the New Credit Agreement to refinance in
full outstanding amounts under the Credit Agreement. Revolving loans under the
New Credit Agreement will be available to the Company for its working capital
and general corporate purposes (including permitted acquisitions). In addition
to increasing the amount of borrowings available to the Company, the Bank
Refinancing will (i) lower the interest rates on the Company's senior secured
credit facility, resulting in a reduction of approximately $8.0 million in the
Company's annual interest expense with respect to indebtedness outstanding
under the Credit Agreement, (ii) extend the maturities of the Company's senior
secured credit facility by 3-4 years, and (iii) change certain covenants under
the Company's senior secured credit facility to further improve the Company's
operating and financial flexibility, including changes to provide more
flexibility under certain circumstances to sell assets, engage in mergers and
acquisitions, make capital expenditures, incur indebtedness, create liens, pay
dividends, repurchase stock, and refinance existing indebtedness. Although there
can be no assurance that the Bank Refinancing will be completed, the Company
expects the Bank Refinancing to occur early in the third quarter of 1997.
The Available Credit Facility. Pursuant to the Credit Agreement, the
Banks loaned to the Company (i) $250 million of term loans designated as "A Term
Loans" and (ii) $400 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 Loan Facility"). As part of the Revolving Loan Facility, 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 the Revolving Loan Facility
available to be borrowed by Containers or Plastics.
To secure the obligations of the Borrowers (the Company, Containers
and Plastics, collectively) under the Credit Agreement: (i) the Company pledged
to the Banks all of the capital stock of Containers and Plastics held by the
Company; (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; and (iv) the
Company and its subsidiaries granted to the Banks security interests in
substantially all of their real and personal property.
The aggregate amount of the Revolving Loan Facility 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.
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Each of the Term Loans and each of the amounts borrowed under the
Revolving Loan Facility, at the respective Borrower's election, consists of
loans designated as Eurodollar rate loans or as Base Rate (as defined in the
Credit Agreement) loans. Subject to certain conditions, each of the Term Loans
and each of the amounts borrowed under the Revolving Loan Facility can be
converted from a Base Rate loan into a Eurodollar rate loan and vice versa.
As of May 31, 1997, after giving effect to the Private Offering and
the use of the proceeds therefrom (see "Summary--Financing Strategy"), the
outstanding principal amounts of A Term Loans, B Term Loans and the Revolving
Loan Facility under the Credit Agreement were $146.4 million, $309.4 million and
$114.5 million, respectively.
Payment of Loans. Generally, the Revolving Loan Facility can be
borrowed, repaid and reborrowed from time to time until December 31, 2000, on
which date the Revolving Loan Facility matures and is 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 (after giving effect to the Private Offering and the use
of the proceeds therefrom):
<TABLE>
<CAPTION>
A TERM LOAN
INSTALLMENT REPAYMENT DATE PRINCIPAL AMOUNT
-------------------------- ----------------
<S> <C>
December 31, 1998........... $39,556,859
December 31, 1999........... 39,556,859
December 31, 2000........... 67,291,968
</TABLE>
The B Term Loans mature on March 15, 2002 and are payable in installments
as follows (after giving effect to the Private Offering and the use of the
proceeds therefrom):
<TABLE>
<CAPTION>
B TERM LOAN
INSTALLMENT REPAYMENT DATE PRINCIPAL AMOUNT
-------------------------- ----------------
<S> <C>
December 31, 1998........... $ 2,781,116
December 31, 1999........... 2,781,116
December 31, 2000........... 52,532,129
December 31, 2001........... 143,428,746
March 15, 2002.............. 107,892,291
</TABLE>
With proceeds from the Private Offering and the IPO, the Company prepaid
approximately $34.9 million and $3.5 million of A Term Loan and B Term Loan
installments, respectively, which were due December 31, 1997. In addition, with
proceeds from the Private Offering, the Company prepaid approximately $38.3
million of A Term Loan installments that would have matured at various times
from December 31, 1998 through December 31, 2000 and $80.8 million of B Term
Loan installments that would have matured at various times from December 31,
1998 through March 15, 2002.
Under the Credit Agreement, the Company is required to repay the Terms
Loans (pro rata for each tranche of Term Loans) in an amount equal to 50% of the
Company's Excess Cash Flow (as defined in the Credit Agreement) in any fiscal
year during the Credit Agreement. Additionally, the Company is required to repay
the Term Loans (pro rata for each tranche of Term Loans) in an amount equal to
80% of the net sale proceeds received from certain asset sales (increasing to
100% of such net sale proceeds under certain circumstances as described in the
Credit Agreement) and 100% of the net equity proceeds received from certain
sales of equity (subject to certain exceptions permitting the Company to use net
equity proceeds to repay certain other indebtedness or to repurchase certain
outstanding capital stock of
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the Company), decreasing to 50% of net equity proceeds received after the
occurrence of certain events as described in the Credit Agreement, all as
provided in the Credit Agreement.
Interest and Fees. Interest on the Term Loans and the Revolving Loan
Facility 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 amounts borrowed under the Revolving Loan
Facility 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 Credit Agreement, the Company 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 Credit Agreement) per annum on the daily average unused portion of the
Banks' revolving commitment in respect of the Revolving Loan Facility 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 Credit Agreement contains numerous financial and
operating covenants, under which the Company must operate. Failure to comply
with any of such covenants permits the Banks to accelerate, subject to the terms
of the Credit Agreement, the maturity of all amounts outstanding under the
Credit Agreement.
The Credit Agreement restricts or limits the Company's ability: (i) to
create certain liens; (ii) to consolidate, merge or sell its assets and to
purchase assets, except that the Company may make certain purchases of assets
and/or stock, all as provided in the Credit Agreement; (iii) to pay dividends
on, or repurchase shares of, its capital stock, except that, among other things:
(a) Containers and Plastics may pay dividends to the Company as long as they
remain wholly owned subsidiaries of the Company, Canadian Holdco may pay
dividends to Plastics, and Silgan Plastics Canada Inc. ("Plastics Canada") may
pay dividends to Canadian Holdco; and (b) the Company may pay dividends to the
holders of Common Stock in amounts and at the times as provided in the Credit
Agreement; (iv) to lease real and personal property; (v) to create additional
indebtedness, except for, among other things: (a) certain indebtedness existing
on the date of the Credit Agreement; (b) indebtedness of Containers to Plastics
or Plastics to Containers; and (c) the Debentures and the Exchange Debentures;
(vi) to make certain advances, investments and loans, except for, among other
things: (a) loans from the Company 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 the Company
not exceeding $25 million in aggregate principal amount outstanding at any time;
and (e) certain limited acquisitions and investments as provided in the Credit
Agreement; (vii) to enter into transactions with affiliates; (viii) to make
certain
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capital expenditures, except for, among other things, capital expenditures which
do not exceed in the aggregate for the Company $70 million for each calendar
year during the term of the 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, with any such amount being deemed utilized first in such
succeeding calendar year; (ix) except as otherwise permitted under the Credit
Agreement, to make any voluntary payments, prepayments, acquire for value,
redeem or exchange, among other things, any of the Debentures, any Refinancing
Indebtedness, any of the Exchange Debentures or to make certain amendments to
the Indenture, the Exchange Debenture Indenture, 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 the Company, C-W
Can and SCCW Can with respect to Containers, and Canadian Holdco and Plastics
Canada 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 Senior
Indebtedness" for purposes of the Debentures or any Refinancing Indebtedness
issued by the Company.
The Credit Agreement requires that the Company own not less than 90% of the
outstanding common stock of Containers and Plastics and 100% of all other
outstanding capital stock of Containers and Plastics.
The Credit Agreement requires that the ratio of Consolidated Current Assets
(as defined below) to Consolidated Current Liabilities (as defined below) 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:
<TABLE>
<CAPTION>
Period Ratio
------ ------
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
Fiscal quarter ending December 31, 2001 and each fiscal quarter
thereafter.................................................... 2.50:1
</TABLE>
In addition, the 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:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
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
</TABLE>
"Consolidated Current Assets" means the current assets of the Company and
its subsidiaries determined on a consolidated basis, provided that the unused
amounts of commitments for the Revolving Loan Facility are included as current
assets of the Company in making such determination.
"Consolidated Current Liabilities" means the current liabilities of the
Company and its subsidiaries determined on a consolidated basis, provided that
the current portion of loans under the Credit Agreement, the current portion of
any loans made by the Company to Containers or Plastics, and accrued interest on
the current portion of loans under the Credit Agreement, the 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 the Company 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.
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"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 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 the Company 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 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
the Company'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 the Company 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 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
Credit Agreement and (ii) the amount of all unpaid drawings for letters of
credit issued under the Credit Agreement.
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"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 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 Credit Agreement the proceeds of which are used to refinance, redeem or
repay outstanding Debentures, Exchange Debentures and/or any Refinancing
Indebtedness issued by the Company.
"Revolving Outstandings" means, at any time, the sum of the aggregate
principal amount of the Revolving Loan Facility 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
the Company (in each case taken as one accounting period).
"Total Consolidated Term Debt" means, at any time, the sum of (1) the
aggregate principal amount of Term Loans then outstanding, (2) the aggregate
principal amount of Debentures then outstanding, (3) the aggregate principal
amount (or accreted amount if issued at a discount) of all Refinancing
Indebtedness then outstanding, (4) the aggregate principal amount of all
Indebtedness then outstanding that was assumed in connection with an acquisition
permitted under the Credit Agreement, and (5) the aggregate principal amount of
Exchange Debentures then outstanding.
"Total Indebtedness" means the aggregate Indebtedness of the Company 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 Credit Agreement or permitted to be
incurred pursuant to the Credit Agreement are excluded.
Events of Default. Events of default under the Credit Agreement include,
among others: (i) the failure to pay any principal on the Term Loans or the
Revolving Loan Facility, 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 Loan Facility or
any unpaid drawings under any letter of credit or any fees or other amounts
owing under the 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 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 or of the security interests granted to the Banks
pursuant to the Credit Agreement; (viii) a Change of Control (as defined in the
Credit Agreement) shall occur; and (ix) the requirement that the Company
repurchase any Debenture as a result of a Change of Control (as defined in
"Description of Debentures--Certain Definitions").
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Upon the occurrence of any event of default under the Credit Agreement, the
Banks are permitted, among other things, to accelerate the maturity of the Term
Loans and the Revolving Loan Facility and all other outstanding indebtedness
under the Credit Agreement and terminate their commitment to make any further
loans under the Revolving Loan Facility or to issue any letters of credit.
EXCHANGE DEBENTURES
On June 13, 1997, the Company issued $56,206,000 aggregate principal amount
of Exchange Debentures in exchange for the Exchangeable Preferred Stock. As a
result of the issuance of the Exchange Debentures, the Company will realize tax
benefits resulting from the deductibility of interest paid thereon.
The Exchange Debentures mature on July 15, 2006. Each Exchange Debenture
bears interest at a rate per annum of 13-1/4%. Interest will be payable on
January 15 and July 15 of each year, beginning on July 15, 1997. On or prior to
July 15, 2000, the Company is permitted to pay interest on the Exchange
Debentures by issuing additional Exchange Debentures.
On or after July 15, 2000, the Exchange Debentures are redeemable, at the
option of the Company, in whole or in part, at the rate of 109.938% of the
principal amount thereof plus accrued interest, declining ratably to 100% by
July 15, 2003. In addition, at any time, or from time to time, on or prior to
July 15, 2000, the Company is able, at its option, to redeem all (but not less
than all) of the outstanding Exchange Debentures at a redemption price equal to
110% of the principal amount thereof plus accrued interest, with the proceeds of
one or more sales of Common Stock. Upon a Change of Control (as defined in the
Exchange Debenture Indenture), the Company is required to make an offer to
purchase all of 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.
The Exchange Debenture Indenture contains certain covenants that, among
other things, direct the application of the proceeds from certain asset sales,
limit the ability of the Company and its subsidiaries to incur indebtedness,
make certain payments with respect to their capital stock, make prepayments of
certain indebtedness, make loans or investments to entities other than
Restricted Subsidiaries (as such term is defined in the Exchange Debenture
Indenture), enter into transactions with affiliates, engage in mergers or
consolidations, and, with respect to the Company's subsidiaries, issue stock.
Generally, these covenants are no more restrictive than the covenants contained
in the Indenture.
The Exchange Debentures represent subordinated indebtedness of the Company.
The Debentures represent indebtedness senior in right of payment of principal
and interest to the Exchange Debentures.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations of the Exchange Offer relevant to holders of Old Debentures but
does not purport to be a complete analysis of all the potential tax effects of
the Exchange Offer. This summary applies (except where otherwise specifically
noted) to a holder of Old Debentures that is, for United States federal income
tax purposes, 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, an estate the income of
which is includable in gross income for U.S. federal income tax purposes
regardless of its source, or a trust the administration over which a United
States court can exercise primary supervision and for which
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one or more United States fiduciaries have the authority to control all
substantial decisions (a "U.S. Holder"). Moreover, the discussion below deals
only with Debentures held as capital assets and does not deal with persons who
may be subject to special treatment under the U.S. tax laws (including, without
limitation, insurance companies, tax-exempt organizations, individual retirement
accounts and other tax-deferred accounts, financial institutions, persons who
are not citizens or residents of the United States, persons subject to the
alternative minimum tax, broker-dealers or persons holding Debentures as part of
a hedging or conversion transaction or a straddle). This summary is based on the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, which change may be retroactive. This summary does not
discuss tax consequences under state, local, or foreign tax laws. Holders of
Debentures should consult with their own tax advisors concerning the application
of United States federal income tax laws, as well as the laws of any state,
local or foreign taxing jurisdictions, to their particular situations.
THE EXCHANGE
The exchange of an Old Debenture for a New Debenture pursuant to the
Exchange Offer should not be treated as an exchange or otherwise as a taxable
event for U.S. federal income tax purposes. Accordingly, the New Debentures
should have the same issue price as the Old Debentures and each holder should
have the same adjusted basis and holding period in the New Debentures as it had
in the Old Debentures immediately before the Exchange Offer. It is assumed, for
purposes of the following discussion, that the consummation of the Exchange
Offer will not be treated as a taxable event and that the New Debentures and the
Old Debentures will be treated as the same instruments for U.S. federal income
tax purposes.
INTEREST ON THE DEBENTURES
A holder of a Debenture is required to include in ordinary income the
stated interest on the Debenture generally when received or accrued, in
accordance with the holder's method of tax accounting.
MARKET DISCOUNT
The Debentures may be affected by the market discount provisions of the
Code. Generally, market discount will exist to the extent a holder's purchase
price for a Debenture (presumably exclusive of the portion attributable to
accrued but unpaid interest) is less than the principal amount of the Debenture.
Under a statutory de minimis rule, however, market discount on a debt instrument
will be considered to be zero for purposes of the rules discussed below if such
market discount is less than 0.25% of the principal amount of the debt
instrument at maturity multiplied by the number of complete years (that is,
rounding down for partial years) to maturity (after the holder acquires the
instrument).
Generally, holders of a Debenture who acquire the Debenture with market
discount will be required to treat any gain realized upon the sale or other
disposition of such Debenture as ordinary income to the extent of the market
discount that accrued (but was not previously included in income) during the
period such holder held the Debenture. Market discount on a debt instrument
generally accrues on a straight-line basis during the period from the date of
acquisition to the maturity date of the Debentures in equal daily portions or,
at the election of the holder, under a constant interest method. If a holder
disposes of a Debenture in any transaction other than a sale, exchange or
involuntary conversion (for example, as a gift), that holder generally is
treated as having an amount realized equal to the fair market value of the
Debenture and will be required to recognize as ordinary income any gain on
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disposition to the extent of the accrued and previously unrecognized market
discount. As a result of this rule, a holder may be required to recognize
ordinary income on the disposition of a Debenture, even though the disposition
would not otherwise be taxable.
Generally, if a holder incurs or continues indebtedness for the purpose of
purchasing or carrying a Debenture acquired at a market discount, the "net
direct interest expense" arising from the indebtedness is allowed as a current
deduction only to the extent it exceeds the portion of market discount allocable
to the days during the year which the Debenture was held by such holder. Net
direct interest expense is the excess, if any, of the amount of interest paid or
accrued during the taxable year on such indebtedness over the aggregate amount
of interest includable in gross income for the taxable year with respect to the
Debenture. Net direct interest expense that exceeds the amount currently
deductible is allowable as a deduction in any subsequent year, to the extent it
does not exceed net interest income (that is, interest income on the Debenture
less interest on indebtedness incurred or continued to purchase or carry the
Debenture) for such year, if a proper election is made.
Disallowed interest deductions, if any, remaining at the time of any
taxable disposition of a Debenture would be treated as interest paid or accrued
in the year of disposition.
A holder may elect to include market discount in income as such discount
accrues with a corresponding increase in the holder's tax basis in the
Debenture. If a holder so elects, the foregoing rules regarding the treatment as
ordinary income of gain upon a disposition of a Debenture, and regarding the
deferral of interest deductions on indebtedness incurred or continued to
purchase or carry a Debenture, would not apply. Once made, such an election
applies to all debt obligations of the holder that are purchased at a market
discount on or after the first day of the first taxable year for which the
election is made, and all subsequent taxable years of the holder, unless the
Internal Revenue Service (the "IRS") consents to a revocation of the election.
Holders are urged to consult their own tax advisors with regard to the
advisability of making such an election or any of the other elections with
respect to market discount described above.
The market discount provisions also contain a rule providing that in the
case of a partial principal payment on a market discount bond, the holder must
include in income at the time of the partial principal payment the portion of
the unrecognized market discount that accrued prior to the receipt of such
payment (up to the amount of such payment). It is unclear whether this rule
would apply in the case of a partial redemption of a Debenture acquired with
market discount.
BOND PREMIUM
If a holder of a Debenture acquires such Debenture at a cost in excess of
its principal amount, the Debenture will be purchased at a premium. Under the
bond premium rules contained in the Code, generally, such holder should be
entitled to elect to offset its interest income by an allocable portion of the
bond premium pursuant to Section 171 of the Code, with a corresponding reduction
to the holder's tax basis in the Debenture, under a constant yield method over
the remaining term of the Debenture. Such a holder should consult a tax advisor
to determine the advisability of such an election. However, if the Debenture is
purchased at a time when the Debenture may be optionally redeemed for an amount
that is in excess of its principal amount, special rules would apply that could
result in a deferral of the amortization of bond premium until later in the term
of the Debenture. An election to amortize bond premium applies to all taxable
debt obligations then owned and thereafter acquired by the holder and may be
revoked only with the permission of the IRS.
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SALE, EXCHANGE OR RETIREMENT
Upon a redemption, sale or exchange of a Debenture, a holder will recognize
gain or loss measured by the difference between the amount received in exchange
therefor (other than the portion received for accrued but unpaid interest, which
portion is treated as interest received) and such holder's adjusted tax basis in
the Debenture. A holder's adjusted tax basis in a Debenture will be equal to
the amount paid to purchase the Debenture, (i) increased by any interest that
has accrued since the last interest payment date and any market discount that
has previously been included by such holder in taxable income with respect to
such Debenture, and (ii) decreased by any bond premium previously amortized and
any principal payments previously received by such holder with respect to such
Debenture. Except to the extent the market discount rules described above
apply, any gain or loss recognized on the redemption, sale or exchange of a
Debenture will be long-term capital gain or loss if such Debenture is held as a
capital asset for the applicable long-term holding period (currently, more than
one year) at the time of such redemption, sale or exchange. Subject to certain
limited exceptions, capital losses cannot be used to offset ordinary income. It
is anticipated that legislative proposals that are currently being considered
may, if enacted, have the effect of reducing the maximum federal income tax rate
on net capital gains. No assurances can be given whether such rate reduction
may ultimately become law or, if so, what the timing and extent of such
reduction may be.
BACKUP WITHHOLDING
Under Section 3406 of the Code and applicable Treasury regulations, a
holder of a Debenture may be subject to backup withholding at a rate of 31% of
certain amounts paid or deemed paid to the holder unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
provides proof of such exemption or (b) provides a correct taxpayer
identification number, certifies that he has not lost exemption from backup
withholding, and has met the requirements for the reporting of previous income
set forth in the backup withholding rules. Holders of Debentures should consult
their tax advisors as to their qualification for exemption from withholding and
the procedure for obtaining such an exemption. Amounts paid as backup
withholding do not constitute an additional tax and will be credited against the
holder's federal income tax liability.
U.S. FEDERAL INCOME TAXATION OF FOREIGN HOLDERS
As used herein, the term "Foreign Holder" means a holder of a Debenture
that is, for U.S. federal income tax purposes, (a) a nonresident alien
individual, (b) a foreign corporation, (c) a nonresident alien fiduciary of a
foreign estate or trust or (d) a foreign partnership.
Payment of Interest on Debentures
In general, payments of interest received by a Foreign Holder will not be
subject to U.S. federal withholding tax, provided that (a)(i) the Foreign Holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (ii) the Foreign
Holder is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership, (iii) the Foreign Holder is
not a bank receiving interest described in Section 881(c)(3)(A) of the Code, and
(iv) either (A) the beneficial owner of the Debenture, under penalties of
perjury, provides the Company or its agent with such beneficial owner's name and
address and certifies on IRS Form W-8 (or a suitable substitute form) that it is
not a U.S. Holder or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") holds the Debenture and
provides a
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statement to the Company or its agent under penalties of perjury in which it
certifies that such an IRS Form W-8 (or a suitable substitute) has been received
by it from the beneficial owner of the Debentures or qualifying intermediary and
furnishes the Company or its agent a copy thereof or (b) the Foreign Holder is
entitled to the benefits of an income tax treaty under which interest on the
Debentures is exempt from U.S. withholding tax and the Foreign Holder or such
Foreign Holder's agent provides a properly executed IRS Form 1001 claiming the
exemption. Payments of interest not exempt from U.S. federal withholding tax as
described above will be subject to such withholding tax at the rate of 30%
(subject to reduction under an applicable income tax treaty).
