-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WYyGEZOvv3iBYuC+YdpVNr70hiEIoiBt/d8O81nwxVpkt1R6SC//H0dXKHGlmK0u obbj2+gRKlnn8J7D3aF6cg== 0000940180-97-000152.txt : 19970222 0000940180-97-000152.hdr.sgml : 19970222 ACCESSION NUMBER: 0000940180-97-000152 CONFORMED SUBMISSION TYPE: S-2/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILGAN HOLDINGS INC CENTRAL INDEX KEY: 0000849869 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 061269834 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-11989 FILM NUMBER: 97528695 BUSINESS ADDRESS: STREET 1: 4 LANDMARK SQ CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2039757110 S-2/A 1 AMENDMENT NO. 5 TO FORM S-2 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997 REGISTRATION NO. 333-11989 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 5 TO FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- SILGAN HOLDINGS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1269834 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) NUMBER) --------------- 4 LANDMARK SQUARE STAMFORD, CT 06901 (203) 975-7110 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- HARLEY RANKIN, JR. 4 LANDMARK SQUARE STAMFORD, CT 06901 (203) 975-7110 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------- COPIES OF ALL COMMUNICATIONS TO: FRANK W. HOGAN, III, ESQ. JERRY V. ELLIOTT, ESQ. WINTHROP, STIMSON, PUTNAM & ROBERTS SHEARMAN & STERLING 695 EAST MAIN STREET 599 LEXINGTON AVENUE STAMFORD, CT 06901 NEW YORK, NY 10022 (203) 348-2300 (212) 848-4000 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If the registrant elects to deliver its latest annual report to security- holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF TITLE OF SHARES TO BE REGISTERED PRICE (1) REGISTRATION FEE (2) - ------------------------------------------------------------------------------ Common Stock, par value $.01 per share............................... $103,500,000 $34,970
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). (2) $29,742 of the Registration Fee was paid in connection with the original filing of the Registration Statement on Form S-2, which filing was made on September 13, 1996. The remaining amount, $5,228, was paid by wire transfer prior to this filing. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1997 4,500,000 SHARES LOGO [OF SILGAN HOLDINGS, INC.] COMMON STOCK (PAR VALUE $.01 PER SHARE) ---------- Of the 4,500,000 shares of Common Stock offered hereby, 3,700,000 shares are being sold by the Company and 800,000 shares are being sold by the Selling Stockholders. See "Principal and Selling Stockholders". The Company will not receive any of the proceeds from the sale of the shares being sold by the Selling Stockholders. Prior to the Offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public offering price per share will be between $18 and $20. For factors considered in determining the initial public offering price, see "Underwriting". SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK. The Common Stock has been approved for quotation on the Nasdaq National Market under the symbol "SLGN". ---------- 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. -----------
PROCEEDS TO INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS -------------- ------------ ----------- ------------ Per Share.................. $ $ $ $ Total(3)................... $ $ $ $
- ----- (1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting estimated expenses of $1,000,000 payable by the Company. (3) The Selling Stockholders have granted the Underwriters an option for 30 days to purchase up to an additional 675,000 shares at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such option is exercised in full, the total initial public offering price, underwriting discount, proceeds to Company and proceeds to Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriting". ---------- The shares offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York, on or about February , 1997, against payment therefor in immediately available funds. GOLDMAN, SACHS & CO. MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC ---------- The date of this Prospectus is February , 1997. [Reserved for photographs] The Company intends to furnish to its stockholders annual reports containing audited financial statements and quarterly reports containing unaudited interim financial information for the first three quarters of each year of the Company. ---------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the consolidated financial statements of the Company contained elsewhere in this Prospectus, as well as the information appearing in the documents incorporated by reference herein. Unless otherwise indicated or unless the context otherwise requires, (i) the term "Holdings" means Silgan Holdings Inc., a Delaware corporation, the term "Company" means the combined business operations of Holdings and its subsidiaries, and the term "Silgan" means Silgan Corporation, a Delaware corporation and a wholly owned subsidiary of Holdings; (ii) all share and per share data have been adjusted to reflect the 17.133145 to 1 stock split of the outstanding Common Stock of Holdings effected by Holdings prior to the date of this Prospectus (the "Stock Split"), as described under "Description of Capital Stock"; and (iii) the information contained in this Prospectus (A) gives effect to the amendment to Holdings' restated certificate of incorporation to convert the separate classes of common stock of Holdings into one class of common stock of Holdings (see "Description of Capital Stock"), (B) assumes the Underwriters' over-allotment option is not exercised and (C) assumes a public offering price per share of Common Stock equal to $19.00. Certain information contained in this summary and elsewhere in this Prospectus, including information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and information with respect to the Company's expected operations, expected financial results, cost savings, plans and strategy for its business and related financing, are forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the forward-looking statements, see "Risk Factors". THE COMPANY The Company is a leading North American manufacturer of consumer goods packaging products that currently produces (i) steel and aluminum containers for human and pet food, (ii) custom designed plastic containers for personal care, health, food, pharmaceutical and household chemical products and (iii) specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. The Company is the largest manufacturer of metal food containers in North America, with a unit sale market share for the twelve months ended October 31, 1996 of 35% in the United States, and is a leading manufacturer of plastic containers in North America for personal care products. The Company's strategy is to increase shareholder value by growing its existing businesses and expanding into other segments by applying its expertise in acquiring, financing, integrating and efficiently operating consumer goods packaging businesses. The Company was founded in 1987 by its current Co-Chief Executive Officers. Since its inception, the Company has acquired and successfully integrated ten businesses, including the recent acquisitions of substantially all of the assets of the Food Metal and Specialty business ("AN Can") of American National Can Company ("ANC") in August 1995 for a purchase price of approximately $362.0 million (including net working capital of approximately $156.0 million) and the U.S. metal container manufacturing business ("DM Can") of Del Monte Corporation ("Del Monte") in December 1993 for a purchase price of approximately $73.3 million (including net working capital of approximately $21.9 million). In addition, on October 9, 1996 the Company completed its acquisition of Finger Lakes Packaging Company, Inc. ("Finger Lakes"), the metal food container manufacturing subsidiary of Curtice Burns Foods, Inc. ("Curtice Burns"). See "--Recent Developments". The Company's strategy has enabled it to rapidly increase its net sales and income from operations. The Company's net sales have increased from $630.0 million in 1992 to $1,405.7 million in 1996, representing a compound annual growth rate of approximately 22%. During this period, income from operations increased from 3 $42.2 million in 1992 to $123.3 million in 1996, representing a compound annual growth rate of approximately 31%, while the Company's income from operations as a percentage of net sales increased 2.1 percentage points from 6.7% to 8.8% over the same period. The Company's philosophy, which has contributed to its strong performance since inception, is based on: (i) a significant equity ownership by management and an entrepreneurial approach to business, (ii) its low cost producer position and (iii) its long-term customer relationships. The Company's senior management has a significant ownership interest in the Company, which fosters an entrepreneurial management style and places a primary focus on creating shareholder value. The Company has achieved a low cost producer status through (i) the maintenance of a flat, efficient organizational structure, resulting in low selling, general and administrative expenses as a percentage of total net sales, (ii) purchasing economies, (iii) significant capital investments that have generated manufacturing and production efficiencies, (iv) plant consolidations and rationalizations and (v) the proximity of its plants to its customers. The Company's philosophy has also been to develop long-term customer relationships by acting in partnership with its customers, providing reliable quality and service and utilizing its low cost producer position. This philosophy has resulted in numerous long-term supply contracts, high retention of customers' business and recognition from its customers, as demonstrated by many quality and service awards. GROWTH STRATEGY The Company intends to enhance its position as a leading supplier of consumer goods packaging products by aggressively pursuing a strategy designed to achieve future growth and to increase profitability. The key components of this strategy are to (i) increase the Company's market share in its current business lines through acquisitions and internal growth, (ii) expand into complementary business lines by applying the Company's acquisition and operating expertise to other areas of the North American consumer goods packaging market and (iii) improve the profitability of acquired businesses through integration, rationalization and capital investments to enhance their manufacturing and production efficiency. INCREASE MARKET SHARE THROUGH ACQUISITIONS AND INTERNAL GROWTH. The Company has increased its revenues and market share in the metal container, plastic container and specialty markets through acquisitions and internal growth. As a result of this strategy, the Company has diversified its customer base, geographic presence and product line. Management believes that certain industry trends exist which will enable the Company to continue to acquire attractive businesses in its existing markets. For example, during the past ten years, the metal container market has experienced significant consolidation due to the desire by food processors to reduce costs and deploy resources to their core operations. Self-manufacturers are increasingly outsourcing their container needs by selling their operations to commercial container manufacturing companies and agreeing to purchase containers from the buyer pursuant to long- term contracts. The Company's acquisitions of the metal container manufacturing operations of the Nestle Food Company ("Nestle"), The Dial Corporation and Del Monte reflect this trend. As a result of its growth strategy, the Company has more than tripled its overall share of the U.S. metal food container market from approximately 10% in 1987 to approximately 35% for the twelve months ended October 31, 1996. The Company expects this consolidation trend to continue as evidenced by its October 9, 1996 acquisition of Finger Lakes. See "--Recent Developments". The Company's plastic container business has also increased its market position primarily through strategic acquisitions, from a sales base of $88.8 million in 1987 to $216.4 million in 1996. The plastic container segment of the consumer goods packaging industry is highly fragmented, and management intends to pursue consolidation opportunities in that segment. 4 The Company also expects to generate internal growth due to its participation in certain higher growth segments of the consumer goods packaging market. For example, due to increasing consumer preference for plastic as a substitute for glass, the Company is aggressively pursuing opportunities for its custom designed polyethylene terephthalate ("PET") and high density polyethylene ("HDPE") containers. These opportunities include producing PET containers for regional bottled water companies, and HDPE and PET containers for products such as shampoo, mouthwash, salad dressing and liquor. The Company also believes that there will be opportunities to expand its specialty business, which generated net sales of $90.7 million in 1996. Specialty products manufactured by the Company include metal closures for vacuum sealed glass containers, its licensed Omni plastic container, a plastic, microwaveable bowl with an easy- open metal end, and paper containers. EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS. Management believes that it can successfully apply its acquisition and operating expertise to new segments of the consumer goods packaging industry. For example, with the AN Can acquisition, the Company expanded its specialty business into metal caps and closures and its licensed Omni plastic container. Management believes that certain trends in and characteristics of the North American consumer goods packaging industry will continue to generate attractive acquisition opportunities in complementary business lines. The Company is focused on the North American consumer goods packaging industry, which represents a significant part of the $95 billion North American packaging market (based on estimated total sales in 1994). Importantly, the industry is also fragmented, with numerous segments and multiple participants in each of them. In addition, many of these segments are experiencing consolidation. ENHANCE PROFITABILITY OF ACQUIRED COMPANIES. The Company seeks to acquire businesses at reasonable cash flow multiples and to enhance profitability by rationalizing plants, by improving manufacturing and production efficiencies and through purchasing economies. Since 1991, the Company has reduced costs by closing twelve smaller, higher cost facilities. Since its inception in 1987, the Company has invested approximately $272.3 million to upgrade acquired manufacturing facilities, aimed at generating manufacturing and production efficiencies and achieving a low cost producer position. As a result, the Company's acquisitions have generally been accretive to earnings and have produced high returns on assets. The AN Can acquisition illustrates the ability of the Company to enhance the profitability of acquired businesses. The Company estimates that it has reduced AN Can's operating costs from its historical 1994 level by at least $21.0 million, through selling and administrative cost reductions, improved manufacturing and production efficiencies and purchasing economies. The Company expects to further reduce AN Can's operating costs over the next few years by an aggregate of approximately $15.0 million (approximately half of which is expected to be realized in 1997) through the elimination of transitional administrative costs, the realization of additional manufacturing and production synergies with its metal container business and plant rationalizations. FINANCIAL STRATEGY The Company's financial strategy has been to use leverage to support its growth and optimize shareholder returns. The Company's stable and predictable cash flow, generated largely as a result of its long-term customer relationships, has supported its financial strategy. Management has successfully operated its businesses and achieved its growth strategy while managing the Company's indebtedness. Management intends to apply this strategy to further expand its business. Additionally, the Offering will provide the Company with improved financial flexibility to implement its growth strategy. 