Registration No. 333-30881
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SILGAN HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1269834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Frank W. Hogan, III, Esq.
Silgan Holdings Inc.
4 Landmark Square
Stamford, CT 06901
(203) 975-7110
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy 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
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PROSPECTUS
$300,000,000
SILGAN HOLDINGS INC.
9% SENIOR SUBORDINATED DEBENTURES DUE 2009
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Interest payable June 1 and December 1
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The 9% Senior Subordinated Debentures due 2009 (the "Debentures") will
be redeemable at any time on or after June 1, 2002 at the option of Silgan
Holdings Inc. (the "Company"), in whole or in part, 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, the Company may redeem up to 35% of the
aggregate principal amount of the Debentures at a redemption price equal to 109%
of their principal amount, plus accrued interest, with the proceeds of one or
more public equity offerings by the Company of its common stock (the "Common
Stock").
An aggregate principal amount of $300,000,000 of the Debentures was
originally issued by the Company on August 28, 1997 in exchange for all of the
Company's then outstanding 9% Senior Subordinated Debentures due 2009 (the "Old
Debentures"). The Old Debentures were originally issued on June 9, 1997 by
Silgan Corporation, formerly a wholly owned subsidiary of the Company. On June
26, 1997, Silgan Corporation was merged with and into the Company and, as a
result, the Old Debentures became obligations of the Company.
The Debentures are unsecured, senior subordinated indebtedness of the
Company, senior to all subordinated indebtedness of the Company and subordinated
to all existing and future Senior Indebtedness (as defined in "Description of
Debentures--Certain Definitions") of the Company. Additionally, because the
Company is a holding company that conducts all of its business through its
subsidiaries, all existing and future liabilities of the Company's subsidiaries
will be effectively senior to the Debentures. As of July 31, 1997, the Company
and its subsidiaries had approximately $609.1 million of Indebtedness
outstanding that was effectively senior to the Debentures, all of which
constituted Senior Indebtedness and was secured by the assets of the Company and
its subsidiaries. At June 30, 1997, the Company's subsidiaries also had other
liabilities of approximately $269.7 million, all of which would be effectively
senior to the Debentures. The indenture relating to the Debentures, as amended
(the "Indenture"), permits, subject to certain limitations contained therein,
the incurrence by the Company of a substantial amount of additional
indebtedness, including Senior Indebtedness. See "Risk Factors--Holding Company
Structure and Subordination," "--Ability of the Company to Incur Additional
Indebtedness" and "Description of Debentures."
Although Morgan Stanley & Co. Incorporated ("Morgan Stanley") currently
makes a market in the Debentures, it is not obligated to do so and may
discontinue or suspend its market-making activities at any time. In addition,
the liquidity of and trading market for the Debentures may be adversely affected
by declines and volatility in the market for similar securities generally as
well as by any changes in the Company's financial performance and prospects. See
"Risk Factors--Trading Market for the Debentures."
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SEE "RISK FACTORS" ON PAGE 7 FOR INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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This Prospectus is to be used by Morgan Stanley & Co. Incorporated
in connection with offers and sales in market-making transactions
at negotiated prices relating to prevailing market prices at the
time of sale. Morgan Stanley & Co. Incorporated may act as
principal or agent in such transactions.
September 12, 1997
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No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or Morgan Stanley.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy by any person in any jurisdiction in which it is unlawful for such
person to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall imply under any circumstances that
the information contained herein is correct as of any date subsequent to the
date hereof.
