-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, n8zG6dUro4y07eIRduYvyDRohBYJpZUWKfMKMX95a/1D0iOimOoYG1DdOH+02huy 3KEAlUiwvqvtGlh8V6qIiw== 0000896058-94-000086.txt : 19940812 0000896058-94-000086.hdr.sgml : 19940812 ACCESSION NUMBER: 0000896058-94-000086 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19940810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILGAN HOLDINGS INC CENTRAL INDEX KEY: 0000849869 STANDARD INDUSTRIAL CLASSIFICATION: 3440 IRS NUMBER: 061269834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-47632 FILM NUMBER: 94542806 BUSINESS ADDRESS: STREET 1: 4 LANDMARK SQ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039757110 POS AM 1 FORM S-1 POST EFFECTIVE AMENDMENT 4 Registration No. 33-47632 ====================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- SILGAN HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware 3441;3085 06-1269834 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Classification Identification incorporation or Code Numbers) Number) organization) 4 Landmark Square Stamford, CT 06901 (203) 975-7110 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Harley Rankin, Jr. Silgan Holdings Inc. 4 Landmark Square Stamford, CT 06901 (203) 975-7110 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------------- Copy to: Frode Jensen, III, Esq. Winthrop, Stimson, Putnam & Roberts Financial Centre 695 East Main Street P.O. Box 6760 Stamford, CT 06904-6760 (203) 348-2300 ========================================================================= SILGAN HOLDINGS INC. Cross Reference Sheet SILGAN HOLDINGS INC. Pursuant to Item 501(b) of Regulation S-K Form S-1 Part I Item Prospectus Location or Caption -------------------- ------------------------------ 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus . . . . . . . Cross Reference Page; Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus . . . Inside Front Cover Page 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges . . . . . . . . . . . . Prospectus Summary; Certain Risk Factors; The Company; Selected Financial Data 4. Use of Proceeds . . . . . . . . Not Applicable 5. Determination of Offering Price Not Applicable 6. Dilution . . . . . . . . . . . . Not Applicable 7. Selling Security Holders . . . . Not Applicable 8. Plan of Distribution . . . . . . Market-Making Activities of Morgan Stanley 9. Description of Securities to be Registered . . . . . . . . . . . Outside Front Cover Page; Prospectus Summary; Description of the Debentures 10. Interests of Named Experts and Counsel . . . . . . . . . . . . Certain Transactions; Legal Matters; Experts 11. Information With Respect to the Registrant . . . . . . . . . . . Outside Front Cover Page; Prospectus Summary; Certain Risk Factors; The Company; Capitalization; Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Securities Ownership of Certain Beneficial Owners and Management; Certain Transactions; Description of the Debentures; Description of Holdings Common Stock; Description of Certain Silgan Indebtedness; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities . . . . . . . . Not Applicable PROSPECTUS $275,000,000 Silgan Holdings Inc. 13-1/4% SENIOR DISCOUNT DEBENTURES DUE 2002 -------------------- No interest on the 13-1/4% Senior Discount Debentures due 2002 (the "Debentures") will accrue prior to June 15, 1996. Thereafter, interest on the Debentures will be payable on June 15 and December 15, commencing December 15, 1996. --------------------- The Debentures were sold at a substantial discount from their principal amounts, and there will not be any payment of interest on the Debentures prior to December 15, 1996. See "Certain Federal Income Tax Considerations" for a discussion of the federal income tax treatment of the Debentures under the original issue discount rules. Interest on the Debentures will be payable in cash at a rate of 13-1/4% per annum from and after June 15, 1996. The Debentures may be redeemed at any time at the option of Silgan Holdings Inc. ("Holdings," and together with its subsidiaries, the "Company"), in whole or in part, at 100% of their principal amount plus accrued interest. The Debentures were originally sold by Holdings to the public in 1992 as part of a plan of the Company to refinance a substantial portion of its indebtedness (the "Refinancing"). The Debentures are pari passu with other unsecured unsubordinated indebtedness of Holdings. Because Holdings is a holding company that conducts all of its business through its subsidiaries, all existing and future liabilities of Holdings' subsidiaries will be effectively senior to the Debentures. As of March 31, 1994, Silgan Corporation, a wholly owned subsidiary of Holdings ("Silgan"), and its subsidiaries had approximately $471.5 million of indebtedness and other liabilities effectively senior to the Debentures, all of which constituted Senior Indebtedness (as defined in "Description of the Debentures-- Subordination Upon Certain Events") and approximately $195.8 million of which was secured by the assets of the Company. The indenture relating to the Debentures (the "Indenture") permits, subject to certain limitations contained therein, the incurrence by the Company of a substantial amount of additional indebtedness, including Senior Indebtedness. See "Certain Risk Factors--Holding Company Structure and Subordination Upon Certain Events," "- - -Ability of the Company to Incur Additional Indebtedness" and "Description of the Debentures." The ability of Holdings to pay interest in cash on the Debentures on and after December 15, 1996 may depend upon the ability of Silgan to pay dividends, or otherwise loan, advance or transfer funds, to Holdings. See "Certain Risk Factors--Ability of Silgan to Provide Financial Support to Holdings." Although Morgan Stanley & Co. Incorporated ("Morgan Stanley") currently makes a market in the Debentures, it is not obligated to do so and may discontinue or suspend its market-making activities at any time. In addition, the liquidity of and trading market for the Debentures may be adversely affected by declines and volatility in the market for high yield securities generally as well as by any changes in the Company's financial performance and prospects. See "Certain Risk Factors--Trading Market for the Debentures." -------------------- SEE "CERTAIN RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. -------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------- This Prospectus is to be used by Morgan Stanley & Co. Incorporated in connection with offers and sales in market-making transactions at negotiated prices relating to prevailing market prices at the time of sale. Morgan Stanley & Co. Incorporated may act as principal or agent in such transactions. August 10, 1994 No person is authorized in connection with any offering made hereby to give any information or to make any representation other than as contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by Holdings or Morgan Stanley. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall imply under any circumstances that the information contained herein is correct as of any date subsequent to the date hereof. ------------------------ TABLE OF CONTENTS Page Additional Information . . . . . . . . . . 3 Prospectus Summary . . . . . . . . . . . . 4 Certain Risk Factors . . . . . . . . . . . 11 The Company . . . . . . . . . . . . . . . . 17 Capitalization . . . . . . . . . . . . . . 19 Selected Financial Data . . . . . . . . . . 20 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 24 Business . . . . . . . . . . . . . . . . . 34 Management . . . . . . . . . . . . . . . . 47 Securities Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 58 Certain Transactions . . . . . . . . . . . 59 Description of the Debentures . . . . . . . 61 Description of Holdings Common Stock . . . 89 Description of Certain Silgan Indebtedness 95 Certain Federal Income Tax Considerations . 101 Market-Making Activities of Morgan Stanley 107 Legal Matters . . . . . . . . . . . . . . . 107 Experts . . . . . . . . . . . . . . . . . . 108 Index to Consolidated Financial Statements F-1 ----------------- ADDITIONAL INFORMATION Holdings has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (which term shall encompass any amendment thereto) relating to the Debentures under the Securities Act of 1933, as amended (the "Securities Act"). For purposes hereof, the term "Registration Statement" means the original Registration Statement and any and all subsequent amendments thereto. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto which reference is made hereby. Each reference made in this Prospectus to a document filed as an exhibit to the Registration Statement is qualified in its entirety by reference to such exhibit for a complete statement of its provisions. Any interested party may inspect the Registration Statement, without charge, at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, DC 20549, and may obtain copies of all or any portion of the Registration Statement from the Commission upon payment of the prescribed fee. In addition, copies of any and all documents incorporated by reference in this Prospectus (not including exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents) may be obtained, without charge, from Holdings by requesting such copies by mail or telephone from Harold J. Rodriguez, Jr., Silgan Holdings Inc., 4 Landmark Square, Stamford, CT 06901, telephone number (203) 975-7110. Holdings is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Commission. The Registration Statement and the exhibits and schedules thereto, as well as all such reports and other information filed by Holdings with the Commission, can be inspected and copied at prescribed rates at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, DC 20549, and at the following Regional Offices of the Commission: New York Regional Office, 75 Park Place, New York, New York 10007 and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Indenture requires Holdings to file with the Commission annual reports containing consolidated financial statements and the related report of independent auditors and quarterly reports containing unaudited consolidated financial statements for the first three quarters of each fiscal year for so long as any Debentures are outstanding. PROSPECTUS SUMMARY This Prospectus Summary is qualified in its entirety by the more detailed information and financial statements and notes thereto that appear elsewhere in this Prospectus. Prospective investors should carefully consider the factors set forth under the caption "Certain Risk Factors." THE COMPANY The Company is a major manufacturer and seller of a broad range of steel and aluminum containers for the human food and pet food markets and plastic containers for the personal care, food, pharmaceutical and household markets in the United States. In 1993, the Company had net sales of $645 million. On December 21, 1993, Silgan's wholly owned subsidiary, Silgan Containers Corporation ("Containers"), acquired from Del Monte Corporation ("Del Monte") substantially all of the fixed assets and certain working capital of Del Monte's container manufacturing business in the United States ("DM Can") for approximately $73 million. See "Business--Company History" below. In connection therewith, Containers and Del Monte entered into a ten- year supply agreement (the "DM Supply Agreement") pursuant to which Containers supplies substantially all of the metal container requirements of Del Monte. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 the Company would have had net sales of $818 million. See "Business- - -Sales and Marketing" below. Management believes that the Company is the largest food can producer in the United States (based on pro forma unit sales after giving effect to the acquisition of DM Can) and one of the largest producers in the United States of high density polyethylene ("HDPE") containers for the personal care market and a major producer of custom polyethylene terephthalate ("PET") products for the personal care and food markets. Silgan has experienced significant growth since its inception in 1987 as a result of its acquisitions and related increased market position. Management estimates that Containers is currently the nation's largest manufacturer of metal food containers and that in 1993 Containers sold approximately 27% of all metal food containers sold in the United States by non-captive manufacturers (manufacturers of containers not owned by a user of containers) and approximately 16% of all metal food containers sold in the United States, in each case based on unit sales. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 Containers would have sold approximately 34% of all metal food containers sold in the United States by non-captive manufacturers and approximately 22% of all metal food containers sold in the United States. Although the food can industry in the United States is relatively stable and mature in terms of unit sales growth, Containers, on a pro forma basis giving effect to the acquisition of DM Can, has realized compound annual unit sales growth in excess of 12% since 1987. Types of containers manufactured include those for vegetables, fruit, pet food, tomato based products, evaporated milk and infant formula. Containers has agreements (the "Nestle Supply Agreements") with Nestle Food Company ("Nestle"), formerly known as The Carnation Company ("Carnation"), pursuant to which Containers supplies substantially all of the can requirements of the former Carnation operations of Nestle. In addition to the Nestle Supply Agreements and the DM Supply Agreement, Containers has other long-term supply arrangements with other customers. The Company estimates that in excess of 80% of Containers' sales in 1994 will be pursuant to long-term supply arrangements. See "Business--Sales and Marketing" below. Management believes that Silgan's wholly owned subsidiary, Silgan Plastics Corporation ("Plastics"), is one of the leading manufacturers of plastic containers sold in the United States for the personal care, household and pharmaceutical markets served by the Company. Plastic containers manufactured by Plastics include personal care containers for shampoos, conditioners, hand creams, lotions and cosmetics, household containers for light detergent liquids, scouring cleaners and specialty cleaning agents and pharmaceutical containers for tablets, laxatives and eye cleaning solutions. Plastics is also one of the leading manufacturers of PET containers sold in the United States for applications other than soft drinks. Plastics manufactures custom PET medicinal and health care product containers (such as mouthwash bottles), custom narrow-neck food product containers (such as salad dressing bottles), custom wide-mouth food product containers (such as mayonnaise and peanut butter containers) and custom non-soft drink beverage product containers (such as juice, water and liquor bottles). See "Business- - -Products." The Company's strategy is to continue to improve its market position and profitability through focus on product quality, customer service, cost efficiencies, strategic acquisitions and market share growth through customers experiencing market share growth. At Containers, management has focused on achieving operating cost advantages over its competitors, primarily through low labor costs, low overhead, technologically advanced manufacturing processes and by exploiting the favorable geographic locations of its 22 can plants. Since its acquisition in 1987 of the metal container manufacturing division of Nestle ("Nestle Can"), Containers has invested more than $82 million in its existing manufacturing facilities and has spent approximately $66 million for the purchase of additional can manufacturing assets. As a result of these efforts and management's focus on quality and service, Containers has increased its overall share of the food can market by approximately 100% in terms of unit sales, from a share of approximately 11% in 1987 to a share of approximately 22% in 1993, on a pro forma basis giving effect to the acquisition of DM Can. Plastics has increased its market position primarily by strategic acquisitions. From a sales base of $89 million in 1987, Plastics' sales increased to $186 million in 1993, or 13% on a compound annual basis. While many of Plastics' larger competitors employ technology oriented to large bottles and long production runs, Plastics has focused on mid-sized, extrusion blow-molded plastic containers requiring special decoration and shorter production runs. Plastics emphasizes value-added fabrication of the container, creative design and sophisticated decoration processes. Plastics is also aggressively pursuing new markets for plastic containers, including the post-consumer recycled ("PCR") resin segment of the market. Based upon published information and management's experience in the industry, management believes that PET custom containers are replacing glass containers for products such as mouthwash, salad dressing, peanut butter and liquor. Management also believes that Plastics is well positioned because of its technologically advanced equipment to respond to opportunities for future growth in the rigid plastic container market. Furthermore, to the extent that mandatory recycling laws, customer preferences or manufacturing costs result in increased demand for HDPE containers that are manufactured using PCR resins, the Company believes that its proprietary equipment is particularly well-suited for the production of such containers because of the relatively low capital costs required to convert its equipment from the use of virgin resins. THE DEBENTURES Original Issue . . . . . . $275,000,000 principal amount ($165,434,500 proceeds amount) of 13-1/4% Senior Discount Debentures due 2002, originally issued on June 29, 1992. Maturity . . . . . . . . . December 15, 2002. Interest . . . . . . . . . The Debentures were offered at a substantial discount from their principal amount, and there will not be any payment of interest on the Debentures prior to December 15, 1996. For a discussion of the federal income tax treatment of the Debentures under the original issue discount rules, see "Certain Federal Income Tax Considerations." From and after June 15, 1996, the Debentures bear interest, which is payable in cash, at a rate of 13-1/4% per annum. Interest Payment Dates . . . . . . . . . . . June 15 and December 15, commencing December 15, 1996. Optional Redemption . . . . The Debentures may be redeemed at any time, at the option of Holdings, in whole or in part, at 100% of their principal amount plus accrued interest (if any) to the redemption date. Change of Control . . . . . In the event of a Change of Control (as defined under "Description of the Debentures-- Certain Definitions"), each holder of Debentures may require Holdings to repurchase such Debentures at 101% of the Accreted Value (as defined under "Description of the Debentures--Certain Definitions") thereof plus accrued interest (if any). Ranking . . . . . . . . . . The Debentures are senior indebtedness of Holdings, ranking pari passu with Holdings' obligations under all other senior indebtedness and senior in right of payment to all existing and future subordinated indebtedness of Holdings. However, since all of the operations of Holdings are conducted through its subsidiaries, all existing and future liabilities of its subsidiaries are effectively senior in right of payment to the Debentures. As of March 31, 1994, Silgan and its subsidiaries had approximately $471.5 million of indebtedness and other liabilities effectively senior to the Debentures. Ranking in the Event of a Holdings Merger . . . . . . . . . . In the event of a Holdings Merger (as defined under "Description of the Debentures--Certain Definitions") or similar transaction between Holdings and Silgan, or upon the assumption by Silgan of the Debentures, the Debentures will be subordinated in right of payment to all Senior Indebtedness of the Successor Corporation (as defined under "Description of the Debentures--Subordination Upon Certain Events") existing on the date of such transaction or assumed or incurred thereafter. If a Holdings Merger or similar transaction between Holdings and Silgan had occurred on March 31, 1994 or if Silgan had assumed the Debentures at such date, there would have been $330.8 million of indebtedness that would have constituted Senior Indebtedness and approximately $471.5 million of indebtedness and other liabilities effectively senior to the Debentures. See "Certain Risk Factors-- Holding Company Structure and Subordination Upon Certain Events" and "Description of the Debentures--Subordination Upon Certain Events." Covenants . . . . . . . . . The Indenture contains certain covenants that, among other things, direct the application of proceeds from certain asset sales and limit the ability of Holdings and its subsidiaries to incur indebtedness, pay dividends or make other distributions on its capital stock or purchase, redeem or retire shares of capital stock of Holdings or any of its subsidiaries, make prepayments of certain indebtedness, and make loans or investments in entities other than Restricted Subsidiaries (as defined under "Description of the Debentures-- Certain Definitions"), enter into transactions with affiliates, engage in mergers or consolidations, and, with respect to Holdings' Restricted Subsidiaries, issue stock. See "Description of the Debentures--Covenants." CERTAIN RISK FACTORS For a discussion of certain factors that should be considered in evaluating an investment in the Debentures, see "Certain Risk Factors." SUMMARY FINANCIAL DATA The following summary historical consolidated financial data of Holdings were derived from, and should be read in conjunction with, the historical financial statements of Holdings that appear elsewhere in this Prospectus. The following summary historical consolidated financial data of Silgan were derived from, and should be read in conjunction with, the historical financial statements of Silgan.
Three Months Ended March 31, ------------------ 1994 1993 ---- ---- (Dollars in thousands) (Unaudited) Net sales . . . . . . . . . . . . . . . . $186,243 $148,727 Cost of goods sold . . . . . . . . . . . 163,520 131,822 ------- ------- Gross profit . . . . . . . . . . . . . . 22,723 16,905 Selling, general and administrative 8,589 8,217 expenses . . . . . . . . . . . . . . . . ------- ------- Income from operations . . . . . . . . . 14,134 8,688 Interest expense and other related 15,647 13,089 financing costs . . . . . . . . . . . . . Other expense (income) . . . . . . . . . 156 (93) ------- ------- Loss before income taxes . . . . . . . . (1,669) (4,308) Income tax provision . . . . . . . . . . 575 450 ------- ------- Loss before cumulative effect of changes in accounting principles . . . . (2,244) (4,758) Cumulative effect of changes in accounting principles . . . . . . . . . . . . . . -- (6,276) ------- ------- Net loss . . . . . . . . . . . . . . . . $ (2,244) $ (11,034) ======= ======= Deficiency of earnings available to cover fixed charges and preferred stock dividends $ 1,669 $ 4,308 Balance Sheet Data (at end of period): Fixed assets . . . . . . . . . . . . . . $285,738 $221,904 Total assets . . . . . . . . . . . . . . 533,105 401,876 Total long-term debt . . . . . . . . . . 538,128 389,046 Common stockholders' deficiency . . . . . (172,261) (163,631) Other Data: EBDITA . . . . . . . . . . . . . . . $23,941 $16,918 Capital expenditures . . . . . . . . . . 4,896 5,463 Depreciation and amortization . . . . . . 9,836 8,037
Predecessor Silgan Silgan Holdings Inc. Corporation ----------------------------------------------------------- ----------- Period from April 6, 1989 Year Ended to Year Ended December 31, December 31, December 31, 1993 1992 1991 1990 1989 1989 -------- ------ -------- -------- ------------ -------- (Dollars in thousands) Operating data: Net sales . . . . . . . . $645,468 $630,039 $678,211 $657,537 $349,069 $610,682 Cost of goods sold . . . 571,174 554,972 605,185 582,991 310,413 537,485 ------- ------- ------- ------- ------- ------- Gross profit . . . . . . 74,294 75,067 73,026 74,546 38,656 73,197 Selling, general and administrative expenses . . . . . . 32,460 32,784 34,129 37,536 16,970 34,687 ------- ------- ------- ------- ------- ------- Income from operations . 41,834 42,283 38,897 37,010 21,686 38,510 Interest expense and other related financing costs . . . . . . . . 54,265 57,091 55,996 55,115 27,997 36,714 Minority interest expense -- 2,745 3,889 3,356 1,502 -- Other expense (income) . 35 25 (396) (574) (559) (810) ------- -------- ------- -------- -------- ------- Income (loss) before income taxes . . . . (12,466) (17,578) (20,592) (20,887) (7,254) 2,606 Income tax provision (benefit) . . . 1,900 2,200 -- (2,495) 204 995 -------- -------- --------- -------- ------- -------- Income (loss) before extraordinary charges and cumulative effect of changes in accounting principles (14,366) (19,778) (20,592) (18,392) (7,458) 1,611 changes in accounting principles . . . (6,276) -- -- -- -- -- ------- -------- --------- --------- --------- -------- Net income (loss) . . . (21,983) (43,375) (20,592) (18,392) (7,458) 1,611 Preferred stock dividend requirements . . . . . -- -- -- -- -- 2,897 -------- -------- --------- --------- ---------- --------- Net loss applicable to common stockholders . $(21,983) $(43,375) $(20,592) $(18,392) $ (7,458) $ (1,286) ======== ======= ======== ======== ======== ======== Deficiency of earnings available to cover fixed charges and preferred stock dividends . . . . $ 12,466 $ 17,578 $ 20,592 $ 20,887 $ 7,254 $ 2,066 Balance Sheet Data (at end of period): Fixed assets . . . . . . $290,395 $223,879 $230,501 $244,672 $245,039 $245,039 Total assets . . . . . . 497,633 389,035 390,693 443,889 445,449 431,489 Total long-term debt . . 505,718 383,232 315,461 337,821 342,249 213,512 Redeemable preferred stock of Silgan (minority interest of Holdings) -- -- 27,878 24,061 20,766 20,766 Common stockholders' equity (deficiency) . (170,017) (152,597) (109,222) (88,630) (70,238) 38,823 Other Data: EBDITA . . . . . . . $ 76,095 $ 74,012 $ 72,141 $ 69,053 $ 36,116 $ 67,638 Capital expenditures . . 42,480 23,447 21,834 22,908 11,589 20,201 Depreciation and amortization . . . . . 33,818 31,754 32,848 29,496 13,871 23,483 Number of employees (at end of period) . 3,330 3,340 3,560 4,330 4,210 4,210 (footnotes follow) Notes to Summary Financial Data For purposes of computing the deficiency of earnings available to cover fixed charges and preferred stock dividends, earnings consist of income (loss) before income taxes plus fixed charges, excluding capitalized interest, and fixed charges consist of interest, whether expensed or capitalized, minority interest expense, amortization of debt expense and discount or premium relating to any indebtedness, whether expensed or capitalized, and such portion of rental expense that is representative of the interest factor. For purposes of the calculation of the deficiency of earnings available to cover fixed charges and preferred stock dividends, Silgan's preferred stock dividend requirements are increased to an amount representing the pre-tax earnings that would be required to cover such requirements. "EBDITA" means consolidated net income before extraordinary charges, cumulative effect of changes in accounting principles and preferred stock dividends plus, to the extent reflected in the income statement for the period for which consolidated net income is to be determined, without duplication, (i) consolidated interest expense (including minority interest expense), (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v) expenses relating to postretirement health care costs which amounted to $0.127 million and $0.100 million for the three months ended March 31, 1994 and 1993, respectively, and $0.478 million for the year ended December 31, 1993, and (vi) charges relating to the vesting of benefits under stock appreciation rights ("SARs") in connection with the 1989 Mergers (as defined in "Business--Company History") of $1.973 million in Holdings' 1990 historical data and $1.973 million and $4.835 million in Silgan's 1990 and 1989 historical data, respectively. The 1989 charge is not reflected in Holdings' historical data because such charge occurred prior to the 1989 Mergers. On December 21, 1993, the Company acquired from Del Monte substantially all of the fixed assets and certain working capital of its container manufacturing business. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. See "Business--Company History." For a discussion of the adjustments relating to such acquisition, see the Pro Forma Unaudited Combined Statement of Operations for the year ended December 31, 1993 and the notes thereto appearing on pages F-73 to F-76 of this Prospectus. On November 15, 1991, the Company sold its nonstrategic PET carbonated beverage bottle business (the "PET Beverage Sale"). For 1991, sales from the PET carbonated beverage business were $33.4 million. See "Business--Company History." On July 13, 1990, Holdings and Silgan entered into a business combination (the "SPHI Business Combination") with Silgan P.E.T. Holdings Inc. ("SPHI") whereby SPHI became a majority owned subsidiary of Silgan. The SPHI Business Combination was accounted for in a manner similar to a pooling of interests and accordingly Holdings' consolidated financial statements include SPHI for periods subsequent to July 24, 1989. SPHI was formed in 1989 to acquire, through its wholly owned subsidiary Silgan P.E.T. Corp. ("Silgan PET"), the business and related assets of Amoco Container Company ("Amoco Container"). Such acquisition occurred on July 24, 1989 and was accounted for as a purchase transaction. See "Business--Company History." Holdings was incorporated on April 6, 1989. On June 30, 1989, Holdings acquired all of the outstanding common stock of Silgan. See "Business--Company History." Holdings did not have any operations from the date of inception through June 30, 1989. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The Company had previously reported under SFAS No. 96 "Accounting for Income Taxes." There was no effect for the difference in methods at the date of adoption. Turthermore, the adoption of SFAS NO. 109 had no effect on the Company's 1993 provision for income taxes During 1993, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers Accounting for Postemployment Benefits." There is no tax effect as a result of these changes due to the net operating loss position of the Company. The Company has elected not to restate prior years' financial statements for any of these pronouncements. The number of employees at December 31, 1993 excludes 650 employees who joined the Company on December 21, 1993 as a result of the acquisition by Containers of DM Can.
CERTAIN RISK FACTORS In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Debentures. Holding Company Structure and Subordination Upon Certain Events Holdings is a holding company with no significant assets other than its investment in and advances to Silgan. The operations of Holdings are conducted principally through Silgan's operating subsidiaries, Containers and Plastics, each of which is a wholly owned subsidiary of Silgan. Therefore, Holdings' ability to pay interest on the Debentures in 1996 when interest thereon becomes due and payable and to pay the principal of the Debentures at maturity is largely dependent upon the future performance and the cash flow of such operating subsidiaries, which will be subject to prevailing economic conditions and to financial, business and other factors (including the state of the economy and the financial markets, demand for the products of the Company, costs of raw materials, legislative and regulatory changes and other factors beyond the control of such operating subsidiaries) affecting the business and operations of such operating subsidiaries. Because Silgan and its subsidiaries do not guarantee the payment of principal of and interest on the Debentures, claims of holders of the Debentures effectively will be subordinated to the claims of creditors of Silgan and its subsidiaries, including claims of the lenders (the "Banks") named in the credit agreement dated as of December 21, 1993 among Silgan and certain of its subsidiaries, the Banks, Bank of America National Trust and Savings Association ("Bank of America"), as Co-Agent, and Bankers Trust Company ("Bankers Trust"), as Agent (the "Silgan Credit Agreement"), and holders of Silgan's Senior Secured Floating Rate Notes due 1997 (the "Secured Notes"), which are guaranteed directly by all of the operating subsidiaries of Silgan, holders of Silgan's 11-3/4% Senior Subordinated Notes due 2002 (the "11-3/4% Notes") and claims of trade creditors, except to the extent that Holdings may be a creditor with recognized claims against Silgan or such subsidiaries. As a result, in the event of Silgan's insolvency, liquidation, reorganization, dissolution or other winding up, or upon acceleration of certain of Silgan's indebtedness, holders of Silgan's indebtedness (including the Banks and the holders of the Secured Notes and the 11-3/4% Notes) must be paid in full before holders of the Debentures may be paid. Although the Silgan Credit Agreement, the Secured Notes, the 11-3/4% Notes and the Debentures impose certain limitations on Silgan's and its subsidiaries' ability to incur additional indebtedness, the Indenture does not prohibit Silgan and its subsidiaries from incurring additional indebtedness. See "Description of Debentures--Covenants." At March 31, 1994, Silgan and its subsidiaries had $471.5 million of indebtedness and other liabilities that were effectively senior to the Debentures. In the event of a Holdings Merger or any similar transaction between Holdings and Silgan or the assumption by Silgan of the Debentures, the Debentures will be subordinated in right of payment to all existing and future Senior Indebtedness of the Successor Corporation, including indebtedness under the Silgan Credit Agreement, the Secured Notes and the 11-3/4% Notes. Other than as set forth in the previous sentence, the Debentures will be senior indebtedness of Holdings ranking pari passu with other senior indebtedness of Holdings and senior in right of payment to all existing and future subordinated indebtedness of Holdings. Because of such subordination, in the event of the Successor Corporation's bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up, or upon acceleration of certain indebtedness of the Successor Corporation, holders of Senior Indebtedness must be paid in full before holders of the Debentures may be paid. Although other instruments and agreements governing the indebtedness of the Successor Corporation, including indebtedness under the Silgan Credit Agreement, the Secured Notes and the 11-3/4% Notes, may impose certain limitations on the Successor Corporation's ability to incur additional indebtedness (including Senior Indebtedness), the Indenture does not prohibit the Successor Corporation from incurring additional indebtedness (including Senior Indebtedness). As of March 31, 1994, Holdings had total consolidated liabilities of approximately $680.3 million (excluding its Class A common stock, par value $.01 per share (the "Holdings Class A Stock"), which is subject to a put option), including Silgan's outstanding aggregate liabilities of approximately $330.8 million that constituted Senior Indebtedness and indebtedness and other liabilities of approximately $471.5 million that were effectively senior to the Debentures in the event of a Holdings Merger or any similar transaction between Holdings and Silgan or the assumption by Silgan of the Debentures. A Holdings Merger or any similar transaction between Holdings and Silgan or the assumption by Silgan of the Debentures is generally prohibited by the Silgan Credit Agreement. Holdings has no present intention of merging or entering into a similar transaction with Silgan. Ability of Silgan to Provide Financial Support to Holdings Since Holdings' only asset is its investment in Silgan, its ability to pay interest on the Debentures on and after December 15, 1996 (the date on which interest is first payable on the Debentures) may depend upon its receipt of funds paid by dividend or otherwise loaned, advanced or transferred by Silgan to Holdings. While Silgan has no legal obligation to make such funds available, it is expected that Silgan will do so if it is permitted under the agreements to which it shall then be a party and if it then has sufficient funds available for such purpose. If sufficient funds to pay such interest are not generated by the operations of Silgan and its subsidiaries, Holdings or Silgan may seek to borrow or otherwise finance the amount of such payments or refinance the Debentures. Neither the Secured Notes nor the 11-3/4% Notes limits the ability of Silgan to pay cash dividends to Holdings in order to enable Holdings to pay interest on the Debentures. The Silgan Credit Agreement presently prohibits Silgan from paying dividends or otherwise transferring funds to Holdings in order to service Holdings' indebtedness; however, the Silgan Credit Agreement matures on September 15, 1996, prior to the date on which interest or principal is payable on the Debentures. Silgan expects to enter into a new credit facility to replace the Silgan Credit Agreement on or before September 15, 1996 on terms which would not limit the ability of Silgan to transfer funds to Holdings in order to enable Holdings to pay interest on the Debentures. However, there can be no assurance that Silgan will be able to enter into a new credit facility on such terms. In such event, Silgan and Holdings would consider pursuing alternative arrangements, including possible equity and/or debt financings, to enable Holdings to meet its obligations. There can be no assurance that any such alternative, if pursued, would be accomplished or would enable Holdings to make timely payments of its obligations under the Debentures. The funding requirements of Holdings to service its indebtedness (beginning in December 1996) will be met by Silgan through cash generated by operations or borrowings or by Holdings through refinancings of its existing indebtedness or additional debt or equity financings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources and Liquidity" and "Description of Certain Silgan Indebtedness--Description of the Secured Notes" and "-- Description of the 11-3/4% Notes." High Leverage; Stockholders' Deficiency; Deficiency of Earnings to Fixed Charges The Company is highly leveraged primarily as a result of the financing of the acquisitions of its metal and plastic container businesses and as a result of the sale by Holdings in 1989 of its Senior Reset Debentures due 2004 (the "Holdings Reset Debentures") in connection with the 1989 Mergers and the refinancing of the Holdings Reset Debentures and incurrence of additional indebtedness pursuant to the Debentures in connection with the Refinancing. See "Business--Company History." In addition, the accretion of original issue discount on the Debentures will cause an increase in indebtedness of $109.6 million by June 15, 1996. Holdings has also guaranteed the obligations and liabilities of Silgan and its subsidiaries under the Silgan Credit Agreement. See "Description of Certain Silgan Indebtedness--Description of the Silgan Credit Agreement." Also, Holdings has a common stockholders' deficiency and a deficiency of earnings available to cover fixed charges. As of March 31, 1994, Holdings' stockholders' deficiency was $172.3 million, and its earnings before fixed charges were less than its fixed charges by $1.7 million for the three months ended March 31, 1994. See "Capitalization." Holdings' high level of indebtedness, common stockholders' deficiency and deficiency of earnings available to cover fixed charges pose substantial risks to purchasers of the Debentures. Restrictive Covenants under Financing Agreements In connection with the incurrence of their indebtedness, Silgan and Holdings have entered into instruments and agreements governing such indebtedness (the "Financing Agreements"), which Financing Agreements contain numerous covenants, including financial and operating covenants, certain of which are quite restrictive. In particular, certain financial covenants become more restrictive over time in anticipation of scheduled debt amortization and improved operating results. Such covenants also affect, and in many respects significantly limit or prohibit, among other things, the ability of the Company to incur additional indebtedness, create liens, sell assets, engage in mergers and acquisitions, make certain capital expenditures and pay dividends. For a description of such covenants, see "Description of Certain Silgan Indebtedness" and "Description of the Debentures." The ability of the Company to satisfy such covenants and its other obligations (including scheduled reductions of its indebtedness under the Silgan Credit Agreement and its obligations under the Secured Notes, the 11-3/4% Notes and the Debentures) depends upon, among other things, the future financial performance of Silgan and its subsidiaries, which will be subject to prevailing economic conditions and to financial, business and other factors (including the state of the economy and the financial markets, demand for the products of the Company, costs of raw materials, legislative and regulatory changes and other factors beyond the control of the Company) affecting the business and operations of Silgan and its subsidiaries. The factors described above could adversely affect the Company's ability to meet its financial obligations, including its obligations to holders of the Debentures. These factors could also limit the ability of the Company to take advantage of business and technological opportunities and to effect financings and could otherwise restrict corporate activities. Management believes that the Company will be able to comply with the financial covenants and other restrictions in the Financing Agreements and that it will have sufficient cash flow available from operations to meet its obligations; however, there can be no assurance of such compliance or of the availability of sufficient cash flow. If the Company anticipates that it will be unable to comply with covenants in any Financing Agreement or that its cash flow will be insufficient to meet its debt service, dividend and other operating needs, the Company might be required to seek amendments or waivers to its Financing Agreements, refinance its debts or dispose of assets. There can be no assurance that any such action could be effected on satisfactory terms or would be permitted under the terms of the Financing Agreements. In the event of a default under the terms of any of the Financing Agreements, the obligees thereunder would be permitted to accelerate the maturity of such obligations and cause defaults under other obligations of the Company. Such defaults could be expected to delay or preclude payment of principal of and/or interest on the Debentures. Secured Indebtedness As of March 31, 1994, the Company had outstanding approximately $195.8 million of indebtedness that is secured by assets of Silgan and its subsidiaries, including indebtedness under the Silgan Credit Agreement and the Secured Notes. The Indenture permits the Company to incur certain additional secured indebtedness. See "Description of the Debentures." Holders of secured indebtedness of the Company, including the indebtedness under the Silgan Credit Agreement and the Secured Notes, have claims with respect to the assets of the Company constituting collateral that are prior to the claims of holders of the Debentures. In the event of a default on the Debentures or a bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up of the Company, or upon the acceleration of any Senior Indebtedness, such assets would be available to satisfy obligations with respect to the indebtedness secured thereby before any payment therefrom could be made on the Debentures. See "Description of Certain Silgan Indebtedness." The indebtedness under the Silgan Credit Agreement and the Secured Notes is secured by a pledge of assets of Silgan and by pledges of the shares of stock of Silgan's subsidiaries. The indebtedness under the Silgan Credit Agreement is also guaranteed by Holdings which guarantee is secured by a pledge of the shares of stock of Silgan. In addition, Silgan's indebtedness under the Silgan Credit Agreement and the Secured Notes is guaranteed by substantially all of Silgan's subsidiaries and the obligations of each such subsidiary are secured by substantially all the assets of each such subsidiary. The Debentures are effectively subordinated to such pledges and guarantees as well as all other indebtedness and liabilities of Silgan and its subsidiaries. Certain Federal Income Tax Consequences For federal income tax purposes, a holder of a Debenture is required to include in income as interest original issue discount ("OID") as such OID accrues, although no cash payments of interest will be made on the Debentures prior to December 15, 1996. See "Certain Federal Income Tax Considerations." However, because of their yield, the Debentures are subject to the high yield discount obligation rules of the Internal Revenue Code, and thus Holdings is not able to deduct interest, including OID, accruing on the Debentures until such interest and OID is paid in cash or property (other than stock or debt of Holdings or a related party). See "Certain Federal Income Tax Considerations." As a result, a portion of the tax deductions that would otherwise be available to Holdings in respect of the Debentures is deferred (until their maturity or sooner upon early repayment in cash or qualified property) which, in turn, might reduce the after-tax cash flows of Holdings and its subsidiaries. Holdings expects to utilize the net operating loss carryforwards available to the Company to offset (but not eliminate) the effect of such deferral. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources and Liquidity." Ability of the Company to Incur Additional Indebtedness Although the Silgan Credit Agreement (which matures on September 15, 1996) limits the incurrence by the Company of additional indebtedness and prohibits any transaction pursuant to which Silgan becomes the direct obligor on the Debentures, the 11-3/4% Notes, the Secured Notes and the Indenture permit, subject to certain limitations, the incurrence by Holdings and its subsidiaries of a substantial amount of additional indebtedness, including additional Senior Indebtedness, indebtedness secured by liens on the Company's assets and other indebtedness that is effectively senior to or pari passu with the Debentures. For example, the Indenture permits Silgan and its subsidiaries to incur indebtedness, which would be effectively senior to the Debentures, including secured indebtedness, if after giving effect to the incurrence of such indebtedness, Silgan's Interest Coverage Ratio (as defined under "Description of the Debentures--Certain Definitions") is at least 2.1 to 1. For the twelve month period ended December 31, 1993, Silgan's Interest Coverage Ratio was 3.0 to 1. The Indenture also permits Holdings to incur any indebtedness, including Senior Indebtedness, if, after giving effect to the incurrence of such indebtedness, Holdings' Interest Coverage Ratio is at least 1.75 to 1. For the twelve month period ended December 31, 1993, Holdings' Interest Coverage Ratio was 1.50 to 1. The Indenture also permits certain specified additional indebtedness to be incurred by Holdings including up to an additional $50 million of any type of indebtedness. See "Description of Certain Silgan Indebtedness" and "Description of the Debentures." Risk of Fraudulent Transfer Liability; Certain State Law Considerations The incurrence by Holdings and its subsidiaries of indebtedness, including the Debentures, and Silgan's ability to make distributions to Holdings may be limited by state and federal fraudulent transfer laws. If a court in a lawsuit by an unpaid creditor or representative of creditors of Holdings, such as a trustee in bankruptcy or Holdings as debtor-in- possession, were to find that (i) there was actual intent to hinder, delay or defraud creditors or (ii) Holdings received less than reasonably equivalent value for the indebtedness and that, at the time of or after and giving effect to such incurrence, Holdings (a) was insolvent, (b) was rendered insolvent by reason of such incurrence, (c) was engaged in a business or transaction for which the assets remaining constituted unreasonably small capital or (d) intended to incur, or believed that it would incur, debts beyond its ability to pay as such debts matured, such court could void such indebtedness and order that the payments of interest and principal on such indebtedness be returned to Holdings or to a fund for the benefit of its creditors. The measure of insolvency for purposes of the foregoing will vary depending upon the law of the jurisdiction that is being applied. Generally, an entity would be considered insolvent if the sum of its debts is greater than all of its property at a fair valuation, or if the present fair saleable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts (including contingent liabilities) as they become absolute and matured. Holdings believes that the obligations under the Debentures were incurred for proper purposes and in good faith and, based on Holdings' prospects and other financial information, Holdings believes that at the time of the incurrence of such obligations, Holdings was solvent, would continue to have sufficient capital to carry on its business and would continue to be able to pay its debts as they matured. Furthermore, Holdings believes that the proceeds of the Debentures constitute reasonably equivalent value or fair consideration therefor. There can be no assurance, however, that a court would not determine that Holdings was insolvent at the time and after giving effect to the incurrence of the obligations under the Debentures. Nor can there be any assurance that, regardless of whether Holdings was solvent, the incurrence of the obligations under the Debentures would not constitute a fraudulent transfer on another of the criteria listed above. Supply Agreements with Principal Customers The Nestle Supply Agreements and the DM Supply Agreement provide Containers with a potential market for a substantial portion of its can output during the terms of these agreements. Sales to Nestle represented approximately 34% of the Company's consolidated sales during 1993. On a pro forma basis, giving effect to the acquisition of DM Can, approximately 27% of the Company's 1993 sales would have been to Nestle and 21% of the Company's 1993 sales would have been to Del Monte. See "Business--Sales and Marketing." Pursuant to six of the original Nestle Supply Agreements, if Nestle receives a competitive bid for any product supplied, Containers has the right to match such bid with respect to the type and volume of cans over the period of the competitive bid. Under the other three Nestle Supply Agreements which were recently extended, Nestle's right to receive competitive bids is narrowly limited to certain circumstances, and Containers has the right to match any such bid. In either case, in the event that Containers chooses not to match any such competitive bid, Nestle may purchase such cans from the competitive bidder at the competitive bid price for the term of the bid. Since 1990, Nestle has requested that Containers match certain bids received from other potential suppliers. Containers agreed to match such bids (which has resulted in minor margin impact) and continues to supply substantially all of the can requirements of the former Carnation operations of Nestle. In the future, there can be no assurance that Containers will choose to match any such bids or that, even if matched, such bids will be at a level sufficient to allow Containers to maintain margins currently received. Until any such bids are received by Nestle and submitted to the Company, the Company cannot predict the effect, if any, of such bids upon its financial condition or results of operations. Significant reduction of margins or the loss of significant unit volume under the Nestle Supply Agreements could, however, have a material adverse effect on the Company. Under the DM Supply Agreement, after five years, Del Monte may, under certain circumstances, receive proposals with terms more favorable than those under the DM Supply Agreement from independent commercial can manufacturers for the supply of containers of a type and quality similar to the metal containers that Containers furnishes to Del Monte, which proposals shall be for the remainder of the term of the DM Supply Agreement and for 100% of the annual volume of containers at one or more of Del Monte's canneries. Containers has the right to retain the business subject to its meeting the terms and conditions of such competitive proposal. See "Business--Sales and Marketing." Neither the Nestle Supply Agreements nor the DM Supply Agreement requires the purchase of minimum amounts, and should Nestle's or DM's demand decrease, the Company's consolidated sales could decrease. In addition, should Nestle terminate any of the Nestle Supply Agreements or Del Monte terminate the DM Supply Agreement because of Containers' inability to meet quality or other requirements, it is highly unlikely that the Company or its subsidiaries could quickly replace the amount of sales represented thereby. Therefore, it is probable that any such termination would have a material adverse effect on the Company. See "Business--Sales and Marketing." Competition The manufacture and sale of metal and plastic containers is highly competitive and many of the Company's competitors have substantially greater financial resources than the Company. See "Business--Competition." Dependence on Key Personnel The success of the Company depends to a large extent on a number of key employees, and the loss of the services provided by them could materially adversely affect the Company. In particular, the loss of the services provided by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer of Holdings and Silgan, and D. Greg Horrigan, the President and Co-Chief Executive Officer of Holdings and Silgan, could materially adversely affect the Company. However, the Company's operations are conducted through Containers and Plastics, each of which has its own independent management. S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and Horrigan, has agreed to provide certain general management and administrative services to each of Holdings, Silgan, Containers and Plastics pursuant to management services agreements which are effective through 1999. See "Certain Transactions--Management Agreements" and "Description of Holdings Common Stock--Description of the Holdings Organization Agreement." Other Management Interests In the future, Messrs. Silver and Horrigan, possibly together with Morgan Stanley or its affiliates, may form additional corporations or partnerships or enter into other transactions for the purpose of making other acquisitions. In connection therewith, Messrs. Silver and Horrigan may provide certain general management and administrative services to such corporations and partnerships. Additionally, circumstances could arise in which the interests of Messrs. Silver and Horrigan, Morgan Stanley and its affiliates and such new corporations or partnerships could conflict with the interests of the Company. Certain Interests of Affiliates The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") owns 38.48% of the outstanding common stock of Holdings. See "Securities Ownership of Certain Beneficial Owners and Management--Certain Beneficial Owners of Holdings' Capital Stock." The general partner of MSLEF II and Morgan Stanley are both wholly owned subsidiaries of Morgan Stanley Group Inc. ("MS Group"), and two of the directors of Holdings and Silgan are officers of Morgan Stanley. As a result of these relationships, MS Group and its affiliates will continue to have significant influence over the management policies and corporate affairs of the Company. Morgan Stanley also receives compensation for ongoing financial advice to the Company and its affiliates. See "Certain Transactions" and "Market-Making Activities of Morgan Stanley." Certain decisions concerning the operations or financial structure of the Company may present conflicts of interest between the owners of Holdings' common stock and the holders of the Debentures. For example, if the Company encounters financial difficulties, or is unable to pay its debts as they mature, the interests of the Holdings' equity investors might conflict with those of the holders of the Debentures. In addition, the equity investors may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to the holders of the Debentures. Trading Market for the Debentures Morgan Stanley currently makes a market in the Debentures. However, it is not obligated to do so, and any such market-making may be discontinued at any time without notice, at its sole discretion. Therefore, no assurance can be given as to the liquidity of, or the trading market for, the Debentures. See "Market-Making Activities of Morgan Stanley." The liquidity of, and trading market for, the Debentures may also be adversely affected by declines and volatility in the market for high yield securities generally as well as by any changes in the Company's financial performance or prospects. THE COMPANY The Company is a major manufacturer and seller of a broad range of steel and aluminum containers for the human food and pet food markets and plastic containers for the personal care, food, pharmaceutical and household markets in the United States. In 1993, the Company had net sales of $645 million. On December 21, 1993, Silgan's wholly owned subsidiary, Containers acquired from Del Monte substantially all of the fixed assets and certain working capital of DM Can for approximately $73 million. See "Business-- Company History" below. In connection therewith, Containers and Del Monte entered into the DM Supply Agreement pursuant to which Containers supplies substantially all of the metal container requirements of Del Monte for a term of ten years. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 the Company would have had net sales of $818 million. See "Business--Sales and Marketing" below. Management believes that the Company is the largest food can producer in the United States (based on pro forma unit sales after giving effect to the acquisition of DM Can) and one of the largest producers in the United States of HDPE containers for the personal care market and a major producer of PET products for the personal care and food markets. Silgan has experienced significant growth since its inception in 1987 as a result of its acquisitions and related increased market position. Management estimates that Containers is currently the nation's largest manufacturer of metal food containers and that in 1993 Containers sold approximately 27% of all metal food containers sold in the United States by non-captive manufacturers (manufacturers of containers not owned by a user of containers) and approximately 16% of all metal food containers sold in the United States, in each case based on unit sales. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 Containers would have sold approximately 34% of all metal food containers sold in the United States by non-captive manufacturers and approximately 22% of all metal food containers sold in the United States. Although the food can industry in the United States is relatively stable and mature in terms of unit sales growth, Containers, on a pro forma basis after giving effect to the acquisition of DM Can, has realized compound annual unit sales growth in excess of 12% since 1987. Types of containers manufactured include those for vegetables, fruit, pet food, tomato based products, evaporated milk and infant formula. Pursuant to the Nestle Supply Agreements, Containers supplies substantially all of the can requirements of the former Carnation operations of Nestle. In addition to the Nestle Supply Agreements and the DM Supply Agreement, Containers has other long-term supply arrangements with other customers. The Company estimates that in excess of 80% of Containers' sales in 1994 will be pursuant to long-term supply arrangements. See "Business--Sales and Marketing" below. Management believes that Silgan's wholly owned subsidiary, Plastics, is one of the leading manufacturers of plastic containers sold in the United States for the personal care, household and pharmaceutical markets served by the Company. Plastic containers manufactured by Plastics include personal care containers for shampoos, conditioners, hand creams, lotions and cosmetics, household containers for light detergent liquids, scouring cleaners and specialty cleaning agents and pharmaceutical containers for tablets, laxatives and eye cleaning solutions. Plastics is also one of the leading manufacturers of PET containers sold in the United States for applications other than soft drinks. Plastics manufactures custom PET medicinal and health care product containers (such as mouthwash bottles), custom narrow-neck food product containers (such as salad dressing bottles), custom wide-mouth food product containers (such as mayonnaise and peanut butter containers) and custom non-soft drink beverage product containers (such as juice, water and liquor bottles). See "Business--Products." The Company's strategy is to continue to improve its market position and profitability through focus on product quality, customer service, cost efficiencies, strategic acquisitions and market share growth through customers experiencing market share growth. At Containers, management has focused on achieving operating cost advantages over its competitors, primarily through low labor costs, low overhead, technologically advanced manufacturing processes and by exploiting the favorable geographic locations of its 22 can plants. Since its acquisition in 1987 of Nestle Can, Containers has invested more than $82 million in its existing manufacturing facilities and has spent approximately $66 million for the purchase of additional can manufacturing assets. As a result of these efforts and management's focus on quality and service, Containers has increased its overall share of the food can market by approximately 100% in terms of unit sales, from a share of approximately 11% in 1987 to a share of approximately 22% in 1993, on a pro forma basis giving effect to the acquisition of DM Can. Plastics has increased its market position primarily by strategic acquisitions. From a sales base of $89 million in 1987, Plastics' sales increased to $186 million in 1993, or 13% on a compound annual basis. While many of Plastics' larger competitors employ technology oriented to large bottles and long production runs, Plastics has focused on mid-sized, extrusion blow-molded plastic containers requiring special decoration and shorter production runs. Plastics emphasizes value-added fabrication of the container, creative design and sophisticated decoration processes. Plastics is also aggressively pursuing new markets for plastic containers, including the PCR resin segment of the market. Based upon published information and management's experience in the industry, management believes that PET custom containers are replacing glass containers for products such as mouthwash, salad dressing, peanut butter and liquor. Management also believes that Plastics is well positioned because of its technologically advanced equipment to respond to opportunities for future growth in the rigid plastic container market. Furthermore, to the extent that mandatory recycling laws, customer preferences or manufacturing costs result in increased demand for HDPE containers that are manufactured using PCR resins, the Company believes that its proprietary equipment is particularly well-suited for the production of such containers because of the relatively low capital costs required to convert its equipment from the use of virgin resins. The Company is also engaged in the manufacture and sale of paper containers primarily used by processors and packagers in the food industry. Sales of paper containers in 1993 were approximately $13 million. Holdings is a Delaware corporation organized in April 1989, that, in June 1989, through certain mergers acquired all of the outstanding common stock of Silgan. Holdings' principal asset is all of the outstanding capital stock of Silgan. Prior to June 30, 1989, Holdings did not engage in any business. See "Business-- Company History." The principal executive offices of Holdings are located at 4 Landmark Square, Stamford, Connecticut 06901, telephone number (203) 975-7110. CAPITALIZATION The following table sets forth the unaudited consolidated capitalization of Holdings as of March 31, 1994. This table should be read in conjunction with the consolidated financial information of Holdings included elsewhere in this Prospectus. March 31, 1994 ----------------- (Dollars in thousands) Short-term debt: --------------- Current portion of term loans . . . . . . . . . . $ 20,000 Working capital loans . . . . . . . . . . . 5,800 ------- Total short-term debt . . . . . . . . . $ 25,800 ======== Long-term debt: -------------- Term loans . . . . . . . . . . . . . . . . . . . $120,000 Senior Secured Floating Rate Notes due 1997 . . . 50,000 11-3/4% Senior Subordinated Notes due 2002 . . . 135,000 13-1/4% Senior Discount Debentures due 2002 . . . 207,328 ------- Total long-term debt . . . . . . . . . $512,328 ------- Class A Common Stock of Holdings subject to put option . . . . . . . . . . . . . $ 25,050 Deficiency in stockholders' equity: Common stock . . . . . . . . . . . . . . . . 8 Additional paid-in capital . . . . . . . . . 33,606 Accumulated deficit . . . . . . . . . . . . (205,875) ------- Total deficiency in stockholders' equity (172,261) ------- Total capitalization . . . . . . . . . . . . . . $365,117 ------- __________________ [FN] See "Description of Certain Silgan Indebtedness" and "Description of the Debentures." For a description of the common stock of Holdings, see "Description of Holdings Common Stock--General." For information regarding the common stock of Holdings subject to put options, see "Description of Holdings Common Stock--Description of the Holdings Organization Agreement." SELECTED FINANCIAL DATA Set forth below are selected historical consolidated financial data of Holdings at March 31, 1994 and 1993 and for the three months then ended, and at December 31, 1993, 1992, 1991 and 1990 and for the years then ended and as of and for the operating period April 6, 1989 to December 31, 1989. Also set forth below are selected historical financial data derived from the historical financial statements of Silgan at December 31, 1989 and for the year then ended. The selected historical consolidated financial data of Holdings for the three months ended March 31, 1994 and 1993 is unaudited, but, in the opinion of management, such information reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial data for the interim periods. The results for the interim periods presented are not necessarily indicative of the results for the corresponding full years. The selected historical consolidated financial data of Holdings at December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993 (with the exception of employee data) were derived from the historical consolidated financial statements of Holdings for such periods that were audited by Ernst & Young, independent auditors, whose report appears elsewhere in this Prospectus. The selected historical consolidated financial data of Holdings at December 31, 1990 and 1989, for the year ended December 31, 1990 and for the period April 6, 1989 through December 31, 1989 were derived from the historical audited consolidated financial statements of Holdings. The selected historical consolidated financial data of Silgan at December 31, 1989 and for the year then ended (with the exception of employee data) were derived from the historical audited consolidated financial statements of Silgan for such period. The selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited financial statements and accompanying notes thereto included elsewhere in this Prospectus. Three Months Ended March 31, ---------------------------- 1994 1993 ---- ---- (Dollars in thousands) Operating Data: Net sales . . . . . . . . . . . . . . . . $186,243 $148,727 Cost of goods sold . . . . . . . . . . . 163,520 131,822 ------- ------- Gross profit . . . . . . . . . . . . . . 22,723 16,905 Selling, general and administrative 8,589 8,217 expenses . . . . . . . . . . . . . . . . ------- ------- Income from operations . . . . . . . . . 14,134 8,688 Interest expense and other related 15,647 13,089 financing costs . . . . . . . . . . . . . Other expense (income) . . . . . . . . . 156 (93) ------- ------- Loss before income taxes . . . . . . . . (1,669) (4,308) Income tax provision . . . . . . . . . . 575 450 ------- ------- Loss before cumulative effect of changes in accounting principles . . . . (2,244) (4,758) Cumulative effect of changes in accounting -- (6,276) principles . . . . . . . . . . . . . . . ------- ------- Net loss . . . . . . . . . . . . . . . . $ (2,244) $ (11,034) ======= ======= Deficiency of earnings available to cover fixed charges and preferred stock dividends $ 1,669 $ 4,308 Balance Sheet Data (at end of period): Fixed assets . . . . . . . . . . . . . . $285,738 $221,904 Total assets . . . . . . . . . . . . . . 533,105 401,876 Total long-term debt . . . . . . . . . . 538,128 389,046 Common stockholders' deficiency . . . . . (172,261) (163,631) Other Data: EBDITA . . . . . . . . . . . . . . . $23,941 $16,918 Capital expenditures . . . . . . . . . . 4,896 5,463 Depreciation and amortization . . . . . . 9,836 8,037