5 MANAGEMENT The Company was founded by R. Philip Silver and D. Greg Horrigan, former members of senior management of the packaging operations of Continental Group Inc. ("Continental Can Company"), which in 1986 was one of the largest packaging companies in the world. At Continental Can Company, Mr. Silver served as President, and Mr. Horrigan served as Executive Vice President and Operating Officer. The Company's senior members of management have on average 24 years of experience in the packaging industry. Mr. Silver, Mr. Horrigan and other members of senior management have a large ownership interest in the Company. After the Offering, Messrs. Silver and Horrigan will collectively own 34.6% (assuming that all outstanding stock options have been exercised in full) of the fully diluted Common Stock and senior management (including Messrs. Silver and Horrigan) will collectively own 43.4% (assuming that all outstanding stock options have been exercised in full) of the fully diluted Common Stock. The Company's ownership structure and philosophy align management's interests with those of its shareholders. BUSINESS SEGMENTS Holdings is a holding company that conducts its business through two operating companies, Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"), each of which is a wholly owned subsidiary of Silgan. CONTAINERS. For 1996, Containers had net sales of $1,189.3 million (85% of the Company's net sales) and income from operations of $106.1 million (85% of the Company's income from operations) (without giving effect to corporate expense). Containers manufactures metal containers for vegetables, fruit, pet food, meat, tomato based products, coffee, soup, seafood and evaporated milk. The Company estimates that approximately 80% of Containers' projected sales in 1997 will be pursuant to long-term supply arrangements. Containers also manufactures certain specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. For 1996, Containers had net sales of specialty packaging items of $90.7 million. PLASTICS. For 1996, Plastics had net sales of $216.4 million (15% of the Company's net sales) and income from operations of $18.4 million (15% of the Company's income from operations) (without giving effect to corporate expense). Plastics emphasizes value-added design, fabrication and decoration of custom containers in its business. Plastics manufactures custom designed HDPE containers for health and personal care products, including containers for shampoos, conditioners, hand creams, lotions, cosmetics and toiletries, household chemical products, including containers for scouring cleaners, cleaning agents and lawn and garden chemicals and pharmaceutical products, including containers for tablets, antacids and eye cleaning solutions. Plastics also manufactures PET custom designed containers for mouthwash, respiratory and gastrointestinal products, liquid soap, skin care lotions, salad dressings, condiments, instant coffee, bottled water and liquor. 6 RECENT DEVELOPMENTS ACQUISITION On October 9, 1996, Containers acquired substantially all of the assets of Finger Lakes, a metal food container manufacturer with facilities in Lyons, New York and Benton Harbor, Michigan and a wholly owned subsidiary of Curtice Burns, for a purchase price of approximately $29.9 million (including net working capital of approximately $8.0 million). As part of the transaction, Containers entered into a ten year supply agreement with Curtice Burns to supply all of the metal food container requirements of Curtice Burns' Comstock Michigan Fruit and Brooks Foods divisions. For its fiscal year ended June 29, 1996, Finger Lakes had net sales of $48.8 million. The Company financed this acquisition through working capital borrowings under the Silgan Credit Agreement (as defined herein). The Company is continually evaluating and intends to continue to pursue acquisition opportunities in the North American consumer goods packaging market. Although the Company has no present agreements or commitments to make any acquisition, the Company has expressed indications of interest or made preliminary bids on three acquisition opportunities presented to it, which have annual sales ranging from approximately $30 million to $250 million. Any such acquisition may be financed through the incurrence of additional indebtedness. No assurance can be given that the Company will complete any such acquisition. See "Risk Factors--Risks Associated with Growth Strategy". 1996 FINANCIAL RESULTS The Company's net sales for the year ended December 31, 1996 were $1,405.7 million, as compared to net sales of $1,101.9 million for the year ended December 31, 1995. Net sales for the Company's metal container business for the year ended December 31, 1996 were $1,189.3 million, an increase of $307.0 million from net sales of $882.3 million for the year ended December 31, 1995. This increase was principally due to the fact that the Company had twelve months of sales from AN Can in 1996 as compared to five months of sales in 1995. Net sales of the Company's metal container business for 1996 were also slightly more than net sales, pro forma for the AN Can acquisition, of $1,184.8 million for 1995. Net sales of the Company's plastic container business for the year ended December 31, 1996 were $216.4 million, as compared to net sales of $219.6 million for the year ended December 31, 1995. This decrease was principally due to the pass through of lower resin costs, offset by an increase in unit volume. Benefits realized from the AN Can acquisition and improved operating performance in 1996 resulted in higher income from operations for the Company for the year ended December 31, 1996, which was $123.3 million, as compared with income from operations of $69.8 million and $92.7 million, historical and pro forma for the AN Can acquisition respectively, for 1995 (in each case after giving effect to a charge of $14.7 million in 1995 to adjust the carrying value of certain assets). The Company's net income applicable to common stockholders for the year ended December 31, 1996 was $25.4 million. For the year ended December 31, 1995, the Company incurred a historical net loss of $21.8 million (which included a charge of $14.7 million to adjust the carrying value of certain assets). The increase in net income in 1996 principally reflected the aforementioned benefits realized from the acquisition of AN Can, improved operating performance and plant consolidations, and the benefits of refinancing a portion of the Discount Debentures in 1995 and 1996 with lower cost indebtedness. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". 7 REFINANCING The Company has actively refinanced its higher cost indebtedness with lower cost indebtedness. Since 1995, the Company will have refinanced all of Holdings' 13 1/4% Senior Discount Debentures due 2002 (the "Discount Debentures"), with the following: (i) lower cost bank indebtedness, (ii) proceeds from the sale of Holdings' Exchangeable Preferred Stock Mandatorily Redeemable 2006 (the "Exchangeable Preferred Stock") and (iii) proceeds from the Offering. The net result of this refinancing will be approximately $19.5 million of annual current cash interest savings (excluding non-cash interest on obligations related to the Exchangeable Preferred Stock). Such refinancing will also permit the Company to deduct accreted interest of approximately $103.5 million on the Discount Debentures from their time of issuance, which will reduce the Company's tax liability by an estimated $25.9 million for 1996 and 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Holdings also intends to issue Subordinated Debentures due 2006 (the "Exchange Debentures") in exchange for its Exchangeable Preferred Stock. This will allow the Company to deduct substantially all of the cash payments of interest on the Exchange Debentures. THE OFFERING Common Stock offered by the Company.................... 3,700,000 shares Common Stock offered by the Selling Stockholders....... 800,000 shares Total..................... 4,500,000 shares Common Stock to be outstanding after this offering (the "Offering")................ 18,862,833 shares(a) Use of Proceeds............. The net proceeds from the Offering to the Company will be used to redeem the remaining Discount Debentures and to repay a portion of the term loans under the Silgan Credit Agreement. See "Use of Proceeds". Nasdaq Symbol............... SLGN - -------- (a) Excludes 3,534,568 shares of Common Stock reserved for issuance under the Silgan Holdings Inc. Stock Option Plan (the "Stock Option Plan"). There are currently 1,821,254 options outstanding under the Stock Option Plan, each of which entitles the holder thereof to purchase one share of Common Stock. See "Management--Stock Option Plan". The weighted average exercise price for all of the options currently outstanding under the Stock Option Plan is $2.18 per share. 8 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following summary historical and pro forma financial data of Holdings were derived from, and should be read in conjunction with, the historical financial statements and pro forma financial information of Holdings, including the notes thereto, included elsewhere in this Prospectus. The summary unaudited pro forma net income per common share data for the year ended December 31, 1996 give effect to (i) the Offering and the use of the proceeds therefrom, (ii) the use of the proceeds from the sale (the "Preferred Stock Sale") on July 22, 1996 by Holdings of 50,000 shares of Exchangeable Preferred Stock to (a) purchase Holdings' Class B Common Stock, par value $.01 per share (the "Holdings Class B Stock"), held by Mellon Bank N.A. ("Mellon"), as trustee for First Plaza Group Trust ("First Plaza"), and (b) redeem $12.0 million principal amount of Discount Debentures, (iii) the incurrence of $125.0 million of additional B term loans in July 1996 and $17.4 million of working capital loans in June 1996 under the Silgan Credit Agreement, and the use of such proceeds to redeem a portion of the Discount Debentures, and (iv) the planned exchange of the Exchangeable Preferred Stock for Exchange Debentures (collectively, the "Refinancing") as if such events had occurred as of January 1, 1996. The summary unaudited pro forma balance sheet data at December 31, 1996 give effect to the Refinancing (other than events that occurred prior to such date) as if it had occurred as of such date. The summary unaudited pro forma data do not purport to represent what the Company's financial position or results of operations would actually have been if such events had in fact occurred as of such dates or at the beginning of the periods presented, or to project the Company's financial position or results of operations for any future date or period. The summary unaudited pro forma data and accompanying notes should be read in conjunction with the unaudited pro forma condensed statements of operations and the historical financial information of Holdings, including the notes thereto, included elsewhere in this Prospectus. 9 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1996(A) 1995(A) 1994(B) 1993(B) 1992 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) OPERATING DATA: Net sales............... $ 1,405.7 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0 Cost of goods sold...... 1,223.6 970.5 748.3 571.2 555.0 ---------- ---------- ---------- ---------- ---------- Gross profit............ 182.1 131.4 113.1 74.3 75.0 Selling, general and administrative expenses............... 58.8 46.9 38.0 32.5 32.8 Reduction in carrying value of assets(c)..... -- 14.7 16.7 -- -- ---------- ---------- ---------- ---------- ---------- Income from operations(d).......... 123.3 69.8 58.4 41.8 42.2 Interest expense and other related financing costs.................. 89.4 80.7 65.8 54.3 57.0 Minority interest expense................ -- -- -- -- 2.7 ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes........... 33.9 (10.9) (7.4) (12.5) (17.5) Income tax provision.... 3.3 5.1 5.6 1.9 2.2 ---------- ---------- ---------- ---------- ---------- Income (loss) before extraordinary charges and cumulative effect of changes in accounting principles.. 30.6 (16.0) (13.0) (14.4) (19.7) Extraordinary charges relating to early extinguishment of debt(e)................ (2.2) (5.8) -- (1.3) (23.6) Cumulative effect of changes in accounting principles(f).......... -- -- -- (6.3) -- ---------- ---------- ---------- ---------- ---------- Net income (loss) before preferred stock dividend requirement... 28.4 (21.8) (13.0) (22.0) (43.3) Preferred stock dividend requirement............ 3.0 -- -- -- -- ---------- ---------- ---------- ---------- ---------- Net income (loss) applicable to common stockholders........... $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3) ========== ========== ========== ========== ========== Net income (loss) per common share(g): Income (loss) before extraordinary charges............... $ 1.60 $ (0.77) $ (0.63) $ (0.87) $ (1.21) Extraordinary charges.. (0.11) (0.29) -- (0.08) (1.44) Cumulative effect of accounting changes.... -- -- -- (0.38) -- Preferred stock dividend requirement.. (0.16) -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total................. $ 1.33 $ (1.06) $ (0.63) $ (1.33) $ (2.65) ========== ========== ========== ========== ========== Pro forma net income per common share(d)(e)(g)(h)...... $ 1.78 ========== Weighted average number of common and common equivalent shares outstanding(i).. 19,169,455 20,647,599 20,647,599 16,469,928 16,364,313 SELECTED SEGMENT DATA: Net sales: Metal container business.............. $ 1,189.3 $ 882.3 $ 657.1 $ 459.2 $ 437.4 Plastic container business.............. 216.4 219.6 204.3 186.3 192.6 Income (loss) from operations:(j) Metal container business.............. 106.1 58.2 59.8 42.3 40.7 Plastic container business.............. 18.4 13.2 (0.1) 0.6 2.3 OTHER DATA: Adjusted EBITDA(k)...... $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0 Adjusted EBITDA as a percentage of net sales.................. 13.2% 12.0% 13.3% 11.8% 11.7% Income (loss) from operations as a percentage of net sales.................. 8.8 6.3 6.8 6.5 6.7 Capital expenditures.... $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4 Depreciation and amortization(l)........ 58.6 45.4 37.2 33.8 31.8 Cash flows provided by operating activities... 125.2 209.6 47.3 48.1 15.4 Cash flows used for investing activities... (98.3) (397.1) (27.9) (116.1) (23.0) Cash flows (used for) provided by financing activities............. (27.9) 186.9 (17.0) 65.3 8.6 Number of employees (at end of period)(m)...... 5,525 5,110 4,000 3,330 3,340
DECEMBER 31, 1996 -------------------- ACTUAL PRO FORMA(H) ------ ------------ (UNAUDITED) BALANCE SHEET DATA (at end of period): Total assets............................................... $913.5 $912.7 Total long-term debt....................................... 693.8 687.8 Deficiency in stockholders' equity......................... (190.2) (122.8)