Sale, Exchange, or Retirement of the Debentures
A Foreign Holder generally will not be subject to U.S. federal income tax
(and generally no tax will be withheld) with respect to gain realized on the
sale, exchange, redemption, retirement at maturity or other disposition of a
Debenture unless the Foreign Holder is an individual who is present in the
United States for a period or periods aggregating 183 or more days in the
taxable year of the disposition and, generally, either has a "tax home" or an
"office or other fixed place of business" in the United States.
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements do not apply to
payments of interest made by the Company or a paying agent to Foreign Holders if
the certification described above under "--Payment of Interest on Debentures" is
received, provided that the payor does not have actual knowledge that the holder
is a U.S. Holder. If any payments of principal and interest are made to the
beneficial owner of a Debenture by or through the foreign office of a foreign
custodian, foreign nominee or other foreign agent of such beneficial owner, or
if the foreign office of a foreign "broker" (as defined in applicable Treasury
regulations) pays the proceeds of the sale of a Debenture or a coupon to the
seller thereof, backup withholding and information reporting will not apply.
Information reporting requirements (but not backup withholding) will apply,
however, to a payment by a foreign office of a broker that is a U.S. person, or
is a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, or that is
a "controlled foreign corporation" (generally, a foreign corporation controlled
by certain U.S. shareholders) with respect to the United States unless the
broker has documentary evidence in its records that the holder is a Foreign
Holder and certain other conditions are met or the holder otherwise establishes
an exemption. Payment by a U.S. office of a broker is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies under penalties of perjury that it is a Foreign Holder or otherwise
establishes an exemption.
The procedures described above for withholding tax on interest payments,
and some of the associated backup withholding and information reporting rules,
are currently the subject of new proposed regulations, which are proposed to be
effective for payments made after December 31, 1997, subject to certain
transition rules. The proposed regulations, if adopted in their current form,
would not substantially change the treatment of Foreign Holders described above,
except that an IRS Form W-8 generally would be required for certification
purposes.
-129-
<PAGE>
Federal Estate Taxes
Subject to applicable estate tax treaty provisions, Debentures held at the
time of death (or Debentures transferred before death but subject to certain
retained rights or powers) by an individual who at the time of death is a
Foreign Holder will not be included in such Foreign Holder's gross estate for
U.S. federal estate tax purposes provided that the individual does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote or hold the Debentures in
connection with a U.S. trade or business.
EXCEPT AS DISCUSSED ABOVE, NO INFORMATION IS PROVIDED HEREIN AS TO THE TAX
TREATMENT OF THE EXCHANGE OFFER TO HOLDERS OF THE OLD DEBENTURES OR NEW
DEBENTURES UNDER APPLICABLE UNITED STATES OR OTHER TAX LAWS. THE DISCUSSION IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. FOR EXAMPLE, THE DISCUSSION MAY NOT BE APPLICABLE
WITH RESPECT TO HOLDERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES.
THEREFORE, HOLDERS OF DEBENTURES ARE URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE
OFFER, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN AND OTHER
TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS.
PLAN OF DISTRIBUTION
The New Debentures will be offered by the Company to the holders of the Old
Debentures in exchange for the Old Debentures 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 Debentures. Each
broker-dealer that receives New Debentures 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 Debentures. 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 Debentures received in exchange for Old Debentures where
such Old Debentures 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 _____________ ____, 1997 all dealers effecting
transactions in the New Debentures may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Debentures
by broker-dealers. New Debentures 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 Debentures 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 Debentures. Any broker or
dealer that participates in a distribution of such New Debentures may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of New Debentures and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
-130-
<PAGE>
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 Debentures and will indemnify the holders of
the New Debentures (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the Debentures offered hereby will be passed upon for the
Company by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main
Street, Stamford, Connecticut 06904-6760. Winthrop, Stimson, Putnam & Roberts
from time to time represents the Placement Agent in connection with certain
legal matters unrelated to its representation of the Company.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996
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.
-131-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1996 and 1995................. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994...................................................... F-4
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Condensed Consolidated Balance Sheets (Unaudited) at March 31, 1997 and
1996..................................................................... F-27
Condensed Consolidated Statements of Operations (Unaudited) for the three
months ended March 31, 1997 and 1996..................................... F-28
Consolidated Statements of Deficiency in Stockholders' Equity (Unaudited). F-29
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three
months ended March 31, 1997 and 1996..................................... F-30
Notes to Condensed Consolidated Financial Statements (Unaudited).......... F-31
Unaudited Pro Forma Condensed Statement of Operations for the three months
ended March 31, 1997 and for the year ended December 31, 1996............ F-34
Notes to Unaudited Pro Forma Condensed Statement of Operations............ F-37
</TABLE>
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 31, 1997, except for Note 22,
as to which date is February 13, 1997
F-2
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 1,017 $ 2,102
Accounts receivable, less allowances for doubtful ac-
counts of $4,045 and $4,843 for 1996 and 1995, respec-
tively.................................................. 101,436 109,929
Inventories.............................................. 195,981 210,471
Prepaid expenses and other current assets................ 7,403 5,801
-------- --------
Total current assets................................... 305,837 328,303
Property, plant and equipment, net......................... 499,781 487,301
Goodwill, net.............................................. 77,176 53,562
Other assets............................................... 30,752 30,880
-------- --------
$913,546 $900,046
======== ========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................... $122,623 $138,195
Accrued payroll and related costs........................ 41,799 32,805
Accrued interest payable................................. 9,522 4,358
Accrued expenses and other current liabilities........... 35,456 43,457
Bank working capital loans............................... 27,800 7,100
Current portion of long-term debt........................ 38,427 28,140
-------- --------
Total current liabilities.............................. 275,627 254,055
Long-term debt............................................. 693,783 750,873
Deferred income taxes...................................... 6,836 6,836
Other long-term liabilities................................ 74,508 68,086
Cumulative exchangeable redeemable preferred stock
(10,000,000 shares authorized,
51,556 shares issued and outstanding)..................... 52,998 --
Deficiency in stockholders' equity:
Common Stock ($0.01 par value per share:
100,000,000 shares authorized, 15,162,833 and 19,446,120
shares issued and outstanding in 1996 and 1995,
respectively)........................................... 152 195
Additional paid-in capital............................... 18,466 33,423
Accumulated deficit...................................... (208,824) (213,422)
-------- --------
Total deficiency in stockholders' equity................... (190,206) (179,804)
-------- --------
$913,546 $900,046
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................... $ 1,405,742 $ 1,101,905 $ 861,374
Cost of goods sold...................... 1,223,684 970,491 748,290
----------- ----------- -----------
Gross profit.......................... 182,058 131,414 113,084
Selling, general and administrative
expenses............................... 58,768 46,848 37,997
Reduction in carrying value of assets... -- 14,745 16,729
----------- ----------- -----------
Income from operations................ 123,290 69,821 58,358
Interest expense and other related
financing costs........................ 89,353 80,710 65,789
----------- ----------- -----------
Income (loss) before income taxes..... 33,937 (10,889) (7,431)
Income tax provision.................... 3,300 5,100 5,600
----------- ----------- -----------
Income (loss) before extraordinary
charge............................... 30,637 (15,989) (13,031)
Extraordinary charges relating to early
extinguishment of debt, net of taxes... (2,222) (5,817) --
----------- ----------- -----------
Net income (loss) before preferred
stock dividend requirement........... 28,415 $ (21,806) $ (13,031)
Preferred stock dividend requirement.... (3,006) -- --
----------- ----------- -----------
Net income (loss) available to common
stockholders......................... $ 25,409 $ (21,806) $ (13,031)
=========== =========== ===========
Income (loss) per common share:
Income (loss) before extraordinary
charges.............................. $ 1.60 $ (0.77) $ (0.63)
Extraordinary charges................. (0.12) (0.29) --
Preferred stock dividend requirement.. (0.16) -- --
----------- ----------- -----------
Net income (loss)..................... $ 1.32 $ (1.06) $ (0.63)
=========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding... 19,178,730 20,656,877 20,656,877
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------- ADDITIONAL DEFICIENCY IN
PAR PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT EQUITY
---------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 1,135,000 $ 12 $ 33,606 $(178,585) $(144,967)
Adjustment for 17.133145
for 1 stock split...... 18,311,120 183 (183) -- --
---------- ---- -------- --------- ---------
As restated at December
31, 1993 for stock
split.................. 19,446,120 195 33,423 (178,585) (144,967)
Net loss................ -- -- -- (13,031) (13,031)
---------- ---- -------- --------- ---------
Balance at December 31,
1994................... 19,446,120 195 33,423 (191,616) (157,998)
Net loss................ -- -- -- (21,806) (21,806)
---------- ---- -------- --------- ---------
Balance at December 31,
1995................... 19,446,120 195 33,423 (213,422) (179,804)
Purchase and retirement
of 250,000 shares of
Class B Common Stock... (4,283,287) (43) (14,957) (20,811) (35,811)
Net income.............. -- -- -- 25,409 25,409
---------- ---- -------- --------- ---------
Balance at December 31,
1996................... 15,162,833 $152 $ 18,466 $(208,824) $(190,206)
========== ==== ======== ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) before preferred stock
dividend requirement....................... $ 28,415 $ (21,806) $ (13,031)
Adjustments to reconcile net income (loss)
to net cash provided by operating activi-
ties:
Depreciation.............................. 54,830 42,217 35,392
Amortization.............................. 8,993 8,083 7,075
Accretion of discount on discount deben-
tures.................................... 12,077 28,672 27,477
Reduction in carrying value of assets..... -- 14,745 16,729
Extraordinary charge relating to early ex-
tinguishment of debt..................... 2,222 6,301 --
Changes in assets and liabilities, net of
effect of acquisitions:
Decrease (increase) in accounts receiv-
able................................... 15,102 (1,011) (21,267)
Decrease (increase) in inventories...... 20,348 10,852 (16,741)
(Decrease) increase in trade accounts
payable................................ (17,145) 43,108 4,478
Net working capital provided by AN Can
from 8/1/95 to 12/31/95................ -- 85,213 --
Other, net increase (decrease).......... 357 (6,745) 7,221
--------- --------- ---------
Total adjustments..................... 96,784 231,435 60,364
--------- --------- ---------
Net cash provided by operating activi-
ties..................................... 125,199 209,629 47,333
--------- --------- ---------
Cash flows from investing activities:
Acquisition of businesses................... (43,043) (348,762) 519
Capital expenditures........................ (56,851) (51,897) (29,184)
Proceeds from sale of assets................ 1,557 3,541 765
--------- --------- ---------
Net cash used in investing activities..... (98,337) (397,118) (27,900)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under working capital loans...... 952,050 669,260 393,250
Repayments under working capital loans...... (931,350) (674,760) (382,850)
Proceeds from issuance of long-term debt.... 125,000 450,000 --
Repayments of long-term debt................ (183,880) (234,506) (20,464)
Proceeds from issuance of cumulative
redeemable exchangeable preferred stock.... 50,000 -- --
Repurchase of common stock.................. (35,811) -- --
Debt financing costs........................ (3,956) (19,290) --
Payments to former shareholders of Silgan... -- (3,795) (6,911)
--------- --------- ---------
Net cash (used by) provided for financing
activities............................... (27,947) 186,909 (16,975)
--------- --------- ---------
Net (decrease) increase in cash and cash
equivalents................................... (1,085) (580) 2,458
Cash and cash equivalents at beginning of 2,102 2,682 224
year.......................................... --------- --------- ---------
Cash and cash equivalents at end of year...... $ 1,017 $ 2,102 $ 2,682
========= ========= =========
Supplementary data:
Interest paid............................... $ 68,390 $45,293 $ 30,718
Income tax (refunds) payments, net.......... (4,836) 8,967 2,588
Preferred stock dividend in lieu of cash
dividend................................... 2,998 -- --
</TABLE>
See accompanying notes.
F-6
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. BASIS OF PRESENTATION
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiaries, 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").
The Company, together with Silgan and 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. The Company
also manufactures custom designed plastic containers used for health and
personal care products, specialty packaging items including metal caps and
closures, and plastic bowls and paper containers used by processors in the
food industry. 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.
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 $49.6 million at December 31,
1996 and $30.0 million at December 31, 1995 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
F-7
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
goodwill impairment to assess whether goodwill is fully recoverable from
projected, undiscounted net cash flows of the related business unit.
Impairments would be recognized in operating results if a permanent reduction
in values were to occur.
Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". 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 1996.
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
The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, "Accounting for 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.
Stock Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October 1995, 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 accounting
method as prescribed under APB No. 25, "Accounting for Stock Issued to
Employees". The Company has chosen to continue to recognize compensation
expense in accordance with APB No. 25.
Derivative Financial Instruments
The Company's use of derivative financial instruments is limited to interest
rate swap agreements which assist in managing exposure to adverse movement in
interest rates on a portion of its indebtedness. The Company does not utilize
financial instruments for speculative purposes. The difference between amounts
to be paid or received on interest rate swap agreements are recorded as
adjustments to interest expense. The methods and assumptions used to estimate
fair values of these and other debt instruments reflected in the financial
statements are discussed in Note 10.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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.
F-8
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Per Share Information
Per share amounts have been computed based upon the weighted average number
of common and common equivalent shares outstanding for all periods presented.
Weighted average shares include options to purchase which were issued within
the twelve month period prior to the initial public offering of the Company at
less than the initial public offering price. All share and per share data have
been adjusted to reflect a 17.133145 for 1 stock split which occurred at the
time of the initial public offering. For a discussion of the initial public
offering, see Note 22.
3. ACQUISITIONS
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging Company, Inc. ("Finger Lakes"), a metal food container
manufacturer, which had net sales of $48.8 million for its fiscal year ended
June 29, 1996. The purchase price was $29.9 million (including net working
capital of $8.0 million) and was primarily allocated to property, plant, and
equipment, and net working capital acquired based on fair market value as of
the date of acquisition. The excess of the purchase price over the fair value
of the net assets acquired was $5.2 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 20 years.
On August 1, 1995, Containers acquired from American National Can Company
("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 final purchase
price for the assets acquired and the assumption of certain specified
liabilities was $362.0 million (including $13.1 million paid in 1996). The
aggregate purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values. The purchase price allocation
was adjusted in 1996 for differences between the actual and preliminary
valuations for the asset appraisals and for projected employee benefit costs
as well as for a revision in estimated costs of plant rationalizations,
administrative workforce reductions and various other acquisition liabilities.
The final purchase price allocation resulted in an adjustment to increase
goodwill by $20.7 million. The aggregate excess of the purchase price over the
fair value of the assets acquired and liabilities assumed for AN Can was $45.6
million and has been recorded as goodwill, which is being amortized on a
straight-line basis over 40 years.
The Finger Lakes and AN Can acquisitions were accounted for using the
purchase method of accounting and accordingly, the results of operations for
Finger Lakes and AN Can have been included in the consolidated financial
statements of the Company from the dates of acquisition.
Set forth below are the Company's summary unaudited pro forma results of
operations for the year ended December 31, 1995, giving effect to the
acquisition of AN Can. The summary unaudited pro forma results of operations
include the historical results of the Company and AN Can and reflect the
effect of purchase accounting adjustments based on appraisals and valuations,
the financing of the acquisition of AN Can by the Company, the refinancing of
the Company's related debt obligations, and certain other adjustments as if
these events occurred as of the beginning of 1995. Pro forma results of
operations for Finger Lakes have not been presented for 1996 or included in
the 1995 summary unaudited pro forma results of operations since the impact of
such acquisition was not significant.
F-9
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
3. ACQUISITIONS--(CONTINUED)
The pro forma results of operations do not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration of
AN Can with the Company's existing can manufacturing operations and benefits
the Company may realize as a result of its planned rationalization of plant
operations. Pro forma adjustments have not been made to interest expense for
the year ended December 31, 1995 for the portion of the 13 1/4% Senior
Discount Debentures due 2002 ("Discount Debentures") redeemed in 1996 as
described in Note 8 or for the subsequent events discussed in Note 22.
The pro forma information 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 to project the Company's results of operations for
any future period:
<TABLE>
<CAPTION>
1995
----------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C>
Net sales.......................................... $1,404,382
Income from operations............................. 92,749(1)
Income before income taxes......................... 4,064
Net loss........................................... (2,736)
Net loss per common share.......................... (0.13)
</TABLE>
- --------
(1) Included in pro forma income from operations for the year ended December
31, 1995 is a charge of $14.7 million to adjust the carrying value of
certain underutilized machinery and equipment at the Company's facilities
(existing prior to the AN Can acquisition) to net realizable value.
4. INVENTORIES
The components of inventories at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Raw materials........................................ $ 40,280 $ 46,027
Work-in-process...................................... 27,861 24,869
Finished goods....................................... 116,498 135,590
Spare parts and other................................ 7,771 6,344
-------- --------
192,410 212,830
Adjustment to value inventory at cost on the LIFO
method.............................................. 3,571 (2,359)
-------- --------
$195,981 $210,471
======== ========
</TABLE>
The amount of inventory recorded on the first-in first-out method at
December 31, 1996 and 1995 was $19.8 million and $17.6 million, respectively.
F-10
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Land............................................... $ 6,425 $ 6,355
Buildings and improvements......................... 79,923 68,860
Machinery and equipment............................ 621,232 584,526
Construction in progress........................... 49,771 33,764
--------- ---------
757,351 693,505
Accumulated depreciation and amortization.......... (257,570) (206,204)
--------- ---------
Property, plant and equipment, net................. $ 499,781 $ 487,301
========= =========
</TABLE>
For the years ended December 31, 1996, 1995, and 1994, depreciation expense
was $54.8 million, $42.2 million and $35.4 million, respectively. The total
amount of repairs and maintenance expense was $32.0 million in 1996, $26.9
million in 1995 and $19.9 million in 1994.
In 1995 and 1994, based on a review of depreciable assets, the Company
determined that certain adjustments were necessary to properly reflect net
fixed asset 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.
6. GOODWILL
Goodwill amortization charged to operations was $2.3 million in 1996; $1.3
million in 1995; and $1.2 million in 1994. Accumulated amortization of
goodwill at December 31, 1996, 1995, and 1994 was $7.7 million; $5.0 million;
and $3.7 million, respectively.
7. OTHER ASSETS
Other assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt issuance costs............................ $ 30,515 $ 30,148
Other.......................................... 8,576 8,027
----------- -----------
39,091 38,175
Less: accumulated amortization................. (8,339) (7,295)
----------- -----------
$ 30,752 $ 30,880
=========== ===========
</TABLE>
During 1996, the Company wrote off $2.2 million of unamortized debt issuance
costs, with no tax benefit, and capitalized $4.0 million of new debt issuance
costs in connection with the refinancing of Discount Debentures. As part of
the acquisition of AN Can and the related refinancing of its secured debt
facilities and Discount Debentures in 1995, the Company wrote off $6.3 million
of unamortized debt issuance costs and
F-11
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
7. OTHER ASSETS--(CONTINUED)
capitalized $19.3 million of new debt issuance costs. Amortization expense
relating to debt issuance for the years ended December 31, 1996, 1995, and
1994 was $4.5 million, $4.9 million, and $5.3 million, respectively.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company has a revolving credit facility which it uses to finance its
seasonal liquidity needs. As of December 31, 1996 and 1995, the Company had
$27.8 million and $7.1 million, respectively, of loans outstanding under the
revolving credit facility ("Working Capital Loans").
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Bank A Term Loans..................................... $194,554 $220,000
Bank B Term Loans..................................... 343,716 222,750
11 3/4% Senior Subordinated Notes due June 15, 2002... 135,000 135,000
13 1/4% Senior Subordinated Debentures due December
15, 2002............................................. 58,940 201,263
-------- --------
732,210 779,013
Less: Amounts due within one year..................... 38,427 28,140
-------- --------
$693,783 $750,873
======== ========
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1996 are
as follows (in thousands):
<TABLE>
<S> <C>
1997..................................... $ 38,427
1998..................................... 53,393
1999..................................... 53,393
2000..................................... 126,112
2001..................................... 155,880
2002 and thereafter...................... 305,005
--------
$732,210
========
</TABLE>
Refinancings
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 Silgan's
Senior Secured Notes (the "Secured Notes"), and to repurchase up to $75.0
million of Discount Debentures.
The Credit Agreement, as entered into during 1995, provided the Company with
(i) $225.0 million of A Term Loans, (ii) $225.0 million of B Term Loans and
(iii) Working Capital Loans of up to $225.0 million. The Company used proceeds
from the Credit Agreement to acquire AN Can for $348.9 million (excluding
$13.1 million paid in 1996), repay $117.1 million of term loans under the
previous credit agreement, repay in full $50.0 million of Secured Notes,
repurchase $61.7 million principal amount at maturity of Discount Debentures
for $57.6 million, and incur debt issuance costs of $19.3 million. As a result
of the early redemption of the Secured
F-12
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT--(CONTINUED)
Notes and a portion of the Discount Debentures in 1995, the Company incurred
an extraordinary charge of $5.8 million, net of taxes, for the write-off of
unamortized deferred financing costs of $6.4 million and premiums of $2.0
million paid on the redemption of the Discount Debentures.
In 1996, the Credit Agreement was amended to provide the Company with
additional B Term Loans of $125.0 million. With borrowings of $17.4 million of
Working Capital Loans, $12.0 million representing a portion of the proceeds
from the issuance of Holdings' 13 1/4% Cumulative Exchangeable Redeemable
Preferred Stock ("Preferred Stock"), and the additional B Term Loans, the
Company redeemed $154.4 million principal amount of Discount Debentures at
par. As a result of the early redemption of a portion of the Discount
Debentures in 1996, the Company incurred an extraordinary charge of $2.2
million for the write-off of unamortized deferred financing costs.