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TABLE OF CONTENTS
Page
Available Information.............................................. 2
Information Incorporated by Reference.............................. 3
Prospectus Summary................................................. 4
Risk Factors....................................................... 7
The Company........................................................ 13
Ratio of Earnings to Fixed Charges................................. 16
Description of Debentures.......................................... 17
Market-Making Activities of Morgan Stanley......................... 47
Legal Matters...................................................... 47
Experts............................................................ 47
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4, as amended by a Registration
Statement on Form S-3, relating to the Debentures under the Securities Act of
1933, as amended (the "Securities Act"). For purposes hereof, the term
"Registration Statement" means the original Registration Statement and any and
all subsequent amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto to which reference is made hereby. Each reference made in this
Prospectus to a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
The Registration Statement and the exhibits and schedules thereto, as well as
all such reports and other information filed by the Company with the Commission,
can be inspected and copied at prescribed rates at the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, DC 20549, and at the
following Regional Offices of the Commission: New York Regional Office, 7 World
Trade Center, New York, New York 10048 and Chicago Regional Office, CitiCorp
Center, 500 West Madison Street, Chicago, Illinois 60661. In addition, the
Commission maintains a Web site that contains reports 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".
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The Indenture requires the Company to file with the Commission annual
reports containing consolidated financial statements and the related report of
independent auditors and quarterly reports containing unaudited consolidated
financial statements for the first three quarters of each fiscal year for so
long as any Debentures are outstanding.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the
Commission pursuant to the Exchange Act and are incorporated herein 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. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997
(File No. 000-22117).
4. Current Report on Form 8-K dated January 27, 1997 (File No. 33-28409).
5. Current Report on Form 8-K dated February 5, 1997 (File No. 33-28409).
6. Current Report on Form 8-K dated February 20, 1997 (File No. 000-22117).
7. Current Report on Form 8-K dated May 21, 1997 (File No. 000-22117).
8. Current Report on Form 8-K dated June 9, 1997 (File No. 000-22117).
9. Current Report on Form 8-K dated August 7, 1997 (File No. 000-22117).
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 shall be deemed to be incorporated by reference into
this Prospectus 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
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).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information contained elsewhere in
this Prospectus and the consolidated financial statements of the Company,
including the notes thereto, and the other information 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, and certain information
incorporated by reference into this Prospectus, including information with
respect to the Company's financial results and condition, expected operations,
cost savings, future liquidity, 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. The Company is also a leading manufacturer of plastic
containers in North America for personal care products and a major manufacturer
of metal closures for food and beverage 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 of Alcoa Closure Systems
International, Inc. ("Alcoa"), and the North American plastic container business
of Rexam plc and Rexam Plastics Inc. ("Rexam") for an aggregate purchase price
of $42.7 million, and 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 $29.9 million.
The Company's strategy has enabled it to rapidly increase its net sales
and income from operations. 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 income from
operations increased from $42.2 million in 1992 to $123.3 million in 1996,
representing a compound annual growth rate of approximately 31%, while the
Company's income from operations as a percentage of net sales increased 2.1
percentage points from 6.7% to 8.8% over the same period. The Company's net
sales increased $50.0 million to $657.0 million for the six months ended June
30, 1997 as compared to the same period in the prior year, and its income from
operations, before consideration of the noncash stock option charge incurred in
connection with the Company's initial public offering of its Common Stock in
February 1997, increased from $58.0 million to $70.5 million over the same
period.
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The Debentures
Debentures.... $300,000,000 aggregate principal amount of 9% Senior
Subordinated Debentures due 2009.
Maturity...... June 1, 2009.
Interest...... Interest on the Debentures is payable semiannually in cash on
June 1 and December 1 of each year, commencing December 1, 1997.
Optional
Redemption.. On or after June 1, 2002, the Debentures will be redeemable, at
the option of the Company, in whole or in part, 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 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 of 109% of their principal amount, 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."
Ranking....... The Debentures are subordinated in right of payment to all
existing and future Senior Indebtedness of the Company
(including indebtedness under the Credit Agreement (as defined
in "Risk Factors--Secured Indebtedness"), 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
Company's 13-1/4% Subordinated Debentures due 2006 (the
"13-1/4% Debentures")). In addition, the Debentures are
effectively subordinated to all liabilities (including trade
payables) of the Company's subsidiaries. As of July 31, 1997,
the Company and its subsidiaries had $609.1 million of Senior
Indebtedness outstanding, consisting of indebtedness
outstanding under the Credit Agreement (all of which is secured
by the assets of the Company and its subsidiaries), and at June
30, 1997, the Company's subsidiaries had approximately $269.7
million of other liabilities, all of which would be effectively
senior to the Debentures. See "Risk Factors--Holding Company
Structure and Subordination" and "Description of
Debentures--Ranking."