(footnotes follow) 10 NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (a) On August 1, 1995, the Company acquired AN Can for a purchase price of $362.0 million (including the purchase from ANC of its St. Louis facility in May 1996 for $13.1 million). The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. See Note 3 to the Consolidated Financial Statements for the year ended December 31, 1996 included elsewhere in this Prospectus. (b) On December 21, 1993, the Company acquired DM Can for a purchase price of approximately $73.3 million. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. (c) Based upon a review of its depreciable assets, the Company determined that certain adjustments were necessary to properly reflect net realizable values. In 1995, the metal container business recorded a write-down of $14.7 million for the excess of carrying value over estimated realizable value of machinery and equipment at existing facilities which had become underutilized due to excess capacity. In 1994, charges of $7.2 million and $9.5 million were recorded by the metal container business and plastic container business, respectively, to write-down the excess carrying value over estimated realizable value of various plant facilities held for sale and for technologically obsolete and inoperable machinery and equipment. (d) Under the terms of the stock option plans of Containers and Plastics, stock options issued under such plans will be converted to options under the Stock Option Plan at the time of the Offering. In accordance with Accounting Principles Board ("APB") No. 25, options granted under these plans are considered variable options with a final measurement date at the time of conversion. The Company will recognize a non-cash charge of approximately $21.1 million, assuming an initial public offering price of $19.00 per share, net of $3.7 million previously accrued, at the time of the Offering in the Company's first quarter in 1997, for the excess of fair market value over grant price of these options less amounts previously accrued. The unaudited pro forma financial data do not give effect to such non-cash charge. Prior to the Offering, the Company recognized compensation expense for the change in pro forma book value since the date of grant of these options, amortized over the vesting period. (e) The unaudited pro forma net income per common share data for the year ended December 31, 1996 does not include the historical extraordinary charge, net of tax, incurred in 1996 and an extraordinary charge, net of tax, that the Company expects to incur in the first quarter of 1997 of $0.7 million, in each case for the write-off of unamortized deferred financing costs related to the early redemption of the Discount Debentures. See "Capitalization". (f) During 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers Accounting for Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers Accounting for Postemployment Benefits". The Company did not elect to restate prior years' financial statements for any of these pronouncements. (g) Actual and pro forma net income (loss) per share are based on the weighted average number of shares outstanding during the period, as adjusted in all periods for the Stock Split, and after giving effect to stock options considered to be dilutive common stock equivalents using the treasury stock method. Primary and fully diluted net income (loss) per share are the same for each of the periods. Under the terms of the stock option plans of Containers and Plastics, stock options issued under such plans will be converted to options under the Stock Option Plan at the time of the Offering. Such conversion will be made based upon the allocable value of Containers and Plastics determined in relation to the value of the Company. Weighted average number of shares outstanding includes the subsidiary options which are considered to be issued within 12 months 11 prior to the Offering at less than the assumed initial public offering price due to their conversion feature as described in footnote (d) above. Supplementary net income (loss) per share, assuming that sufficient shares will be issued in the Offering to repay indebtedness as described in "Use of Proceeds" as of January 1, 1996, was $1.41 for the year ended December 31, 1996. (h) The unaudited pro forma net income per common share data for the year ended December 31, 1996 and the unaudited pro forma balance sheet data at December 31, 1996 assume gross proceeds from the Offering to the Company of $70.3 million and the use of the net proceeds therefrom as described under "Use of Proceeds". For a detailed presentation of the unaudited pro forma results of operations of the Company for the year ended December 31, 1996, see the unaudited pro forma condensed statement of operations, including the notes thereto, included elsewhere in this Prospectus. See "Capitalization". (i) The weighted average number of common and common equivalent shares outstanding gives effect to the Stock Split. (j) Income from operations in the selected segment data includes charges incurred for the reduction in carrying value of certain assets for the metal containers business of $14.7 million and $7.2 million for the years ended December 31, 1995 and 1994 and for the plastic containers business of $9.5 million for the year ended December 31, 1994, as referred to in footnote (c) above. Income from operations for both the metal container and plastic container businesses excludes corporate expense. (k) "Adjusted EBITDA" means consolidated net income before extraordinary charges, cumulative effect of changes in accounting principles and preferred stock dividends plus, to the extent reflected in the income statement for the applicable period, without duplication, consolidated interest expense, income tax expense and depreciation and amortization expense, as adjusted to add back expenses relating to postretirement health care costs (which amounted to $2.6 million, $1.7 million, $0.7 million and $0.5 million for the years ended December 31, 1996, 1995, 1994 and 1993, respectively), the reduction in carrying value of assets (which were $14.7 million and $16.7 million for the years ended December 31, 1995 and 1994, respectively) and certain other non-cash charges (which included charges relating to the vesting of benefits under Stock Appreciation Rights ("SARs") of $0.8 million for each of the years ended December 31, 1996 and 1995 and $1.5 million for the year ended December 31, 1994). The Company has included information regarding Adjusted EBITDA because management believes that many investors consider it to be important in assessing a company's ability to service and incur debt. Accordingly, this information has been disclosed herein to permit a more complete analysis of the Company's financial condition. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other consolidated statement of operations or cash flows data prepared in accordance with generally accepted accounting principles ("GAAP") as a measure of the profitability or liquidity of the Company. See the consolidated statements of operations and consolidated statements of cash flows of Holdings, including the notes thereto, included elsewhere in this Prospectus. Adjusted EBITDA does not take into account the Company's debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. Additionally, Adjusted EBITDA is not computed in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. (l) Depreciation and amortization excludes amortization of debt financing costs. (m) The number of employees at December 31, 1995 includes approximately 1,400 employees who joined the Company on August 1, 1995 as a result of the acquisition by Containers of AN Can. The number of employees at December 31, 1993 excludes 650 employees who joined the Company on December 21, 1993 as a result of the acquisition by Containers of DM Can. 12 RISK FACTORS Prospective purchasers of the Common Stock offered hereby should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the following risks in connection with an investment in the Common Stock. HIGH LEVERAGE; STOCKHOLDERS' DEFICIENCY; RESTRICTIVE COVENANTS; SECURITY INTERESTS The Company is highly leveraged primarily as a result of the financing of the acquisitions of its metal and plastic container businesses. See "Business--Company History" and "Description of Certain Indebtedness". At December 31, 1996, on a pro forma basis after giving effect to the Refinancing (assuming that the Refinancing occurred as of such date, other than such events that occurred prior to such date), the Company would have had approximately $748.6 million of total consolidated indebtedness. The Company may incur significant amounts of additional indebtedness in the future, particularly in connection with acquisitions. See "Prospectus Summary--Recent Developments--Acquisition". A substantial portion of the Company's cash flow must be used to service its indebtedness and is therefore not available to be used in its business. In addition, a substantial portion of the Company's indebtedness bears interest at floating rates, and therefore a substantial increase in interest rates could have a material adverse effect on the Company's results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Also, as of December 31, 1996, on a pro forma basis after giving effect to the Refinancing (assuming that the Refinancing occurred as of such date, other than such events that occurred prior to such date), Holdings' deficiency in stockholders' equity would have been $122.8 million. Through 1995, the Company has experienced net losses for each year since its inception, primarily as a result of interest expense on its indebtedness. However, in 1996 the Company had net income of $25.4 million. See "Prospectus Summary--Recent Developments--1996 Financial Results", "Capitalization" and "Selected Historical and Pro Forma Financial Information". The Company's instruments and agreements governing its indebtedness contain numerous covenants, including financial and operating covenants, certain of which are quite restrictive. In particular, certain financial covenants under the credit agreement dated as of August 1, 1995 among Silgan and certain of its subsidiaries, the lenders named therein (the "Banks"), Bankers Trust Company ("Bankers Trust"), as Administrative Agent and Co-Arranger, and Bank of America Illinois, as Documentation Agent and Co-Arranger, as amended (the "Silgan Credit Agreement"), become more restrictive over time in anticipation of scheduled debt amortization and improved operating results. These covenants affect, and in many respects limit or prohibit, among other things, the ability of the Company to incur additional indebtedness, create liens, sell assets, engage in mergers and acquisitions, make certain capital expenditures and pay dividends. Such covenants could restrict the Company in its pursuit of its growth strategy. For a description of such covenants, see "Description of Certain Indebtedness". The obligations of each of Silgan, Plastics and Containers under the Silgan Credit Agreement are guaranteed by Holdings and by each other subsidiary of Holdings. Such obligations and guarantees under the Silgan Credit Agreement are, and following consummation of the Offering will continue to be, secured by first priority liens on all of the material assets of the Company and pledges of the capital stock of all of Holdings' subsidiaries (collectively, the "Collateral"). If an event of default under the Silgan Credit Agreement were to occur, the Banks generally would have the right to accelerate and declare due the Company's indebtedness thereunder. In such case, if the indebtedness owed by the Company under the Silgan Credit Agreement were not repaid or restructured, the Banks could proceed to foreclose on the Collateral. See "Description of Certain Indebtedness". RISKS ASSOCIATED WITH GROWTH STRATEGY Historically, the Company has grown predominantly through acquisitions. The Company's future growth will depend in large part on additional acquisitions of consumer goods packaging businesses. There can be no assurance that the Company will be able to locate or acquire other suitable 13 acquisition candidates on acceptable terms or that the Company will be able to fund future acquisitions because of limitations contained in its instruments and agreements governing its indebtedness or otherwise. See "Description of Certain Indebtedness". In pursuing its strategy of growth through acquisitions, the Company will face risks commonly encountered with such a strategy. These risks include failing to assimilate the operations and personnel of the acquired businesses, disrupting the Company's ongoing business, dissipating the Company's limited management resources, and impairing relationships with employees and customers of the acquired business as a result of changes in ownership and management. Depending upon the size of the acquisition, it can take up to two to three years to completely integrate an acquired business into the Company's operations and systems and realize the full benefit of the Company's strategies. During the early part of this integration period, the operating results of an acquired business may decrease from results attained prior to the acquisition. Moreover, additional indebtedness incurred to make acquisitions could adversely affect the Company's liquidity and financial stability, and the issuance of Common Stock to effect acquisitions could result in dilution to the Company's shareholders. RELIANCE ON MAJOR CUSTOMERS Containers has agreements with Nestle (the "Nestle Supply Agreements") pursuant to which Containers supplies a majority of Nestle's metal container requirements, and an agreement with Del Monte (the "DM Supply Agreement") pursuant to which Containers supplies substantially all of Del Monte's metal container requirements. The Nestle Supply Agreements and the DM Supply Agreement provide Containers with a potential market for a substantial portion of its metal container output during the terms of these agreements. Approximately 17% and 12% of the Company's sales in 1996 were to Nestle and Del Monte, respectively. The Company has recently agreed with Nestle, subject to definitive documentation, to extend the term of certain of the Nestle Supply Agreements through 2004 (representing approximately 10% of the Company's 1996 sales) in return for certain price concessions by the Company. The Company believes that these price concessions will not have a material adverse effect on its results of operations. Under the Company's recent agreement with Nestle, with respect to the remaining Nestle Supply Agreements that expire in August 1997 (representing approximately 6% of the Company's 1996 sales), the Company has the right to submit a bid to Nestle, and to match any bid received by Nestle, for the 1998 supply year with respect to the metal containers that are the subject of such Nestle Supply Agreements. There can be no assurance that any such bid by the Company will be made at sales prices equivalent to those currently in effect or otherwise on terms similar to those currently in effect. In addition, the Company cannot predict the effect, if any, on its results of operations of matching or not matching any such bids. Under certain limited circumstances, Del Monte, beginning in December 1998, and Nestle, beginning in January 2000 (with respect to all of the metal containers supplied under the Nestle Supply Agreements that have been extended through 2004), may receive competitive bids, and Containers has the right to match any such bids. If Containers matches a competitive bid, it may result in reduced sales prices with respect to the metal containers that are the subject of such competitive bid. In the event that Containers chooses not to match a competitive bid, such metal containers may be purchased from the competitive bidder at the competitive bid price for the term of the bid. See "Business-- Sales and Marketing". The Company's results of operations could be adversely affected if the Company loses significant unit sales to Nestle and/or Del Monte as a result of a competitive bid or otherwise. Neither the Nestle Supply Agreements nor the DM Supply Agreement require the purchase of minimum amounts, and should Nestle's or Del Monte's demand decrease, the Company's consolidated sales could decrease. The loss by the Company of either Nestle or Del Monte as a customer would have a material adverse effect on the Company's results of operations. DEPENDENCE ON AGRICULTURAL HARVEST; SEASONALITY The Company's metal container business sales are dependent, in part, upon the vegetable, tomato and fruit harvests in the midwest and western regions of the United States. The size and quality 14 of these harvests varies from year to year, depending in large part upon the weather conditions in those regions, and the Company's results of operations could be impacted accordingly. The Company's results of operations could be materially adversely affected in a year in which crop yields are substantially lower than normal in either of the prime agricultural regions of the United States in which the Company operates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview-- Agricultural Harvest and Seasonality". The Company's business is affected by seasonal variations as a result of the timing of the harvest. Accordingly, the Company experiences higher unit sales volume in the second and third quarters and, as a result, the Company has historically generated a disproportionate amount of its annual income from operations during these quarters. In 1996, the Company generated substantially all of its net income in the second and third quarters. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Overview--Agricultural Harvest and Seasonality" and "--Quarterly Results of Operations". IMPACT OF HOLDING COMPANY STRUCTURE Holdings is a holding company with no business operations of its own. Holdings' principal asset is all the outstanding capital stock of Silgan. The operations of Holdings are conducted through Silgan's operating subsidiaries, Containers and Plastics, each of which is a wholly owned subsidiary of Silgan. Accordingly, Holdings will be dependent upon the earnings and cash flows of such operating subsidiaries, and dividends and distributions from Silgan and such operating subsidiaries, to pay its expenses and meet its obligations and to pay any cash dividends or distributions on the Common Stock that may be authorized by the Board of Directors of Holdings. There can be no assurance that such operating subsidiaries will generate sufficient earnings and cash flows to pay dividends or distribute funds to Holdings to enable Holdings to pay its expenses and meet its obligations, or that applicable state law and contractual restrictions, including negative covenants contained in the instruments and agreements governing the indebtedness of Silgan and such operating subsidiaries, will permit such dividends or distributions. Subject to certain limited exceptions, the terms of the Silgan Credit Agreement currently restrict Silgan and its operating subsidiaries from paying dividends or making distributions to Holdings and the terms of Silgan's 11 3/4% Senior Subordinated Notes due 2002 (the "11 3/4% Notes") currently restrict Silgan from paying dividends or making distributions to Holdings. See "--High Leverage; Stockholders' Deficiency; Restrictive Covenants; Security Interests" and "Description of Certain Indebtedness". COMPETITION The manufacture and sale of metal and plastic containers is highly competitive and many of the Company's competitors have substantially greater financial resources than the Company. In particular, price competition can be an important factor and may affect the Company's results of operations. See "Business--Competition". DEPENDENCE ON KEY PERSONNEL The success of the Company depends to a large extent on a number of key employees, and the loss of the services provided by them could materially adversely affect the Company. In particular, the loss of the services provided by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer of 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. See "Certain Transactions--Management Agreements". 15 SIGNIFICANT STOCKHOLDERS After completion of the Offering, Messrs. Silver and Horrigan and The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") (collectively, the "Principal Common Stockholders") will collectively own approximately 72.1% of the outstanding Common Stock (approximately 68.9% if the Underwriters over- allotment option is exercised in full). Accordingly, if such persons act together they will be able to control all matters submitted to the stockholders for a vote, including the election of directors. Under a stockholders agreement entered into by the Principal Common Stockholders (the "Principals Stockholders Agreement"), Messrs. Silver and Horrigan agreed to vote their shares of Common Stock for the election of two directors chosen by MSLEF II so long as MSLEF II holds at least one-half of the number of shares of Common Stock held by it immediately prior to the Offering, and MSLEF II agreed to vote its shares of Common Stock for the election of two directors chosen by Messrs. Silver and Horrigan so long as they hold in the aggregate at least one-half of the number of shares of Common Stock held by them on the date of this Prospectus. Holdings currently has four directors, but intends to increase its board of directors after the Offering to six members to include two additional independent directors. Under the Principals Stockholders Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold in the aggregate at least one-half of the number of shares of Common Stock held by them on the date of this Prospectus, Messrs. Silver and Horrigan will nominate the two independent directors, who must then be elected in accordance with Holdings' Restated Certificate of Incorporation. See "Management", "Principal and Selling Stockholders" and "Description of Capital Stock". SHARES ELIGIBLE FOR FUTURE SALE Immediately after consummation of the Offering, the Company will have outstanding 18,862,833 shares of Common Stock. The shares of Common Stock sold pursuant to the Offering may be resold without restriction by persons other than "affiliates" of Holdings. The shares of Common Stock directly or indirectly held by the Principal Common Stockholders and Bankers Trust New York Corporation ("BTNY") following the Offering will be "restricted" securities within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and may not be sold in the absence of registration under the Securities Act, or an exemption therefrom, including the exemptions contained in Rule 144 under the Securities Act. The Principal Common Stockholders and BTNY have agreed, subject to certain exceptions, for a period of one year from the date of this Prospectus not to register for sale or offer, sell, contract to sell, or otherwise dispose of any shares of Common Stock without the prior written consent of Goldman, Sachs & Co., other than in the Offering. See "Underwriting". Subject to such agreement and restrictions under the Securities Act, the Principal Common Stockholders could sell shares of Common Stock owned by them from time to time in the open market for any reason. Holdings has granted MSLEF II and Messrs. Silver and Horrigan certain registration rights with respect to the shares of Common Stock owned by them which have been waived for a period of one year. Sales of substantial amounts of Common Stock or the availability of such shares for sale could adversely affect prevailing market prices for the Common Stock and the Company's ability to issue additional equity securities. See "Shares Eligible for Future Sale". ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CERTAIN AGREEMENTS AND THE CERTIFICATE OF INCORPORATION Under the Principals Stockholders Agreement, MSLEF II agreed to vote its shares of Common Stock against any unsolicited merger or sale of the Company's business or its assets if Messrs. Silver and Horrigan oppose such transaction, so long as Messrs. Silver and Horrigan hold at least 90% of the shares of Common Stock held by them in the aggregate on the date of this Prospectus. See "Description of Capital Stock--Description of Stockholders Agreements". Certain provisions of Holdings' Restated Certificate of Incorporation may have the effect of delaying or preventing transactions involving a change of control of Holdings, including transactions in 16 which stockholders might otherwise receive a substantial premium for their shares over then current market prices, and may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. In particular, under the Restated Certificate of Incorporation, the Board of Directors is authorized to issue one or more classes of preferred stock having such designations, rights and preferences as may be determined by the Board. Under the Restated Certificate of Incorporation, the Board of Directors is divided into three classes, and each year, one third of the directors is elected for a term of three years. In addition, any action taken by the holders of Common Stock must be taken at a meeting and may not be taken by consent in writing, and a special meeting of the stockholders may only be called by the Chairman of the Board or the President of the Company or by a majority of the Board of Directors of the Company, and may not be called by the holders of Common Stock. See "Description of Capital Stock". Under the Silgan Credit Agreement, the occurrence of a Change of Control (as defined in the Silgan Credit Agreement) constitutes an event of default thereunder, permitting, among other things, the acceleration of amounts owed thereunder. Additionally, upon the occurrence of a Change of Control under and as defined in the instruments governing Silgan's 11 3/4% Notes and the Exchange Debentures, the holders thereof have the right to require the repurchase of such indebtedness at a purchase price equal to 101% of the principal amount thereof, plus accrued interest thereon. See "Description of Certain Indebtedness". ABSENCE OF PRIOR PUBLIC MARKET Prior to the Offering, there has been no public market for the Common Stock. Although the Common Stock has been approved for quotation on the Nasdaq National Market under the symbol "SLGN", there can be no assurance that an active market for the Common Stock will be developed or sustained following the Offering or that investors in the Common Stock will be able to resell their shares of Common Stock at or above the initial public offering price. The initial public offering price for the shares of Common Stock will be determined through negotiations between the Company and the Selling Stockholders and the representatives of the Underwriters, and may not be indicative of the market price of the Common Stock after the Offering. See "Underwriting". Morgan Stanley & Co. Incorporated ("Morgan Stanley") will not act as a market maker for the Common Stock. DILUTION Purchasers of the Common Stock in the Offering will experience immediate and substantial dilution in net tangible book value per share of Common Stock from the initial public offering price. In addition, to the extent outstanding options to purchase Common Stock are exercised, there will be further dilution. See "Dilution". USE OF PROCEEDS The net proceeds to the Company from the sale of the 3,700,000 shares of Common Stock offered hereby by the Company are estimated to be $64.4 million, after deducting the underwriting discount and estimated offering expenses payable by the Company. The Company will not receive any of the net proceeds from the sale of shares by MSLEF II and BTNY (collectively, the "Selling Stockholders"). The net proceeds of the Offering will be used to redeem the remaining outstanding Discount Debentures (approximately $59.0 million aggregate principal amount). Accrued interest on such Discount Debentures will be paid with working capital borrowings under the Silgan Credit Agreement. The Discount Debentures bear interest at a rate of 13 1/4% per annum and mature on December 15, 2002. A portion of the net proceeds from the Offering will be used to prepay approximately $3.5 million principal amount of the B term loans (together with accrued interest thereon) under the Silgan Credit Agreement, which amount would have been due on December 31, 1997. Such B term loans had a weighted average interest rate of 8.7% during the year ended December 31, 1996. The remaining net 17 proceeds from the Offering will be used to prepay approximately $1.9 million principal amount of the A term loans (together with accrued interest thereon) under the Silgan Credit Agreement that would have been due on December 31, 1997. Such A term loans had a weighted average interest rate of 8.2% during the year ended December 31, 1996. Pending the redemption of the remaining Discount Debentures which is expected to occur no later than 45 days after the completion of the Offering, the net proceeds will be used to repay working capital loans under the Silgan Credit Agreement. Generally, the Company may borrow, repay and reborrow working capital loans from time to time in accordance with the Silgan Credit Agreement. The Company financed its recent acquisition of Finger Lakes through working capital borrowings under the Silgan Credit Agreement of approximately $29.9 million. See "Description of Certain Indebtedness--Description of the Silgan Credit Agreement". DIVIDEND POLICY Holdings has never declared or paid cash dividends on its Common Stock. The Company currently anticipates that it will retain all available funds for use in the operation and expansion of its business and does not anticipate paying any cash dividends on the Common Stock in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of Holdings' Board of Directors and will be dependent upon the Company's results of operations, financial condition, contractual restrictions and other factors deemed relevant by Holdings' Board of Directors. The Holdings Guaranty (as defined in "Description of Certain Indebtedness--Description of the Silgan Credit Agreement") and the Exchangeable Preferred Stock (and, when issued, the Exchange Debentures) limit the ability of Holdings to pay dividends, and the Silgan Credit Agreement and the 11 3/4% Notes limit the ability of Silgan to pay dividends to Holdings. See "Risk Factors--High Leverage; Stockholders' Deficiency; Restrictive Covenants; Security Interests", "--Impact of Holding Company Structure" and "Description of Certain Indebtedness". 18 DILUTION As of December 31, 1996, the Company had a deficit in net tangible book value of approximately $289.7 million or $19.11 per share of Common Stock. "Net tangible book value" per share of Common Stock represents the total amount of tangible assets of the Company, less the total amount of liabilities of the Company, divided by the number of shares of Common Stock outstanding. Without taking into account any changes in net tangible book value after December 31, 1996, other than to give effect to (i) the sale by the Company of the 3,700,000 shares of Common Stock in the Offering (at an assumed initial public offering price of $19.00 per share and after deducting the underwriting discount and offering expenses) and (ii) the application of the net proceeds therefrom to redeem the remaining outstanding Discount Debentures and to repay a portion of the A and B term loans under the Silgan Credit Agreement, the pro forma deficit in net tangible book value of the Common Stock as of December 31, 1996 would have been approximately $225.4 million or $11.95 per share. This represents an immediate decrease in pro forma deficit in net tangible book value of $7.16 per share of Common Stock to existing stockholders and an immediate dilution in pro forma net tangible book value of $30.95 per share to new stockholders. "Dilution" per share represents the difference between the price per share to be paid by the new stockholders and the pro forma deficit in net tangible book value per share as of December 31, 1996. The following table illustrates this per share dilution. Assumed initial public offering price per share......... $ 19.00 Deficit in net tangible book value per share as of December 31, 1996...................................... $(19.11) Decrease in deficit in net tangible book value per share attributable to the Offering and the application of the proceeds therefrom..................................... 7.16 ------- Pro forma deficit in net tangible book value per share as of December 31, 1996 after giving effect to the Offering and the application of the proceeds therefrom.............................................. (11.95) ------- (Dilution) per share to new stockholders................ $(30.95) =======
The following table sets forth, on a pro forma basis as of December 31, 1996, the number of shares of Common Stock purchased from Holdings and the total consideration and the average price per share paid by the existing stockholders and to be paid by investors purchasing shares of Common Stock offered hereby.