Bank Credit Agreement
The A Term Loans mature on December 31, 2000, and the B Term Loans mature on
March 15, 2002. Principal repayments of $25.4 million and $5.0 million on the
A Term Loans and $4.0 million and $2.3 million on the B Term Loans were made
in 1996 and 1995, respectively. Principal is to be repaid on each of the A and
B Term Loans in installments in accordance with the Credit Agreement until
maturity.
As provided 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 prepay 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 up to $225.0 million for working capital needs. Borrowings
available under the revolving credit facility were $190.0 million at December
31, 1996, after taking into account outstanding Working Capital Loans of $27.8
million and outstanding letters of credit of $7.2 million. The Company may
utilize up to a maximum of $20.0 million in letters of credit as long as the
aggregate amount of borrowings of Working Capital Loans and letters of credit
do not exceed the amount of the commitment under the revolving credit
facility. 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.
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 a margin of 1.50% in the case of A Term
Loans and Working Capital Loans; and a margin of 2.0% in the case of B Term
Loans. Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus a
margin of 2.50% in the case of A Term Loans and Working Capital Loans; and a
margin of 3.0% in the case of B Term Loans. In accordance with the Credit
Agreement, if the Company meets certain financial tests, the interest rate
margin on Base Rate and Eurodollar Rate borrowings may be reduced from the
existing margin. As of December 31, 1996, the interest rate for Base Rate
borrowings was 9.75% and the interest rate for Eurodollar Rate
F-13
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT--(CONTINUED)
borrowings ranged between 8.0% and 8.63%. During 1996, the Company entered
into interest rate swap agreements to convert interest rate exposure from
variable to fixed rates of interest on A Term Loans and B Term Loans in an
aggregate amount of $200.0 million (for a discussion of the interest rate swap
agreements, see Note 9).
For 1996, 1995 and 1994, respectively, the average amount of borrowings of
Working Capital Loans was $104.1 million, $67.6 million and $14.4 million; the
weighted average annual interest rate paid on such borrowings was 8.4%, 8.9%,
and 8.4%; and the highest amount of such borrowings was $175.1 million, $188.1
million, and $46.0 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 Silgan, Containers and Plastics and secured by a security interest in
substantially all of the real and personal property of Silgan, Containers and
Plastics. 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.
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 of Silgan,
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 Silgan. 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:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
---- ----------
<S> <C>
1997................................... 105.8750%
1998................................... 102.9375%
1999 and thereafter.................... 100.0000%
</TABLE>
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the terms of the 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 was amortized through June 15, 1996 with a yield to maturity of
13 1/4%. From and after
F-14
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT--(CONTINUED)
June 15, 1996, interest on the Discount Debentures accrues on the principal
amount thereof at the rate of 13 1/4% and is 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 Company redeemed $154.4 million principal amount of
its Discount Debentures in 1996 and repurchased $61.7 million principal amount
at maturity of its Discount Debentures for $57.6 million in 1995.
The Discount Debenture Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement and the 11 3/4%
Notes.
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company has entered into interest rate swap agreements with various
banks to manage its exposure to interest rate fluctuations. The agreements are
with major financial institutions which are expected to fully perform under
the terms thereof. The interest rate swap agreements effectively convert
interest rate exposure from variable rates to fixed rates of interest without
the exchange of the underlying principal amounts. A portion of the Company's
term debt instruments carries a variable rate of interest based on the London
interbank offered rate ("LIBOR") plus a margin currently ranging from 2.5% to
3.0%. The interest rate swap agreements require the Company to pay fixed rates
of interest based on LIBOR ranging from 5.6% to 6.2% plus the aforementioned
margin. Notional principal amounts of these agreements total $200.0 million
and these agreements mature in the year 1999. The notional amounts are used to
measure the interest to be paid or received and do not represent the amount of
exposure to credit loss. Net payments of $0.3 million under these agreements
made in 1996 were 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. Aggregate revenues from its two
largest customers accounted for approximately 29.1% of its net sales in 1996
and 36.0% of its net sales in 1995. The receivable balances from these
customers collectively represented 20.3% and 28.2% of the Company's accounts
receivable before allowances at December 31, 1996 and 1995, 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-15
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Working Capital Facility................ $ 27,800 $ 27,800 $ 7,100 $ 7,100
Bank A Term Loans....................... 194,554 194,554 220,000 220,000
Bank B Term Loans....................... 343,716 343,716 222,750 222,750
11 3/4% Senior Subordinated Notes due
June 15, 2002.......................... 135,000 144,500 135,000 144,500
13 1/4% Senior Subordinated Debentures
due December 15, 2002.................. 58,940 59,235 201,263 205,873
Cumulative Exchangeable Redeemable
Preferred Stock........................ 52,998 58,671 -- --
Interest Rate Swap Agreements........... -- 504 -- --
</TABLE>
Methods and assumptions used in estimating fair values are as follows:
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.
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.
Convertible exchangeable preferred stock: The fair value of the preferred
stock is estimated based on quoted market prices.
Interest rate swap agreements: Fair values of interest rate swap agreements
reflect the estimated amounts that the Company would receive to terminate the
contracts at the reporting date based on quoted market prices.
11. 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):
<TABLE>
<S> <C>
1997................................. $13,779
1998................................. 10,615
1999................................. 8,181
2000................................. 6,257
2001................................. 4,431
2002 and thereafter.................. 9,213
-------
$52,476
=======
</TABLE>
Rent expense was approximately $13.9 million in 1996; $10.8 million in 1995;
and $9.1 million in 1994.
F-16
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
12. 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.
The following table sets forth the funded status of the Company's retirement
plans as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations............ $14,009 $12,135 $33,558 $31,465
Non-vested benefit obligations........ 383 547 4,718 3,158
------- ------- ------- -------
Accumulated benefit obligations......... 14,392 12,682 38,276 34,623
Additional benefits due to future salary 6,255 5,667 6,526 7,132
levels.................................. ------- ------- ------- -------
Projected benefit obligations........... 20,647 18,349 44,802 41,755
Plan assets at fair value............... 15,055 12,988 31,265 23,535
------- ------- ------- -------
Projected benefit obligation in excess
of plan assets......................... 5,592 5,361 13,537 18,220
Unrecognized actuarial gain (loss)...... 110 (165) 3,476 1,237
Unrecognized prior service costs........ (565) (615) (2,052) (2,128)
Additional minimum liability............ -- -- 1,124 1,990
------- ------- ------- -------
Accrued pension liability recognized in $ 5,137 $ 4,581 $16,085 $19,319
the balance sheet...................... ======= ======= ======= =======
</TABLE>
For certain pension plans with accumulated benefits in excess of plan assets
at December 31, 1996 and December 31, 1995, the balance sheet reflects an
additional minimum pension liability and related intangible asset of $1.1
million and $2.0 million, respectively.
The components of net periodic pension costs for defined benefit plans are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 5,229 $ 3,067 $ 2,947
Interest cost................................... 4,452 3,887 3,334
Actual loss (return) on assets.................. (3,946) (7,284) 539
Net amortization and deferrals.................. 650 5,008 (2,698)
------- ------- -------
Net periodic pension cost....................... $ 6,385 $ 4,678 $ 4,122
======= ======= =======
</TABLE>
F-17
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
12. RETIREMENT PLANS--(CONTINUED)
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 1996, 1995, and 1994 in the Company's Consolidated
Statements of Operations is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Net periodic pension cost........................... $ 6,385 $4,678 $4,122
Settlement and curtailment losses, net.............. 48 418 --
Contributions to multi-employer union plans......... 3,813 2,708 2,700
------- ------ ------
Total pension costs................................. $10,246 $7,804 $6,822
======= ====== ======
</TABLE>
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate........................................... 7.5% 7.5% 8.5%
Weighted average rate of compensation increase.......... 4.0% 4.0% 4.5%
Expected long-term rate of return on plan assets........ 9.0% 8.5% 8.5%
</TABLE>
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 $4.5 million in 1996;
$1.7 million in 1995; and $2.5 million in 1994. Improved operating performance
in 1996 as compared to 1995 resulted in greater contributions to the Company's
profit sharing plans.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
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, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................... $ 2,691 $ 1,587
Fully eligible active plan participants...... 5,576 11,647
Other active plan participants............... 18,214 14,770
----------- -----------
Total accumulated postretirement benefit
obligation..................................... 26,481 28,004
Unrecognized net loss (gain)................... 2,993 (2,929)
Unrecognized prior service costs............... (275) (298)
----------- -----------
Accrued postretirement benefit liability....... $ 29,199 $ 24,777
=========== ===========
</TABLE>
F-18
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--(CONTINUED)
Net periodic postretirement benefit cost include the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 871 $ 372 $321
Interest cost......................................... 1,766 1,097 412
Net amortization and deferral......................... 25 42 (14)
------ ------ ----
Net periodic postretirement benefit cost.............. $2,662 $1,511 $719
====== ====== ====
</TABLE>
The weighted average discount rate used to determine the accumulated
postretirement benefit obligation as of December 31, 1996 and 1995 was 7.5%.
The net periodic postretirement benefit costs were calculated using a discount
rate of 7.5% in 1996 and discount rates ranging from 7.5% to 8.5% for 1995.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation in 1996 ranged from 10% to 9.5% for pre-age
65 retirees and was 9.0% for post-age 65 retirees, declining gradually to an
ultimate rate of 5.5% over the next 12 years.
A 1% increase in the health care cost trend rate assumption would increase
the accumulated postretirement benefit obligation as of December 31, 1996 by
approximately $1.7 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
1996 by approximately $0.2 million.
14. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Current
Federal.......................................... $ -- $ 500 $2,500
State............................................ 3,000 1,900 3,200
Foreign.......................................... 300 100 (100)
------ ------ ------
3,300 2,500 5,600
Deferred
Federal.......................................... -- -- --
State............................................ -- -- --
Foreign.......................................... -- -- --
------ ------ ------
-- -- --
------ ------ ------
$3,300 $2,500 $5,600
====== ====== ======
Income tax expense is included in the financial statements as follows:
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary charges................ $3,300 $5,100 $5,600
Extraordinary charges.............................. -- (2,600) --
------ ------ ------
$3,300 $2,500 $5,600
====== ====== ======
</TABLE>
F-19
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
14. INCOME TAXES--(CONTINUED)
The income tax provision varied from that computed by using the U.S.
statutory rate as a result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at the U.S. Federal income
tax rate.................................... $ 11,100 $(3,811) $(2,601)
State and foreign tax expense, net of Federal
income benefit.............................. 2,145 1,820 2,015
Amortization of goodwill..................... 621 471 576
Change in valuation allowance................ (10,566) 6,620 5,610
-------- ------- -------
$ 3,300 $ 5,100 $ 5,600
======== ======= =======
</TABLE>
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, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation............................ $ 65,000 $ 53,400
Book over tax basis of assets acquired................ 13,200 16,100
Other................................................. 4,100 3,900
-------- --------
Total deferred tax liabilities...................... 82,300 73,400
Deferred tax assets:
Book reserves not yet deductible for tax purposes..... 59,200 56,300
Deferred interest on high yield obligations........... 7,700 25,100
Net operating loss carryforwards...................... 57,200 35,600
Other................................................. 500 1,200
-------- --------
Total deferred tax assets........................... 124,600 118,200
Valuation allowance for deferred tax assets........... 49,136 51,636
-------- --------
Net deferred tax assets............................. 75,464 66,564
-------- --------
Net deferred tax liabilities............................ $ 6,836 $ 6,836
======== ========
</TABLE>
The Company has a net deferred tax asset position primarily as a result of
its net operating loss carryforwards and net temporary differences. In years
prior to 1996 the Company reported book losses, therefore, under current
accounting principles the full amount of the deferred tax asset has been
offset by a valuation allowance. The valuation allowance will be reduced at
the time it is more likely than not that the Company will generate taxable
income sufficient to realize a portion of the tax benefits associated with the
net operating loss carryforwards and future deductible temporary differences.
The Company believes this will occur in 1997. At the time the valuation
allowance is reduced a portion of the benefit will be recorded as a reduction
to income tax expense and the remainder will be recorded as a reduction to
goodwill.
The valuation allowance decline in 1996 represented the reversal of the
reserve for prior years' operating losses not previously recognized, net of
the additional deferred tax asset recorded as a result of the finalization of
the purchase price allocation for AN Can.
F-20
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
14. INCOME TAXES--(CONTINUED)
The Company files a consolidated federal income tax return. At December 31,
1996, the Company has net operating loss carryforwards of approximately $164.0
million which are available to offset future consolidated taxable income of
the group and expire from 2001 through 2011. The Company also has $3.9 million
of alternative minimum tax credits which are available indefinitely to reduce
future tax payments for regular federal income tax purposes.
15. ACQUISITION RESERVES
In connection with the acquisition of AN Can, the Company has finalized its
plant rationalization and integration plans. These plans consist primarily of
the closing or downsizing of certain manufacturing plants and the integration
of the selling, general and administrative functions of the former AN Can
operations with the Company. Provisions were established for such planned
costs which include approximately $22.6 million related to employee severance
and relocation costs, $3.5 million related to administrative workforce
reductions, and $23.4 million related to plant exit costs and other
acquisition liabilities. The timing of the plant rationalizations, among other
things, will be dependent on covenants in existing labor agreements and
accordingly these costs will be incurred during the period through 1998.
During 1996 and 1995, respectively, costs of $6.5 million and $0.9 million
were incurred primarily for relocation and severance in connection with
administrative workforce reductions.
16. CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of Preferred Stock,
mandatorily redeemable in 2006, at $1,000 per share which represents the
liquidation preference of the Preferred Stock. The Company used $35.8 million
of these proceeds to purchase 4,283,286 shares of its Class B Common Stock
held by Mellon Bank, as trustee for First Plaza Group Trust, pursuant to its
right to purchase such stock for such amount under the Organization Agreement.
In aggregate, common stock and additional paid in capital were reduced by
$15.0 million, the original issuance amount received for such Class B Common
Stock, and the remainder of the payment was applied to Holdings' accumulated
deficit.
The Preferred Stock holders are entitled to receive cumulative dividends of
13 1/4% per annum, which are payable quarterly in cash or, on or prior to July
15, 2000 at the sole option of the Company, in additional shares of Preferred
Stock. After July 15, 2000, dividends may be paid only in cash. During 1996,
dividends of $1.6 million were paid in additional shares of Preferred Stock.
As of December 31, 1996, the Company accrued dividends of $1.4 million, which
it intends to pay in additional shares of Preferred Stock.
The Preferred Stock is exchangeable into Holdings' Subordinated Debentures
due 2006 (the "Exchange Debentures"), in whole but not in part, at any time at
the option of the Company, subject to certain conditions. The Exchange
Debentures will bear interest at the dividend rate in effect with respect to
the Preferred Stock. Interest on the Exchange Debentures will be payable semi-
annually and, on or prior to July 15, 2000, the Company may pay such interest
by issuing additional Exchange Debentures. If by July 22, 1997 the Preferred
Stock has not been exchanged for Exchange Debentures, the dividend rate on the
Preferred Stock will increase by 0.5% per annum to 13 3/4% per annum until
such exchange occurs.
The Company is required to redeem the Preferred Stock or Exchange Debentures
on July 15, 2006, but may elect to redeem the Preferred Stock or Exchange
Debentures, in whole or in part, at any time during the twelve month period
beginning July 15 of each of the years set forth below, at a redemption price
(expressed as a
F-21
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
16. CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK--(CONTINUED)
percentage of the liquidation preference of the Preferred Stock or principal
amount of the Exchange Debentures), plus an amount equal to all the
accumulated and unpaid dividends or accrued and unpaid interest.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000................................... 109.938%
2001................................... 106.625%
2002................................... 103.313%
2003 and thereafter.................... 100.000%
</TABLE>
In addition, all (but not less than all) of the outstanding Preferred Stock
or Exchange Debentures may be redeemed prior to July 15, 2000 at the option of
the Company for a redemption price equal to 110% of the liquidation preference
of the Preferred Stock plus accrued and unpaid dividends, or 110% of the
principal amount of the Exchange Debentures plus accrued and unpaid interest,
to the redemption date with the proceeds of any sale by Holdings of its common
stock. Upon the occurrence of a Change of Control (as defined in the
Certificate of Designation relating to the Preferred Stock or the indenture
relating to the Exchange Debentures), the Company is required to make an offer
to purchase all of the shares of Preferred Stock or all of the Exchange
Debentures at a purchase price equal to 101% of the liquidation preference of
the Preferred Stock, plus accrued and unpaid dividends to the date of
purchase, or 101% of the principal amount of the Exchange Debentures, plus
accrued and unpaid interest to the date of purchase.
The Preferred Stock will rank senior to all common stock of Holdings and
upon conversion, the Exchange Debentures will be subordinate to the
indebtedness of Holdings. The holders of the Preferred Stock do not have
voting rights except in certain limited circumstances. The Company's Credit
Agreement and various debt indentures restrict the Company's ability to, among
other things, pay dividends, incur additional indebtedness, and purchase or
redeem shares of capital stock.
17. 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 411,196 shares
of its Class C Common Stock and Containers and Plastics have each reserved
1,200 shares of their common stock for issuance under their respective plans.
Containers has 13,764 shares and Plastics has 13,800 shares of $0.01 par value
common stock currently issued, and all such shares are owned by Silgan.
The SARs extend to 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 of control (as defined in such plan), 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 Plastics' plan, in the event of a public offering or a change in
control (as defined in such plan), 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 of Containers held
by the employee at the then pro forma book value.
F-22
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
17. STOCK OPTION PLANS--(CONTINUED)
At December 31, 1996, there were outstanding options for 411,196 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 $2.04
to $3.54 for the Holdings options, $2,122 to $4,933 for the Containers options
and $126 to $993 for the Plastics options. The stock options and SARs
generally become exercisable ratably over a five-year period. At December 31,
1996, there were 318,675 options exercisable under the Holdings plan,
846 options/SARs exercisable under the Containers plan, and 420 options/SARs
exercisable under the Plastics plan. For the year ended December 31, 1994,
154,197 options were granted under the Holdings plan, 240 options were granted
under the Containers plan, and 900 options were granted under the Plastics
plan. For the year ended December 31, 1995, 300 options were granted under the
Plastics plan. There were no grants in 1996. For the years ended December 31,
1996, 1995, and 1994, no options were exercised under any of the plans. The
Company incurred charges relating to the vesting of benefits under the stock
option plans of $0.8 million in 1996 and 1995, and $1.5 million in 1994.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans and (ii) any stock issued by Containers upon
exercise of such options are convertible into either stock options or common
stock of Holdings, as the case may be. The conversion of such options or shares
will be based upon a valuation of Holdings and an allocation of such value
between the subsidiaries after giving affect to, among other things, that
portion of the outstanding indebtedness of Holdings allocable to each such
subsidiary.
For the year ended December 31, 1995, the value of the options granted under
the Plastic plan were not significant. Accordingly, the impact on net income
and earnings per share from the issuance of these options would not be
materially different from amounts currently reported and would not require
SFAS No. 123 pro forma disclosure.
18. DEFICIENCY IN STOCKHOLDERS' EQUITY
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value):
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
DECEMBER 31,
---------------------
CLASS 1996 1995
----- ---------- ----------
<S> <C> <C>
A.................................................. 7,153,088 7,153,088
B.................................................. 7,153,088 11,436,375
C.................................................. 856,657 856,657
---------- ----------
15,162,833 19,446,120
========== ==========
</TABLE>
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 Stock does not have voting rights except in certain circumstances.
As discussed in Note 22, in connections with the initial public offering,
Holdings amended its Restated Certificate of Incorporation, converted Class A,
Class B and Class C Common Stock into Common Stock on a one for one basis and
effected a stock split of 17.133145 to 1.
F-23
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
19. RELATED PARTY TRANSACTIONS
Pursuant to various management services agreements (the "Management
Agreements") entered into between Holdings, Silgan, Containers, Plastics, and
S&H, Inc. ("S&H"), a company wholly-owned by Mr. Silver, the Chairman and Co-
Chief Executive Officer of Holdings and Silgan, and Mr. 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 ("EBIDTA") until EBIDTA has
reached the Scheduled Amount set forth in the Management Agreements and 3.3%
(of which 0.3% is payable to MS & Co.) after EBIDTA 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 $5.3 million in 1996, $5.4
million in 1995, and $5.0 million in 1994, and was allocated, based upon
EBIDTA, as a charge to operating income of each business segment. Included in
accounts payable at December 31, 1996 and 1995, 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 Credit Agreement and its related amendments entered
into during 1996 and 1995, the banks thereunder (including Bankers Trust
Company) received fees totaling $1.6 million in 1996 and $17.2 million in
1995.
20. 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
tendered payment of $3.8 million to these former holders in 1995. 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.
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-24
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
21. 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:
<TABLE>
<CAPTION>
NET OPER. IDENTIFIABLE DEP.& CAPITAL
SALES PROFIT ASSETS AMORT. EXPEND.