SELECTED FINANCIAL DATA Predecessor Silgan Silgan Holdings Inc. Corporation --------------------------------------------------------------- ----------- Period from Year Ended April 6, 1989 December 31, to Year Ended ----------------------------------------------- December 31, December 31, 1993 1992 1991 1990 1989 1989 -------- ------ -------- -------- ------------ --------- (Dollars in thousands) Operating data: Net sales . . . . . . . . . $645,468 $630,039 $678,211 $657,537 $349,069 $610,682 Cost of goods sold . . . . 571,174 554,972 605,185 582,991 310,413 537,485 ------- ------- ------- ------- ------- ------- Gross profit . . . . . . . 74,294 75,067 73,026 74,546 38,656 73,197 Selling, general and administrative expenses 32,460 32,784 34,129 37,536 16,970 34,687 ------- ------- ------- ------- ------- ------- Income from operations . . 41,834 42,283 38,897 37,010 21,686 38,510 Interest expense and other related financing costs 54,265 57,091 55,996 55,115 27,997 36,714 Minority interest expense . -- 2,745 3,889 3,356 1,502 -- Other expense (income) . . 35 25 (396) (574) (559) (810) ------ ------- ------ ------ ------ ------ Income (loss) before income taxes . . . . . . . . . (12,466) (17,578) (20,592) (20,887) (7,254) 2,606 Income tax provision (benefit) . . . . . 1,900 2,200 -- (2,495) 204 995 ------ ------ ------ ------ ------ ------ Income (loss) before extraordinary charges and cumulative effect of changes in accounting principles . . . . . . . (14,366) (19,778) (20,592) (18,392) (7,458) 1,611 Extraordinary charges relating to early extinguishment of debt . (1,341) (23,597) -- -- -- -- Cumulative effect of changes in accounting principles . . . . . . . . . . (6,276) -- -- -- -- -- ------ ------ ------ ------ ------- ------ Net income (loss) . . . . (21,983) (43,375) (20,592) (18,392) (7,458) 1,611 Preferred stock dividend requirements . . . . . . -- -- -- -- -- 2,897 ------ ------ ------ ------ ------ ------ Net loss applicable to common stockholders $(21,983) $(43,375) $(20,592) $(18,392) $ (7,458) $ (1,286) ======= ======= ======= ======= ======= ======= Deficiency of earnings available to cover fixed charges and preferred stock dividends . . $ 12,466 $ 17,578 $ 20,592 $ 20,887 $ 7,254 $ 2,066 Balance Sheet Data (at end of period): Fixed assets . . . . . . . $290,395 $223,879 $230,501 $244,672 $245,039 $245,039 Total assets . . . . . . . 497,633 389,035 390,693 443,889 445,449 431,489 Total long-term debt . . . 505,718 383,232 315,461 337,821 342,249 213,512 Redeemable preferred stock of Silgan (minority interest of Holdings) . -- -- 27,878 24,061 20,766 20,766 Common stockholders' equity (deficiency) . . . (170,017) (152,597) (109,222) (88,630) (70,238) 38,823 Other Data: EBDITA . . . . . . . . $76,095 $74,012 $72,141 $69,053 $36,116 $67,638 Capital expenditures . . . 42,480 23,447 21,834 22,908 11,589 20,201 Depreciation and amortization . . . . . . 33,818 31,754 32,848 29,496 13,871 23,483 Number of employees (at end of period) . . . . 3,330 3,340 3,560 4,330 4,210 4,210 Notes to Selected Financial Data For purposes of computing the deficiency of earnings available to cover fixed charges and preferred stock dividends, earnings consist of income (loss) before income taxes plus fixed charges, excluding capitalized interest, and fixed charges consist of interest, whether expensed or capitalized, minority interest expense, amortization of debt expense and discount or premium relating to any indebtedness, whether expensed or capitalized, and such portion of rental expense that is representative of the interest factor. For purposes of the calculation of the deficiency of earnings available to cover fixed charges and preferred stock dividends, Silgan's preferred stock dividend requirements are increased to an amount representing the pre-tax earnings that would be required to cover such requirements. "EBDITA" means consolidated net income before extraordinary charges, cumulative effect of changes in accounting principles and preferred stock dividends plus, to the extent reflected in the income statement for the period for which consolidated net income is to be determined, without duplication, (i) consolidated interest expense (including minority interest expense), (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v) expenses relating to postretirement health care costs which amounted to $0.127 million and $0.100 million for the three months ended March 31, 1994 and 1993, respectively, and $0.478 million for the year ended December 31, 1993, and (vi) charges relating to the vesting of benefits under SARs in connection with the 1989 Mergers of $1.973 million in Holdings' 1990 historical data and $1.973 million and $4.835 million in Silgan's 1990 and 1989 historical data, respectively. The 1989 charge is not reflected in Holdings' historical data because such charge occurred prior to the 1989 Mergers. On December 21, 1993, the Company acquired from Del Monte substantially all of the fixed assets and certain working capital of its container manufacturing business. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. See "Business--Company History." For a discussion of the adjustments relating to such acquisition, see the Pro Forma Unaudited Combined Statement of Operations for the year ended December 31, 1993 and the notes thereto appearing on pages F-73 to F-76 of this Prospectus. On November 15, 1991, the Company completed the PET Beverage Sale. For 1991, sales from the PET carbonated beverage business were $33.4 million. See "Business--Company History." On July 13, 1990, Holdings and Silgan entered into the SPHI Business Combination with SPHI whereby SPHI became a majority owned subsidiary of Silgan. The SPHI Business Combination was accounted for in a manner similar to a pooling of interests and accordingly Holdings' consolidated financial statements include SPHI for periods subsequent to July 24, 1989. SPHI was formed in 1989 to acquire, through its wholly owned subsidiary Silgan PET, the business and related assets of Amoco Container. Such acquisition occurred on July 24, 1989 and was accounted for as a purchase transaction. See "Business--Company History." Holdings was incorporated on April 6, 1989. On June 30, 1989, Holdings acquired all of the outstanding common stock of Silgan. See "Business-Company History." Holdings did not have any operations from the date of inception through June 30, 1989. Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The Company had previously reported under SFAS No. 96 "Accounting for Income Taxes." There was no effect for the difference in methods at the date of adoption. Furthermore, the adoption of SFAS No. 109 had no effect on the Company's 1993 provision for income taxes. During 1993, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers Accounting for Postemployment Benefits." There is no tax effect as a result of these changes due to the net operating loss position of the Company. The Company has elected not to restate prior years' financial statements for any of these pronouncements. The number of employees at December 31, 1993 excludes 650 employees who joined the Company on December 21, 1993 as a result of the acquisition by Containers of DM Can.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Although the food can industry in the United States is relatively stable and mature in terms of unit sales growth, Containers has realized compound annual unit growth in excess of 7% since 1987. On a pro forma basis giving effect to the acquisition of DM Can, annual unit sales growth of Containers is in excess of 12% since 1987. Plastics is pursuing new markets for its plastic containers, including the PCR recycled resin segment of the market. Based upon published information and management's experience in the industry, management believes that PET custom containers are replacing glass containers for products such as mouthwash, salad dressing, peanut butter and liquor. Management also believes that Plastics is well positioned because of its technologically advanced equipment to respond to opportunities for future growth in the rigid plastic container market. Sales growth at Containers and Plastics has enabled the Company to improve EBDITA by achieving economies of scale. Since 1991 Containers has closed two smaller, higher cost facilities and Plastics has implemented an aggressive consolidation and rationalization program that resulted in the closing of three plants, the consolidation of technical and administrative centers and a substantial reduction in personnel. In November 1991, Plastics sold its nonstrategic PET carbonated beverage bottle business, exiting that commodity business. The Company has reduced its selling and administrative expenses and its manufacturing costs as a result of these actions. In 1992, Holdings and Silgan completed the Refinancing to improve their financial flexibility. See "Business--Company History." On December 21, 1993, Containers acquired the assets of DM Can for approximately $73 million. In connection with the acquisition of DM Can, Containers and Del Monte entered into the DM Supply Agreement under which for a term of ten years Containers will supply all of Del Monte's metal container requirements for the packaging of food and beverages in the United States and not less than 65% of Del Monte's annual requirements of metal containers for the packaging of food and beverages at Del Monte's Irapuato, Mexico facility. As a result of the acquisition of DM Can, the Company will produce almost all of the containers necessary to package the canned vegetable and fruit products of Del Monte, the largest provider of canned fruits and vegetables in the United States. In conjunction with the acquisition of DM Can, Silgan, Containers and Plastics entered into the Silgan Credit Agreement with the Banks. The proceeds from the Silgan Credit Agreement were used to finance, in part, the acquisition of DM Can, repay in full amounts owing under the Amended and Restated Credit Agreement (as defined under "Business--Company History") and pay fees and expenses related thereto. Additionally, Holdings issued and sold 250,000 shares of its Class B common stock, par value $.01 per share (the "Holdings Class B Stock"), for $15 million, which amount Holdings contributed to the capital of Silgan. The Company believes that the combination of the nine DM Can facilities with its existing thirteen can plants will create cost reduction opportunities through plant rationalization and equipment investment as well as additional cost savings from production scheduling and line reconfiguration. This discussion should be read in conjunction with the selected financial data, the pro forma financial data, the historical statements of operations and the notes thereto included elsewhere in this Prospectus. In addition to the discussion of historical results of operations, to provide more meaningful information about the acquisition of DM Can, management has provided a pro forma discussion of the results of operations of the Company for the year ended December 31, 1993 as compared to the year ended December 31, 1992, after giving effect to the acquisition of DM Can. Results of Operations Three Months Ended March 31, 1994 Compared with Three Months Ended March 31, 1993. Net sales of metal containers were $133.3 million for the three months ended March 31, 1994 (including net sales of $50.4 million and $35.5 million to Nestle and Del Monte, respectively, during such period), an increase of $36.0 million, or 37.0%, over net sales of metal containers of $97.3 million for the same period in 1993 (including net sales of $57.8 million and $2.0 million to Nestle and Del Monte, respectively, during the same period in 1993). The increase in net sales for the three months ended March 31, 1994 as compared to the three months ended March 31, 1993 was primarily attributable to increased unit sales due to the acquisitions of DM Can in December 1993 and of an additional manufacturing facility in May 1993 and to the earlier sales of containers to certain vegetable pack customers, offset, in part, by lower unit sales to Nestle and lower average sales prices. Net sales of plastic containers increased $2.1 million, or 4.4%, to $50.0 million for the three months ended March 31, 1994, as compared to $47.9 million for the same period in 1993. The increase in net sales was principally attributable to a change in the mix of products sold. Sales of other containers totaled $2.9 million for the three months ended March 31, 1994, compared to $3.5 million for the same period in 1993. Cost of goods sold was 87.8% of net sales ($163.5 million) for the three months ended March 31, 1994, a decrease of 0.8 percentage points as compared to 88.6% of net sales ($131.8 million) for the same period in 1993. The decrease in cost of goods sold as a percentage of net sales principally resulted from improved manufacturing efficiencies as a result of capital investments, increased margin contribution due to a change in the mix of products sold and economic benefits resulting from the acquisition of DM Can. Also, the purchase of an additional manufacturing facility in May 1993 increased production capacity and eliminated the Company's first quarter 1993 outsourcing requirement for which there was no margin contribution. Selling, general and administrative expenses as a percentage of net sales declined 0.9 percentage points to 4.6% of net sales ($8.6 million) for the three months ended March 31, 1994, as compared to 5.5% ($8.2 million) for the same period in 1993. The decrease as a percentage of net sales resulted from the Company's ability to absorb the increase in selling, general and administrative functions associated with the acquisition of DM Can with a modest increase in expenses, and by a decline in selling, general and administrative expenses of the Company's other existing business. Income from operations as a percentage of net sales increased 1.8 percentage points to 7.6% ($14.1 million) for the three months ended March 31, 1994, compared with 5.8% ($8.7 million) for the same period in 1993. The increase in income from operations of $5.4 million was attributable to the aforementioned increase in gross profit margin and the maintenance of a constant level of selling, general and administrative expenses. Interest expense increased by approximately $2.5 million to $15.6 million for the three months ended March 31, 1994. The increase resulted from the incurrence of additional bank borrowings to finance the acquisition of DM Can, higher average interest rates, and higher accretion of interest on the Debentures. The provisions for income taxes for the three months ended March 31, 1994 and 1993 were comprised of state and foreign components and recognized the benefit of certain deductions for federal income tax purposes which are available to Holdings. As a result of the items discussed above, the net loss before cumulative effect of changes in accounting principles for the three months ended March 31, 1994 was $2.2 million, $2.6 million less than the loss before cumulative effect of changes in accounting principles for the three months ended March 31, 1993 of $4.8 million. Effective January 1, 1993, the Company adopted SFAS No. 106, SFAS No. 109 and SFAS No. 112. The cumulative effect of these accounting changes for years prior to 1993 was to decrease the net loss by $6.3 million. Year Ended December 31, 1993 Compared with Year Ended December 31, 1992. Net sales of metal containers increased $20.1 million, or 4.7%, to $445.9 million for the year ended December 31, 1993, compared to $425.8 million for the same period in 1992. Net sales of metal containers to Nestle decreased $11.6 million to $214.1 million, compared to net sales of $225.7 million for the same period in 1992, primarily due to reduced demand by Nestle. Net sales of metal containers to other customers increased $31.7 million to $231.8 million, compared to net sales of $200.1 million for the same period in 1992. The increase was primarily due to an increase in unit sales to existing non-vegetable pack customers and the purchase of an additional manufacturing facility in May 1993, which accounted for sales of $12.5 million, offset, in part, by lower unit sales to vegetable pack customers due to the extremely wet weather in the Midwest in the summer of 1993. Net sales of plastic containers were $186.3 million for the year ended December 31, 1993, $6.3 million lower than net sales of plastic containers of $192.6 million for the same period in 1992. The decrease in net sales was primarily attributable to lower unit sales to existing customers due to soft market conditions. Sales of other containers increased approximately 15% to $13.3 million for the year ended December 31, 1993, compared to $11.6 million for the same period in 1992. Cost of goods sold was 88.5% of net sales ($571.2 million) for the year ended December 31, 1993, compared to 88.1% of net sales ($555.0 million) for the same period in 1992. The increase in cost of goods sold as a percentage of sales principally resulted from higher per unit manufacturing costs incurred as a result of higher depreciation expense, lost margin on outsourced cans due to capacity constraints in early 1993, offset, in part, by general gains in manufacturing efficiencies. Selling, general and administrative expenses were 5.0% of net sales ($32.5 million) for the year ended December 31, 1993, compared to 5.2% ($32.8 million) for the same period in 1992. The decrease in selling, general and administrative expenses as a percentage of sales was principally attributable to the maintenance of a constant level of expenditures on a greater sales base. Income from operations as a percentage of net sales was 6.5% ($41.8 million) for the year ended December 31, 1993, compared to 6.7% ($42.3 million) for the same period in 1992. The 0.2% decrease in income from operations as a percentage of sales was due primarily to the aforementioned decrease in gross profit margin. Interest expense decreased by approximately $5.5 million to $54.3 million for the year ended December 31, 1993 compared with $59.8 million (including minority interest expense of $2.7 million) for the same period in 1992. The decrease principally reflected the benefit of the refinancing in June 1992 of the Company's and Silgan's debt and Silgan's preferred stock at lower average interest rates. The provisions for income taxes for 1993 and 1992 were comprised of state and foreign components and recognized the benefit of certain deductions for federal income tax which were available to Holdings. Effective January 1, 1993, the Company adopted SFAS No. 109. The application of the new standard did not have an effect on the Company's provision for income taxes for 1993. The loss before extraordinary charges and cumulative effect of changes in accounting principles for the year ended December 31, 1993 was $14.4 million, as compared to $19.8 million for the year ended December 31, 1992. The decrease in the loss before extraordinary charges and cumulative effect of changes in accounting principles was principally the result of the decrease in interest expense in 1993. As a result of the refinancing of the Amended and Restated Credit Agreement in conjunction with the acquisition of DM Can and the refinancing in June 1992 of Silgan's debt and preferred stock and Holdings' debt, the Company incurred extraordinary charges of $1.3 million and $23.6 million for the early extinguishment of debt in 1993 and 1992, respectively. During 1993 the Company adopted SFAS No. 106 and SFAS No. 112. The cumulative effect of these accounting changes was to decrease net income by $5.0 million and $1.3 million, respectively. Year Ended December 31, 1992 Compared with Year Ended December 31, 1991 Net sales of metal containers decreased $9.5 million to $425.8 million for the year ended December 31, 1992, compared to $435.3 million for the same period in 1991. Net sales of metal containers to Nestle increased $12.6 million to $225.7 million, compared to net sales of $213.1 million for the same period in 1991, primarily due to increased unit sales of pet food containers, offset, in part, by less demand for tomato cans due to a smaller pack in 1992 than in the prior year and by the pass through of lower material costs. Net sales of metal containers to other customers decreased $22.1 million to $200.1 million, compared to net sales of $222.2 million for the same period in 1991. The decrease was primarily due to colder and wetter summer weather experienced in the Midwest which resulted in a reduced vegetable pack as compared to the prior year along with lower unit sales volume as a result of the closing by the Company of two metal container manufacturing facilities, and was partially offset by increased sales to existing customers. Net sales of plastic containers were $192.6 million for the year ended December 31, 1992, $39.5 million lower than net sales of plastic containers of $232.1 million for the same period in 1991. The decrease in net sales was primarily attributable to the disposition of the PET carbonated beverage bottle business in November 1991 which accounted for sales of $33.4 million during the year ended December 31, 1991. The decrease in net sales of other plastic containers of $6.1 million was attributable to lower average sales prices due to the pass through of lower average resin costs and a change in the mix of products sold. Sales of other containers totaled $11.6 million for the year ended December 31, 1992, compared to $10.8 million for the same period in 1991. Costs of goods sold was 88.1% of net sales ($555.0 million) for the year ended December 31, 1992, compared to 89.2% of net sales ($605.2 million) for the same period in 1991. The decrease in cost of goods sold as a percentage of sales principally resulted from lower per unit manufacturing costs realized through improved manufacturing efficiencies in the Company's existing plant facilities, the benefits realized from the closing of four higher cost manufacturing plants in the latter part of 1991 and early 1992, and the sale of the lower margin PET carbonated beverage business, offset, in part, by lower margins realized on certain products due to competitive pricing conditions. Selling, general and administrative expenses were 5.2% of net sales ($32.8 million) for the year ended December 31, 1992, compared to 5.0% ($34.1 million) for the same period in 1991. The $1.3 million decrease was principally attributable to cost savings generated from a reduction in administrative personnel, partially offset by a charge for an uncollectible account that has been fully reserved. Income from operations as a percentage of net sales was 6.7% ($42.3 million) for the year ended December 31, 1992, compared to 5.7% ($38.9 million) for the same period in 1991. The 1.0% increase in income from operations as a percentage of sales was due primarily to the improved overall margins realized by the Company from its existing operations after closing four higher cost manufacturing facilities in the latter part of 1991 and early 1992 and the disposition in November 1991 of the lower margin PET carbonated beverage business. Interest expense increased by approximately $1.1 million to $57.1 million for the year ended December 31, 1992. The increase was due to additional interest accruing at a higher rate on the higher balance of the Holdings Reset Debentures, additional indebtedness which was outstanding in the third quarter of 1992 because the 14% Notes Redemption and the Holdings Reset Debentures Redemption (each as defined in "--Capital Resources and Liquidity" below) did not take place until 60 and 30 days, respectively, after the closings for the Debt Securities Financings (as defined in "--Capital Resources and Liquidity" below), offset, in part, by lower average interest rates incurred on a lower average balance of bank borrowings. Average bank borrowings have declined due to tighter management of inventories and term loan repayments. The provisions for income tax for the years ended December 31, 1992 and 1991 were comprised of state and foreign components. As a result of the items discussed above, Holdings' loss before the extraordinary charge for the year ended December 31, 1992 was $19.8 million, $0.8 million less than Holdings' net loss for the year ended December 31, 1991 of $20.6 million. As a result of the Refinancing, the Company incurred an extraordinary charge of $23.6 million for the early extinguishment of debt. Such charge reflects a $12.6 million expense for premiums paid in connection with the Redemptions (as defined under "--Capital Resources and Liquidity") and the charge-off of $11.0 million for unamortized debt financing costs related to the securities redeemed under the Redemptions. Results of Operations - Pro Forma The following discussion sets forth the pro forma results of operations of the Company for the year ended December 31, 1993 as compared to the year ended December 31, 1992, after giving effect to the acquisition of DM Can. The following table sets forth, for the years ended December 31, 1993 and 1992, certain consolidated pro forma data. This data includes the historical results of operations for the Company and DM Can and give effect to the pro forma adjustments assuming the acquisition occurred at the beginning of each year presented. The pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The final purchase price allocation may differ from that used for the pro forma data, although it is not expected that the final allocation of purchase price will be materially different. The unaudited pro forma combined financial data do not purport to represent what the Company's financial position or results of operations would actually have been had the transactions in fact occurred on the dates or at the beginning of the period indicated, or to project the Company's financial position or results of operations for any future date or period. This discussion should be read in conjunction with the discussion of historical results of operations of the Company for the years ended December 31, 1993 and 1992. 1993 1992 ---- ---- (Dollars in millions) Net sales $818.6 $819.6 Income from operations 50.7 56.7 Loss before income taxes (8.1) (8.1) Loss before extraordinary (10.4) (11.1) charges and cumulative effect of changes in accounting principles Net loss (18.0) (34.7) Management believes that pro forma income from operations in 1993 declined $6.0 million as compared to the prior year primarily as a result of a one-time inventory reduction by Del Monte in anticipation of the sale of DM Can to Containers and, to a lesser extent, due to lower vegetable pack sales as a result of adverse growing conditions in the Midwest in the summer of 1993. The pro forma loss before income taxes for 1993 and 1992 was $8.1 million. Management believes that this resulted from the one-time inventory reduction and reduced demand for vegetable pack containers as referred to above, offset by lower interest expense in 1993 due to the benefits realized from the Refinancing. Capital Resources and Liquidity The Company's liquidity requirements arise primarily from its obligations under the indebtedness incurred in connection with its acquisitions and the refinancing of such indebtedness, capital investment in new and existing equipment and the funding of the Company's seasonal working capital needs. Historically, the Company has met these liquidity requirements through cash flow generated from operating activities and working capital borrowings. As described below, beginning in December 1996 the Company's liquidity requirements may also be affected by the interest associated with Holdings' indebtedness. For the first three months of 1994, the borrowing of working capital loans of $3.6 million along with $3.8 million of cash provided by operating activities were used to fund net capital expenditures of $4.9 million and increase cash balances by $2.5 million. The Company's earnings before depreciation, interest, taxes and amortization for the three months ended March 31, 1994 increased by $7.2 million over the same period in the prior year to $23.9 million. However, cash provided by operations during the first three months of 1994 declined slightly from the same period in 1993 because there was an increase in working capital needs in 1994. During the first three months of 1994 there was an increase in accounts receivable due to greater sales during the first quarter of 1994 and an increase in inventories due to the projected requirements for DM Can, offset by an increase in trade accounts payable resulting from the higher inventory levels. On December 21, 1993 Silgan, Containers and Plastics entered into the Silgan Credit Agreement to finance the acquisition of DM Can and to refinance and repay in full all amounts owing under the Amended and Restated Credit Agreement. In conjunction therewith, the Banks loaned the Company $60.0 million of A Term Loans, $80.0 million of B Term Loans and $29.8 million of Working Capital Loans (each as defined in "Description of Certain Indebtedness--Description of Credit Agreement"). In addition, Holdings issued and sold 250,000 shares of the Holdings Class B Stock for $15.0 million. With these proceeds, the Company (i) repaid $41.5 million of term loans and $60.8 million of Working Capital Loans under the Amended and Restated Credit Agreement; (ii) acquired from Del Monte substantially all the fixed assets and certain working capital of Del Monte's container manufacturing business for approximately $73 million; and (iii) paid fees and expenses of $8.9 million. For 1993, the Company used cash generated from operations of $48.1 million and available cash balances of $2.7 million to fund capital expenditures of $42.5 million, repay working capital loans of $7.2 million (in addition to working capital loans which were repaid with proceeds from the Silgan Credit Agreement), and pay $1.1 million of term loans. During the year, the Company increased its annual amount of capital spending in order to reduce costs and to add incremental production capacity. The increase in inventory at December 31, 1993 as compared to the prior year principally resulted from the inventory acquired as part of the acquisition of DM Can. To improve their financial flexibility, Holdings and Silgan completed the Refinancing in 1992. The Refinancing (i) lowered Holdings' consolidated average cost of indebtedness by refinancing Silgan's 14% Senior Subordinated Notes due 1997 (the "14% Notes") and the Holdings Reset Debentures with new indebtedness bearing lower interest rates, (ii) improved Silgan's liquidity and ability to further repay its indebtedness by eliminating Silgan's obligation to pay cash dividends on its 15% Cumulative Exchangeable Redeemable Preferred Stock (the "Silgan Preferred Stock") through the redemption by Silgan on August 16, 1992 of all of the outstanding Silgan Preferred Stock (the "Silgan Preferred Stock Redemption") and by deferring for an additional two years (until December 1996) and reducing the cash interest requirements on Holdings' indebtedness, (iii) provided Holdings with additional financial flexibility by eliminating restrictions in the indenture relating to the 14% Notes on Silgan's ability to pay dividends to Holdings in order to fund interest payments on Holdings' indebtedness through the redemption by Silgan on August 28, 1992 of all of the outstanding 14% Notes (the "14% Notes Redemption") and (iv) extended the average length of maturity of Silgan's indebtedness by issuing the 11-3/4% Notes and the Secured Notes to refinance $30 million of bank term loans and the 14% Notes. The Refinancing included the following components: (i) the public offering (the "Silgan Notes Offering") in June 1992 by Silgan of $135 million principal amount of the 11-3/4% Notes; (ii) the private placement in June 1992 by Silgan of $50 million principal amount of its Secured Notes with certain institutional investors (the "Secured Notes Placement"); (iii) the public offering in June 1992 by Holdings of $275 million principal amount of the Debentures for an aggregate amount of proceeds of $165.4 million (the "Debentures Offering" and, together with the Silgan Notes Offering and the Secured Notes Placement, the "Debt Securities Financings"); (iv) the amendment of the Amended and Restated Credit Agreement, followed by the borrowing by Silgan of approximately $17 million of working capital loans and the prepayment by Silgan of $30 million of term loans under the Amended and Restated Credit Agreement; (v) the 14% Notes Redemption; (vi) the Silgan Preferred Stock Redemption; (vii) the repayment by Silgan of a $25.2 million advance from Holdings and the payment by Silgan to Holdings of a $15.7 million dividend; (viii) the payment by Holdings in cash of $15.3 million of interest payable on July 1, 1992 on the Holdings Reset Debentures; (ix) the redemption by Holdings on July 29, 1992 of all of the outstanding Holdings Reset Debentures at 103.67% of the principal amount thereof and the payment in cash of accrued interest thereon (the "Holdings Reset Debentures Redemption" and, together with the 14% Notes Redemption and the Silgan Preferred Stock Redemption, the "Redemptions"); and (x) the payment of transaction fees and expenses of $17.3 million relating to the Refinancing. In connection with the Refinancing, Holdings and Silgan received $333.1 million in proceeds from the issuance of the Secured Notes, the 11-3/4% Notes, and the Debentures net of debt issuance costs of $17.3 million. On June 29, 1992, Silgan repaid $30 million of bank term loans. On July 29, 1992, Holdings paid $181.6 million to redeem the Holdings Reset Debentures. On August 16, 1992, Silgan paid $31.5 million to redeem the Silgan Preferred Stock. On August 28, 1992, Silgan paid $89.3 million to redeem the 14% Notes. The Company borrowed working capital loans of $19.2 million during the year ended December 31, 1992 which, along with cash provided by operations during 1992 of $15.4 million (which included payment of $17.7 million in cash interest on the Holdings Reset Debentures) were used principally to fund capital expenditures of $23 million, to make bank term loan repayments of $10.2 million (in addition to the term loan repayment made in connection with the Refinancing), to pay cash dividends of $1.1 million on the Silgan Preferred Stock and to increase outstanding cash balances by $1.1 million. During 1991, cash provided from operations of $61.2 million was used to fund capital expenditures of $21.8 million and scheduled bank term loan repayments of $25 million. The balance of the cash provided from operations during the year of $14.4 million was used to repay working capital loans and principally resulted from the receipt in January 1991 of $16 million from a major customer on an account normally settled by the prior year's end. In November 1991, the Company completed the sale of its PET carbonated beverage bottle business. The proceeds of approximately $12 million, net of costs associated with such sale, were principally used to repay bank term loans. Due to reduced working capital requirements, $4 million of working capital loans was also repaid. Since a portion of the proceeds realized from the Silgan Credit Agreement on December 21, 1993 was used to repay working capital loans under the Amended and Restated Credit Agreement, the Company was able to reduce the amount of its commitment for working capital loans. Under the Silgan Credit Agreement, the commitment for working capital loans was reduced by $41 million to $70 million. As of March 31, 1994, the outstanding principal amount of working capital loans was $5.8 million and, subject to a borrowing base limitation and taking into account outstanding letters of credit, the unused portion of working capital commitments at such date was $57.8 million. The decrease of $32.5 million in the outstanding principal amount of working capital loans since March 31, 1993 resulted from the repayment of approximately $30 million of working capital loans with proceeds from the refinancing of the Silgan Credit Agreement as well as from cash generated from operations. Because the Company sells metal containers used in vegetable and fruit processing, its sales are seasonal. As a result, a significant portion of the Company's revenues are generated in the first nine months of the year. As is common in the packaging industry, the Company must access working capital to build inventory and then carry accounts receivable for some customers beyond the end of the summer and fall packing season. Seasonal accounts are generally settled by year end. Due to the Company's seasonal requirements, the Company expects to incur short term indebtedness to finance its working capital requirements, and it is estimated that approximately $50 million of the working capital revolver, including letters of credit, will be utilized at its peak in July 1994. In addition to its operating cash needs, the Company's cash requirements over the next several years are anticipated to consist primarily of (i) annual capital expenditures of $25 million to $33 million (approximately $13 million of which is nondiscretionary in each year), (ii) principal amortization payments of A Term Loans under the Silgan Credit Agreement of $20 million in each of 1994, 1995 and 1996, (iii) expenditures of approximately $13 million associated with the rationalization of facilities related to the acquisition of DM Can, (iv) the scheduled maturity on September 15, 1996 of the Working Capital Loans and $80 million of B Term Loans under the Silgan Credit Agreement, (v) payments by Silgan to Holdings to fund Holdings' semi-annual cash interest requirements of $18.2 million on the Debentures commencing in December 1996, (vi) the scheduled maturity of the $50 million principal amount of the Secured Notes in 1997, and (vii) the Company's interest requirements (including interest on the Working Capital Loans, the principal amount of which will vary depending upon seasonal requirements, the Secured Notes, the 11-3/4% Notes and bank term loans, all of which bear fluctuating rates of interest). Interest on the Debentures is payable at a rate of 13-1/4% per annum from and after June 15, 1996, and commencing on December 15, 1996 semi-annual interest payments of $18.2 million will be required to be made thereon. Since Holdings' only asset is its investment in Silgan, its ability to pay interest on the Debentures on and after December 15, 1996 (the date on which interest is first payable on the Debentures) may depend upon its receipt of funds paid by dividend or otherwise loaned, advanced or transferred by Silgan to Holdings. While Silgan has no obligation, legal or otherwise, to make such funds available, it is expected that Silgan will do so if it is permitted under the agreements to which it shall then be a party and if it then has sufficient funds available for such purpose. If sufficient funds to pay such interest are not generated by the operations of Silgan and its subsidiaries, Holdings or Silgan may seek to borrow or otherwise finance the amount of such payments or refinance the Debentures. Neither the Secured Notes nor the 11-3/4% Notes limits the ability of Silgan to pay cash dividends to Holdings in order to enable Holdings to pay interest on the Debentures. The Silgan Credit Agreement presently prohibits Silgan from paying dividends or otherwise transferring funds to Holdings in order to service Holdings' indebtedness; however, the Silgan Credit Agreement matures on September 15, 1996, prior to the date on which interest or principal is payable on the Debentures. Silgan expects to enter into a new credit facility to replace the Silgan Credit Agreement on or before September 15, 1996 on terms which would not limit the ability of Silgan to transfer funds to Holdings in order to enable Holdings to pay interest on the Debentures. However, there can be no assurance that Silgan will be able to enter into a new credit facility on such terms. In such event, Silgan and Holdings would consider pursuing alternative arrangements, including possible equity and/or debt financings, to enable Holdings to meet its obligations. There can be no assurance that any such alternative, if pursued, would be accomplished or would enable Holdings to make timely payments of its obligations under the Debentures. The funding requirements of Holdings to service its indebtedness (beginning in December 1996) will be met by Silgan through cash generated by operations or borrowings or by Holdings through refinancings of its existing indebtedness or additional debt or equity financings. The Debentures represent "applicable high yield discount obligations" ("AHYDOs") within the meaning of Section 163(i) of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the tax deduction which would otherwise be available to Holdings in respect of the accretion of interest on the Debentures during their noncash interest period ending June 15, 1996 ($109.6 million) has been and will continue to be deferred, which, in turn, will increase the taxable income of Holdings and reduce the after-tax cash flows of Holdings. However, as a result of Holdings' utilization of its net operating loss carryforward, which currently amounts to approximately $105 million for regular federal income tax purposes, the effect of such deferral on the regular federal income taxes of Holdings has been and will continue to be mitigated until such net operating loss carryforward is fully utilized. In 1993, Holdings became subject to alternative minimum tax ("AMT"). Because Holdings has AMT net operating loss carryforwards, Holdings has incurred and will continue to incur an AMT liability at a rate of 2%. In 1995, Holdings anticipates that the AMT net operating loss carryforward will have been fully utilized. Thereafter, Holdings will incur an AMT liability at a rate of 20% (or the applicable rate then in effect). The AMT paid is allowed (subject to certain limitations) as an indefinite credit carryover against Holdings' regular tax liability in the future when and if Holdings' regular tax liability exceeds the AMT liability. The deferred accreted interest will not be deductible until the redemption, retirement or other repayment of the Debentures (other than with stock or debt of Holdings or a related party). Until the deferred accreted interest is deductible, except to the extent the net operating loss carryforward is available, Holdings will realize taxable income sooner and in a greater amount than if the deferred accreted interest on the Debentures were deductible as it accretes. Depending upon its tax position and financial condition and the benefit which may be available through the deduction of the deferred accreted interest, Holdings could decide in the future to refinance the Debentures or a portion thereof prior to their stated maturity date. In such event, the full amount of the deferred accreted interest (applicable to the Debentures retired) should be deductible under the carryback and carryforward rules under the Code unless the holders of the Debentures receive stock or debt of Holdings or a related party in exchange for the Debentures. No assurance can be given that Holdings will be able to refinance the Debentures at such time; however, management believes that application of the AHYDO rules will not have a material adverse effect on Holdings' financial condition or ability to repay the Debentures. In addition, the Internal Revenue Service ("IRS") has broad authority to issue regulations under the AHYDO rules with retroactive effect to prevent the avoidance of the purposes of those rules through agreements to borrow amounts due under a debt instrument or other arrangements, and thus these regulations, when issued, may affect the timing or availability of the tax deductions for original issue discount on the Debentures. Management believes that cash generated by operations and funds from working capital borrowings under the Silgan Credit Agreement will be sufficient to meet the Company's expected operating needs, planned capital expenditures and debt service requirements until the maturity of the working capital facility under the Silgan Credit Agreement on September 15, 1996. Management also believes that it will be able to replace the working capital facility under the Silgan Credit Agreement with another facility on or prior to September 15, 1996 on terms which will be acceptable to the Company. However, there can be no assurance that the Company will be able to replace its working capital facility. In such event, the Company could be required to consider alternative equity or debt financings in order to meet its cash needs. The ability of the Company to effect any such financing and the extent to which the Company may seek or be required to obtain additional financing will depend upon a variety of factors, including, the future performance of the Company and its subsidiaries, which will be subject to prevailing economic conditions and to financial, business and other factors (including the state of the economy and the financial markets, demand for the products of the Company and its subsidiaries, costs of raw materials, legislative and regulatory changes and other factors beyond the control of the Company and its subsidiaries) affecting the business and operations of the Company and its subsidiaries as well as prevailing interest rates, actual amounts expended for capital expenditures and other corporate purposes and the timing and amount of debt prepayments or redemptions. The Silgan Credit Agreement, the Secured Notes and the indentures relating to the 11-3/4% Notes and the Debentures each contain restrictive covenants that, among other things, limit the Company's ability to incur debt, sell assets and engage in certain transactions. Management does not expect these limitations to have a material effect on the Company's business or results of operations. The Company is in compliance with all financial and operating covenants contained in such financing agreements and believes that it will continue to be in compliance during 1994 with all such covenants. Effect of Interest Rate Fluctuations and Inflation Because the Company has indebtedness which bears interest at floating rates, the Company's financial results will be sensitive to changes in prevailing interest rates. To mitigate the effect of significant changes in interest rates, the Company may enter into interest rate protection agreements (with counterparties that, in the Company's judgment, have sufficient creditworthiness) with respect to a portion of its floating rate indebtedness. At March 31, 1994, the Company was not a party to any interest rate protection agreement. Historically, inflation has not had a material effect on the Company, other than to increase its cost of borrowing. In general, the Company has been able to increase the sales prices of its products to reflect any increases in the prices of raw materials. Impact of New Accounting Standards Postretirement Benefits. Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Under Statement No. 106 the Company is required to accrue the cost of retiree health and other postretirement benefits during the years that covered employees render service. The cumulative effect of this accounting change was to decrease net income by $5.0 million. This change in accounting principle, excluding the cumulative effect, decreased pretax income for the year ended December 31, 1993 by $0.5 million. Prior to 1993, the Company recorded these benefits on a pay-as-you-go basis, and the Company has elected not to restate prior years for this change. The new rules are expected to result in an increase in net annual periodic postretirement benefit costs of less than $1.0 million. See Note 16 to consolidated financial statements of the Company included elsewhere in this Prospectus. Income Taxes. Effective January 1, 1993 the Company adopted SFAS No. 109, "Accounting for Income Taxes." The Company had previously reported under SFAS No. 96 "Accounting for Income Taxes." There was no effect for the differences in methods at the date of adoption. Furthermore, the adoption of SFAS No. 109 had no effect on the Company's 1993 provision for income taxes. See Note 8 to consolidated financial statements of the Company included elsewhere in this Prospectus. BUSINESS General The Company is a major manufacturer and seller of a broad range of steel and aluminum containers for the human food and pet food markets and plastic containers for the personal care, food, pharmaceutical and household markets in the United States. In 1993, the Company had net sales of $645 million. On December 21, 1993, Silgan's wholly owned subsidiary, Containers, acquired from Del Monte substantially all of the fixed assets and certain working capital of DM Can for approximately $73 million. See "Business-- Company History" below. In connection therewith, Containers and Del Monte entered into the DM Supply Agreement pursuant to which Containers supplies substantially all of the metal container requirements of Del Monte for a term of ten years. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 the Company would have had net sales of $818 million. See "Business--Sales and Marketing" below. Management believes that the Company is the largest food can producer in the United States (based on pro forma unit sales after giving effect to the acquisition of DM Can) and one of the largest producers in the United States of HDPE containers for the personal care market and a major producer of PET products for the personal care and food markets. Silgan has experienced significant growth since its inception in 1987 as a result of its acquisitions and related increased market position. Management estimates that Containers is currently the nation's largest manufacturer of metal food containers and that in 1993 Containers sold approximately 27% of all metal food containers sold in the United States by non-captive manufacturers (manufacturers of containers not owned by a user of containers) and approximately 16% of all metal food containers sold in the United States, in each case based on unit sales. On a pro forma basis giving effect to the acquisition of DM Can, in 1993 Containers would have sold approximately 34% of all metal food containers sold in the United States by non-captive manufacturers and approximately 22% of all metal food containers sold in the United States. Although the food can industry in the United States is relatively stable and mature in terms of unit sales growth, Containers, on a pro forma basis after giving effect to the acquisition of DM Can, has realized compound annual unit sales growth in excess of 12% since 1987. Types of containers manufactured include those for vegetables, fruit, pet food, tomato based products, evaporated milk and infant formula. Pursuant to the Nestle Supply Agreements, Containers supplies substantially all of the can requirements of the former Carnation operations of Nestle. In addition to the Nestle Supply Agreements and the DM Supply Agreement, Containers has other long-term supply arrangements with other customers. The Company estimates that in excess of 80% of Containers' sales in 1994 will be pursuant to long-term supply arrangements. See "Business--Sales and Marketing" below. Management believes that Silgan's wholly owned subsidiary, Plastics, is one of the leading manufacturers of plastic containers sold in the United States for the personal care, household and pharmaceutical markets served by the Company. Plastic containers manufactured by Plastics include personal care containers for shampoos, conditioners, hand creams, lotions and cosmetics, household containers for light detergent liquids, scouring cleaners and specialty cleaning agents and pharmaceutical containers for tablets, laxatives and eye cleaning solutions. Plastics is also one of the leading manufacturers of PET containers sold in the United States for applications other than soft drinks. Plastics manufactures custom PET medicinal and health care product containers (such as mouthwash bottles), custom narrow-neck food product containers (such as salad dressing bottles), custom wide-mouth food product containers (such as mayonnaise and peanut butter containers) and custom non-soft drink beverage product containers (such as juice, water and liquor bottles). See "Business-- Products." The Company's strategy is to continue to improve its market position and profitability through focus on product quality, customer service, cost efficiencies, strategic acquisitions and market share growth through customers experiencing market share growth. At Containers, management has focused on achieving operating cost advantages over its competitors, primarily through low labor costs, low overhead, technologically advanced manufacturing processes and by exploiting the favorable geographic locations of its 22 can plants. Since its acquisition in 1987 of Nestle Can, Containers has invested more than $82 million in its existing manufacturing facilities and has spent approximately $66 million for the purchase of additional can manufacturing assets. As a result of these efforts and management's focus on quality and service, Containers has increased its overall share of the food can market by approximately 100% in terms of unit sales, from a share of approximately 11% in 1987 to a share of approximately 22% in 1993, on a pro forma basis giving effect to the acquisition of DM Can. Plastics has increased its market position primarily by strategic acquisitions. From a sales base of $89 million in 1987, Plastics' sales increased to $186 million in 1993, or 13% on a compound annual basis. While many of Plastics' larger competitors employ technology oriented to large bottles and long production runs, Plastics has focused on mid-sized, extrusion blow-molded plastic containers requiring special decoration and shorter production runs. Plastics emphasizes value-added fabrication of the container, creative design and sophisticated decoration processes. Plastics is also aggressively pursuing new markets for plastic containers, including the PCR resin segment of the market. Based upon published information and management's experience in the industry, management believes that PET custom containers are replacing glass containers for products such as mouthwash, salad dressing, peanut butter and liquor. Management also believes that Plastics is well positioned because of its technologically advanced equipment to respond to opportunities for future growth in the rigid plastic container market. Furthermore, to the extent that mandatory recycling laws, customer preferences or manufacturing costs result in increased demand for HDPE containers that are manufactured using PCR resins, the Company believes that its proprietary equipment is particularly well-suited for the production of such containers because of the relatively low capital costs required to convert its equipment from the use of virgin resins. The Company is also engaged in the manufacture and sale of paper containers primarily used by processors and packagers in the food industry. Sales of paper containers in 1993 were approximately $13 million. Products The Company is engaged in the manufacture and sale of steel and aluminum containers that are used primarily by processors and packagers in the food and pet food industries. Types of containers manufactured include those for vegetables, fruit, pet food, tomato based products, evaporated milk and infant formula. The Company does not produce cans for use in the beer or soft drink industries. Cans are produced in a variety of sizes, ranging in diameter from 2-1/8 inches to 6-3/16 inches and in height from 1-7/16 inches to 7 inches. The Company is also engaged in the manufacture and sale of plastic containers primarily used in the personal care, food, beverage (other than carbonated soft drinks), household and pharmaceutical container markets. Plastic containers are produced by converting thermoplastic materials into plastic containers ranging in size from 1/2 to 96 ounces. Emphasis is on value-added fabrication of the container and the decoration process. The Company designs and manufactures a wide range of containers for toiletries and cosmetic products such as shampoos, hand creams and lotions. Because toiletries and cosmetic products are characterized by short product life and a demand for creative packaging, the containers manufactured for these products generally have more sophisticated designs and decorations. Food and beverage containers are designed and manufactured (generally to unique specifications for a specific customer) to contain products such as mouthwash, salad dressing, peanut butter, coffee, juice, water and liquor. Household containers are designed and manufactured to contain light-duty dishwasher and heavy-duty laundry detergents, bleach, polishes, specialty cleaning agents, insecticides and liquid household products. Pharmaceutical containers are designed and manufactured (either in a generic or in a custom-made form) to contain tablets, solutions and similar products for the ethical and over-the-counter markets. Manufacturing and Production The Company uses three basic processes to produce cans. The traditional three-piece method requires three pieces of flat metal to form a cylindrical body with a welded side seam, a bottom and a top. The Company uses a welding process for the side seam of three-piece cans to achieve a superior seal. High integrity of the side seam is further assured by the use of sophisticated electronic weld monitors and organic coatings that are thermally cured by induction and convection processes. The other two methods of producing cans start by forming a shallow cup that is then formed into the desired height using either the draw and iron process or the draw and redraw process. Using the draw and redraw process, the Company manufactures steel and aluminum two-piece cans, the height of which does not exceed the diameter. For cans the height of which is greater than the diameter, the Company also manufactures steel two-piece cans by using a drawing and ironing process. Quality and stackability of such cans are comparable to that of the shallow two-piece cans described above. Can bodies and ends are manufactured from thin, high-strength aluminum alloys and steels by utilizing proprietary tool and die designs and selected can making equipment. The Company's manufacturing operations include cutting, coating, lithographing, fabricating, assembling and packaging finished cans. The Company utilizes two basic processes to produce plastic bottles. In the blow molding process, pellets of plastic resin are heated and extruded into a tube of plastic. A two-piece metal mold is then closed around the plastic tube and high pressure air is blown into it causing a bottle to form in the mold's shape. In the injection blow molding process, pellets of plastic resin are heated and injected into a mold, forming a plastic tube. The plastic tube is then blown into a bottle-shaped metal mold, creating a plastic bottle. The Company believes that its proprietary equipment for the production of HDPE containers is particularly well-suited for the use of PCR resins because of the relatively low capital costs required to convert its equipment from the use of virgin resins. The Company's decorating methods for its plastic products include (i) silk screen decoration, which enables the application of one to six images in multiple colors to the bottle, (ii) post-molding decoration, which uses paper labels applied to the bottles with glue and (iii) pressure-sensitive decoration, which applies a paper label to a post-molded bottle by pressing against the bottle. The Company has state-of-the-art decorating equipment, including, management believes, one of the largest sophisticated decorating facilities in the Midwest, which allows the Company to custom-design new products with short lead times. As is the practice in the industry, most of the Company's can and plastic container customers provide it with annual estimates of products and quantities pursuant to which periodic commitments are given. Such estimates enable the Company to effectively manage production and control working capital requirements. At December 31, 1993, Containers had in excess of 80% of its projected 1994 sales under long-term contracts. Plastics has written purchase orders or contracts for containers with the majority of its customers. In general, these purchase orders and contracts are for containers made from proprietary molds and are for a duration of 2 to 5 years. Both Containers and Plastics schedule their production to meet their customers' requirements. Because the production time for the Company's products is short, the backlog of customer orders in relation to sales is not significant. Raw Materials The Company uses tin plated and chromium plated steel, aluminum, copper wire, organic coatings, lining compound and inks in the manufacture and decoration of its metal can products. The Company's steel and other material requirements are supplied through purchase orders with suppliers with whom the Company, through its predecessors, has long-term relationships or through open market purchases. The Company has a contract to obtain the majority of its requirements for aluminum from a supplier at prices that are subject to adjustment based on formulas and market conditions. Such contract expires in 1996. The Company believes that it would be able to satisfy its requirements for aluminum from other suppliers in the event of the loss of its current supplier. The Company believes that it will be able to purchase sufficient quantities of steel and aluminum can sheet for the foreseeable future. The raw materials used by the Company for the manufacture of plastic containers are primarily resins in pellet form such as PCR and virgin HDPE and PET and, to a lesser extent, low density polyethylene, extrudable polyester terephthalate, polyethylene terephthalate glycol, polypropylene, polyvinyl chloride and medium density polyethylene. The Company's resin requirements are acquired through a series of informal annual purchase orders for specific quantities of resins with several suppliers of resins. The price the Company pays to purchase resin is determined at the time of purchase. The Company believes that it will be able to purchase sufficient quantities of resin for the foreseeable future. The Company does not believe that it