SHARES PURCHASED TOTAL CONSIDERATION --------------------- ---------------------- AVERAGE PRICE NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE ---------- ---------- ----------- ---------- ------------- Existing stockholders... 15,162,833 80.4% $18,618,000 20.9% $ 1.23 New stockholders........ 3,700,000 19.6 70,300,000 79.1 19.00 ---------- ----- ----------- ----- Total................... 18,862,833 100.0% $88,918,000 100.0% $ 4.71 ========== ===== =========== =====
Sales by the Selling Stockholders in the Offering will reduce the number of shares held by existing stockholders to 14,362,833, or approximately 76.1% of the total number of shares of Common Stock outstanding after the Offering (or approximately 72.6% if the Underwriters' over-allotment option is exercised in full), and will increase the number of shares held by new investors to 4,500,000, or approximately 23.9% of the total number of shares of Common Stock outstanding after the Offering (or 5,175,000 shares and approximately 27.4% if the Underwriters' over-allotment option is exercised in full). The calculations in the tables set forth above do not reflect an aggregate of 3,534,568 shares of Common Stock reserved for issuance under the Stock Option Plan. There are currently 1,821,254 options outstanding under the Stock Option Plan, each of which entitles the holder thereof to purchase one share of Common Stock. See "Management--Stock Option Plan". The weighted average exercise price for all of the options currently outstanding under the Stock Option Plan is $2.18 per share. See "Management--Executive Compensation". To the extent outstanding options to purchase Common Stock are exercised, there will be further dilution. 19 CAPITALIZATION The following table sets forth (i) the audited actual consolidated capitalization of Holdings as of December 31, 1996, and (ii) the unaudited pro forma consolidated capitalization of Holdings as of December 31, 1996, giving effect to the Offering (assuming gross proceeds to the Company of $70.3 million) and the application of the proceeds therefrom, and the exchange of all outstanding shares of Exchangeable Preferred Stock for Exchange Debentures. This table should be read in conjunction with the historical and pro forma consolidated financial information of Holdings included elsewhere in this Prospectus.
DECEMBER 31, 1996 ------------------------- ACTUAL PRO FORMA ----------- ------------ (AUDITED) (UNAUDITED) (DOLLARS IN THOUSANDS) LONG-TERM DEBT: Term loans(a)............... $ 499,843 $ 499,843 (b) 11 3/4% Senior Subordinated Notes due 2002............. 135,000 135,000 13 1/4% Senior Discount Debentures due 2002........ 58,940 -- 13 1/4% Subordinated Debentures due 2006........ -- 52,998 ----------- ----------- Total long-term debt(c)... 693,783 687,841 ----------- ----------- Cumulative exchangeable redeemable preferred stock... 52,998 -- DEFICIENCY IN STOCKHOLDERS' EQUITY: Common stock, par value $.01 per share, 100,000,000 shares authorized, 885,000 shares issued and outstanding (actual), 15,162,833 shares issued and outstanding (as adjusted for the Stock Split), and 18,862,833 shares issued and outstanding (pro forma)(d).................. 9 189 Additional paid-in capital.. 18,609 107,647 (e) Accumulated deficit......... (208,824) (230,614)(e)(f) ----------- ----------- Total deficiency in stockholders' equity..... (190,206) (122,778) ----------- ----------- Total capitalization.... $ 556,575 $ 565,063 =========== ===========
- -------- (a) The term loans exclude the current portion of the term loans under the Silgan Credit Agreement. At December 31, 1996, the current portion of the term loans was $38.4 million. (b) Approximately $5.4 million of the net proceeds from the Offering will be used to prepay a portion of the current portion of the term loans under the Silgan Credit Agreement. See "Use of Proceeds". (c) Pursuant to the Silgan Credit Agreement, the lenders thereunder have agreed to lend to Plastics and Containers up to an aggregate of $225.0 million of revolving loans, which are reflected as short-term debt on the Company's balance sheet. As of December 31, 1996, the outstanding principal amount of revolving loans under the Silgan Credit Agreement was $27.8 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources and Liquidity". (d) Excludes 3,534,568 shares of Common Stock reserved for issuance under the Stock Option Plan, including shares reserved for issuance in connection with currently outstanding options to purchase 1,821,254 shares of Common Stock. The weighted average exercise price for all of the options currently outstanding under the Stock Option Plan is $2.18 per share. (e) Under the terms of the stock option plans of Containers and Plastics, stock options issued under such plans will be converted to options under the Stock Option Plan at the time of the Offering. In accordance with APB No. 25, options granted under these plans are considered variable options with a final measurement date at the time of conversion. The Company will recognize a non-cash charge to earnings of approximately $21.1 million (assuming an initial public offering price of $19.00 per share), net of $3.7 million previously accrued, at the time of the Offering for the excess of fair market value over grant price of these options, less amounts previously accrued, which will be offset by an increase to paid-in capital. (f) Includes an extraordinary charge, net of tax, of $0.7 million for the write-off of unamortized deferred financing costs related to the redemption of Discount Debentures. Such charge is expected to be incurred during the first quarter of 1997. 20 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA Set forth below are selected historical consolidated financial data of Holdings at December 31, 1996, 1995, 1994, 1993 and 1992 and for the years then ended. The selected historical consolidated financial data of Holdings at December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 (with the exception of employee data) were derived from the historical consolidated financial statements of Holdings for such periods that were audited by Ernst & Young LLP, independent auditors, whose report appears elsewhere in this Prospectus. The selected historical consolidated financial data of Holdings at December 31, 1994, 1993 and 1992 and for the years ended December 31, 1993 and 1992 were derived from the historical audited consolidated financial statements of Holdings for such periods. The unaudited pro forma net income per common share data for the year ended December 31, 1996 give effect to the Refinancing as if it had occurred as of January 1, 1996. The summary unaudited pro forma balance sheet data at December 31, 1996 give effect to the Refinancing (other than events that occurred prior to such date) as if it had occurred as of such date. The unaudited pro forma data do not purport to represent what the Company's financial position or results of operations would actually have been if such events had in fact occurred as of such dates or at the beginning of the periods presented, or to project the Company's financial position or results of operations for any future date or period. The selected historical and unaudited pro forma data of Holdings were derived from, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations," the unaudited pro forma condensed statements of operations and the historical financial statements and pro forma financial information of Holdings, including the notes thereto, included elsewhere in this Prospectus. 21 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 1996(A) 1995(A) 1994(B) 1993(B) 1992 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) OPERATING DATA: Net sales............... $ 1,405.7 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0 Cost of goods sold...... 1,223.6 970.5 748.3 571.2 555.0 ---------- ---------- ---------- ---------- ---------- Gross profit............ 182.1 131.4 113.1 74.3 75.0 Selling, general and administrative expenses............... 58.8 46.9 38.0 32.5 32.8 Reduction in carrying value of assets(c)..... -- 14.7 16.7 -- -- ---------- ---------- ---------- ---------- ---------- Income from operations(d).......... 123.3 69.8 58.4 41.8 42.2 Interest expense and other related financing costs.................. 89.4 80.7 65.8 54.3 57.0 Minority interest expense................ -- -- -- -- 2.7 ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes........... 33.9 (10.9) (7.4) (12.5) (17.5) Income tax provision.... 3.3 5.1 5.6 1.9 2.2 ---------- ---------- ---------- ---------- ---------- Income (loss) before extraordinary charges and cumulative effect of changes in accounting principles.. 30.6 (16.0) (13.0) (14.4) (19.7) Extraordinary charges relating to early extinguishment of debt(e)................ (2.2) (5.8) -- (1.3) (23.6) Cumulative effect of changes in accounting principles(f).......... -- -- -- (6.3) -- ---------- ---------- ---------- ---------- ---------- Net income (loss) before preferred stock dividend requirement... 28.4 (21.8) (13.0) (22.0) (43.3) Preferred stock dividend requirement............ 3.0 -- -- -- -- ---------- ---------- ---------- ---------- ---------- Net income (loss) applicable to common stockholders........... $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3) ========== ========== ========== ========== ========== Net income (loss) per common share(g): Income (loss) before extraordinary charges............... $ 1.60 $ (0.77) $ (0.63) $ (0.87) $ (1.21) Extraordinary charges.. (0.11) (0.29) -- (0.08) (1.44) Cumulative effect of accounting changes.... -- -- -- (0.38) -- Preferred stock dividend requirement.. (0.16) -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total................. $ 1.33 $ (1.06) $ (0.63) $ (1.33) $ (2.65) ========== ========== ========== ========== ========== Pro forma net income per common share(d)(e)(g)(h)...... $ 1.78 ========== Weighted average number of common and common equivalent shares outstanding(i).. 19,169,455 20,647,599 20,647,599 16,469,928 16,364,313 SELECTED SEGMENT DATA: Net sales: Metal container business.............. $ 1,189.3 $ 882.3 $ 657.1 $ 459.2 $ 437.4 Plastic container business.............. 216.4 219.6 204.3 186.3 192.6 Income (loss) from operations:(j) Metal container business.............. 106.1 58.2 59.8 42.3 40.7 Plastic container business.............. 18.4 13.2 (0.1) 0.6 2.3 OTHER DATA: Adjusted EBITDA(k)...... $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0 Adjusted EBITDA as a percentage of net sales.................. 13.2% 12.0% 13.3% 11.8% 11.7% Income (loss) from operations as a percentage of net sales.................. 8.8 6.3 6.8 6.5 6.7 Capital expenditures.... $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4 Depreciation and amortization(l)........ 58.6 45.4 37.2 33.8 31.8 Cash flows provided by operating activities... 125.2 209.6 47.3 48.1 15.4 Cash flows used for investing activities... (98.3) (397.1) (27.9) (116.1) (23.0) Cash flows (used for) provided by financing activities............. (27.9) 186.9 (17.0) 65.3 8.6 Number of employees (at end of period)(m)...... 5,525 5,110 4,000 3,330 3,340
DECEMBER 31, -------------------------------------------------- PRO FORMA 1996(H) 1996 1995 1994 1993 1992 ----------- ------ ------ ------ ------ ------ (UNAUDITED) BALANCE SHEET DATA (at end of period): Total assets.............. $912.7 $913.5 $900.0 $504.3 $497.6 $389.0 Total long-term debt...... 687.8 693.8 750.9 510.8 505.7 383.2 Deficiency in stockholders' equity..... (122.8) (190.2) (179.8) (158.0) (145.0) (138.0)
(footnotes follow) 22 NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA (a) On August 1, 1995, the Company acquired AN Can for a purchase price of $362.0 million (including the purchase from ANC of its St. Louis facility in May 1996 for $13.1 million). The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. See Note 3 to the Consolidated Financial Statements for the year ended December 31, 1996 included elsewhere in this Prospectus. (b) On December 21, 1993, the Company acquired DM Can for a purchase price of approximately $73.3 million. The acquisition was accounted for as a purchase transaction and the results of operations have been included with the Company's historical results from the acquisition date. (c) Based upon a review of its depreciable assets, the Company determined that certain adjustments were necessary to properly reflect net realizable values. In 1995, the metal container business recorded a write-down of $14.7 million for the excess of carrying value over estimated realizable value of machinery and equipment at existing facilities which had become underutilized due to excess capacity. In 1994, charges of $7.2 million and $9.5 million were recorded by the metal container business and plastic container business, respectively, to write-down the excess carrying value over estimated realizable value of various plant facilities held for sale and for technologically obsolete and inoperable machinery and equipment. (d) Under the terms of the stock option plans of Containers and Plastics, stock options issued under such plans will be converted to options under the Stock Option Plan at the time of the Offering. In accordance with APB No. 25, options granted under these plans are considered variable options with a final measurement date at the time of conversion. The Company will recognize a non-cash charge of approximately $21.1 million, assuming an initial public offering price of $19.00 per share, net of $3.7 million previously accrued, at the time of the Offering in the Company's first quarter in 1997, for the excess of fair market value over grant price of these options less amounts previously accrued. The unaudited pro forma financial data do not give effect to such non-cash charge. Prior to the Offering, the Company recognized compensation expense for the change in pro forma book value since the date of grant of these options, amortized over the vesting period. (e) The unaudited pro forma net income per common share data for the year ended December 31, 1996 does not include the historical extraordinary charge, net of tax, incurred in 1996 and an extraordinary charge, net of tax, that the Company expects to incur in the