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Certain
Covenants... The Indenture contains certain covenants which, among other
things, restrict or limit the ability of the Company and its
Restricted Subsidiaries (as defined in "Description of
Debentures--Certain Definitions") to incur or guarantee
additional indebtedness; pay dividends or make distributions in
respect of their capital stock; purchase, redeem or otherwise
acquire for value shares of their capital stock; make any
voluntary or optional principal payments or voluntary or
optional redemption, repurchase, defeasance or other
acquisition or retirement for value of any Indebtedness (as
defined in "Description of Debentures--Certain Definitions")
subordinated to the Debentures; make any Investments (as
defined in "Description of Debentures--Certain Definitions");
create restrictions on the ability of Restricted Subsidiaries
to make certain payments; issue or sell stock of Restricted
Subsidiaries; enter into transactions with shareholders 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."
Change of
Control..... Upon a Change of Control (as defined in "Description of
Debentures--Certain Definitions"), the Company will be required
to make an offer to purchase the Debentures at a purchase price
equal to 101% of their principal amount, plus accrued interest,
if any, to the date of purchase. See "Description of
Debentures--Covenants--Change of Control."
Risk Factors
For a discussion of certain factors that should be considered in
evaluating an investment in the Debentures, see "Risk Factors" beginning on page
7.
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RISK FACTORS
An investment in the Debentures 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 Debentures.
Certain information contained in this Prospectus and in documents
incorporated or deemed to be incorporated by reference in this Prospectus,
including information regarding the Company's financial results and condition,
expected operations, cost savings, future liquidity, plans and strategy for its
business and related financing, which are not historical facts, are forward
looking statements within the meaning of the Federal securities laws. Such
forward looking statements involve known and unknown risks and uncertainties,
including, but not limited to, factors described in this Prospectus and in
documents incorporated or deemed to be incorporated by reference in this
Prospectus, and should not be regarded as representations or guarantees of the
Company. Accordingly, the Company's actual financial results and condition,
operations, cost savings, liquidity, plans and strategy for its business and
related financing could differ materially from the information expressed or
implied in such forward looking statements.
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 July 31,
1997, the Company had approximately $965.3 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." Additionally, as of June 30,
1997, the Company's deficiency in stockholders' equity was $84.9 million. 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 dated as of July 29, 1997
among the Company and certain of its subsidiaries, the lenders from time to time
party thereto (the "Banks"), Bankers Trust Company, as administration agent and
as a co-arranger, Bank of America National Trust & Savings Association, as
syndication agent and as a co-arranger, Goldman Sachs Credit Partners L.P., as
co-documentation agent and as a co-arranger, and Morgan Stanley Senior Funding,
Inc., as co-documentation agent and as a co-arranger (as amended from time to
time, the "Credit Agreement") is secured by substantially all of the assets of
the Company and the stock of the Company's subsidiaries. The Credit Agreement
provides the Company with a total senior secured credit facility of $1.0
billion, which includes $450.0 million of term loans (all of which have been
incurred) and $550.0 million of revolving loans. In addition, under the Credit
Agreement the Banks have approved an increase of up to $200.0 million in the
amount of revolving loans available to the Company, with any such increase to be
funded by one or more of the Banks that elect to participate in such increase
but with no Bank being obligated to participate in any such increase. Revolving
loans under the Credit Agreement are available to the Company for its working
capital and general corporate purposes (including permitted acquisitions) and
generally may be borrowed, repaid and reborrowed. At July 31, 1997,
approximately $609.1 million of the Company's and its subsidiaries' indebtedness
was outstanding under the Credit Agreement and was 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."