is materially dependent upon any single supplier for any of its raw materials and, based upon the existing arrangements with suppliers discussed above, its current and anticipated requirements and market conditions, the Company believes that it has made adequate provisions for acquiring raw materials. Although increases in the prices of raw materials have generally been passed along to the Company's customers, the inability to do so in the future could have a significant impact on the Company's operating margins. In addition, should any of its suppliers fail to deliver under their arrangements, the Company would be forced to purchase raw materials on the open market, and no assurances can be given that it would be able to make such purchases at prices which would allow it to remain competitive. Sales and Marketing The Company markets its products in most areas of the continental United States primarily by a direct sales force through regional sales offices. Because of the high cost of transporting empty containers, the Company generally sells to customers within a 300 mile radius of its manufacturing plants. See also "--Competition" below. In 1987, the Company, through Containers, and Nestle entered into the Nestle Supply Agreements pursuant to which Containers has agreed to supply Nestle with, and Nestle has agreed to purchase from Containers, substantially all of the can requirements of the former Carnation operations of Nestle for a period of ten years, subject to certain conditions. In 1994, the term of three of the Nestle Supply Agreements (representing approximately 65% of the Company's unit sales to Nestle) was extended through 2001. The Nestle Supply Agreements provide for certain prices and specify that such prices will be increased or decreased based upon cost change formulas set forth therein. During the duration of six of the original Nestle Supply Agreements, if Nestle receives a competitive bid for any product supplied, Containers has the right to match such bid with respect to the type and volume of cans over the period of the competitive bid. Under the other three Nestle Supply Agreements which were recently extended through 2001, Nestle's right to receive competitive bids is narrowly limited to certain circumstances, and Containers has the right to match any such bid. In either case, in the event that Containers chooses not to match any such competitive bid, Nestle may purchase such cans from the competitive bidder at the competitive bid price for the term of the bid. The Nestle Supply Agreements contain provisions that require Containers to maintain certain levels of product quality, service and delivery in order to retain the Nestle business. In the event of a breach of a particular Nestle Supply Agreement, Nestle may terminate such Nestle Supply Agreement but the other Nestle Supply Agreements would remain in effect. Since 1990, Nestle has requested that Containers match certain bids received from other potential suppliers. Containers agreed to match such bids (which resulted in minor margin impact) and continues to supply substantially all of the can requirements of the former Carnation operations of Nestle. In the future, there can be no assurance that Containers will choose to match any such bids or that, even if matched, such bids will be at a level sufficient to allow Containers to maintain margins currently received. Until any such bids are received by Nestle and submitted to the Company, the Company cannot predict the effect, if any, of such bids upon its financial condition or results of operations. Significant reductions of margins or the loss of significant unit volume under the Nestle Supply Agreements could, however, have a material adverse effect on the Company. On December 21, 1993, Containers and Del Monte entered into the DM Supply Agreement. Under the DM Supply Agreement, Del Monte has agreed to purchase from Containers, and Containers has agreed to sell to Del Monte, 100% of Del Monte's annual requirements for metal containers to be used for the packaging of food and beverages in the United States and not less than 65% of Del Monte's annual requirements of metal containers for the packaging of food and beverages at Del Monte's Irapuato, Mexico facility, subject to certain limited exceptions. The DM Supply Agreement provides for certain prices for all metal containers supplied by Containers to Del Monte thereunder and specifies that such prices will be increased or decreased based upon specified cost change formulas. Under the DM Supply Agreement, after five years, Del Monte may, under certain circumstances, receive proposals with terms more favorable than those under the DM Supply Agreement from independent commercial can manufacturers for the supply of containers of a type and quality similar to the metal containers that Containers furnishes to Del Monte, which proposals shall be for the remainder of the term of the DM Supply Agreement and for 100% of the annual volume of containers at one or more of Del Monte's canneries. Containers has the right to retain the business subject to the terms and conditions of such competitive proposal. The sale of metal containers to vegetable pack customers is seasonal and monthly revenues increase during the months of June through October. As is common in the packaging industry, the Company must build inventory and then carry accounts receivable for some seasonal vegetable pack customers beyond the end of the harvest season. Consistent with industry practice, such customers may return unused containers. Historically, such returns have been minimal. As part of its marketing strategy, the Company has arrangements to sell some of its plastic products to distributors, which in turn sell such products primarily to small-size regional customers. Plastic containers sold to distributors are manufactured by using generic molds with decoration, color and neck finishes added to meet the distributors' individual requirements. The distributors' warehouses and their sales personnel enable the Company to market and inventory a wide range of such products to a variety of customers. In 1993, 1992 and 1991, metal containers accounted for approximately 69%, 68% and 64%, respectively, of the Company's total sales, and plastic containers accounted for approximately 29%, 30% and 34%, respectively, of the Company's total sales. On a pro forma basis after giving effect to the acquisition of DM Can, metal and plastic containers in 1993 would have accounted for approximately 76% and 23% of the Company's total sales, respectively. The Company's total sales of paperboard cartons accounted for approximately 2% of the Company's total sales in each of 1993, 1992 and 1991. In 1993, 1992 and 1991, approximately 34%, 37% and 32%, respectively, of the Company's sales were to Nestle. On a pro forma basis after giving effect to the acquisition of DM Can, approximately 27% of the Company's 1993 sales would have been to Nestle and 21% of the Company's 1993 sales would have been to Del Monte. No other customer accounted for more than 10% of the Company's total sales during such years. Competition The packaging industry is highly competitive. The Company competes in this industry with other packaging manufacturers as well as fillers, food processors and packers who manufacture containers for their own use and for sale to others. The Company attempts to compete effectively through the quality of its products, pricing and its ability to meet customer requirements for delivery, performance and technical assistance. The Company also pursues market niches such as the manufacture of easy-open ends and special feature cans, which may differentiate the Company's products from its competitors' products. Management believes that the market for metal food containers is mature. Some self-manufacturers have sold or closed can manufacturing operations and entered into long-term supply agreements with the new owners or with commercial can manufacturers. Of the commercial metal can manufacturers, Crown Cork and Seal Company, Inc., American National Can Company and Ball Corporation (through its Heekin Can operations) are the Company's most significant competitors. Although metal containers face continued competition from plastic, paper and composite containers, management believes that metal containers are superior to plastic and paper containers in industry sectors where the contents are processed at high temperatures, where the contents are packaged in large or institutional quantities (14 to 64 oz.) or where long-term storage of the product is desirable. Such sectors include canned vegetables, fruits, meats, juices, non-carbonated beverages and pet foods. These sectors are the principal areas for which the Company manufactures its products. Plastics competes with a number of large national producers of food, beverage and household plastic container products, including Owens-Brockway Plastics Products, a division of Owens-Illinois, Inc., Plastic Containers Inc., Johnson Controls Inc., Constar Plastics Inc., a subsidiary of Crown Cork and Seal Company, Inc., Graham Packaging Co. and Plastipak Packaging Inc. In order to compete effectively in the constantly changing market for plastic bottles, the Company must remain current with, and to some extent anticipate innovations in, resin composition and applications and changes in the manufacturing of plastic bottles. Because of the high cost of transporting empty containers, the Company generally sells to customers within a 300 mile radius of its manufacturing plants. Strategically located existing plants give the Company an advantage over competitors from other areas, and the Company would be disadvantaged by the loss or relocation of a major customer. As of March 31, 1994, the Company operated 35 manufacturing facilities, geographically dispersed throughout the United States and Canada, that serve the distribution needs of its customers. Employees As of December 31, 1993, the Company employed approximately 630 salaried and 3,350 hourly employees on a full time basis, including 650 employees who joined the Company on December 21, 1993 as a result of the acquisition of DM Can. Approximately 60% of the Company's hourly plant employees are represented by one of the following unions: (i) Sheet Metal Workers International Association, (ii) International Association of Machinists and Aerospace Workers, (iii) The International Brotherhood of Teamsters, (iv) The United Steel Workers of America, (v) Industrial, Technical & Professional Employees Union, (vi) The Glass, Molders, Pottery, Plastics and Allied Workers International Union, (vii) The United Rubber, Cork and Plastic Workers of America and (viii) Oil, Chemical & Atomic Workers International Union. The Company's labor contracts expire at various times between 1994 and 1998. Contracts covering approximately 14% of the Company's hourly employees presently expire during 1994. The Company expects no significant changes in its relations with these unions. Management believes that its relationship with its employees is good. Regulation The Company is subject to federal, state and local environmental laws and regulations. In general, these laws and regulations limit the discharge of pollutants into the air and water and establish standards for the treatment, storage, and disposal of solid and hazardous waste. The Company believes that all of its facilities are either in compliance in all material respects with all presently applicable environmental laws and regulations or are operating in accordance with appropriate variances, delayed compliance orders or similar arrangements. In the past, the Company inadvertently made late filings with the federal Environmental Protection Agency under the Emergency Planning and Community Right to Know Act ("EPCRA"). The Company is currently in compliance in all material respects with EPCRA. In addition to costs associated with regulatory compliance, the Company may be held liable for alleged environmental damage associated with the past disposal of hazardous substances. Generators of hazardous substances disposed of at sites at which environmental problems are alleged to exist, as well as the owners of those sites and certain other classes of persons, are subject to claims under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the original disposal. Liability under CERCLA and under many similar state statutes is joint and several, and, therefore, any responsible party may be held liable for the entire cleanup cost at a particular site. Other state statutes may impose proportionate rather than joint and several liability. The federal Environmental Protection Agency or a state agency may also issue orders requiring responsible parties to undertake removal or remedial actions at certain sites. Pursuant to the agreement relating to the acquisition in 1987 of Nestle Can, the Company has assumed liability for the past waste disposal practices of Nestle Can. The Company has received notice that it is one of many potentially responsible parties (or similarly designated parties) for cleanup of hazardous waste at two sites to which it (or its predecessor Nestle Can) is alleged to have shipped such waste, one site at which the Company's share of cleanup costs could exceed $100,000. See "--Legal Proceedings" below. Pursuant to the agreement relating to the acquisition in 1987 from Monsanto Company ("Monsanto") of substantially all of the business and related fixed assets and inventory of Monsanto's plastic containers business ("Monsanto Plastic Containers"), Monsanto has agreed to indemnify the Company for substantially all of the costs attributable to the past waste disposal practices of Monsanto Plastic Containers. In connection with the acquisition of DM Can, Del Monte has agreed to indemnify the Company for a period of three years for substantially all of the costs attributable to any noncompliance by DM Can with any environmental law prior to the closing, including all of the costs attributable to the past waste disposal practices of DM Can. The Company is subject to the Occupational Safety and Health Act and other laws regulating noise exposure levels in the production areas of its plants. Management does not believe that any of the matters described above individually or in the aggregate will have a material effect on the Company's capital expenditures, earnings, financial position or competitive position. Research and Technology The Company's research, product development and product engineering efforts relating to its metal containers are conducted at its research center at Oconomowoc, Wisconsin and at other plant locations. The Company's research, product development and product engineering efforts with respect to its plastic containers are currently performed by its manufacturing and engineering personnel located at its Norcross, Georgia facility. In addition to its own research and development staff, the Company participates in arrangements with four non-U.S. plastic container manufacturers that call for an exchange of technology among these manufacturers. Pursuant to these arrangements, the Company licenses its blow molding technology to such manufacturers. Company History Silgan was organized in August 1987 as a holding company to acquire interests in various packaging manufacturers. On August 31, 1987, Silgan, through Containers, purchased from Nestle the business and related assets and working capital of Nestle Can for approximately $151 million in cash and the assumption of substantially all of the liabilities of Nestle Can. Also on August 31, 1987, Silgan, through Plastics, purchased from Monsanto substantially all the business and related fixed assets and inventory of Monsanto Plastic Containers for approximately $43 million in cash and the assumption of certain liabilities of Monsanto Plastic Containers. To finance these acquisitions and to pay related fees and expenses, Silgan raised approximately $222.5 million on August 31, 1987 by issuing $6 million of common stock, $15 million of Silgan Preferred Stock and $85 million of 14% Notes and by borrowing $116.5 million under its credit agreement. During 1988, Containers acquired from The Dial Corporation its metal container manufacturing division known as the Fort Madison Can Company ("Fort Madison"), and from Nestle its carton manufacturing division known as the Seaboard Carton Division ("Seaboard"). During 1989, Plastics acquired Aim Packaging, Inc. ("Aim") and Fortune Plastics, Inc. ("Fortune") in the United States, and Express Plastic Containers Limited ("Express") in Canada, to improve its competitive position in the HDPE container market. Such acquisitions were financed through additional borrowings under Silgan's credit agreement. Holdings was organized in April 1989 as a holding company to acquire all of the outstanding common stock of Silgan. On June 30, 1989, Silgan Acquisition, Inc. ("Acquisition"), a wholly owned subsidiary of Holdings, merged with and into Silgan, and Silgan became a wholly owned subsidiary of Holdings (the "1989 Mergers"). In connection with the 1989 Mergers, Holdings received $109.4 million in proceeds from the issuance of $120 million aggregate principal amount of the Holdings Reset Debentures, net of debt issuance costs of $10.1 million. Additionally, Holdings received $14.6 million in proceeds from the issuance of its Holdings Class B Stock. With such proceeds, payments of $69.9 million were made to Silgan's stockholders and stock option holders in connection with the 1989 Mergers and $25.2 million was advanced to Silgan and used by Silgan to repay working capital loans. The balance of such proceeds, along with additional term loan borrowings under Silgan's credit agreement of $24.0 million and a capital contribution of $5.0 million by the stockholders of SPHI, was used by Holdings in connection with the purchase of Silgan PET on August 1, 1989 for $51.4 million, including $2.2 million of acquisition costs. In 1989, Silgan PET, a wholly owned subsidiary of SPHI, acquired the business and related assets of Amoco Container. On July 13, 1990, Holdings and Silgan entered into the SPHI Business Combination pursuant to which SPHI became a majority owned subsidiary of Silgan. The SPHI Business Combination was accounted for in a manner similar to a pooling of interests. See "Selected Financial Data." In November 1991, Plastics sold its nonstrategic PET carbonated beverage bottle business, exiting that commodity business. In 1992, Holdings and Silgan completed the Refinancing pursuant to a plan to improve their financial flexibility. The Refinancing included the following: (i) the public offering in June 1992 by Silgan of $135 million principal amount of the 11-3/4% Notes; (ii) the private placement in June 1992 by Silgan of $50 million principal amount of the Secured Notes with certain institutional investors; (iii) the public offering in June 1992 by Holdings of the Debentures for an aggregate amount of proceeds of $165.4 million; (iv) the amendment of the Amended and Restated Credit Agreement, dated as of August 31, 1987, as amended (the "Amended and Restated Credit Agreement") among Silgan and certain of its subsidiaries, the lenders named therein and Bankers Trust, as agent, followed by the prepayment in June 1992 by Silgan of $30 million of term loans and the borrowing by Silgan of approximately $17 million of working capital loans under the Amended and Restated Credit Agreement; (v) the 14% Notes Redemption; (vi) the Silgan Preferred Stock Redemption; (vii) the repayment by Silgan of a $25.2 million advance from Holdings and the payment to Holdings of a $15.7 million dividend; (viii) the payment by Holdings in cash of $15.3 million of interest payable on July 1, 1992 on the Holdings Reset Debentures; (ix) the Holdings Reset Debentures Redemption; and (x) the payment of transaction fees and expenses relating to the Refinancing. Additionally, in June 1992 Aim, Fortune, Silgan PET and SPHI were merged into Plastics. On December 21, 1993, Containers acquired from Del Monte substantially all of the fixed assets and certain working capital of Del Monte's container manufacturing business in the United States for a purchase price of approximately $73 million and the assumption of certain limited liabilities. To finance the acquisition, (i) Silgan, Containers and Plastics (collectively, the "Borrowers") entered into the Silgan Credit Agreement with the Banks, Bank of America, as Co-Agent, and Bankers Trust, as Agent, and (ii) Holdings issued and sold to Mellon Bank, N.A., as trustee for First Plaza Group Trust, a group trust established under the laws of the State of New York ("First Plaza"), 250,000 shares of its Holdings Class B Stock (the "Holdings Stock") for a purchase price of $60.00 per share and an aggregate purchase price of $15 million. Additionally, Silgan, Containers and Plastics borrowed term and working capital loans under the Silgan Credit Agreement to refinance and repay in full all amounts owing under the Amended and Restated Credit Agreement. Properties Holdings' and Silgan's principal executive offices are located at 4 Landmark Square, Stamford, Connecticut 06901. The administrative headquarters and principal places of business for Containers and Plastics are located at 21800 Oxnard Street, Woodland Hills, California 91367 and 14515 N. Outer Forty, Suite 210, Chesterfield, Missouri 63017, respectively. All of these offices are leased by the Company. The Company owns and leases properties for use in the ordinary course of business. Such properties consist primarily of 22 metal container manufacturing facilities, 12 plastic container manufacturing facilities and one paper container manufacturing facility. Eighteen of these facilities are owned and 17 are leased by the Company. The leases expire at various times through 2020. Some of these leases provide for options to purchase or to renew the lease. Below is a list of the Company's operating facilities, including attached warehouses, as of June 30, 1994: Approximate Building Area Location (square feet) -------- ------------- Anaheim, CA 127,000 (leased) Kingsburgh, CA 37,783 (leased) Modesto, CA 35,585 (leased) Oakland, CA 173,780 (leased) Riverbank, CA 167,000 Stockton, CA 243,500 Stockton, CA 71,785 (leased) Deep River, CT 140,000 Monroe, GA 117,000 Norcross, GA 59,000 (leased) Broadview, IL 85,000 Rochelle, IL 175,000 Ft. Dodge, IA 49,500 (leased) Fort Madison, IA 66,000 Ligonier, IN 284,000 (leased) Seymour, IN 406,000 Franklin, KY 118,000 (leased) Louisville, KY 30,000 (leased) Maysville, KY 31,300 Mt. Vernon, MO 100,000 St. Joseph, MO 173,725 Port Clinton, OH 336,000 (leased) Hillsboro, OR 47,000 Cambridge Springs, PA 55,000 Langhorne, PA 156,000 (leased) Crystal City, TX 26,045 (leased) Smithfield, UT 105,000 Toppenish, WA 98,000 Menomonee Falls, WI 116,000 Menomonie, WI 60,000 (leased) Oconomowoc, WI 105,200 Plover, WI 44,495 (leased) Waupun, WI 212,000 Mississauga, Ontario 80,000 (leased) Mississauga, Ontario 60,000 (leased) The Company owns and leases certain other warehouse facilities that are detached from its manufacturing facilities. In addition, the Company owns four other properties, two of which the Company subleases to a third party and intends to sell and the other two of which the Company is not currently using and intends to sell or sublease. The Company believes that its plants, warehouses and other facilities are in good operating condition, adequately maintained, and suitable to meet its present needs and future plans. The Company believes that it has sufficient capacity to satisfy the demand for its products in the foreseeable future. To the extent that the Company needs additional capacity, management believes that the Company can convert certain facilities to continuous operation or make the appropriate capital expenditures to increase capacity. Legal Proceedings Fidelity and EQJ Complaints. On June 28, 1989, a complaint was filed in the Court of Chancery in the State of Delaware in and for New Castle County jointly by Fidelity Bankers Life Insurance Company ("Fidelity"), which was the beneficial holder of 150,000 shares of Class B common stock of Silgan, and Ince & Co. ("Ince," together with Fidelity, sometimes hereinafter referred to as the "Fidelity Plaintiffs"), which was the registered owner of Fidelity's shares, against Silgan, Holdings, Morgan Stanley, certain officers, directors and majority stockholders of Silgan and certain other parties (the "Fidelity Complaint"). In addition, on September 14, 1989, a second complaint was filed in the Court of Chancery in the State of Delaware in and for New Castle County jointly by EQJ Partnership, Equitable Life Assurance Society of the United States, Integrity Life Insurance Company, Kleinwort Benson Limited, Merrill Lynch Corporate Bond Fund, Inc., New Locke Fund, SAM Associates, L.P., the beneficial holder of shares of Class B common stock of Silgan held in the name of Calmont & Co., as nominee, and SIB Nominees Ltd. (the "EQJ Plaintiffs"), which plaintiffs were the beneficial holders of an aggregate of 900,000 shares of Class B common stock of Silgan, against Silgan, Holdings, Acquisition and directors of Silgan (the "EQJ Complaint," together with the Fidelity Complaint, sometimes hereinafter referred to as the "Complaints"). Although filed separately, the Complaints are similar and allege, among other things, that the defendants breached their fiduciary duties of loyalty and candor under Delaware law to minority stockholders of Silgan by engaging in unfair dealings, attempting to effect a merger at a grossly inadequate price and distributing misleading proxy materials. See "Business--Company History." The Complaints also allege that various defendants aided and abetted these purported breaches of fiduciary duties. The Complaints ask the court, among other things, to rescind the 1989 Mergers and/or to grant to the plaintiffs such damages, including rescissory damages, as are found by the court to be proven at trial. In the fall of 1989, all defendants moved to dismiss the Complaints for failure to state a claim upon which relief can be granted. The court ruled on the motion in the Fidelity Complaint on February 7, 1991, dismissing seven of the ten claims asserted and allowing the Fidelity Plaintiffs leave to plead one additional claim. On February 27, 1991, the Fidelity Plaintiffs filed an amended complaint. On May 24, 1991, the defendants answered the amended complaint, denying the material allegations and asserting affirmative defenses. On January 29, 1992, Silgan and the EQJ Plaintiffs filed a stipulation dismissing the EQJ Complaint with respect to all defendants without prejudice to the right of the EQJ Plaintiffs to reinstate the action at the conclusion of the appraisal proceeding instituted by the EQJ Plaintiffs and described below. On September 14, 1989, the EQJ Plaintiffs filed a Petition for Appraisal (the "EQJ Appraisal") against Silgan in the Court of Chancery in the State of Delaware in and for New Castle County. On October 13, 1989, the Fidelity Plaintiffs filed a Petition for Appraisal (the "Fidelity Appraisal," together with the EQJ Appraisal, sometimes hereinafter referred to as the "Appraisals") against Silgan in the Court of Chancery in the State of Delaware in and for New Castle County. Although filed separately, the Appraisals both purport to invoke the rights of the EQJ Plaintiffs and the Fidelity Plaintiffs to seek an appraisal of their shares of Class B common stock of Silgan pursuant to Section 262 of the Delaware General Corporation Law as a consequence of the 1989 Mergers. The Fidelity Appraisal purports to seek, among other relief, a judgment awarding the Fidelity Plaintiffs the fair value of their shares of Class B common stock of Silgan in an unspecified amount. On May 13, 1991, Fidelity was seized and placed into receivership by the Virginia State Corporation Commission. As a result, the Fidelity Complaint and Fidelity Appraisal were stayed until March 30, 1992. Both the Fidelity Complaint and Fidelity Appraisal were dismissed in February 1994 following settlement with the Fidelity Plaintiffs. The EQJ Appraisal alleges that the EQJ Plaintiffs' shares are worth more than three times the price offered in connection with the 1989 Mergers and seeks, among other relief, a judgment awarding the EQJ Plaintiffs the fair value of their shares of Class B common stock of Silgan in an amount of no less than $24 per share. Discovery in the EQJ Appraisal has concluded. At the EQJ Plaintiffs' request, the court has agreed to postpone the start of trial until the week of October 24, 1994. In addition, Silgan has settled with several of the EQJ Plaintiffs with respect to the EQJ Appraisal. Management believes that there is no factual basis for the allegations and claims contained in the Complaints. Management also believes that the lawsuits are without merit and intends to defend the lawsuits vigorously. In addition, management believes that the ultimate resolution of these matters and the appraisal proceedings will not have a material effect on the financial condition or results of operations of the Company. Katell/Desert Complaint. On November 6, 1991, Gerald L. Katell ("Katell") and Desert Equities, Inc. ("Desert"), who are limited partners of The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF"), filed a consolidated complaint in the Court of Chancery of the State of Delaware in and for New Castle County (the "Katell/Desert Complaint") against a number of defendants, including Holdings and Silgan. (The plaintiffs previously had filed similar complaints in the New York Supreme Court, but the complaints were dismissed on the grounds that, in the interests of substantial justice, the actions should be heard in the courts of Delaware.) The plaintiffs allege, among other things, that The Morgan Stanley Leveraged Capital Fund, Inc. and Cigna Leveraged Capital Fund, Inc., the general partners of MSLEF, breached duties owed to the limited partners. Holdings and Silgan are named as defendants in Count III of such amended complaint, which charges them with aiding and abetting breaches of fiduciary duty by MSLEF and the general partners. These aiding and abetting claims are premised on the same allegations concerning the 1989 Mergers that form the basis of the Complaints. The plaintiffs claim damages in the amount of $4.67 million. On December 9, 1991, all defendants moved to dismiss the Katell/Desert Complaint on the grounds that (i) plaintiffs' claims are derivative in nature and cannot be maintained as individual actions, (ii) plaintiffs' claims as to shares of stock and other rights allegedly held by them directly fail to state a claim and, in some cases, are time barred and (iii) with respect to the aiding and abetting claims asserted against Holdings and Silgan, the Katell/Desert Complaint fails to allege sufficient knowing participation to constitute a cause of action for aiding and abetting breaches of fiduciary duties. On February 17, 1992, the plaintiffs filed an amended complaint asserting derivative claims on behalf of the partnership alternatively to Counts I through IV of the Katell/Desert Complaint. The amended complaint also deletes specific allegations as to the amount of damages, seeking a determination of such damages by the court. All defendants moved to dismiss the amended complaint on February 27, 1992. After full briefing and oral argument, the court dismissed all claims against Holdings and Silgan by memorandum opinion and order dated January 14, 1993. On January 25, 1993, the plaintiffs moved for reargument, seeking that the court amend its order to provide that the dismissal of the claims against certain defendants, including Holdings and Silgan, be without prejudice to reinstatement. The court denied this motion by order dated March 29, 1993. Management believes that there is no factual basis for the allegations and claims contained in the Katell/Desert Complaint. Management also believes that the lawsuit is without merit and intends to defend the lawsuit vigorously. In addition, management believes that the ultimate resolution of these matters and the appraisal proceedings will not have a material effect on the financial condition or results of operations of the Company. Summer del Caribe. On October 17, 1989, the State of California, on behalf of the California Department of Toxic Substances, filed a suit in the United States District Court for the Northern District of California against the owners and operators of a recycling facility operated by Summer del Caribe, Inc., Dale Summer and Lynn Rodich. The complaint also named 16 can manufacturing companies, including Silgan, that had sent small amounts of solder dross to the facility for recycling as "Responsible Parties" under the California Superfund statute. The court has stayed the action. The Company is one of 16 defendant can companies participating in a steering committee. The steering committee has actively undertaken a feasibility study which was approved by the California Department of Toxic Substances in June 1994. The Company has agreed with the other can company defendants that Silgan's apportioned share of cleanup costs would be 6.72% of the total cost of cleanup. Although the total cost of cleanup has not yet been determined, the Company understands that the State of California's current worst case estimate of total cleanup costs for all parties is $5.5 million. The steering committee believes that the cost to remediate will be less than one- half of the government's estimate. Accordingly, the Company believes its maximum exposure is not greater than 6.72% of $3 million, or approximately $202,000. Other. Other than the actions mentioned above, there are no other pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company is a party or to which any of its properties are subject. MANAGEMENT Directors and Executive Officers of Holdings and Silgan The current directors and executive officers of Holdings and Silgan, and their respective ages, positions and principal occupations, five-year employment history and other directorships held are furnished below: Age at June 1, Five-Year Employment Name and Position 1994 History and Other ----------------- -------- Directorships Held ------------------------------ - 51 Prior to forming S&H in 1987, President of Continental Can R. Philip Silver Company from June 1983 to Chairman of the Board and August 1986; consultant to Co-Chief Executive Officer packaging industry from August of Holdings and Silgan 1986 to August 1987; Vice since March 1994; formerly Chairman of the Board and President of Holdings and Director of Sweetheart Silgan; Director of Holdings Inc. and Sweetheart Holdings since April 1989 Cup Company, Inc. from and of Silgan since August September 1989 to January 1987; Chairman of the Board 1991; Chairman of the Board of Plastics since March and Director of Sweetheart 1994; Director of Holdings Inc. and Sweetheart Containers and Plastics Cup Company, Inc. from January since August 1987. 1991 through August 1993; Director, Johnstown America Corporation. D. Greg Horrigan 50 Prior to forming S&H in 1987, President and Co-Chief Executive Vice President and Executive Officer of Operating Officer of Holdings and Silgan since Continental Can Company from March 1994; formerly 1984 to 1987; Chairman of the Chairman of the Board of Board and Director of Holdings and Silgan; Sweetheart Holdings Inc. and Director of Holdings since Sweetheart Cup Company, Inc. April 1989 and of Silgan from September 1989 to January since August 1987; Chairman 1991; Vice Chairman of the of the Board of Containers Board and Director of since August 1987; Chairman Sweetheart Holdings Inc. and of the Board of Plastics Sweetheart Cup Company, Inc. from May 1991 to March from January 1991 through 1994; Director of August 1993. Containers and Plastics since August 1987. James S. Hoch 34 Principal of Morgan Stanley & Director, Vice President Co. Incorporated since 1993, and Assistant Secretary of Vice President of Morgan Holdings since January Stanley & Co. Incorporated 1991; Director of Silgan from 1991 to 1993, Associate since January 1991; Vice of Morgan Stanley & Co. President and Assistant Incorporated from 1986 to Secretary of Silgan since 1990. Director of Fort Howard 1987; Director, Vice Corporation, Sullivan President and Assistant Communications, Inc., Sullivan Secretary of Containers Graphics, Inc. since January 1991; Director, Vice President and Assistant Secretary of Plastics since January 1991. Robert H. Niehaus 38 Managing Director of Morgan Vice President, Assistant Stanley & Co. Incorporated Secretary and Director of since January 1, 1990; Holdings since April 1989; Principal of Morgan Stanley & Vice President, Assistant Co. Incorporated from 1988 to Secretary and Director of 1989; Vice President of Morgan Silgan since August 1987; Stanley & Co. Incorporated in Vice President, Assistant 1987. Director of American Secretary and Director of Italian Pasta Company, Containers and Plastics Randall's Food Markets, Inc., since August 1987. Randall's Management Corp., Inc., Randall's Properties, Inc., Randall's Warehouse, Inc., Fort Howard Corporation, Waterford Wedgwood plc, Waterford Crystal Ltd., Waterford Wedgwood UK plc, MS Distribution Inc., Tennessee Valley Steel Corporation, NCC L.P., Shuttleway and MS/WW Holdings Inc. Harley Rankin, Jr. 54 Prior to joining the Company, Executive Vice President Senior Vice President and and Chief Financial Officer Chief Financial Officer of of Holdings since April Armtek Corporation; prior to 1989; Treasurer of Holdings Armtek Corporation, Vice since January 1992; President and Chief Financial Executive Vice President Officer of Continental Can and Chief Financial Officer Company from November 1984 to of Silgan since January August 1986. Vice President, 1989; Treasurer of Silgan Chief Financial Officer and since January 1992; Vice Treasurer of Sweetheart President of Containers and Holdings Inc. and Vice Plastics since January President of Sweetheart Cup 1989; Treasurer of Plastics Company, Inc. from September since January 1994. 1989 to August 1993. Harold J. Rodriguez, Jr. 38 Employed by Ernst & Young from Vice President of Holdings 1978 to 1987, last serving as and Silgan since March Senior Manager specializing in 1994; Vice President of taxation. Controller, Containers and Plastics Assistant Secretary and since March 1994; Assistant Treasurer of Controller and Assistant Sweetheart Holdings Inc. and Treasurer of Holdings and Assistant Secretary and Silgan since March 1990; Assistant Treasurer of Assistant Controller and Sweetheart Cup Company, Inc. Assistant Treasurer of from September 1989 to August Holdings from April 1989 to 1993. March 1990; Assistant Controller and Assistant Treasurer of Silgan from October 1987 to March 1990. Management of Containers In addition to the persons listed under "--Directors and Executive Officers of Holdings and Silgan" above, the following are the principal executive officers of Containers: Age at Five-Year Employment June 1, History and Other Directorships Name and Position 1994 Held ------------------ -------- ------------------------------ 51 Vice President - Marketing & Sales of Containers from James D. Beam September 1987 to July 1990; President and a Vice President and General non-voting Director of Manager of Continental Can Containers since July Company, Western Food Can 1990. Division, from March 1986 to September 1987. Gerald T. Wojdon 58 General Manager of Vice President - Manufacturing of the Can Operations and Assistant Division of The Carnation Secretary of Containers Company from August 1982 to since September 1987. August 1987. 52 Vice President, Sales and Gary M. Hughes Marketing of the Beverage Vice President - Sales & Division of Continental Can Marketing of Containers Company from February 1988 to since July 1990. July 1990; prior to February 1988, was employed by Continental Can in various regional sales positions. George S. Hartley 47 Vice President - Finance of Vice President - Romanoff International, Inc. Finance, Treasurer and from 1990 to 1993; Director, Assistant Secretary Business Planning of Amphenol since March 1994. Corporation (Electronic Connectors) from 1988 to 1989; Continental Can Corporation, 1974-1988, employed in various finance and planning positions. Dennis Nerstad 56 Vice President - Distribution Vice President since and Container Manufacturing of March 1994. Del Monte from August 1989 to December 1993; Director of Container Manufacturing of Del Monte from November 1983 to July 1989; prior to 1983, employed by Del Monte in various regional and plant positions. Management of Plastics In addition to the persons listed under "--Directors and Executive Officers of Holdings and Silgan" above, the following are the principal executive officers of Plastics: Age at June 1, Five-Year Employment History and Name and Position 1994 Positions ----------------- -------- -------------------------------- 50 President and Chief Executive Officer of Aim Packaging, Inc. from Russell F. Gervais March 1984 to September 1989. President and non-voting Director of Plastics since December 1992; Vice President - Sales & Marketing of Plastics from September 1989 until December 1992. Howard H. Cole 48 Manager of Personnel of Monsanto Vice President and Engineered Products Division of the Assistant Secretary of Monsanto Company from April 1986 to Plastics since September September 1987. 1987. Charles Minarik 56 President of Wheaton Industries Vice President - Plastics Group, from February 1991 Operations and to August 1992; Vice President - Commercial Development Marketing of Constar International, since May 1993. Inc. from March 1983 to February 1991. Executive Compensation. The following table sets forth information concerning the annual and long term compensation for services rendered in all capacities to the Company and its subsidiaries during the fiscal years ended December 31, 1993, 1992 and 1991 of those persons who at December 31, 1993 were (i) the Chief Executive Officer of Holdings and (ii) the other four most highly compensated executive officers of Holdings and its subsidiaries. No director of Holdings or its subsidiaries receives any compensation for serving as a director of Holdings or its subsidiaries. See "Certain Transactions--Management Agreements."
Summary Compensation Table Long Term Annual Compensation Compensation ------------------------------------------------- ------------ Awards ------ Other Annual Stock All Other Name and Principal Position Year Salary Bonus Compensation Options/SARs Compensation - --------------------------- ---- -------------- ------------- ------------ ------------ ---------------- R. Philip Silver 1993 $1,378,799 - - - - (Chairman of the Board of 1992 1,528,844 - - - - Holdings and Silgan and 1991 1,378,000 - - - - Co-Chief Executive Officer of Holdings and Silgan and Chairman of the Board of Plastics) D. Greg Horrigan 1993 1,378,799 - - - - (President of Holdings 1992 1,528,844 - - - - and Silgan and Co-Chief 1991 1,378,000 - - - - Executive Officer of Holdings and Silgan and Chairman of the Board of Containers) Harley Rankin, Jr. 1993 321,898 - - - - (Executive Vice President, 1992 324,407 - - - - Chief Financial Officer and 1991 303,200 - - - - Treasurer of Holdings and Silgan and Vice President of Containers and Plastics) James D. Beam 1993 239,949 $65,277 - - $ 24,883 (President of Containers) 1992 231,949 65,497 - - 24,215 1991 221,894 38,854 - - - Gary M. Hughes 1993 167,763 45,701 - - 17,397 (Vice President - Sales and 1992 162,372 45,851 - - 16,952 Marketing of Containers) 1991 155,326 27,198 - - - Gerald T. Wojdon 1993 167,763 45,701 - - 17,397 (Vice President - 1992 162,372 45,850 - - 16,952 Operations of Containers) 1991 155,326 27,198 - - - The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez was paid by S&H and they received no direct compensation from Holdings, Silgan or their respective subsidiaries. See "Certain Transactions--Management Agreements." The salaries of Messrs. Beam, Hughes and Wojdon were paid by Containers. Bonuses of Messrs. Beam, Hughes and Wojdon were earned by them in such year and paid in the following year, pursuant to the Silgan Containers Corporation Performance Incentive Plan. Under the Silgan Containers Corporation Performance Incentive Plan, executive officers and other key employees of Containers may be awarded cash bonuses provided that Containers achieves certain assigned financial targets. Reflects amounts contributed by Containers under the Silgan Containers Corporation Deferred Incentive Savings Plan (the "Savings Plan"). Containers contributes to the Savings Plan an amount each year based on its profits for such year, as determined by Containers' board of directors. Such contribution is allocated proportionately to participants in accordance with their compensation. A participant's allocable share of such contribution becomes fully vested after five years of service or, if earlier, upon reaching age 55, death, total and permanent disability or termination on account of the sale or closure of a work facility.
OPTION/SAR VALUES AT DECEMBER 31, 1993 -------------------------------------- Value of Number of Unexercised Unexercised in-the-Money Options/SARs at Options/SARs at December 31, 1993 December 31, 1993 ----------------- ----------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- R. Philip Silver . . -- -- -- -- D. Greg Horrigan . . -- -- -- -- Harley Rankin, Jr. . . . . . . . . 10,000 -- -0- -- James D. Beam . . . . . . 336 144 $402,390 $100,597 Gary M. Hughes . . . . . . 144 96 -0- -0- Gerald T. Wojdon . . . . . . 48 48 100,597 100,597 [FN] Options are for, and tandem SARs relate to, shares of Holdings Class C Common Stock, par value $.01 per share (the "Holdings Class C Stock"). Value is the excess of the book value of Holdings Class C Stock from the date of grant over the exercise price. In the event of a public offering or third party sale, value would be based on fair market value. See "--Stock Option Plans" below. Options are for, and tandem SARs relate to, shares of Containers' common stock. As of December 31, 1993, 10,800 shares of Containers' common stock are issued and outstanding and an additional 1,200 shares of Containers' common stock are authorized but not issued. Value is the excess of the book value of Containers' common stock from the date of grant, less the portion of parent debt allocable to Containers, over the exercise price. In the event of a public offering or third party sale, value would be based on fair market value as determined under the Containers Plan (as defined in "--Stock Option Plans" below). See "-- Stock Option Plans" below. 240 options and tandem SARs were granted in June 1989 under the Containers Plan, for which the book value, as computed under the Containers Plan, exceeds the exercise price. An additional 240 options and tandem SARs were granted in July 1990 under the Containers Plan. 240 options and tandem SARs were granted in July 1990 under the Containers Plan. 240 options and tandem SARs were granted in June 1989 under the Containers Plan, of which 144 SARs have been exercised prior to 1993. Pension Plans The Company has established pension plans (the "Pension Plans") covering substantially all of the salaried employees of Containers and Plastics, respectively, including the executive officers (the "Containers Pension Plan" and the "Plastics Pension Plan," respectively). The Pension Plans are defined benefit plans intended to be qualified pension plans under Section 401(a) of the Code, under which pension costs are determined annually on an actuarial basis with contributions made accordingly. The pension benefits at normal retirement under each Pension Plan are generally comparable to the benefits under the pension plan covering individuals at Nestle Can or Monsanto, as the case may be, at the time of acquisition in 1987. Certain salaried employees of Containers, including Containers' executive officers, were covered by the Carnation Employees Plan Number Two for United States Employees (the "Carnation Pension Plan") immediately prior to the acquisition of Nestle Can. The Containers Pension Plan recognizes prior service under the Carnation Pension Plan for purposes of eligibility, vesting and benefit accrual. The benefits payable at retirement under, or upon vested termination from, the Containers Pension Plan are based on the benefit formula and all other factors then in effect under the Containers Pension Plan applied to all combined pension service. Such benefit shall be offset by the accrued benefit, if any, such employee is entitled to receive under the Carnation Pension Plan as of August 31, 1987. Under the Containers Pension Plan, both the employer and participants contribute. Participants contribute approximately 3% of their annual compensation. The benefit for any participant thereunder is calculated under the greater of either (i) a career average formula of the sum of, for each year of participation up to March 31, 1991, 1% of annual base salary up to $5,400 plus 2% of such salary over $5,400 or (ii) a final pay formula of the average base salary over the final three years of employment multiplied by a percentage (not to exceed 61-1/4%) based upon the participant's years of credited service (not to exceed 35), less a percentage (not to exceed approximately 50%) of such participant's primary social security benefit at employment termination based upon the participant's years of credited service (not to exceed 35). Compensation covered by the Containers Pension Plan is a participant's base salary exclusive of any bonus, overtime or other extra compensation. A participant becomes fully vested after five years of service or upon reaching age 55, if earlier. The following table illustrates the estimated annual normal retirement benefits that are payable under the Containers Pension Plan based upon the final pay formula. Such benefit levels assume retirement at age 65, the years of service shown, continued existence of the Containers Pension Plan without substantial change and payment in the form of a single life annuity and includes benefits, if any, payable under the Carnation Pension Plan which will be paid by that plan. Containers Pension Plan Table Final Years of Service Average -------------------------------------------------------------- Earnings 10 15 20 25 30 35 --------- ------ ------ ------ ------ ------ ------ $ 50,000 $ 7,130 $ 10,640 $ 14,260 $ 17,830 $ 21,390 $ 24,960 75,000 11,510 17,260 23,010 28,760 34,520 40,270 100,000 15,880 23,820 31,760 39,700 47,640 55,580 125,000 20,260 30,380 40,510 50,640 60,770 70,890 150,000 24,630 36,950 49,260 61,580 73,890 86,210 175,000 29,010 43,510 58,010 72,510 87,020 101,520 200,000 33,380 50,070 66,760 83,450 100,140 116,830 225,000 37,760 56,630 75,510 94,390 113,270 132,140 Pursuant to Section 401(a)(17) of the Code, there is a limit on the amount of annual compensation which can be taken into account under the Containers Pension Plan. The dollar limit on compensation for 1993 was $235,840. The dollar limit on compensation for 1994 is $150,000. The dollar limit, where applicable, will reduce the amount of benefits payable to highly compensated participants in the Containers Pension Plan. As of December 31, 1993, the years of credited service under the Containers Pension Plan for each of the eligible executive officers named in the Summary Compensation Table are as follows: James D. Beam, 6, Gary M. Hughes, 3, and Gerald T. Wojdon 34. In conjunction with the acquisition of DM Can, the employees of Del Monte that are employed by Containers will participate in the Containers Pension Plan. Pursuant to the purchase agreement for the acquisition of DM Can, Del Monte has agreed to transfer to the Containers Pension Plan assets for benefits accrued for such employees while they were employed by Del Monte. Certain salaried employees of Plastics, including Plastics' executive officers, were covered by the Monsanto Company Salaried Employees' Pension Plan (the "Monsanto Pension Plan") immediately prior to the acquisition of Monsanto Plastic Containers. The Plastics Pension Plan recognizes prior service under the Monsanto Pension Plan for purposes of eligibility, vesting and benefit accrual. The benefits payable at retirement under, or upon vested termination from, the Plastics Pension Plan are based on the benefit formula and all other factors then in effect under the Plastics Pension Plan applied to all combined pension service. Such benefit is offset by the accrued benefit, if any, such employee is entitled to receive under the Monsanto Pension Plan as of August 31, 1987. Under the Plastics Pension Plan, pensions are based on the greatest of (i) years of benefit service multiplied by 1.4% of Average Earnings, which is defined as the greater of (a) average compensation received during the final 36 months of employment or (b) average compensation received during the highest three of the final five calendar years of employment; (ii) years of benefit service multiplied by 1.5% of Average Earnings less a 50% social security offset; or (iii) years of benefit service multiplied by $30.00. For employees hired between April 1, 1986 and September 1, 1987, the formula is the greater of (i) years of benefit service multiplied by 1.2% of Average Earnings; or (ii) years of benefit service multiplied by 1.5% of Average Earnings less a 50% social security offset. For employees hired after September 1, 1987, the formula is years of benefit service multiplied by 1.1% of Average Earnings. Average Earnings under the Plastics Pension Plan is a participant's total cash income before deduction for contributions, if any, to a plan pursuant to Section 401(k) of the Code or Section 125 of the Code less any moving expense allowance but, in no event, shall Average Earnings exceed 125% of base pay of the participant. A participant becomes fully vested after five years of service or attainment of Normal Retirement Age (as defined under the Plastics Pension Plan), if earlier. The following table illustrates the estimated annual normal retirement benefits that are payable under the Plastics Pension Plan based upon the greater of 1.4% of Average Earnings, without reduction for social security or other offset amounts, or 1.5% of Average Earnings less a 50% social security offset. Such benefit levels assume retirement age at 65, the years of service shown, continued existence of the Plastics Pension Plan without substantial change and payment in the form of a single life annuity and includes benefits, if any, payable under the Monsanto Pension Plan which will be paid by that plan. Plastics Pension Plan Table Final Years of Service Average ------------------------------------------------------------- Earnings 10 15 20 25 30 35 -------- ------ ------ ------ ------ ------ ------ $ 50,000 $ 7,000 $ 10,550 $ 14,000 $ 17,500 $ 21,000 $ 24,500 75,000 10,500 15,750 21,000 26,250 31,500 36,750 100,000 14,000 21,000 28,000 35,000 42,000 49,000 125,000 17,500 26,250 35,000 43,750 52,500 61,250 150,000 21,000 31,500 42,000 52,500 63,000 73,950 175,000 24,500 36,750 49,000 61,250 73,950 87,075 200,000 28,000 42,000 56,000 70,200 85,200 100,200 225,000 31,500 47,250 63,000 79,575 96,450 113,325 Pursuant to Section 401(a)(17) of the Code, there is a limit on the amount of annual compensation which can be taken into account under the Plastics Pension Plan. The dollar limit on compensation for 1993 was $235,840. The dollar limit on compensation for 1994 is $150,000. The dollar limit, where applicable, will reduce the amount of benefits payable to highly compensated participants in the Plastics Pension Plan. Stock Option Plans Containers, Plastics and Holdings have established separate but similar stock option plans entitled, respectively, the Silgan Containers Corporation Amended and Restated 1989 Stock Option Plan (the "Containers Plan"), the Silgan Plastics Corporation 1994 Stock Option Plan (the "Plastics Plan") and the Silgan Holdings Inc. Amended and Restated 1989 Stock Option Plan (the "Holdings Plan"; collectively, the "Plans"). Under each such Plan, participants may be granted options to purchase shares of common stock or restricted stock and/or SARs. Options granted may be either nonstatutory stock options or incentive stock options under Section 422 of the Code. SARs granted may be related to options concurrently granted or independent of any options. The board of directors of each of the respective sponsoring companies, through a committee, administers its respective plan and has the power to, among other things, choose participants, the type of grant and all the terms and conditions thereof, including number of shares covered by a grant and the exercise price, if applicable. Only officers (including executive officers) and other key employees are eligible to participate in the plan sponsored by their employer. As of December 31, 1993, Containers and Plastics have reserved 1,200 authorized but unissued shares of their respective common stock, $.01 par value, for issuance under their respective plans, and Holdings has reserved 24,000 authorized but unissued shares of Holdings Class C Stock for issuance under the Holdings Plan. Generally, each option granted under the Plans becomes exercisable over a period of five years, with 20% of the option having become exercisable on the first anniversary of the grant and an additional 20% having become or becoming exercisable on each anniversary thereafter. The purchase price of each option granted under the Containers Plan ranges from $2,122.00 to $4,933.20 per share. The purchase price of options granted under the Plastics Plan is $126 per share. The purchase price of options granted under the Holdings Plan ranges from $35.00 to $60.71 per share. Each option granted under the Plans was granted with related SARs. The SARs extend to all option shares and under the Containers Plan and Holdings Plan provide for a payment by the sponsoring company to the holder of an amount equal to the excess of the book value of a share of the sponsoring company at the SAR exercise date or, if applicable, the fair market value of such share at the SAR exercise date after a public offering of such shares, over the exercise price of the SAR multiplied by the number of shares involved in the SAR exercise and under the Plastics Plan provide for a payment by Plastics to the holder of an amount equal to the excess of the fair market value of such share at the SAR exercise date over the exercise price of the SAR multiplied by the number of shares involved in the SAR exercise. Each option and related SAR granted under each of the Plans expires on the date that is one day before ten years after the date of grant or on such earlier date as the holder's employment shall terminate or within a specified period after termination as provided in the respective Plans. All options granted under any of the Plans must be evidenced by an option agreement between the sponsoring company and the option recipient embodying all the terms and conditions of the option grant; provided that (i) all options must be granted before the respective Plan expires, (ii) incentive stock options granted must comply with Section 422 of the Code, (iii) all options must be exercisable no earlier than one year from the date of grant, (iv) no option shall be transferable or assignable otherwise than by will or the laws of descent and distribution and, during the lifetime of the recipient, such option shall be exercisable only by the recipient, (v) all options must expire or remain exercisable for a limited time after termination of employment, all as specified in the respective Plans, and (vi) upon exercise of all options, full payment for the shares covered shall be made in cash for each of the Plans or, for the Containers Plan and Holdings Plan, shares of common stock of the sponsoring company already owned or a combination of cash and shares of common stock. All SARs granted under any of the Plans must be evidenced by an agreement containing the terms of exercise and manner of settlement, provided that (i) all SARs must be granted before the respective Plan expires, (ii) SARs must be exercisable no earlier than one year from the date of grant, (iii) SARs granted in tandem with options must have the same terms and conditions as the related option and the exercise of a related SAR extinguishes the related option to the extent exercised and vice versa and (iv) SARs may contain a provision for automatic exercise on the last day of the term thereof. Restricted stock issued under any of the Plans must bear an appropriate legend referring to the terms, conditions and restrictions applicable thereto. The sponsoring company has a right to purchase and participants have a right to require the sponsoring company to repurchase its common stock acquired pursuant to the respective Plan upon the occurrence of certain events in accordance with such Plan. In the event of a public offering of any of Holdings' common stock or a sale of Holdings to a third party, the options granted by Containers and Plastics pursuant to their respective Plans are convertible into stock options of Holdings under the Holdings Plan and any stock issued upon exercise of options under the Containers Plan are convertible into common stock of Holdings. The calculation of the number of shares to be issued upon the conversion of such options or shares will be determined based upon a valuation of Holdings and an allocation of such value among its subsidiaries (after giving effect to, among other things, that portion of the outstanding indebtedness of Holdings allocable to each such subsidiary). Certain Employment Agreements Certain executive officers and other key employees of Containers and Plastics (including Messrs. Beam and Wojdon) have executed employment agreements. The initial term of such employment agreements is generally three years from their effective date and is automatically extended for successive one year periods unless terminated pursuant to the terms of such agreements. Each such employment agreement provides for, among other things, a minimum severance benefit equal to base salary and benefits for, in most cases, a period of one year (or the remainder of the term of the agreement, if longer) (i) if the employee is terminated by his employer for any reason other than disability or for cause as specified in the agreement or (ii) if the employee voluntarily terminates employment due to a demotion and, in some cases, significant relocation, all as specified in the agreement. The foregoing summaries of the various benefit plans and agreements of the Company are qualified by reference to such plans and agreements, copies of certain of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Certain Beneficial Owners of Holdings' Capital Stock The following table sets forth, as of June 30, 1994, certain information with respect to the beneficial ownership by certain persons and entities of outstanding shares of capital stock of Holdings:
Number of Shares of each class Percentage Ownership of of Holdings Common Stock Owned Holdings Common Stock ----------------------------- ------------------------------------------- Consolidated Class A Class B Class C Class A Class B Class C ------- ------- ------- ------- ------- ------- ------------ R. Philip Silver . . . . 208,750 -- -- 50% -- -- 19.24% D. Greg Horrigan . . . . 208,750 -- -- 50% -- -- 19.24% James S. Hoch . . . . . -- -- -- -- -- -- -- Robert H. Niehaus . . . -- -- -- -- -- -- -- Harley Rankin, Jr. . . . . . -- -- 10,000 -- -- 15.38% -- James D. Beam . . . . . -- -- -- -- -- -- -- Gary M. Hughes . . . . . -- -- -- -- -- -- -- Gerald T. Wojdon . . . . -- -- -- -- -- -- -- The Morgan Stanley Leveraged Equity Fund II, L.P. . . -- 417,500 -- -- 62.55% -- 38.48% Mellon Bank, N.A., as trustee for First Plaza Group Trust -- 250,000 -- -- 37.45% -- 23.04% All officers and directors as a group . . . . . . . . . . . 417,500 -- 15,000 100% -- 23.08% 38.48% ___________________ This column reflects the percentage ownership of voting common stock that would exist if Holdings Class A Stock and Holdings Class B Stock were treated as a single class. Holdings Class C Stock generally does not have voting rights and is not included in the percentage ownership reflected in this column. See "Description of Holdings Common Stock- -General." Director of Holdings and Silgan. Messrs. Silver and Horrigan are parties to a voting agreement pursuant to which they have agreed to use their best efforts to vote their shares as a block. The address for such person is 4 Landmark Square, Stamford, CT 06901. Director of Holdings and Silgan. The address for such person is c/o Morgan Stanley & Co. Incorporated, 1251 Avenue of the Americas, New York, NY 10020. Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to the Holdings Plan. Options to purchase shares of common stock of Containers and tandem SARs have been granted to such person pursuant to the Containers Plan. Pursuant to the Containers Plan, such options may be converted into stock options of Holdings (and the Containers' common stock issuable upon exercise of such options may be converted into common stock of Holdings) in the event of a public offering of any of Holdings' common stock or a sale of Holdings to a third party. The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1251 Avenue of the Americas, New York, NY 10020. The address for First Plaza Group Trust is c/o General Motors Investment Management Corporation, 767 Fifth Avenue, New York, NY 10153. Mellon Bank, N.A. ("Mellon"), acts as the trustee for First Plaza, a trust under and for the benefit of certain employee benefit plans of General Motors Corporation ("GM") and its subsidiaries. These shares may be deemed to be owned beneficially by General Motors Investment Management Corporation ("GMIMCo"), a wholly owned subsidiary of GM. GMIMCo is serving as First Plaza's investment manager with respect to these shares and in that capacity it has the sole power to direct Mellon as to the voting and disposition of these shares. Because of Mellon's limited role, beneficial ownership of the shares by Mellon is disclaimed. Bankers Trust New York Corporation ("BTNY") beneficially owns 50,000 shares of Holdings Class C Stock.