first quarter of 1997 of $0.7 million, in each case for the write-off of unamortized deferred financing costs related to the early redemption of the Discount Debentures. See "Capitalization". (f) During 1993, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 112, "Employers Accounting for Postemployment Benefits". The Company did not elect to restate prior years' financial statements for any of these pronouncements. (g) Actual and pro forma net income (loss) per share are based on the weighted average number of shares outstanding during the period, as adjusted in all periods for the Stock Split, and after giving effect to stock options considered to be dilutive common stock equivalents using the treasury stock method. Primary and fully diluted net income (loss) per share are the same for each of the periods. Under the terms of the stock option plans of Containers and Plastics, stock options issued under such plans will be converted to options under the Stock Option Plan at the time of the Offering. Such conversion will be made based upon the allocable value of Containers and Plastics determined in relation to the value of the Company. Weighted average number of shares outstanding includes the subsidiary options which are considered to be issued within 12 months prior to the Offering at less than the assumed initial public offering price due to their conversion 23 feature as described in footnote (d) above. Supplementary net income (loss) per share, assuming that sufficient shares will be issued in the Offering to repay indebtedness as described in "Use of Proceeds" as of January 1, 1996, was $1.41 for the year ended December 31, 1996. (h) The unaudited pro forma net income per common share data for the year ended December 31, 1996 and the unaudited pro forma balance sheet data at December 31, 1996 assume gross proceeds from the Offering to the Company of $70.3 million and the use of the net proceeds therefrom as described under "Use of Proceeds". For a detailed presentation of the unaudited pro forma results of operations of the Company for the year ended December 31, 1996, see the unaudited pro forma condensed statement of operations, including the notes thereto, included elsewhere in this Prospectus. See "Capitalization". (i) The weighted average number of common and common equivalent shares outstanding gives effect to the Stock Split. (j) Income from operations in the selected segment data includes charges incurred for the reduction in carrying value of certain assets for the metal containers business of $14.7 million and $7.2 million for the years ended December 31, 1995 and 1994 and for the plastic containers business of $9.5 million for the year ended December 31, 1994, as referred to in footnote (c) above. Income from operations for both the metal container and plastic container businesses excludes corporate expense. (k) "Adjusted EBITDA" means consolidated net income before extraordinary charges, cumulative effect of changes in accounting principles and preferred stock dividends plus, to the extent reflected in the income statement for the applicable period, without duplication, consolidated interest expense, income tax expense and depreciation and amortization expense, as adjusted to add back expenses relating to postretirement health care costs (which amounted to $2.6 million, $1.7 million, $0.7 million and $0.5 million for the years ended December 31, 1996, 1995, 1994 and 1993, respectively), the reduction in carrying value of assets (which were $14.7 million and $16.7 million for the years ended December 31, 1995 and 1994, respectively) and certain other non-cash charges (which included charges relating to the vesting of benefits under SARs of $0.8 million for each of the years ended December 31, 1996 and 1995 and $1.5 million for the year ended December 31, 1994). The Company has included information regarding Adjusted EBITDA because management believes that many investors consider it to be important in assessing a company's ability to service and incur debt. Accordingly, this information has been disclosed herein to permit a more complete analysis of the Company's financial condition. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other consolidated statement of operations or cash flows data prepared in accordance with GAAP as a measure of the profitability or liquidity of the Company. See the consolidated statements of operations and consolidated statements of cash flows of Holdings, including the notes thereto, included elsewhere in this Prospectus. Adjusted EBITDA does not take into account the Company's debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. Additionally, Adjusted EBITDA is not computed in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. (l) Depreciation and amortization excludes amortization of debt financing costs. (m) The number of employees at December 31, 1995 includes approximately 1,400 employees who joined the Company on August 1, 1995 as a result of the acquisition by Containers of AN Can. The number of employees at December 31, 1993 excludes 650 employees who joined the Company on December 21, 1993 as a result of the acquisition by Containers of DM Can. 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included elsewhere in this Prospectus. The following discussion includes certain forward-looking statements regarding the Company's expected results of operations, cost savings and future liquidity. For a discussion of important factors that could cause actual results to differ materially from the forward-looking statements, see "Risk Factors". OVERVIEW The Company is a leading North American manufacturer of consumer goods packaging products that currently produces (i) steel and aluminum containers for human and pet food, (ii) custom designed plastic containers for personal care, health, food, pharmaceutical and household chemical products and (iii) specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. The Company is the largest manufacturer of metal food containers in North America, with a unit sale market share for the twelve months ended October 31, 1996 of 35% in the United States, and is a leading manufacturer of plastic containers in North America for personal care products. The Company has focused on growth through acquisitions, followed by plant rationalizations and consolidations and investment in the acquired businesses to gain manufacturing and production efficiencies and to provide for internal growth. Since its inception, the Company has acquired and successfully integrated ten businesses, including the recent acquisitions of AN Can in August 1995 for a purchase price of approximately $362.0 million (including net working capital of approximately $156.0 million) and DM Can in December 1993 for a purchase price of approximately $73.3 million (including net working capital of approximately $21.9 million). In addition, on October 9, 1996 the Company completed its acquisition of Finger Lakes, the metal container manufacturing subsidiary of Curtice Burns. See "Prospectus Summary--Recent Developments". The Company's future growth will depend in large part on additional acquisitions of consumer goods packaging businesses. Holdings is a holding company that conducts its business through two operating companies, Containers and Plastics, each of which is a wholly owned subsidiary of Silgan. COST REDUCTIONS AND INVESTMENTS FOLLOWING ACQUISITIONS The Company believes that its acquisitions and investments have enabled it to achieve a low cost position in the metal food container segment. To further enhance its low cost position, the Company has realized cost reduction opportunities through plant rationalizations and capital improvements, as well as from improved production scheduling and line reconfiguration. Since 1991, Containers has closed eight smaller, higher cost metal container facilities, including five facilities that were closed in 1995 as a result of the integration of the manufacturing operations of DM Can. Because most of the facilities that were closed in 1995 were closed late in the year, the Company began to realize the benefits from the closing of such facilities in 1996. From 1991 through 1993, Plastics closed three manufacturing facilities and consolidated the technical and administrative functions of its plastic container businesses. An additional facility was closed in 1995. In 1994, Plastics began to realize the benefits of this consolidation and rationalization program, as well as from its capital investment program. In the fourth quarter of 1996, the Company initiated further downsizing and rationalizations of certain of its facilities. Management expects that these actions, along with improved production scheduling, will enable the Company to achieve lower manufacturing costs in 1997 as compared to 1996. AN CAN ACQUISITION Management believes that the acquisition of AN Can, which has seventeen manufacturing facilities, provides the Company with further cost reduction opportunities, not only through purchasing economies and manufacturing synergies which it will realize from the combined operations, but also through the integration of selling, general and administrative operations of AN Can into the Company's 25 existing metal container business. In 1996, the Company realized certain of the manufacturing synergies. In 1997, the Company expects to complete the integration of the selling, general and administrative functions. The Company believes that it will realize the full benefits of the integration of the selling, general and administrative functions in 1998, and that benefits to be realized by the rationalization of plant operations will begin to occur in 1997. Although employee termination costs in connection with plant rationalizations, administrative workforce reductions and other plant exit costs associated with the acquisition of AN Can have been accrued through purchase accounting adjustments, the Company incurred in 1995 and in 1996 other non-recurring costs which under current accounting pronouncements will be charged against operating income. These costs, which include transitional charges related to the integration of selling and administrative functions, as well as costs associated with plant rearrangement and clean-up, were $3.2 million in 1995 and were approximately $3.5 million in 1996. The Company expects that it will eliminate the redundant charges related to the integration of selling and administrative functions in 1997. NET SALES LONG-TERM CONTRACTS. The Company seeks to develop and maintain long-term relationships with its customers. The Company estimates that approximately 80% of Containers' projected sales in 1997 will be pursuant to long-term supply arrangements. Containers' has agreements with Nestle pursuant to which Containers supplies a majority of Nestle's metal container requirements, and an agreement with Del Monte pursuant to which Containers supplies substantially all of Del Monte's U.S. metal container requirements. Revenues from these two customers represented approximately 29% of net sales by Containers in 1996. In addition to Nestle and Del Monte, Containers has multi- year supply arrangements with several other customers, including contracts which AN Can had with many of its customers. The Company has recently agreed with Nestle, subject to definitive documentation, to extend the term of certain of the Nestle Supply Agreements through 2004 (representing approximately 10% of the Company's 1996 sales) in return for certain price concessions by the Company. See "Risk Factors--Reliance on Major Customers" and "Business--Sales and Marketing". The Company believes that these price concessions will not have a material adverse effect on its results of operations. Under the Company's recent agreement with Nestle, with respect to the remaining Nestle Supply Agreements that expire in August 1997 (representing approximately 6% of the Company's 1996 sales), the Company has the right to submit a bid to Nestle, and to match any bid received by Nestle, for the 1998 supply year with respect to the metal containers that are the subject of such Nestle Supply Agreements. There can be no assurance that any such bid by the Company will be made at sales prices equivalent to those currently in effect or otherwise on terms similar to those currently in effect. The loss by the Company of either Nestle or Del Monte as a customer would have a material adverse effect on the Company's results of operations. See "Risk Factors--Reliance on Major Customers" and "Business--Sales and Marketing". The Company's long-term supply contracts generally provide for pricing changes in accordance with cost change formulas, thereby significantly reducing the exposure of the Company's results from operations to the volatility of raw material costs. In addition, the terms of the Company's long-term supply contracts limit the Company's ability to increase margins. AGRICULTURAL HARVEST AND SEASONALITY. The Company's metal container business sales are dependent, in part, upon the vegetable, tomato and fruit harvests in the midwest and western regions of the United States. The size and quality of these harvests varies from year to year, depending in large part upon the weather conditions in those regions. The fruit and vegetable pack harvest in 1994 was better than the below normal fruit and vegetable pack harvest in 1995, resulting in greater sales to fruit and vegetable pack processing customers in 1994 as compared to 1995. The 1996 midwest 26 vegetable harvest was better than in 1995, but, due to cool wet weather during the 1996 planting season, was less than the harvest in 1994. See "Risk Factors--Dependence on Agricultural Harvest; Seasonality". The Company's business is affected by seasonal variations as a result of the timing of the harvest. Accordingly, the Company experiences higher unit sales volume in the second and third quarters and, as a result, the Company has historically generated a disproportionate amount of its annual income from operations during these quarters. In 1996, the Company generated substantially all of its net income in the second and third quarters. See "Risk Factors-- Dependence on Agricultural Harvest; Seasonality" and "--Quarterly Results