-------- ------ ------------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1996
Metal container &
specialty(1)................ $1,189.3 $106.1 $750.7 $44.7 $39.1
Plastic container........... 216.4 18.4 158.5 14.6 17.6
-------- ------ ------ ----- -----
Total...................... $1,405.7 $124.5 $909.2 $59.3 $56.7
======== ====== ====== ===== =====
1995
Metal container &
specialty(1)................ $ 882.3 $ 58.2 (2) $736.7 $31.6 $32.5
Plastic container........... 219.6 13.2 159.4 13.8 19.4
-------- ------ ------ ----- -----
Total...................... $1,101.9 $ 71.4 $896.1 $45.4 $51.9
======== ====== ====== ===== =====
1994
Metal container &
specialty(1)................ $ 657.1 $ 59.8 (3) $335.3 $23.1 $16.9
Plastic container........... 204.3 (0.1)(3) 162.8 14.1 12.3
-------- ------ ------ ----- -----
Total...................... $ 861.4 $ 59.7 $498.1 $37.2 $29.2
======== ====== ====== ===== =====
</TABLE>
- --------
(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) Includes charge for reduction in carrying value of assets of $14.7 million
for the metal container segment.
(3) Includes 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.
Operating profit is reconciled to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Operating profit..................................... $124.5 $ 71.4 $ 59.7
Interest expense..................................... 89.4 80.7 65.8
Corporate expense.................................... 1.2 1.5 1.3
------ ------ ------
Income (loss) before income taxes.................. $ 33.9 $(10.8) $ (7.4)
====== ====== ======
Identifiable assets are reconciled to total assets as follows:
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Identifiable assets.................................. $909.2 $896.1 $498.1
Corporate assets..................................... 4.3 3.9 6.2
------ ------ ------
Total assets....................................... $913.5 $900.0 $504.3
====== ====== ======
</TABLE>
Metal container and other segment sales to Nestle Food Company accounted for
17.1%, 21.4%, and 25.9% of net sales of the Company during the years ended
December 31, 1996, 1995, and 1994, respectively. Sales to Del Monte
Corporation accounted for 12.0%, 14.5%, and 21.4% of net sales of the Company
during the years ended December 31, 1996, 1995, and 1994, respectively.
F-25
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
22. SUBSEQUENT EVENTS
Initial Public Offering
On February 13, 1997, the Company's registration statement for an initial
public offering ("IPO") of 5,175,000 shares of its Common Stock was declared
effective by the Securities and Exchange Commission. In connection with the
IPO, Holdings amended its Restated Certificate of Incorporation to change its
authorized capital stock to 100,000,000 shares of Common Stock, par value $.01
per share, and 10,000,000 shares of preferred stock, par value $.01 per share.
In addition, in connection with the IPO the existing Class A, Class B and
Class C Common Stock of Holdings were converted to Common Stock on a one for
one basis, and thereafter, Holdings effected a 17.133145 to 1 stock split.
Share information and per share data have been adjusted to give effect to the
amendment to Holdings' Restated Certificate of Incorporation and the stock
split.
Supplementary net income per share (unaudited), assuming the repayment as of
January 1, 1996 of the indebtedness, described below, from the net proceeds to
the Company from the IPO, was $1.42 for the year ended December 31, 1996.
Under the terms of the stock option plans of Containers and Plastics, stock
options issued under such plans were converted to Holdings' options at the
time of the IPO. In accordance with APB No. 25, options granted under these
plans are considered variable options with a final measurement date at the
time of conversion. The Company will recognize a non-cash charge of
approximately $22.5 million, net of $3.7 million previously accrued, in the
first quarter of 1997, for the excess of the fair market value over the grant
price of these options less amounts previously accrued.
Use of Proceeds
The Company intends to use net proceeds from the IPO to redeem Holdings'
remaining Discount Debentures (approximately $59.0 million) and to repay
approximately $8.9 million of bank term loans. These debt repayments are
expected to occur during the first quarter of 1997. In connection with early
redemption of the remaining Discount Debentures, the Company will recognize an
extraordinary charge of approximately $0.7 million, net of tax, for the write-
off of unamortized deferred financing costs.
F-26
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 5,860 $ 5,991
Accounts receivable, net................................ 104,730 98,177
Inventories............................................. 248,679 254,092
Prepaid expenses and other current assets............... 11,046 10,957
--------- ---------
Total current assets.................................. 370,315 369,217
Property, plant and equipment, net........................ 496,197 491,177
Other non-current assets.................................. 122,898 82,360
--------- ---------
$ 989,410 $ 942,754
========= =========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................. $ 106,212 $ 113,674
Accrued payroll and related costs....................... 43,013 40,613
Accrued interest payable................................ 12,105 8,340
Accrued expenses and other current liabilities.......... 35,874 38,903
Bank working capital loans.............................. 88,400 60,150
Current portion of long-term debt....................... 29,547 27,192
--------- ---------
Total current liabilities............................. 315,151 288,872
Long-term debt............................................ 634,843 757,501
Deferred income taxes..................................... -- 6,836
Other long-term liabilities............................... 73,818 69,206
Cumulative exchangeable redeemable preferred stock........ 54,748 --
Deficiency in stockholders' equity:
Common stock............................................ 189 195
Additional paid-in capital.............................. 110,935 33,423
Accumulated deficit..................................... (200,274) (213,279)
--------- ---------
Total deficiency in stockholders' equity.............. (89,150) (179,661)
--------- ---------
$ 989,410 $ 942,754
========= =========
</TABLE>
See accompanying notes.
F-27
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---------- ----------
<S> <C> <C>
Net sales............................................... $ 299,427 $ 279,860
Cost of goods sold...................................... 256,708 242,207
---------- ----------
Gross profit.......................................... 42,719 37,653
Selling, general and administrative expenses............ 14,035 13,737
Non-cash stock option charge............................ 22,522 200
---------- ----------
Income from operations................................ 6,162 23,716
Interest expense and other related financing costs...... 19,965 22,573
---------- ----------
Income (loss) before income taxes..................... (13,803) 1,143
Income tax provision (benefit).......................... (24,850) 1,000
---------- ----------
Income before extraordinary charge.................... 11,047 143
Extraordinary charge relating to early extinguishment of
debt, net of taxes..................................... (742) --
---------- ----------
Net income before preferred stock dividend
requirement.......................................... 10,305 143
Preferred stock dividend requirement.................... (1,755) --
---------- ----------
Net income available to common stockholders........... $ 8,550 $ 143
========== ==========
Income per share:
Income before extraordinary charge.................... $ 0.59 $ 0.01
Extraordinary charge.................................. (0.04) --
Preferred stock dividend requirement.................. (0.09) --
---------- ----------
Net income per common share......................... $ 0.46 $ 0.01
========== ==========
Weighted average number of common and common equivalent
shares outstanding..................................... 18,674,108 21,068,071
========== ==========
</TABLE>
See accompanying notes.
F-28
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- ADDITIONAL DEFICIENCY IN
PAR PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL DEFICIT EQUITY
---------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 885,000 $ 9 $ 18,609 $(208,824) $(190,206)
Adjustment for 17.133145
for 1 stock split...... 14,277,833 143 (143) -- --
---------- ---- -------- --------- ---------
As restated at December
31, 1996 for
stock split............ 15,162,833 152 18,466 (208,824) (190,206)
Issuance of common
stock.................. 3,700,001 37 67,183 -- 67,220
Conversion of subsidiary
stock options to parent
company................ -- -- 25,286 -- 25,286
Net income.............. -- -- -- 8,550 8,550
---------- ---- -------- --------- ---------
Balance at March 31,
1997................... 18,862,834 $189 $110,935 $(200,274) $ (89,150)
========== ==== ======== ========= =========
</TABLE>
See accompanying notes.
F-29
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 10,305 $ 143
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation......................................... 13,714 14,589
Amortization......................................... 1,725 1,958
Accretion of discount on discount debentures......... -- 6,628
Extraordinary charge relating to early extinguishment
of debt, net of taxes............................... 742 --
Non-cash stock option charge......................... 22,522 200
Changes in assets and liabilities:
(Increase) decrease in accounts receivable......... (3,227) 11,713
(Increase) in inventories.......................... (52,987) (43,621)
(Increase) decrease in other non-current assets.... (17,148) 159
(Decrease) in trade accounts payable............... (16,411) (24,521)
Other, net......................................... (4,137) 1,602
--------- ---------
Total adjustments................................ (55,207) (31,293)
--------- ---------
Net cash used by operating activities.......... (44,902) (31,150)
--------- ---------
Cash flows from investing activities:
Capital expenditures................................... (10,284) (18,558)
Proceeds from sale of assets........................... 29 1,495
--------- ---------
Net cash used in investing activities.......... (10,255) (17,063)
--------- ---------
Cash flows from financing activities:
Borrowings under working capital loans................. 279,750 210,350
Repayments under working capital loans................. (219,150) (157,300)
Net proceeds from issuance of common stock............. 67,220 --
Repayment of long-term debt............................ (67,820) (948)
--------- ---------
Net cash provided by financing activities...... 60,000 52,102
--------- ---------
Net increase in cash and cash equivalents................ 4,843 3,889
Cash and cash equivalents at beginning of year........... 1,017 2,102
--------- ---------
Cash and cash equivalents at end of period............... $ 5,860 $ 5,991
========= =========
Supplementary data:
Cash interest payments................................. $ 16,253 $ 10,864
Cash income tax (refunds) payments..................... (56) 214
Preferred stock issued in lieu of cash dividend........ 1,702 --
</TABLE>
See accompanying notes.
F-30
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1997 AND 1996 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, the accompanying financial statements contain all adjustments
(consisting solely of a normal recurring nature) necessary to present fairly
the Company's financial position as of March 31, 1997 and 1996, and the
Company's results of operations and statements of cash flows for the three
months ended March 31, 1997 and 1996.
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 Company's financial statements and
notes included in its Annual Report on Form 10-K for the year ended December
31, 1996.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation.
2. INITIAL PUBLIC OFFERING
On February 20, 1997 the Company completed an initial public offering
("IPO") of 5,175,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company. In connection with the IPO, the Company
amended its Restated Certificate of Incorporation to change its authorized
capital stock to 100,000,000 shares of Common Stock, par value $.01 per share,
and 10,000,000 shares of preferred stock, par value $.01 per share. In
addition, the existing Class A, Class B and Class C Common Stock of Holdings
were converted to Common Stock on a one for one basis, and immediately
thereafter Holdings effected a 17.133145 to 1 stock split of its outstanding
Common Stock. All prior period share and per share data have been adjusted to
give effect to the amendment to Holdings' Restated Certificate of
Incorporation and the stock split. Per share amounts have been computed based
upon the weighted average number of common and common equivalent shares
outstanding for each of the periods presented.
In the IPO, the Company sold to the underwriters 3,700,000 previously
unissued shares of Common Stock at an initial public offering price of $20.00
per share. The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF") and
Bankers Trust New York Corporation ("BTNY"), existing stockholders of the
Company prior to the IPO, sold to the underwriters 1,317,246 and 157,754
previously issued and outstanding shares of Common Stock owned by them,
respectively. The Company did not receive any of the proceeds from the sale of
the shares of Common Stock by MSLEF or BTNY.
Net proceeds received from the IPO of $67.2 million were used by the Company
to prepay bank term loans and to redeem the Company's remaining outstanding
13 1/4% Senior Discount Debentures due 2002 ("Discount Debentures"). In
connection with the early redemption of the Discount Debentures, the Company
incurred an extraordinary charge of $0.7 million, net of tax, for the write-
off of unamortized deferred financing costs.
In connection with the IPO, the Company recognized a non-cash, pre-tax
charge of $22.5 million for the excess of fair market value over the grant
price of stock options converted from Holdings' subsidiaries' stock option
plans to Holdings' stock option plan. Under Accounting Principles Bulletin
("APB") No. 25, options granted under the subsidiary plans were considered
variable options with a final measurement date at the time of conversion. Paid
in capital was credited for $25.3 million which represented the current year
charge and amounts accrued in prior years.
F-31
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1997 AND 1996 AND FOR
THE THREE MONTHS THEN ENDED IS UNAUDITED)
3. EARNINGS PER SHARE
In February 1997, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128 ("SFAS No. 128"), Earnings
per Share, which supersedes APB No. 15, Earnings per Share. The new
pronouncement is effective for the December 31, 1997 financial statements and
earlier adoption is not permitted. Upon adoption, the Company will be required
to change its current method of computing earnings per share and to restate
all prior periods.
Under SFAS No. 128, primary earnings per share will be replaced with basic
earnings per share. Basic earnings per share will exclude the dilutive effect
of stock options. In addition, the new pronouncement requires that fully
diluted earnings per share be calculated using the treasury stock method
applying the average market price for the period rather than the higher of the
average market price or the ending market price.
For the quarter ended March 31, 1997, the Company's basic earnings per share
would have been $0.04 greater than its primary earnings per share. The
Company's basic and primary earnings per share would have been the same for
the three month period ended March 31, 1996. The impact of SFAS No. 128 on the
calculation of the Company's fully diluted earnings per share for these
quarters is not material.
The weighted average number of common and common equivalent shares decreased
from March 31, 1996 due to the repurchase of 4,283,287 shares of Class B
Common Stock (adjusted for the stock split) in July 1996, offset by the
issuance of 3,700,001 shares of common stock in February 1997.
4. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Raw materials and supplies.............................. $ 44,694 $ 38,148
Work-in-process......................................... 31,468 28,261
Finished goods.......................................... 161,577 178,863
Spare parts and other................................... 7,977 7,823
-------- --------
245,716 253,095
Adjustment to value inventory at cost on the LIFO
Method................................................. 2,963 997
-------- --------
$248,679 $254,092
======== ========
</TABLE>
5. PREFERRED STOCK DIVIDEND
As of March 31, 1997, the Company had 53,258 shares of its 13 1/4%
Cumulative Exchangeable Redeemable Preferred Stock ("Preferred Stock"), with a
liquidation preference of $1,000 per share, outstanding. Included in Preferred
Stock at March 31, 1997 were accrued dividends of $1.5 million. On April 15,
1997, the Company made its quarterly dividend payment of $1.8 million in
additional shares of Preferred Stock.
F-32
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT MARCH 31, 1997 AND 1996 AND FOR
THE THREE MONTHS THEN ENDED IS UNAUDITED)
6. INCOME TAXES
During the first quarter of 1997, the Company determined that it was more
likely than not that a portion of the future tax benefits arising from its net
operating loss carryforwards would be realized in future years due to the
Company's continued improvement in earnings and the probability of future
taxable income. As a result, in accordance with SFAS No. 109, the Company
recognized an income tax benefit of $23.2 million by releasing a portion of
the valuation allowance.
In addition, for the quarter ended March 31, 1997, the Company incurred a
loss as a result of the non-cash stock option charge and has recognized an
income tax benefit of $1.6 million. The Company provides for income taxes
during interim reporting periods based upon an estimate of its annual
effective tax rate. This estimate reflects the benefits of net operating loss
carryforwards and adjustments to the valuation allowance related to the
realizability of the Company's deferred tax assets.
7. SUBSEQUENT EVENTS
Effective April 1, 1997, the Company acquired the North American aluminum
roll-on closure business ("Roll-on Closures") from Alcoa Closure Systems
International, Inc. ("Alcoa") and the North American plastic container
business ("Rexam Plastics") from Rexam plc and Rexam Plastics Inc. ("Rexam").
In 1996, Roll-on Closures and Rexam Plastics had combined net sales of
approximately $80.0 million. The aggregate purchase price, net of cash
acquired, of approximately $42.3 million will be allocated to inventory,
machinery and equipment, and net working capital acquired based on fair market
value as of the date of each acquisition, respectively. The acquisitions of
Roll-on Closures and Rexam Plastics will be accounted for using the purchase
method of accounting, and accordingly the results of operations will be
included in the consolidated financial statements of the Company from April 1,
1997.
The Company used borrowings of $50.0 million of additional B term loans and
$25.0 million of additional A term loans under the Company's credit agreement
to finance the acquisitions of Roll-on Closures and Rexam Plastics and to
repay working capital loans in April 1997.
F-33
<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, 1997 and the year ended
December 31, 1996. 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, 1997 gives effect to (i) the Private Offering of $300.0 million
of 9% Senior Subordinated Debentures, (ii) the sale of $74.0 million of Common
Stock in the IPO, and (iii) the exchange of the Exchangeable Preferred Stock for
Exchange Debentures, and the use of the proceeds from the Private Offering and
the IPO to redeem the 11 3/4% Notes at 105.875% of their principal amount,
redeem the remaining outstanding amount of Discount Debentures, and prepay
$157.5 million of bank term loans, as if such events had occurred as of January
1, 1997.
The unaudited pro forma condensed statement of operations for the year ended
December 31, 1996 gives effect to (i) the Private Offering of $300.0 million of
9% Senior Subordinated Debentures, (ii) the sale of $74.0 million of Common
Stock in the IPO, (iii) the sale of $50.0 million of Exchangeable Preferred
Stock (and the exchange of the Exchangeable Preferred Stock for Exchange
Debentures), and (iv) the incurrence of $125.0 million of additional B term
loans in July 1996 and $17.4 million of working capital loans in June 1996
under the Company's Credit Agreement, and the use of such proceeds to redeem the
11 3/4% Notes at 105.875% of their principal amount, redeem the remaining
outstanding amount of Discount Debentures, purchase the Class B Common Stock
held by Mellon Bank N.A. for $35.8 million and repay $157.5 million of bank term
loans, as if such events had occurred as of January 1, 1996.
The unaudited 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 period presented,
or to project the Company's financial position or results of operations at any
future date or for any future period. The unaudited pro forma adjustments are
based upon available information and upon certain assumptions that the Company
believes are reasonable. The unaudited pro forma financial data and
accompanying notes should be read in conjunction with the historical financial
information of the Company, including notes thereto, included elsewhere in
this Prospectus.
F-34
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------
IPO
AND PREFERRED PRIVATE
HISTORICAL STOCK EXCHANGE(a) OFFERING(b) PRO FORMA
---------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $299,427 $ -- $ -- $299,427
Cost of goods sold............ 256,708 -- -- 256,708
-------- ------- ----- --------
Gross profit................ 42,719 -- -- 42,719
Selling, general and
administrative expenses...... 14,035 -- -- 14,035
Non-cash stock option
charge(c).................... 22,522 -- -- 22,522
-------- ------- ----- --------
Income from operations...... 6,162 -- -- 6,162
Interest expense and other
related financing
costs(d)(e).................. 19,965 (233) (528) 19,204
-------- ------- ----- --------
Income before income taxes.. (13,803) 233 528 (13,042)
Income tax provision
(benefit)(f)................. (24,850) 28 63 (24,759)
-------- ------- ----- --------
Income before extraordinary
charge..................... 11,047 205 465 11,717
Extraordinary charge relating
to early extinguishment of
debt, net of taxes(g)........ (742) 742 -- --
-------- ------- ----- --------
Net income before preferred
stock dividend requirement. 10,305 947 465 11,717
Preferred stock dividend
requirement.................. (1,755) 1,755 -- --
-------- ------- ----- --------
Net income applicable to
common stockholders........ $ 8,550 $ 2,702 $ 465 $ 11,717
======== ======= ===== ========
</TABLE>
F-35
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------
IPO AND
BANK DEBT PREFERRED
AND PREFERRED STOCK PRIVATE
HISTORICAL STOCK(h) EXCHANGE(a) OFFERING(b) PRO FORMA
---------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $1,405,742 $ -- $ -- $ -- $1,405,742
Cost of goods sold...... 1,223,684 -- -- -- 1,223,684
---------- ------- ------- ------- ----------
Gross profit.......... 182,058 -- -- -- 182,058
Selling, general and
administrative
expenses............... 58,768 -- -- -- 58,768
---------- ------- ------- ------- ----------
Income from
operations........... 123,290 -- -- -- 123,290
Interest expense and
other related financing
costs(d)(e)............ 89,353 (4,253) (1,766) (2,274) 81,060
---------- ------- ------- ------- ----------
Income before income
taxes................ 33,937 4,253 1,766 2,274 42,230
Income tax provision(f). 3,300 -- -- -- 3,300
---------- ------- ------- ------- ----------
Income before
extraordinary charge. 30,637 4,253 1,766 2,274 38,930
Extraordinary charge
relating to early
extinguishment of debt,
net of taxes(g)........ (2,222) 2,222 -- -- --
---------- ------- ------- ------- ----------
Net income before
preferred stock
dividend requirement. 28,415 6,475 1,766 2,274 38,930
Preferred stock dividend
requirement............ (3,006) (3,838) 6,844 -- --
---------- ------- ------- ------- ----------
Net income applicable
to common
stockholders......... $ 25,409 $ 2,637 $ 8,610 $ 2,274 $ 38,930
========== ======= ======= ======= ==========
</TABLE>
F-36
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(a) The IPO and Preferred Stock Exchange includes adjustments for the sale of
$74.0 million of Common Stock in the IPO and the use of the proceeds
therefrom and the exchange of the Exchangeable Preferred Stock for Exchange
Debentures, as if such events had occurred as of the beginning of the
periods presented. The Company used the proceeds from the IPO to redeem the
remaining outstanding Discount Debentures ($59.0 million) and to repay bank
term loans.
(b) The Private Offering includes adjustments for the sale of $300.0 million of
9% Senior Subordinated Debentures and the use of such proceeds to redeem in
full the 11 3/4% Notes at 105.875% of their principal amount and to repay
$148.6 million of bank term loans, as if such events had occurred as of the
beginning of the periods presented.
(c) The unaudited pro forma condensed statement of operations for the three
months ended March 31, 1997 include the non-cash, pre-tax stock option
charge of $22.5 million recognized by the Company in connection with the
IPO. See Notes 17 and 22 to the Consolidated Financial Statements of the
Company for the year ended December 31, 1996 included elsewhere in this
Prospectus.