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Under the Credit Agreement, the Banks 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 on
a secured basis by substantially all of 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 (including the Company's indebtedness
under the Credit Agreement), such assets and stock would be available to satisfy
obligations with respect to the indebtedness under the Credit Agreement before
any payment therefrom could be made on the Debentures. To the extent such assets
were not sufficient to repay indebtedness under the Credit Agreement as well as
any other 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
"--Holding Company Structure and Subordination" and "Description of
Debentures--Ranking."
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 through each of its wholly owned operating subsidiaries,
Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation
("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 their
products, 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 July 31, 1997,
excluding intercompany indebtedness, the Company's subsidiaries had
approximately $159.1 million of indebtedness (consisting of indebtedness under
the Credit Agreement) effectively senior to the Debentures. See "--Secured
Indebtedness," "--Ability of the Company to Incur Additional Indebtedness" and
"Description of Debentures--Ranking." In addition, the Company's subsidiaries
had other liabilities of approximately $269.7 million at June 30, 1997, all of
which would be effectively senior to the Debentures.
The payment of principal on the Debentures is expressly subordinate to
the indebtedness under the Credit Agreement and all other 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 July 31, 1997,
the Company had outstanding approximately $609.1 million of Senior Indebtedness
(consisting of indebtedness outstanding under the Credit Agreement).
Ability of the Company to Incur Additional Indebtedness
Under the Credit Agreement, Containers and Plastics have available to
them up to $550 million of revolving loans which generally may be borrowed,
repaid and reborrowed from time to time. As of July 31, 1997, there were $159.1
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million of revolving loans outstanding under the Credit Agreement. The Company
is generally permitted under the Credit Agreement to borrow revolving loans for
working capital and general corporate purposes, including to make permitted
acquisitions. Although the Credit Agreement limits the incurrence by the Company
and its subsidiaries of additional indebtedness, the Indenture permits the
Company and its subsidiaries to incur a substantial amount of indebtedness in
addition to the Debentures, the 13-1/4% Debentures and the indebtedness that may
be incurred under the Credit Agreement, including additional Senior
Indebtedness, secured indebtedness and other indebtedness that would be
effectively senior to or pari passu with the Debentures. For example, the
Indenture permits the Company and its subsidiaries to incur any indebtedness 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 June 30,
1997, the Company's Interest Coverage Ratio was 2.7 to 1. See "Description of
Debentures--Covenants--Limitation on Indebtedness." The Company and its
subsidiaries may make additional acquisitions in the future and may finance such
acquisitions with additional indebtedness, including Senior Indebtedness,
secured indebtedness and indebtedness effectively senior to the Debentures, as
permitted under the instruments and agreements governing its indebtedness.
Refinancing Risk
Under the Credit Agreement, revolving loans generally may be borrowed,
repaid and reborrowed from time to time until December 31, 2003, on which date
all such revolving loans mature and are payable in full. Additionally, A term
loans under the Credit Agreement are payable in installments through December
31, 2003, and B term loans under the Credit Agreement are payable in
installments through June 30, 2005. The Company will have to refinance all of
its indebtedness under the Credit Agreement, as well as the 13-1/4% Debentures,
prior to the maturity of the Debentures. The Company's ability to do so will
depend on, among other things, its financial condition at the time, the
restrictions in the instruments governing its 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
such 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, consisting
principally of the Credit Agreement, the Indenture, and the indenture in respect
of the 13-1/4% Debentures (collectively, the "Financing Agreements"). The
Financing Agreements contain numerous restrictive covenants, including financial
and operating covenants, certain of which 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,
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 and make other payments in respect of its
capital stock.
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 13-1/4% 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
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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 of the Company.
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 any 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
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 may incur additional indebtedness, including indebtedness under the
Credit Agreement and other Senior Indebtedness, secured indebtedness and
indebtedness effectively senior to the Debentures, 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. 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. Certain of the Nestle Supply Agreements (representing
approximately 10% of the Company's 1996 sales) have been extended through 2004
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. The remaining Nestle Supply Agreements (representing
approximately 6% of the Company's 1996 sales) continue through 1997. However,
the Company has the right to submit a bid to Nestle, and to match any bid
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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. 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 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.