of Operations". INTEREST EXPENSE In order to increase its financial flexibility, during 1995 and 1996 the Company refinanced portions of its higher cost capital with lower cost capital. Upon completion of the Refinancing, the Company will have refinanced all of the Discount Debentures. The net result of these refinancings will be approximately $19.5 million of annual current cash interest savings (excluding non-cash interest relating to the Exchange Debentures) and approximately $25.9 million of current cash tax savings (as a result of the deduction by the Company of the accreted interest of approximately $103.5 million on the retired Discount Debentures). The Company's aggregate interest expense and the preferred stock dividend requirement in 1996 was $92.4 million. On a pro forma basis after giving effect to the Refinancing, the Company's interest expense for 1996 (including interest on the Exchange Debentures which, as part of the Refinancing, are assumed to have been exchanged for the Exchangeable Preferred Stock as of the beginning of the year) would have been $83.5 million. For 1997, assuming that the floating rates of interest to be borne by the Company's indebtedness in 1997 are comparable to 1996 rates and without giving effect to incremental borrowings to finance acquisitions, if any, the Company expects that its interest expense will decline by approximately $10.0 million as compared to 1996. Since the Company refinanced a substantial amount of the Discount Debentures in the third quarter of 1996, the Company expects that most of this reduction in interest expense will occur during the first and second quarters of 1997 as compared to the same periods in 1996. As of December 31, 1996, on a pro forma basis after giving effect to the Refinancing, the Company would have had approximately $748.6 million of indebtedness outstanding, including $27.8 million of working capital loans. Historically, the Company's working capital loans are at their lowest amount at year-end. Because the Company sells metal containers used in vegetable and fruit processing, 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. Due to these seasonal requirements, the Company incurs short term indebtedness to finance its working capital requirements. At its peak in September 1996, approximately $182.5 million of the working capital revolver under the Silgan Credit Agreement, including letters of credit, was utilized. The Company's financial results are sensitive to changes in prevailing market rates of interest. At December 31, 1996, on a pro forma basis after giving effect to the Refinancing and including working capital loans of $27.8 million, 48.2% of the Company's indebtedness bore interest at floating rates, taking into account interest rate swap agreements entered into by the Company to mitigate the effect of interest rate fluctuations. These agreements have a notional amount of $200.0 million, including interest rate swap agreements entered into during the fourth quarter of 1996 with a notional amount of $100.0 million. Under these agreements, floating rate interest was exchanged for fixed rates of interest ranging from 5.6% to 6.2% plus the Company's incremental margin, which currently ranges from 2.5% to 3.0%. Depending upon market conditions, the Company may enter into additional interest rate swap or hedge agreements in the future to hedge its exposure to interest rate volatility. 27 INCOME TAX CONSIDERATIONS FEDERAL TAX LIABILITY. Because the Discount Debentures represent "applicable high yield discount obligations," the tax deduction that would otherwise have been available to the Company for the accreted interest on the Discount Debentures during the five years that no cash interest was paid thereon was not available until the retirement of the Discount Debentures. After giving effect to the Refinancing, the Company will have redeemed or repurchased all of the Discount Debentures from 1995 to 1997, providing the Company with an allowable deduction of approximately $103.5 million for the amount of accreted interest on such indebtedness, and resulting in no federal tax liability for the Company in 1996. At December 31, 1996, the Company had a regular net operating loss carryforward of approximately $164.0 million. This net operating loss carryforward resulted principally from both the deduction of the accreted interest on the Discount Debentures refinanced in 1996 and 1995 and significant tax depreciation deductions from the acquisition of AN Can. Upon completion of the Refinancing, after giving effect to the deduction of accreted interest on the remaining Discount Debentures, the Company estimates it will have a regular net operating loss carryforward of approximately $185.0 million. Subject to certain limitations, this net operating loss carryforward will be available to offset taxable income that the Company expects to generate in 1997 and in the future until such time as the regular net operating loss carryforward is fully utilized. Effective in 1993, however, the Company became subject to alternative minimum tax ("AMT") for federal income tax purposes. Due to the availability of an AMT net operating loss carryforward, the Company incurred an AMT liability at the rate of 2% of AMT taxable income for 1993 through 1995. Beginning in 1996, the Company would have fully utilized its AMT net operating loss carryforwards and would have incurred an AMT liability at the statutory rate of 20% of AMT taxable income if it had not realized the benefit of the deduction of accreted interest on the retired Discount Debentures. As a result of this deduction, the Company will have reduced its federal tax liability by approximately $20.7 million and state tax liability by approximately $5.2 million for 1996 and 1997. Management expects that the Company will fully utilize the benefit of this deduction in late 1997 or early 1998 at which time it will then become subject to AMT at the statutory rate. BOOK ACCOUNTING IMPLICATIONS. SFAS No. 109 of the Financial Accounting Standards Board ("FASB") requires that a valuation allowance be recorded when it is more likely than not that some portion or all of the future tax benefits arising from the deferred tax assets will not be realized. Because the Company incurred losses from its inception through 1995, SFAS No. 109 required the Company to record a valuation allowance. Although the Company reported net income for 1996, it has not yet met the criteria under SFAS No. 109 to release any of its valuation allowance. The ultimate realization of all or part of the Company's deferred income tax assets depends on the Company's ability to generate sufficient taxable income in the future. When preparing future period interim and annual financial statements, the Company will evaluate its strategic plans, in light of evolving business conditions, and the valuation allowance will be adjusted based on such evaluation. The Company expects that it will meet the realization criteria of SFAS No. 109 in 1997, and that it will release a portion of its deferred tax asset valuation allowance, resulting in the recognition of a tax benefit. After the expected release of a portion of its valuation allowance in 1997, the Company expects to provide for federal income taxes at the statutory rate. The Company's income tax rate varied from the U.S. statutory rate in 1996 due to the utilization of net operating loss carryforwards. In 1995 and 1994, the Company's income tax rate varied from the U.S. statutory rate due to losses which resulted in temporary differences between book and taxable income for which recognition of a deferred tax asset was not considered appropriate at the time. In accordance with SFAS No. 109, the Company has provided a provision for income taxes based upon 28 federal, state and foreign taxes currently payable. See Note 14 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. RESULTS OF OPERATIONS The following table sets forth certain income statement data for the Company, expressed as a percentage of net sales, for each of the periods presented, and should be read in conjunction with the historical and pro forma financial information and related notes thereto included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 ------- ------- ------- OPERATING DATA: Net sales: Metal container business................... 84.6% 80.1 % 76.3 % Plastic container business................. 15.4 19.9 23.7 ------ ------ ------ Total.................................... 100.0 100.0 100.0 Cost of goods sold........................... 87.0 88.1 86.9 ------ ------ ------ Gross profit................................. 13.0 11.9 13.1 Selling, general and administrative expenses.................................... 4.2 4.3 4.4 Reduction in carrying value of assets........ -- 1.3 1.9 ------ ------ ------ Income from operations....................... 8.8 6.3 6.8 Interest expense and other related financing costs....................................... 6.4 7.3 7.6 ------ ------ ------ Income (loss) before income taxes............ 2.4 (1.0) (0.8) Income tax provision......................... 0.2 0.5 0.7 ------ ------ ------ Income (loss) before extraordinary charges... 2.2 (1.5) (1.5) Extraordinary charges relating to early extinguishment of debt...................... (0.2) (0.5) -- ------ ------ ------ Net income (loss) before preferred stock dividend requirement........................ 2.0 (2.0) (1.5) Preferred stock dividend requirement......... (0.2) -- -- ------ ------ ------ Net income (loss) applicable to common stockholders................................ 1.8% (2.0)% (1.5)% ====== ====== ====== Pro forma net income......................... 2.6% ======
Summary historical results for the Company's two business segments, metal and plastic containers, for the calendar years ended December 31, 1996, 1995 and 1994 and summary pro forma results for these business segments for the calendar year ended December 31, 1995 (after giving effect to the acquisition of AN Can as of the beginning of such period) are provided below. The unaudited pro forma financial data includes the historical results of the Company and AN Can and reflects the effect of purchase accounting adjustments based on appraisals and valuations, the financing of the acquisition of AN Can, the refinancing of certain of the Company's debt obligations, and certain other adjustments, as if these events occurred as of the beginning of the periods presented. The unaudited pro forma financial data do not purport to represent what the Company's financial position or results of operations would actually have been had these transactions in fact occurred at the beginning of the periods indicated, or to project the Company's financial position or results of operations for any future date or period. The unaudited pro forma financial data do not give effect to adjustments for decreased costs from manufacturing synergies resulting from the integration of AN Can with Containers' existing can manufacturing operations and benefits the Company may 29 realize as a result of its planned rationalization of plant operations. The pro forma information presented should be read in conjunction with the historical results of operations of the Company included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, ----------------------------------------- HISTORICAL PRO FORMA -------------------------- ------------- 1996 1995 1994 1995 -------- -------- ------ -------- (DOLLARS IN MILLIONS) Net sales: Metal container business........... $1,189.3 $ 882.3 $657.1 $1,184.8 Plastic container business......... 216.4 219.6 204.3 219.6 -------- -------- ------ -------- Consolidated..................... $1,405.7 $1,101.9 $861.4 $1,404.4 ======== ======== ====== ======== Income from operations: Metal container business........... $ 106.1 $ 72.9 $ 67.0 $ 95.7 Plastic container business......... 18.4 13.2 9.4 13.2 Reduction in asset value(1)........ -- (14.7) (16.7) (14.7) Corporate expense.................. (1.2) (1.6) (1.3) (1.5) -------- -------- ------ -------- Consolidated..................... $ 123.3 $ 69.8 $ 58.4 $ 92.7 ======== ======== ====== ========