F-37
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
(d) Pro forma adjustments made to the historical data for interest expense as
of March 31, 1997 and December 31, 1996 consist of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997(1) DECEMBER 31, 1996(2)
----------------- --------------------
<S> <C> <C>
Historical interest expense............ $19,965 $89,353
Increase in interest expense related to
additional bank borrowings of B term
loans and working capital loans used
to fund the redemption of a portion of
the Discount Debentures at current
borrowing rates(3).................... -- 6,377
Increase in interest expense related to
the Exchange Debentures(4)............ 1,755 6,844
Increase in interest expense related
to the 9% Senior Subordinated
Debentures ........................... 6,750 27,000
Net decrease in deferred financing
costs related to amortization of new
indebtedness less retired debt costs.. (161) (529)
Decrease in interest expense due to the
redemption of the Discount
Debentures(5)......................... (1,844) (17,563)
Decrease in interest expense due to the
redemption of the 11 3/4% Notes with
proceeds from the Private Offering.... (3,966) (15,863)
Decrease in interest expense due to the
repayment of bank term loans from the
excess proceeds of the IPO and the
Private Offering(6)................... (3,295) (14,559)
------- -------
Pro forma interest expense............. $19,204 $81,060
======= =======
</TABLE>
- --------
(1) Pro forma interest expense for the three months ended March 31, 1997 gives
effect to (i) the sale of $300.0 million of 9% Senior Subordinated
Debentures, (ii) the sale of $74.0 million of Common Stock in the IPO, and
(iii) the exchange of the Exchangeable Preferred Stock for Exchange
Debentures, and the use of the proceeds from (y) the Private Offering to
redeem in full the 11 3/4% Notes at 105.875% of their principal amount and
prepay $148.6 million of bank term loans and (z) the IPO to redeem the
remaining outstanding amount of Discount Debentures and prepay $8.9 million
of bank term loans, as if such events had occurred as of January 1, 1997.
(2) Pro forma interest expense for the year ended December 31, 1996 gives
effect to (i) the sale of $300.0 million of 9% Senior Subordinated
Debentures, (ii) the sale of $74.0 million of Common Stock in the IPO, (iii)
the sale of $50.0 million of Exchangeable Preferred Stock (and the exchange
of the Exchangeable Preferred Stock for Exchange Debentures), (iv) the
incurrence of $125.0 million of additional B term loans in July 1996 and
$17.4 million of working capital loans in June 1996 under the Credit
Agreement, and the use of such proceeds to redeem in full the 11 3/4% Notes
at 105.875% of their principal amount, redeem the remaining outstanding
amount of Discount Debentures, purchase the Class B Common Stock held by
Mellon Bank N.A. for $35.8 million and prepay $157.5 million of bank term
loans, as if such events had occurred as of January 1, 1996.
(3) For the computations above, the assumed interest rates for borrowings
under the Credit Agreement are based upon the three month LIBOR of 5.8125%
per annum as of June 12, 1997 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.
(4) In conjunction with the Private Offering, it was assumed that the
outstanding shares of Exchangeable Preferred Stock were exchanged for the
Exchange Debentures.
(5) The adjustment in interest expense related to the Discount Debentures has
been calculated to eliminate the amount of historical interest incurred.
(6) Pursuant to the Company's Credit Agreement, proceeds in excess of the
amount required to redeem the remaining balance of Discount Debentures and
the 11 3/4% Notes were applied to repay bank term loans.
F-38
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(e) Pro forma adjustments made to interest expense for the period ending March
31, 1997 and for the year ended December 31, 1996 do not include the
effect of an additional $75.0 million of bank term loans incurred by the
Company to finance the acquisitions of Roll-on Closures and Rexam Plastics
and to repay approximately $32.7 million of the outstanding Revolving Loan
Facility.
(f) During the first quarter of 1997 the Company determined that a portion of
the future tax benefits arising from its net operating loss carryforward
would be realized due to the Company's continued improvement in earnings
and increased probability of future taxable income. In accordance with
SFAS No. 109, the Company reduced its valuation allowance and recognized
an income tax benefit of $23.2 million.
The Company will provide for income taxes during interim reporting periods
in 1997 based upon an estimate of its annual effective tax rate taking into
consideration various factors, such as operating results, benefits of net
operating loss carryforwards and levels of taxable income. Due to the pre-
tax loss realized by the Company during the first quarter of 1997 and as a
result of uncertainties inherent in the factors mentioned above, the Company
has provided an income tax benefit for the first quarter at a 12% tax rate.
The income tax provision for the year ended December 31, 1996 is comprised
of federal, state and foreign income taxes currently payable. The income tax
provision has been adjusted to reflect the federal and state income tax
benefits realized from the deduction of the accreted interest available to
the Company as a result of the redemption of the Discount Debentures. For
1996, there were no federal taxes currently payable due to the deduction of
the accreted interest on the retired Discount Debentures.
(g) The pro forma condensed statement of operations for the three months ended
March 31, 1997 does not include an historical extraordinary charge of $0.7
million incurred in the first quarter of 1997 related to the redemption of
the remaining Discount Debentures, and extraordinary charges of $9.3
million, net of tax, expected to be incurred in connection with the
Private Offering for the redemption of the 11 3/4% Notes and the prepayment
of a portion of the bank term loans. The pro forma condensed statement of
operations for the year ended December 31, 1996 does not include historical
extraordinary charges of $2.2 million, net of tax, for the write-off of
unamortized deferred financing costs related to the early redemption of
Discount Debentures.
(h) Bank Debt and Preferred Stock adjustments include the (i) the sale of
$50.0 million of Exchangeable Preferred Stock and (ii) the incurrence of
$125.0 million of additional B term loans and $17.4 million of working
capital loans under the Credit Agreement, and the use of such proceeds to
redeem a portion of the Discount Debentures and to purchase the Class B
Common Stock held by Mellon Bank N.A., as if such events had occurred as
of the beginning of the period presented.
F-39
<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 the Company (incorporated by
reference to Exhibit 3.1 filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. Commission File No.
000-22117).
3.2 Amended and Restated By-laws of the Company (incorporated by reference
to Exhibit 3.2 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1996. Commission File No. 000-22117).
4.1 Indenture, dated as of June 9, 1997, between the Company (as successor
to Silgan Corporation) and The First National Bank of Chicago, as
trustee, with respect to the Debentures (incorporated by reference to
Exhibit 4.1 filed with the Company's Current Report on Form 8-K dated
June 9, 1997, Commission File No. 000-22117).
*4.2 First Supplemental Indenture dated as of June 24, 1997 among the
Company, Silgan Corporation and The First National Bank of Chicago, as
Trustee, to the Indenture, dated as of June 9, 1997, between the
Company and The First National Bank of Chicago, as trustee, with
respect to the Debentures.
4.3 Indenture dated as of June 29, 1992, between the Company (as successor
to Silgan Corporation) and Fleet National Bank, as Trustee, with
respect to the 11-3/4% Notes (incorporated by reference to Exhibit 1
filed with Silgan Corporation's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
*4.4 First Supplemental Indenture dated as of June 24, 1997 among the
Company, Silgan Corporation and Fleet National Bank, as Trustee, to
the Indenture dated as of June 29, 1992 between the Company and Fleet
National Bank, as Trustee, with respect to the 11-3/4% Notes.
II-1
<PAGE>
4.5 Form of the 9% Senior Subordinated Debentures due 2009 of the Company
(as successor to Silgan Corporation) (incorporated by reference to
Exhibit 4.2 filed with the Company's Current Report on Form 8-K dated
June 9, 1997, Commission File No. 000-22117).
4.6 Form of the 11-3/4% Senior Subordinated Notes due 2002 of the Company
(as successor to Silgan Corporation) (incorporated by reference to
Exhibit 4.5 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, Commission File No. 33-28409).
4.7 Registration Rights Agreement, dated June 9, 1997, between the Company
(as successor to Silgan Corporation) and Morgan Stanley (incorporated
by reference to Exhibit 4.3 filed with the Company's Current Report on
form 8-K dated June 9, 1997, Commission File No. 000-22117).
4.8 Indenture, dated as of July 22, 1996, between the Company and Fleet
National Bank, as Trustee, with respect to the Exchange Debentures
(incorporated by reference to Exhibit 4.10 filed with the Company's
Amendment No. 2 to Registration Statement on Form S-4, dated October
31, 1996, Registration Statement No. 333-9979).
4.9 Form of the Company's Subordinated Debentures due 2006 (incorporated
by reference to Exhibit 4.11 filed with the Company's Amendment No. 2
to Registration Statement on Form S-4, dated October 31, 1996,
Registration Statement No. 333-9979).
*4.10 Form of the Company's New 9% Senior Subordinated Debentures due 2009
(the New Debentures).
*4.11 Form of Letter of Transmittal with respect to the Exchange Offer.
*5 Opinion of Winthrop, Stimson, Putnam and Roberts as to the legality of
the New Debentures.
*8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax matters.
10.1 Supply Agreement between Containers and Nestle for Hanford, California
effective August 31, 1987 (incorporated by reference to Exhibit 10(xi)
filed with Silgan Corporation'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).
10.2 Amendment to Supply Agreement for Hanford, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.31 filed with Silgan
Corporation'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).
10.3 Supply Agreement between Containers and Nestle for Riverbank,
California effective August 31, 1987 (incorporated by reference to
Exhibit 10(xii) filed with Silgan Corporation'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).
II-2
<PAGE>
10.4 Supply Agreement between Containers and Nestle for Morton, Illinois,
effective August 31, 1987 (incorporated by reference to Exhibit
10(vii) filed with Silgan Corporation'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).
10.5 Amendment to Supply Agreement for Morton, Illinois, dated July 1, 1990
(incorporated by reference to Exhibit 10.36 filed with Silgan
Corporation'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).
10.6 Supply Agreement between Containers and Nestle for Ft. Dodge, Iowa,
effective August 31, 1987 (incorporated by reference to Exhibit
10(xiv) filed with Silgan Corporation'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).
10.7 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March 1, 1990
(incorporated by reference to Exhibit 10.38 filed with Silgan
Corporation'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).
10.8 Supply Agreement between Containers and Nestle for St. Joseph,
Missouri, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xvii) filed with Silgan Corporation'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).
10.9 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.42 filed with Silgan
Corporation'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).
10.10 Supply Agreement between Containers and Nestle for Trenton, Missouri,
effective August 31, 1987 (incorporated by reference to Exhibit
10(xviii) filed with Silgan Corporation'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).
10.11 Amendment to Supply Agreement for Trenton, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.44 filed with Silgan
Corporation'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).
10.12 Supply Agreement between Containers and Nestle for Moses Lake,
Washington, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xxii) filed with Silgan Corporation's Registration
Statement on Form S-1, dated January 11, 1988, Registration
II-3
<PAGE>
Statement No. 33-18719) (Portions of this Exhibit are subject to
confidential treatment pursuant to order of the Commission).
10.13 Amendment to Supply Agreement for Moses Lake, Washington, dated March
1, 1990 (incorporated by reference to Exhibit 10.51 filed with Silgan
Corporation'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).
10.14 Supply Agreement between Containers and Nestle for Jefferson,
Wisconsin, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xxiii) filed with Silgan Corporation'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).
10.15 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1,
1990 (incorporated by reference to Exhibit 10.53 filed with Silgan
Corporation'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).
10.16 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 Corporation'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).
10.17 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 Corporation's Registration Statement
on Form S-1, dated January 11, 1988, Registration Statement No. 33-
18719).
10.18 Employment Agreement, dated as of September 1, 1989, between the
Company, InnoPak Plastics Corporation (Plastics), Russell F. Gervais
and Aim Packaging, Inc. (incorporated by reference to Exhibit 5 filed
with Silgan Corporation's Report on Form 8-K, dated March 15, 1989).
10.19 InnoPak Plastics Corporation (Plastics) Pension Plan for Salaried
Employees (incorporated by reference to Exhibit 10.32 filed with
Silgan Corporation's Annual Report on Form 10-K for the year ended
December 31, 1988, Commission File No. 33-18719).
10.20 Containers Pension Plan for Salaried Employees (incorporated by
reference to Exhibit 10.34 filed with Silgan Corporation's Annual
Report on Form 10-K for the year ended December 31, 1988, Commission
File No. 33-18719).
10.21 Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock Option
Plan (incorporated by reference to Exhibit 10.21 filed with the
Company's Annual Report on Form 10-K for the period ended December 31,
1996, Commission File No. 000-22117).
II-4
<PAGE>
10.22 Form of the Company's Nonstatutory Stock Option Agreement
(incorporated by reference to Exhibit 10.22 filed with the Company's
Annual Report on Form 10-K for the period ended December 31, 1996,
Commission File No. 000-22117) .
10.23 Stockholders Agreement, dated as of December 21, 1993, among R. Philip
Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and the Company
(incorporated by reference to Exhibit 3 filed with the Company's
Current Report on Form 8-K, dated March 25, 1994, Commission File No.
33-28409).
10.24 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and the Company (incorporated by
reference to Exhibit 10.24 filed with the Company's Annual Report on
Form 10-K for the period ended December 31, 1996, Commission File No.
000-22117).
10.25 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and Containers (incorporated by
reference to Exhibit 10.26 filed with the Company's Annual Report on
Form 10-K for the period ended December 31, 1996, Commission File No.
000-22117).
10.26 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and Plastics (incorporated by reference
to Exhibit 10.27 filed with the Company's Annual Report on Form 10-K
for the period ended December 31, 1996, Commission File No. 000-
22117).
10.27 Purchase Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated January 5, 1994,
Commission File No. 33-28409).
10.28 Amendment to Purchase Agreement, dated as of December 10, 1993,
between Containers and Del Monte (incorporated by reference to Exhibit
2 filed with the Company's Current Report on Form 8-K, dated January
5, 1994, Commission File No. 33-28409).
10.29 Supply Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 10.118 filed with
Silgan Corporation'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.)
10.30 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 Corporation'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.)
10.31 Credit Agreement, dated as of August 1, 1995, among the Company (as
successor to Silgan Corporation), Containers, Plastics, the lenders
from time to time party thereto, Bankers Trust, as Administrative
Agent and as a Co-Arranger, and Bank of America Illinois, as
Documentation Agent and as a Co-Arranger (incorporated by reference to
Exhibit 2 filed with the Company's Current Report on Form 8-K, dated
August 14, 1995, Commission File No. 33-28409).
II-5
<PAGE>
10.32 Amended and Restated Holdings Guaranty, dated as of August 1, 1995,
made by the Company (incorporated by reference to Exhibit 4 filed with
the Company's Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409) .
10.33 Amended and Restated Borrowers Guaranty, dated as of August 1, 1995,
made by the Company (as successor to Silgan Corporation), Containers,
Plastics, California-Washington Can Corporation and SCCW Can
Corporation (incorporated by reference to Exhibit 3 filed with the
Company's Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.34 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 Corporation's Current Report
on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
10.35 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by the Company (as successor to Silgan Corporation) (incorporated by
reference to Exhibit 5 filed with Silgan Corporation's Current Report
on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
10.36 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 Corporation's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
10.37 Asset Purchase Agreement, dated as of June 2, 1995, between ANC and
Containers (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.38 Placement Agreement, dated June 3, 1997, between the Company (as
successor to Silgan Corporation) and Morgan Stanley (incorporated by
reference to Exhibit 99.1 filed with the Company's Current Report on
Form 8-K, dated June 9, 1997, Commission File No. 000-22117).
10.39 Underwriting Agreement, dated as of February 13, 1997, among the
Company, Containers, Plastics, MSLEF II, BTNY and the underwriters
listed on Schedule I thereto (incorporated by reference to Exhibit
10.40 filed with the Company's Annual Report on Form 10-K for the
period ended December 31, 1996, Commission File No. 000-22117).
10.40 Placement Agreement between the Company and Morgan Stanley, dated July
17, 1996 (incorporated by reference to Exhibit 6 filed with the
Company's Current Report on Form 8-K dated August 2, 1996, Commission
File No. 33-28409).
10.41 Amendment to Stockholders Agreement, dated as of February 14, 1997,
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY and the
Company (incorporated by reference to Exhibit 10.42 filed with the
Company's Annual Report on Form 10-K for the period ended December 31,
1996, Commission File No. 000-22117).
*12.1 Computations of the Company's Ratio of Earnings to Fixed Charges for
the three months ended March 31, 1997 and 1996.
II-6
<PAGE>
*12.2 Computations of the Company's Ratio of Earnings to Fixed Charges for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992.
*21 Subsidiaries of the Registrant.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibits 5
and 8).
*24 Power of Attorney (included on signature page).
*25 Statement of Eligibility of Trustee with respect to the Debentures.
____________________
*Filed herewith.
II-7
<PAGE>
(b) Financial Statement Schedules:
-----------------------------
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................... S-1
I. Condensed Financial Information of Silgan Holdings Inc.:
Condensed Balance Sheet at December 31, 1996 and 1995...... S-2
Condensed Statement of Operations for the years ended
December 31, 1996, 1995 and 1994........................ S-3
Condensed Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994........................ S-4
II. Schedules of Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and 1994............ S-5
</TABLE>
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-8
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) 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.
(b) 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.
(c) 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 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.
(d) 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-9
<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 July 8, 1997.
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ R. Philip Silver Chairman of the Board and July 8, 1997
- ------------------------------ Co-Chief Executive Officer
(R. Philip Silver) (Principal Executive Officer)
/s/ D. Greg Horrigan President, Co-Chief Executive July 8, 1997
- ------------------------------ Officer and Director
(D. Greg Horrigan)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert H. Niehaus Director July 8, 1997
- ------------------------------
(Robert H. Niehaus)
/s/ Leigh J. Abramson Director July 8, 1997
- ------------------------------
(Leigh J. Abramson)
/s/ Jeffrey C. Crowe Director July 8, 1997
- ------------------------------
(Jeffrey C. Crowe)
/s/ Thomas M. Begel Director July 8, 1997
- ------------------------------
(Thomas M. Begel)
/s/ Harley Rankin, Jr. Executive Vice President, Chief July 8, 1997
- ------------------------------ Financial Officer and Treasurer
(Harley Rankin, Jr.) (Principal Financial Officer)
/s/ Harold J. Rodriguez, Jr. Vice President, Controller and July 8, 1997
- ------------------------------ Assistant Treasurer
(Harold J. Rodriguez, Jr.) (Principal Accounting Officer)
</TABLE>
<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, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, and have issued our report thereon
dated January 31, 1997, except for Note 22, as to which date is February 13,
1997 (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.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 13, 1997
S-1
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED BALANCE SHEETS
December 31, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
- ------
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 70 $ 10
Other current assets 74 70
--------- ---------
Total current assets 144 80
Investment in and other amounts due
from subsidiary - 19,040
Notes receivable-subsidiary 1,489 1,489
Debt issuance costs and other assets 3,533 3,418
--------- ---------
$ 5,166 $ 24,027
========= =========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
- ----------------------------------------------------
Current liabilities:
Accrued expenses $ 1,339 $ 393
Amount payable to subsidiary 2,810 2,175
--------- ---------
Total current liabilities 4,149 2,568
Excess of distributions over investment
in subsidiary 79,285 -
Long-term debt 58,940 201,263
Cumulative exchangeable redeemable
preferred stock 52,998 -
Deficiency in stockholders' equity:
Common stock 152 195
Additional paid-in capital 18,466 33,423
Accumulated deficit (208,824) (213,422)
--------- ---------
Total deficiency in stockholders' equity (190,206) (179,804)
--------- ---------
$ 5,166 $ 24,027
========= =========
</TABLE>
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere herein.
S-2
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Net sales $ - $ - $ -
Cost of goods sold - - -
------- -------- --------
Gross profit - - -
Selling, general and administrative
expenses 713 1,113 837
------- -------- --------
Loss from operations (713) (1,113) (837)
Equity in earnings of consolidated
subsidiaries 31,611 6,806 12,053
Interest expense and other related
financing costs 17,861 28,248 29,647
------- -------- --------
Income (loss) before income taxes 13,037 (22,555) (18,431)
Income tax benefit 17,600 4,100 5,400
------- -------- --------
Income (loss) before extraordinary charge 30,637 (18,455) (13,031)
Extraordinary charges relating to
early extinguishment of debt (2,222) (3,351) -
------- -------- --------
Net income (loss) before preferred stock
dividend requirement 28,415 (21,806) (13,031)
Preferred stock dividend requirement (3,006) - -
------- -------- --------
Net income (loss) available to
common stockholders $25,409 $(21,806) $(13,031)
======= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere herein.
S-3
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF SILGAN HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities: $ (4,868) $ (7) $ (2)
--------- -------- -------
Cash flows from investing activities:
Cash distribution received from subsidiary 147,539 61,391 6,911
--------- -------- -------
Net cash provided by investing activities 147,539 61,391 6,911
--------- -------- -------
Cash flows from financing activities:
Repayment of long-term debt (154,400) (57,596) -
Proceeds from issuance preferred stock 50,000 - -
Repurchase of common stock (35,811) - -
Debt financing costs (2,400) - -
Payments to former shareholders of Silgan - (3,795) (6,911)
--------- -------- -------
Net cash used by financing activities (142,611) (61,391) (6,911)
--------- -------- -------
Net increase (decrease) in cash
and cash equivalents 60 (7) (2)
Cash and cash equivalents at
the beginning of year 10 17 19
--------- -------- -------
Cash and cash equivalents at end of year $ 70 $ 10 $ 17
========= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements for Silgan Holdings Inc.
appearing elsewhere herein.
S-4
<PAGE>
SCHEDULE II
SILGAN HOLDINGS INC.
SCHEDULES OF VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
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
- ----------------------- ---------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
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
====== ==== ======= ==== ======
For the year ended
December 31, 1996:
Allowance for
doubtful accounts
receivable $4,843 $572 $(1,041)(3) $329 $4,045
====== ==== ======= ==== ======
</TABLE>
- ----------
(1) Uncollectible accounts written off, net of recoveries.
(2) Represents the accounts receivable allowance for doubtful accounts assumed
upon the acquisition of AN Can.