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 by borrowing revolving loans under the Credit Agreement to finance
its working capital requirements.
Competition
The manufacture and sale of metal and plastic containers is highly
competitive and certain of the Company's competitors have greater financial
resources than the Company. In particular, price competition can be an important
factor and may affect the Company's results of operations.
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., 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.
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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. Additionally, Morgan Stanley
receives compensation for ongoing financial advice to the Company and its
affiliates, and Morgan Stanley Senior Funding, Inc., an affiliate of Morgan
Stanley Dean Witter, receives certain fees and other amounts from the Company in
its capacity as a co-arranger, co-documentation agent and one of the several
Banks under the Credit Agreement.
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.
Trading Market for the Debentures
Morgan Stanley currently makes a market in the Debentures. However, it
is not obligated to do so, and any such market-making activities may be
discontinued at any time without notice, at its sole discretion. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, the
Debentures. See "Market-Making Activities of Morgan Stanley."
The liquidity of, and trading market for, the Debentures may also be
adversely affected by declines and volatility in the market for similar
securities generally as well as by any changes in the Company's financial
performance or prospects.
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THE COMPANY
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. The Company is also a leading manufacturer of plastic
containers in North America for personal care products and a major manufacturer
of metal closures for food and beverage 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 $42.7 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 income from operations. 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 income from
operations increased from $42.2 million in 1992 to $123.3 million in 1996,
representing a compound annual growth rate of approximately 31%, while the
Company's income from operations as a percentage of net sales increased 2.1
percentage points from 6.7% to 8.8% over the same period. The Company's net
sales increased $50.0 million to $657.0 million for the six months ended June
30, 1997 as compared to the same period in the prior year, and its income from
operations, before consideration of the noncash stock option charge incurred in
connection with the Company's initial public offering of its Common Stock in
February 1997, increased from $58.0 million to $70.5 million over the same
period.
The principal executive offices of the Company are located at 4
Landmark Square, Stamford, Connecticut 06901, telephone number (203) 975-7110.
Company History
The Company is a Delaware corporation, organized as a holding company
to acquire interests in various packaging manufacturers. The Company has
completed the following acquisitions:
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Acquired Business Year Products
- ----------------- ---- --------
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
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. The Company has also expanded its
specialty business, most recently with its acquisition in April 1997 of the
North American aluminum roll-on closure business of Alcoa. Management believes
that certain industry trends exist which will enable the Company to continue to
acquire attractive businesses in its existing metal container, plastic container
and specialty markets. In pursuing its strategy, the Company seeks to acquire
businesses at reasonable cash flow multiples and to enhance profitability by
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rationalizing plants, by improving manufacturing and production efficiencies and
through purchasing economies. The Company also expects to generate internal
growth due to its participation in certain higher growth segments of the
consumer goods packaging market.
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 and income from
operations 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. In addition to lowering the Company's interest expense on its
outstanding indebtedness and extending the maturities of the Company's
indebtedness, the Company's financing strategy has resulted in (i) an increase
in borrowings available to the Company under the Credit Agreement, which
borrowings are available as revolving loans and may be used by the Company for
permitted acquisitions and for general corporate purposes and (ii) improved
operating and financial flexibility for the Company as a result of changes in
covenants under the Financing Agreements which provide the Company with more
flexibility to, among other things, make acquisitions, pay dividends, repurchase
stock and refinance existing indebtedness.
Business Segments
The Company is a holding company that conducts its business through its
two wholly owned operating companies, Containers and Plastics.
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' 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 high density
polyethylene 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 polyethylene terephthalate custom designed containers
for mouthwash, respiratory and gastrointestinal products, liquid soap, skin care
lotions, salad dressings, condiments, instant coffee, bottled water and liquor.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges,
or the deficiency of earnings available to cover fixed charges, as the case may
be, for the Company for the six month periods ended June 30, 1997 and 1996 and
for each of the five years ended December 31, 1996, 1995, 1994, 1993 and 1992.
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.