See "Description of Holdings Common Stock" for additional information about the common stock of Holdings, the holders thereof and certain arrangements among them. CERTAIN TRANSACTIONS Management Agreements Holdings, Silgan, Containers and Plastics each entered into an amended and restated management services agreement dated as of December 21, 1993 (collectively, the "Management Agreements") with S&H to replace in its entirety its existing management services agreement, as amended, with S&H. Pursuant to the Management Agreements, S&H provides Holdings, Silgan, Containers and Plastics and their respective subsidiaries with general management and administrative services (the "Services"). The Management Agreements provide for payments to S&H (i) on a monthly basis, of $5,000 plus an amount equal to 2.475% of consolidated earnings before depreciation, interest and taxes of Holdings and its subsidiaries ("Holdings EBDIT"), for such calendar month until Holdings EBDIT for the calendar year shall have reached an amount set forth in the Management Agreements for such calendar year (the "Scheduled Amount") and 1.65% of Holdings EBDIT for such calendar month to the extent that Holdings EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall not have been greater than an amount (the "Maximum Amount") set forth in the Management Agreements (the "Monthly Management Fee") and (ii) on a quarterly basis, of an amount equal to 2.475% of Holdings EBDIT for such calendar quarter until Holdings EBDIT for the calendar year shall have reached the Scheduled Amount and 1.65% of Holdings EBDIT for such calendar quarter to the extent that Holdings EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall not have been greater than the Maximum Amount (the "Quarterly Management Fee"). The Scheduled Amount was $65.5 million for the calendar year 1993 and increases by $6.0 million for each year thereafter. The Maximum Amount is $90.197 million for the calendar year 1994, $95.758 million for the calendar year 1995, $98.101 million for the calendar year 1996, $100.504 million for the calendar year 1997, $102.964 million for the calendar year 1998 and $105.488 million for the calendar year 1999. The Management Agreements provide that upon receipt by Silgan of a notice from Bankers Trust that certain events of default under the Silgan Credit Agreement have occurred, the Quarterly Management Fee shall continue to accrue, but shall not be paid to S&H until the fulfillment of certain conditions, as set forth in the Management Agreements. The Management Agreements continue in effect until the earliest of: (i) the completion of an IPO (as defined in Description of Holdings Common Stock- - -Description of the Holdings Organization Agreement); (ii) June 30, 1999; (iii) at the option of each of the respective companies, the failure or refusal of S&H to perform its obligations under the Management Agreements, if such failure continues unremedied for more than 60 days after written notice of its existence shall have been given; (iv) at the option of MSLEF II (a) if S&H or Holdings is declared insolvent or bankrupt or a voluntary bankruptcy petition is filed by either of them, (b) upon the occurrence of any of the following events with respect to S&H or Holdings if not cured, dismissed or stayed within 45 days: the filing of an involuntary petition in bankruptcy, the appointment of a trustee or receiver or the institution of a proceeding seeking a reorganization, arrangement, liquidation or dissolution, (c) if S&H or Holdings voluntarily seeks a reorganization or arrangement or makes an assignment for the benefit of creditors or (d) upon the death or permanent disability of both of Messrs. Silver and Horrigan; and (v) upon the occurrence of a Change of Control (as defined in the Restated Certificate of Incorporation of Holdings and as described under "Description of Holdings Common Stock--General"). In addition to the management fees described above, the Management Agreements provide for the payment to S&H on the closing date of the IPO of an amount, if any (the "Additional Amount") equal to the sum of the present values, calculated for each year or portion thereof, of (i) the amount of the annual management fee for such year or portion thereof that otherwise would have been payable to S&H for each such year or portion thereof for the period beginning as of the time of the IPO and ending on June 30, 1999 (the "Remaining Term") pursuant to the provisions described in the preceding paragraph but for the occurrence of the IPO, minus (ii) the amount payable to S&H for the Remaining Term at the rate of $2.0 million per year. The Management Agreements further provide that the amounts described in clause (i) of the first sentence of this paragraph will be calculated based upon S&H's good faith projections of Holdings EBDIT for each such year (or portion thereof) during the Remaining Term (the "Estimated Fees"), which projections shall be made on a basis consistent with S&H's past projections. The difference between the amount of Estimated Fees for any particular year and $2 million shall be discounted to present value at the time of the IPO using a discount rate of eight percent (8%) per annum, compounded annually. Additionally, the Management Agreements provide that Holdings, Silgan, Containers, Plastics and their respective subsidiaries shall reimburse S&H, on a monthly basis, for all out-of-pocket expenses paid by S&H in providing the Services, including fees and expenses to consultants, subcontractors and other third parties, in connection with such Services. All fees and expenses paid to S&H under each of the Management Agreements are credited against amounts paid to S&H under the other Management Agreements. Under the terms of the Management Agreements, Holdings, Silgan, Containers and Plastics have agreed, subject to certain exceptions, to indemnify S&H and its affiliates, officers, directors, employees, subcontractors, consultants or controlling persons against any losses, damages, costs and expenses they may sustain arising in connection with the Management Agreements. The Management Agreements also provide that S&H may select a consultant, subcontractor or agent to provide the Services. S&H has retained Morgan Stanley to render financial advisory services to S&H. In connection with such retention, S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of the fees paid to S&H under the Management Agreements. The Silgan Credit Agreement does not permit the payment of fees under the Management Agreements above amounts provided for therein. For the years ended December 31, 1993, 1992 and 1991, pursuant to the arrangements described above, S&H earned aggregate fees, including reimbursable expenses and fees payable to Morgan Stanley, of $4.4 million, $4.2 million and $4.0 million, respectively, from Holdings, Silgan, Containers, Plastics, SPHI and Silgan PET and during 1993, 1992 and 1991, Morgan Stanley earned fees of $337,000, $324,000 and $306,000, respectively. Other In connection with the 1989 Mergers, subject to the provisions of Delaware law, Silgan agreed to indemnify each director, officer, employee, fiduciary and agent of Silgan, Containers, Plastics and its subsidiaries and their respective affiliates against costs, expenses, judgments, fines, losses, claims, damages and settlements (except for any settlement effected without Silgan's written consent) in connection with any claims, actions, suits, proceedings or investigations arising out of or related to the 1989 Mergers or their financing, including certain liabilities arising under the federal securities laws. Simultaneously with the consummation of the 1989 Mergers, a tax allocation agreement was entered into by Holdings, Silgan, Plastics and Containers that permits Silgan and its subsidiaries to use the tax benefits provided by the debt of Holdings and permits funds to be provided to Holdings from Silgan and its subsidiaries in an amount equal to the federal and state tax liabilities of Holdings, as the parent of the consolidated group consisting of Holdings, Silgan and its Subsidiaries. Such tax allocation agreement has been amended and restated from time to time to include new members of the consolidated group. In connection with the Amended and Restated Credit Agreement under the Refinancing, the lenders thereunder (including Bankers Trust) received certain fees amounting to $1.4 million. In connection with the Refinancing, Morgan Stanley received as compensation for its services as underwriter for the 11-3/4% Notes Offering and Holdings Debentures Offering and as initial purchaser of the Secured Notes an aggregate of $11.5 million. In connection with the Silgan Credit Agreement entered into in December 1993, the Banks (including Bankers Trust) received certain fees amounting to $8.1 million. G. William Sisley, Secretary of Holdings and Silgan, is a partner in the law firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson, Putnam & Roberts provides legal services to Holdings, Silgan and their subsidiaries. DESCRIPTION OF THE DEBENTURES The Debentures were issued under the Indenture, dated as of June 29, 1992, between Holdings and Shawmut Bank, N.A. (formerly The Connecticut National Bank), as Trustee (the "Trustee"). A copy of the Indenture is filed as an exhibit to the Registration Statement of which this Prospectus is a part and is available as described under "Additional Information." The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part thereof by the Trust Indenture Act of 1939, as amended. Wherever particular Sections or defined terms of the Indenture not otherwise defined herein are referred to, such Sections or defined terms are incorporated herein by reference. Capitalized terms used herein that are not otherwise defined shall have the meanings assigned to them in the Indenture. For federal income tax purposes, Holders are required to recognize interest income in respect of the Debentures in the form of original issue discount in advance of the receipt of cash payments attributable to interest income on such Debentures. See "Certain Federal Income Tax Considerations" for important information concerning the federal income tax considerations associated with the Debentures. General The Debentures are unsecured obligations of Holdings, limited to $275 million aggregate principal amount, and mature on December 15, 2002. Although for federal income tax purposes a significant amount of original issue discount, taxable as ordinary income, will be recognized by a Holder as such discount accrues from the issue date of the Debentures, no interest is payable on the Debentures prior to December 15, 1996. Interest on the Debentures will accrue at the rate per annum shown on the front cover of this Prospectus from June 15, 1996 or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semiannually (to Holders of record at the close of business on June 1 or December 1 immediately preceding the Interest Payment Date) on June 15 and December 15 of each year, commencing December 15, 1996. Principal of, premium, if any, and interest on the Debentures are payable, and the Debentures may be exchanged or transferred, at the office or agency of Holdings in the Borough of Manhattan, The City of New York (which shall initially be the office of Shawmut Trust Company, at 40 Broad Street, New York, New York 10004 ); provided that, at the option of Holdings, payment of interest may be made by check mailed to the address of the Holders as such address appears in the Security Register. (Sections 2.01, 2.03 and 2.05) The Debentures are issuable only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. (Section 2.02) No service charge shall be made for any registration of transfer or exchange of Debentures, but Holdings may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. (Section 2.05) Subordination upon Certain Events The Debentures are senior indebtedness of Holdings, ranking pari passu with Holdings' obligations under all other senior indebtedness of Holdings and senior in right of payment to all existing and future subordinated indebtedness of Holdings. However, since all of the operations of Holdings are conducted through its subsidiaries, the liabilities of its subsidiaries are effectively senior in right of payment to the Debentures. As of March 31, 1994, Silgan and its subsidiaries had approximately $471.5 million of indebtedness and other liabilities effectively senior to the Debentures. See "Capitalization." In the event that the Debentures become obligations of any Successor Corporation, whether as a result of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures, all Subordinated Obligations, including the Debentures, will be subordinated in right of payment to all Senior Indebtedness of such Successor Corporation existing on the date of such transaction or assumed or incurred thereafter. As of March 31, 1994, if an event as described in clause (i), (ii) or (iii) of the preceding sentence had occurred on such date or if Silgan had assumed the Debentures at such date, there would have been approximately $330.8 million of Indebtedness that would have constituted Senior Indebtedness and approximately $471.5 million of Indebtedness and other liabilities effectively senior to the Debentures. See "Certain Risk Factors--Holding Company Structure and Subordination Upon Certain Events." Other than as set forth in this paragraph, the Debentures are not subordinated by their terms to any other existing or future Indebtedness of Holdings or its successors. To the extent any payment of Senior Indebtedness (whether by or on behalf of the Successor Corporation, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligations so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligations not been so affected) shall be deemed to be reinstated and outstanding as Senior Indebtedness for all purposes of the Indenture as if such declaration, invalidity or setting aside had not occurred. Upon any payment or distribution of assets or securities of the Successor Corporation of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Successor Corporation, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness (including any interest accruing subsequent to an event of bankruptcy, whether or not such interest is an allowed claim enforceable against the debtor under the United States Bankruptcy Code) shall first be paid in full, in cash or cash equivalents before the Holders or the Trustee on behalf of the Holders shall be entitled to receive any payment by the Successor Corporation on account of Subordinated Obligations, or any payment to acquire any of the Debentures for cash, property or securities, or any distribution with respect to the Debentures of any cash, property or securities. Before any payment may be made by or on behalf of the Successor Corporation of any Subordinated Obligations upon any such dissolution, winding up, liquidation or reorganization, any payment or distribution of assets or securities of the Successor Corporation of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee on behalf of the Holders would be entitled, but for the subordination provisions of the Indenture, shall be made by the Successor Corporation or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person making such payment or distribution, or by the Holders or the Trustee if received by them or it, directly to the holders of the Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representatives, or to the trustee or trustees under any indenture pursuant to which any such Senior Indebtedness may have been issued, as their respective interests appear, to the extent necessary to pay all such Senior Indebtedness in full, in cash or cash equivalents after giving effect to any concurrent payment, distribution or provision therefor, to or for the holders of such Senior Indebtedness. No direct or indirect payment by or on behalf of the Successor Corporation of Subordinated Obligations, whether pursuant to the terms of the Debentures or upon acceleration or otherwise, shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of the obligations on any Senior Indebtedness and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Senior Indebtedness. In addition, during the continuance of any other event of default with respect to (i) the Silgan Credit Agreement or the Secured Notes pursuant to which the maturity thereof may be accelerated and (a) upon receipt by the Trustee of written notice from the Bank Agent or, if there is no Silgan Credit Agreement in effect, from an authorized representative of the Requisite Secured Noteholders or (b) if such event of default under the Silgan Credit Agreement or the Secured Notes results from the acceleration of the Debentures, from and after the date of such acceleration, no payment of Subordinated Obligations may be made by or on behalf of the Successor Corporation upon or in respect of the Debentures for a period (a "Payment Blockage Period") commencing on the earlier of the date of receipt of such notice or the date of such acceleration and ending 159 days thereafter (unless such Payment Blockage Period shall be terminated by written notice to the Trustee from the Bank Agent or, if there is no Silgan Credit Agreement in effect, from an authorized representative of the Requisite Secured Noteholders or such event of default has been cured or waived) or (ii) any other Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated, upon receipt by the Trustee of written notice from the trustee or other representative for the holders of such other Designated Senior Indebtedness (or the holders of at least majority in principal amount of such other Designated Senior Indebtedness then outstanding), no payment of Subordinated Obligations may be made by or on behalf of the Successor Corporation upon or in respect of the Debentures for a Payment Blockage Period commencing on the date of receipt of such notice and ending 119 days thereafter (unless, in each case, such Payment Blockage Period shall be terminated by written notice to the Trustee from such trustee or other representatives for such holders). Not more than one Payment Blockage Period may be commenced with respect to the Debentures during any period of 360 consecutive days; provided that, subject to the limitation contained in the next sentence, the commencement of a Payment Blockage Period by the representatives for, or the holders of, Designated Senior Indebtedness other than under the Silgan Credit Agreement, the Secured Notes or under clause (i)(b) of this paragraph shall not bar the commencement of another Payment Blockage Period by the Bank Agent or, if there is no Silgan Credit Agreement in effect, by an authorized representative of the Requisite Secured Noteholders within such period of 360 consecutive days. Notwithstanding anything in the Indenture to the contrary, there must be 180 consecutive days in any 360-day period in which no Payment Blockage Period is in effect. No event of default (other than an event of default pursuant to the financial maintenance covenants under the Silgan Credit Agreement) that existed or was continuing (it being acknowledged that any subsequent action that would give rise to an event of default pursuant to any provision under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose) on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the representative for, or the holders of, such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. (Article Ten) By reason of the subordination provisions described above, in the event of liquidation or insolvency, creditors of the Successor Corporation who are not holders of Senior Indebtedness or of the Debentures may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than Holders of the Debentures. "Successor Corporation" is defined to mean (i) the surviving entity of any Holdings Merger, (ii) Silgan, upon the assumption by Silgan of the liabilities of Holdings represented by the Debentures or (iii) any successor corporation to Silgan that becomes the successor obligor on the Debentures, whether by merger, consolidation, sale of assets, assumption of liabilities or otherwise. (Section 1.01) "Senior Indebtedness" is defined to mean the following obligations of the Successor Corporation: (i) all Indebtedness and other monetary obligations of the Successor Corporation under the Silgan Credit Agreement, the Secured Notes (including the Secured Notes Purchase Agreement), the 11-3/4% Notes (including any agreement pursuant to which the 11-3/4% Notes are issued), any Interest Rate Agreement or any Currency Agreement, (ii) all other Indebtedness of the Successor Corporation (other than Indebtedness evidenced by the Debentures), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is pari passu with, or subordinated in right of payment to, the Debentures and (iii) all fees, expenses and indemnities payable in connection with the Silgan Credit Agreement, the Secured Notes (including the Secured Notes Purchase Agreement), the 11-3/4% Notes (including any agreement pursuant to which the 11-3/4% Notes are issued) and, if applicable, Currency Agreements and Interest Rate Agreements; provided that the term "Senior Indebtedness" shall not include (a) any Indebtedness of the Successor Corporation that, when Incurred and without respect to any election under Section 1111(b) of the United States Bankruptcy Code, was without recourse to the Successor Corporation, (b) any Indebtedness of the Successor Corporation to a Subsidiary of the Successor Corporation or to a joint venture in which the Successor Corporation has an interest, (c) any Indebtedness of the Successor Corporation (other than such Indebtedness already described in clause (i) above) of the type described in clause (ii) above and not permitted by the "Limitation on Indebtedness" covenant described in "--Covenants" below, (d) any repurchase, redemption or other obligation in respect of Redeemable Stock, (e) any Indebtedness to any employee or officer of the Successor Corporation or any of its Subsidiaries, (f) any liability for federal, state, local or other taxes owed or owing by the Successor Corporation or (g) any Trade Payables. "Senior Indebtedness" also includes interest accruing subsequent to events of bankruptcy of the Successor Corporation and its Subsidiaries at the rate provided for in the document governing such Indebtedness, whether or not such interest is an allowed claim enforceable against the debtor in a bankruptcy case under federal bankruptcy law. (Section 1.01) "Designated Senior Indebtedness" is defined to mean (i) Indebtedness under the Silgan Credit Agreement and the Secured Notes (including the Secured Notes Purchase Agreement), including refinancings thereof if it is specifically designated by Holdings, Silgan or the Successor Corporation in the instrument creating or evidencing such refinancing Indebtedness that such refinancing Indebtedness constitutes "Designated Senior Indebtedness" and (ii) any other Indebtedness constituting Senior Indebtedness that, at any date of determination, has an aggregate principal amount of at least $25 million and is specifically designated by Holdings, Silgan or the Successor Corporation in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness." (Section 1.01) Optional Redemption The Debentures are redeemable at any time, at Holdings' option, in whole or in part, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last address as it appears in the Security Register, at a Redemption Price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date). (Sections 3.01 and 3.04) Selection. In the case of any partial redemption, selection of the Debentures for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Debentures are listed or, if the Debentures are not listed on a national securities exchange, on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate; provided that no Debenture of $1,000 in original principal amount or less shall be redeemed in part. If any Debenture is to be redeemed in part only, the notice of redemption relating to such Debenture shall state the portion of the principal amount thereof to be redeemed. A new Debenture in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Debenture. (Sections 3.03 and 3.04) The Holdings Guaranty (as defined in "Description of Certain Silgan Indebtedness--Description of the Silgan Credit Agreement") contains a covenant prohibiting the optional redemption of the Debentures. See "Description of Certain Silgan Indebtedness--Description of the Silgan Credit Agreement." Certain Definitions Set forth below is a summary of certain of the defined terms used in the covenants and other provisions of the Indenture. Reference is made to the Indenture for the full definitions of all such terms as well as any other capitalized terms used herein for which no definition is provided. (Section 1.01) "Accreted Value" is defined to mean an amount in respect of each outstanding Debenture equal to the sum of (i) the issue price of such Debenture as determined in accordance with Section 1273 of the Internal Revenue Code plus (ii) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provision, whether denominated as principal or interest, over the issue price of such Debenture) that shall theretofore have accrued pursuant to Section 1272 of the Internal Revenue Code (without regard to Section 1272(a)(7) of the Internal Revenue Code) from the date of issue of such Debenture (a) for each six month or shorter period ending June 15 or December 15 prior to the date of determination and (b) for the shorter period, if any, from the end of the immediately preceding six month period, as the case may be, to the date of determination plus (iii) accrued interest to the date such Accreted Value is paid (without duplication of any amount set forth in (ii) above), minus all amounts theretofore paid in respect of such Debenture, which amounts are considered as part of the "stated redemption price at maturity" of such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provision (whether such amounts paid were denominated principal or interest). "Adjusted Consolidated Net Income" is defined to mean, for any period, the aggregate net income (or loss) of any Person and its consolidated Subsidiaries for such period determined in conformity with GAAP; provided that the following items shall be excluded in computing Adjusted Consolidated Net Income (without duplication): (i) the net income (or loss) of such Person (other than a Subsidiary of such Person) in which any other Person (other than such Person or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to such Person or any of its Subsidiaries by such other Person during such period; (ii) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of the "Limitation on Restricted Payments" covenant described in "--Covenants" below (and in such case, except to the extent includible pursuant to clause (i) above), the net income (or loss) of such Person accrued prior to the date it becomes a Subsidiary of any other Person or is merged into or consolidated with such other Person or any of its Subsidiaries or all or substantially all of the property and assets of such Person are acquired by such other Person or any of its Subsidiaries; (iii) the net income (or loss) of any Subsidiary of any Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to Asset Sales; (v) any amounts paid or accrued as dividends on Preferred Stock of such Person or Preferred Stock of any Subsidiary of such Person; (vi) any amounts reducing Adjusted Consolidated Net Income resulting from payments made to holders of stock options or stock appreciation rights resulting from the 1989 Mergers; and (vii) all extraordinary gains and extraordinary losses; provided that, solely for the purposes of calculating the Interest Coverage Ratio (and in such case, except to the extent includible pursuant to clause (i) above), "Adjusted Consolidated Net Income" of Holdings shall include the amount of all cash dividends received by Holdings or any Subsidiary of Holdings from an Unrestricted Subsidiary. "Affiliate" is defined to mean, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, is defined to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, neither the Bank Agent nor any Bank nor any affiliate of any of them shall be deemed to be an Affiliate of Holdings or any Subsidiary of Holdings. "Asset Acquisition" is defined to mean (i) an investment by Holdings or any of its Subsidiaries in any other Person pursuant to which such Person shall become a Subsidiary of Holdings or any of its Subsidiaries or shall be merged into or consolidated with Holdings or any of its Subsidiaries or (ii) an acquisition by Holdings or any of its Subsidiaries of the property and assets of any Person other than Holdings or any of its Subsidiaries that constitute substantially all of an operating unit or business of such Person. "Asset Disposition" is defined to mean the sale or other disposition by Holdings or any of its Subsidiaries (other than to Holdings or another Subsidiary of Holdings) of (i) all or substantially all of the Capital Stock of any Subsidiary of Holdings or (ii) all or substantially all of the property and assets that constitute an operating unit or business of Holdings or any of its Subsidiaries. "Asset Sale" is defined to mean, with respect to any Person, any sale, transfer or other disposition (including by way of merger, consolidation or sale-leaseback transaction) in one transaction or a series of related transactions by such Person or any of its Subsidiaries to any Person other than Holdings or any of its Subsidiaries of (i) all or any of the Capital Stock of any Subsidiary of such Person, (ii) all or substantially all of the property and assets of an operating unit or business of such Person or any of its Subsidiaries or (iii) any other property and assets of such Person or any of its Subsidiaries outside the ordinary course of business of such Person or such Subsidiary and, in each case, that is not governed by the provisions in the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of Holdings; provided that sales or other dispositions of inventory, receivables and other current assets shall not be included within the meaning of such term. "Average Life" is defined to mean, at any date of determination with respect to any debt security, the quotient obtained by dividing (i) the sum of the product of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such debt security and (b) the amount of such principal payment by (ii) the sum of all such principal payments. "Bank Agent" is defined to mean Bankers Trust Company, as agent for the Banks pursuant to the Silgan Credit Agreement, and any successor or successors thereto. "Banks" is defined to mean the lenders who are from time to time parties to the Silgan Credit Agreement. "Board of Directors" is defined to mean the Board of Directors of Holdings or any committee of such Board of Directors duly authorized to act under the Indenture. "Business Day" is defined to mean any day except a Saturday, Sunday or other day on which commercial banks in The City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized by law to close. "Capital Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock of such Person which is outstanding or issued on or after the date of the Indenture, including, without limitation, all Common Stock and Preferred Stock. "Capitalized Lease" is defined to mean, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person; and "Capitalized Lease Obligation" is defined to mean the rental obligations, as aforesaid, under such lease. "Change of Control" is defined to mean such time as (i) (a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than MSLEF II, Mr. Silver, Mr. Horrigan and their respective Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the then outstanding Voting Stock of Holdings and (b) MSLEF II, Mr. Horrigan, Mr. Silver and their respective Affiliates beneficially own, directly or indirectly, less than 25% of the total voting power of the then outstanding Voting Stock of Holdings; (ii) individuals who at the beginning of any period of two consecutive calendar years constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination for election by Holdings' shareholders was approved by a vote of at least two-thirds of the members of the Board of Directors then still in office who either were members of the Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; (iii) (a) Holdings merges into or consolidates with any other Person or sells, conveys, transfers, leases or otherwise disposes of, all or substantially all of its property and assets to any Person or (b) any Person merges into Holdings, in either case pursuant to a transaction in which any Voting Stock of Holdings outstanding immediately prior to the effectiveness thereof is reclassified or changes into or is exchanged for cash, securities or other property; provided that any merger, consolidation, sale, transfer, lease or other disposition (1) between Holdings and Silgan, (2) between Holdings and any of its Subsidiaries or between Subsidiaries (including, without limitation, the reincorporation of Holdings in another jurisdiction) or (3) for the purpose of creating a public holding company for Holdings in which all holders of the Capital Stock of Holdings would be entitled to receive (other than cash in lieu of fractional shares) solely Capital Stock of the holding company in amounts proportionate to their holdings of Capital Stock of Holdings immediately prior to such transaction, shall be excluded from the operation of this clause (iii); or (iv) Holdings shall not beneficially own, directly or indirectly, at least a majority of the issued and outstanding Voting Stock of Silgan other than as a result of a Holdings Merger. "Closing Date" is defined to mean the date on which the Debentures are originally issued under the Indenture. "Common Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of common stock of such Person which is outstanding or issued on or after the date of the Indenture, including, without limitation, all series and classes of such common stock. "Consolidated EBITDA" is defined to mean, with respect to any Person for any period, the sum of the amounts for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) income taxes (other than income taxes (either positive or negative) attributable to extraordinary and non-recurring gains or losses or sales of assets), (iv) depreciation expense, (v) amortization expense and (vi) all other noncash items reducing Adjusted Consolidated Net Income, less all noncash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for such Person and its Subsidiaries in conformity with GAAP; provided that, if a Person has any Subsidiary that is not a Wholly Owned Subsidiary of such Person, Consolidated EBITDA of such Person shall be reduced by an amount equal to (a) the Adjusted Consolidated Net Income of such Subsidiary multiplied by (b) the quotient of (1) the number of shares of outstanding Common Stock of such Subsidiary not owned on the last day of such period by such Person or any Subsidiary of such Person divided by (2) the total number of shares of outstanding Common Stock of such Subsidiary on the last day of such period. "Consolidated Interest Expense" is defined to mean, with respect to any Person for any period, the aggregate amount of interest in respect of Indebtedness (including amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting; all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; and the net costs associated with Interest Rate Agreements) and all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid or accrued by such Person during such period; excluding, however, (i) any amount of such interest of any Subsidiary of such Person if the net income (or loss) of such Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income for such Person pursuant to clause (iii) of the definition thereof (but only in the same proportion as the net income (or loss) of such Subsidiary is excluded from the calculation of Adjusted Consolidated Net Income for such Person pursuant to clause (iii) of the definition thereof), (ii) any premiums, fees and expenses (and any amortization thereof) payable in connection with the 1989 Mergers and the Refinancing and (iii) amortization of any other deferred financing costs, all as determined on a consolidated basis in conformity with GAAP. "Consolidated Net Tangible Assets" is defined to mean the total amount of assets of Holdings and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves), except to the extent resulting from write-ups of capital assets (excluding write-ups in connection with accounting for acquisitions in conformity with GAAP), after deducting therefrom (i) all current liabilities of Holdings and its consolidated Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recently available consolidated balance sheet of Holdings and its consolidated Subsidiaries prepared in conformity with GAAP. "Consolidated Net Worth" is defined to mean, at any date of determination, stockholders' equity as set forth on the most recently available consolidated balance sheet of Holdings and its consolidated Subsidiaries (which shall be as of a date not more than 60 days prior to the date of such computation), less any amounts attributable to Redeemable Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of Capital Stock of Holdings or any of its Subsidiaries, each item to be determined in conformity with GAAP (excluding the effects of foreign currency exchange adjustments under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 52). "Currency Agreement" is defined to mean any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect Holdings or any of its Subsidiaries against fluctuations in currency values to or under which Holdings or any of its Subsidiaries is a party or a beneficiary on the date of the Indenture or becomes a party or a beneficiary thereafter. "GAAP" is defined to mean generally accepted accounting principles in the United States of America as in effect as of the date of the Indenture applied on a basis consistent with the principles, methods, procedures and practices employed in the preparation of Holdings' audited financial statements, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP, except that calculations made for purposes of determining compliance with the terms of the covenants described below and other provisions of the Indenture shall be made without giving effect to (i) the amortization of any expenses incurred in connection with the 1989 Mergers or the Refinancing, (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and 17 and (iii) any charges associated with the adoption of Financial Accounting Standard Nos. 106 and 109. "Guarantee" is defined to mean any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Holder" is defined to mean the registered holder of any Debenture. "Holdings Merger" is defined to mean the merger or consolidation of Holdings and Silgan or either of their successors. "Incur" is defined to mean, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that neither the accrual of interest (whether such interest is payable in cash or kind) nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness. "Indebtedness" is defined to mean, with respect to any Person at any date of determination (without duplication), (i) all indebtedness of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (iv) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables, (v) all obligations of such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (a) the fair market value of such asset at such date of determination and (b) the amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person, (viii) all obligations of such Person in respect of borrowed money under the Silgan Credit Agreement, the Secured Notes (including the Secured Notes Purchase Agreement) and any Guarantees thereof and (ix) to the extent not otherwise included in this definition, all obligations of such Person under Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP. "Interest Coverage Ratio" is defined to mean, with respect to any Person on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA of such Person for the four fiscal quarters for which financial information in respect thereof is available immediately prior to such Transaction Date to (ii) the aggregate Consolidated Interest Expense of such Person during such four fiscal quarters. In making the foregoing calculation, (a) pro forma effect shall be given to (1) any Indebtedness Incurred subsequent to the end of the four-fiscal-quarter period referred to in clause (i) and prior to the Transaction Date (other than Indebtedness Incurred under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any predecessor revolving credit or similar arrangement) on the last day of such period), (2) any Indebtedness Incurred during such period to the extent such Indebtedness is outstanding at the Transaction Date and (3) any Indebtedness to be Incurred on the Transaction Date, in each case as if such Indebtedness had been Incurred on the first day of such four-fiscal-quarter period and after giving effect to the application of the proceeds thereof; (b) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the date of computation (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months) had been the applicable rate for the entire period; (c) there shall be excluded from Consolidated Interest Expense any Consolidated Interest Expense related to any amount of Indebtedness that was outstanding during such four-fiscal- quarter period or thereafter but which is not outstanding or which is to be repaid on the Transaction Date, except for Consolidated Interest Expense accrued (as adjusted pursuant to clause (b)) during such four-fiscal-quarter period under a revolving credit or similar arrangement to the extent of the commitment thereunder (or under any successor revolving credit or similar arrangement) on the Transaction Date; (d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions that occur during such four-fiscal- quarter period or thereafter and prior to the Transaction Date (including any Asset Acquisition to be made with the Indebtedness Incurred pursuant to clause (i) above) as if they had occurred on the first day of such four- fiscal-quarter period; (e) with respect to any such four-fiscal-quarter period commencing prior to the Refinancing, the Refinancing shall be deemed to have taken place on the first day of such period; and (f) pro forma effect shall be given to asset dispositions and asset acquisitions that have been made by any Person that has become a Subsidiary of Holdings or has been merged with or into Holdings or any Subsidiary of Holdings during the four- fiscal-quarter period referred to above or subsequent to such period and prior to the Transaction Date and that would have been Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Subsidiary of Holdings as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such period. "Interest Rate Agreement" is defined to mean any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect Holdings or any of its Subsidiaries against fluctuations in interest rates to or under which Holdings or any of its Subsidiaries is a party or a beneficiary on the date of the Indenture or becomes a party or a beneficiary thereafter. "Investment" is defined to mean any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of any Person or its Subsidiaries) or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, bonds, notes, debentures or other similar instruments issued by any other Person. For purposes of the definition of "Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant described below, (i) "Investment" shall include the fair market value of the net assets of any Subsidiary of Holdings at the time that such Subsidiary of Holdings is designated an Unrestricted Subsidiary and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Subsidiary of Holdings and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "Lien" is defined to mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any sale with recourse against the seller or any Affiliate of the seller, or any agreement to give any security interest). "Net Cash Proceeds" is defined to mean, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents (except to the extent such obligations are financed or sold with recourse to Holdings or any Subsidiary of Holdings) and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale computed without regard to the consolidated results of operations of Holdings and its Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (a) is secured by a Lien on the property or assets sold or (b) is required to be paid as a result of such sale and (iv) appropriate amounts to be provided by Holdings or any Subsidiary of Holdings as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP. "Person" is defined to mean an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Preferred Stock" is defined to mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of preferred or preference stock of such Person which is outstanding or issued on or after the date of the Indenture, including, without limitation, the Silgan Preferred Stock. "Redeemable Stock" is defined to mean any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Debentures, (ii) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Debentures or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Debentures; provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require Holdings to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or a "change of control" occurring prior to the Stated Maturity of the Debentures shall not constitute Redeemable Stock if the "asset sale" or "change of control" provision applicable to such Capital Stock is no more favorable to the holders of such Capital Stock than the provisions contained in the "Limitation on Asset Sales" and "Repurchase of Debentures upon Change of Control" covenants described in "--Covenants" below and such Capital Stock specifically provides that Holdings will not repurchase or redeem any such Capital Stock pursuant to such provisions prior to Holdings' repurchase of Debentures required to be repurchased by Holdings under the "Limitation on Asset Sales" and "Repurchase of Debentures upon Change of Control" covenants described below. "Requisite Secured Noteholders" is defined to mean a majority in aggregate principal amount of outstanding Secured Notes. "Restricted Subsidiary" is defined to mean any Subsidiary of Holdings other than an Unrestricted Subsidiary. "Shareholder Subordinated Notes" shall have the same meaning given such term in the Amended and Restated Credit Agreement (including the exhibits thereto) as in effect on the date of the Indenture. "Significant Subsidiary" is defined to mean, at any date of determination, any Subsidiary of Holdings that, together with its Subsidiaries, (i) for the most recent fiscal year of Holdings, accounted for more than 10% of the consolidated revenues of Holdings or (ii) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of Holdings, all as set forth on the most recently available consolidated financial statements of Holdings and its consolidated Subsidiaries for such fiscal year prepared in conformity with GAAP. "Silgan Credit Agreement" is defined to mean the Credit Agreement dated as of December 21, 1993, among Silgan, Containers, Plastics, the Banks party thereto, Bank of America, as Co-Agent, and the Bank Agent, together with the related documents thereof (including without limitation any Guarantees and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented, replaced or otherwise modified from time to time, including any agreement extending the maturity of, refinancing or otherwise restructuring (including, but not limited to, the inclusion of additional borrowers thereunder that are Subsidiaries of Silgan whose obligations are Guaranteed by Silgan thereunder and who are included as additional borrowers thereunder) all or any portion of the Indebtedness under such agreement or any successor agreement; provided that, with respect to any agreement providing for the refinancing of Indebtedness under the Silgan Credit Agreement, such agreement shall only be the Silgan Credit Agreement under the Indenture if a notice to that effect is delivered by Holdings or Silgan to the Trustee and there shall be at any time only one debt instrument that is the Silgan Credit Agreement under the Indenture. "Silgan Indebtedness" is defined to mean any Indebtedness of Silgan or any of its Subsidiaries (including, without limitation, any undrawn commitments under the Silgan Credit Agreement) that is permitted to be Incurred under the Silgan Note Indenture. "Silgan Note Indenture" is defined to mean the indenture, dated as of June 29, 1992, between Silgan and Shawmut Bank, N.A., as trustee, relating to the 11-3/4% Notes, as it may be amended or supplemented from time to time by one or more indentures supplemental thereto entered into pursuant to the applicable provisions thereof. "Stated Maturity" is defined to mean, with respect to any debt security or any installment of interest thereon, the date specified in such debt security as the fixed date on which any principal of such debt security or any such installment of interest is due and payable. "Stock Based Plan" is defined to mean any stock option plan, stock appreciation rights plan or other similar plan or agreement of Holdings or any Subsidiary of Holdings relating to Capital Stock of Holdings or any Subsidiary of Holdings established and in effect from time to time, including, without limitation, the Holdings Organization Agreement or any stock option plan, stock appreciation rights plan or other similar plan or agreement for the benefit of employees of Holdings and its Subsidiaries. "Subordinated Obligations" is defined to mean any principal of, premium, if any, or interest on the Debentures payable pursuant to the terms of the Debentures or upon acceleration, including any amounts received upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Debentures or amounts corresponding to such principal, premium, if any, or interest on the Debentures. "Subsidiary" is defined to mean, with respect to any Person, any corporation, association or other business entity of which more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by Holdings or by one or more other Subsidiaries of Holdings, or by such Person and one or more other Subsidiaries of such Person; provided that, except as the term "Subsidiary" is used in the definition of "Unrestricted Subsidiary" described below, an Unrestricted Subsidiary shall not be deemed to be a Subsidiary of Holdings. "Trade Payables" is defined to mean, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. "Transaction Date" is defined to mean, with respect to the Incurrence of any Indebtedness by Holdings or any of its Subsidiaries, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of Holdings that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of Holdings (including any newly acquired or newly formed Subsidiary of Holdings) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, Holdings or any other Subsidiary of Holdings that is not a Subsidiary of the Subsidiary to be so designated; provided that either (a) the Subsidiary to be so designated has total assets of $1,000 or less or (b) if such Subsidiary has assets greater than $1,000, that such designation would be permitted under the "Limitation on Restricted Payments" covenant described below. The Board of Directors may designate any Unrestricted Subsidiary to be a Subsidiary of Holdings; provided that immediately after giving effect to such designation (1) Holdings could Incur $1.00 of additional Indebtedness under the first paragraph in part (a) of the "Limitation on Indebtedness" covenant described in "--Covenants" below and (2) no Event of Default, or any event that is, or after the giving of notice or the passage of time or both would be an Event of Default, shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing promptly with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "Voting Stock" is defined to mean, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors of such Person. "Wholly Owned Subsidiary" is defined to mean, (i) with respect to Silgan and Holdings, Plastics and Containers, and (ii) with respect to any Person, any Subsidiary of such Person if all of the Common Stock or other similar equity ownership interests (but not including Preferred Stock) in such Subsidiary (other than any director's qualifying shares or Investments by foreign nationals mandated by applicable law) is owned directly or indirectly by such Person. Covenants Limitation on Indebtedness (a) So long as any of the Debentures are outstanding, Holdings shall not, and shall not permit any Subsidiary (other than Silgan and its Subsidiaries) to, Incur any Indebtedness (other than the Debentures and Indebtedness existing on the Closing Date) unless after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of Holdings would be greater than 1.75:1. Notwithstanding the foregoing, Holdings and its Subsidiaries (other than Silgan and its Subsidiaries) may Incur each and all of the following: (i) Indebtedness in an aggregate principal amount not to exceed $50 million outstanding at any time; (ii) Indebtedness to Holdings or any Restricted Subsidiary; (iii) Indebtedness issued in exchange for, or the net proceeds of which are used to exchange, refinance or refund, outstanding Indebtedness, other than Indebtedness Incurred under clauses (i) and (viii) and any refinancings thereof, in an amount (or, if such new Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, with an original issue price) not to exceed the amount so exchanged, refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that Indebtedness the proceeds of which are used to exchange, refinance or refund the Debentures or other Indebtedness that is subordinated in right of payment to the Debentures shall only be permitted under this clause (iii) if: (A) in case the Debentures are exchanged, refinanced or refunded in part, such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made pari passu with, or subordinate in right of payment to, the remaining Debentures, (B) in case the Indebtedness to be exchanged, refinanced or refunded is subordinated in right of payment to the Debentures, such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made subordinate in right of payment to the Debentures at least to the extent that the Indebtedness to be exchanged, refinanced or refunded is subordinated in right of payment to the Debentures and (C) in case the Debentures are exchanged, refinanced or refunded in part or the Indebtedness to be exchanged, refinanced or refunded is subordinated in right of payment to the Debentures, such Indebtedness (1) determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Debentures, and the Average Life of such Indebtedness is at least equal to the remaining Average Life of the Debentures and (2) by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is not scheduled to pay interest in cash prior to the first Interest Payment Date; and provided further that in no event may Indebtedness of Holdings that is pari passu with, or subordinated in right of payment to, the Debentures be exchanged, refinanced or refunded by means of Indebtedness of any Subsidiary of Holdings pursuant to this clause (iii); (iv) Indebtedness issued in exchange for, or the net proceeds of which are used to exchange, refinance or refund, Silgan Indebtedness; provided that (A) the principal amount (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, the original issue price) of such new Indebtedness shall not exceed the principal amount of Silgan Indebtedness exchanged, refinanced or refunded (plus premiums, if any, accrued interest, fees and expenses) and (B) the Average Life of such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, is at least equal to the remaining Average Life of the Debentures; (v) Indebtedness Incurred in connection with the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Holdings, Silgan or any other Restricted Subsidiary, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) and which were issued pursuant to any Stock Based Plan, upon death, disability, retirement, termination of employment or pursuant to the terms of such Stock Based Plan or any other agreement under which such shares of Capital Stock, options, related rights or similar securities were issued; provided that (A) such Indebtedness (other than any Shareholder Subordinated Notes, which must be pari passu with, or subordinated in right of payment to, the Debentures), by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made subordinate in right of payment to the Debentures at least to the extent that the Debentures are subordinated in right of payment to Senior Indebtedness in the event of a Holdings Merger, (B) such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, provides that no payments of principal of such Indebtedness by way of sinking fund, mandatory redemption or otherwise (including defeasance) may be made by Holdings (including, without limitation, at the option of the holder thereof other than an option given to a holder pursuant to an "asset sale" or a "change of control" provision that is no more favorable to the holders of such Indebtedness than the provisions contained in the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of Control" covenants and such Indebtedness specifically provides that Holdings will not repurchase or redeem such Indebtedness pursuant to such provisions prior to Holdings' repurchase of the Debentures required to be repurchased by Holdings under the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of Control" covenants) at any time prior to the Stated Maturity of the Debentures and (C) the scheduled maturity of all principal of such Indebtedness is beyond the Stated Maturity of the Debentures; (vi) Guarantees of Indebtedness of Silgan and other Restricted Subsidiaries under the Silgan Credit Agreement or the Secured Notes; (vii) Indebtedness (A) in respect of performance bonds, bankers' acceptances and surety or appeal bonds provided in the ordinary course of business, (B) under Currency Agreements and Interest Rate Agreements; provided that in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of Holdings outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder and (C) arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of Holdings or any of its Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Subsidiary of Holdings, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Subsidiary of Holdings for the purpose of financing such acquisition; and (viii) unsecured Indebtedness of Holdings; provided that such Indebtedness, (A) by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is expressly made subordinate in right of payment to the Debentures at least to the extent that the Debentures are subordinated in right of payment to Senior Indebtedness in the event of a Holdings Merger, (B) determined as of the date of Incurrence of such Indebtedness, does not mature prior to the Stated Maturity of the Debentures, and the Average Life of such Indebtedness is greater than the remaining Average Life of the Debentures, (C) by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, provides that no payments of principal of such Indebtedness by way of sinking fund, mandatory redemption or otherwise (including defeasance) may be made by Holdings (including, without limitation, at the option of the holder thereof other than an option given to a holder pursuant to an "asset sale" or a "change of control" provision that is no more favorable to the holders of such Indebtedness than the provisions contained in the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of Control" covenants and such Indebtedness specifically provides that Holdings will not repurchase or redeem such Indebtedness pursuant to such provisions prior to Holdings' repurchase of the Debentures required to be repurchased by Holdings under the "Limitation on Asset Sales" and "Repurchase of Debentures upon a Change of Control" covenants) at any time prior to the Stated Maturity of the Debentures and (D) by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is not scheduled to pay interest in cash prior to the first Interest Payment Date. (b) So long as any of the Debentures are outstanding, Holdings shall not permit Silgan or any Subsidiary of Silgan to Incur any Indebtedness unless (i) after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Interest Coverage Ratio of Silgan would be greater than 2.1:1 or (ii) such Indebtedness so Incurred by Silgan or such Subsidiary of Silgan constitutes Silgan Indebtedness; provided, however, that any Indebtedness so Incurred pursuant to clause (i) or (ii) above may not prohibit the payment of dividends to Holdings in amounts sufficient to make mandatory interest and principal payments due on the Debentures at the times and in the amount due and payable, except (A) in the event of a payment default on such Indebtedness or certain events of bankruptcy of Silgan or such Subsidiary of Silgan or (B) in the event of a non-payment default on such Indebtedness in respect of which the maturity of such other Indebtedness may be accelerated, and then until the earlier of (1) the cure or waiver of such non-payment or (2) a period of 160 days has elapsed, unless such non-payment default has resulted in the acceleration of such Indebtedness; and provided further, however, that in the event the Debentures become obligations of a Successor Corporation, nothing in this part (b) shall prohibit the Successor Corporation from assuming or otherwise becoming liable for existing Indebtedness of Holdings or its Subsidiaries. (c) Notwithstanding any other provision of this "Limitation on Indebtedness" covenant, (i) the maximum amount of Indebtedness that Holdings, Silgan or any of their respective Subsidiaries may Incur pursuant to this "Limitation on Indebtedness" covenant shall not be deemed to be exceeded due solely to the result of fluctuations in the exchange rates of currencies, (ii) for purposes of calculating the amount of Indebtedness outstanding at any time under clause (i) of the second paragraph in part (a) of this "Limitation on Indebtedness" covenant, no amount of Indebtedness of Holdings, Silgan or any of their respective Subsidiaries outstanding on the Closing Date shall be considered to be outstanding and (iii) Holdings shall not Incur any Indebtedness that is expressly subordinated to any other Indebtedness of Holdings unless such Indebtedness, by its terms or the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is also expressly made subordinate to the Debentures at least to the extent that it is subordinated to such other Indebtedness. (d) For purposes of determining any particular amount of Indebtedness under this "Limitation on Indebtedness" covenant, Guarantees of, or obligations with respect to letters of credit supporting, Indebtedness otherwise included in the determination of such particular amount shall not be included. For purposes of determining compliance with this "Limitation on Indebtedness" covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, Holdings, in its sole discretion, shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses and (ii) the amount of Indebtedness issued at a price that is less than the principal amount thereof shall be equal to the amount of the liability in respect thereof determined in conformity with GAAP. (e) Notwithstanding any of the foregoing, nothing in this "Limitation on Indebtedness" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures. Immediately upon the occurrence of an event specified in clause (i), (ii) or (iii) in this part (e), parts (a) and (c) (other than clause (i)) of this "Limitation on Indebtedness" covenant shall be of no further force and effect, all references to Silgan in part (b) of this "Limitation on Indebtedness" covenant shall refer to the Successor Corporation and the Interest Coverage Ratio of the Successor Corporation required by clause (i) in part (b) of this "Limitation on Indebtedness" covenant shall be 1.75:1. (Section 4.03) The Holdings Guaranty prohibits Holdings from Incurring Indebtedness (other than a Guarantee under the Silgan Credit Agreement or the Shareholder Subordinated Notes) other than the Debentures. Limitation on Restricted Payments So long as any of the Debentures are outstanding, Holdings will not, and will not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make any distribution on its Capital Stock (other than dividends or distributions payable solely in shares of its or such Restricted Subsidiary's Capital Stock (other than Redeemable Stock) of the same class held by such holders or in options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than Holdings or another Restricted Subsidiary, (ii) purchase, redeem, retire or otherwise acquire for value, any shares of Capital Stock of Holdings, any Restricted Subsidiary or any Unrestricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by Persons other than Holdings or another Restricted Subsidiary, (iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance or other acquisition or retirement for value, of Indebtedness of Holdings that is subordinated in right of payment to the Debentures or (iv) make any Investment in any Affiliate (other than Holdings or a Restricted Subsidiary) or Unrestricted Subsidiary (such payments or any other actions described in clauses (i) through (iv) being collectively "Restricted Payments") if at the time of and after giving effect to the proposed Restricted Payment: (A) an Event of Default or event that, after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing, (B) Holdings could not Incur at least $1.00 of Indebtedness under the first paragraph in part (a) of the "Limitation on Indebtedness" covenant or (C) the aggregate amount expended for all Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) after the date of the Indenture (other than any Restricted Payments described in clauses (ii), (iii) and (iv) of the second paragraph of this "Limitation on Restricted Payments" covenant) shall exceed the sum of (1) 50% of the aggregate amount of Adjusted Consolidated Net Income (or, if Adjusted Consolidated Net Income is a loss, minus 100% of such amount) of Holdings (determined by excluding income resulting from the transfers of assets received by Holdings or a Restricted Subsidiary from an Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the month immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date plus (2) the aggregate net proceeds (including the fair market value of noncash proceeds, as determined in good faith by the Board of Directors) received by Holdings from the issuance and sale permitted by the Indenture of its Capital Stock to any Person other than a Subsidiary of Holdings (not including Redeemable Stock), including an issuance or sale permitted by the Indenture for cash or other property upon the conversion of any Indebtedness of Holdings subsequent to the Closing Date, or from the issuance of any options, warrants or other rights to acquire Capital Stock of Holdings (in each case, exclusive of any Redeemable Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Debentures) plus (3) an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to Holdings or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed in the case of any Unrestricted Subsidiary the amount