(3) Principally represents the final purchase price allocation for the
acquisition of AN Can.
S-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. Commission File No.
000-22117).
3.2 Amended and Restated By-laws of the Company (incorporated by reference
to Exhibit 3.2 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1996. Commission File No. 000-22117).
4.1 Indenture, dated as of June 9, 1997, between the Company (as successor
to Silgan Corporation) and The First National Bank of Chicago, as
trustee, with respect to the Debentures (incorporated by reference to
Exhibit 4.1 filed with the Company's Current Report on Form 8-K dated
June 9, 1997, Commission File No. 000-22117).
*4.2 First Supplemental Indenture dated as of June 24, 1997 among the
Company, Silgan Corporation and The First National Bank of Chicago, as
Trustee, to the Indenture, dated as of June 9, 1997, between the
Company and The First National Bank of Chicago, as trustee, with
respect to the Debentures.
4.3 Indenture dated as of June 29, 1992, between the Company (as successor
to Silgan Corporation) and Fleet National Bank, as Trustee, with
respect to the 11-3/4% Notes (incorporated by reference to Exhibit 1
filed with Silgan Corporation's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
*4.4 First Supplemental Indenture dated as of June 24, 1997 among the
Company, Silgan Corporation and Fleet National Bank, as Trustee, to
the Indenture dated as of June 29, 1992 between the Company and Fleet
National Bank, as Trustee, with respect to the 11-3/4% Notes.
4.5 Form of the 9% Senior Subordinated Debentures due 2009 of the Company
(as successor to Silgan Corporation) (incorporated by reference to
Exhibit 4.2 filed with the Company's Current Report on Form 8-K dated
June 9, 1997, Commission File No. 000-22117).
4.6 Form of the 11-3/4% Senior Subordinated Notes due 2002 of the Company
(as successor to Silgan Corporation) (incorporated by reference to
Exhibit 4.5 filed with the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, Commission File No. 33-28409).
4.7 Registration Rights Agreement, dated June 9, 1997, between the Company
(as successor to Silgan Corporation) and Morgan Stanley (incorporated
by reference to Exhibit 4.3 filed with the Company's Current Report on
form 8-K dated June 9, 1997, Commission File No. 000-22117).
4.8 Indenture, dated as of July 22, 1996, between the Company and Fleet
National Bank, as Trustee, with respect to the Exchange Debentures
(incorporated by reference to Exhibit 4.10 filed with the Company's
Amendment No. 2 to Registration Statement on Form S-4, dated October
31, 1996, Registration Statement No. 333-9979).
<PAGE>
4.9 Form of the Company's Subordinated Debentures due 2006 (incorporated
by reference to Exhibit 4.11 filed with the Company's Amendment No. 2
to Registration Statement on Form S-4, dated October 31, 1996,
Registration Statement No. 333-9979).
*4.10 Form of the Company's New 9% Senior Subordinated Debentures due 2009
(the New Debentures).
*4.11 Form of Letter of Transmittal with respect to the Exchange Offer.
*5 Opinion of Winthrop, Stimson, Putnam and Roberts as to the legality of
the New Debentures.
*8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax matters.
10.1 Supply Agreement between Containers and Nestle for Hanford, California
effective August 31, 1987 (incorporated by reference to Exhibit 10(xi)
filed with Silgan Corporation'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).
10.2 Amendment to Supply Agreement for Hanford, California, dated July 1,
1990 (incorporated by reference to Exhibit 10.31 filed with Silgan
Corporation'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).
10.3 Supply Agreement between Containers and Nestle for Riverbank,
California effective August 31, 1987 (incorporated by reference to
Exhibit 10(xii) filed with Silgan Corporation'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).
10.4 Supply Agreement between Containers and Nestle for Morton, Illinois,
effective August 31, 1987 (incorporated by reference to Exhibit
10(vii) filed with Silgan Corporation'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).
10.5 Amendment to Supply Agreement for Morton, Illinois, dated July 1, 1990
(incorporated by reference to Exhibit 10.36 filed with Silgan
Corporation'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).
10.6 Supply Agreement between Containers and Nestle for Ft. Dodge, Iowa,
effective August 31, 1987 (incorporated by reference to Exhibit
10(xiv) filed with Silgan Corporation'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).
10.7 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March 1, 1990
(incorporated by reference to Exhibit 10.38 filed with Silgan
Corporation's Registration Statement on Form S-1 ,
<PAGE>
dated March 18, 1992, Registration Statement No. 33-46499) (Portions
of this Exhibit are subject to confidential treatment pursuant to
order of the Commission).
10.8 Supply Agreement between Containers and Nestle for St. Joseph,
Missouri, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xvii) filed with Silgan Corporation'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).
10.9 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.42 filed with Silgan
Corporation'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).
10.10 Supply Agreement between Containers and Nestle for Trenton, Missouri,
effective August 31, 1987 (incorporated by reference to Exhibit
10(xviii) filed with Silgan Corporation'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).
10.11 Amendment to Supply Agreement for Trenton, Missouri, dated March 1,
1990 (incorporated by reference to Exhibit 10.44 filed with Silgan
Corporation'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).
10.12 Supply Agreement between Containers and Nestle for Moses Lake,
Washington, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xxii) filed with Silgan Corporation'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).
10.13 Amendment to Supply Agreement for Moses Lake, Washington, dated March
1, 1990 (incorporated by reference to Exhibit 10.51 filed with Silgan
Corporation'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).
10.14 Supply Agreement between Containers and Nestle for Jefferson,
Wisconsin, effective August 31, 1987 (incorporated by reference to
Exhibit 10(xxiii) filed with Silgan Corporation'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).
10.15 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1,
1990 (incorporated by reference to Exhibit 10.53 filed with Silgan
Corporation'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).
10.16 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 Corporation's Annual Report on Form 10-K for the
<PAGE>
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).
10.17 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 Corporation's Registration Statement
on Form S-1, dated January 11, 1988, Registration Statement No. 33-
18719).
10.18 Employment Agreement, dated as of September 1, 1989, between the
Company, InnoPak Plastics Corporation (Plastics), Russell F. Gervais
and Aim Packaging, Inc. (incorporated by reference to Exhibit 5 filed
with Silgan Corporation's Report on Form 8-K, dated March 15, 1989).
10.19 InnoPak Plastics Corporation (Plastics) Pension Plan for Salaried
Employees (incorporated by reference to Exhibit 10.32 filed with
Silgan Corporation's Annual Report on Form 10-K for the year ended
December 31, 1988, Commission File No. 33-18719).
10.20 Containers Pension Plan for Salaried Employees (incorporated by
reference to Exhibit 10.34 filed with Silgan Corporation's Annual
Report on Form 10-K for the year ended December 31, 1988, Commission
File No. 33-18719) .
10.21 Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock Option
Plan (incorporated by reference to Exhibit 10.21 filed with the
Company's Annual Report on Form 10-K for the period ended December 31,
1996, Commission File No. 000-22117).
10.22 Form of the Company's Nonstatutory Stock Option Agreement
(incorporated by reference to Exhibit 10.22 filed with the Company's
Annual Report on Form 10-K for the period ended December 31, 1996,
Commission File No. 000-22117).
10.23 Stockholders Agreement, dated as of December 21, 1993, among R. Philip
Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and the Company
(incorporated by reference to Exhibit 3 filed with the Company's
Current Report on Form 8-K, dated March 25, 1994, Commission File No.
33-28409).
10.24 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and the Company (incorporated by
reference to Exhibit 10.24 filed with the Company's Annual Report on
Form 10-K for the period ended December 31, 1996, Commission File No.
000-22117).
10.25 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and Containers (incorporated by
reference to Exhibit 10.26 filed with the Company's Annual Report on
Form 10-K for the period ended December 31, 1996, Commission File No.
000-22117).
10.26 Amended and Restated Management Services Agreement, dated as of
February 14, 1997, between S&H and Plastics (incorporated by reference
to Exhibit 10.27 filed with the Company's Annual Report on Form 10-K
for the period ended December 31, 1996, Commission File No. 000-
22117).
<PAGE>
10.27 Purchase Agreement, dated as of September 3, 1993, between Containers
and Del Monte (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated January 5, 1994, Commission
File No. 33-28409).
10.28 Amendment to Purchase Agreement, dated as of December 10, 1993, between
Containers and Del Monte (incorporated by reference to Exhibit 2 filed
with the Company's Current Report on Form 8-K, dated January 5, 1994,
Commission File No. 33-28409).
10.29 Supply Agreement, dated as of September 3, 1993, between Containers and
Del Monte (incorporated by reference to Exhibit 10.118 filed with
Silgan Corporation'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.)
10.30 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 Corporation'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.)
10.31 Credit Agreement, dated as of August 1, 1995, among the Company (as
successor to Silgan Corporation), Containers, Plastics, the lenders
from time to time party thereto, Bankers Trust, as Administrative Agent
and as a Co-Arranger, and Bank of America Illinois, as Documentation
Agent and as a Co-Arranger (incorporated by reference to Exhibit 2
filed with the Company's Current Report on Form 8-K, dated August 14,
1995, Commission File No. 33-28409).
10.32 Amended and Restated Holdings Guaranty, dated as of August 1, 1995,
made by the Company (incorporated by reference to Exhibit 4 filed with
the Company's Current Report on Form 8-K, dated August 14, 1995,
Commission File No. 33-28409).
10.33 Amended and Restated Borrowers Guaranty, dated as of August 1, 1995,
made by the Company (as successor to Silgan Corporation), Containers,
Plastics, California-Washington Can Corporation and SCCW Can
Corporation (incorporated by reference to Exhibit 3 filed with the
Company's Current Report on Form 8-K, dated August 14, 1995, Commission
File No. 33-28409).
10.34 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 Corporation's Current Report on Form 8-K
dated July 15, 1992, Commission File No. 33-46499).
10.35 Amended and Restated Pledge Agreement dated as of June 18, 1992, made
by the Company (as successor to Silgan Corporation) (incorporated by
reference to Exhibit 5 filed with Silgan Corporation's Current Report
on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
10.36 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 Corporation's Current Report on Form 8-K dated July
15, 1992, Commission File No. 33-46499).
<PAGE>
10.37 Asset Purchase Agreement, dated as of June 2, 1995, between ANC and
Containers (incorporated by reference to Exhibit 1 filed with the
Company's Current Report on Form 8-K, dated August 14, 1995, Commission
File No. 33-28409).
10.38 Placement Agreement, dated June 3, 1997, between the Company (as
successor to Silgan Corporation) and Morgan Stanley (incorporated by
reference to Exhibit 99.1 filed with the Company's Current Report on
Form 8-K, dated June 9, 1997, Commission File No. 000-22117).
10.39 Underwriting Agreement, dated as of February 13, 1997, among the
Company, Containers, Plastics, MSLEF II, BTNY and the underwriters
listed on Schedule I thereto (incorporated by reference to Exhibit
10.40 filed with the Company's Annual Report on Form 10-K for the
period ended December 31, 1996, Commission File No. 000-22117).
10.40 Placement Agreement between the Company and Morgan Stanley, dated July
17, 1996 (incorporated by reference to Exhibit 6 filed with the
Company's Current Report on Form 8-K dated August 2, 1996, Commission
File No. 33-28409).
10.41 Amendment to Stockholders Agreement, dated as of February 14, 1997,
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY and the
Company (incorporated by reference to Exhibit 10.42 filed with the
Company's Annual Report on Form 10-K for the period ended December 31,
1996, Commission File No. 000-22117).
*12.1 Computations of the Company's Ratio of Earnings to Fixed Charges for
the three months ended March 31, 1997 and 1996.
*12.2 Computations of the Company's Ratio of Earnings to Fixed Charges for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992.
*21 Subsidiaries of the Registrant.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Winthrop, Stimson, Putnam & Roberts (included in
Exhibits 5 and 8).
*24 Power of Attorney (included on signature page).
*25 Statement of Eligibility of Trustee with respect to the Debentures.
____________________
*Filed herewith.
<PAGE>
EXHIBIT 4.2
-----------
================================================================================
FIRST SUPPLEMENTAL INDENTURE
Dated as of June 24, 1997
AMONG
SILGAN CORPORATION,
SILGAN HOLDINGS INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
TO
INDENTURE
Dated as of June 9, 1997
BETWEEN
SILGAN CORPORATION, as Issuer
AND
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
================================================================================
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE, dated as of June 24, 1997, is
entered into by and among Silgan Corporation, a Delaware corporation (the
"Company"), Silgan Holdings Inc., a Delaware corporation and the holder of all
of the outstanding capital stock of the Company ("Holdings"), and The First
National Bank of Chicago, a national banking association, as Trustee (the
"Trustee").
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated
as of June 9, 1997 (the "Indenture"), pursuant to which the Company has
heretofore issued $300,000,000 in aggregate principal amount of the Debentures
(such term and all other defined terms used herein and not otherwise defined
herein having the meanings set forth in the Indenture); and
WHEREAS, the Board of Directors of Holdings has determined that it is
in the best interests of Holdings to merge the Company with and into Holdings,
with Holdings being the surviving corporation (the "Holdings Merger"), to be
effective as of June 26, 1997 (the "Effective Date"), pursuant to the terms of
the Certificate of Ownership and Merger filed with the Secretary of State of the
State of Delaware on June 25, 1997; and
WHEREAS, in connection with the Holdings Merger, Holdings, by due
corporate action, has determined to assume all of the obligations of the Company
on all of the Debentures and under the Indenture; and
WHEREAS, Section 5.01 of the Indenture provides, in pertinent part,
that the Company will not merge with or into any other Person unless the Company
shall be the continuing Person, or the successor Person 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 a supplemental
indenture, executed and delivered to the Trustee, all of the obligations of the
Company on all of the Debentures and under the Indenture; and
WHEREAS, Section 5.02 of the Indenture provides, in pertinent part,
that in case of any such merger in accordance with Section 5.01, and following
such assumption by the successor Person, such successor shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture, with the same effect as if such successor Person had been named
as the Company in the Indenture; and
WHEREAS, Section 9.01 of the Indenture provides, in pertinent part,
that without notice to or the consent of any Holder, the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement the Indenture or the Debentures to provide for Holdings'
assumption
-2-
<PAGE>
of the liabilities of the Company represented by the Debentures following the
consummation of the Holdings Merger; and
WHEREAS, the Company and Holdings, by due corporate actions, have
determined to execute a supplemental indenture to effect the assumption by
Holdings of all of the obligations of the Company under the Debentures and the
Indenture;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, and of other valuable
consideration the sufficiency of which is hereby acknowledged, the Company and
Holdings covenant and agree with the Trustee, for the equal and proportionate
benefit of all Holders, as follows:
ARTICLE I.
ASSUMPTION OF THE INDENTURE AND THE DEBENTURES
Section 1.1 Assumption as to Company. On the Effective Date,
------------------------
contemporaneous with the Holdings Merger, Holdings shall assume all of the
obligations of the Company under the Debentures and the Indenture, including,
without limitation, the due and punctual payment of the principal of and
interest on all of the Debentures and the performance of every covenant of the
Indenture on the part of the Company to be performed or observed.
ARTICLE II.
CLOSING DOCUMENTS
Section 2.1 Documents to be given to Trustee. Pursuant to the
--------------------------------
provisions of Section 5.01(v) of the Indenture, the Company will deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate, each dated as of the
Effective Date and each satisfying the provisions of Sections 5.01(v), 11.03 and
11.04 of the Indenture.
ARTICLE III.
MISCELLANEOUS
Section 3.1 Trustee's Acceptance. The Trustee accepts the provisions
--------------------
of this First Supplemental Indenture upon the terms and conditions set forth in
the Indenture; provided, however, that the foregoing acceptance shall not make
-------- -------
the Trustee responsible in any manner whatsoever for the correctness of recitals
or statements by other parties herein.
-3-
<PAGE>
Section 3.2 Indenture to Remain in Full Force and Effect. Except as
--------------------------------------------
hereby expressly provided, the Indenture, as supplemented and amended by this
First Supplemental Indenture, is in all respects ratified and confirmed and all
its terms, provisions and conditions shall be and remain in full force and
effect.
Section 3.3 Rights, Etc. of Trustee. All recitals in this First
-----------------------
Supplemental Indenture are made by the Company and Holdings only and not by the
Trustee. All of the provisions contained in the Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect hereof as fully and with like effect as if set forth
herein in full.
Section 3.4 Successors and Assigns. All covenants and agreements in
----------------------
this First Supplemental Indenture made by the Company and Holdings shall bind
their respective successors and assigns, whether so expressed or not.
Section 3.5 Notices and Demands on Issuer. Any notice or demand
-----------------------------
which by any provision of this First Supplemental Indenture or the Indenture is
required or permitted to be given or served by the Trustee or by the Holders to
or on the Company may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein or in the
Indenture) addressed (until another address of the Issuer is filed by the Issuer
with the Trustee) to Silgan Holdings Inc., 4 Landmark Square, Suite 400,
Stamford, CT 06901, Attention: General Counsel.
Section 3.6 Conflict with Trust Indenture Act. If any provision of
---------------------------------
this First Supplemental Indenture limits, qualifies or conflicts with the duties
imposed by operation of Trust Indenture Act Section 318(c), the imposed duties
shall control.
Section 3.7 Governing Law. The laws of the State of New York shall
-------------
govern this First Supplemental Indenture. The Trustee, Holdings and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this First Supplemental
Indenture.
Section 3.8 Titles, Headings, Etc. The Article and Section headings
----------------------
of this First Supplemental Indenture are for convenience only and shall not
affect the construction hereof.
Section 3.9 Separability Clause. In case any provision in this First
-------------------
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
-4-
<PAGE>
Section 3.10 Execution in Counterparts. This First Supplemental
-------------------------
Indenture may be executed in any number of counterparts, each of which shall be
deemed an original, but such counterparts shall together constitute but one and
the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date and year first above
written.
SILGAN CORPORATION
By: /s/ Harley Rankin, Jr.
----------------------
Harley Rankin, Jr.
Executive Vice President
SILGAN HOLDINGS INC.
By: /s/ Harley Rankin Jr.
---------------------
Harley Rankin, Jr.
Executive Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Richard D. Manella
----------------------
Richard D. Manella
Vice President
-6-
<PAGE>
EXHIBIT 4.4
-----------
===============================================================================
FIRST SUPPLEMENTAL INDENTURE
Dated as of June 24, 1997
AMONG
SILGAN CORPORATION,
SILGAN HOLDINGS INC.
AND
FLEET NATIONAL BANK, formerly SHAWMUT BANK, N.A., as Trustee
TO
INDENTURE
Dated as of June 29, 1992
BETWEEN
SILGAN CORPORATION, as Issuer
AND
FLEET NATIONAL BANK, formerly SHAWMUT BANK, N.A., as Trustee
===============================================================================
<PAGE>
This FIRST SUPPLEMENTAL INDENTURE, dated as of June 24, 1997, is
entered into by and among Silgan Corporation, a Delaware corporation (the
"Company"), Silgan Holdings Inc., a Delaware corporation and the holder of all
of the outstanding capital stock of the Company ("Holdings"), and Fleet National
Bank, formerly Shawmut Bank, N.A., a national banking association, as Trustee
(the "Trustee").
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated
as of June 29, 1992 (the "Indenture"), pursuant to which the Company has
heretofore issued $135,000,000 in aggregate principal amount of the Securities
(such term and all other defined terms used herein and not otherwise defined
herein having the meanings set forth in the Indenture); and
WHEREAS, the Board of Directors of Holdings has determined that it is
in the best interests of Holdings to merge the Company with and into Holdings,
with Holdings being the surviving corporation (the "Holdings Merger"), to be
effective as of June 26, 1997 (the "Effective Date"), pursuant to the terms of
the Certificate of Ownership and Merger filed with the Secretary of State of the
State of Delaware on June 25, 1997; and
WHEREAS, in connection with the Holdings Merger, Holdings, by due
corporate action, has determined to assume all of the obligations of the Company
on all of the Securities and under the Indenture; and
WHEREAS, Section 5.01 of the Indenture provides, in pertinent part,
that the Company will not merge with or into any other Person unless (i) the
Company shall be the continuing Person, or the successor Person 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 a
supplemental indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Securities and under the Indenture,
(ii) immediately after giving effect to such merger, no Default or Event of
Default shall have occurred and be continuing and (iii) immediately after giving
effect to such merger on a pro forma basis, the Interest Coverage Ratio of
Holdings (as the successor obligor on the Securities) is at least 1.75:1; and
WHEREAS, Section 5.02 of the Indenture provides, in pertinent part,
that in case of any such merger in accordance with Section 5.01, and following
such assumption by the successor corporation, such successor shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under the Indenture, with the same effect as if such successor corporation had
been named as the Company in the Indenture; and
-2-
<PAGE>
WHEREAS, Section 9.01 of the Indenture provides, in pertinent part,
that without notice to or the consent of any Holder, the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement the Indenture or the Securities to provide for Holdings'
assumption of the liabilities of the Company represented by the Securities
following the consummation of the Holdings Merger; and
WHEREAS, the Company and Holdings, by due corporate actions, have
determined to execute a supplemental indenture to effect the assumption by
Holdings of all of the obligations of the Company under the Securities and the
Indenture;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, and of other valuable
consideration the sufficiency of which is hereby acknowledged, the Company and
Holdings covenant and agree with the Trustee, for the equal and proportionate
benefit of all Holders, as follows:
ARTICLE I.
ASSUMPTION OF THE INDENTURE AND THE DEBENTURES
Section 1.1 Assumption as to Company. On the Effective Date,
------------------------
contemporaneous with the Holdings Merger, Holdings shall assume all of the
obligations of the Company under the Securities and the Indenture, including,
without limitation, the due and punctual payment of the principal of and
interest on all of the Securities and the performance of every covenant of the
Indenture on the part of the Company to be performed or observed.