Six Months
Ended
June 30, Year Ended December 31,
-------- ---------------------------------
1997(1) 1996 1996 1995 1994 1993 1992
------ ---- ---- ---- ---- ---- ----
Ratio of earnings to
fixed charges................ 1.16 1.25 1.36 -- -- -- --
Deficiency of earnings available
to cover fixed charges
($ in millions) .............. -- -- -- $10.9 $7.4 $12.5 $17.5
- -------------
(1) Excluding the historical non-cash pre-tax stock option charge of $22.5
million recognized by the Company in the first quarter of 1997 in connection
with the Company's initial public offering of its Common Stock, the Company's
ratio of earnings to fixed charges for the six months ended June 30, 1997
would have been 1.68.
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DESCRIPTION OF DEBENTURES
The Debentures were issued under the Indenture between the Company and
The First National Bank of Chicago, as trustee (the "Trustee"). 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 Debentures are unsecured senior subordinated obligations of the
Company, initially limited to $300 million aggregate principal amount, and will
mature on June 1, 2009. Each Debenture bears 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.
Principal of, premium, if any, and interest on the Debentures are
payable, and the Debentures may be exchanged or transferred, at the office or
agency of the Registrar and Paying Agent; provided that, at the Company's
option, payment of interest may be made by check mailed to the Holders at their
addresses as they appear in the Security Register. The Trustee currently acts as
Registrar and Paying Agent. The Company may change any Registrar and Paying
Agent without prior notice to Holders of the Debentures.
The Debentures are 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 and any additional Debentures subsequently issued would be
treated as a single class for all purposes under the Indenture.
Optional Redemption
The 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:
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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 a 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 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 Debentures are subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, 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 13-1/4% Debentures. In addition, since all of the operations of
the Company are conducted through its subsidiaries, all existing and future
liabilities (including trade payables) of its subsidiaries are and will be
effectively senior to the Debentures. As of July 31, 1997, the Company had
outstanding approximately $609.1 million of Indebtedness that constituted Senior
Indebtedness (all of which was secured). In addition, the Company's subsidiaries
had other liabilities of approximately $269.7 million at June 30, 1997, all of
which would be effectively senior to the Debentures. See "Risk Factors--Secured
Indebtedness" and "--Holding Company Structure and Subordination."
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred. To the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
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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 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
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<PAGE>
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 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.
Certain Definitions
Set forth below is a summary of certain of the defined terms used
herein and 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
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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 (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
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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.
"Bank Agent" means Bankers Trust Company, or its successor as a
co-arranger and administrative 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 or (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.
"Closing Date" means June 9, 1997.
"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)
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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.
"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 July 29,
1997, among the Company, Containers, Plastics, certain other subsidiaries of any
of them, the Banks party thereto, the Bank Agent, Bank of America National Trust
& Savings Association, as a co-arranger and as syndication agent, and Goldman
Sachs Credit Partners L.P. and Morgan Stanley Senior Funding, Inc., as
co-documentation agents and each as a 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.
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"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"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."
"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 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.
"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% Exchangeable Preferred
Stock Mandatorily Redeemable 2006 of the Company, the 11-3/4% Senior
Subordinated Notes due 2002 of the Company (as successor to Silgan Corporation),
the 13-1/4% Senior Discount Debentures due 2002 of the Company 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
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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 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.
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"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 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.
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"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 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
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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.
"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
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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.
"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
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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.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether outstanding as of the Closing Date or issued after the Closing Date,
including, without limitation, all series and classes of such preferred or
preference stock.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"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.
"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.
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"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.
"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.
"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.
"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
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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.
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
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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 13-1/4% Debentures in satisfaction of
payment-in-kind interest obligations on outstanding 13-1/4% Debentures; (vii)
Guarantees of Indebtedness of the Company and Restricted Subsidiaries to the
extent 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 Company's previous credit agreement dated as of August 1, 1995, as
amended, 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
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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 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
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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 a 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 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; and (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;
provided that, except in the case of clauses (i), (ii), (iii) and (v), 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 and an Investment referred to in clause (vii)
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
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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; (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
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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" 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,
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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 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
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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 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), 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
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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.