of Investments previously made by Holdings or any Restricted Subsidiary in such Unrestricted Subsidiary plus (4) $13 million. The foregoing provision shall not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration thereof if, at the date of declaration, such payment would comply with the foregoing provision; (ii) (A) the declaration and payment in cash of stated dividends on the Silgan Preferred Stock and the Containers Mirror Preferred Stock and Plastics Mirror Preferred Stock (each as defined in the Amended and Restated Credit Agreement) and (B) the redemption, repurchase or other acquisition for value of the Silgan Preferred Stock, Containers Mirror Preferred Stock and Plastics Mirror Preferred Stock, in each case in connection with the Refinancing; (iii) the making of Investments in an Unrestricted Subsidiary in an aggregate amount not to exceed $10 million outstanding at any time; provided that the aggregate amount of Investments in all of the Unrestricted Subsidiaries does not exceed $30 million outstanding at any time; (iv) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Debentures, including premium, if any, and accrued and unpaid interest, with the proceeds of Indebtedness Incurred under clauses (iv) or (ix) of the second paragraph in part (a) of the "Limitation on Indebtedness" covenant; (v) the declaration and payment of dividends on the Common Stock of Holdings or Silgan, following an initial public offering of the Common Stock of Holdings or Silgan, as the case may be, of up to 6% per annum of the net proceeds received by Holdings or Silgan, as the case may be, in such initial public offering; (vi) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Holdings, Silgan or any other Restricted Subsidiary, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) and which were issued pursuant to any Stock Based Plan, upon death, disability, retirement, termination of employment or pursuant to the terms of such Stock Based Plan or any other agreement under which such shares of Capital Stock, options, related rights or similar securities were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement for value of such shares of Capital Stock, options, related rights or similar securities after the date of the Indenture does not exceed $13 million and that any additional consideration in excess of such $13 million is in the form of Indebtedness that would be permitted to be Incurred under clause (vi) of the second paragraph in part (a) of the "Limitation on Indebtedness" covenant; (vii) the repurchase of Common Stock of Holdings or Silgan followed immediately by the reissuance thereof for consideration in an amount at least equal to the consideration paid to acquire such stock, or the redemption, repurchase or other acquisition for value of Capital Stock of Holdings or any Subsidiary of Holdings in exchange for, or with the proceeds of a substantially concurrent offering of, other shares of the Capital Stock of such entity (other than Redeemable Stock); (viii) the acquisition of Indebtedness of Holdings that is subordinated in right of payment to the Debentures in exchange for, or out of the proceeds of a substantially concurrent issuance of, shares of the Capital Stock of Holdings or Silgan (other than Redeemable Stock); and (ix) payments or distributions pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of Holdings; provided that, in the case of clauses (iii), (v), (vi) and (ix), no Event of Default, or event or condition that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing or shall occur as a consequence thereof. (Section 4.04) Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries So long as any of the Debentures are outstanding, Holdings will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions permitted by applicable law on any Capital Stock of such Restricted Subsidiary owned by Holdings or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to Holdings or any other Restricted Subsidiary, (iii) make loans or advances to Holdings or any other Restricted Subsidiary or (iv) transfer, subject to certain exceptions, any of its property or assets to Holdings or any other Restricted Subsidiary. This covenant shall not restrict or prohibit any encumbrances or restrictions existing: (i) in the Silgan Credit Agreement, the Secured Notes (including the Secured Notes Purchase Agreement), the 11-3/4% Notes (including any agreement pursuant to which the 11-3/4% Notes were issued), the Holdings Reset Debentures (including any agreement pursuant to which the Holdings Reset Debentures were issued), the Debentures (including any agreement pursuant to which the Debentures were issued) or any other agreements in effect on the Closing Date, including extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; (ii) under or by reason of applicable law, rule or regulation (including, without limitation, applicable currency control laws and applicable state corporate statutes restricting the payment of dividends in certain circumstances); (iii) with respect to any Person or the property or assets of such Person acquired by Holdings or any Restricted Subsidiary and existing at the time of such acquisition, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired; (iv) in the case of clause (iv) of the first paragraph of this "Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, (B) by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of Holdings or any Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising or agreed to in the ordinary course of business and that do not, individually or in the aggregate, detract from the value of the property or assets of Holdings or any Restricted Subsidiary in any manner material to Holdings or such Restricted Subsidiary; or (v) with respect to any Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary. Nothing contained in this "Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall prevent Holdings or any Restricted Subsidiary from (1) entering into any agreement permitting the incurrence of Liens otherwise permitted under the Indenture or (2) restricting the sale or other disposition of property or assets of Holdings or any of its Subsidiaries that secure Indebtedness of Holdings or any of its Subsidiaries. (Section 4.05) Limitation on Transactions with Shareholders and Affiliates So long as any of the Debentures are outstanding, Holdings will not, and will not permit any Subsidiary of Holdings to, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of Holdings (other than the Bank Agent or any of its Affiliates) or any Subsidiary of Holdings or with any Affiliate of Holdings or any Subsidiary of Holdings, except upon fair and reasonable terms no less favorable to Holdings or such Subsidiary of Holdings than could be obtained in a comparable arm's-length transaction with a Person that is not such a holder or an Affiliate. The foregoing limitation does not limit, and shall not apply to: (i) any transaction between Holdings and any Subsidiary of Holdings or between Subsidiaries of Holdings; (ii) transactions (A) for which Holdings or any Subsidiary of Holdings delivers to the Trustee a written opinion of a nationally recognized investment banking firm stating that the transaction is fair to Holdings or such Subsidiary of Holdings from a financial point of view or (B) approved by a majority of the disinterested members of the Board of Directors; (iii) the payment of fees pursuant to the Management Agreements or pursuant to any similar management contracts entered into by Holdings or any Subsidiary of Holdings; (iv) the payment of reasonable and customary regular fees to directors of Holdings or any Subsidiary of Holdings who are not employees of Holdings or such Subsidiary of Holdings; (v) any payments or other transactions pursuant to any tax-sharing agreement between Holdings and Silgan or any other Person with which Holdings is required or permitted to file a consolidated tax return or with which Holdings is or could be part of a consolidated group for tax purposes; (vi) any Restricted Payments not prohibited by the "Limitation on Restricted Payments" covenant; (vii) the payment of fees to Morgan Stanley, S&H or their respective Affiliates for financial, advisory, consulting or investment banking services that the Board of Directors deems to be advisable or appropriate for Holdings or any Subsidiary of Holdings to obtain (including the payment to Morgan Stanley of any underwriting discounts or commissions or placement agency fees) in connection with the issuance and sale of any securities by Holdings or any Subsidiary of Holdings; or (viii) any transaction contemplated by any of the Stock Based Plans. Notwithstanding any of the foregoing, nothing in this "Limitation on Transactions with Shareholders and Affiliates" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures. Immediately upon the occurrence of an event specified in clause (i), (ii) or (iii) of the preceding sentence, all references to Holdings in this "Limitation on Transactions with Shareholders and Affiliates" covenant shall refer to the Successor Corporation. (Section 4.06) Limitation on the Issuance of Capital Stock of Restricted Subsidiaries So long as any of the Debentures are outstanding, Holdings will not permit any Restricted Subsidiary to, directly or indirectly, issue or sell any shares of its Capital Stock (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to Holdings or another Restricted Subsidiary that is a Wholly Owned Subsidiary of Holdings, (ii) pursuant to options on such Capital Stock granted to officers and directors of such Restricted Subsidiary, (iii) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary or (iv) in connection with an initial public offering of the Common Stock of such Restricted Subsidiary; provided that, within 12 months after the date the Net Cash Proceeds of such initial public offering are received by such Restricted Subsidiary, such Restricted Subsidiary shall (A) apply an amount equal to such Net Cash Proceeds to repay unsubordinated Indebtedness of Holdings or Indebtedness of such Restricted Subsidiary, in each case owing to a Person other than Holdings or any of its Subsidiaries, (B) apply an amount equal to such Net Cash Proceeds to the repurchase of Indebtedness pursuant to mandatory repurchase or repayment provisions applicable to such Indebtedness or (C) invest an equal amount, or the amount not so applied pursuant to subclause (A) (or enter into a definitive agreement committing to so invest within 12 months of the date of such agreement), in property or assets that (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) are of a nature or type or are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, any Restricted Subsidiary and its Subsidiaries existing on the date thereof. Notwithstanding any of the foregoing, nothing in this "Limitation on the Issuance of Capital Stock of Restricted Subsidiaries" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures. Immediately upon the occurrence of an event specified in clause (i), (ii) or (iii) of the preceding sentence, all references to Holdings in this "Limitation on the Issuance of Capital Stock of Restricted Subsidiaries" covenant shall refer to the Successor Corporation. (Section 4.07) Repurchase of Debentures upon Change of Control (a) In the event of a Change in Control, each Holder shall have the right to require the repurchase of its Debentures by Holdings in cash pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the Accreted Value, plus accrued interest (if any) to the date of purchase (the "Change of Control Payment"). Prior to the mailing of the notice to Holders provided for in the succeeding paragraph, but in any event within 30 days following any Change of Control, Holdings covenants to, or to cause Silgan to, (i) repay in full all Indebtedness under the Silgan Credit Agreement, the Secured Notes, the 11-3/4% Notes and, upon the occurrence of an event specified in clause (i), (ii) or (iii) of paragraph (e) of this "Repurchase of Debentures upon Change of Control" covenant, any Senior Indebtedness, or to offer to repay in full all such Indebtedness and to repay the Indebtedness of each Bank and each holder of Secured Notes, 11-3/4% Notes and, upon the occurrence of an event specified in clause (i), (ii) or (iii) of paragraph (e) of this "Repurchase of Debentures upon Change of Control" covenant, any Senior Indebtedness, who has accepted such offer or (ii) obtain the requisite consents under the Silgan Credit Agreement, the Secured Notes and the 11-3/4% Notes to permit the repurchase of the Debentures as provided for in the succeeding paragraph. Holdings shall first comply with the covenant in the preceding sentence before it shall be required to repurchase Debentures pursuant to this "Repurchase of Debentures upon Change of Control" covenant. (b) Within 30 days of the Change of Control, Holdings shall mail a notice to the Trustee and each Holder stating: (i) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this "Repurchase of Debentures upon Change of Control" covenant and that all Debentures validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Change of Control Payment Date"); (iii) that any Debenture not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless Holdings defaults in the payment of the Change of Control Payment, any Debenture accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have any Debenture purchased pursuant to the Change of Control Offer will be required to surrender such Debenture, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of such Debenture completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Debentures delivered for purchase and a statement that such Holder is withdrawing his election to have such Debentures purchased; and (vii) that Holders whose Debentures are being purchased only in part will be issued new Debentures equal in principal amount to the unpurchased portion of the Debentures surrendered; provided that each Debenture purchased and each new Debenture issued shall be in an original principal amount of $1,000 or integral multiples thereof. (c) On the Change of Control Payment Date, Holdings shall: (i) accept for payment Debentures or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Debentures or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all Debentures or portions thereof so accepted together with an Officers' Certificate specifying the Debentures or portions thereof accepted for payment by Holdings. The Paying Agent shall promptly mail, to the Holders of Debentures so accepted, payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Debenture equal in principal amount to any unpurchased portion of the Debentures surrendered; provided that each Debenture purchased and each new Debenture issued shall be in an original principal amount of $1,000 or integral multiples thereof. Holdings will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. For purposes of this "Repurchase of Debentures upon Change of Control" covenant, the Trustee shall act as Paying Agent. (d) Holdings will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that a Change of Control occurs under this "Repurchase of Debentures upon Change of Control" covenant and Holdings is required to repurchase Debentures as described above. (e) Notwithstanding any of the foregoing, nothing in this "Repurchase of Debentures upon Change of Control" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures. Immediately upon the occurrence of an event specified in clause (i), (ii) or (iii) of the preceding sentence, all references to Holdings in this "Repurchase of Debentures upon a Change of Control" covenant shall refer to the Successor Corporation. (Section 4.08) Limitation on Asset Sales (a) In the event and to the extent that the Net Cash Proceeds received by Holdings or any Restricted Subsidiary from one or more Asset Sales occurring on or after the Closing Date in any period of 12 consecutive months (other than Asset Sales by Holdings or any Restricted Subsidiary to Holdings or another Restricted Subsidiary) exceed 15% of Consolidated Net Tangible Assets in any one fiscal year (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of Holdings and its Subsidiaries has been prepared), then Holdings shall, or shall cause such Restricted Subsidiary to, (i) within 12 months after the date Net Cash Proceeds so received exceed 15% of Consolidated Net Tangible Assets in any one fiscal year (determined as of the date closest to the commencement of such 12-month period for which a consolidated balance sheet of Holdings and its Subsidiaries has been prepared) (A) apply an amount equal to such excess Net Cash Proceeds to repay unsubordinated Indebtedness of Holdings or Indebtedness of such Restricted Subsidiary, in each case owing to a Person other than Holdings or any of its Subsidiaries or (B) invest an equal amount, or the amount not so applied pursuant to subclause (A) (or enter into a definitive agreement committing to so invest within 12 months of the date of such agreement), in property or assets that (as determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a Board Resolution) are of a nature or type or are used in a business (or in a company having property and assets of a nature or type, or engaged in a business) similar or related to the nature or type of the property and assets of, or the business of, Holdings and its Subsidiaries existing on the date thereof and (ii) apply such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided in the following paragraphs of this "Limitation on Asset Sales" covenant. The amount of such excess Net Cash Proceeds required to be applied (or to be committed to be applied) during such 12-month period as set forth in subclause (A) or (B) of the preceding sentence and not applied as so required by the end of such period shall constitute "Excess Proceeds." (b) If, as of the first day of any calendar month, the aggregate amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below) totals at least $5 million, Holdings must, not later than the fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer") to purchase from the Holders on a pro rata basis an aggregate principal amount of Debentures equal to the Excess Proceeds on such date, at a purchase price equal to 101% of the Accreted Value, plus accrued interest (if any) to the date of purchase (the "Excess Proceeds Payment"); provided, however, that if the Debentures become obligations of a Successor Corporation no Excess Proceeds Offer shall be required to be commenced with respect to the Debentures until the Business Day following the dates that payments are made pursuant to similar offers that are made to holders of the Secured Notes and the 11-3/4% Notes with respect to the Secured Notes and the 11-3/4% Notes, respectively, and need not be commenced if the Excess Proceeds remaining after application to the Secured Notes and the 11-3/4% Notes purchased in the offers made to the holders of the Secured Notes and the 11-3/4% Notes are less than $5 million; and provided further, however, that no Debentures may be purchased under this "Limitation on Asset Sales" covenant unless the Successor Corporation shall have purchased all Secured Notes and 11-3/4% Notes tendered pursuant to the offers applicable thereto. (c) Holdings shall commence an Excess Proceeds Offer by mailing a notice to the Trustee and each Holder stating: (i) that the Excess Proceeds Offer is being made pursuant to this "Limitation on Asset Sales" covenant and that all Debentures validly tendered will be accepted for payment on a pro rata basis; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Excess Proceeds Payment Date"); (iii) that any Debenture not tendered will continue to accrue interest pursuant to its terms; (iv) that, unless Holdings defaults in the payment of the Excess Proceeds Payment, any Debenture accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest after the Excess Proceeds Payment Date; (v) that Holders electing to have any Debenture purchased pursuant to the Excess Proceeds Offer will be required to surrender the Debenture, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Debenture completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Excess Proceeds Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Excess Proceeds Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Debentures delivered for purchase and a statement that such Holder is withdrawing his election to have such Debentures purchased; and (vii) that Holders whose Debentures are being purchased only in part will be issued new Debentures equal in principal amount to the unpurchased portion of the Debentures surrendered; provided that each Debenture purchased and each new Debenture issued shall be in an original principal amount of $1,000 or integral multiples thereof. (d) On the Excess Proceeds Payment Date, Holdings shall: (i) accept for payment on a pro rata basis Debentures or portions thereof tendered pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Debentures or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all Debentures or portions thereof so accepted, together with an Officers' Certificate specifying the Debentures or portions thereof accepted for payment by Holdings. The Paying Agent shall promptly mail to the Holders of Debentures so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Debenture equal in principal amount to any unpurchased portion of the Debenture surrendered; provided that each Debenture purchased and each new Debenture issued shall be in an original principal amount of $l,000 or integral multiples thereof. Holdings will publicly announce the results of the Excess Proceeds Offer as soon as practicable after the Excess Proceeds Payment Date. For purposes of this "Limitation on Asset Sales" covenant, the Trustee shall act as the Paying Agent. (e) Holdings will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that such Excess Proceeds are received by Holdings under this "Limitation on Asset Sales" covenant and Holdings is required to repurchase Debentures as described above. (f) Notwithstanding the foregoing, nothing in this "Limitation on Asset Sales" covenant shall prohibit the occurrence of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures. Immediately upon the occurrence of an event specified in clause (i), (ii) or (iii) of the preceding sentence, all references to Holdings in this "Limitation on Asset Sales" covenant shall refer to the Successor Corporation. (Section 4.09) Events of Default An "Event of Default" occurs with respect to the Debentures if: (i) Holdings defaults in the payment of principal of (or premium, if any, on) any Debenture when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, whether or not such payment is prohibited by the subordination provisions of the Indenture, if such provisions are then applicable; (ii) Holdings defaults in the payment of interest on any Debenture when the same becomes due and payable, and such default continues for a period of 30 days, whether or not such payment is prohibited by the subordination provisions of the Indenture, if such provisions are then applicable; (iii) Holdings defaults in the performance of or breaches any other covenant or agreement of Holdings in the Indenture or under the Debentures, and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Debentures; (iv) there occurs with respect to any issue or issues of Indebtedness of Holdings and/or any Significant Subsidiary having an outstanding principal amount of $5 million or more individually or $10 million or more in the aggregate for all such issues of Holdings and/or any Significant Subsidiary, whether such Indebtedness now exists or shall hereafter be created, an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration; (v) any final judgment or order (not covered by insurance) for the payment of money in excess of $5 million individually or $10 million or more in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self- insurance or retention as not so covered) shall be rendered against Holdings or any Significant Subsidiary and shall not be discharged, and there shall be any period of 60 consecutive days following entry of the final judgment or order in excess of $5 million individually or that causes the aggregate amount for all such final judgments or orders outstanding against all such Persons to exceed $10 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (vi) a court having jurisdiction in the premises enters a decree or order for (a) relief in respect of Holdings or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (b) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of Holdings or any Significant Subsidiary or for all or substantially all of the property and assets of Holdings or any Significant Subsidiary or (c) the winding up or liquidation of the affairs of Holdings or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; (vii) Holdings or any Significant Subsidiary (a) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of Holdings or any Significant Subsidiary or for all or substantially all of the property and assets of Holdings or any Significant Subsidiary or (c) effects any general assignment for the benefit of creditors; (viii) Holdings and/or one or more Significant Subsidiaries fails to make (a) at the final (but not any interim) fixed maturity of any issue of Indebtedness a principal payment of $5 million or more or (b) at the final (but not any interim) fixed maturity of more than one issue of such Indebtedness principal payments aggregating $10 million or more and, in the case of clause (a), such defaulted payment shall not have been made, waived or extended within 30 days of the payment default and, in the case of clause (b), all such defaulted payments shall not have been made, waived or extended within 30 days of the payment default that causes the amount described in clause (b) to exceed $10 million; or (ix) there occurs the nonpayment of any two or more items of Indebtedness that would constitute at the time of such nonpayments, but for the individual amounts of such Indebtedness, an Event of Default under clause (iv) or clause (viii) above, or both, and which items of Indebtedness aggregate $10 million or more. (Section 6.01) If an Event of Default (other than an Event of Default specified in clause (vi) or (vii) above that occurs with respect to Holdings or Silgan) occurs and is continuing under the Indenture, the Trustee thereunder or the Holders of at least 25% of the aggregate principal amount of the Debentures then outstanding, by written notice to Holdings (and to the Trustee if such notice is given by the Holders (the "Acceleration Notice")), may, and the Trustee at the request of the Holders of at least 25% in aggregate principal amount of the Debentures then outstanding shall, declare the Default Amount to be immediately due and payable. In the event any such declaration of acceleration occurs as a result of (i) a Holdings Merger, (ii) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (iii) the assumption by Silgan or its successors of Indebtedness represented by the Debentures, if the Silgan Credit Agreement and/or the Secured Notes, or any agreement pursuant to which any Senior Indebtedness that has refinanced the Indebtedness under the Silgan Credit Agreement and/or the Secured Notes is in effect, such declaration shall not become effective until the earlier of (A) five Business Days after receipt of the Acceleration Notice by the Bank Agent, Holdings and the agent for the holders of the Secured Notes (which shall be the Bank Agent unless and until the holders of a majority in principal amount of Secured Notes designate another agent in writing to Holdings and the Trustee) or (B) acceleration of the Indebtedness under the Silgan Credit Agreement or the Secured Notes; provided that such acceleration shall automatically be rescinded and annulled without any further action required on the part of the Holders in the event that any and all Events of Default specified in the Acceleration Notice under the Indenture shall have been cured, waived or otherwise remedied as provided in the Indenture prior to the expiration of the period referred to in the preceding clauses (A) and (B). In the event of a declaration of acceleration because an Event of Default set forth in clause (iv), (viii) or (ix) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (iv), (viii) or (ix) shall be remedied, cured by Holdings and/or such Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (vi) or (vii) above occurs with respect to Holdings or Silgan, the Default Amount shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in aggregate principal amount of the outstanding Debentures, by written notice to Holdings and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (1) all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Debentures that have become due solely by such declaration of acceleration, have been cured or waived and (2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. (Sections 6.02 and 6.04) For information as to the waiver of defaults, see "--Modification and Waiver." "Default Amount" is defined to mean an amount in respect of each outstanding Debenture equal to the sum of (i) the issue price of such Debenture as determined in accordance with Section 1273 of the Internal Revenue Code plus (ii) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provision, whether denominated as principal or interest, over the issue price of such Debenture) that shall theretofore have accrued pursuant to Section 1272 of the Internal Revenue Code (without regard to Section 1272(a)(7) of the Internal Revenue Code) from the date of issue of such Debenture (a) for each six month or shorter period ending June 15 or December 15 prior to the date of declaration of acceleration and (b) for the shorter period, if any, from the end of the immediately preceding six month period, as the case may be, to the date of declaration of acceleration plus (iii) accrued interest to the date such Default Amount is paid (without duplication of any amount set forth in clause (ii) above), less all amounts theretofore paid in respect of such Debenture, which amounts are considered as part of the "stated redemption price at maturity" of such Debenture within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provision (whether such amounts paid were denominated principal or interest). (Section 1.01) The Holders of at least a majority in aggregate principal amount of the outstanding Debentures may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that the Trustee is advised by counsel conflicts with law or the Indenture, that may involve the Trustee in personal liability or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction. (Section 6.05) A Holder may not pursue any remedy with respect to the Indenture or the Debentures unless: (i) the Holder gives to the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Debentures make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Debentures do not give the Trustee a direction that is inconsistent with the request. (Section 6.06) However, such limitations do not apply to the right of any Holder to receive payment of the principal of, premium, if any, or interest on its Debentures, or to bring suit for the enforcement of any such payment, on or after the respective due dates expressed in its Debentures, which rights shall not be impaired or affected without the consent of the Holder. (Section 6.07) The Indenture requires certain officers of Holdings to certify, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of Holdings and its Subsidiaries and Holdings' and its Subsidiaries' performance under the Indenture and that Holdings has fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. Holdings is also obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under the Indenture. (Section 4.14) Consolidation, Merger and Sale of Assets Holdings shall not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person (other than a Restricted Subsidiary that is a Wholly Owned Subsidiary of Holdings; provided that, in connection with any merger of Holdings with any Restricted Subsidiary that is a Wholly Owned Subsidiary of Holdings, no consideration (other than common stock in the surviving Person or Holdings) shall be issued or distributed to the stockholders of Holdings) or permit any Person to merge with or into Holdings, unless: (i) Holdings shall be the continuing Person, or the Person (if other than Holdings) formed by such consolidation or into which Holdings is merged or that acquired or leased such property and assets of Holdings shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of Holdings on all of the Debentures and under the Indenture; (ii) immediately after giving effect to such transaction, no Event of Default, and no event that after the giving of notice or lapse of time or both will become an Event of Default, shall have occurred and be continuing; (iii) immediately after giving effect to such transaction on a pro forma basis, the Interest Coverage Ratio of Holdings (or any Person becoming the successor obligor on the Debentures) is at least 1:1; provided that if the Interest Coverage Ratio of Holdings before giving effect to such transaction is within the range set forth in column (A) below, then the Interest Coverage Ratio of Holdings (or any Person becoming the successor obligor on the Debentures) shall be at least equal to the lesser of (1) the ratio determined by multiplying the percentage set forth in column (B) below by the Interest Coverage Ratio of Holdings prior to such transaction and (2) the ratio set forth in column (C) below: (A) (B) (C) --- --- --- 1.11:1 to 1.99:1 . . . . . . . . . 90% 1.5:1 2.00:1 to 2.99:1 . . . . . . . . . 80% 2.1:1 3.00:1 to 3.99:1 . . . . . . . . . 70% 2.4:1 4.00:1 or more . . . . . . . . . . 60% 2.5:1 and provided further that, if the Interest Coverage Ratio of Holdings (or any Person becoming the successor obligor on the Debentures) is 3:1 or more, the calculation in the preceding proviso shall be inapplicable and such transaction shall be deemed to have complied with the requirements of this clause (iii); (iv) immediately after giving effect to such transaction on a pro forma basis, Holdings (or any Person that becomes the successor obligor on the Debentures) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of Holdings immediately prior to such transaction; and (v) Holdings delivers to the Trustee an Officer's Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (iii) and (iv)) and an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture comply with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; provided, however, that clause (iv) of this covenant does not apply to, and the Interest Coverage Ratio required by clause (iii) of this "Consolidation, Merger and Sale of Assets" covenant (A) shall be 1.75:1 with respect to, (1) a Holdings Merger, (2) the sale of all or substantially all of the property and assets of Silgan or its successors to Holdings, and the assumption by Holdings of all or substantially all of the liabilities of Silgan or its successors or (3) the assumption by Silgan or its successors of Indebtedness represented by the Debentures and (B) does not apply if, in the good faith determination of the Board of Directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of Holdings; and provided further, however, that any such transaction shall not have as one of its purposes the evasion of the limitations of this covenant. (Section 5.01) Defeasance Defeasance and Discharge. The Indenture provides that Holdings will be deemed to have paid and will be discharged from any and all obligations in respect of the Debentures and the provisions of the Indenture will no longer be in effect with respect to the Debentures on the 123rd day after the deposit described below (except for, among other matters, certain obligations to register the transfer or exchange of the Debentures, to replace stolen, lost or mutilated Debentures, to maintain paying agencies and to hold monies for payment in trust) if, among other things, (A) Holdings has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Debentures on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Debentures, (B) Holdings has delivered to the Trustee (i) either an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of Holdings' exercise of its option under this "Defeasance" provision and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be accompanied by a ruling of the IRS to the same effect or a change in applicable federal income tax law after the date of the Indenture or a ruling directed to the Trustee received from the IRS to the same effect as the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (C) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which Holdings is a party or by which Holdings is bound, (D) the Successor Corporation is not prohibited from making payments in respect of the Debentures by the provisions described under "Subordination Upon Certain Events," above and (E) if at such time the Debentures are listed on a national securities exchange, Holdings has delivered to the Trustee an Opinion of Counsel to the effect that the Debentures will not be delisted as a result of such deposit, defeasance and discharge. (Section 8.02) Defeasance of Certain Covenants and Certain Events of Default. The Indenture further provides that the provisions of the Indenture will no longer be in effect with respect to clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets" and all the covenants described under "Covenants," clause (iii) under "Events of Default" with respect to such covenants and clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets," and clauses (iv), (v) and (viii) under "Events of Default" shall be deemed not to be Events of Default, and the provisions described under "Subordination Upon Certain Events" shall not apply, upon, among other things, the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Debentures on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Debentures, the satisfaction of the provisions described in clauses (B)(ii), (C), (D) and (E) of the preceding paragraph and the delivery by Holdings to the Trustee of an Opinion of Counsel to the effect that, among other things, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. (Section 8.03) Defeasance and Certain Other Events of Default. In the event Holdings exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Debentures as described in the immediately preceding paragraph and the Debentures are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Debentures at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Debentures at the time of the acceleration resulting from such Event of Default. However, Holdings shall remain liable for such payments. The Holdings Guaranty contains a covenant prohibiting defeasance of the Debentures. See "Description of Certain Silgan Indebtedness--Description of the Silgan Credit Agreement." Modification and Waiver Modifications and amendments of the Indenture may be made by Holdings and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Debentures; provided, however, that no such modification or amendment may, without the consent of each Holder affected thereby, (i) change the Stated Maturity of the principal of, or any installment of interest on, any Debenture, (ii) reduce the principal amount of, premium, if any, or interest on, any Debenture, (iii) change the place or currency of payment of principal of, premium, if any, or interest on, any Debenture, (iv) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any Debenture, (v) modify the subordination provisions in a manner adverse to the Holders, (vi) reduce the above-stated percentage of outstanding Debentures the consent of whose Holders is necessary to modify or amend the Indenture, (vii) waive a default in the payment of principal of, premium, if any, or interest on the Debentures or (viii) reduce the percentage of aggregate principal amount of outstanding Debentures the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. (Section 9.02) The Holders of a majority in aggregate principal amount of the outstanding Debentures may waive compliance by Holdings with certain restrictive provisions of the Indenture. (Section 9.02) The Holdings Guaranty contains a covenant prohibiting Holdings from consenting to any modification of the Indenture or waiver of any provision thereof without the consent of a specified percentage of the lenders under the Silgan Credit Agreement. See "Description of Certain Silgan Indebtedness--Description of the Silgan Credit Agreement." No Personal Liability of Incorporators, Shareholders, Officers, Directors or Employees The Indenture provides that no recourse for the payment of the principal of, premium, if any, or interest on any of the Debentures, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of Holdings contained in the Indenture or in any of the Debentures, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator or past, present or future shareholder, officer, director, employee or controlling person of Holdings or of any Successor Corporation. Each Holder, by accepting such Debenture, waives and releases all such liability. (Section 11.09) Concerning the Trustee Shawmut Bank, N.A. (formerly The Connecticut National Bank) acts as Trustee under the Indenture. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under such Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. (Article Seven) The provisions of the Trust Indenture Act of 1939, as amended, incorporated by reference in the Indenture contain limitations on the rights of the Trustee thereunder, should it become a creditor of Holdings, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest, it must eliminate such conflict or resign. DESCRIPTION OF HOLDINGS COMMON STOCK General Certain of the statements contained herein are summaries of the detailed provisions of the Certificate of Incorporation of Holdings (the "Certificate of Incorporation") and are qualified in their entirety by reference to the Certificate of Incorporation, a copy of which is filed herewith. Under the Certificate of Incorporation, Holdings has authority to issue 500,000 shares of Class A Common Stock, par value $.01 per share, 667,500 shares of Class B Common Stock, par value $.01 per share, and 1,000,000 shares of Class C Common Stock, par value $.01 per share. Holdings has an aggregate of 1,135,000 shares of common stock outstanding as follows: (i) 417,500 shares of Holdings Class A Stock; (ii) 667,500 shares of Holdings Class B Stock; and (iii) 50,000 shares of Holdings Class C Stock. Except as described below, the rights, privileges and powers of Holdings Class A Stock and Holdings Class B Stock are identical, with each share of each class being entitled to one vote on all matters to come before the stockholders of Holdings. Until the occurrence of a Change of Control (as defined in the Certificate of Incorporation and as described below), the affirmative vote of the holders of not less than a majority of the outstanding shares of Holdings Class A Stock and Holdings Class B Stock, voting as separate classes, shall be required for the approval of any matter to come before the stockholders of Holdings, except that (i) the holders of a majority of the outstanding shares of Holdings Class A Stock, voting as a separate class, have the sole right to vote for the election and removal of three directors (the directors elected by the holders of Holdings Class A Stock being referred to herein as "Class A Directors"); (ii) the holders of a majority of the outstanding shares of Holdings Class B Stock, voting as a separate class, have the sole right to vote for the election and removal of all directors other than the Class A Directors (the directors elected by the holders of Holdings Class B Stock being referred to herein as "Class B Directors"); and (iii) the vote of not less than a majority of the outstanding shares of Holdings Class B Stock shall be required in certain circumstances set forth in the Certificate of Incorporation. The holders of Holdings Class C Stock have no voting rights except as provided by applicable law and except that such holders are entitled to vote as a separate class on certain amendments to the Certificate of Incorporation as provided therein. In the event Holdings sells shares of any class of its common stock to the public, the distinctions between Holdings Class A Stock and Holdings Class B Stock terminate, the powers, including voting powers, of Holdings Class A Stock and Holdings Class B Stock shall be identical upon compliance with certain provisions contained in the Certificate of Incorporation, and any Regulated Stockholder (generally defined to mean banks) will be entitled to convert all shares of Holdings Class C Stock held by such stockholder into the same number of shares of Holdings Class B Stock (or Holdings Class A Stock to the extent such Holdings Class C Stock was issued upon conversion of Holdings Class A Stock). After a Change of Control, the affirmative vote of the holders of not less than a majority of the outstanding shares of Holdings Class A Stock and Holdings Class B Stock, voting together as a single class, will be required for the approval of any matter to come before the stockholders of Holdings, except that the provisions described in clauses (i) and (ii) in the preceding paragraph shall continue to apply from and after a Change of Control, and except as otherwise provided in the Certificate of Incorporation with respect to its amendment. Also, after a Change of Control, the number of Class B Directors will be increased to five. In the event that a vacancy among the Class A Directors or the Class B Directors occurs at any time prior to the election of directors at the next scheduled annual meeting of stockholders, the vacancy shall be filled, in the case of the Class A Directors, by either (i) the vote of the holders of a majority of the outstanding shares of Holdings Class A Stock at a special meeting of stockholders, or (ii) by written consent of the holders of a majority of the outstanding shares of Holdings Class A Stock, and, in the case of the Class B Directors, by either (i) the vote of the holders of a majority of the outstanding shares of Holdings Class B Stock at a special meeting or stockholders, or (ii) by written consent of the holders of a majority of the outstanding shares of the Holdings Class B Stock. A "Change of Control" is defined in the Certificate of Incorporation to include the occurrence of any of the following events: (i) Messrs. Silver and Horrigan shall collectively own, directly or indirectly, less than one-half of the aggregate number of outstanding shares of Holdings Class A Stock owned by them directly or indirectly on June 30, 1989 on a common stock equivalent basis, or (ii) the acceleration of the indebtedness under the Silgan Credit Agreement or the Debentures, as a result of the occurrence of an event of default thereunder relating to a payment default or a financial covenant event of default. Description of the Holdings Organization Agreement Concurrently with the issuance and sale to First Plaza of the Holdings Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. R. Philip Silver and D. Greg Horrigan entered into the Amended and Restated Organization Agreement dated as of December 21, 1993 (the "Holdings Organization Agreement") that provides for the termination of the Organization Agreement dated as of June 30, 1989 by and among Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan (except for the indemnification provisions thereof, which provisions survive) and for the investment by First Plaza in Holdings and the relationships among the stockholders and between the stockholders and Holdings. Certain of the statements contained herein are summaries of the detailed provisions of the Holdings Organization Agreement and are qualified in their entirety by reference to the Holdings Organization Agreement. The Holdings Organization Agreement prohibits the disposition of Holdings' common stock without the prior written consent of Messrs. Silver and Horrigan and MSLEF II, except for (i) dispositions to affiliates (which, in the case of First Plaza, includes any successor or underlying trust, and which, in the case of MSLEF II, does not include any person which is not an Investment Entity (as defined below)), (ii) dispositions to certain family members of Messrs. Silver and Horrigan or trusts for the benefit of those family members, (iii) certain transfers among MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan that comply with certain rights of first refusal set forth in the Holdings Organization Agreement, which rights expire on June 30, 1994, (iv) dispositions to certain parties at any time on or after June 30, 1994, subject to certain other rights of first refusal discussed below, (v) the sale by First Plaza to Holdings of all of the Holdings Stock acquired by First Plaza on December 21, 1993, upon the exercise of Holdings' call option as described below, and (vi) dispositions in connection with an initial public offering of the common stock of Holdings, as described below. Any transfer of Holdings' common stock (other than transfers described in clauses (v) and (vi) of the preceding sentence) will be void unless the transferee agrees in writing prior to the proposed transfer to be bound by the terms of the Holdings Organization Agreement. At any time on or after June 30, 1994, MSLEF II may effect a sale of stock to an Investment Entity (generally defined as any person who (i) is primarily engaged in the business of investing in securities of other companies and not taking an active role in the management or operations of such companies and (ii) does not permit the participation or involvement in any way in the business or affairs of Holdings of a person who is engaged in a business not described in clause (i)) or, in the event of certain defaults under the amended and restated management services agreement by and between S&H, a company wholly-owned by Messrs. Silver and Horrigan, and Holdings (described under "Certain Transactions--Management Agreements"), to a third party, in each case, if it first offers such stock to: (a) Holdings, (b) the Group (defined generally to mean, collectively, Messrs. Silver and Horrigan and their respective affiliates and certain related family transferees and estates, with Mr. Silver and his affiliates and certain related family transferees and estates being deemed to be collectively one member of the Group, and Mr. Horrigan and his affiliates and certain related family transferees and estates being deemed to be collectively one member of the Group) and (c) BTNY, in each case on the same terms and conditions as the proposed sale to an Investment Entity or the proposed third party sale. In addition, in any such sale by MSLEF II, BTNY and First Plaza must be given the opportunity to sell the same percentage of its stock to such Investment Entity or third party. At any time on or after June 30, 1994, each member of the Group may transfer shares of stock to a third party if such holder first offers such shares to: (a) the other member of the Group, (b) Holdings, (c) MSLEF II and (d) BTNY, in each case on the same terms and conditions as the proposed third party sale. At any time on or after June 30, 1994, BTNY may effect a sale of stock to a third party if it first offers such shares to: (a) Holdings, (b) MSLEF II and (c) the Group, in each case on the same terms and conditions as the proposed third party sale. At any time on or after June 30, 1994, either MSLEF II or the Group has the right to require a recapitalization transaction. A recapitalization transaction is defined as any transaction (such as a merger, consolidation, exchange of securities or liquidation) involving Holdings pursuant to which MSLEF II and the Group retain their proportionate ownership interest in the surviving entity if the following conditions are met: (i) the value of any securities of the surviving entity acquired or retained by the party not initiating the recapitalization transaction does not exceed 67% of the difference between (x) the value of such securities and any cash received by such party and (y) all taxes payable as a result of the transaction, (ii) if MSLEF II initiates the recapitalization transaction and will not own all the voting equity securities of the surviving entity not owned by the Group, the Group shall have the right to purchase such securities, (iii) if the Group initiates the recapitalization transaction and will not own all of the voting equity securities of the surviving entity, MSLEF II shall have the right to purchase such securities, and (iv) the majority in principal amount of the indebtedness incurred in connection with such transaction shall be held for at least one year by persons not affiliated with either MSLEF II or any member of the Group. The Holdings Organization Agreement provides that in the event that either Mr. Silver or Mr. Horrigan (each, a "Manager") dies or becomes permanently disabled prior to June 30, 1994 (an "Inactive Manager"), such Inactive Manager or his affiliates shall have the right to sell to Holdings all Holdings Class A Stock held by the Inactive Manager at the Fair Market Value (as defined in the Holdings Organization Agreement) of such stock, provided that such stock must first be offered to the remaining Manager at the same price. The Holdings Organization Agreement also provides that if either Mr. Silver or Mr. Horrigan dies, becomes permanently disabled or is convicted of any felony directly related to the business of Holdings prior to June 30, 1994, the other Manager and his affiliates shall have the right to purchase all of such person's Holdings Class A Stock at a price equal to Fair Market Value in the case of death or disability and the Adjusted Book Value (as defined in the Holdings Organization Agreement) in the case of a conviction as stated above, and Holdings shall have the right to purchase all such stock not purchased by the other Manager. At any time prior to December 21, 1998, Holdings shall have the right and option to purchase from First Plaza, and First Plaza shall have the obligation to sell to Holdings, all (but not less than all) of the Holdings Stock for a price per share equal to the greater of (i) $120 per share and (ii) the purchase price necessary to yield on an annual basis a compound return on investment of forty percent (40%). The number of shares subject to such call and the call purchase price shall be proportionately adjusted to take into account any stock dividend, stock split, combination of shares, subdivision or other recapitalization of the capital stock of Holdings. The Holdings Organization Agreement provides that at any time after June 15, 1996, the holders of a majority of the issued and outstanding shares of Holdings Class A Stock and Holdings Class B Stock (considered together as a class) may by written notice to Holdings require Holdings to pursue the first public offering of Holdings' common stock pursuant to an effective registration statement (an "IPO") on the terms and conditions provided in the Holdings Organization Agreement. In addition to the portion of the IPO which shall consist of shares of Holdings' common stock to be sold by Holdings, the IPO may also include a secondary tranche consisting of shares of Holdings' common stock to be sold by stockholders of Holdings. Pursuant to the provisions of the Holdings Organization Agreement, each of MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan has agreed to take all action (including voting its shares of Holdings' common stock) to approve the adoption of the Restated Certificate of Incorporation of Holdings, as amended, the Amended and Restated By-laws of Holdings, and the Amended and Restated Management Services Agreement (the "Post-IPO Management Services Contract"), in each case substantially in the form agreed to pursuant to the Holdings Organization Agreement and in each case to become effective at the time an IPO is completed. The Post-IPO Management Services Contract provides, among other things, for the payment to S&H of management fees of $2.0 million annually plus reimbursement of expenses. See "Certain Transactions--Management Agreements." Pursuant to the provisions of the Holdings Organization Agreement, MSLEF II has agreed that it will not vote its shares of Holdings Class B Stock in favor of any changes in the Certificate of Incorporation or By-laws of Holdings which would adversely affect the rights of First Plaza, unless First Plaza has consented in writing to such change. In addition, so long as First Plaza shall hold not less than 18.73% of the issued and outstanding shares of Holdings Class B Stock, First Plaza shall have the right to nominate one of the Class B Directors to be elected at each annual meeting of stockholders in accordance with the provisions of the Certificate of Incorporation, and the holders of Holdings Class B Stock parties to the Holdings Organization Agreement have agreed to vote their shares of Holdings Class B Stock in favor of such nominee. In addition, in the event that First Plaza, MSLEF II or BTNY shall purchase any shares of Holdings Class A Stock, such purchaser has agreed that it will vote such shares in accordance with the directions of the "holders of a majority of the shares of Class A Stock held by the Group" (defined generally to mean the holders of a majority of the aggregate of 417,500 shares of Holdings Class A Stock held by Messrs. Silver and Horrigan at December 21, 1993, which at the time of any such determination have been continuously and are held by the Group) until such time as a Change of Control has occurred. In the event that Messrs. Silver or Horrigan shall purchase any shares of Holdings Class B Stock, such purchaser agrees that it will vote such shares in accordance with the directions of MSLEF II, unless MSLEF II and First Plaza (together with their respective affiliates) shall hold directly or indirectly less than one-half of the aggregate number of shares of Holdings Class B Stock held by MSLEF II and First Plaza immediately following the issuance and sale of the Holdings Stock to First Plaza on December 21, 1993. Pursuant to the terms of the Holdings Organization Agreement, Holdings entered into an amended and restated management services agreement with S&H, a corporation wholly owned by Messrs. Silver and Horrigan. See "Certain Transactions--Management Agreements." The Holdings Organization Agreement terminates upon the earlier of (i) the mutual agreement of the parties, (ii) such time as it becomes unlawful, (iii) the completion of an IPO, and (iv) June 30, 1999. The parties may agree to extend the term of the Holdings Organization Agreement. Description of the Holdings Stockholders Agreement Concurrently with the issuance and sale to First Plaza of the Holdings Stock, Holdings, MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan entered into a Stockholders Agreement dated as of December 21, 1993 (the "Stockholders Agreement") that provides for certain prospective rights and obligations among the stockholders and between the stockholders and Holdings. The operative provisions of the Stockholders Agreement do not take effect until after the occurrence of an IPO, at which time the Holdings Organization Agreement will have terminated in accordance with its terms as described above under "--Description of the Holdings Organization Agreement." Certain of the statements contained herein are summaries of the detailed provisions of the Stockholders Agreement and are qualified in their entirety by reference to the Stockholders Agreement. The Stockholders Agreement provides that for a period of eight years after the IPO, each of MSLEF II and First Plaza shall have the right to demand two separate registrations of its shares of Holdings' common stock (equalling a total of four separate demand registrations); provided, however, that such demand right will terminate as to MSLEF II or First Plaza, as the case may be, at such time as MSLEF II or First Plaza, as the case may be, together with its affiliates, owns less than five percent of the issued and outstanding shares of Holdings' common stock at any time. If, at any time or from time to time for a period of eight years after the IPO, Holdings shall determine to register Holdings' common stock (other than in connection with certain non-underwritten offerings), Holdings will offer each of MSLEF II, BTNY, First Plaza and Messrs. Silver and Horrigan the opportunity to register shares of Holdings' common stock it holds in a "piggyback registration." The Stockholders Agreement prohibits the transfer prior to June 30, 1999 (or, in the case of any restriction applicable to First Plaza, December 21, 1998) by MSLEF II, First Plaza or Messrs. Silver or Horrigan of Holdings' common stock without the prior written consent of Messrs. Silver and Horrigan and MSLEF II, except for (i) transfers made in connection with a public offering or a Rule 144 Open Market Transaction (as defined in the Stockholders Agreement), (ii) transfers made to an affiliate, which, in the case of a transfer by First Plaza or MSLEF II to an affiliate, must be an Investment Entity (defined generally to be any person who is primarily engaged in the business of investing in securities of other companies and not taking an active role in the management or operations of such companies), (iii) transfers made to certain family members of Messrs. Silver and Horrigan or trusts for the benefit of those family members, (iv) certain transfers by First Plaza to a third party that comply with certain rights of first refusal of the Group and MSLEF II set forth in the Stockholders Agreement, (v) certain transfers by MSLEF II to an Investment Entity or, in the event of certain defaults under the amended and restated management services agreement between S&H and Holdings, to a third party, that comply with certain rights of first refusal of the Group set forth in the Stockholders Agreement, (vi) certain transfers by either member of the Group to a third party that comply with certain rights of first refusal of the other member of the Group and MSLEF II set forth in the Stockholders Agreement, and (vii) in the case of MSLEF II, a distribution of all or substantially all of the shares of Holdings' common stock then owned by MSLEF II to the partners of MSLEF II (a "MSLEF Distribution"). Notwithstanding the foregoing, MSLEF II may pledge its shares of Holdings' common stock to a lender or lenders reasonably acceptable to Holdings to secure a loan or loans to MSLEF II. In the event of any proposed foreclosure of such pledge, such shares will be subject to certain rights of first refusal of the Group set forth in the Stockholders Agreement. The Stockholders Agreement provides that until December 21, 1998, for so long as MSLEF II and its affiliates (excluding the limited partners of MSLEF II who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF Distribution) shall hold at least one-half of the number of shares of Holdings' common stock held by MSLEF II on December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings), the parties and their Restricted Voting Transferees (as defined in the Stockholders Agreement) shall use their best efforts (including to vote any shares of Holdings' common stock owned or controlled by such person or otherwise) to cause the nomination and election of two (2) members of the Board of Directors of Holdings to be chosen by MSLEF II; provided, however, that each such nominee shall be (i) either an employee of Morgan Stanley whose primary responsibility is managing investments for MSLEF II (or a successor or related partnership) or (ii) a person reasonably acceptable to the Group not engaged in (as a director, officer, employee, agent or consultant or as a holder of more than five percent of the equity securities of) a business competitive with that of Holdings. In addition, until December 21, 1998, for so long as the Group shall hold at least one-half of the number of shares of Holdings' common stock held by it in the aggregate on December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings), the parties and their Restricted Voting Transferees shall use their best efforts (including to vote any shares of Holdings' common stock owned or controlled by such person or otherwise) to cause the nomination and election of two (2) individuals nominated by the "holders of a majority of the shares of [c]ommon [s]tock held by the Group" (as such phrase is defined in the Stockholders Agreement) as members of the Board of Directors of Holdings; provided, however, that at least one (1) of such nominees shall be Mr. Silver or Mr. Horrigan and the other person, if not Mr. Silver or Mr. Horrigan, shall be a person reasonably acceptable to MSLEF II, so long as MSLEF II and its affiliates (other than any affiliate which is not an Investment Entity and excluding the limited partners of MSLEF II who may acquire shares of Holdings' common stock from MSLEF II in a MSLEF distribution) shall hold at least one-half of the number of shares of Holdings' common stock held by MSLEF II at December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings). Subject to the terms of the preceding two paragraphs, for so long as the Group shall hold at least one-half of the number of shares of Holdings' common stock held by it in the aggregate at December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings), First Plaza and its Restricted Voting Transferees shall vote all shares of Holdings' common stock held by them in favor of any other directors standing for election to Holdings' Board of Directors for whom the holders of a majority of the shares of Holdings' common stock held by the Group shall direct First Plaza to vote. The Stockholders Agreement further provides that until December 21, 1998, MSLEF II and its Restricted Voting Transferees shall vote all shares of Holdings' common stock held by them against any unsolicited merger, or sale of Holdings' business or its assets, if such transaction is opposed by the holders of a majority of the shares of common stock held by the Group, unless as of the applicable record date for such vote, the Group holds less than ninety percent (90%) of the number of shares of Holdings' common stock held by it in the aggregate at December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings). Until December 21, 1998, First Plaza and its Restricted Voting Transferees shall vote all shares of common stock held by them against any unsolicited merger, or sale of Holdings' business or its assets, if such transaction is opposed by the holders of a majority of the shares of common stock held by the Group; provided, however, that First Plaza and its Restricted Voting Transferees shall not be required to vote their shares of Holdings' common stock in accordance with the foregoing if (i) in connection with such merger or sale, (x) First Plaza and its Restricted Voting Transferees propose to sell or otherwise transfer all of their shares of Holdings' common stock to a third party for aggregate cash consideration of less than $10 million and (y) the Group and/or MSLEF II has not exercised their right of first refusal in respect of such sale or transfer by First Plaza or such right of first refusal in respect of the shares of Holdings' common stock held by First Plaza shall have terminated, or (ii) as of the applicable record date for such vote, the Group holds less than ninety percent (90%) of the number of shares of Holdings' common stock held by it in the aggregate at December 21, 1993 (as adjusted, if necessary, to take into account any stock dividend, stock split, combination of shares, subdivision or recapitalization of the capital stock of Holdings). DESCRIPTION OF CERTAIN SILGAN INDEBTEDNESS Description of the Silgan Credit Agreement The following is a summary of the terms of the Silgan Credit Agreement. The Available Credit Facility. Pursuant to the Silgan Credit Agreement, an aggregate of (i) $60 million of term loans designated as A Term Loans (the "A Term Loans") and (ii) $80 million of term loans designated as B Term Loans (the "B Term Loans," together with the A Term Loans, the "Term Loans") are outstanding and owing to the Banks by Silgan, and the Banks have agreed to lend to Containers and Plastics up to an aggregate of $70 million of working capital loans (the "Working Capital Loans"). To secure the obligations of the Borrowers under the Silgan Credit Agreement: (i) Silgan pledged to the Banks all of the capital stock of Containers and Plastics held by Silgan; (ii) Containers pledged to the Banks all of the capital stock of California-Washington Can Corporation ("CW Can") held by Containers; (iii) Plastics pledged to the Banks 65% of the capital stock of 827599 Ontario Inc. ("Canadian Holdco") held by Plastics; (iv) Silgan, Containers, Plastics and CW Can each granted to the Banks security interests in substantially all of their respective real and personal property; and (v) Holdings pledged to the Banks all of the capital stock of Silgan held by Holdings. Such collateral (other than the collateral described in (v)) also secures on an equal and ratable basis the Secured Notes, subject to intercreditor arrangements. Holdings and each of the Borrowers have guaranteed on a secured basis all of the obligations of the Borrowers under the Silgan Credit Agreement. The aggregate amount of Working Capital Loans which may be outstanding at any time is, subject to a borrowing base limitation, the sum of (i) 85% of eligible accounts receivable and (ii) 50% of eligible inventory of Containers, Plastics and CW Can. Each of the Term Loans and each of the Working Capital Loans, at the respective Borrower's election, consists of loans designated as Eurodollar rate loans or as base rate loans. Subject to certain conditions, each of the Term Loans and each of the Working Capital Loans can be converted from a base rate loan into a Eurodollar rate loan and vice versa. As of March 31 31, 1994, the outstanding principal amount of the A Term Loans, the B Term Loans and the Working Capital Loans under the Silgan Credit Agreement were $60 million, $80 million and $5.8 million, respectively. Payment of Loans. Generally, the Working Capital Loans can be borrowed, repaid and reborrowed from time to time until September 15, 1996, on which date all Working Capital Loans mature. Amounts repaid under the Term Loans cannot be reborrowed. The B Term Loans mature on September 15, 1996 and are payable in full on such date. The A Term Loans are payable in installments as follows: A Term Loan Scheduled Repayment Date Amount ------------------------ ------ September 30, 1994 . . . . . . . . . . . . $ 5,000,000 December 31, 1994 . . . . . . . . . . . . $ 15,000,000 September 30, 1995 . . . . . . . . . . . . $ 5,000,000 December 31, 1995 . . . . . . . . . . . . $ 15,000,000 September 15, 1996 . . . . . . . . . . . . $ 20,000,000 The Term Loans and Working Capital Loans may be prepaid, without penalty or premium, at any time. The Term Loans are required to be prepaid, and the working capital commitment may be required to be reduced, upon the occurrence of, among other things, certain asset sales and certain sales of equity by Silgan or Holdings and to the extent of 75% of Excess Cash Flow (as defined in the Silgan Credit Agreement). Interest and Fees. Interest on the Term Loans and the Working Capital Loans is payable at certain margins over certain rates as summarized below. Interest on base rate loans accrues at floating rates of the Applicable Margin (as defined in the Silgan Credit Agreement) plus the highest of (i) 1/2 of 1% in excess of a formula rate based on the offering rate for negotiable certificates of deposit with a three-month maturity, (ii) 1/2 of 1% in excess of the Federal Funds Rate, and (iii) Bankers Trust's then applicable prime lending rate. Interest on Eurodollar rate loans accrues at floating rates of the Applicable Margin over a formula rate determined with reference to the rate offered by Bankers Trust for dollar deposits in the New York interbank Eurodollar market. Each of Containers and Plastics has agreed to jointly and severally pay to the Banks, on a quarterly basis, a commitment commission calculated as 0.50% per annum on the daily average unused portion of the Banks' working capital commitment in respect of the Working Capital Loans until such working capital commitment is terminated. Containers and Plastics are required to pay to the Banks, on a quarterly basis, a letter of credit fee of 3.0% per annum on the daily average stated amount of each letter of credit issued for the account of Containers or Plastics. Containers and Plastics are also required to pay to Bankers Trust, on a quarterly basis, a facing fee of 1/4 of 1% per annum on the daily average stated amount of each letter of credit issued for the account of Containers or Plastics. Certain Covenants. The Silgan Credit Agreement contains numerous financial and operating covenants, under which the Company must operate. Failure to comply with any of such covenants permits the Banks to accelerate, subject to the terms of the Silgan Credit Agreement, the maturity of all amounts outstanding under the Silgan Credit Agreement. The Silgan Credit Agreement restricts or limits each of the Borrowers' and their respective subsidiaries' abilities: (i) to create certain liens; (ii) to consolidate, merge or sell its assets and to purchase assets; (iii) to pay dividends on, or repurchase shares of, its capital stock, except that, among other things: (a) Silgan may pay dividends to Holdings under certain circumstances; (b) Containers and Plastics may pay dividends to Silgan as long as they remain wholly owned subsidiaries of Silgan, CW Can may pay dividends to Containers, Canadian Holdco may pay dividends to Plastics and Express may pay dividends to Canadian Holdco; and (c) Silgan may repurchase or redeem stock options or SARs, issued to management of Containers and Plastics under certain circumstances; (iv) to lease real and personal property; (v) to create additional indebtedness, except for, among other things: (a) certain indebtedness existing on the date of the Silgan Credit Agreement; (b) indebtedness of Containers to Plastics or Plastics to Containers; and (c) Silgan's indebtedness represented by the Secured Notes, the 11-3/4% Notes and by the intercompany notes; (vi) to make certain advances, investments and loans, except for, among other things: (a) loans from Silgan to each of Containers and Plastics represented by intercompany notes; (b) loans from Containers to Plastics or from Plastics to Containers; and (c) loans from Containers and/or Plastics to Silgan not exceeding $15 million in aggregate principal amount outstanding at any time; (vii) to enter into transactions with affiliates; (viii) to make certain capital expenditures, except for, among other things, capital expenditures which do not exceed in the aggregate for the Borrowers, such amounts, during such periods, as set forth below: Period Amount ------ ------ Calendar year ended December 31, 1993 . . . $46,500,000 Calendar year ended December 31, 1994 . . . $35,000,000 Calendar year ended December 31, 1995 . . . $30,000,000 Calendar year ended December 31, 1996 . . . $30,000,000 ; provided, however, that to the extent capital expenditures made during any period set forth above are less than the amounts set forth opposite such period, such amount may be carried forward and utilized to make capital expenditures in the immediately succeeding calendar year; (ix) to make any voluntary payments, prepayments, acquire for value, redeem or exchange, among other things, any 11-3/4% Notes or Secured Notes, or to make certain amendments to the 11-3/4% Notes, the Secured Notes, the Borrowers' or their respective subsidiaries' respective certificates of incorporation and by- laws, or to certain other agreements; (x) with certain exceptions, to have any subsidiaries other than Containers and Plastics with respect to Silgan, CW Can with respect to Containers, and Canadian Holdco and Express with respect to Plastics; (xi) with certain exceptions, to permit its respective subsidiaries to issue capital stock; (xii) to permit its respective subsidiaries to create limitations on the ability of any such subsidiary to (a) pay dividends or make other distributions, (b) make loans or advances, or (c) transfer assets; and (xiii) to engage in any business other than the packaging business. The Silgan Credit Agreement requires that Silgan own not less than 90% of the outstanding common stock of Containers and Plastics and 100% of all other outstanding capital stock of Containers and Plastics. The Silgan Credit Agreement requires that the ratio of Consolidated Current Assets (as defined below) to Consolidated Current Liabilities (as defined below) of any of the Borrowers may not, at any time, be less than 2:1 and that the ratio of Bank EBITDA (as defined below) to Interest Expense (as defined below) for any of the Borrowers may not be, for any period of four consecutive fiscal quarters (or, if shorter, the period beginning on January 1, 1994 and ending on the last day of a fiscal quarter ended after January 1, 1994) (taken as one accounting period) ending during a period set forth below, less than the ratio set forth opposite such period below: Period Ratio ------ ----- Fiscal quarter ending March 31, 1994 . . . . . . . . 