ARTICLE II.
CLOSING DOCUMENTS
Section 2.1 Documents to be given to Trustee. Pursuant to the
--------------------------------
provisions of Section 5.01(v) of the Indenture, the Company will deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate, each dated as of the
Effective Date and each satisfying the provisions of Sections 5.01(v) and 11.04
of the Indenture.
ARTICLE III.
MISCELLANEOUS
Section 3.1 Trustee's Acceptance. The Trustee accepts the provisions
--------------------
of this First Supplemental Indenture upon the terms and conditions set forth in
the Indenture; provided, however,
-------- -------
-3-
<PAGE>
that the foregoing acceptance shall not make the Trustee responsible in any
manner whatsoever for the correctness of recitals or statements by other parties
herein.
Section 3.2 Indenture to Remain in Full Force and Effect. Except as
--------------------------------------------
hereby expressly provided, the Indenture, as supplemented and amended by this
First Supplemental Indenture, is in all respects ratified and confirmed and all
its terms, provisions and conditions shall be and remain in full force and
effect.
Section 3.3 Rights, Etc. of Trustee. All recitals in this First
-----------------------
Supplemental Indenture are made by the Company and Holdings only and not by the
Trustee. All of the provisions contained in the Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect hereof as fully and with like effect as if set forth
herein in full.
Section 3.4 Successors and Assigns. All covenants and agreements in
----------------------
this First Supplemental Indenture made by the Company and Holdings shall bind
their respective successors and assigns, whether so expressed or not.
Section 3.5 Notices and Demands on Issuer. Any notice or demand
-----------------------------
which by any provision of this First Supplemental Indenture or the Indenture is
required or permitted to be given or served by the Trustee or by the Holders to
or on the Company may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein or in the
Indenture) addressed (until another address of the Issuer is filed by the Issuer
with the Trustee) to Silgan Holdings Inc., 4 Landmark Square, Suite 400,
Stamford, CT 06901, Attention: General Counsel.
Section 3.6 Conflict with Trust Indenture Act. If any provision of
---------------------------------
this First Supplemental Indenture limits, qualifies or conflicts with the duties
imposed by operation of Trust Indenture Act Section 318(c), the imposed duties
shall control.
Section 3.7 Governing Law. The laws of the State of New York shall
-------------
govern this First Supplemental Indenture. The Trustee, Holdings and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this First Supplemental
Indenture.
Section 3.8 Titles, Headings, Etc. The Article and Section headings
----------------------
of this First Supplemental Indenture are for convenience only and shall not
affect the construction hereof.
Section 3.9 Separability Clause. In case any provision in this First
-------------------
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the
-4-
<PAGE>
remaining provisions shall not in any way be affected or impaired thereby.
Section 3.10 Execution in Counterparts. This First Supplemental
-------------------------
Indenture may be executed in any number of counterparts, each of which shall be
deemed an original, but such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the date and year first above
written.
SILGAN CORPORATION
By: /s/ Harley Rankin, Jr.
----------------------
Harley Rankin, Jr.
Executive Vice President
SILGAN HOLDINGS INC.
By: /s/ Harley Rankin, Jr.
----------------------
Harley Rankin, Jr.
Executive Vice President
FLEET NATIONAL BANK
By: /s/ Michael Quaile
------------------
Michael Quaile
Corporate Trust Officer
-5-
<PAGE>
EXHIBIT 4.10
------------
SILGAN HOLDINGS INC.
9% Senior Subordinated Debenture due 2009
CUSIP No. ___________
No. __ $___________
SILGAN HOLDINGS INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to _______________, or its registered assigns, the
principal sum of _______________________________________ United States Dollars
($______________) on June 1, 2009.
Interest Payment Dates: June 1 and December 1, commencing December 1, 1997.
Regular Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this Debenture set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company caused this Debenture to be signed manually
or by facsimile by its duly authorized officers.
SILGAN HOLDINGS INC.
By:
------------------------------------
Harley Rankin, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
By:
------------------------------------
Sharon E. Budds
Assistant Secretary
This is one of the 9% Senior Subordinated Debentures due 2009 described in
the within-mentioned Indenture.
Date: THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:
------------------------------------
Authorized Signatory
-1-
<PAGE>
SILGAN HOLDINGS INC.
9% Senior Subordinated Debenture due 2009
1. Principal and Interest.
----------------------
The Company will pay the principal of this Debenture on June 1, 2009.
The Company promises to pay interest on the principal amount of this
Debenture on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of the
Debentures at the close of business on the May 15 or November 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
December 1, 1997.
Interest on the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from June 9, 1997;
provided that, if there is no existing default in the payment of interest and
this Debenture is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the principal
amount of the Debentures as provided above on each June 1 and December 1 to the
persons who are Holders (as reflected in the Security Register at the close of
business on such May 15 and November 15 immediately preceding the Interest
Payment Date), in each case, even if the Debenture is cancelled on registration
of transfer or registration of exchange after such record date; provided that,
with respect to the payment of principal, the Company will make payment to the
Holder that surrenders this Debenture to a Paying Agent on or after June 1,
2009.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
-2-
<PAGE>
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary of the Company or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Debentures under an Indenture dated as of June 9,
1997, between the Company (as successor to Silgan Corporation) and The First
National Bank of Chicago, as trustee (the "Trustee"), as amended by the First
Supplemental Indenture thereto, dated as of June 24, 1997, among the Company,
Silgan Corporation and the Trustee (as so amended, the "Indenture").
Capitalized terms herein are used as defined in the Indenture unless otherwise
indicated. The terms of the Debentures include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act.
The Debentures are subject to all such terms, and Holders are referred to the
Indenture and the Trust Indenture Act for a statement of all such terms. To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Debenture and the terms of the Indenture, the terms of the
Indenture shall control.
The Debentures are unsecured, general obligations of the Company.
5. Redemption.
----------
The Debentures will be redeemable, at the Company's option, in whole or in
part, at any time on or after June 1, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Security Register, at the following
Redemption Prices (expressed in percentages of their principal amount), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on or
prior to the Redemption Date to receive interest due on an Interest Payment
Date), if redeemed during the 12-month period commencing on June 1 of the
applicable year set forth below:
Year Redemption Price
---- ----------------
2002 ....................... 104.500%
2003 ....................... 103.375%
2004 ....................... 102.250%
2005 ....................... 101.125%
2006 and thereafter ......... 100.000%
In addition, at any time prior to June 1, 2000, the Company may redeem
up to 35% of the principal amount of the Debentures with the proceeds of one or
more public equity offerings of Common Stock of the Company or the Successor
Corporation, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of
-3-
<PAGE>
109.000%, plus accrued and unpaid interest to the Redemption Date (subject to
the rights of Holders of record on the relevant Regular Record Date that is
prior to the Redemption Date to receive interest due on an Interest Payment
Date); provided that at least $195 million aggregate principal amount of
Debentures remains outstanding after each such redemption.
Debentures in original denominations larger than $1,000 may be
redeemed in part. On and after the Redemption Date, interest ceases to accrue on
Debentures or portions of Debentures called for redemption, unless the Company
defaults in the payment of the Redemption Price.
6. Repurchase upon Change of Control.
---------------------------------
Upon the occurrence of any Change of Control, each Holder shall have
the right, subject to the terms of the Indenture, to require the repurchase of
its Debentures by the Company in cash pursuant to the offer described in the
Indenture at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Payment Date.
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Debentures in original denominations larger than $1,000
may be sold to the Company in part. On and after the Payment Date, interest
ceases to accrue on Debentures or portions of Debentures surrendered for
purchase by the Company, unless the Company defaults in the payment of the
purchase price.
7. Denominations; Transfer; Exchange.
---------------------------------
The Debentures are in registered form without coupons in denominations
of $1,000 of principal amount and multiples of $1,000 in excess thereof. A
Holder may register the transfer or exchange of Debentures in accordance with
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Debentures selected for redemption.
Also, it need not issue, register the transfer of or exchange any Debentures for
a period of 15 days before a selection of Debentures to be redeemed is made.
8. Persons Deemed Owners.
---------------------
A Holder shall be treated as the owner of a Debenture for all
purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
-4-
<PAGE>
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Debentures (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Debentures, except in
certain circumstances for certain sections thereof, and (b) to the Stated
Maturity, the Company will be discharged from certain covenants set forth in the
Indenture.
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Debentures then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of at least a majority in aggregate principal amount of the
Debentures then outstanding. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Debentures to,
among other things, cure any ambiguity, defect or inconsistency and make any
change that does not materially and adversely affect the rights of any Holder.
12. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (120 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
13. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Debentures and the Indenture, the predecessor person
will be released from those obligations.
14. Defaults and Remedies.
---------------------
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Debenture when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment is prohibited
by the subordination provisions set forth in Article Ten of the Indenture; (b)
default in the payment of interest on any Debenture when the same becomes due
and payable, and such default continues for a period of 30 days, whether or not
such payment is prohibited by the subordination provisions set forth in Article
Ten of the Indenture; (c) default in the performance or breach of Article Five
of the Indenture or the failure to make or consummate an Offer to Purchase in
accordance with Section 4.10 or 4.11 of the Indenture, whether or not such Offer
to Purchase is prohibited by the provisions set forth in Article Ten
-5-
<PAGE>
of the Indenture; (d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in the Indenture or under the
Debentures (other than a default specified in clause (a), (b) or (c) above) and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Debentures; (e) there occurs with respect to any issue
or issues of Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate for all
such issues of all such Persons, 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; (f) any final judgment or order (not
covered by insurance) for the payment of money in excess of $10 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the aggregate amount
for all such final judgments or orders outstanding and not paid or discharged
against all such Persons to exceed $10 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (g) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of the Company or
any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or (h) the Company or any Significant Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any of
its Significant Subsidiaries or (C) effects any general assignment for the
benefit of creditors.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Debentures then outstanding may declare all the Debentures to be
due and payable subject to the terms of the Indenture. If a bankruptcy or
insolvency default with respect to the Company or any Restricted Subsidiary
occurs and is continuing, the Debentures automatically become due and payable.
Holders may not enforce the Indenture or the Debentures except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Debentures. Subject to certain limitations,
Holders of at least a majority in principal amount of the Debentures then
outstanding may direct the Trustee in its exercise of any trust or power.
-6-
<PAGE>
15. Subordination.
-------------
The payment of the Debentures will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full, in
cash or cash equivalents, of all Senior Indebtedness.
16. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
--------------------------
No incorporator or any past, present or future partner, stockholder,
other equity holder, officer, director, employee or controlling person as such,
of the Company or of any successor Person shall have any liability for any
obligations of the Company under the Debentures or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Debenture waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Debentures.
18. Authentication.
--------------
This Debenture shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Debenture.
19. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Silgan Holdings
Inc., 4 Landmark Square, Stamford, Connecticut 06901, Attention: General
Counsel.
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ---------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Debenture and all rights thereunder, hereby irrevocably constituting
and appointing
_____________________________________________ attorney to transfer said
Debenture on the books of the Company with full power of substitution in the
premises.
Date: _________________________ Signature: _________________________________
Notice: The signature to this
assignment must correspond with
the name as written upon the face
of the within-mentioned
instrument in every particular,
without alteration or any change
whatsoever.
-8-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Debenture purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Debenture purchased by the Company
pursuant to Section 4.10 or Section 4.11 of the Indenture, state the amount:
$_____________.
Date: ________
Your Signature: _______________________________________________________________
(Sign exactly as your name appears on the other side of this
Debenture)
Signature Guarantee: ________________________________
-9-
<PAGE>
EXHIBIT 4.11
------------
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
9% SENIOR SUBORDINATED DEBENTURES
DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
9% SENIOR SUBORDINATED DEBENTURES
DUE 2009
OF
SILGAN HOLDINGS INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
Deliver to:
The First National Bank of Chicago, Exchange Agent
<TABLE>
<S> <C>
By Registered Mail, Certified Mail, By Facsimile:
Overnight Courier or Hand Delivery: (212) 240-8938
The First National Bank of Chicago Confirm by Telephone:
c/o First Chicago Trust (212) 240-8801
Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Attn: Corporate Trust Administration
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated _______________, 1997 (the "Prospectus") of Silgan Holdings
Inc. (the "Issuer") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Issuer's offer (the "Exchange
Offer") to exchange an equal principal amount of its newly issued 9% Senior
Subordinated Debentures due 2009 (the "New Debentures") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for its
outstanding 9% Senior Subordinated Debentures due 2009 (the "Old Debentures").
Other
<PAGE>
capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
This Letter of Transmittal is to be completed by a holder of Old Debentures
only if certificates for Old Debentures are to be forwarded herewith.
Certificates, or Book-Entry Confirmation (as defined herein) of a book-entry
transfer of such Old Debentures into the Exchange Agent's account at DTC, as
well as this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth above on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message (as defined below) in lieu of this Letter of Transmittal. The term
"Book-Entry Confirmation" means a confirmation of a book-entry transfer of Old
Debentures into the Exchange Agent's account at DTC. The term "Agent's Message"
means a message, transmitted by DTC to and received by the Exchange Agent and
forming a part of a Book-Entry Confirmation, which states that DTC has received
an express acknowledgement from the tendering participant, which acknowledgement
states that such participant has received and agrees to be bound by this Letter
of Transmittal and that the Company may enforce this Letter of Transmittal
against such participant.
Holders of Old Debentures whose certificates are not immediately available,
or who are unable to deliver their certificates or a Book-Entry Confirmation and
all other documents required by this Letter of Transmittal to the Exchange Agent
on or prior to the Expiration Date, must tender their Old Debentures according
to the guaranteed delivery procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1
hereto. Delivery of documents to the DTC does not constitute delivery to the
Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Debentures are registered on the books of the Issuer or any other
person who has obtained a properly completed assignment from a registered
holder. Holders who wish to tender their Old Debentures and are not eligible to
tender their Old Debentures via a Book-Entry Confirmation and an Agent's Message
must complete in its entirety and execute and deliver this Letter of
Transmittal.
-2-
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF 9% SENIOR SUBORDINATED DEBENTURES DUE 2009
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT PRINCIPAL
NAMES AND ADDRESS(ES) OF OF DEBENTURES AMOUNT OF
REGISTERED HOLDERS (PLEASE CERTIFICATE REPRESENTED BY DEBENTURES
FILL IN, IF BLANK) NUMBER(S)/1/ CERTIFICATE(S)/2/ TENDERED/3/
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------
</TABLE>
/1./ Need not be completed by book-entry holders.
/2./ Unless indicated in the column labeled "Principal Amount of Debentures
Tendered," any tendering Holder of 9% Senior Subordinated Debentures due
2009 will be deemed to have tendered the entire principal amount
represented by the column labeled "Aggregate Principal Amount of
Debentures Represented by Certificate(s)."
/3./ The minimum permitted tender is $1,000 in principal amount of 9% Senior
Subordinated Debentures due 2009. All other tenders must be in integral
multiples of $1,000.
If the space provided above is inadequate, list the certificate numbers, the
aggregate principal amount of Debentures represented by each such certificate
and the principal amount of Debentures tendered with respect to each such
certificate on a separate signed schedule and affix the list to this Letter of
Transmittal.
- --------------------------------------------------------------------------------
{__} CHECK HERE IF TENDERED OLD DEBENTURES ARE ENCLOSED HEREWITH.
{__} CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
-------------------------------------------------
Account Number:
----------------------------------------------------------------
-3-
<PAGE>
Transaction Code Number:
-------------------------------------------------------
{__} CHECK HERE IF TENDERED OLD DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Debentures:
----------------------------
-------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Window Ticket Number (if available):
------------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------
Account Number (if delivered by book-entry transfer):
-------------------------
{__} CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
-4-
<PAGE>
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
- ------------------------------------------ --------------------------------
<S> <C>
To be completed ONLY (i) if certificates To be completed ONLY if
for Old Debentures not tendered, or New certificates for Old Debentures
Debentures issued in exchange for Old not tendered, or New Debentures
Debentures accepted for exchange, are to issued in exchange for Old
be issued in the name of someone other Debentures accepted for
than the undersigned, or (ii) if Old exchange, are to be sent to
Debentures tendered by book-entry transfer someone other than the
which are not exchanged are to be returned undersigned, or to the
by credit to an account maintained at DTC. undersigned at an address other
than that shown above.
Issue certificate(s) to: Mail to:
Name: Name:
-------------------------------------- ---------------------------
(Please Print) (Please Print)
Address: Address:
----------------------------------- ------------------------
-------------------------------------------- ---------------------------------
(Include Zip Code) (Include Zip Code)
-------------------------------------------- ---------------------------------
(Tax Identification or Social Security No.) (Tax Identification or Social
Security No.)
Credit Old Debentures not exchanged and
delivered by book-entry transfer to the
DTC account set forth below:
--------------------------------------------
DTC Account Number
- -------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuer the principal amount of Old Debentures indicated
above. Subject to and effective upon the acceptance for exchange of this
principal amount of Old Debentures tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Issuer all right, title and interest in and to the Old Debentures
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent also acts as the agent of the Issuer) with respect to the
tendered Old Debentures with full power of substitution to (i) deliver
certificates for such Old Debentures, or transfer ownership of such Old
Debentures on the account books maintained by DTC, to the Issuer and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Issuer, (ii) present certificates for such Old Debentures for transfer or
evidence of book-entry transfer of such Old Debentures and to transfer the Old
Debentures on the books of the Issuer, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Debentures,
all in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Debentures
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Issuer. The
undersigned hereby further represents that (i) any New Debentures acquired in
exchange for Old Debentures tendered hereby will have been acquired in the
ordinary course of business of the person receiving such New Debentures, whether
or not the undersigned, (ii) neither the undersigned nor any such other person
is engaging in or intends to engage in a distribution of the New Debentures,
(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
Debentures and (iv) neither the Holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer, or
a broker-dealer who receives such New Debentures directly from the Issuer to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the New
Debentures issued in exchange for the Old Debentures pursuant to the Exchange
Offer may be offered for resale, resold and otherwise
-6-
<PAGE>
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act, or a broker-dealer who receives such New Debentures directly from the
Issuer to resell pursuant to Rule 144A or any other available exemption under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Debentures are
acquired in the ordinary course of such holders' business and such holders are
not engaging in and do not intend to engage in a distribution of the New
Debentures and have no arrangement or understanding with any person to
participate in a distribution of such New Debentures. If the undersigned is not
a broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of New Debentures. If the undersigned
is a broker-dealer that will receive New Debentures for its own account in
exchange for Old Debentures that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Debentures; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and exchange of the Old
Debentures tendered hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Debentures when, as and if the Issuer has given
oral or written notice thereof to the Exchange Agent.
If any tendered Old Debentures are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Debentures will be returned (or, in the case of Old Debentures tendered by book-
entry transfer, such Old Debentures will be credited to an account maintained at
DTC), without expense to the tendering Holder as promptly as practicable after
the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Debentures pursuant to any
of the procedures described under the caption "The Exchange Offer--Procedures
for Tendering Old Debentures" in the Prospectus and in the instructions hereto
will constitute a
-7-
<PAGE>
binding agreement between the undersigned and the Issuer upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Debentures issued in exchange for
the Old Debentures accepted for exchange and return any Old Debentures not
tendered or not exchanged in the name(s) of the undersigned or, in the case of a
book-entry transfer of Old Debentures, please credit such New Debentures and any
Old Debentures not tendered or exchanged to the account indicated above
maintained at DTC. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please send the certificates representing the New
Debentures issued in exchange for the Old Debentures accepted for exchange and
any certificates for Old Debentures not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Debentures issued in exchange for the Old
Debentures accepted for exchange in the name(s) of, and return any Old
Debentures not tendered or not exchanged and send said certificates to, the
person(s) so indicated or, in the case of a book-entry transfer of Old
Debentures, please credit such New Debentures and any Old Debentures not
tendered or not exchanged to the account indicated above maintained at DTC. The
undersigned recognizes that the Issuer has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Old Debentures from the name of the registered holder(s) thereof if the
Issuer does not accept for exchange any of the Old Debentures so tendered.
Holders of Old Debentures who wish to tender their Old Debentures and
(i) whose Old Debentures are not immediately available, or (ii) who cannot
deliver their Old Debentures, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date (or who
cannot comply with the book-entry transfer procedures on a timely basis), may
tender their Old Debentures according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." See Instruction 1 regarding the completion of this
Letter of Transmittal, printed below.
-8-
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD DEBENTURES ARE BEING PHYSICALLY TENDERED HEREBY
- -------------------------------------------------- -----------------------------
(Date)
- -------------------------------------------------- -----------------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number:
----------------------
The above lines must be signed by the registered holder(s) of Old
Debentures as their name(s) appear(s) on the certificate for the Old Debentures
or by person(s) authorized to become registered holder(s) by a properly
completed assignment from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Old Debentures to which this
Letter of Transmittal relates are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Issuer, submit evidence satisfactory to the Issuer of such
person's authority so to act. See Instruction 4 regarding the completion of
this Letter of Transmittal, printed below.
Name(s):
----------------------------------------------------------------------
----------------------------------------------------------------------
(Please Print)
Capacity:
----------------------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution (as hereinafter defined):
(If required by Instruction 4)
----------------------------------------------------------------------------
(Authorized Signature)
----------------------------------------------------------------------------
(Title)
----------------------------------------------------------------------------
(Name of Firm)
Dated , 1997
--------------
-9-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD DEBENTURES.