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.
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 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
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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 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
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<PAGE>
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
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
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<PAGE>
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 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
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<PAGE>
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.
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 First National Bank of Chicago acts as Trustee under the Indenture.
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<PAGE>
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 The Depository Trust Company ("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 Debentures
represented by such Global Debenture for all purposes under the Indenture and
the 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 System ("Euroclear") and Citibank, N.A., as
operator of Cedel Bank societe anonyme ("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 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 Debentures (including the presentation of 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 Debentures as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the 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 in the Indenture.
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
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<PAGE>
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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<PAGE>
MARKET-MAKING ACTIVITIES OF
MORGAN STANLEY
The Prospectus is to be used by Morgan Stanley in connection with
offers and sales of the Debentures in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Morgan Stanley
may act as principal or agent in such transactions. Morgan Stanley has no
obligation to make a market in the Debentures, and may discontinue its
market-making activities at any time without notice, in its sole discretion. As
of the date of this Prospectus, MSLEF II, an affiliate of Morgan Stanley, owns
30.9% of the outstanding Common Stock. See "Risk Factors--Certain Interests of
Stockholders."
In connection with the Company's issuance and sale in June 1997 of
$300.0 million aggregate principal amount of the Debentures in a private
placement, Morgan Stanley acted as placement agent and received certain fees
amounting to $7.9 million in connection therewith. In connection with such
offering, the Company agreed to indemnify Morgan Stanley, as the placement
agent, against certain liabilities, including liabilities under the Securities
Act.
Morgan Stanley acted as placement agent in connection with the offering
by the Company of its 13-1/4% Exchangeable Preferred Stock Mandatorily
Redeemable 2006, all of which was exchanged into the 13-1/4% Debentures, and
received certain fees amounting to $1.8 million in connection therewith. Morgan
Stanley also acted as one of the several underwriters in connection with the
Company's initial public offering in February 1997 of Common Stock and received
fees of approximately $1.2 million in connection therewith. In connection with
the Credit Agreement, Morgan Stanley Senior Funding, Inc., an affiliate of
Morgan Stanley, in its capacity as a co-arranger, co-documentation agent and one
of the several Banks thereunder, receives certain fees and other amounts.
Morgan Stanley has provided, and continues to provide, investment
banking services to the Company and its affiliates.
LEGAL MATTERS
The legality of the Debentures has been passed on for the Company by
Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street,
Stamford, Connecticut 06901. Winthrop, Stimson, Putnam & Roberts from time to
time represents Morgan Stanley in connection with certain legal matters
unrelated to its representation of the Company.
EXPERTS
The consolidated financial statements and schedules of Silgan Holdings
Inc. appearing in the Company's Annual Report (Form 10-K) for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their reports thereon included therein and incorporated herein
by reference. Such consolidated financial statements and schedules are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Not Applicable.
Item 15. 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 Restated Certificate of Incorporation and Amended and
Restated 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.
Item 16. Exhibits.
Exhibit
Number Description
- ------ -----------
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 (as successor to Silgan Corporation)
and The First National Bank of Chicago, as trustee, with
respect to the Debentures (incorporated by reference to
Exhibit 4.2 filed with the Company's Registration Statement on
Form S-4, dated July 8, 1997, Registration Statement No.
333-30881).
4.3 Form of the 9% Senior Subordinated Debentures due 2009
(incorporated by reference to Exhibit 4.10 filed with the
Company's Registration Statement on Form S-4, dated July 8,
1997, Registration Statement No. 333-30881).
5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the
legality of the Debentures (incorporated by reference to
Exhibit 5 filed with the Company's Registration Statement
on Form S-4, dated July 8, 1997, Registration Statement
No. 333-30881).
12.1 Computations of the Company's Ratio of Earnings to Fixed
Charges for the six months ended June 30, 1997 and 1996
(incorporated by reference to Exhibit 12.1 filed with the
Company's Registration Statement on Form S-3, dated September
12, 1997, Registration Statement No. 333-9979).