2.25:1 Fiscal quarter ending June 30, 1994 . . . . . . . . 2.35:1 Fiscal quarter ending September 30, 1994 . . . . . . 2.70:1 Fiscal quarter ending December 31, 1994 . . . . . . 2.70:1 January 1, 1995 to and including December 31, 1995 . 3.00:1 January 1, 1996 to and including September 30, 1996 3.40:1 In addition, the ratio of Total Indebtedness (as defined below) to Consolidated Net Worth (as defined below) of any of the Borrowers is not permitted to exceed on any date set forth below the ratio set forth opposite such date: Period Ratio ------ ----- December 31, 1994 . . . . . . . . . . . . . 5.00:1 December 31, 1995 . . . . . . . . . . . . . 3.25:1 August 31, 1996 . . . . . . . . . . . . . . 2.75:1 "Bank EBITDA" means for any period, EBIT, adjusted by adding thereto the amount of all depreciation and amortization of intangibles (including covenants not to compete), goodwill and loan fees that were deducted in arriving at EBIT for such period. "Consolidated Current Assets" means the current assets of Silgan and its subsidiaries determined on a consolidated basis, provided that the unused amounts of commitments for Working Capital Loans shall also be included as a current asset of Silgan in making such determination. "Consolidated Current Liabilities" means the current liabilities of Silgan and its subsidiaries determined on a consolidated basis, provided that the current portion of loans, and accrued interest thereon, under the Silgan Credit Agreement, the current portion of any loans made by Silgan to Containers or Plastics, the current portion of, and accrued interest on, the Secured Notes and the 11-3/4% Notes from the last interest payment date shall not be considered current liabilities for the purposes of making such determination. "Consolidated Net Worth" means the Net Worth of Silgan and its subsidiaries determined on a consolidated basis, and "Net Worth" of any person means the sum of its capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings (without giving effect to any noncash adjustments resulting from changes in value of employee stock options), and any other account which, in accordance with generally accepted accounting principles, constitutes stockholders' equity, less treasury stock. "EBIT" means for any period, the consolidated net income of Silgan and its subsidiaries, before interest expense and provision for taxes and without giving effect to any extraordinary noncash gains or extraordinary noncash losses and gains from sales of assets (other than sales of inventory in the ordinary course of business), any noncash adjustments resulting from changes in value of employee stock options. "Indebtedness" means, as to any person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such person for borrowed money or for the deferred purchase price of property or services, (ii) the face amount of all letters of credit issued for the account of such person and all drafts drawn thereunder, (iii) all liabilities secured by any lien on any property owned by such person, whether or not such liabilities have been assumed by such person, (iv) the aggregate amount required to be capitalized under leases under which such person is the lessee and (v) all contingent obligations of such person. "Interest Expense" means, for any period, the total consolidated interest expense of Silgan and its subsidiaries for such period. "Total Indebtedness" means the aggregate Indebtedness of Silgan and its subsidiaries determined on a consolidated basis, provided that there shall be excluded, in making such determination, indebtedness consisting of capitalized lease obligations existing as of the effective date of the Silgan Credit Agreement. For purposes of all computations to determine compliance with the financial covenants under the Silgan Credit Agreement, such computations are to be made utilizing the accounting principles and policies in conformity with those used to prepare Silgan's audited financial statements for the fiscal year ended December 31, 1992. For purposes of determining the Net Worth of Silgan, no effect is given to the Allowed Reduction (as defined in the Silgan Credit Agreement). The ability of Holdings to take certain actions is restricted or limited pursuant to the terms of the Silgan Holdings Guaranty, dated as of June 30, 1989, as amended, made by Holdings in favor of the Banks and Bankers Trust, as agent (the "Holdings Guaranty"). The Holdings Guaranty restricts or limits Holdings' ability to, among other things: (i) create certain liens, (ii) incur additional indebtedness, (iii) consolidate, merge or sell its assets and to purchase or lease assets, (iv) pay dividends, (v) make loans or advances and (vi) engage in any business other than holding Silgan's common stock and making certain investments. Events of Default. Events of default under the Silgan Credit Agreement include, with respect to each of the Borrowers, as the case may be, among others: (i) the failure to pay any principal on the Term Loans or the Working Capital Loans, the failure to reimburse drawings under any letters of credit when due or the failure to pay within two business days after the date such payment is due interest on the Term Loans, the Working Capital Loans or any unpaid drawings under any letter of credit or any fees or other amounts owing under the Silgan Credit Agreement (collectively, a "Payment Default"); (ii) any failure to pay amounts due under certain other agreements or any defaults that result in or permit the acceleration of certain other indebtedness; (iii) subject to certain limited exceptions, the breach of any covenants, representations or warranties contained in the Silgan Credit Agreement or any related document; (iv) certain events of bankruptcy, insolvency or dissolution; (v) the occurrence of certain judgments, writs of attachment or similar process against any of the Borrowers or any of their respective subsidiaries; (vi) the occurrence of certain ERISA related liabilities; (vii) a default under or invalidity of the guarantees (including an event of default under the Holdings Guaranty) or of the security interests granted to the Banks pursuant to the Silgan Credit Agreement; (viii) the failure of Holdings to own 100% of the capital stock of Silgan (other than Silgan Preferred Stock); and (ix) a Change of Control (as defined in the Holdings Guaranty, the Secured Notes Purchase Agreement (as defined below), the indenture relating to the 11-3/4% Notes or the Indenture) shall occur; and (x) the requirement that Silgan repurchase 25% or more of the aggregate principal amount of the Secured Notes then outstanding or any 11-3/4% Note or Debenture as a result of a Change of Control (as defined in the agreements and indentures relating thereto). Upon the occurrence of any event of default under the Silgan Credit Agreement, the Banks are permitted, among other things, to accelerate the maturity of the Term Loans and Working Capital Loans and of all outstanding indebtedness under the Silgan Credit Agreement and terminate their commitment to make any further Working Capital Loans or to issue any letters of credit. Description of the Secured Notes The Secured Notes, which were issued on June 29, 1992 pursuant to a secured notes purchase agreement (as such agreement may be amended from time to time, the "Secured Notes Purchase Agreement"), constitute senior indebtedness of Silgan, are limited to an aggregate principal amount of $50 million, and mature on June 30, 1997. The Secured Notes are secured by a first lien (subject to permitted liens) on substantially all of the assets of Silgan and its subsidiaries. Such collateral also secures on an equal and ratable basis, subject to certain intercreditor arrangements, all other Secured Obligations (as defined in the Secured Notes Purchase Agreement), including indebtedness of Silgan and its subsidiaries under the Silgan Credit Agreement. In addition, the obligations of Silgan under the Secured Notes and the Secured Notes Purchase Agreement are guaranteed by Containers and Plastics. The Secured Notes bear interest at a rate of three-month LIBOR plus 300 basis points. The Secured Notes are redeemable at the option of Silgan at par plus accrued and unpaid interest to the redemption date. Net cash proceeds from (i) certain asset sales and (ii) the issuance of capital stock by any Restricted Subsidiary (as defined in the Secured Notes Purchase Agreement) of Silgan, are required to be applied to prepay the Secured Notes and indebtedness under the Silgan Credit Agreement on a pro rata basis, subject to certain exceptions. In the event of a Change of Control (as defined in the Secured Notes Purchase Agreement), each holder of a Secured Note has the right to require Silgan to repurchase such holder's Secured Notes at a purchase price equal to 100% of the principal amount thereof plus accrued interest. The Secured Notes contain certain restrictive covenants including, subject to certain exceptions, the following: (i) limitations on the ability of Silgan and its Restricted Subsidiaries to grant liens on any property; (ii) limitations on the ability of Silgan and its Restricted Subsidiaries to incur indebtedness; (iii) limitations on payments of dividends and purchases of the capital stock of Silgan and its Restricted Subsidiaries; (iv) restrictions on repayments of subordinated indebtedness; (v) limitations on investments by Silgan or any Restricted Subsidiary in affiliates of Silgan or in any Unrestricted Subsidiary (as defined in the Secured Notes Purchase Agreement); (vi) limitations on the incurrence by Silgan and its Restricted Subsidiaries of any restriction on the ability of any Restricted Subsidiaries to pay dividends or repay any indebtedness owed to, or transfer any property or assets to, Silgan or any Restricted Subsidiary; (vii) limitations on transactions with affiliates; and (viii) limitations on Silgan's ability to effect certain mergers, consolidations and transfers of assets. The covenants referred to in clauses (ii) through (viii) above are substantially similar to the comparable covenants that are contained in the indenture relating to the 11-3/4% Notes, except that the covenant referred to in clause (ii) above is more restrictive than the comparable covenant contained in such indenture and becomes even more restrictive over the term of the Secured Notes. However, none of the covenants relating to the Secured Notes are more restrictive upon Silgan or any Restricted Subsidiary than the corresponding restrictive covenant in the Silgan Credit Agreement. See "--Description of the Silgan Credit Agreement" and "--Description of the 11-3/4% Notes." Events of default under the Secured Notes include: (i) failure to pay principal or premium, if any, when due, or to pay interest within 30 days of when due; (ii) failure by Silgan to comply with any of its covenants or agreements under the Secured Notes and the continuance of such failure for 30 days after written notice; (iii) an acceleration of certain other indebtedness of Silgan; (iv) certain events of bankruptcy of Silgan or any Significant Subsidiaries (as defined in the Secured Notes Purchase Agreement); and (v) a judgment is rendered against Silgan or certain Subsidiaries for an amount in excess of $5 million which is not discharged within 60 days. Description of the 11-3/4% Notes Silgan sold the 11-3/4% Notes in a public offering on June 29, 1992. The 11-3/4% Notes bear interest at a rate of 11-3/4% per annum. The 11-3/4% Notes are redeemable at any time on and after June 15, 1997 at the option of Silgan, in whole or in part, at 105.875% of their principal amount plus accrued interest, declining to 100% of their principal amount plus accrued interest on or after June 15, 1999. In the event of a Change of Control, each holder of the 11-3/4% Notes may require Silgan to repurchase its 11-3/4% Notes at 101% of the principal amount plus accrued interest. The indenture relating to the 11-3/4% Notes (the "11-3/4% Notes Indenture") contains certain covenants that, among other things, direct the application of the proceeds from certain asset sales, limit the ability of Silgan and its subsidiaries to incur indebtedness, make certain payments with respect to their capital stock, make prepayments of certain indebtedness, make loans or investments to entities other than Restricted Subsidiaries (as defined in the 11-3/4% Notes Indenture), enter into transactions with affiliates, engage in mergers or consolidations, and, with respect to Silgan's subsidiaries, issue stock. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of certain federal income tax consequences associated with the purchase, ownership and disposition of the Debentures but does not purport to be a complete analysis of all the potential tax effects of such purchase, ownership and disposition. This summary is based on existing laws, regulations, proposed regulations, rulings and judicial decisions, all of which are subject to change. In particular, the proposed regulations issued with respect to OID in 1986 (and amended in 1989 and 1991) (the "1986 Proposed Regulations") were withdrawn as of December 21, 1992, the date of issuance of new proposed regulations relating to OID (the "1992 Proposed Regulations"). The 1992 Proposed Regulations, which substantially revised the 1986 Proposed Regulations, are generally proposed to be effective for debt instruments issued on or after the date that is 60 days after the date such proposed regulations are issued in final form. The IRS, however, intends to treat the 1986 Proposed Regulations as substantial authority for debt instruments issued prior to December 21, 1992. Any change to the 1986 Proposed Regulations, or to the existing laws, regulations, proposed regulations, rulings and judicial decisions, could apply retroactively in a manner that could adversely affect a holder of one or more of the Debentures. Accordingly, holders of Debentures are urged to monitor the substance and effective dates of the 1992 Proposed Regulations (including the finalization thereof). This summary deals only with Debentures held as capital assets within the meaning of Section 1221 of the Code (generally property held for investment). It does not address all aspects of the federal income tax consequences of holding Debentures that may be relevant to a particular investor in the context of such investor's individual investment circumstance or to investors in special tax situations, such as life insurance companies, banks, tax-exempt organizations, dealers in securities and foreign persons or foreign entities. This summary does not discuss tax consequences under state, local, or foreign tax laws. Persons considering the purchase of Debentures should consult their own tax advisors concerning the application of United States federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdictions, to their particular situations. The following discussion, subject to the qualifications stated herein, describes the material federal income tax considerations relevant to the purchase, ownership and disposition of the Debentures and constitutes the opinion of Winthrop, Stimson, Putnam & Roberts, counsel to Holdings. Such opinion represents its best legal judgment, but it will not be binding on the IRS or the courts. Holdings has not sought, nor does it intend to seek, a ruling from the IRS that its position as reflected in the following discussion will be accepted by the IRS. Certain provisions of the Code applicable to the issuance, purchase, ownership and disposition of the Debentures were added or have been substantially modified by recent legislation. Although the 1986 Proposed Regulations address some aspects of these provisions, there are no final regulations, rulings or judicial decisions which provide definitive guidance as to the interpretation of certain relevant provisions. Moreover, the 1986 Proposed Regulations are ambiguous in certain respects, and their potential application to the Debentures is unclear because they do not address, or are subject to varying interpretations with regard to, several relevant issues. Holdings has adopted the positions described below as reflecting the appropriate federal income tax treatment of the Debentures, but such positions may be changed with the issuance of final regulations, or otherwise upon clarification by the IRS of the proper treatment of instruments such as the Debentures. For example, the 1992 Proposed Regulations address certain ambiguities in the 1986 Proposed Regulations, such as the application of the aggregation rules and what constitutes an intention to call prior to maturity. Accordingly, the ultimate federal income tax treatment of the Debentures may differ from that discussed below. The discussion set forth below with respect to the tax treatment of the holder relating to OID, market discount and premium assumes that the Debentures are subject to the Applicable High Yield Discount Rules (as described below), but that no portion of the tax deduction for OID will be disqualified and treated as dividend income because their yield does not exceed six percentage points plus the applicable Federal rate in effect as of the date of original issue. For a discussion of the special tax treatment of holders of the Debentures and Holdings because the Debentures are subject to such rules, see the discussion below under "Applicable High Yield Discount Rules." Original Issue Discount on the Debentures. The Debentures were issued with "OID" within the meaning of Section 1273 of the Code. Holders of the Debentures (including holders who are cash basis taxpayers) will be required to include such OID in income as interest on a constant yield to maturity basis prior to the receipt of cash attributable to such income as described below. OID is the difference between a Debenture's "stated redemption price at maturity" and its "issue price." The issue price of a Debenture is the initial offering price to the public (excluding underwriters or wholesalers) at which price a substantial amount of such Debentures were sold. The 1986 Proposed Regulations state that the stated redemption price at maturity of a debt instrument is the sum of its principal amount plus all other payments required thereunder, other than "qualified periodic interest payments." The interest payments on the Debentures will not constitute "qualified periodic interest payments," and thus will be included along with principal in the stated redemption price at maturity of the Debentures. As a result, each Debenture was issued with OID in an amount equal to the excess of (i) the sum of its principal amount and all stated interest payments over (ii) its issue price. The Debentures had an issue price (for each $1,000 principal amount) of $601.58. Based upon the discussion in the preceding paragraph, the stated redemption price at maturity of the Debentures is $1,861.25 (for each $1,000 principal amount). Therefore, subject to the discussion below, the Debentures had OID at original issue (for each $1,000 principal amount) in the amount of $1,259.67. A holder of a Debenture must include in income as interest the OID on the Debenture as it accrues, but (except as discussed below with respect to market discount) such holder will not be required to include in income any cash payments received by such holder on the Debenture even if such payment is denominated as interest. The amount required to be included in a holder's income as OID in a taxable year will be determined by allocating to each day during such taxable year on which the holder holds the Debenture a pro rata portion of the OID on the Debenture attributable to the accrual period (that is, the six-month period that ends on a day of the calendar year corresponding to the maturity date or the date six months before such maturity date) in which such day is included. The amount of OID attributable to an accrual period is the product of (i) the adjusted issue price at the beginning of such accrual period (that is, the issue price plus OID attributable to prior accrual periods (disregarding any reduction on account of an Acquisition Premium (as defined below)) less any cash payments during such prior accrual periods) multiplied by (ii) their yield to maturity of 13.25% (divided by the number of accrual periods per year). If a holder pays an Acquisition Premium for a Debenture, the amount of such premium will reduce the amount of OID that such holder must include in income with regard to that Debenture. Holdings' option to redeem the Debentures at any time after issuance at 100% of their principal amount plus accrued and unpaid interest to the redemption date will be treated as a "call option" within the meaning of the 1986 Proposed Regulations. As a result, Holdings will be presumed under the 1986 Proposed Regulations to exercise its option to redeem the Debentures if, by utilizing the date of exercise of the call option as the maturity date and the amount for which the Debentures could be redeemed in accordance with the terms of the redemption feature as the stated redemption price at maturity, the yield on the Debentures would be lower than such yield would be if the option were not exercised. Under this rule, Holdings' option to redeem the Debentures should not be presumed exercised since the Debentures should have a semi-annual yield of 13.25%, compounded semi-annually, regardless of when they are called. A holder's initial tax basis in a Debenture will be equal to the price paid for such Debenture. A holder's basis in a Debenture will be increased by the amount of any OID includible in the holder's income under the rules discussed above (and by any market discount includible in the holder's income under the rules described below) and decreased by any cash payments (other than qualified periodic interest payments) received by such holder with respect to the Debenture. Additional Original Issue Discount Considerations. If a holder owns both the Debentures and either the 11-3/4% Notes or the Secured Notes, or possibly if a holder owns only the Debentures, but the Debentures are not traded on an established securities market, the 1986 Proposed Regulations could, under certain circumstances, be interpreted to require that such debt instruments be aggregated and treated as a single debt instrument for purposes of computing OID, which treatment could result in a distortion in the amount of OID included in income by holders of the Debentures. In any event, a holder of the Debentures who does not also hold either the 11-3/4% Notes or the Secured Notes should not be subject to these aggregation rules if the Debentures are treated as separately traded on an established securities market. Moreover, absent further clarification of the 1986 Proposed Regulations, Holdings does not intend to treat any of the Debentures as being subject to these aggregation rules. If Holdings is considered to have issued the Debentures with an intention to call them prior to maturity, then any gain realized on the sale or redemption of such Debentures would be treated as ordinary income to the extent that the entire OID on the Debentures exceeded the OID previously includible in the income of any holder (disregarding any reduction on account of an Acquisition Premium). The 1986 Proposed Regulations do not describe what constitutes an intention to call prior to maturity. Under the 1986 Proposed Regulations the existence of provisions such as the optional call feature could be interpreted by the IRS as indicating such an intention. Disposition of Debentures. Generally any sale or redemption of Debentures will result in taxable gain or loss equal to the difference between the amount of cash or other property received and the holder's adjusted tax basis in the Debentures. Generally, a holder's adjusted tax basis will equal the amount paid for the Debenture, adjusted as described above under the OID rules and as described below under the rules relating to market discount and premium. Except to the extent that the market discount rules described below apply, such gain or loss generally would be capital gain or loss if the Debentures were held as a capital asset and if at the time the Debentures were issued Holdings did not have an intention to call the Debentures before maturity. Any capital gain or loss would be long-term gain or loss if the Debentures were held for the applicable long-term holding period (currently, more than one year). Market Discount. The sale of the Debentures may be affected by the market discount provisions of the Code. Generally, market discount will exist to the extent a holder's purchase price for a Debenture is less than the revised issue price of the Debenture. Under a statutory de minimis rule, however, market discount on a debt instrument will be considered to be zero for purposes of the rules discussed below if such market discount is less than 0.25% of the stated redemption price of the debt instrument at maturity (or possibly, in the case of the Debentures, their revised issue price when acquired) multiplied by the number of complete years (that is, rounding down for partial years) to maturity (after the holder acquires the instrument). The revised issue price for a Debenture equals the issue price plus the amount of OID includible in the income of all holders for periods prior to a holder's acquisition (disregarding any deduction on account of an Acquisition Premium), presumably less any cash payments on the Debentures. Generally, a holder of a Debenture who acquires the Debenture with market discount will be required to treat any gain realized upon the sale or other disposition of such Debenture as ordinary income to the extent of the market discount that accrued (but was not previously included in income) during the period such holder held the Debenture. Market discount on a debt instrument generally accrues on a straight-line basis in equal daily portions or, at the election of the holder, under a constant interest method. If a holder disposes of a Debenture in any transaction other than a sale, exchange or involuntary conversion (for example, as a gift), that holder generally is treated as having an amount realized equal to the fair market value of the Debenture and will be required to recognize as ordinary income any gain on disposition to the extent of the accrued and previously unrecognized market discount. As a result of this rule, a holder may be required to recognize ordinary income on the disposition of a Debenture, even though the disposition would not otherwise be taxable. If principal is paid in more than one installment, any partial principal payment must be included in gross income as ordinary income to the extent such payment does not exceed accrued market discount on the instrument. This rule presumably would apply to a holder of a Debenture with market discount if such Debenture were redeemed in part. Furthermore, if a cash payment that is denominated as an interest payment is received, the holder must include in income at the time such cash payment is received the portion of the unrecognized market discount that accrued prior to the receipt of such cash payment (up to the amount of such payment). Generally, a holder of a Debenture who has acquired the Debenture with market discount will also be required to defer deduction of a portion of interest on debt incurred or continued to purchase or carry the Debenture until disposition of the Debenture in a taxable transaction. If a holder incurs or continues indebtedness to purchase or carry a Debenture acquired at a market discount, "net direct interest expense" arising from the indebtedness is allowed as a current deduction only to the extent it exceeds the portion of market discount allocable to the days during the year on which the Debenture was held by the holder. Net direct interest expense is the excess, if any, of the amount of interest paid or accrued during the taxable year on such indebtedness over the aggregate amount of interest (including OID) includible in gross income for the taxable year with respect to the Debenture. Net direct interest expense that exceeds the amount currently deductible is allowable as a deduction in any subsequent year, to the extent it does not exceed net interest income (that is, interest income on the Debenture, including OID, less interest on indebtedness incurred or continued to purchase or carry the Debenture) for such year, if a proper election is made. Disallowed interest deductions, if any, remaining at the time of any taxable disposition of the Debenture would be treated as interest paid or accrued in the year of disposition. A holder may elect to include market discount in income as such discount accrues with a corresponding increase in the holder's tax basis in the Debenture. If a holder so elects, the foregoing rules regarding the treatment as ordinary income of gain upon a disposition of the Debenture and upon receipt of certain cash payments, and regarding the deferral of interest deductions on indebtedness related to a Debenture, would not apply. Once made, such an election applies to all debt obligations of the holder that are purchased at a market discount on or after the first day of the taxable year for which the election is made, and all subsequent taxable years of the holder, unless the IRS consents to a revocation of the election. Holders are urged to consult their own tax advisors with regard to the advisability of making such an election, or any of the other elections with respect to market discount described above. The market discount rules of the Code do not completely address the treatment of market discount on a debt instrument having the deferred interest feature of the Debentures, and Treasury regulations implementing the market discount rules have not been promulgated. Therefore, the treatment of the Debentures under those market discount rules is not entirely clear and holders are urged to consult their own tax advisors in respect of such treatment. Acquisition Premium. A purchaser of a Debenture who acquires such Debenture at a cost in excess of its adjusted issue price and less than or equal to its stated redemption price at maturity, reduced by the amount of any payment previously made on the Debenture, will be considered to have purchased such Debenture at an "Acquisition Premium." Under the Acquisition Premium rules contained in the Code, generally, such purchaser will be entitled to a reduction in the amount of OID otherwise includible in income with respect to such Debenture. If a holder purchases a Debenture for a cost in excess of its stated redemption price at maturity, reduced by the amount of any payment previously made on the Debenture, such holder should consult a tax advisor to determine the advisability of an election, if available, to amortize as an offset to interest income such excess as bond premium pursuant to Code section 171 (with a corresponding reduction to the holder's tax basis in the Debenture). An election to amortize bond premium applies to all taxable debt obligations then owned and thereafter acquired by the holder and may be revoked only with the permission of the IRS. Applicable High Yield Discount Rules. Holdings will not be entitled to an interest deduction in respect of a Debenture in the same amount and at the same time that a taxable holder of Debentures would be required to include OID in its gross income because the Debentures represent AHYDOs within the meaning of Section 163(i) of the Code. Generally, an AHYDO is defined as a corporate debt instrument with (i) a maturity date in excess of five years from its issue date, (ii) a yield to maturity equal to, or in excess of, five percentage points plus the "applicable federal rate" ("AFR") in effect for the month in which the debt instrument is issued, and (iii) "significant OID." The AFR is a Treasury related interest rate that changes from month to month and is published by the IRS for long-term, mid-term, and short-term debt instruments, in each case, about two weeks before becoming effective for a particular month. No regulations, proposed or otherwise, have been issued with respect to the AHYDO rules and these provisions are ambiguous in certain respects, are subject to differing interpretations, and their interaction with the 1986 Proposed Regulations is not clear. Under Section 163(e)(5) and (i) of the Code, a corporate issuer of an AHYDO generally is not allowed a deduction for the disqualified portion of the OID on the obligation, and the remainder of the OID is not allowable as a deduction until paid in cash or property (other than stock or debt of the issuer or a related party). The "disqualified portion" of the OID is the lesser of (i) the amount of the OID on the instrument or (ii) the portion of the total return on such instrument that bears the same ratio to the total return as the "disqualified yield" bears to the yield to maturity on the instrument. The term "disqualified yield" means the portion of the yield that exceeds the AFR plus six percentage points. A holder of an AHYDO must include OID in income under the general OID provisions of the Code regardless of the deferral or disallowance of the interest deduction to the issuer, except that, for purposes of the dividends received deduction, corporate holders of AHYDOs would be treated as receiving distributions with respect to the stock of the issuer (rather than interest) to the extent of the disqualified portion of the OID and to the extent that such distribution would have been treated as a dividend. The Debentures have a term in excess of five years, a yield to maturity of 13.25%, which exceeds five percentage points plus 7.74% (the AFR in effect for June 1992) and bear significant OID. Thus, the Debentures will be treated as AHYDOs and Holdings and holders of the Debentures will be subject to the rules summarized above except that there will be no "disqualified portion" of OID since their yield does not exceed the AFR plus six percentage points. As a result, a portion of the tax deductions that would otherwise be available to Holdings in respect of the Debentures will be deferred (until their maturity or sooner upon early repayment in cash or qualified property) which, in turn, might reduce the after-tax cash flows of Holdings and its subsidiaries. Holdings expects to utilize the net operating loss carryforwards available to the Company to offset (but not eliminate) the effect of such deferral, subject to otherwise applicable limitations on the utilization of such carryforwards. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources and Liquidity." As explained above, because the Debentures' yield is less than the AFR plus six percentage points, tax deductions for OID on the Debentures will be deferred until paid in cash or qualified property, but should not be disallowed under the AHYDO rules. Prospective purchasers should be aware, however, that the IRS has broad authority to issue regulations under the AHYDO rules with retroactive effect which may affect the timing or availability of tax deductions for OID on the Debentures. Backup Withholding. Under Section 3406 of the Code and applicable Treasury regulations, a holder of a Debenture may be subject to backup withholding at a rate of 31% of certain amounts paid or deemed paid (including OID) to the holder unless such holder (i) is a corporation or comes within certain other exempt categories and, when required, provides proof of such exemption or (ii) provides a correct taxpayer identification number, certifies that he has not lost exemption from backup withholding, and has met the requirements for the reporting of previous income set forth in the backup withholding rules. Holders of Debentures should consult their tax advisors as to their qualification for exemption from withholding and the procedure for obtaining such an exemption. Amounts paid as backup withholding do not constitute an additional tax and will be credited against the holder's federal income tax liability. EXCEPT AS DISCUSSED ABOVE, NO INFORMATION IS PROVIDED HEREIN AS TO THE TAX TREATMENT OF HOLDERS OF THE DEBENTURES UNDER APPLICABLE UNITED STATES OR OTHER TAX LAWS. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. FOR EXAMPLE, THE DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO HOLDERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES. THEREFORE, PROSPECTIVE PURCHASERS OF DEBENTURES ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE DEBENTURES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE FUTURE CHANGES IN SUCH TAX LAWS. MARKET-MAKING ACTIVITIES OF MORGAN STANLEY The Prospectus is to be used by Morgan Stanley in connection with offers and sales of the Debentures in market-making transactions at negotiated prices related to prevailing market prices at the time of sale. Morgan Stanley may act as principal or agent in such transactions. Morgan Stanley has no obligation to make a market in the Debentures, and may discontinue its market-making activities at any time without notice, in its sole discretion. Morgan Stanley acted as underwriter in connection with the original offering of the Debentures and received an underwriting discount of $5,790,208 in connection therewith. As of the date of this Prospectus, MSLEF II owns 38.48% of the outstanding common stock of Holdings. See "Securities Ownership of Certain Beneficial Owners and Management--Certain Beneficial Owners of Holdings' Capital Stock." Morgan Stanley also acted as the underwriter for the Silgan Notes Offering and the purchaser for the private placement of the Secured Notes, for which it was paid an aggregate of $5,742,500. For a description of certain transactions between Holdings, and Morgan Stanley and affiliates of Morgan Stanley, see "Certain Transactions." In connection with the original offering of the Debentures, Holdings agreed to indemnify Morgan Stanley, as the underwriter, and A.G. Edwards & Sons, Inc., as a "qualified independent underwriter," against certain liabilities, including liabilities under the Securities Act. Morgan Stanley has provided, and continues to provide, investment banking services to Holdings and its affiliates. LEGAL MATTERS The legality of the Debentures has been passed on for Holdings by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street, Stamford, Connecticut 06901. G. William Sisley, a partner in Winthrop, Stimson, Putnam & Roberts, is Secretary of Holdings and Silgan. Winthrop, Stimson, Putnam & Roberts from time to time represents Morgan Stanley in connection with certain legal matters unrelated to its representation of Holdings. EXPERTS The consolidated financial statements of Holdings at December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young, independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Silgan at December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young, independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The Statement of Assets, Liabilities and Net Assets of the Del Monte Corporation Can Manufacturing Operations (an operation of Del Monte Corporation), as Constituted for Sale to Silgan Containers Corporation, as of June 30, 1993 and the Schedule of Sales and Cost of Sales for the year then ended appearing in this Prospectus and Registration Statement have been audited by Ernst & Young, independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SILGAN HOLDINGS INC.: Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . F-4 Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . F-6 Consolidated Statements of Deficiency in Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991 . . . . . F-7 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . F-8 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-10 Condensed Unaudited Consolidated Balance Sheets at March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31 Condensed Unaudited Consolidated Statements of Operations for the three months ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . F-32 Condensed Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . F-33 Notes to Condensed Unaudited Consolidated Financial Statements . . . . F-34 SILGAN CORPORATION: Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-36 Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . F-37 Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . F-38 Consolidated Statements of Common Stockholder's Equity for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . F-39 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . F-40 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-42 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS: Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . F-63 Statement of Assets, Liabilities and Net Assets at June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . F-64 Schedule of Sales and Cost of Sales for the Year ended June 30, 1993 . . . . . . . . . . . . . . . . . . . . F-65 Notes to Financial Statement and Schedule . . . . . . . . . . . . . . . F-66 Statement of Assets, Liabilities and Net Assets at September 30, 1993 (unaudited) . . . . . . . . . . . . . . . F-69 Schedule of Sales and Cost of Sales for the Three Months ended September 30, 1993 and 1992 (unaudited) . . . . F-70 Notes to Financial Statement and Schedule . . . . . . . . . . . . . . . F-71 ADDITIONAL FINANCIAL INFORMATION: SILGAN HOLDINGS INC.: Pro Forma Unaudited Combined Statement of Operations for the year ended December 31, 1993 . . . . . . . . . . . F-73 Notes to Pro Forma Unaudited Combined Statement of Operations F-75 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Silgan Holdings Inc. We have audited the accompanying consolidated balance sheets of Silgan Holdings Inc. as of December 31, 1993 and 1992, and the related consolidated statements of operations, deficiency in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Silgan Holdings Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, in 1993, the Company changed its method of accounting for postretirement benefits other than pensions, income taxes and postemployment benefits. Ernst & Young Stamford, CT March 10, 1994 F-3 SILGAN HOLDINGS INC. CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992 (Dollars in thousands) ASSETS 1993 1992 Current assets: Cash and cash equivalents $ 224 $ 2,887 Accounts receivable, less allowances for doubtful accounts of $1,084 and $1,643 for 1993 and 1992, respectively 44,409 44,557 Inventories 108,653 75,007 Prepaid expenses and other current assets 3,676 4,052 Total current assets 156,962 126,503 Property, plant and equipment, at cost: Land 4,469 3,743 Buildings and improvements 56,087 50,382 Machinery and equipment 352,409 270,845 Construction in progress 19,894 15,334 432,859 340,304 Less accumulated depreciation and amortization (142,464) (116,425) Net property, plant and equipment 290,395 223,879 Other assets 50,276 38,653 $497,633 $389,035 See accompanying notes. F-4 SILGAN HOLDINGS INC. CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992 (Dollars in thousands) LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY 1993 1992 Current liabilities: Working capital loans $ 2,200 $ 40,400 Current portion of term loans 20,000 20,899 Trade accounts payable 31,913 27,956 Accrued payroll and related costs 20,523 19,242 Accrued interest payable 783 1,067 Accrued expenses and other current liabilities 21,385 14,977 Total current liabilities 96,804 124,541 Term loans 120,000 21,681 Senior secured notes 50,000 50,000 11 3/4% Senior subordinated notes 135,000 135,000 13 1/4% Senior discount debentures 200,718 176,551 Deferred income taxes 6,836 5,788 Other long-term liabilities 33,242 13,458 Class A common stock, $0.01 par value, subject to put option, valued at fair market value, 500,000 shares authorized, 417,500 shares issued and outstanding (Note 14) 25,050 14,613 Deficiency in stockholders' equity: Common stock $0.01 par value: Class B: 667,500 shares authorized, 667,500 and 417,500 shares issued and outstanding in 1993 and 1992, respectively. 7 4 Class C: 1,000,000 shares authorized, 50,000 shares issued and outstanding 1 1 Additional paid-in capital 33,606 18,609 Accumulated deficit (203,631) (171,211) Total deficiency in stockholders' equity (170,017) (152,597) $497,633 $389,035 See accompanying notes. F-5 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Net sales $645,468 $630,039 $678,211 Cost of goods sold 571,174 554,972 605,185 Gross profit 74,294 75,067 73,026 Selling, general and administrative expenses 32,460 32,784 34,129 Income from operations 41,834 42,283 38,897 Interest expense and other related financing costs 54,265 57,091 55,996 Minority interest expense - 2,745 3,889 Other (income) expense 35 25 (396) Loss before income taxes (12,466) (17,578) (20,592) Income tax provision (Note 8) 1,900 2,200 - Loss before extraordinary charges and cumulative effects of changes in accounting principles (14,366) (19,778) (20,592) Extraordinary charges relating to early extinguishment of debt (1,341) (23,597) - Cumulative effect of changes in accounting principles (Notes 2, 8 & 16) (6,276) - - Net loss $(21,983) $(43,375) $(20,592) See accompanying notes. F-6 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) Total Class B & C Additional deficiency in Common paid-in Accumulated stockholders' stock capital (deficit) equity Balance at December 31, 1990 $ 5 $18,609 $(107,244) $(88,630) Net loss - - (20,592) (20,592) Balance at December 31, 1991 5 18,609 (127,836) (109,222) Net loss - - (43,375) (43,375) Balance at December 31, 1992 5 18,609 (171,211) (152,597) Issuance of 250,000 shares of Class B Common Stock 3 14,997 - 15,000 Adjustment to the fair market value of the Class A Common Stock subject to put option (Note 14) - - (10,437) (10,437) Net loss - - (21,983) (21,983) Balance at December 31, 1993 $ 8 $ 33,606 $(203,631) $(170,017) See accompanying notes. F-7 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Cash flows from operating activities: Net loss $ (21,983) $(43,375) $(20,592) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 31,607 29,538 30,019 Amortization 5,488 5,097 4,712 Accretion of discount on discount debentures 24,167 11,116 - Minority interest expense - 2,745 3,889 Interest on senior reset debentures to be paid in additional debentures - - 25,505 Other items 342 1,215 324 Extraordinary charges relating to early extinguishment of debt 1,341 23,597 - Cumulative effect of changes in accounting principles 6,276 - - Changes in assets and liabilities, net of effect of acquisitions: (Increase) decrease in accounts receivable 707 (8,705) 23,539 (Increase) decrease in inventories (4,316) 5,541 8,471 Increase (decrease) in trade accounts payable 3,757 (4,330) (10,448) Other, net 749 (6,999) (4,260) Total adjustments 70,118 58,815 81,751 Net cash provided by operating activities 48,135 15,440 61,159 Cash flows from investing activities: Acquisition of Del Monte Can Manufacturing Assets (73,865) - - Capital expenditures (42,480) (23,447) (21,834) Proceeds from sale of assets 262 429 12,028 Net cash used in investing activities (116,083) (23,018) (9,806) Contined on following page. F-8 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Cash flows from financing activities: Borrowings under working capital loans 328,050 316,050 357,560 Repayments under working capital loans (366,250) (296,850) (372,960) Repayment of term loans (42,580) (40,205) (36,507) Proceeds from issuance of term loans 140,000 - - Proceeds from issuance of common stock 15,000 - - Proceeds from issuance of senior secured notes - 50,000 - Proceeds from issuance of 11 3/4% senior subordinated notes - 135,000 - Proceeds from issuance of 13 1/4% senior discount debentures - 165,435 - Redemption of 14% senior subordinated notes - (89,250) - Redemption of Silgan preferred stock - (31,508) - Redemption of senior reset debentures - (181,588) - Cash dividends paid on Silgan preferred stock - (1,137) - Debt financing costs (8,935) (17,300) - Net cash provided (used) by financing activities 65,285 8,647 (51,907) Net increase (decrease) in cash and cash equivalents (2,663) 1,069 (554) Cash and cash equivalents at beginning of year 2,887 1,818 2,372 Cash and cash equivalents at end of year $ 224 $ 2,887 $ 1,818 Supplementary data: Interest paid $ 25,733 $ 46,757 $ 27,503 Income taxes paid, net of refunds 722 1,206 764 See accompanying notes. F-9 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 1. Basis of Presentation Silgan Holdings Inc. ("Holdings", together with its wholly owned subsidiary, "the Company"), a company controlled by Silgan management and Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co. Incorporated ("MS & Co."), own all the outstanding common stock of Silgan Corporation ("Silgan"). Silgan has two operating subsidiaries, Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"). The Company is engaged in the packaging business which includes the manufacture and sale of steel, aluminum and paperboard containers, mainly to processors and packagers of food products, and the design, manufacture and sale of various plastic containers, mainly for food, beverage, household, pharmaceutical and personal care products. 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. Assets and liabilities of the Company's foreign subsidiary are translated at rates of exchange in effect at the balance sheet date. Income amounts are translated at the average of monthly exchange rates. Accounts Receivable Accounts receivable consist primarily of amounts due from domestic companies. Credit is extended based on an evaluation of the customer's financial condition and collateral is not generally required. The Company maintains an allowance for doubtful accounts at a level which management believes is sufficient to cover potential credit losses. Inventories Inventories are stated at the lower of cost or market (net realizable value). Finished goods, work-in-process and raw material inventories are principally accounted for by the last-in, first-out method (LIFO). Property, plant and equipment Property, plant and equipment are recorded at cost and are depreciated on the straight-line method over their estimated useful lives (ranging from 3 to 25 years). Maintenance and repair expenditures are charged to expense as incurred; major renewals and betterments are capitalized. The total amount of repairs and maintenance expense for the years ended December 31, 1993, 1992 and 1991 was $17,072, $14,962 and $16,507, respectively. F-10 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 2. Summary of Significant Accounting Policies (continued) Other Assets Cost in excess of fair value of net assets acquired is amortized on a straight-line basis over a period not exceeding forty years. Covenants not to compete are being amortized over five years. Debt issuance costs are being amortized over the terms of the related debt agreements (3 to 10 years). Cash flows For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase and investments in money market accounts to be cash equivalents. Fair Values of Financial Instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Short and long-term debt: The carrying amounts of the Company's borrowings under its working capital loans and variable-rate borrowings approximate their fair value. The fair values of fixed-rate borrowings are based on quoted market prices. Letters of Credit: Fair values of the Company's outstanding letters of credit are based on current contractual amounts outstanding. Adoption of New Accounting Policies Postretirement Benefits Other than Pensions: Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". Under SFAS No. 106, the Company is required to accrue the estimated cost of retiree health and other postretirement benefits during the years that covered employees render service. Prior to 1993, the Company recorded these benefits on the pay-as-you-go basis. As permitted by the Statement, prior years' financials have not been restated. There is no tax effect of the cumulative charge due to the net operating loss position of the Company. See Note 16 - Postretirement Benefits Other than Pensions. F-11 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 2. Summary of Significant Accounting Policies (continued) Income Taxes: Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the use of the liability method of accounting for deferred income taxes. The provision for income taxes includes federal, state and foreign income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. The Company had previously reported under SFAS No. 96, "Accounting for Income Taxes". There was no effect for the difference in methods at the date of adoption. See Note 8 - Income Taxes. Postemployment Benefits: During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The cumulative effect as of January 1, 1993 of this accounting change was to decrease net income by $1,276. There was no tax effect of the charge due to the net operating loss position of the Company. There was no effect on income before income taxes as a result of this change in accounting principle. 3. Acquisitions On December 21, 1993, Containers acquired from Del Monte Corporation ("Del Monte") substantially all of the fixed assets and certain working capital of its container manufacturing business in the United States ("DM Can"). The purchase price, which is subject to post-closing adjustments, for the assets acquired and the assumption of certain specified liabilities, including related transaction costs, was $73,865. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's results from the acquisition date. The total purchase cost was allocated first to the tangible assets acquired and liabilities assumed based upon their respective fair values as determined from preliminary appraisals and valuations and the excess was allocated to cost over fair value of assets acquired. The aggregate purchase cost and its preliminary allocation to the assets and liabilities is as follows: Net working capital acquired $26,400 Property, plant and equipment 57,238 Cost in excess of fair value of assets acquired 6,587 Other liabilities assumed (16,360) $73,865 Set forth below is the Company's summary unaudited pro forma results of operations for the years ended December 31, 1993 and 1992. The unaudited pro forma results of operations for the year ended December 31, 1993 include the historical results of DM Can for the period ended December 21, 1993 and give effect to the pro forma adjustments. The unaudited pro forma results of operations for the year ended December 31, 1992 include the historical results of DM Can and the Company for the year ended December 31, 1992 and give effect to the pro forma adjustments. F-12 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 3. Acquisitions (continued) The pro forma adjustments to the historical results of operations reflect the sales prices set forth in a supply agreement with Del Monte, the estimated effect of purchase accounting adjustments based upon preliminary appraisals and evaluations, the financing of the acquisition and certain other adjustments as if these events had occurred as of the beginning of the periods mentioned therein. The following unaudited pro forma results of operations do not purport to represent what the Company's results of operations would actually have been had the transactions in fact occurred on the dates indicated or to project the Company's results for any future period: 1993 1992 Net sales $818,614 $819,579 Income from operations 50,669 56,747 Loss before income taxes (8,134) (8,102) Loss before extraordinary charges and cumulative effect of accounting changes (10,380) (11,060) Net loss (17,997) (34,657) 4. Dispositions In November 1991 the Company sold substantially all of the assets used in its PET carbonated beverage bottle business. Most of the sales proceeds of $12,000 were used to repay term loans. No gain or loss was recognized as a result of the disposition. 5. Refinancings 1993 Effective December 21, 1993, Silgan, Containers and Plastics entered into a credit agreement (the "Credit Agreement") with certain lenders (the "Banks"), Bank of America, as Co-Agent, and Bankers Trust, as Agent, to refinance in full all amounts owing under the Amended and Restated Credit Agreement, dated as of August 31, 1987, and to finance the acquisition of DM Can by Containers. Under the Credit Agreement, the Banks loaned the Company $140,000 of term loans and $29,800 of working capital loans on the effective date. In addition, the Company issued and sold 250,000 shares of its Class B Common Stock for $15,000. The Company used these proceeds to repay $41,452 of term loans and $60,800 of working capital loans, to acquire DM Can and pay fees and expenses. As a result of the early extinguishment of debt, the Company incurred a charge of $1,341. There was no tax effect of this charge due to the net operating loss position of the Company. See Note 9 - Bank Credit Facility. F-13 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 5. Refinancings (continued) 1992 Effective June 29, 1992, Holdings and Silgan refinanced a significant portion of their indebtedness (the "Refinancing"). The Refinancing included a private placement by Silgan of $50,000 principal amount of its Senior Secured Floating Rate Notes due June 30, 1997 (the "Secured Notes"), a public offering of $135,000 principal amount of Silgan's 11 3/4% Senior Subordinated Notes due 2002 (the "11 3/4% Notes") and a public offering by Holdings of its 13 1/4% Senior Discount Debentures due 2002 (the " Discount Debentures") for proceeds of $165,435. The aggregate proceeds from the new debt offerings of $350,435, less $17,300 of transaction fees and expenses, were used, in part, to redeem Silgan's 14% Senior Subordinated Notes (the "14% Notes"), Silgan's 15% Cumulative Exchangeable Redeemable Preferred Stock (the "Preferred Stock") and Holdings' Senior Reset Debentures due 2004 (the "Holdings Reset Debentures"). The Preferred Stock (300,083 shares) was redeemed on August 16, 1992 at a redemption price of $105 per share plus accrued dividends. The 14% Notes ($85,000 aggregate principal amount) were redeemed on August 28, 1992 at a redemption price of 105% of the principal amount thereof plus accrued interest. The Holdings Reset Debentures were redeemed on July 29, 1992 ($175,160 aggregate principal amount) at a redemption price of 103.67% of the principal amount thereof plus accrued interest. In addition, the Company paid cash interest of $15,326 at a rate of 17 1/2% on the principal amount of the Holdings Reset Debentures for the period January 1, to June 30, 1992. In conjunction with the Refinancing, Silgan's Amended and Restated Credit Agreement was amended to, among other things, permit the Refinancing and the Company repaid $30,000 of term loans thereunder. As a result of the Refinancing, unamortized deferred financing costs relating to the 14% Notes, the Preferred Stock, the repayment of term loans under the Amended and Restated Credit Agreement and Holdings Reset Debentures totaling $11,034 in the aggregate were written off in 1992 and, along with the redemption premiums of $12,563, are reflected as an extraordinary charge. There was no tax effect on this charge due to the net operating loss position of the Company. F-14 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 6. Inventories Inventories at December 31, 1993 and 1992 consist of the following: 1993 1992 Raw materials and supplies $ 26,458 $ 17,623 Work-in-process 17,105 10,413 Finished goods 65,072 49,546 108,635 77,582 Adjustment to value inventory at cost on the LIFO method 18 (2,575) $108,653 $ 75,007 The amount of inventory recorded on the first-in first-out method at December 31, 1993 and 1992 was $2,178 and $2,189, respectively. 