This Letter of Transmittal is to be completed only if Certificates are to
be forwarded herewith. Certificates, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, a substitute Form W-9 (or facsimile thereof) and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth above on or prior to the Expiration
Date; provided, however, that book-entry transfers of Old Debentures may be
effected in accordance with the procedures mandated by DTC's Automated Tender
Offer Program ("ATOP"). Although delivery of Old Debentures may be effected
through ATOP, this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signatures guarantees, or an
Agent's Message in lieu of this Letter of Transmittal, and any other required
documents, must in any case be delivered to and received by the Exchange Agent
at its address set forth above on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth in this Instruction 1 must be complied
with.
The method of delivery of the tendered Old Debentures, this Letter of
Transmittal and all other required documents to the Exchange Agent are at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Debentures should be sent to the Issuer.
Holders who wish to tender their Old Debentures and (i) whose Old
Debentures are not immediately available, or (ii) who cannot deliver their Old
Debentures, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date or (iii) who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
their Old Debentures according to the guaranteed delivery procedures set forth
in the Prospectus. Pursuant to such procedure: (i) such tender must be made by
or through a participant in a Recognized Signature Guarantee Medallion Program
(either a participant in the Securities Transfer Association Medallion Program
(STAMP) or the Stock Exchange Medallion Program (SEMP)) (an "Eligible
Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
-10-
<PAGE>
delivery) setting forth the name and address of the Holder of the Old
Debentures, the certificate number or numbers of such Old Debentures (unless
such Old Debentures are to be tendered via a Book-Entry Confirmation) and the
principal amount of Old Debentures tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, (A) either (1) this Letter of Transmittal (or
facsimile hereof) together with the certificate(s) representing the Old
Debentures or (2) an Agent's Message delivered in connection with a book-entry
transfer, and (B) any other required documents will be deposited by the Eligible
Institution (as hereinafter defined) with the Exchange Agent or otherwise
received by the Exchange Agent; and (iii) either (A) such properly completed and
executed Letter of Transmittal (or facsimile hereof) together with the
certificate(s) representing all tendered Old Debentures, or (B) an Agent's
Message delivered in connection with a book-entry transfer, and all other
documents required by this Letter of Transmittal, all in proper form for
transfer, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date, all as provided in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." Any Holder of Old Debentures who wishes to tender his Old
Debentures pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior
to 5:00 p.m., New York City time, on the Expiration Date. Upon request of the
Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish
to tender their Old Debentures according to the guaranteed delivery procedures
set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Debentures and withdrawal of tendered Old
Debentures will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all Old Debentures not properly tendered or any Old Debentures
the Issuer's acceptance of which would, in the opinion of counsel for the
Issuer, be unlawful. The Issuer also reserves the right to waive any
irregularities or conditions of tender as to particular Old Debentures. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Debentures must be cured within such time as the
Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Debentures, nor shall any of them incur any
liability for failure to give such notification. Tenders of Old Debentures will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Debentures received by the Exchange Agent that are not
properly tendered and as to which the
-11-
<PAGE>
defects or irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holders of Old Debentures, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Debentures may tender such Old
Debentures in the Exchange Offer. Any beneficial holder of Old Debentures who
is not the registered holder and who wishes to tender should arrange with the
registered holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal and
delivering his Old Debentures, either make appropriate arrangements to register
ownership of the Old Debentures in such holder's name or obtain a properly
completed assignment from the registered holder.
3. PARTIAL TENDERS. Tenders of Old Debentures will be accepted only in
integral multiples of $1,000 principal amount. If less than the entire
principal amount of any Old Debenture certificate is tendered, the tendering
Holder should fill in the principal amount tendered in the fourth column of the
box entitled "Description of 9% Senior Subordinated Debentures due 2009" above.
The entire principal amount of Old Debentures set forth on the certificate
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Debentures is
not tendered, then an Old Debenture certificate for the principal amount of Old
Debentures not tendered and a certificate or certificates representing New
Debentures issued in exchange for any Old Debentures accepted will be sent to
the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal, or, in the case
of a book-entry transfer, such Old Debentures certificate and the certificate or
certificates representing New Debentures will be credited to an account
maintained as DTC, promptly after the Old Debenture is accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is signed by
the record Holder(s) of the Old Debentures tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Debenture without
alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Debentures tendered and the certificate or
certificates for New Debentures issued in exchange therefor are to be issued (or
any untendered principal amount of Old Debentures are to be reissued) to the
registered holder, then said holder need not and should not endorse any tendered
Old Debentures. In any other case, such holder must either properly endorse the
Old Debentures tendered or transmit a properly completed assignment with this
Letter of
-12-
<PAGE>
Transmittal, with the signatures on the endorsement or assignment guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Debentures listed, such
Old Debentures must be endorsed or accompanied by appropriate assignments, in
each case signed as the name of the registered holder or holders appears on the
Old Debentures.
If this Letter of Transmittal (or facsimile hereof) or any Old Debentures
or assignments are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Debentures or signatures on assignments required by
this Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. Signatures on this
Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal
is signed by the registered Holder(s) of the Old Debentures tendered herewith
and such Holder(s) have not completed the box set forth herein entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(b) if such Old Debentures are tendered for the account of an Eligible
Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Debentures or substitute Old Debentures for any principal amount of Old
Debentures not tendered or not accepted for exchange are to be issued or sent,
if different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Debentures pursuant to the Exchange Offer.
If, however, certificates representing New Debentures or Old Debentures not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Debentures tendered hereby, or if tendered Old Debentures are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Debentures pursuant to the Exchange Offer, then the amount of
any
-13-
<PAGE>
such transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Debentures listed in this Letter of
Transmittal.
7. FORM W-9. Any Holder who tenders his Old Debentures is required to
provide the Exchange Agent with a correct Taxpayer Identification Number ("TIN")
on the Form W-9 which is enclosed herewith. If such Holder is an individual,
the TIN is his social security number. Failure to provide the information on
the Form W-9 may subject the surrendering Holder to 31 percent federal income
tax withholding on any payment made to holders of the New Debentures and a $50
penalty imposed by the Internal Revenue Service. Exempt Holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. In order to satisfy the
Exchange Agent that a foreign individual qualifies as an exempt recipient, the
Holder must submit a Form W-8, signed under penalties of perjury, attesting to
that individual's exempt status. A Form W-8 can be obtained from the Exchange
Agent.
8. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Debenture tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD CERTIFICATES. Any tendering
Holder whose certificate(s) representing Old Debentures have been mutilated,
lost, stolen or destroyed should contact the Exchange Agent at the address
indicated herein for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
-14-
<PAGE>
<TABLE>
<CAPTION>
(DO NOT WRITE IN SPACE BELOW)
================================================================================
CERTIFICATE OLD DEBENTURES OLD DEBENTURES
SURRENDERED TENDERED ACCEPTED
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Delivery Prepared by:
--------------------------
Checked by:
------------------------------------
Date:
------------------------------------------
-15-
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
SILGAN HOLDINGS INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Silgan Holdings Inc. (the "Issuer") made pursuant to the
Prospectus, dated ____________, 1997 (the "Prospectus"), if certificates for Old
Debentures of the Issuer are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by facsimile transmission, mail, overnight courier
or hand delivery to The First National Bank of Chicago (the "Exchange Agent") as
set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Old Debentures pursuant to the Exchange Offer, either (i) a
completed, signed and dated Letter of Transmittal (or facsimile thereof)
together with the certificates representing all tendered Old Debentures, or (ii)
an Agent's Message delivered in connection with a book-entry transfer, and all
other documents required by the Letter of Transmittal, must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the fifth New York
Stock Exchange trading day after the Expiration Date. Capitalized terms not
defined herein are defined in the Prospectus.
Deliver to:
The First National Bank of Chicago, Exchange Agent
<TABLE>
<S> <C>
By Registered Mail, Certified Mail, By Facsimile:
Overnight Courier or Hand Delivery: (212) 240-8938
The First National Bank of Chicago Confirm by Telephone:
c/o First Chicago Trust (212) 240-8801
Company of New York
14 Wall Street
8th Floor, Window 2
New York, New York 10005
Attn: Corporate Trust Administration
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer
the principal amount of Old
-1-
<PAGE>
Debentures set forth below, pursuant to the guaranteed delivery procedure
described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. By so tendering, the undersigned hereby does make, at and as of the
date hereof, the representations and warranties of a tendering holder of Old
Debentures set forth in the Letter of Transmittal.
Principal Amount of Old If Old Debentures will be delivered by
Debentures Tendered: book-entry transfer to Depository Trust
Company, provide account number:
-------------------------------
Certificate Nos. (if Account Number
available): -------------------------------
-------------------------------
Total Principal Amount
Represented by Old Debenture
Certificate(s):
-------------------------------
-2-
<PAGE>
- --------------------------------------------------------------------------------
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH, INCAPACITY OR DISSOLUTION OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE
UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
- -------------------------------------- ----------------------------------------
(Date)
- -------------------------------------- ----------------------------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number:
------------------------
Must be signed by the holder(s) of Old Debentures as their name(s)
appear(s) on certificates for Old Debentures or by person(s) authorized to
become registered holder(s) by endorsement and documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below:
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
-3-
<PAGE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the
aggregate principal amount of Old Debentures tendered hereby in proper form for
transfer, or timely confirmation of the book-entry transfer of such Old
Debentures into the Exchange Agent's account at Depository Trust Company
pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus, together with a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
(except with respect to a Holder who tenders via Book-Entry Confirmation and an
Agent's Message) with any required signature guarantee and any other documents
required by the Letter of Transmittal, will be received by the Exchange Agent at
the address set forth above, no later than five New York Stock Exchange trading
days after the date of execution hereof.
- -------------------------------------- ---------------------------------------
Name of Firm Authorized Signature
- -------------------------------------- ---------------------------------------
Address Title
Name:
- -------------------------------------- ----------------------------------
Zip Code (Please Type or Print)
Area Code and Telephone No. Dated:
------------------------- --------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD DEBENTURES WITH THIS FORM. CERTIFICATES
FOR OLD DEBENTURES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-4-
<PAGE>
EXHIBIT 5
---------
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Stamford, Connecticut 06904-6760
July 8, 1997
Silgan Holdings Inc.
4 Landmark Square
Stamford, CT 06901
Re: Registration Statement on Form S-4
of Silgan Holdings Inc.
----------------------------------
Gentlemen:
We have acted as counsel to Silgan Holdings Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company with the Securities and Exchange Commission of a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Act"), relating to up to $300 million aggregate principal
amount of the Company's 9% Senior Subordinated Debentures due 2009 (the "New
Debentures") to be issued by the Company in exchange for an equal aggregate
principal amount of its outstanding 9% Senior Subordinated Debentures due 2009.
In connection with this opinion, we have examined copies of (i) the
Registration Statement; (ii) a specimen copy of the debenture representing the
New Debentures; (iii) an originally executed copy of the Indenture (the
"Original Indenture") dated as of June 9, 1997 between the Company (as successor
to Silgan Corporation), as Issuer, and The First National Bank of Chicago, as
Trustee (the "Trustee"), with respect to the 9% Senior Subordinated Debentures
due 2009 of the Company (as successor to Silgan Corporation); (iv) an originally
executed copy of the First Supplemental Indenture (the "Supplemental Indenture")
dated as of June 24, 1997 among the Company, Silgan Corporation and the Trustee,
to the Original Indenture (the Original Indenture, as modified by the
Supplemental Indenture, being referred to herein as the "Indenture"); (v) copies
of the restated certificate of incorporation of the Company, as certified by the
Secretary of State of the State of Delaware; (vi) the amended and restated by-
<PAGE>
laws of the Company; (vii) copies of certain resolutions of the Board of
Directors of the Company; and (viii) all other records, agreements, instruments
and documents that we have deemed relevant or necessary as the basis for the
opinion hereinafter set forth. In stating our opinion, we have assumed the
genuineness of all signatures on original documents (except when executed in our
presence), the authenticity of documents submitted to us as originals and the
conformity to originals of all copies submitted to us as certified, conformed or
reproduction copies.
Based upon the foregoing and subject to the limitations set forth
herein, we are of the opinion that the New Debentures have been duly authorized
by the Company and that when the Registration Statement has become effective
under the Act and the New Debentures have been executed, authenticated and
issued in accordance with the terms of the Indenture and as contemplated by the
Registration Statement, the New Debentures will be entitled to the benefits of
the Indenture and will be legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
(a) the validity, binding effect and enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and (b) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability (regardless of whether such enforceability is considered in a
proceeding in equity or in law).
The foregoing opinion is limited to the Federal laws of the United
States and the General Corporation Law of the State of Delaware, and we express
no opinion as to the effect of the laws of any other jurisdiction.
The opinion expressed herein is solely for your benefit and may not be
relied upon in any manner or for any purpose by, or furnished to, any other
person without our express written consent.
We consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5 to the Registration Statement and to the
reference to our firm under the caption "Legal Matters" in the Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/ Winthrop, Stimson, Putnam & Roberts
-2-
<PAGE>
EXHIBIT 8
---------
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
(212) 858-1000
July 8, 1997
Silgan Holdings Inc.
4 Landmark Square
Stamford, CT 06901
Gentlemen:
As your counsel, we have participated in the preparation of, and have
reviewed, the Prospectus contained in the Registration Statement on Form S-4
dated the date hereof (the "Registration Statement"), filed with the Securities
and Exchange Commission relating to your offer to exchange certain debentures as
described in the Registration Statement (the "Exchange Offer").
On the basis of the foregoing and upon consideration of applicable
law, we are of the opinion that, subject to the qualifications stated therein,
the discussion as to the federal income tax matters set forth under the caption
"Certain United States Federal Income Tax Considerations" in the Prospectus
contained in the Registration Statement summarizes the material federal income
tax consequences relevant to the Exchange Offer.
We consent to being named in the Registration Statement and related
Prospectus as counsel who are passing upon the material tax matters relating to
the Exchange Offer for Silgan Holdings Inc. We also consent to your filing
copies of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Winthrop, Stimson, Putnam &
Roberts
<PAGE>
EXHIBIT 12.1
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
The following table reflects Silgan Holdings Inc.'s computations of ratio of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
Three Months ended March 31,
-----------------------------
(Dollars in thousands)
(unaudited)
1997 1996
--------------- ------------
<S> <C> <C>
Income (loss) before income taxes........................ $(13,803) $ 1,143
Add:
Interest expense and amortization
of debt expense....................................... 19,965 22,573
Rental expense representative of
the interest factor................................... 1,148 1,120
-------- -------
Income as adjusted...................................... $ 7,310 $24,836
======== =======
Fixed charges:
Interest expense and amortization
of debt expense....................................... $ 19,965 $22,573
Rental expense representative of
the interest factor................................... 1,148 1,120
-------- -------
Total fixed charges..................................... $ 21,113 $23,693
======== =======
Deficiency of earnings available to cover fixed charges.. $ 13,803 --
========
Ratio of earnings to fixed charges....................... -- 1.05
=======
</TABLE>
<PAGE>
EXHIBIT 12.2
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
The following table reflects Silgan Holdings Inc.'s computations of ratio of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Income (loss) before income taxes..... $ 33,937 $(10,889) $(7,431) $(12,466) $(17,578)
Add:
Interest expense and amortization
of debt expense................. 89,353 80,710 65,789 54,265 57,091
Minority interest expense.......... -- -- -- -- 2,745
Rental expense representative of
the interest factor............. 4,633 3,607 3,047 2,666 2,659
-------- -------- ------- -------- --------
Income as adjusted................. $127,923 $ 73,428 $61,405 $ 44,465 $ 44,917
======== ======== ======= ======== ========
Fixed charges:
Interest expense and amortization
of debt expense................. $ 89,353 $ 80,710 $65,789 $ 54,265 $ 57,091
Minority interest expense.......... -- -- -- -- 2,745
Rental expense representative of
the interest factor............. 4,633 3,607 3,047 2,666 2,659
-------- -------- ------- -------- --------
Total fixed charges................ $ 93,986 $ 84,317 $68,836 $ 56,931 $ 62,495
======== ======= ======= ======== =======
Ratio of earnings to fixed charges.... 1.36 -- -- -- --
========
Deficiency of earnings available to
cover fixed charges................ -- $ 10,889 $ 7,431 $ 12,466 $ 17,578
======== ======= ======== ========
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries of Silgan Holdings Inc.
Silgan Plastics Corporation/1/
827599 Ontario Inc. (Canadian Holdco.)/2/
Silgan Plastics Canada Inc./3/
Silgan Containers Corporation/1/
California-Washington Can Corporation/4/
SCCW Can Corporation/4/
828745 Ontario Inc. (NRO, Ltd.)/1/
___________________
1. Wholly-owned subsidiary of Silgan Holdings Inc.
2. Wholly-owned subsidiary of Silgan Plastics Corporation.
3. Wholly-owned subsidiary of Canadian Holdco.
4. Wholly-owned subsidiary of Silgan Containers Corporation.
<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 reports
dated January 31, 1997, except for Note 22, as to which date is February 13,
1997 and February 13, 1997 with respect to the consolidated financial statements
and schedules of Silgan Holdings Inc. included in the Registration Statement
(Form S-4, No. 333-____) and related Prospectus of Silgan Holdings Inc. for the
registration of $300,000,000 of 9% Senior Subordinated Debentures due 2009.
We also consent to the incorporation by reference therein of our report dated
January 31, 1997, except for Note 22, as to which date is February 13, 1997 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, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
July 7, 1997
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _____
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-----------------------------------
SILGAN HOLDINGS INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 3441; 3085 06-1269834
(STATE OR OTHER (PRIMARY STANDARD I.R.S.EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBERS)
ORGANIZATION)
4 LANDMARK SQUARE
STAMFORD, CONNECTICUT 06901
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
9% SENIOR SUBORDINATED DEBENTURES DUE 2009
(TITLE OF INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
--------------------
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
------------------------------
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
-----------------
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by Section 321(b)
of the Act.
2
<PAGE>
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the United
States of America, has duly caused this Statement of Eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago and State of Illinois, on the 24th day of June, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25,
1996 (REGISTRATION NO. 333-14201).
3
<PAGE>
EXHIBIT 6 to Form T-1
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
June 24, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between Silgan Holdings
Inc. and The First National Bank of Chicago, the undersigned, in accordance with
Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents
that the reports of examinations of the undersigned, made by Federal or State
authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
VERY TRULY YOURS,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
4
<PAGE>
EXHIBIT 7 to Form T-1
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 03/31/97 ST-BK: 17-1630 FFIEC 031
<S> <C> <C>
Address: One First National Plaza, Ste 0303 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
DOLLAR AMOUNTS IN ----
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and
currency and coin(1) 0081 3,871,170 1.a.
b. Interest-bearing balances(2) 0071 6,498,314 1.b.
2. Securities
a. Held-to-maturity securities(from
Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from
Schedule RC-B, column D).................. 1773 3,901,208 2.b.
3. Federal funds sold and securities purchased under agreements to
resell 1350 4,612,975 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) RCFD 2122 23,345,201 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 420,963 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases, net of unearned
income, allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 22,924,238 4.d.
5. Trading assets (from Schedule RD-D) 3545 8,792,158 5.
6. Premises and fixed assets (including capitalized leases) 2145 706,928 6.
7. Other real estate owned (from Schedule RC-M) 2150 6,563 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) 2130 61,551 8.
9. Customers' liability to this bank on acceptances outstanding 2155 488,866 9.
10. Intangible assets (from Schedule RC-M) 2143 291,569 10.
11. Other assets (from Schedule RC-F) 2160 1,775,283 11.
12. Total assets (sum of items 1 through 11) 2170 53,930,823 12.
- ------------------
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 03/31/97 ST-BK: 17-1630 FFIEC 031
<S> <C>
Address: One First National Plaza, Ste 0303 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
----------
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- ------------
<S> <C> <C> <C> <C>
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) RCON 2200 21,550,056 13.a.
(1) Noninterest-bearing(1) RCON 6631 8,895,137 13.a.1
(2) Interest-bearing RCON 6636 12,654,919 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) RCFN 2200 12,364,650 13.b.
(1) Noninterest bearing RCFN 6631 287,496 13.b.1
(2) Interest-bearing RCFN 6636 12,077,154 13.b.2
14. Federal funds purchased and securities sold under agreements
to repurchase: RCFD 2800 3.817,421 14
15. a. Demand notes issued to the U.S. Treasury RCON 2840 63,621 15.a.
b. Trading Liabilities (from Schedule RC-D)...... RCFD 3548 5,872,831 15b.
16. Other borrowed money:
a. With original maturity of one year or less RCFD 2332 2,607,549 16.a.
b. With original maturity of more than one year RCFD 2333 322,414 16b.
17. Not applicable
18. Bank's liability on acceptance executed and outstanding RCFD 2920 488,866 18.
19. Subordinated notes and debentures RCFD 3200 1,550,000 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 1,196,229 20.
21. Total liabilities (sum of items 13 through 20) RCFD 2948 49 ,833,637 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus RCFD 3838 0 23.
24. Common stock RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,944,244 25.
26. a. Undivided profits and capital reserves RCFD 3632 954,885 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities RCFD 8434 (1,089) 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (1,712) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,097,186 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) RCFD 3300 53,930,823 29.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external Number
auditors as of any date during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 [2 ] M.1.
<S> <C>
1 = Independent audit of the bank 4 = Directors' examination of the
conducted in accordance bank performed by other
with generally accepted auditing external auditors (may be
standards by a certified required by state chartering
public accounting firm authority)
which submits a report on the bank 5 = Review of the bank's financial
2 = Independent audit of the bank's statements by external auditors
parent holding company 6 = Compilation of the bank's
conducted in accordance with financial statements by external auditors
generally accepted auditing 7 = Other audit procedures (excluding tax preparation
standards by a certified work)
public accounting firm which 8 = No external audit work
submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the
bank conducted in accordance with generally accepted
auditing standards by a certified public accounting
firm (may be required by state chartering authority)
</TABLE>
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