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 (incorporated by reference to Exhibit 12.2
filed with the Company's Registration Statement on Form S-4,
dated July 8, 1997, Registration Statement No. 333-30881).
*23.1 Consent of Ernst & Young LLP.
23.2 Consent of Winthrop, Stimson, Putnam & Roberts (included in
Exhibit 5).
*24 Power of Attorney (included on signature page).
II-1
<PAGE>
25 Statement of Eligibility of Trustee with respect to the
Debentures (incorporated by reference to Exhibit 25 filed
with the Company's Registration Statement on Form S-4,
dated July 8, 1997, Registration Statement No. 333-30881).
- --------------------
*Filed herewith.
Item 17. Undertakings.
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and 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 September 12,
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.
Signature Title Date
- --------- ----- ----
Chairman of the Board and
/s/ R. Philip Silver Co-Chief Executive Officer
- -------------------- (Principal Executive Officer) September 12, 1997
(R. Philip Silver)
/s/ D. Greg Horrigan President, Co-Chief Executive
- --------------------- Officer and Director September 12, 1997
(D. Greg Horrigan)
/s/ Robert H. Niehaus Director September 12, 1997
- -----------------------------
(Robert H. Niehaus)
/s/ Leigh J. Abramson Director September 12, 1997
- -----------------------------
(Leigh J. Abramson)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Thomas M. Begel Director September 12, 1997
- -----------------------------
(Thomas M. Begel)
/s/ Jeffrey C. Crowe Director September 12, 1997
- -----------------------------
(Jeffrey C. Crowe)
Executive Vice President,
Chief Financial Officer and
/s/ Harley Rankin, Jr. Treasurer
- ----------------------------- (Principal Financial Officer) September 12, 1997
(Harley Rankin, Jr.)
Vice President, Controller
/s/ Harold J. Rodriguez, Jr. and Assistant Treasurer
- ----------------------------- (Principal Accounting Officer) September 12, 1997
(Harold J. Rodriguez, Jr.)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
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 (as successor to Silgan Corporation)
and The First National Bank of Chicago, as trustee, with
respect to the Debentures (incorporated by reference to
Exhibit 4.2 filed with the Company's Registration Statement on
Form S-4, dated July 8, 1997, Registration Statement No.
333-30881).
4.3 Form of the 9% Senior Subordinated Debentures due 2009
(incorporated by reference to Exhibit 4.10 filed with the
Company's Registration Statement on Form S-4, dated July 8,
1997, Registration Statement No. 333-30881).
5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the
legality of the Debentures (incorporated by reference to
Exhibit 5 filed with the Company's Registration Statement
on Form S-4, dated July 8, 1997, Registration No. 333-30881).
12.1 Computations of the Company's Ratio of Earnings to Fixed
Charges for the six months ended June 30, 1997 and 1996
(incorporated by reference to Exhibit 12.1 filed with the
Company's Registration Statement on Form S-3, dated September
12, 1997, Registration Statement No. 333-9979).
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 (incorporated by reference to Exhibit 12.2
filed with the Company's Registration Statement on Form S-4,
dated July 8, 1997, Registration Statement No. 333-30881).
*23.1 Consent of Ernst & Young LLP.
23.2 Consent of Winthrop, Stimson, Putnam & Roberts (included in
Exhibit 5).
*24 Power of Attorney (included on signature page).
25 Statement of Eligibility of Trustee with respect to the
Debentures (incorporated by reference to Exhibit 25 filed
with the Company's Registration Statement on Form S-4,
dated July 8, 1997, Registration Statement No. 333-30881).
- --------------------
*Filed herewith.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Post-Effective Amendment No. 1 to the Registration Statement (Form S-4 No.
333-30881) on Form S-3 and related Prospectus of Silgan Holdings Inc. for the
registration of $300,000,000 9% Senior Subordinated Debentures Due 2009 and to
the incorporation by reference therein of our reports dated January 31, 1997,
except for Note 22, as to which the 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
September 8, 1997