7. Other Assets Other assets at December 31, 1993 and 1992 consist of the following: 1993 1992 Cost in excess of fair value of assets acquired $ 26,671 $ 20,178 Debt issuance costs 25,213 24,079 Covenants not to compete 8,500 8,500 Other 3,539 596 63,923 53,353 Less: accumulated amortization (13,647) (14,700) $ 50,276 $ 38,653 In 1993, upon the effectiveness of the Credit Agreement, the Company wrote off $1,341 of net debt issuance costs, which has been classified as an extraordinary charge, and capitalized $8,935 in new debt issuance costs. In 1992, as part of the Refinancing, the Company wrote off $11,034 of net debt issuance costs and capitalized $17,300 in new debt issuance costs. Amortization expense for the years ended December 31, 1993 and 1992 was $5,488 and $5,097, respectively. 8. Income Taxes Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes" which requires the use of the liability method of accounting for deferred income taxes. The Company had previously reported under SFAS No. 96, "Accounting for Income Taxes". There was no effect for the difference in methods at the date of adoption. F-15 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 8. Income Taxes (continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets at December 31, 1993 are as follows: 1993 Deferred tax liabilities: Tax over book depreciation $20,700 Book over tax basis of assets acquired 24,000 Other 3,600 Total deferred tax liabilities 48,300 Deferred tax assets: Book reserves not yet deductible for tax purposes 20,700 Deferred interest on high yield obligations 12,300 Net operating loss carryforwards 37,300 Other 3,400 Total deferred tax assets 73,700 Valuation allowance for deferred tax assets 32,236 Net deferred tax assets 41,464 Net deferred tax liabilities $ 6,836 The income tax provision consists of the following: 1993 1992 1991 Current Federal $ 300 $ - $ - State 1,900 1,705 682 Foreign (400) 31 380 1,800 1,736 1,062 Deferred: Federal - - (1,500) State 100 464 438 Foreign - - - 100 464 (1,062) $1,900 $2,200 $ - F-16 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 8. Income Taxes (continued) The aggregate income tax provision varied from that computed by using the U.S. statutory rate as a result of the following: 1993 1992 1991 Income tax benefit at the U.S. federal income tax rate $(4,363) $(5,977) $(7,001) State and foreign tax expense net of federal income taxes 1,235 1,452 990 Nondeductible items: Amortization of goodwill 154 154 154 Minority interest expense - 933 1,322 Losses for which no benefit is available 4,874 5,638 4,535 $ 1,900 $ 2,200 $ - The Company files a consolidated federal income tax return. At December 31, 1993, the Company had net operating loss carryforwards at December 31, 1993 of approximately $105,000 which are available to offset future consolidated taxable income of the group and expire from 2001 through 2008. At December 31, 1993, the Company had an alternative minimum tax liability of $300 and approximately $1,900 of alternative minimum tax credits which are available indefinitely to reduce future tax payments for regular federal income tax purposes. 9. Bank Credit Facility On December 21, 1993, Silgan, Containers and Plastics (the "Borrowers") and the Banks entered into the Credit Agreement pursuant to which the Banks loaned to Silgan (i) $60,000 of term loans (the "A Term Loans") and (ii) $80,000 of term loans (the "B Term Loans"), collectively, the "Term Loans", and agreed to lend to Containers or Plastics up to an aggregate of $70,000 of working capital loans (the "Working Capital Loans"). Concurrent with the borrowings under the Credit Agreement, the Company repaid in full amounts outstanding under the Amended and Restated Credit Agreement. See Note 5 - Refinancings. F-17 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 9. Bank Credit Facility (continued) To secure the obligations of Borrowers under the Credit Agreement, Silgan has pledged to the Banks principally all of the capital stock of its subsidiaries and the subsidiaries have each granted to the Banks security interests in substantially all of their respective real and personal property. Such collateral also secures on an equal and ratable basis the Secured Notes, subject to certain intercreditor arrangements. Holdings has pledged to the Banks all of the capital stock of Silgan. Holdings and each of the Borrowers have guaranteed on a secured basis all of the obligations of the Borrowers under the Credit Agreement. The A Term Loans mature on September 15, 1996 and are payable in installments during the listed years as follows: A Term Loan Installment Repayment Date Principal Amount 1994 $ 20,000 1995 20,000 1996 20,000 The B Term Loans mature and are payable in full on September 15, 1996. Amounts repaid under the Term Loans cannot be reborrowed. Under the Credit Agreement, Silgan is required to repay the Term Loans (pro rata for each tranche of Term Loans) in an amount equal to 75% of the Company's Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year during the Credit Agreement (beginning with the 1994 fiscal year). Additionally, Silgan is required to repay the Term Loans (pro rata for each tranche of Term Loans) and the Secured Notes, in an aggregate amount equal to 80% of the net sale proceeds from certain assets sales and 100% of the net equity proceeds from certain sales of equity, all as provided in the Credit Agreement and the Secured Notes Agreement. The aggregate amount of Working Capital Loans which may be outstanding at any time is subject to a borrowing base limitation of the sum of (i) 85% of eligible accounts receivable of Containers and Plastics and (ii) 50% of eligible inventory of Containers and Plastics. In lieu of Working Capital Loans, Containers and Plastics may request Bankers Trust to issue up to $15,000 of letters of credit (the "Letters of Credit"). At December 31, 1993, $6,094 of Letters of Credit were outstanding. Subject to the terms of the Credit Agreement, the Working Capital Loans can be borrowed, repaid and reborrowed from time to time until September 15, 1996, on which date all Working Capital Loans mature and are payable in full. F-18 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 9. Bank Credit Facility (continued) Each of the Term Loans and each of the Working Capital Loans, at the respective Borrower's election, consist of loans designated as Eurodollar rate loans or as Base Rate loans. Subject to certain conditions, each of the Term Loans and each of the Working Capital Loans can be converted from a Base Rate loan into a Eurodollar rate loan and vice versa. The term "Base Rate" means the highest of (i) 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate (as defined in the Credit Agreement), (ii) 1/2 of 1% in excess of the Federal Funds Rate (as defined in the Credit Agreement) and (iii) Bankers Trust's prime lending rate. Interest on Term Loans maintained as Base Rate loans accrues at floating rates of 1.75% (in the case of A Term Loans) and 2.25% (in the case of B Term Loans) over the Base Rate. Interest on Term Loans maintained as Eurodollar rate loans accrues at floating rates of 2.75% (in the case of A Term Loans) and 3.25% (in the case of B Term Loans) over a formula rate (the "Eurodollar Rate") determined with reference to the rate offered by Bankers Trust for dollar deposits in the New York interbank Eurodollar market. Interest on Working Capital Loans maintained as (i) Base Rate loans accrues at floating rates of 2% over the Base Rate or (ii) Eurodollar rate loans accrues at floating rates of 3% over the Eurodollar Rate. At December 31, 1993, the loans were maintained as Base Rate loans and the interest rate was between 7 3/4% and 8 1/4%. Each of Containers and Plastics has agreed to jointly and severally pay to the Banks, on a quarterly basis, a commitment commission calculated as 0.50% per annum on the daily average unused portion of the Banks' working capital commitment in respect of the Working Capital Loans until such working capital commitment is terminated. Additionally, Containers and Plastics are required to pay to Bankers Trust, on a quarterly basis in arrears, a letter of credit fee of 3.0% per annum and a facing fee of 1/4 of 1% per annum, each on the average daily stated amount of each letter of credit issued for the account of Containers or Plastics, respectively. The Credit Agreement requires Silgan to meet certain financial covenants, and restricts or limits, among other items, each of the Borrowers' ability to (i) incur additional indebtedness, (ii) create certain liens, (iii) consolidate, merge or sell assets, (iv) make capital expenditures and (v) pay dividends, except for distributions to Holdings to fund federal and state tax obligations. For 1993, 1992 and 1991, respectively, the average amount of borrowings under the Working Capital Loans was $51,935, $44,525, and $56,342; the average annual interest rate was 6.5%, 7.2% and 9.0%; and the highest amount of such borrowings at any month-end was $80,250, $80,800 and $81,300. F-19 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 10. Senior Secured Notes The Secured Notes constitute senior indebtedness of Silgan and are secured by a first lien on substantially all of the assets of Silgan. Such collateral also secures on an equal and ratable basis, subject to certain intercreditor arrangements, all indebtedness of Silgan under the Credit Agreement. The Secured Notes mature on June 30, 1997 and bear interest, which is payable quarterly, at a rate of three-month LIBOR plus 3%. The interest rate is adjusted quarterly. The interest rate in effect at December 31, 1993 was 6.38%. The Secured Notes are redeemable at the option of Silgan at par plus accrued and unpaid interest to the redemption date. Net cash proceeds from certain asset sales and the issuance of capital stock by Silgan are required to be applied to prepay the Secured Notes and indebtedness under the Credit Agreement on a pro rata basis, subject to certain exceptions. The Secured Notes contain covenants which are comparable to or less restrictive than those required by the Credit Agreement. These covenants limit, among other items, Silgan's ability to (i) incur additional indebtedness, (ii) pay dividends, except for distributions to Holdings to fund federal and state tax obligation, (iii) enter into certain transactions with affiliates, (iv) repay subordinated indebtedness, and (v) effect certain mergers, consolidations and transfers of assets. 11. 11 3/4% Senior Subordinated Notes The 11 3/4% Notes, which mature on June 15, 2002, represent unsecured general obligations of Silgan, subordinate in right of payment to obligations of the Company under the Credit Agreement and the Secured Notes and effectively subordinate to all of the obligations of the subsidiaries of Silgan. Interest is payable semi-annually on June 15 and December 15. The 11 3/4% Notes are redeemable at the option of Silgan, in whole or in part, at any time during the twelve months commencing June 15 of the following years at the indicated percentages of their principal amount plus accrued interest: Redemption Year Percentage 1997 105.8750% 1998 102.9375% 1999 and thereafter 100.0000% The 11 3/4% Notes Indenture contains covenants which are comparable to or less restrictive than those required by the Credit Agreement and the Secured Notes. The estimated fair value of the 11 3/4% Notes at December 31, 1993 was $145,800. F-20 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 12. 13 1/4% Senior Discount Debentures On June 30, 1992, Holdings issued $275,000 principal amount of discount Debentures for cash proceeds of $165,435. The Discount Debentures, which are due on December 15, 2002, represent unsecured general obligations of Holdings, subordinate in right of payment to the obligations of Silgan. The original issue discount is being amortized through June 15, 1996 with a yield to maturity of 13 1/4%. The carrying amount at December 31, 1993 of the Discount Debentures represents the principal amount less an unamortized discount of $74,282. From and after June 15, 1996, interest on the Discount Debentures will accrue on the principal amount at the rate of 13 1/4% and be payable in cash semiannually. The Discount Debentures are redeemable at any time, at the option of Holdings, in whole or in part, at 100% of their principal amount plus accrued interest to the redemption date. The Discount Debenture Indenture contains covenants which are comparable to or less restrictive than those required by the Credit Agreement, the Secured Notes and the 11 3/4% Notes. The estimated fair value of the Discount Debentures at December 31, 1993 was $214,500. 13. Preferred Stock/Minority Interest The minority interest represented shares of Preferred Stock issued by Silgan. The Preferred Stockholders received cumulative preferential dividends at the rate per annum of 15% per share calculated as a percentage of $100. Dividends were, at the option of Silgan, paid in additional shares of Preferred Stock. During 1992 and 1991, Silgan issued 21,301 and 38,173 shares of Preferred Stock at $100 per share, representing its Preferred Stock dividend requirement for the two quarters ended May 15, 1992 and the four quarters ended November 15, 1991. A cash dividend payment of $1,137 was made for the quarter ended August 15, 1992, at which time the preferred stock was redeemed. As of December 31, 1993, Silgan has authorized 1,000 shares of Preferred Stock, of which, none is issued or outstanding. 14. Common Stock During 1993, Holdings increased its authorized Class B Common Stock from 500,000 shares to 667,500 shares and on December 21, 1993, Holdings sold 250,000 shares of its Class B Common Stock for a purchase price of $60.00 per share and an aggregate purchase price of $15,000. Holdings contributed the proceeds to Silgan in conjunction with the acquisition of DM Can. See Note 3 - Acquisitions. F-21 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 14. Common Stock (continued) The rights privileges and powers of the Class A Common Stock and the Class B Common Stock are identical, with shares of each class being entitled to one vote on all matters to come before the stockholders of Holdings. The Class C Common stockholders do not have voting rights except in certain circumstances. Pursuant to an organization agreement, each of the holders of the Class A Common Stock, upon the death or permanent disablement of either of the holders of the Class A Common Stock prior to June 30, 1994, have the right to require Holdings to acquire all the shares held by the respective holder or his affiliates at the then fair market value of the stock (as defined in the Organization Agreement). In connection therewith the value of the Class A Common Stock has been adjusted to fair market value. The increase in the fair market value has been charged to accumulated deficit. At June 30, 1994, to the extent the put option has not been exercised, the accumulated deficit will be decreased by the amount previously charged for the put option liability. 15. Retirement Plans The Company sponsors contributory and non-contributory pension and retirement plans which cover substantially all employees, other than union employees covered by multi-employer defined benefit pension plans under collective bargaining agreements. The benefits are paid based on either a career average, final pay or years of service formula. With respect to certain hourly employees, pension benefits are provided for based on stated amounts for each year of service. The Company funds the minimum amount required under the Employee Retirement Income Security Act of 1974 with certain employees contributing approximately 3% of their annual compensation. The provisions of SFAS No. 87, "Employers' Accounting for Pensions" require recognition in the balance sheet of an additional minimum liability and related intangible asset for pension plans with accumulated benefits in excess of plan assets. At December 31, 1993, an additional liability of $2,107 and an intangible asset of equal amount are reflected in the consolidated balance sheet. The additional liability is principally the result of the change in the assumed discount rate. F-22 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 15. Retirement Plans (continued) Based on the latest actuarial information available, the following table sets forth the defined benefit plans funded status and amounts recognized in the Company's balance sheets as of December 31: 1993 1992 Actuarial present value of benefit obligations: Vested benefit obligations $ 19,096 $ 13,543 Non-vested benefit obligations 1,100 970 Accumulated benefit obligations 20,196 14,513 Additional benefits due to future salary levels 9,825 9,847 Projected benefit obligations 30,021 24,360 Plan assets at fair value 18,327 14,644 Projected benefit obligation in excess of plan assets 11,694 9,716 Unrecognized actuarial gain (loss) 2 2,431 Unrecognized prior service costs (2,093) (2,218) Additional minimum liability 2,107 114 Net pension liability $ 11,710 $10,043 The 1992 funded status amounts have been restated to reflect revisions in actuarial computations. These revisions had no effect on the Company's net pension liability. In addition to amounts set forth above, the Company has assumed defined benefit plan obligations of approximately $11,000 (as calculated at the Company's discount rate of 7 1/2%) in connection with the acquisition of DM Can. Under the terms of the DM Can purchase agreement, Del Monte will be transferring to the Company fund assets of approximately $9,000 (as calculated using a discount rate of 9%). The assumptions used in determining actuarial present value of plan benefit obligations as of December 31: 1993 1992 1991 Discount rate 7.5% 8.5% 8.5% Weighted average rate of compensation increase 4.5% 5.0 - 5.5% 5.0 - 5.5% Expected long-term rate of return on plan assets 8.5% 8.5% 8.5% F-23 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 15. Retirement Plans (continued) The components of total pension expense are as follows: 1993 1992 1991 Service cost $1,809 $1,722 $1,816 Interest cost 2,144 2,101 1,977 Net amortization and deferrals 500 75 1,298 Actual return on assets (1,784) (891) (1,717) Other (gains) (183) (183) (307) Net pension cost of defined benefit plans 2,486 2,824 3,067 Multi-employer plans 2,210 2,159 2,041 Total pension expense $4,696 $4,983 $5,108 Plan assets are invested in money market funds, equity funds and bond funds. In 1991, the Company realized a curtailment gain of $2,500 due to a reduction in the Company's work force. Such amount has not been reflected in total pension expense above. Containers sponsors a deferred incentive savings plan for eligible salaried employees where contributions are provided if Containers meets certain financial targets. The maximum aggregate amount of awards will not exceed 15% of the aggregate salaries of the participants in the Plan. Contributions of $1,630, $1,730 and $1,700 were made for 1993, 1992 and 1991, respectively. Plastics sponsors a savings and investment plan which is organized under Section 401(k) of the Internal Revenue Code. Plastics' contributions to the plan were $146, $147 and $149 in 1993, 1992 and 1991, respectively. 16. Postretirement Benefits Other than Pensions As discussed in Note 2, the Company adopted SFAS No. 106 in 1993. The Company has elected to immediately recognize a cumulative charge of $5,000 for this change in accounting principle which represents the accumulated postretirement benefit obligation existing as of January 1, 1993. This change in accounting principle, excluding the cumulative effect, decreased pretax income for the year ended December 31, 1993 by approximately $478. The postretirement benefit cost for 1992 and 1991, which was recorded on a pay-as-you-go basis, has not been restated and was not material. F-24 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 16. Postretirement Benefits Other than Pensions (continued) The Company has defined benefit health care and life insurance plans that provide postretirement benefits to certain employees. The plans are contributory, with retiree contributions adjusted annually, and contain cost sharing features including deductibles and coinsurance. The Company does not fund the plans. The following table presents the plan's funded status and amounts recognized in the Company's balance sheet as of December 31, 1993: Accumulated postretirement benefit obligation: Retirees $1,209 Fully eligible active plan participants 1,197 Other active plan participants 2,127 4,533 Plan assets at fair value - Accumulated postretirement benefit obligation in excess of plan assets 4,533 Unrecognized net gain or (loss) (462) Unrecognized transition obligation - Accrued postretirement benefit cost $4,071 Net periodic postretirement benefit cost for 1993 included the following components: Service cost $ 152 Interest cost 326 Net periodic postretirement benefit cost $ 478 F-25 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 16. Postretirement Benefits Other than Pensions (continued) The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.5%. The weighted average rate of increase in future compensation levels was 4.5%. For measuring the expected postretirement benefit obligation, the weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) principally used is 14% for 1994 (15% for 1993). This rate is assumed to decrease by 1% per year to an ultimate rate of 6%. A 1% increase in the trend rate assumption would increase the accumulated postretirement benefit obligation as of December 31, 1993 by approximately $62 and increase the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for 1993 by approximately $12. As of December 31, 1992, the plan's unfunded accumulated postretirement benefit obligations for retirees and active participants was $1,144 and $3,856, respectively. 17. Stock Option Plans The Company, Containers and Plastics have established separate but virtually identical stock option plans for their key employees pursuant to which options to purchase shares of common stock of Holdings' and its subsidiaries and stock appreciation rights ("SARs") may be granted. Options granted under the plans may be either incentive stock options or non qualified stock options. To date, all stock options granted have been non qualified stock options. Under the plans, the Company has reserved 15,000 shares and Containers and Plastics have each reserved 1,200 shares of their common stock in order to enable them to issue shares under the plans. Both Containers and Plastics have 10,800 shares of $0.01 par value common stock currently issued, all of which are owned by Silgan. The SARs extend to all of the shares covered by the options and provide for the payment by either Holdings, Containers or Plastics, as the case may be, to the holders of the options an amount in cash or stock equal to the excess of the proforma book value, as defined, of a share of common stock (or in the event of a public offering, the fair market value of a share of common stock) over the exercise price of the option with certain adjustments for the portion of vested stock appreciation not paid at the time of recapitalization in June, 1989. Holdings and its subsidiaries have the right to repurchase, and employees have the right to require the subsidiaries to repurchase, their common stock at the then proforma book value, or market value as the case may be, should employees leave the Company. F-26 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 17. Stock Options Plans (continued) At December 31, 1993, there were outstanding options for 15,000 shares under the Holdings' Plan, 816 shares under the Containers' Plan and 300 shares under the Plastics' Plan. The exercise prices per share are $35 for the Holdings' options, range from $2,122 to $2,456 for the Containers' options and are $746 for the Plastics' options. There were 14,000 options, 528 options and 240 options exercisable at December 31, 1993 under the Holdings', Containers' and Plastics' plans, respectively. The Company incurred charges relating to the vesting and payment of benefits under the stock option plans of $200 and $350 in 1993 and 1992, respectively (none in 1991). The stock options and SARs generally become exercisable ratably over a five year period. In the event of a public offering of any of Holdings' capital stock or a sale of Holdings to a third party, (i) the options granted by Containers and Plastics pursuant to the plans, or (ii) any stock issued upon exercise of such options issued by Containers and Plastics are convertible into either stock options or common stock of Holdings. The conversion of such options or shares will be based upon a valuation of Holdings and an allocation of such value among the subsidiaries after giving affect to, among other things, that portion of the outstanding obligation of Holdings allocable to each such subsidiary. 18. Business Information The Company is engaged in the packaging business. Its principal products are metal and plastic containers. Net sales for its metal and plastic containers were $445,871 and $186,319; $425,844 and $192,596; and $435,349 and $232,139 for the years ended December 31, 1993, 1992 and 1991, respectively. Other sales amounted to $13,278, $11,599 and $10,723 for the years ended December 31, 1993, 1992 and 1991, respectively. One customer accounted for 34.1%, 36.5% and 32.2%, of net sales during the years ended December 31, 1993, 1992 and 1991 respectively. At December 31, 1993 and 1992, 12.9% and 14.5%, respectively, of the accounts receivable balance is due from this customer. F-27 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 19. Related Party Transactions Pursuant to various management services agreements (the "Management Agreement") entered into between Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and Horrigan, the Chairman of the Board and President of Holdings, respectively, S&H provides Holdings and Silgan and its subsidiaries with general management, supervision and administrative services (the "Services"). In consideration for the Services, S&H receives a fee of 4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated earnings before depreciation, amortization, interest and taxes ("EBDIT") until EBDIT has reached the Scheduled Amount set forth in the Management Agreement and 3.3% (of which 0.3% is payable to MS & Co.) after EBDIT has exceeded the Scheduled Amount up to the Maximum Amount as set forth in the Management Agreement, plus reimbursement for all related out-of-pocket expenses. The total amount incurred for the years ended December 31, 1993, 1992 and 1991 was approximately $4,385, $4,225 and $4,027, respectively. Included in accounts payable at December 31, 1993 and 1992, was approximately $575 and $200, payable to S&H, respectively. Under the terms of the Management Agreement, the Company agreed, subject to certain exceptions, to indemnify S&H and any of its affiliates, officers, directors, employees, subcontractors, consultants or controlling persons against any loss or damage they may sustain arising in connection with the Management Agreement. In connection with the 1992 Refinancing, MS & Co. received as compensation for its services as underwriter for the Secured Notes, the 11 3/4% Notes and the Discount Debentures an aggregate of $11,500. In connection with the Credit Agreement entered into in 1993, the Banks (including Bankers Trust) received certain fees amounting to $8,100. 20. Commitments The Company is committed under certain noncancelable operating leases for office and plant facilities, equipment and automobiles. Minimum future rental payments under these operating leases are: 1994 $8,960 1995 6,700 1996 5,829 1997 4,873 1998 3,606 Thereafter 9,44l $39,409 Rental expense for the years ended December 31, 1993, 1992 and 1991 was approximately $7,999, $7,977 and $8,102, respectively. F-28 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 21. Litigation On June 30, 1989, Holdings acquired all of the outstanding shares of the Company for $6.50 per share (the "Merger"). In connection with the Merger, two complaints were filed during 1989 in the Court of Chancery in the State of Delaware (the "Court") by certain Silgan Class B Common Stockholders against Silgan, Holdings, MS & Co., officers and directors. The complaints allege, among other things, that certain defendants breached their fiduciary duties under Delaware law to minority stockholders of Silgan by engaging in unfair dealing, attempting to effect a merger at a grossly inadequate price and distributing misleading proxy materials. The complaints ask the Court, among other things, to rescind the Merger and/or to grant to plaintiffs such damages, including rescissory damages, as are found by the Court to be proven at trial. Additionally, each plaintiff filed a petition for appraisal. In 1991, the Court stayed one of the actions and related appraisal proceeding based upon the seizure and placement into receivership of one plaintiff. The Court lifted the stay of the action and appraisal proceeding on March 30, 1992 and both the action and appraisal were dismissed in February 1994 following settlement with the plaintiff. The second action was voluntarily dismissed on January 29, 1992 without prejudice to the right of the plaintiffs to reinstate the action at the conclusion of the related appraisal proceeding. Discovery is proceeding in the appraisal. The Court has set the week of May 9, 1994 for trial. Additionally, a complaint was filed by parties who are limited partners of The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number of defendants, including Silgan and Holdings. The complaint alleges that Silgan and Holdings aided and abetted the general partners MSLEF in breaching their fiduciary duties to the limited partners. The Court dismissed all claims against Silgan and Holdings related to this action on January 14, 1993, and subsequently upheld that dismissal after plaintiffs filed a motion for reargument. The defendants believe that there is no factual basis for the allegations and claims contained in the complaints. Management also believes that the lawsuits are without merit and they intend to defend the lawsuits vigorously. In addition, management believes that the ultimate resolution of these matters and the appraisal proceedings will not have a material effect on the financial condition or results of operations of Silgan or Holdings. F-29 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 21. Litigation (continued) In connection with the Merger and the litigation described above, as of December 31, 1993 approximately $6,800 of the purchase price has not been paid to certain former stockholders and such amount has been recorded by the Company as a current liability. Other than the actions mentioned above there are no other pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company is a party or to which any of its properties are subject. F-30 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, March 31, Dec. 31, 1994 1993 1993 ASSETS (unaudited)(unaudited)(audited) Current assets: Cash and cash equivalents $ 2,687 $ 391 $ 224 Accounts receivable, net 68,188 53,409 44,409 Inventories 124,009 85,375 108,653 Prepaid expenses and other current assets 3,598 3,493 3,676 Total current assets 198,482 142,668 156,962 Property, plant and equipment, net 285,738 221,904 290,395 Other assets 48,885 37,304 50,276 $533,105 $401,876 $497,633 LIABILITIES & DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities: Working capital loans $ 5,800 $ 38,250 $ 2,200 Current portion of term loans 20,000 20,899 20,000 Trade accounts payable 48,665 32,344 31,913 Accrued payroll and related costs 25,263 22,249 20,523 Accrued interest payable 6,250 5,224 783 Accrued expenses and other current liabilities 21,391 20,151 21,385 Total current liabilities 127,369 139,117 96,804 Term loans 120,000 21,681 120,000 Senior secured notes 50,000 50,000 50,000 11 3/4% Senior subordinated notes 135,000 135,000 135,000 13 1/4% Senior discount debentures 207,328 182,365 200,718 Deferred income taxes 7,319 6,131 6,836 Other long-term liabilities 33,300 16,600 33,242 Class A common stock subject to put option 25,050 14,613 25,050 Deficiency in stockholders' equity: Class B & C common stock 8 5 8 Additional paid-in capital 33,606 18,609 33,606 Accumulated deficit (205,875) (182,245) (203,631) Total deficiency in stockholders' equity (172,261) (163,631) (170,017) $533,105 $401,876 $497,633 See accompanying notes. F-31 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands) Three Months Ended March 31, March 31, 1994 1993 Net sales $186,243 $148,727 Cost of goods sold 163,520 131,822 Gross profit 22,723 16,905 Selling, general and administrative expenses 8,589 8,217 Income from operations 14,134 8,688 Interest expense and other related financing costs 15,647 13,089 Other (income) expense 156 (93) Loss before income taxes (1,669) (4,308) Income tax provision 575 450 Loss before cumulative effect of changes in accounting principles (2,244) (4,758) Cumulative effect of changes in accounting principles - (6,276) Net loss $ (2,244) $(11,034) See accompanying notes. F-32 SILGAN HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 31, March 31, 1994 1993 Cash flows from operating activities: Net loss $ (2,244) $(11,034) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation 9,376 7,484 Amortization 1,774 1,371 Other items 276 (46) Accretion of discount on discount debentures 6,610 5,814 Cumulative effect of changes in accounting principles - 6,276 Changes in assets and liabilities: (Increase) in accounts receivable (23,878) (8,852) (Increase) in inventories (15,356) (10,368) Increase in trade accounts payable 16,752 4,388 Increase in accrued interest payable 5,467 4,157 Other, net 4,982 5,927 Total adjustments 6,003 16,151 Net cash provided by operating activities 3,759 5,117 Cash flows from investing activities: Capital expenditures (4,896) (5,463) Net cash used in investing activities (4,896) (5,463) Cash flows from financing activities: Borrowings under working capital loans 33,750 79,250 Repayments under working capital loans (30,150) (81,400) Net cash provided (used) by financing activities 3,600 (2,150) Net increase (decrease) in cash and cash equivalents 2,463 (2,496) Cash and cash equivalents at beginning of year 224 2,887 Cash and cash equivalents at end of period $ 2,687 $ 391 Supplementary data: Interest paid $ 1,786 $ 1,943 Income taxes paid, net of refunds 138 (50) See accompanying notes. F-33 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1994 and 1993 and for the three months months then ended is unaudited) (Dollars in thousands) 1. Basis of Presentation The accompanying condensed unaudited consolidated financial statements of Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. All adjustments of a normal recurring nature have been made, including appropriate estimates for reserves and provisions which are normally determined or settled at year end. In the opinion of the Company, however, the accompanying financial statements contain all adjustments (consisting solely of a normal recurring nature) necessary to present fairly Holdings' financial position as of March 31, 1994 and 1993 and December 31, 1993, the results of operations for the three months ended March 31, 1994 and 1993, and the statements of cash flows for the three months ended March 31, 1994 and 1993. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and notes included in Holdings' Annual Report on Form 10-K for the year ended December 31, 1993. In the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions" and SFAS No. 109 "Accounting for Income Taxes". In the fourth quarter of 1993, the Company adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits" effective as of January 1, 1993. The cumulative effect of these changes in accounting methods aggregated $6,276. The financial statements for the quarter ended March 31, 1993 have been restated to reflect the adoption of SFAS No. 112. F-34 SILGAN HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Information at March 31, 1994 and 1993 and for the three months months then ended is unaudited) (Dollars in thousands) 2. Inventories Inventories consisted of the following: March 31, March 31, Dec. 31, 1994 1993 1993 Raw materials and supplies $ 27,274 $ 20,181 26,458 Work-in-process 20,481 10,179 17,105 Finished goods 74,444 55,906 65,072 122,199 86,266 108,635 Adjustment to value inventory at cost on the LIFO Method 1,810 (891) 18 $124,009 $ 85,375 $108,653 F-35 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholder Silgan Corporation We have audited the accompanying consolidated balance sheets of Silgan Corporation as of December 31, 1993 and 1992, and the related consolidated statements of operations, common stockholder's equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Silgan Corporation at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, in 1993, the Company changed its method of accounting for postretirement benefits other than pensions, income taxes and postemployment benefits. Ernst & Young Stamford, CT March 10, 1994 F-36 SILGAN CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992 (Dollars in thousands) ASSETS 1993 1992 Current assets: Cash and cash equivalents $ 205 $ 2,672 Accounts receivable, less allowances for doubtful accounts of $1,084 and $1,643 for 1993 and 1992, respectively 44,409 44,557 Inventories 108,653 75,007 Prepaid expenses and other current assets 3,562 3,354 Total current assets 156,829 125,590 Property, plant and equipment, at cost 432,859 340,304 Less accumulated depreciation and amortization (142,464) (116,425) Net property, plant and equipment 290,395 223,879 Other assets 44,840 32,685 $492,064 $382,154 LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Working capital loans $ 2,200 $40,400 Current portion of term loans 20,000 20,899 Trade accounts payable 31,913 27,956 Accrued payroll and related costs 20,523 19,242 Accrued interest payable 783 1,067 Accrued expenses and other current liabilities 11,094 6,217 Total current liabilities 86,513 115,781 Term loans 120,000 21,681 Senior secured notes 50,000 50,000 11 3/4% Senior subordinated notes 135,000 135,000 Deferred income taxes 13,017 11,970 Other long-term liabilities 34,731 14,947 Common stockholder's equity: Common stock $0.01 par value: Class A: 1,000 shares authorized, 1 share issued and outstanding - - Class B: 1,000 shares authorized, 1 share issued and outstanding - - Class C: 1,000 authorized, none outstanding - - Additional paid-in capital (Note 8) 64,135 41,560 Retained earnings (deficit) (11,332) (8,785) Total common stockholder's equity 52,803 32,775 $492,064 $382,154 See accompanying notes. F-37 SILGAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Net sales $645,468 $630,039 $678,211 Cost of goods sold 571,174 554,972 605,185 Gross profit 74,294 75,067 73,026 Selling, general and administrative expenses 31,786 32,249 33,619 Income from operations 42,508 42,818 39,407 Interest expense and other related financing costs 27,928 26,916 28,981 Other (income) expense 35 25 (396) Income before income taxes 14,545 15,877 10,822 Income tax provision (Note 9) 6,300 2,200 1,500 Income before extraordinary charges and cumulative effects of changes in accounting principles 8,245 13,677 9,322 Extraordinary charges relating to early extinguishment of debt, net of taxes (841) (9,075) - Cumulative effect of changes in accounting principles, net of taxes (Notes 2, 9 & 15) (9,951) - - Net income (loss) (2,547) 4,602 9,322 Preferred stock dividend requirements - 2,745 3,889 Net income (loss) applicable to common stockholder $ (2,547) $ 1,857 $ 5,433 See accompanying notes. F-38 SILGAN CORPORATION CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) Total Additional Retained common Common paid-in Earnings stockholder's stock capital (deficit) equity Balance at December 31, 1990 $ - $41,560 $ (351) $41,209 Preferred stock dividend requirements of Silgan - - (3,889) (3,889) Net income - - 9,322 9,322 Balance at December 31, 1991 - 41,560 5,082 46,642 Preferred stock dividend requirements of Silgan - - (2,745) (2,745) Net income - - 4,602 4,602 Dividend to Parent - - (15,724) (15,724) Balance at December 31, 1992 - 41,560 (8,785) 32,775 Capital contribution by Parent - 15,000 - 15,000 Tax benefit realized from Parent - 7,575 - 7,575 Net loss - - (2,547) (2,547) Balance at December 31, 1993 $ - $ 64,135 $ (11,332) $ 52,803 See accompanying notes. F-39 SILGAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Cash flows from operating activities: Net income (loss) $ (2,547) $ 4,602 $ 9,322 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 31,607 29,538 30,019 Amortization 4,817 4,424 4,038 Other items 342 1,215 324 Contribution by Parent for federal income tax provision 7,575 - - Extraordinary charges relating to early extinguishment of debt 1,341 9,075 - Cumulative effect of changes in accounting principles 6,276 - - Changes in assets and liabilities, net of effect of acquisitions: (Increase) decrease in accounts receivable 707 (8,705) 23,539 (Increase) decrease in inventories (4,316) 5,541 8,471 Increase (decrease) in trade accounts payable 3,757 (4,330) (10,448) Other, net (1,228) (7,000) (3,931) Total adjustments 50,878 29,758 52,012 Net cash provided by operating activities 48,331 34,360 61,334 Cash flows from investing activities: Acquisition of Del Monte Can Manufacturing Assets (73,865) - - Capital expenditures (42,480) (23,447) (21,834) Proceeds from sale of assets 262 429 12,028 Net cash used in investing activities (116,083) (23,018) (9,806) Continued on following page. F-40 SILGAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the years ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 Cash flows from financing activities: Borrowings under working capital loans 328,050 316,050 357,560 Repayments under working capital loans (366,250) (296,850) (372,960) Repayment of term loans (42,580) (40,205) (36,507) Proceeds from issuance of term loans 140,000 - - Capital contribution by Parent 15,000 - - Proceeds from issuance of senior secured notes - 50,000 - Proceeds from issuance of 11 3/4% senior subordinated notes - 135,000 - Redemption of 14% senior subordinated notes - (89,250) - Redemption of preferred stock - (31,508) - Repayment of advance from Parent - (25,200) - Dividend to Parent - (15,724) - Cash dividends paid on preferred stock - (1,137) - Debt financing costs (8,935) (10,250) - Net cash provided (used) by financing activities 65,285 9,074) (51,907) Net increase (decrease) in cash and cash equivalents (2,467) 2,268 (379) Cash and cash equivalents at beginning of year 2,672 404 783 Cash and cash equivalents at end of year $ 205 $ 2,672 $ 404 Supplementary data: Interest paid $ 25,733 $ 29,046 $ 27,503 Income taxes paid, net of refunds 722 1,206 764 Additional preferred stock issued in lieu of dividend - 2,130 3,817 See accompanying notes. F-41 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 1. Basis of Presentation Silgan Corporation ("Silgan", together with its wholly owned subsidiaries, Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"), the "Company") is a wholly owned subsidiary of Silgan Holdings Inc. ("Holdings" or "Parent"). Holdings is a company controlled by Silgan management and Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), an affiliate of Morgan Stanley & Co. Incorporated ("MS & Co."). The Company is engaged in the packaging business which includes the manufacture and sale of steel, aluminum and paperboard containers, mainly to processors and packagers of food products, and the design, manufacture and sale of various plastic containers, mainly for food, beverage, household, pharmaceutical and personal care products. 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. Assets and liabilities of the Company's foreign subsidiary are translated at rates of exchange in effect at the balance sheet date. Income amounts are translated at the average of monthly exchange rates. Accounts Receivable Accounts receivable consist primarily of amounts due from domestic companies. Credit is extended based on an evaluation of the customer's financial condition and collateral is not generally required. The Company maintains an allowance for doubtful accounts at a level which management believes is sufficient to cover potential credit losses. Inventories Inventories are stated at the lower of cost or market (net realizable value). Finished goods, work-in-process and raw material inventories are principally accounted for by the last-in, first-out method (LIFO). Property, plant and equipment Property, plant and equipment are recorded at cost and are depreciated on the straight-line method over their estimated useful lives (ranging from 3 to 25 years). Maintenance and repair expenditures are charged to expense as incurred; major renewals and betterments are capitalized. The total amount of repairs and maintenance expense for the years ended December 31, 1993, 1992 and 1991 was $17,072, $14,962 and $16,507, respectively. F-42 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 2. Summary of Significant Accounting Policies (continued) Other Assets Cost in excess of fair value of net assets acquired is amortized on a straight-line basis over a period not exceeding forty years. Covenants not to compete are being amortized over five years. Debt issuance costs are being amortized over the terms of the related debt agreements (3 to 10 years). Cash flows For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase and investments in money market accounts to be cash equivalents. Fair Values of Financial Instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Short and long-term debt: The carrying amounts of the Company's borrowings under its working capital loans and variable-rate borrowings approximate their fair value. The fair values of fixed-rate borrowings are based on quoted market prices. Letters of Credit: Fair values of the Company's outstanding letters of credit are based on current contractual amounts outstanding. Adoption of New Accounting Policies Postretirement Benefits Other than Pensions: Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". Under SFAS No. 106, the Company is required to accrue the estimated cost of retiree health and other postretirement benefits during the years that covered employees render service. Prior to 1993, the Company recorded these benefits on the pay-as-you-go basis. As permitted by the Statement, prior years' financials have not been restated. See Note 15 - Postretirement Benefits Other than Pensions. F-43 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 2. Summary of Significant Accounting Policies (continued) Income Taxes: Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the use of the liability method of accounting for deferred income taxes. The provision for income taxes includes federal, state and foreign income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. The Company had previously reported under SFAS No. 96, "Accounting for Income Taxes". Under SFAS No. 96, the Company had recognized a federal income tax benefit from the tax losses of Holdings. Under SFAS No. 109, this benefit will be reflected as a contribution to additional paid-in capital instead of as a reduction of income tax expense. As permitted by the Statement, prior years' financial statements have not been restated. See Note 9 - Income Taxes. Postemployment Benefits: During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The cumulative effect as of January 1, 1993 of this accounting change was to decrease net income by $826 (after related income taxes of $450). There was no effect on income before income taxes as a result of this change in accounting principle. 3. Acquisitions On December 21, 1993, Containers acquired from Del Monte Corporation ("Del Monte") substantially all of the fixed assets and certain working capital of its container manufacturing business in the United States ("DM Can"). The purchase price, which is subject to post-closing adjustments, for the assets acquired and the assumption of certain specified liabilities, including related transaction costs, was $73,865. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's results from the acquisition date. The total purchase cost was allocated first to the tangible assets acquired and liabilities assumed based upon their respective fair values as determined from preliminary appraisals and valuations and the excess was allocated to cost over fair value of assets acquired. The aggregate purchase cost and its preliminary allocation to the assets and liabilities is as follows: Net working capital acquired $26,400 Property, plant and equipment 57,238 Cost in excess of fair value of assets acquired 6,587 Other liabilities assumed (16,360) $73,865 F-44 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 3. Acquisitions (continued) Set forth below is the Company's summary unaudited pro forma results of operations for the years ended December 31, 1993 and 1992. The unaudited pro forma results of operations for the year ended December 31, 1993 include the historical results of DM Can for the period ended December 21, 1993 and give effect to the pro forma adjustments. The unaudited pro forma results of operations for the year ended December 31, 1992 include the historical results of DM Can and the Company for the year ended December 31, 1992 and give effect to the pro forma adjustments. The pro forma adjustments to the historical results of operations reflect the sales prices set forth in a supply agreement with Del Monte, the estimated effect of purchase accounting adjustments based upon preliminary appraisals and evaluations, the financing of the acquisition and certain other adjustments as if these events had occurred as of the beginning of the periods mentioned therein. The following unaudited pro forma results of operations do not purport to represent what the Company's results of operations would actually have been had the transactions in fact occurred on the dates indicated or to project the Company's results for any future period: 1993 1992 Net sales $818,614 $819,579 Income from operations 51,343 57,282 Income before income taxes 18,877 25,353 Income before extraordinary charges and cumulative effect of accounting changes 10,844 22,301 Net income 52 13,226 4. Dispositions In November 1991 the Company sold substantially all of the assets used in its PET carbonated beverage bottle business. Most of the sales proceeds of $12,000 were used to repay term loans. No gain or loss was recognized as a result of the disposition. F-45 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 5. Refinancings 1993 Effective December 21, 1993, Silgan, Containers and Plastics entered into a credit agreement (the "Credit Agreement") with certain lenders (the "Banks"), Bank of America, as Co-Agent, and Bankers Trust, as Agent, to refinance in full all amounts owing under the Amended and Restated Credit Agreement, dated as of August 31, 1987, and to finance the acquisition of DM Can by Containers. Under the Credit Agreement, the Banks loaned the Company $140,000 of term loans and $29,800 of working capital loans on the effective date. In addition, Holdings contributed $15,000 to the Company. The Company used these proceeds to repay $41,452 of term loans and $60,800 of working capital loans, to acquire DM Can and pay fees and expenses. As a result of the early extinguishment of debt, the Company incurred a charge of $841 (net of $500 of taxes). See Note 10 - Bank Credit Facility. 1992 Effective June 29, 1992, the Company and Holdings refinanced a significant portion of their indebtedness (the "Refinancing"). The Refinancing included a private placement by the Company of $50,000 principal amount of its Senior Secured Floating Rate Notes due June 30, 1997 (the "Secured Notes") and a public offering of $135,000 principal amount of the Company's 11 3/4% Senior Subordinated Notes due 2002 (the "11 3/4% Notes"). The proceeds from the new debt offerings, net of $10,250 of transaction fees and expenses, were used, in part, to redeem the Company's 14% Senior Subordinated Notes (the "14% Notes") and 15% Cumulative Exchangeable Redeemable Preferred Stock (the "Preferred Stock"). The Preferred Stock (300,083 shares) was redeemed on August 16, 1992 at a redemption price of $105 per share plus accrued dividends. The 14% Notes ($85,000 aggregate principal amount) were redeemed on August 28, 1992 at a redemption price of 105% of the principal amount thereof plus accrued interest. In conjunction with the Refinancing, the Amended and Restated Credit Agreement was amended to, among other things, permit the Refinancing and the Company repaid $30,000 of term loans thereunder. In addition, the Company repaid the $25,200 advance from Holdings and advanced $16,000 to Holdings. Upon completion of the redemption of the 14% Notes, the Company paid a $15,724 dividend to Holdings which Holdings, along with additional cash earned on its short term investments of proceeds received by it in connection with the Refinancing, used to retire the outstanding advance to the Company. Such payments to Holdings, along with the public offering by Holdings of its 13 1/4% Senior Discount Debentures due 2002 (the "Discount Debentures") for an aggregate amount of proceeds of $165,435, were used by Holdings to redeem its Senior Reset Debentures due 2004 (the "Holdings Reset Debentures") on July 29, 1992. F-46 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 5. Refinancings (continued) 1992 (continued) As a result of the Refinancing, unamortized deferred financing costs elating to the 14% Notes, the Preferred Stock and the repayment of term loans under the Amended and Restated Credit Agreement totaling $3,325 in the aggregate were written off in 1992 and, along with the redemption premiums of $5,750, are reflected as an extraordinary charge. Since the Company was reporting under SFAS No. 96, there was no tax effect on this charge due to the tax allocation arrangement with Holdings and Holdings' net operating loss position. 6. Inventories Inventories at December 31, 1993 and 1992 consist of the following: 1993 1992 Raw materials and supplies $ 26,458 $ 17,623 Work-in-process 17,105 10,413 Finished goods 65,072 49,546 108,635 77,582 Adjustment to value inventory at cost on the LIFO method 18 (2,575) $108,653 $ 75,007 The amount of inventory recorded on the first-in first-out method at December 31, 1993 and 1992 was $2,178 and $2,189, respectively. 7. Property, plant and equipment Net property, plant and equipment at December 31, 1993 and 1992 consist of the following: 1993 1992 Land $ 4,469 $ 3,743 Buildings and improvements 56,087 50,382 Machinery and equipment 352,409 270,845 Construction in progress 19,894 15,334 432,859 340,304 Less: accumulated depreciation and amortization (142,464) (116,425) $290,395 $223,879 F-47 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 8. Other Assets Other assets at December 31, 1993 and 1992 consist of the following: 1993 1992 Cost in excess of fair value of assets acquired $ 26,671 $ 20,178 Debt issuance costs 18,163 17,029 Covenants not to compete 8,500 8,500 Other 4,146 1,342 57,480 47,049 Less: accumulated amortization (12,640) (14,364) $ 44,840 $ 32,685 In 1993, upon the effectiveness of the Credit Agreement, the Company wrote off $841 of net debt issuance costs (net of tax) and capitalized $8,935 in new debt issuance costs. In 1992, as part of the Refinancing, the Company wrote off $3,325 of net debt issuance costs and capitalized $10,250 in new debt issuance costs. Amortization expense for the years ended December 31, 1993 and 1992 was $4,817 and $4,424, respectively. 9. Income Taxes Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes" which requires the use of the liability method of accounting for deferred income taxes. The Company had previously reported under SFAS No. 96, "Accounting for Income Taxes". Under SFAS No. 96, the Company had recognized a federal income tax benefit from the tax losses of Holdings. Under SFAS No. 109, this benefit will be reflected as a contribution to additional paid-in capital instead of a reduction of income tax expense. Accordingly, the Company recorded a cumulative charge to earnings and credit to paid-in capital of $6,000 for the difference in methods up to the date of adoption. As permitted by SFAS No. 109, the Company has elected not to restate prior years' financial statements. F-48 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 9. Income Taxes (continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets at December 31 are as follows: 1993 Deferred tax liabilities: Tax over book depreciation $20,700 Book over tax basis of assets acquired 24,000 Other 6,392 Total deferred tax liabilities 51,092 Deferred tax assets: Book reserves not yet deductible for tax purposes 20,700 Net operating loss carryforwards 7,800 Benefit taken for Holdings' losses 7,575 Other 2,000 Total deferred tax assets 38,075 Net deferred tax liabilities $13,017 The Company files a consolidated Federal income tax return with Holdings. In accordance with the tax allocation agreement thereunder, the Company is obligated to reimburse Holdings for the use of Holdings losses only to the extent that Holdings has taxable income on a stand-alone basis. A liability has not been established to the extent of the use of Holdings' losses since the possibility of the ultimate payment for these benefits is considered remote. Accordingly, the use of Holdings' losses has been accounted for as a contribution of capital. Also, in accordance with the tax allocation agreement, the Company is required to reimburse Holdings for its allocable share of Holdings' tax liability. In 1993, the Company's share of Holdings' federal tax liability, for alternative minimum tax, aggregated $300. The income tax provision for 1993 reflects the adoption of SFAS No. 109 under which the Company provides for taxes as if it were a separate taxpayer. The income tax provision for 1992 and 1991 takes into consideration certain matters covered under a tax allocation arrangement with Holdings, under which the Company obtains a federal income tax benefit from Holdings' tax losses. F-49 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 9. Income Taxes (continued) The income tax provision consists of the following: 1993 1992 1991 Current Federal $ 300 $ - $ - State 1,900 1,705 682 Foreign (400) 31 380 1,800 1,736 1,062 Deferred: Federal 4,100 - - State 400 464 438 Foreign - - - 4,500 464 438 $6,300 $2,200 $1,500 The aggregate income tax provision varied from that computed by using the U.S. statutory rate as a result of the following: 1993 1992 1991 Income tax provision at the U.S. federal income tax rate $5,091 $5,398 $3,679 Income tax benefit realized from Holdings - (4,650) (3,169) State and foreign tax expense net of federal income taxes 1,209 1,452 990 $6,300 $2,200 $1,500 The Company files a consolidated federal income tax return with Holdings. On a consolidated basis the Company and Holdings have net operating loss carryforwards at December 31, 1993 of approximately $105,000 which are available to offset future consolidated taxable income of the group and expire from 2001 through 2008. The Company and Holdings, on a consolidated basis at December 31, 1993, have $1,900 of alternative minimum tax credits which are available indefinitely to reduce future tax payments for regular federal income tax purposes. At December 31, 1993 the Company, if reporting on a separate company basis, would have had net operating loss carryforwards for federal tax purposes of approximately $19,000 which are available for carryforward for a period of up to 15 years. F-50 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 10. Bank Credit Facility On December 21, 1993, the Company, Containers and Plastics (the "Borrowers") and the Banks entered into the Credit Agreement pursuant to which the Banks loaned to Silgan (i) $60,000 of term loans (the "A Term Loans") and (ii) $80,000 of term loans (the "B Term Loans"), collectively, the "Term Loans", and agreed to lend to Containers or Plastics up to an aggregate of $70,000 of working capital loans (the "Working Capital Loans"). Concurrent with the borrowings under the Credit Agreement, the Company repaid in full amounts outstanding under the Amended and Restated Credit Agreement. See Note 5 - Refinancings. To secure the obligations of Borrowers under the Credit Agreement, the Company pledged to the Banks principally all of the capital stock of its subsidiaries and the subsidiaries have each granted to the Banks security interests in substantially all of their respective real and personal property. Such collateral also secures on an equal and ratable basis the Secured Notes, subject to certain intercreditor arrangements. Holdings has pledged to the Banks all of the capital stock of the Company. Holdings and each of the Borrowers have guaranteed on a secured basis all of the obligations of the Borrowers under the Credit Agreement. The A Term Loans mature on September 15, 1996 and are payable in installments during the listed years as follows: A Term Loan Installment Repayment Date Principal Amount 1994 $ 20,000 1995 20,000 1996 20,000 The B Term Loans mature and are payable in full on September 15, 1996. Amounts repaid under the Term Loans cannot be reborrowed. Under the Credit Agreement, the Company is required to repay the Term Loans (pro rata for each tranche of Term Loans) in an amount equal to 75% of the Company's Excess Cash Flow (as defined in the Credit Agreement) in any fiscal year during the Credit Agreement (beginning with the 1994 fiscal year). Additionally, the Company is required to repay the Term Loans (pro rata for each tranche of Term Loans) and the Secured Notes, in an aggregate amount equal to 80% of the net sale proceeds from certain assets sales and 100% of the net equity proceeds from certain sales of equity, all as provided in the Credit Agreement and the Secured Notes Agreement. F-51 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 10. Bank Credit Facility (continued) The aggregate amount of Working Capital Loans which may be outstanding at any time is subject to a borrowing base limitation of the sum of (i) 85% of eligible accounts receivable of Containers and Plastics and (ii) 50% of eligible inventory of Containers and Plastics. In lieu of Working Capital Loans, Containers and Plastics may request Bankers Trust to issue up to $15,000 of letters of credit (the "Letters of Credit"). At December 31, 1993, $6,094 of Letters of Credit were outstanding. Subject to the terms of the Credit Agreement, the Working Capital Loans can be borrowed, repaid and reborrowed from time to time until September 15, 1996, on which date all Working Capital Loans mature and are payable in full. Each of the Term Loans and each of the Working Capital Loans, at the respective Borrower's election, consist of loans designated as Eurodollar rate loans or as Base Rate loans. Subject to certain conditions, each of the Term Loans and each of the Working Capital Loans can be converted from a Base Rate loan into a Eurodollar rate loan and vice versa. The term "Base Rate" means the highest of (i) 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate (as defined in the Credit Agreement), (ii) 1/2 of 1% in excess of the Federal Funds Rate (as defined in the Credit Agreement) and (iii) Bankers Trust's prime lending rate. Interest on Term Loans maintained as Base Rate loans accrues at floating rates of 1.75% (in the case of A Term Loans) and 2.25% (in the case of B Term Loans) over the Base Rate. Interest on Term Loans maintained as Eurodollar rate loans accrues at floating rates of 2.75% (in the case of A Term Loans) and 3.25% (in the case of B Term Loans) over a formula rate (the "Eurodollar Rate") determined with reference to the rate offered by Bankers Trust for dollar deposits in the New York interbank Eurodollar market. Interest on Working Capital Loans maintained as (i) Base Rate loans accrues at floating rates of 2% over the Base Rate or (ii) Eurodollar rate loans accrues at floating rates of 3% over the Eurodollar Rate. At December 31, 1993, the loans were maintained as Base Rate loans and the interest rate was between 7 3/4% and 8 1/4%. Each of Containers and Plastics has agreed to jointly and severally pay to the Banks, on a quarterly basis, a commitment commission calculated as 0.50% per annum on the daily average unused portion of the Banks' working capital commitment in respect of the Working Capital Loans until such working capital commitment is terminated. Additionally, Containers and Plastics are required to pay to Bankers Trust, on a quarterly basis in arrears, a letter of credit fee of 3.0% per annum and a facing fee of 1/4 of 1% per annum, each on the average daily stated amount of each letter of credit issued for the account of Containers or Plastics, respectively. F-52 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 10. Bank Credit Facility (continued) The Credit Agreement requires the Company to meet certain financial covenants, and restricts or limits, among other items, each of the Borrowers' ability to (i) incur additional indebtedness, (ii) create certain liens, (iii) consolidate, merge or sell assets, (iv) make capital expenditures and (v) pay dividends, except for distributions to Holdings to fund federal and state tax obligations. For 1993, 1992 and 1991, respectively, the average amount of borrowings under the Working Capital Loans was $51,935, $44,525, and $56,342; the average annual interest rate was 6.5%, 7.2% and 9.0%; and the highest amount of such borrowings at any month-end was $80,250, $80,800 and $81,300. 11. Senior Secured Notes The Secured Notes constitute senior indebtedness of the Company and are secured by a first lien on substantially all of the assets of the Company. Such collateral also secures on an equal and ratable basis, subject to certain intercreditor arrangements, all indebtedness of the Company under the Credit Agreement. The Secured Notes mature on June 30, 1997 and bear interest, which is payable quarterly, at a rate of three-month LIBOR plus 3%. The interest rate is adjusted quarterly. The interest rate in effect at December 31, 1993 was 6.38%. The Secured Notes are redeemable at the option of the Company at par plus accrued and unpaid interest to the redemption date. Net cash proceeds from certain asset sales and the issuance of capital stock by the Company are required to be applied to prepay the Secured Notes and indebtedness under the Credit Agreement on a pro rata basis, subject to certain exceptions. The Secured Notes contain covenants which are comparable to or less restrictive than those required by the Credit Agreement. These covenants limit, among other items, the Company's ability to (i) incur additional indebtedness, (ii) pay dividends, except for distributions to Holdings to fund federal and state tax obligations, (iii) enter into certain transactions with affiliates, (iv) repay subordinated indebtedness, and (v) effect certain mergers, consolidations and transfers of assets. 12. 11 3/4% Senior Subordinated Notes The 11 3/4% Notes, which mature on June 15, 2002, represent unsecured general obligations of Silgan, subordinate in right of payment to obligations of the Company under the Credit Agreement and the Secured Notes and effectively subordinate to all of the obligations of the subsidiaries of the Company. Interest is payable semi-annually on June 15 and December 15. F-53 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 12. 11 3/4% Senior Subordinated Notes (continued) The 11 3/4% Notes are redeemable at the option of the Company, in whole or in part, at any time during the twelve months commencing June 15 of the following years at the indicated percentages of their principal amount plus accrued interest: Redemption Year Percentage 1997 105.8750% 1998 102.9375% 1999 and thereafter 100.0000% The 11 3/4% Notes Indenture contains covenants which are comparable to or less restrictive than those required by the Credit Agreement and the Secured Notes. The estimated fair value of the 11 3/4% Notes at December 31, 1993 was $145,800. 13. Preferred Stock The Preferred Stock holders received cumulative preferential dividends at the rate per annum of 15% per share calculated as a percentage of $100. Dividends were, at the option of the Company, paid in additional shares of Preferred Stock. During 1992 and 1991, the Company issued 21,301 and 38,173 shares of Preferred Stock at $100 per share, representing its Preferred Stock dividend requirement for the two quarters ended May 15, 1992 and the four quarters ended November 15, 1991. A cash dividend payment of $1,137 was made for the quarter ended August 15, 1992. As of December 31, 1993, the Company has authorized 1,000 shares of Preferred Stock, of which, none is issued or outstanding. 14. Retirement Plans The Company sponsors contributory and non-contributory pension and retirement plans which cover substantially all employees, other than union employees covered by multi-employer defined benefit pension plans under collective bargaining agreements. The benefits are paid based on either a career average, final pay or years of service formula. With respect to certain hourly employees, pension benefits are provided for based on stated amounts for each year of service. The Company funds the minimum amount required under the Employee Retirement Income Security Act of 1974 with certain employees contributing approximately 3% of their annual compensation. F-54 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 14. Retirement Plans (continued) The provisions of SFAS No. 87, "Employers' Accounting for Pensions" require recognition in the balance sheet of an additional minimum liability and related intangible asset for pension plans with accumulated benefits in excess of plan assets. At December 31, 1993, an additional liability of $2,107 and an intangible asset of equal amount are reflected in the consolidated balance sheet. The additional liability is principally the result of the change in the assumed discount rate. Based on the latest actuarial information available, the following table sets forth the defined benefit plans funded status and amounts recognized in the Company's balance sheets as of December 31: 1993 1992 Actuarial present value of benefit obligations: Vested benefit obligations $ 19,096 $ 13,543 Non-vested benefit obligations 1,100 970 Accumulated benefit obligations 20,196 14,513 Additional benefits due to future salary levels 9,825 9,847 Projected benefit obligations 30,021 24,360 Plan assets at fair value 18,327 14,644 Projected benefit obligation in excess of plan assets 11,694 9,716 Unrecognized actuarial gain (loss) 2 2,431 Unrecognized prior service costs (2,093) (2,218) Additional minimum liability 2,107 114 Net pension liability $ 11,710 $ 10,043 The 1992 funded status amounts have been restated to reflect revisions in actuarial computations. These revisions had no effect on the Company's net pension liability. In addition to amounts set forth above, the Company has assumed defined benefit plan obligations of approximately $11,000 (as calculated at the Company's discount rate of 7 1/2%) in connection with the acquisition of DM Can. Under the terms of the DM Can purchase agreement, Del Monte will be transferring to the Company fund assets of approximately $9,000 (as computed using a discount rate of 9%). F-55 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 14. Retirement Plans (continued) The assumptions used in determining actuarial present value of plan benefit obligations as of December 31: 1993 1992 1991 Discount rate 7.5% 8.5% 8.5% Weighted average rate of compensation increase 4.5% 5.0 - 5.5% 5.0 - 5.5% Expected long-term rate of return on plan assets 8.5% 8.5% 8.5% The components of total pension expense are as follows: 1993 1992 1991 Service cost $1,809 $1,722 $1,816 Interest cost 2,144 2,101 1,977 Net amortization and deferrals 500 75 1,298 Actual return on assets (1,784) (891) (1,717) Other (gains) (183) (183) (307) Net pension cost of defined benefit plans 2,486 2,824 3,067 Multi-employer plans 2,210 2,159 2,041 Total pension expense $4,696 $4,983 $5,108 Plan assets are invested in money market funds, equity funds and bond funds. In 1991, the Company realized a curtailment gain of $2,500 due to a reduction in the Company's work force. Such amount has not been reflected in total pension expense above. Containers sponsors a deferred incentive savings plan for eligible salaried employees where contributions are provided if Containers meets certain financial targets. The maximum aggregate amount of awards will not exceed 15% of the aggregate salaries of the participants in the Plan. Contributions of $1,630, $1,730 and $1,700 were made for 1993, 1992 and 1991, respectively. Plastics sponsors a savings and investment plan which is organized under Section 401(k) of the Internal Revenue Code. Plastics' contributions to the plan were $146, $147 and $149 in 1993, 1992 and 1991, respectively. F-56 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 15. Postretirement Benefits Other than Pensions As discussed in Note 2, the Company adopted SFAS No. 106 in 1993. The Company has elected to immediately recognize a cumulative charge of $3,125 (after related income taxes of $1,875) for this change in accounting principle which represents the accumulated postretirement benefit obligation existing as of January 1, 1993. This change in accounting principle, excluding the cumulative effect, decreased pretax income for the year ended December 31, 1993 by approximately $478. The postretirement benefit cost for 1992 and 1991, which was recorded on a pay-as-you-go basis, has not been restated and was not material. The Company has defined benefit health care and life insurance plans that provide postretirement benefits to certain employees. The plans are contributory, with retiree contributions adjusted annually, and contain cost sharing features including deductibles and coinsurance. The Company does not fund the plans. The following table presents the plan's funded status and amounts recognized in the Company's balance sheet as of December 31, 1993: Accumulated postretirement benefit obligation: Retirees $1,209 Fully eligible active plan participants 1,197 Other active plan participants 2,127 4,533 Plan assets at fair value - Accumulated postretirement benefit obligation in excess of plan assets 4,533 Unrecognized net gain or (loss) (462) Unrecognized transition obligation - Accrued postretirement benefit cost $4,071 Net periodic postretirement benefit cost for 1993 included the following components: Service cost $ 152 Interest cost 326 Net periodic postretirement benefit cost $ 478 F-57 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 15. Postretirement Benefits Other than Pensions (continued) The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.5%. The weighted average rate of increase in future compensation levels was 4.5%. For measuring the expected postretirement benefit obligation, the weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) principally used is 14% for 1994 (15% for 1993). This rate is assumed to decrease by 1% per year to an ultimate rate of 6%. A 1% increase in the trend rate assumption would increase the accumulated postretirement benefit obligation as of December 31, 1993 by approximately $62 and increase the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for 1993 by approximately $12. As of December 31, 1992, the plan's unfunded accumulated postretirement benefit obligations for retirees and active participants was $1,144 and $3,856, respectively. 16. Stock Option Plans Containers and Plastics have established separate but virtually identical stock option plans for their key employees pursuant to which options to purchase shares of common stock of Holdings' and its subsidiaries and stock appreciation rights ("SARs") may be granted. Options granted under the plans may be either incentive stock options or non qualified stock options. To date, all stock options granted have been non qualified stock options. Under the plans, Containers and Plastics have each reserved 1,200 shares of their common stock in order to enable them to issue shares under the plans. Both Containers and Plastics have 10,800 shares of $0.01 par value common stock currently issued, all of which are owned by Silgan. The SARs extend to all of the shares covered by the options and provide for the payment by either Containers or Plastics, as the case may be, to the holders of the options an amount in cash or stock equal to the excess of the proforma book value, as defined, of a share of common stock (or in the event of a public offering, the fair market value of a share of common stock) over the exercise price of the option with certain adjustments for the portion of vested stock appreciation not paid at the time of recapitalization in June, 1989. The subsidiaries have the right to repurchase, and employees have the right to require the subsidiaries to repurchase, their common stock at the then proforma book value, or market value as the case may be, should employees leave the Company. F-58 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 16. Stock Option Plans (continued) At December 31, 1993, there were outstanding options for 816 shares under the Containers' Plan and 300 shares under the Plastics' Plan. The exercise prices per share range from $2,122 to $2,456 for the Containers' options and are $746 for the Plastics' options. There were 528 options and 240 options exercisable at December 31, 1993 under the Containers' and Plastics' plans, respectively. The Company incurred charges relating to the vesting and payment of benefits under the stock option plans of $200 and $350 in 1993 and 1992, respectively (none in 1991). The stock options and SARs generally become exercisable ratably over a five year period. In the event of a public offering of any of the Company's or Holdings' capital stock or a sale of the Company or Holdings to a third party, (i) the options granted by Containers and Plastics pursuant to the plans, or (ii) any stock issued upon exercise of such options issued by Containers and Plastics are convertible into either stock options or common stock of the Company or Holdings. The conversion of such options or shares will be based upon a valuation of Holdings and an allocation of such value among the subsidiaries after giving affect to, among other things, that portion of the outstanding obligation of Holdings allocable to each such subsidiary. 17. Business Information The Company is engaged in the packaging business. Its principal products are metal and plastic containers. Net sales for its metal and plastic containers were $445,871 and $186,319; $425,844 and $192,596; and $435,349 and $232,139 for the years ended December 31, 1993, 1992 and 1991, respectively. Other sales amounted to $13,278, $11,599 and $10,723 for the years ended December 31, 1993, 1992 and 1991, respectively. One customer accounted for 34.1%, 36.5% and 32.2%, of net sales during the years ended December 31, 1993, 1992 and 1991 respectively. At December 31, 1993 and 1992, 12.9% and 14.5%, respectively, of the accounts receivable balance is due from this customer. F-59 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 18. Related Party Transactions Pursuant to various management services agreements (the "Management Agreement") entered into between Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and Horrigan, the Chairman of the Board and President of Holdings, respectively, S&H provides Holdings and the Company and its subsidiaries with general management, supervision and administrative services (the "Services"). In consideration for the Services, S&H receives a fee of 4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated earnings before depreciation, amortization, interest and taxes ("EBDIT") until EBDIT has reached the Scheduled Amount set forth in the Management Agreement and 3.3% (of which 0.3% is payable to MS & Co.) after EBDIT has exceeded the Scheduled Amount up to the Maximum Amount as set forth in the Management Agreement, plus reimbursement for all related out-of-pocket expenses. The total amount incurred for the years ended December 31, 1993, 1992 and 1991 was approximately $4,385, $4,225 and $4,027, respectively. Included in accounts payable at December 31, 1993 and 1992, was approximately $575 and $200, payable to S&H, respectively. Under the terms of the Management Agreement, the Company agreed, subject to certain exceptions, to indemnify S&H and any of its affiliates, officers, directors, employees, subcontractors, consultants or controlling persons against any loss or damage they may sustain arising in connection with the Management Agreement. In connection with the 1992 Refinancing, MS & Co. received as compensation for its services as underwriter for the Secured Notes, the 11 3/4% Notes and the Discount Debentures an aggregate of $11,500. In connection with the Credit Agreement entered into in 1993, the Banks (including Bankers Trust) received certain fees amounting to $8,100. 19. Commitments The Company is committed under certain noncancelable operating leases for office and plant facilities, equipment and automobiles. Minimum future rental payments under these operating leases are: 1994 $8,960 1995 6,700 1996 5,829 1997 4,873 1998 3,606 Thereafter 9,44l $39,409 Rental expense for the years ended December 31, 1993, 1992 and 1991 was approximately $7,999, $7,977 and $8,102, respectively. F-60 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 20. Litigation On June 30, 1989, Holdings acquired all of the outstanding shares of the Company for $6.50 per share (the "Merger"). In connection with the Merger, two complaints were filed during 1989 in the Court of Chancery in the State of Delaware (the "Court") by certain Silgan Class B Common Stockholders against Silgan, Holdings, MS & Co., officers and directors. The complaints allege, among other things, that certain defendants breached their fiduciary duties under Delaware law to minority stockholders of Silgan by engaging in unfair dealing, attempting to effect a merger at a grossly inadequate price and distributing misleading proxy materials. The complaints ask the Court, among other things, to rescind the Merger and/or to grant to plaintiffs such damages, including rescissory damages, as are found by the Court to be proven at trial. Additionally, the plaintiffs each filed a petition for appraisal. In 1991, the Court stayed one of the actions and related appraisal proceeding based upon the seizure and placement into receivership of one plaintiff. The Court lifted the stay of the action and appraisal proceeding on March 30, 1992 and both the action and appraisal were dismissed in February 1994 following settlement with the plaintiffs. The second action was voluntarily dismissed on January 29, 1992 without prejudice to the right of the plaintiffs to reinstate the action at the conclusion of the related appraisal proceeding. Discovery is proceeding in the appraisal. The Court has set the week of May 9, 1994 for trial. Additionally, a complaint was filed by parties who are limited partners of The Morgan Stanley Leveraged Equity Fund, L.P. ("MSLEF") against a number of defendants including Silgan and Holdings. The complaint alleges that Silgan and Holdings aided and abetted the general partners MSLEF in breaching their fiduciary duties to the limited partners. The Court dismissed all claims against Silgan and Holdings related to this action on January 14, 1993, and subsequently upheld that dismissal after the plaintiff filed a motion for reargument. The defendants believe that there is no factual basis for the allegations and claims contained in the complaints. Management also believes that the lawsuits are without merit and they intend to defend the lawsuits vigorously. In addition, management believes that the ultimate resolution of these matters and the appraisal proceedings will not have a material effect on the financial condition or results of operations of Silgan or Holdings. F-61 SILGAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (Dollars in thousands except for per share data) 20. Litigation (continued) In connection with the Merger and the litigation described above, as of December 31, 1993 approximately $6,800 of the purchase price has not been paid to certain former stockholders and such amount has been recorded by Holdings as a current liability. To the extent the Company elects to make such payments to former stockholders, the Company's stockholder's equity could be reduced by the amount of such payment. Other than the actions mentioned above there are no other pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company is a party or to which any of its properties are subject. F-62 REPORT OF INDEPENDENT AUDITORS Board of Directors Del Monte Corporation We have audited the accompanying Statement of Assets, Liabilities and Net Assets of the Del Monte Corporation Can Manufacturing Operations (an operation of Del Monte Corporation) as Constituted for Sale to Silgan Containers Corporation, as of June 30, 1993, and the Schedule of Sales and Cost of Sales for the year then ended. This financial statement and schedule are the responsibility of Del Monte Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement of Assets, Liabilities and Net Assets and the Schedule of Sales and Cost of Sales are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the presentation of the overall financial statement and schedule. We believe that our audit provides a reasonable basis for our opinion. The Del Monte Corporation Can Manufacturing Operations is an operation of Del Monte Corporation and has no separate legal status or existence. In our opinion, the Statement of Assets, Liabilities and Net Assets and the Schedule of Sales and Cost of Sales referred to above present fairly, in all material respects, the financial position of the Del Monte Corporation Can Manufacturing Operations as Constituted for Sale to Silgan Containers Corporation at June 30, 1993 and the sales and cost of sales for the year then ended in conformity with generally accepted accounting principles. Ernst & Young San Francisco, California December 17, 1993 F-63 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS JUNE 30, 1993 (Dollars in Thousands) ASSETS Current assets: Cash $ 2 Inventories 30,407 Prepaid expenses 6 Total current assets 30,415 Property, plant and equipment, net 36,880 TOTAL ASSETS $67,295 LIABILITIES AND NET ASSETS Current liabilities: Trade accounts payable $ 969 Accrued expenses 1,159 Total current liabilities 2,128 Net assets 65,167 TOTAL LIABILITIES AND NET ASSETS $67,295 See Notes to Financial Statement and Schedule F-64 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION SCHEDULE OF SALES AND COST OF SALES YEAR ENDED JUNE 30, 1993 (Dollars in Thousands) Sales (at manufactured cost - Note B) $197,054 Cost of sales $197,054 See Notes to Financial Statement and Schedule F-65 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION NOTES TO FINANCIAL STATEMENT AND SCHEDULE JUNE 30, 1993 (Dollars in Thousands) NOTE A - BASIS OF PRESENTATION The financial statement and schedule of Del Monte Corporation Can Manufacturing Operations as Constituted for Sale to Silgan Containers Corporation have been prepared in accordance with U.S. generally accepted accounting principles. The financial statement includes the assets to be purchased and certain related liabilities which are to be assumed of DMC's can manufacturing operations ("Can Man") pursuant to the Purchase Agreement (the "Agreement") dated September 3, 1993, as amended by the Amendment to the Purchase Agreement dated December 10, 1993, between Del Monte Corporation ("DMC") and Silgan Containers Corporation ("Silgan"). Can Man, comprising DMC's metal food and beverage container manufacturing operations, has no separate legal status or existence. Substantially all of the metal containers produced by Can Man are used by DMC in its canning business. DMC has accounted for Can Man as a cost center. Due to DMC's highly-integrated operations, interest, general and administrative costs, including income taxes, have never been allocated to Can Man and no allocation of these costs has been made in the financial statement or schedule. As a cost center, the transfer of metal containers to DMC canneries has not resulted in the exchange of cash, and as a result, no statement of cash flows is presented. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventories: Inventories are stated at the lower of cost or market utilizing the last-in, first-out (LIFO) method. For purposes of the purchase price determination, inventories will be valued utilizing the LIFO method, however there will be no adjustments for a LIFO reserve. Property, Plant and Equipment: Property, plant and equipment is stated at cost. Significant expenditures that increase useful lives are capitalized. Maintenance and repair costs are expensed as incurred. Depreciation is calculated by the straight-line method over the estimated useful lives of the respective assets. The principal estimated useful lives are: land improvements - 10 to 30 years; buildings and leasehold improvements - 4 to 25 years; machinery and equipment - 3 to 15 years. F-66 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION NOTES TO FINANCIAL STATEMENT AND SCHEDULE (Continued) JUNE 30, 1993 (Dollars in Thousands) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sales: Due to DMC's highly-integrated operations, no intercompany sale is recorded when metal containers manufactured by Can Man are transferred into the canning process. Since virtually all of DMC's metal containers have been supplied from its can manufacturing facilities, and since sales of unpacked metal containers to third parties have been minimal, DMC cannot reasonably estimate an arms-length market price for Can Man's metal containers. Therefore, sales in the Schedule of Sales and Cost of Sales are presented on the basis of cost and may not be indicative of market price. Cost of sales: Cost of sales represents fully absorbed manufacturing costs directly related to the manufacturing of metal containers. Interest and other general and administrative expenses: DMC does not allocate corporate interest or general and administrative expenses to its facilities. Accordingly, no such expenses are reflected in the Schedule of Sales and Cost of Sales. NOTE C - INVENTORIES Tinplate $ 4,023 Work in process 10,421 Purchased ends 3,255 Tin ends 10,980 Aluminum plate 324 Aluminum cups and tops 1,150 Materials and supplies 800 Reserve for obsolete inventory (236) LIFO reserve (310) Total Inventory $30,407 F-67 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION NOTES TO FINANCIAL STATEMENT AND SCHEDULE (Continued) JUNE 30, 1993 (Dollars in Thousands) NOTE D - PROPERTY, PLANT AND EQUIPMENT Accumulated Net Book Cost Depreciation Value Land and land improvements $ 1,042 $ (110) $ 932 Buildings and leasehold improvements 6,839 (903) 5,936 Machinery and equipment 41,269 (11,708) 29,561 Construction in process 451 -- 451 $49,601 $(12,721) $36,880 Depreciation expense included in cost of sales for the year ended June 30, 1993 was $3,970. NOTE E - COMMITMENTS DMC leases certain equipment in connection with its can manufacturing operations. At June 30, 1993, the aggregate minimum rental payments required under operating leases which are to be assumed by Silgan that have initial or remaining terms in excess of one year are as follows: 1994 $ 107 1995 106 1996 73 1997 20 1998 5 Thereafter -- $ 311 Rent expense included in cost of sales for the year ended June 30, 1993 was $942. F-68 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS SEPTEMBER 30, 1993 (Dollars in Thousands) (Unaudited) ASSETS Current assets: Cash $ 3 Inventories 25,177 Prepaid expenses 159 Total current assets 25,339 Property, plant and equipment, net 36,511 TOTAL ASSETS $61,850 LIABILITIES AND NET ASSETS Current liabilities: Trade accounts payable $ 1,891 Accrued expenses 1,478 Total current liabilities 3,369 Net assets 58,481 TOTAL LIABILITIES AND NET ASSETS $61,850 See Notes to Financial Statement and Schedule F-69 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION SCHEDULE OF SALES AND COST OF SALES (Dollars in Thousands) (Unaudited) Three Months Ended September 30, 1993 1992 Sales (at manufactured cost - Note B) $56,433 $59,929 Cost of sales $56,433 $59,929 See Notes to Financial Statement and Schedule F-70 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION NOTES TO FINANCIAL STATEMENT AND SCHEDULE SEPTEMBER 30, 1993 (Dollars in Thousands) NOTE A - BASIS OF PRESENTATION The financial statement and schedule of Del Monte Corporation Can Manufacturing Operations as Constituted for Sale to Silgan Containers Corporation at September 30, 1993 and for the three-month periods ended September 30, 1993 and 1992 are unaudited, but have been prepared in accordance with U.S. generally accepted accounting principles. The financial statement includes the assets to be purchased and certain related liabilities which are to be assumed of DMC's can manufacturing operations ("Can Man") pursuant to the Purchase Agreement (the "Agreement") dated September 3, 1993, as amended by the Amendment to the Purchase Agreement dated December 10, 1993, between Del Monte Corporation ("DMC") and Silgan Containers Corporation ("Silgan"). Can Man, comprising DMC's metal food and beverage container manufacturing operations, has no separate legal status or existence. Substantially all of the metal containers produced by Can Man are used by DMC in its canning business. DMC has accounted for Can Man as a cost center. Due to DMC's highly-integrated operations, interest, general and administrative costs, including income taxes, have never been allocated to Can Man and no allocation of these costs has been made in the financial statement or schedule. As a cost center, the transfer of metal containers to DMC canneries has not resulted in the exchange of cash, and as a result, no statement of cash flows is presented. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventories: Inventories are stated at the lower of cost or market utilizing the last-in, first-out (LIFO) method. For purposes of the purchase price determination, inventories will be valued utilizing the LIFO method, however there will be no adjustments for a LIFO reserve. Property, Plant and Equipment: Property, plant and equipment is stated at cost. Significant expenditures that increase useful lives are capitalized. Maintenance and repair costs are expensed as incurred. Depreciation is calculated by the straight-line method over the estimated useful lives of the respective assets. The principal estimated useful lives are: land improvements - 10 to 30 years; buildings and leasehold improvements - 4 to 25 years; machinery and equipment - 3 to 15 years. F-71 DEL MONTE CORPORATION CAN MANUFACTURING OPERATIONS AS CONSTITUTED FOR SALE TO SILGAN CONTAINERS CORPORATION NOTES TO FINANCIAL STATEMENT AND SCHEDULE SEPTEMBER 30, 1993 (Dollars in Thousands) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sales: Due to DMC's highly-integrated operations no intercompany sale is recorded when metal containers manufactured by Can Man are transferred into the canning process. Since virtually all of DMC's metal containers have been supplied from its can manufacturing facilities, and since sales of unpacked metal containers to third parties have been minimal, DMC cannot reasonably estimate an arms-length market price for Can Man's metal containers. Therefore, sales in the Schedule of Sales and Cost of Sales are presented on the basis of cost and may not be indicative of market price. Cost of sales: Cost of sales represents fully absorbed manufacturing costs directly related to the manufacturing of metal containers. Interest and other general and administrative expenses: DMC does not allocate corporate interest or general and administrative expenses to its facilities. Accordingly, no such expenses are reflected in the Schedule of Sales and Cost of Sales. NOTE C - INVENTORIES September 30, 1993 Tinplate $ 4,777 Work in process 9,839 Purchased ends 1,822 Tin ends 6,369 Aluminum plate 289 Aluminum cups and tops 1,809 Materials and supplies 822 Reserve for obsolete inventory (236) LIFO reserve (314) Total Inventory $25,177 F-72 SILGAN HOLDINGS INC. PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993 (Dollars in Thousands) Set forth below is the Company's summary pro forma unaudited combined statement of operations for the year ended December 31, 1993 which include the historical results of DM Can for the period ended December 21, 1993 and give effect to the pro forma adjustments. The pro forma adjustments to the historical results of operations reflect the sales prices set forth in a supply agreement with Del Monte, the estimated effect of purchase accounting adjustments based upon preliminary apraisals and evaluations, the financing of the acquisition and certain other adjustments as if these events had occurred as of the beginning of the periods mentioned therein. The following unaudited pro forma results of operations would actually have been had the transaction in fact occurred on the date indicated or to project the Company's results for any future period. F-73 SILGAN HOLDINGS INC. PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993 (Dollars in Thousands) Pro Forma Historical DM Can Adjustments Pro Forma Net sales $645,468 $175,169 $ (2,023)(a) $818,614 1,516 (b) 330 (c) Cost of goods sold 571,174 175,169 (14,704)(d) 733,485 Gross profit 74,294 $ - 10,835 85,129 Selling, general and administrative expenses 32,460 2,000 (e) 34,460 Income from operations 41,834 8,835 50,669 Interest expense and other related financing costs 54,265 4,503 (f) 58,768 Other expense 35 - 35 Loss before income taxes (12,466) 4,332 (8,134) Income tax provision 1,900 346 (g) 2,246 Loss before extraordinary charges and cumulative effect of changes in accounting principles $ (14,366) $ 3,986 $(10,380) F-74 SILGAN HOLDINGS INC. NOTES TO PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (a) Historical net sales have been adjusted to reflect the prices set forth in the supply agreement with Del Monte as applied against quantities delivered. (b) Increased depreciation charge based upon the estimated fair values of property, plant and equipment and applying Silgan's estimated useful life of 25 years for buildings and improvements and 3 - 11 years for machinery and equipment. (c) Amortization of expense of fair value over net assets acquired over estimated life of 20 years. (d) Decreased cost of goods sold for the difference between DM Can's historical costs to produce units transferred to Del Monte in 1993 (calculated from the audited Schedule of Sales and Cost of Sales for the year ended June 30, 1993 for Del Monte Corporation Can Manufacturing Operations included elsewhere in this Prospectus and certain other financial information provided by Del Monte) and the costs, calculated by the Company on a pro forma basis, that the Company would have incurred to produce such units in 1993. With respect to Del Monte's Schedule of Sales and Cost of Sales, since virtually all of Del Monte's metal containers were supplied from its can manufacturing facilities and since sales of unpacked metal containers to third parties were minimal, Del Monte could not reasonably estimate an arms-length market price for Del Monte's metal containers. Therefore, sales in the Schedule of Sales and Cost of Sales are presented on the basis of cost and may not be indicative of market price. Cost of sales in the Schedule of Sales and Cost of Sales represents fully absorbed manufacturing costs directly related to the manufacturing by Del Monte of metal containers. Additionally, Del Monte did not allocate corporate interest or general and administrative expenses to its can manufacturing facilities. Accordingly, no such expenses are reflected in the Schedule of Sales and Cost of Sales. The Company's calculation of the cost that it would have incurred was based upon the actual units (by can specification) transferred by DM Can to Del Monte during 1993, multiplied by the Company's calculated cost of material, labor and overhead for each such can specification. The Company's cost data used for such calculation was derived from the detail information it used to determine the cost components for each can specification which was provided in the Supply Agreement with Del Monte. Management believes that such adjustment reflects the margins inherent in the F-75 SILGAN HOLDINGS INC. NOTES TO PRO FORMA UNAUDITED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993 (Continued) contractual pricing under the Supply Agreement with Del Monte based upon 1993 unit volume. (e) Increase in administrative support services which will be incurred as a result of the increased sales volume of DM Can. (f) Estimated increase in interest expense due to additional bank borrowings of approximately $70 million at a rate of 6.5% (the 1993 average annual bank borrowing rate) to finance the acquisition of DM Can. (g) For pro forma purposes there is no federal income tax expense due to Silgan's consolidated net operating loss position. An adjustment has been made to the state income tax provision for the estimated effect of DM Can. F-76 PART II: INFORMATION NOT REQUIRED IN PROSPECTUS Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits: -------- Exhibit Number Description - ------ ----------- 3.1 Restated Certificate of Incorporation of Silgan, as amended (incorporated by reference to Exhibit 3.1 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-11200). 3.2 By-laws of Silgan (incorporated by reference to Exhibit 3(ii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 3.3 Restated Certificate of Incorporation of Holdings (incorporated by reference to Exhibit 1 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 3.4 By-laws of Holdings (incorporated by reference to Exhibit 3.4 filed with Silgan's Registration Statement on Form S-1, dated May 1, 1989, Registration Statement No. 33-28409). 4.1 Indenture, dated as of June 29, 1992, between Holdings and The Connecticut National Bank, as trustee, with respect to the Discount Debentures (incorporated by reference to Exhibit 1 filed with Holdings' Current Report on Form 8-K dated July 15, 1992, Commission File No. 33-47632). 4.2 Indenture dated as of June 29, 1992, between Silgan and Shawmut Bank, N.A., as Trustee, with respect to the Notes (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K dated July 15, 1992, Commission File No. 33-46499). 4.3 Secured Notes Purchase Agreement dated as of June 29, 1992, between Silgan and Morgan Stanley (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K dated July 15, 1992, Commission File No. 33-46499). 4.4 Form of Holdings' 13-1/4% Senior Discount Debentures Due 2002 (incorporated by reference to Exhibit 4.4 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 33-28409). 4.5 Form of Silgan's 11-3/4% Senior Subordinated Notes due 2002 (incorporated by reference to Exhibit 4.5 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 33-28409). 4.6 Registration Rights Agreement, dated August 31, 1987, among Silgan and each of the Purchasers who are signatory thereto with respect to Silgan's Class B Common Stock (incorporated by reference to Exhibit 10(ii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality of the Debentures (incorporated by reference to Exhibit 5 filed with Amendment No. 3 to Holdings' Registration Statement on Form S- 1, dated June 19, 1992, Registration Statement No. 33-47632). 8 Opinion of Winthrop, Stimson, Putnam & Roberts as to tax matters (incorporated by reference to Exhibit 8 filed with Post-Effective Amendment No. 1 to Holdings' Registration Statement on Form S-1, dated June 18, 1993, Registration Statement No. 33-47632). 10.1 Agreement for Purchase and Sale of Assets, dated as of June 18, 1987, between Carnation Company and Canaco Corporation (Containers) (incorporated by reference to Exhibit 2(i) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.2 First Amendment to Agreement for Purchase and Sale of Assets, dated as of July 15, 1987, between Carnation Company and Canaco Corporation (Containers) (incorporated by reference to Exhibit 2(ii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.3 Second Amendment to Agreement for Purchase and Sale of Assets, dated as of August 31, 1987, between Carnation Company and Canaco Corporation (Containers) (incorporated by reference to Exhibit 2(iii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.4 Asset Purchase Agreement, dated as of July 29, 1987, between Plastics Corporation (Plastics) and Monsanto Company (incorporated by reference to Exhibit 2(iv) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.5 First Amendment to the Asset Purchase Agreement, dated as of July 29, 1987, between Plastics Corporation (Plastics) and Monsanto Company (incorporated by reference to Exhibit 2(v) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.6 Agreement for Purchase and Sale of Assets, dated as of September 27, 1988, between Carnation Company and Containers (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K, dated October 17, 1988). 10.7 Agreement for Purchase and Sale of Cartons, effective October 1, 1988, between Containers and Carnation Company (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated October 17, 1988). 10.8 Agreement for Sale and Purchase of Containers, dated as of December 3, 1988, between Containers and Dial (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated December 19, 1988). 10.9 Asset Purchase Agreement, dated as of November 7, 1988, between Containers and Dial (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K, dated December 19, 1988). 10.10 Amended and Restated Stock Purchase Agreement, dated as of January 1, 1989, among Aim, certain shareholders of Aim, and Silgan (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K, dated March 15, 1989). 10.11 Assignment and Assumption, dated as of March 1, 1989, between Silgan and InnoPak Plastics Corporation (Plastics) (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated March 15, 1989). 10.12 Agreement for Purchase and Sale of Assets between Fortune and InnoPak Plastics Corporation (Plastics) dated as of March 1, 1989 (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.13 Amendment to Agreement for Purchase and Sale of Assets, dated as of March 30, 1989, between Fortune and InnoPak Plastics Corporation (Plastics) (incorporated by reference to Exhibit 2 to Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.14 Assignment and Assumption Agreement, dated as of March 31, 1989, between InnoPak Plastics Corporation (Plastics) and Fortune Acquisition Corporation (incorporated by reference to Exhibit 3 to Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.15 Agreement for Purchase and Sale of Shares between and among InnoPak Plastics Corporation (Plastics), Gordon Malloch and Jurgen Arnemann and Express, dated as of March 1, 1989 (incorporated by reference to Exhibit 5 to Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.16 Amendment to Agreement for Purchase and Sale of Shares, dated as of March 31 , 1989, among InnoPak Plastics Corporation (Plastics), Express, Gordon Malloch and Jurgen Arnemann (incorporated by reference to Exhibit 6 to Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.17 Assignment and Assumption Agreement dated as of March 31, 1989, between InnoPak Plastics Corporation (Plastics) and 827598 Ontario Inc. (incorporated by reference to Exhibit 7 to Silgan's Current Report on Form 8-K, dated April 14, 1989). 10.18 Employment Agreement, dated as of September 14, 1987, between James Beam and Canaco Corporation (Containers) (incorporated by reference to Exhibit 10(vi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33- 18719). 10.19 Amended and Restated Employment Agreement, dated as of June 18, 1987, between Gerald Wojdon and Canaco Corporation (Containers) (incorporated by reference to Exhibit 10(vii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719). 10.20 Employment Agreement, dated as of September 1, 1989, between Silgan, InnoPak Plastics Corporation (Plastics), Russell F. Gervais and Aim (incorporated by reference to Exhibit 5 filed with Silgan's Report on Form 8-K, dated March 15, 1989). 10.21 Supply Agreement for Gridley, California effective August 31, 1987 (incorporated by reference to Exhibit 10(ix) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.22 Amendment to Supply Agreement for Gridley, California, dated July 1, 1990 (incorporated by reference to Exhibit 10.27 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.23 Supply Agreement for Gustine, California effective August 31, 1987 (incorporated by reference to Exhibit 10(x) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.24 Amendment to Supply Agreement for Gustine, California, dated March 1, 1990 (incorporated by reference to Exhibit 10.29 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.25 Supply Agreement for Hanford, California effective August 31, 1987 (incorporated by reference to Exhibit 10(xi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.26 Amendment to Supply Agreement for Hanford, California, dated July 1, 1990 (incorporated by reference to Exhibit 10.31 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.27 Supply Agreement for Riverbank, California effective August 31, 1987 (incorporated by reference to Exhibit 10(xii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.28 Supply Agreement for Woodland, California effective August 31, 1987 (incorporated by reference to Exhibit 10(xiii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.29 Amendment to Supply Agreement for Woodland, California, dated July 1, 1990 (incorporated by reference to Exhibit 10.34 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.30 Supply Agreement for Morton, Illinois, effective August 31, 1987 (incorporated by reference to Exhibit 10(vii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.31 Amendment to Supply Agreement for Morton, Illinois, dated July 1, 1990 (incorporated by reference to Exhibit 10.36 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.32 Supply Agreement for Ft. Dodge, Iowa, effective August 31, 1987 (incorporated by reference to Exhibit 10(xiv) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.33 Amendment to Supply Agreement for Ft. Dodge, Iowa, dated March 1, 1990 (incorporated by reference to Exhibit 10.38 filed with Silgan's Registration statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.34 Supply Agreement for Maysville, Kentucky, effective August 31, 1987 (incorporated by reference to Exhibit 10(xvi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.35 Amendment to Supply Agreement for Maysville, Kentucky, dated March 1, 1990 (incorporated by reference to Exhibit 10.40 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.36 Supply Agreement for St. Joseph, Missouri, effective August 31, 1987 (incorporated by reference to Exhibit 10(xvii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.37 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1, 1990 (incorporated by reference to Exhibit 10.42 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.38 Supply Agreement for Trenton, Missouri, effective August 31, 1987 (incorporated by reference to Exhibit 10(xviii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.39 Amendment to Supply Agreement for Trenton, Missouri, dated March 1, 1990 (incorporated by reference to Exhibit 10.44 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.40 Supply Agreement for South Dayton, New York, effective August 31, 1987 (incorporated by reference to Exhibit 10(xix) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.41 Amendment to Supply Agreement for South Dayton, New York, dated March 1, 1990 (incorporated by reference to Exhibit 10.46 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.42 Supply Agreement for Statesville, North Carolina, effective August 31, 1987 (incorporated by reference to Exhibit 10(xx) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.43 Supply Agreement for Hillsboro, Oregon, effective August 31, 1987 (incorporated by reference to Exhibit 10(xxi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.44 Amendment to Supply Agreement for Hillsboro, Oregon, dated March 1, 1990 (incorporated by reference to Exhibit 10.49 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.45 Supply Agreement for Moses Lake, Washington, effective August 31, 1987 (incorporated by reference to Exhibit 10(xxii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.46 Amendment to Supply Agreement for Moses Lake, Washington, dated March 1, 1990 (incorporated by reference to Exhibit 10.51 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.47 Supply Agreement for Jefferson, Wisconsin, effective August 31, 1987 (incorporated by reference to Exhibit 10(xxiii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.48 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1, 1990 (incorporated by reference to Exhibit 10.53 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.49 Supply Agreement for Seaboard, effective October 1, 1988 (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated October 17, 1988). 10.50 Supply Agreement for Fort Madison, dated as of December 3, 1988 (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated December 19, 1988). 10.51 Amendment to Supply Agreements dated November 17, 1989 for Ft. Dodge, Iowa; Hillsboro, Oregon; Jefferson, Wisconsin; St. Joseph, Missouri; and Trenton, Missouri (incorporated by reference to Exhibit 10.49 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.52 Raw Materials Agreement, dated as of November 12, 1986, by and between Carnation and Alcoa (incorporated by reference to Exhibit 10(xxxix) filed with Silgan's Registration Statement on Form S-1, dated September 14, 1988, Registration Statement No. 33-18719). 10.53 Assignment of Raw Materials Agreement, dated as of August 31, 1987, by and between Carnation and Alcoa (incorporated by reference to Exhibit 10(xl) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.54 Amendment to Raw Materials Agreement, dated February 21, 1990, by and between Containers and Alcoa (incorporated by reference to Exhibit 10.52 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.55 InnoPak Plastics Corporation (Plastics) Pension Plan for Salaried Employees (incorporated by reference to Exhibit 10.32 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 33-18719). 10.56 InnoPak Plastics Corporation (Plastics) Compensation Investment Plan for Salaried Employees (incorporated by reference to Exhibit (xli) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.57 Containers Pension Plan for Salaried Employees (incorporated by reference to Exhibit 10.34 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 33-18719). 10.58 Non-Competition Agreement, dated as of January 1, 1989, among Silgan, Aim, and certain shareholders of Aim (incorporated by reference to Exhibit 4 filed with Silgan's Current Report on Form 8-K, dated March 15, 1989). 10.59 Sharonville Conversion Agreement, dated as of August 31, 1987, between Monsanto and InnoPak Plastics Corporation (Plastics) (incorporated by reference to Exhibit 10(xxix) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.60 Consent, dated August 11, 1987, by Yoshino Kogyosno Co., Ltd. to the Sharonville Conversion Agreement (incorporated by reference to Exhibit 10(xxx) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.61 Lease, dated as of August 31, 1987, between Monsanto and InnoPak Plastics Corporation (Plastics), concerning the land and plant in Anaheim, California (incorporated by reference to Exhibit 10(xxxi) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.62 Assignment and Assumption Agreement, dated as of August 31, 1987, between Monsanto and Innopak Plastics Corporation (Plastics), with respect to certain premises known as the Westport Plant located in Westport, Missouri (incorporated by reference to Exhibit 10(xxxii) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.63 Amendment to Lease, dated August 31, 1987, between Houston/St. Louis Properties (Successor) and InnoPak Plastics Corporation (Plastics), with respect to property located in Westport, Missouri (incorporated by reference to Exhibit 10(xxxiii) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.64 Assignment and Assumption Agreement, dated as of August 31, 1987, between Monsanto and InnoPak Plastics Corporation (Plastics), with respect to certain premises at 2469 Schuetz Road, Westport, Missouri (incorporated by reference to Exhibit 10(xxxiv) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.65 Assignment and Assumption Agreement, dated as of August 31, 1987, between Monsanto and InnoPak Plastics Corporation (Plastics), with respect to certain premises at 2451 Schuetz Road, Westport, Missouri (incorporated by reference to Exhibit 10(xxxv) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.66 Landlord Estoppel Certificates dated August 17, 1987, with respect to real property lease located in Westport, Missouri (incorporated by reference to Exhibit 10(xxxvi) filed with Silgan's Post- Effective Amendment No. 4 to its Registration Statement on Form S- 1, dated September 14, 1988, Registration No. 33-18719). 10.67 Landlord Estoppel Certificates dated August 25, 1987, with respect to real property lease covering certain premises at 2451 Schuetz Road, Westport, Missouri (incorporated by reference to Exhibit 10(xxxvii) filed with Silgan's Post-Effective Amendment No. 4 to its Registration Statement on Form S-1, dated September 14, 1988, Registration No. 33-18719). 10.68 Express Guaranty dated as of March 31, 1989 (incorporated by reference to Exhibit 10.66 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.69 Express Security Agreement dated as of March 31, 1989 (incorporated by reference to Exhibit 10.67 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.70 Canadian Holdco Guaranty dated as of March 31, 1989 (incorporated by reference to Exhibit 10.68 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.71 Canadian Holdco Pledge Agreement dated as of March 31, 1989 (incorporated by reference to Exhibit 10.69 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.72 Canadian Acquisition Co. Guaranty dated as of March 31, 1989 (incorporated by reference to Exhibit 10.70 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.73 Canadian Acquisition Co. Pledge Agreement dated as of March 31, 1989 (incorporated by reference to Exhibit 10.71 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.74 Agreement and Plan of Merger, dated as of April 28, 1989, among Holdings, Acquisition and Silgan (incorporated by reference to Exhibit 2.6 to Holdings' Registration Statement on Form S-1, dated May 1, 1989, Registration No. 33-28409). 10.75 Lease between Containers and Riverbank Venture dated May 1, 1990 (incorporated by reference to Exhibit 10.99 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719). 10.76 Loan Agreement between The Iowa Department of Economic Development, City of Iowa City and Iowa City Can Manufacturing Company, dated November 17, 1988 (incorporated by reference to Exhibit 10.100 filed with Silgan's Annual Report on Form 10-K for the year ended December 31,1989, Commission File No. 33-18719). 10.77 Promissory Note and Promissory Note Agreement dated November 17, 1988 from Iowa City Can Manufacturing Company to the City of Iowa City (incorporated by reference to Exhibit 10.101 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719). 10.78 Mortgage between City of Iowa City, Iowa City Can Manufacturing Company and Michael Development dated January 5, 1990 (incorporated by reference to Exhibit 10.102 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719). 10.79 Containers Master Equipment Lease with Decimus Corporation, dated as of October 11, 1989 (incorporated by reference to Exhibit 10.103 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719). 10.80 Underwriting Agreement dated June 22, 1989 between Holdings and Morgan Stanley (incorporated by reference to Exhibit 1 filed with Amendment No. 4 to Holdings' Registration Statement on Form S-1, dated June 23, 1989, Registration Statement No. 33-28409). 10.81 Amended and Restated Tax Allocation Agreement by and among Holdings, Silgan, Containers, InnoPak Plastics Corporation (Plastics), Aim, Fortune, SPHI and Silgan PET dated as of July 13, 1990 (incorporated by reference to Exhibit 10.107 filed with Post- Effective Amendment No. 6 to Silgan's Registration Statement on Form S-1, dated August 20, 1990, Registration Statement No. 33- 18719). 10.82 Sublease Agreement between Amoco and PET Acquisition Corp. (Silgan PET) dated July 24, 1989 (incorporated by reference to Exhibit 10.111 filed with Post-Effective Amendment No. 6 to Silgan's Registration Statement on Form S-1, dated August 20, 1990, Registration Statement No. 33-18719). 10.83 Lease Agreement between the Trustees of Cabot 95 Trust and Amoco Plastic Products Company dated August 16, 1978 (incorporated by reference to Exhibit 10.112 filed with Post-Effective Amendment No. 6 to Silgan's Registration Statement on Form S-1, dated August 20, 1990, Registration Statement No. 33-18719). 10.84 Contribution Agreement by and among Messrs. Silver, Horrigan, Rankin and Rodriguez, MSLEF II and BTNY dated as of July 13, 1990 (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated July 1990). 10.85 Asset Purchase Agreement, dated as of November 1, 1991 by and among Silgan PET, Holdings and Sewell Plastics Inc. (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K, dated December 2,1991). 10.86 Inventory and Equipment Purchase Agreement, dated as of November 1, 1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by reference to Exhibit 2 filed with Silgan's Current Report on Form 8-K, dated December 2, 1991). 10.87 Letter Agreement, dated November 15, 1991, amending the Asset Purchase Agreement dated as of November 1, 1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by reference to Exhibit 3 to Silgan's Current Report on Form 8-K, dated December 2, 1991). 10.88 Letter Agreement, dated November 15, 1991, amending the Inventory and Equipment Purchase Agreement dated as of November 1, 1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by reference to Exhibit 4 filed with Silgan's Current Report on Form 8-K, dated December 2,1991). 10.89 Letter Agreement, dated November 31, 1991, amending the Inventory and Equipment Purchase Agreement dated as of November 1, 1991 by and among Silgan PET, Holdings and Sewell Plastics, Inc. (incorporated by reference to Exhibit 5 filed with Silgan's Current Report on Form 8-K, dated December 2, 1991). 10.90 Containers Deferred Incentive Savings Plan (incorporated by reference to Exhibit 10.144 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499). 10.91 Amended and Restated Credit Agreement dated as of June 18, 1992, among Silgan, Containers, Plastics, various banks and Bankers Trust, as Agent (incorporated by reference to Exhibit 4 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.92 Amended and Restated Pledge Agreement dated as of June 18, 1992, made by Silgan (incorporated by reference to Exhibit 5 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.93 Amended and Restated Pledge Agreement dated as of June 18, 1992, made by Containers and Plastics (incorporated by reference to Exhibit 6 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.94 Amended and Restated Pledge Agreement dated as of June 18, 1992, made by Holdings (incorporated by reference to Exhibit 7 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.95 Amended and Restated Security Agreement dated as of June 18, 1992, among Plastics, Containers and Bankers Trust (incorporated by reference to Exhibit 8 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.96 Amended and Restated Holdings Guaranty dated as of June 18, 1992 (incorporated by reference to Exhibit 9 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33- 46499). 10.97 Borrowers Guaranty, dated as of June 18, 1992, made by Silgan, Containers and Plastics (incorporated by reference to Exhibit 10 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.98 Subsidiaries Guarantee, dated as of June 29, 1992, of Containers and Plastics (incorporated by reference to Exhibit 11 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.99 Underwriting Agreement, dated June 22, 1992, between Holdings and Morgan Stanley with respect to the Debentures (incorporated by reference to Exhibit 2 filed with Holdings' Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-47632). 10.100 Underwriting Agreement, dated June 22, 1992, between Silgan and Morgan Stanley with respect to the 11-3/4% Notes (incorporated by reference to Exhibit 3 filed with Silgan's Current Report on Form 8-K, dated July 15, 1992, Commission File No. 33-46499). 10.101 Silgan Containers Corporation Second Amended and Restated 1989 Stock Option Plan (incorporated by reference to Exhibit 10.100 filed with Post-Effective Amendment No. 2 to Silgan's Registration Statement on Form S-1, dated May 11, 1994, Commission File No. 33- 46499). 10.102 Form of Containers Nonstatutory Restricted Stock Option and Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.120 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 33-28409). 10.103 Silgan Plastics Corporation 1994 Option Plan (incorporated by reference to Exhibit 10.102 filed with Post-Effective Amendment No. 2 to Silgan's Registration Statement on Form S-1, dated May 11, 1994, Commission File No. 33-46499). 10.104 Form of Plastics Nonstatutory Restricted Stock Option and Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.103 filed with Post-Effective Amendment No. 2 to Silgan's Registration Statement on Form S-1, dated May 11, 1994, Commission File No. 33-46499). 10.105 Silgan Holdings Inc. Second Amended and Restated 1989 Stock Option Plan (incorporated by reference to Exhibit 10.104 filed with Post- Effective Amendment No. 2 to Silgan's Registration Statement on Form S-1, dated May 11, 1994, Commission File No. 33-46499). 10.106 Form of Holdings Nonstatutory Restricted Stock Option and Stock Appreciation Right Agreement (incorporated by reference to Exhibit 10.124 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 33-28409). 10.107 Purchase Agreement, dated as of September 3, 1993, between Containers and Del Monte (incorporated by reference to Exhibit 1 filed with Holdings' Current Report on Form 8-K, dated January 5, 1994, Commission File No. 33-28409). 10.108 Amendment to Purchase Agreement, dated as of December 10, 1993, between Containers and Del Monte (incorporated by reference to Exhibit 2 filed with Holdings' Current Report on Form 8-K, dated January 5, 1994, Commission File No. 33-28409). 10.109 Amended and Restated Organization Agreement, dated as of December 21, 1993, among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and Holdings (incorporated by reference to Exhibit 2 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.110 Stockholders Agreement, dated as of December 21, 1993, among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and Holdings (incorporated by reference to Exhibit 3 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.111 Amended and Restated Management Services Agreement, dated as of December 21, 1993, between S&H and Holdings (incorporated by reference to Exhibit 4 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.112 Amended and Restated Management Services Agreement, dated as of December 21, 1993, between S&H and Silgan (incorporated by reference to Exhibit 5 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.113 Amended and Restated Management Services Agreement, dated as of December 21, 1993, between S&H and Containers (incorporated by reference to Exhibit 6 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.114 Amended and Restated Management Services Agreement, dated as of December 21, 1993, between S&H and Plastics (incorporated by reference to Exhibit 7 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.115 Stock Purchase Agreement, dated as of December 21, 1993, between Holdings and First Plaza (incorporated by reference to Exhibit 8 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.116 Credit Agreement, dated as of December 21, 1993, among Silgan, Containers, Plastics, the lenders from time to time party thereto, Bank of America, as co-agent, and Bankers Trust, as agent (incorporated by reference to Exhibit 9 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.117 Amended and Restated Holdings Guaranty, dated as of December 21, 1993, made by Holdings (incorporated by reference to Exhibit 10 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.118 Amended and Restated Borrowers Guaranty, dated as of December 21, 1993, made by Silgan, Containers, Plastics and California- Washington Can Corporation (incorporated by reference to Exhibit 11 filed with Holdings' Current Report on Form 8-K, dated March 25, 1994, Commission File No. 33-28409). 10.119 Supply Agreement, dated as of September 3, 1993, between Containers and Del Monte (incorporated by reference to Exhibit 10.118 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-11200). (Portions of this Exhibit are subject to an application for confidential treatment filed with the Commission.) 10.120 Amendment to Supply Agreement, dated as of December 21, 1993, between Containers and Del Monte (incorporated by reference to Exhibit 10.119 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 1-11200). (Portions of this Exhibit are subject to an application for confidential treatment filed with the Commission.) *12.1 Computations of Holdings' Ratio Earnings to Fixed Charges for the three months ended March 31, 1994 and 1993 (incorporated by reference to Exhibit 12.1 filed with Post-Effective Amendment No. 3 to Holdings, Registration Statement on Form S-1, dated August 2, 1994, Registration No. 33-47632). 12.2 Computations of Holdings' Ratio of Earnings to Fixed Charges for the years ended December 31, 1993, 1992, 1991 and 1990 and for the period from April 6, 1989 to December 31, 1989 (incorporated by reference to Exhibit 12.1 filed with Post-Effective Amendment No. 2 to Holdings' Registration Statement on Form S-1, dated May 11, 1994, Registration No. 33-47632). 12.3 Computations of Silgan's Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements for the year ended December 31, 1989 (incorporated by reference to Exhibit 12.2 filed with Post-Effective Amendment No. 2 to Holdings' Registration Statement on Form S-1, dated May 11, 1994, Registration No. 33-47632). 22 Subsidiaries of the Registrant (incorporated by reference to Exhibit 22 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 33-28409. 24 Consent of Ernst & Young. 25 Power of Attorney (incorporated by reference to Exhibit 25 filed with Post-Effective Amendment No. 2 to Holdings' Registration Statement on Form S-1, dated May 11, 1994, Registration No. 33- 47632). 26 Statement of Eligibility of Trustee (incorporated by reference to Exhibit 26 filed with Amendment No. 2 to Holdings' Registration Statement on Form S-1, dated June 8, 1992, Registration Statement No. 33-47632). _________________________ [FN] Filed herewith SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on August 10, 1994. SILGAN HOLDINGS INC. By /s/ R. Philip Silver --------------------------- R. Philip Silver Chairman of the Board and Co-Chief Executive Officer 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) August 10, 1994 (R. Philip Silver) D. Greg Horrigan * President, Co-Chief Executive - -------------------------- Officer and Director August 10, 1994 (D. Greg Horrigan) Vice President, Assistant James S. Hoch * Secretary and Director August 10, 1994 - -------------------------- (James S. Hoch) Vice President, Assistant Robert H. Niehaus * Secretary and Director August 10, 1994 - -------------------------- (Robert H. Niehaus) Executive Vice President, Chief Harley Rankin, Jr. * Financial Officer and August 10, 1994 - -------------------------- Treasurer (Harley Rankin, Jr.) (Principal Financial Officer) Vice President, Controller and Harold J. Rodriguez, Jr. * Assistant Treasurer August 10, 1994 - -------------------------- (Principal Accounting (Harold J. Rodriguez, Jr.) Officer) *By /s/ R. Philip Silver ----------------------- R. Philip Silver Attorney-in-fact INDEX TO EXHIBITS Exhibit No. Exhibit - ---------- ------- 24 Consent of Ernst & Young EX-24 2 EXHIBIT 24 TO POST EFFECTIVE AMENDMENT 4 TO S-1 EXHIBIT 24 Consent of Independent Auditors We consent to the references to our firm under the caption "Experts" and to the use of our reports dated March 10, 1994 with respect to the consolidated financial statements of Silgan Holdings Inc. and Silgan Corporation and to our report dated December 17, 1993 with respect to the financial statements of the Del Monte Corporation Can Manufacturing Operations as constituted for sale to Silgan Corporation included in the Post-Effective Amendment No. 4 to the Registration Statement (Form S-1, No. 33-47632) and related Prospectus of Silgan Holdings Inc. for the registration of its Senior Discount Debentures Due 2002. ERNST & YOUNG LLP /s/ Ernst & Young LLP Stamford, Connecticut August 10, 1994 -----END PRIVACY-ENHANCED MESSAGE-----