- -------- (1) Included in the historical and pro forma income from operations of the Company in 1995 are charges incurred for the reduction of the carrying value of certain underutilized equipment to net realizable value of $14.7 million allocable to the metal container business. Included in the historical income from operations of the Company in 1994 are charges incurred for the reduction of the carrying value of certain underutilized and obsolete equipment to net realizable value of $16.7 million in 1994, of which $7.2 million was allocable to the metal container business and $9.5 million to the plastic container business. HISTORICAL YEAR ENDED DECEMBER 31, 1996 COMPARED WITH HISTORICAL YEAR ENDED DECEMBER 31, 1995 NET SALES. Consolidated net sales increased $303.8 million, or 27.6%, to $1.4 billion for the year ended December 31, 1996, as compared to net sales of $1.1 billion for the same period in 1995. This increase resulted predominantly from net sales generated by the former AN Can operations. Net sales for the metal container business (including net sales of its specialty business of $90.7 million) were $1,189.3 million for the year ended December 31, 1996, an increase of $307.0 million from net sales of $882.3 million for the same period in 1995. Net sales of metal cans of $1,098.6 million for the year ended December 31, 1996 were $253.1 million greater than net sales of metal cans of $845.5 million for the same period in 1995. This increase resulted from the inclusion of a full year of sales generated from the former AN Can operations, including net sales of approximately $236.0 million during the first seven months of 1996, and increased unit sales due to a better vegetable pack harvest in 1996 as compared to 1995, offset to a limited extent by volume losses with certain customers. Sales of specialty items included in the metal container segment increased $53.9 million to $90.7 million during the year ended December 31, 1996 as compared to the same period in 1995, due predominantly to additional sales generated by the former AN Can operations. Net sales for the plastic container business of $216.4 million during the year ended December 31, 1996 decreased $3.2 million from net sales of $219.6 million for the same period in 1995. Despite an increase in unit sales, net sales of plastic containers declined as a result of the pass through of lower resin costs. 30 COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net sales was 87.0% ($1.2 billion) for the year ended December 31, 1996, a decrease of 1.1 percentage points as compared to 88.1% ($970.5 million) for the same period in 1995. The decrease in cost of goods sold as a percentage of net sales was principally attributable to synergies realized from the AN Can acquisition, improved operating efficiencies due to can plant consolidations as well as the improved manufacturing performance by the plastic container business, offset, in part, by the higher cost base of the former AN Can operations and the realization of higher per unit costs due to the Company's one-time planned reduction in finished goods inventory. The additional production capacity provided by AN Can has enabled the Company to produce its product closer to the time of sale and, as a result, during 1996 the Company reduced the amount of finished goods that it carries. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percentage of consolidated net sales decreased 0.1 percentage points to 4.2% ($58.8 million) for the year ended December 31, 1996, as compared to 4.3% ($46.9 million) for the year ended December 31, 1995. This decrease in selling, general and administrative expenses as a percentage of net sales reflects the expected lower administrative expenses realized as a result of the integration of the administrative functions of AN Can with the Company, despite the incurrence of certain redundant costs, estimated to be $3.5 million, associated with the integration of the AN Can operations. In 1997, the Company expects to eliminate all of these redundant costs as it completes its integration of the administrative functions of AN Can with the Company. INCOME FROM OPERATIONS. Income from operations as a percentage of consolidated net sales increased 2.5 percentage points to 8.8% ($123.3 million) for the year ended December 31, 1996, as compared with 6.3% ($69.8 million) for the same period in the prior year. Included in income from operations for 1995 was a charge of $14.7 million for the write-off of certain underutilized assets. Without giving effect to this charge, income from operations as a percentage of consolidated net sales would have increased 1.1 percentage points in 1996 as compared to 1995, primarily as a result of the aforementioned improvement in gross margin. Income from operations as a percentage of net sales for the metal container business improved to 8.9% ($106.1 million) for the year ended December 31, 1996, from 8.3% ($72.9 million) (without giving effect to the charge of $14.7 million to adjust the carrying value of certain assets) for the same period in 1995. This increase in income from operations as a percentage of net sales for the metal container business was principally attributable to synergies resulting from the acquisition of AN Can, improved operating efficiencies due to plant consolidations and the benefit of cost reductions provided by the Company's capital investment program, offset, in part, by the higher cost base of the AN Can operations and the negative impact of the Company's one-time planned reduction in the amount of finished goods inventory. Income from operations as a percentage of net sales for the plastic container business improved to 8.5% ($18.4 million) for the year ended December 31, 1996, from 6.0% ($13.2 million) for the same period in 1995. The improvement in the operating performance of the plastic container business was principally attributable to increased production volumes as well as the benefits realized through capital investment and improved production planning and scheduling efficiencies. INTEREST EXPENSE. Interest expense increased $8.7 million to $89.4 million for the year ended December 31, 1996, principally as a result of increased borrowings to finance the acquisition of AN Can in August 1995, offset, in part, by the benefit realized from the redemption of $154.4 million of the Discount Debentures with lower cost bank borrowings (additional B term loans of $125.0 million and working capital loans of $17.4 million) and with $12.0 million of the proceeds from the Preferred Stock Sale, and by lower average bank borrowing rates. 31 Upon completion of the Refinancing, the Company will have refinanced all of the Discount Debentures with lower cost borrowings and proceeds from the Preferred Stock Sale and the Offering. Since a substantial portion of the Discount Debentures were refinanced in the third quarter of 1996, the Company expects that its interest expense will decline significantly in the first and second quarters of 1997 as compared to the same quarters in the prior year. INCOME TAXES. The provisions for income taxes for the years ended December 31, 1996 and 1995 provide for federal, state and foreign taxes currently payable. The decrease in the provision for income taxes of $1.8 million for the year ended December 31, 1996 as compared to the same period in 1995 reflects the benefit of the current cash tax savings realized from the deduction of accreted interest on the retired Discount Debentures. NET INCOME. As a result of the items discussed above, net income of $30.6 million (before extraordinary charges of $2.2 million and the preferred stock dividend requirement of $3.0 million) increased $46.6 million for the year ended December 31, 1996, as compared to a net loss of $16.0 million (before extraordinary charges, net of taxes, of $5.8 million) for the year ended December 31, 1995. During 1996, the Company incurred an extraordinary charge of $2.2 million for the write-off of unamortized debt costs associated with the early redemption of Discount Debentures. In 1995, the Company incurred an extraordinary charge of $5.8 million, net of taxes, for the write-off of unamortized debt costs related to the refinancing of its secured debt facilities to fund the AN Can acquisition, the repurchase of a portion of the Discount Debentures, and premiums paid on the repurchase of a portion of such Discount Debentures. HISTORICAL YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31, 1995 NET SALES. Consolidated net sales for the year ended December 31, 1996 of $1.4 billion were comparable to pro forma consolidated net sales for the same period in 1995. Increased unit sales of metal containers due to a better vegetable pack harvest in 1996 as compared to 1995 offset the loss of an AN Can customer whose product line was acquired by a company that manufactured its own cans and volume losses with certain other customers. Although the plastic container business had increased unit volume in 1996, net sales declined $3.2 million due to the pass through of lower resin costs. INCOME FROM OPERATIONS. Income from operations as a percentage of consolidated net sales for the year ended December 31, 1996 increased 1.2 percentage points to 8.8% ($123.3 million), as compared to pro forma income from operations as a percentage of pro forma consolidated net sales of 7.6% ($107.4 million) (without giving effect to the charge to adjust the carrying value of certain assets of $14.7 million) for the year ended December 31, 1995. The increase in income from operations for the year ended December 31, 1996 as compared to pro forma income from operations for the same period in 1995 was attributable to more efficient production planning, the realization of can manufacturing synergies resulting from the acquisition of AN Can, the benefits realized from plant consolidations and capital investments, and the improved operating performance of the plastic container business, offset, in part, by redundant costs associated with the AN Can operations and the negative impact of the Company's one-time planned reduction of the amount of finished goods inventory. HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED DECEMBER 31, 1994 NET SALES. Consolidated net sales increased $240.5 million, or 27.9%, to $1.1 billion for the year ended December 31, 1995, as compared to net sales of $861.4 million for the same period in 1994. 32 This increase resulted from net sales of $264.3 million generated by AN Can since its acquisition in August 1995 and a $15.3 million increase in sales of plastic containers offset, in part, by a decline in sales of metal containers to Silgan's existing customer base of $39.1 million. Net sales for the metal container business (including its specialty business) were $882.3 million for the year ended December 31, 1995, an increase of $225.2 million from net sales of $657.1 million for the same period in 1994. Excluding net sales of metal cans of $236.0 million generated by AN Can since its acquisition, net sales of metal cans to the Company's customers were $609.5 million during the year ended December 31, 1995, as compared to $647.5 million for the same period in 1994. Net sales to the Company's customers in 1995 decreased principally due to lower unit volume resulting from the below normal 1995 vegetable pack offset, in part, by slightly higher sales prices due to the pass through of raw material cost increases. Sales of specialty items included in the metal container segment increased $27.2 million to $36.8 million during the year ended December 31, 1995 as compared to the same period in 1994, due to the acquisition of AN Can which generated sales of $28.3 million of specialty items since its acquisition. Net sales for the plastic container business of $219.6 million during the year ended December 31, 1995 increased $15.3 million over net sales of $204.3 million for the same period in 1994. This increase was attributable to increased unit sales for new customer products and to higher average sales prices due to the pass through of higher average resin costs. COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net sales was 88.1% ($970.5 million) for the year ended December 31, 1995, an increase of 1.2 percentage points as compared to 86.9% ($748.3 million) for the same period in 1994. The increase in cost of goods sold as a percentage of net sales principally resulted from increased per unit manufacturing costs resulting from reduced can production volumes, lower margins realized on certain products due to competitive market conditions and lower margins on sales made by AN Can, offset, in part, by improved manufacturing operating efficiencies due to plant consolidations and lower depreciation expense due to a change in the estimated useful life of certain equipment. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percentage of consolidated net sales declined 0.1 percentage points to 4.3% ($46.9 million) for the year ended December 31, 1995 as compared to 4.4% ($38.0 million) for the year ended December 31, 1994. The decrease in selling, general and administrative expenses as a percentage of net sales resulted from the Company's continued control of these expenses in respect of the Company's existing business, offset partially by a temporarily higher level of expenses incurred during the integration of AN Can. The Company expects that its selling, general and administration costs as a percentage of sales will decline in 1997 after it completes the integration of the administrative functions of its metal container business. INCOME FROM OPERATIONS. Income from operations as a percentage of consolidated net sales was 6.3% ($69.8 million) for the year ended December 31, 1995, as compared with 6.8% ($58.4 million) for the same period in 1994. Included in income from operations were charges for the write-off of certain underutilized assets of $14.7 million and $16.7 million in 1995 and 1994, respectively. Without giving effect to these charges, income from operations as a percentage of consolidated net sales would have declined 1.0% in 1995, primarily as a result of the aforementioned decline in gross margin. Income from operations as a percentage of net sales for the metal container business (without giving effect to charges of $14.7 million and $7.2 million in 1995 and 1994, respectively, to adjust the carrying value of certain assets) was 8.3% ($72.9 million) for the year ended December 31, 1995, as compared to 10.2% ($67.0 million) for the same period in the prior year. The decrease in income from 33 operations as a percentage of net sales principally resulted from higher per unit manufacturing costs realized on lower production volume, lower margins realized on certain products due to competitive market conditions, inefficiencies caused by work stoppages at two of the Company's California facilities, and lower margins realized on sales made by AN Can, offset, in part, by operating efficiencies due to plant consolidations. Income from operations as a percentage of net sales attributable to the plastic container business (without giving effect to the charge of $9.5 million in 1994 to adjust the carrying value of certain assets) was 6.0% ($13.2 million) for the year ended December 31, 1995, as compared to 4.6% ($9.4 million) for the same period in 1994. The operating performance of the plastic container business improved as a result of production planning and scheduling efficiencies and benefits realized from capital investment, offset, in part, by increased unit production costs incurred as a result of an inventory reduction program. INTEREST EXPENSE. Interest expense, including amortization of debt financing costs, increased by approximately $14.9 million to $80.7 million for the year ended December 31, 1995, principally as a result of increased borrowings to finance the acquisition of AN Can and to fund higher working capital needs as a result of the increased seasonality of the Company's metal container business, and higher average interest rates. Accretion of interest on the Discount Debentures in 1995 approximated the prior year's accretion due to the repurchase of $61.7 million principal amount at maturity of Discount Debentures in the third quarter of 1995. INCOME TAXES. The provisions for income taxes for the years ended December 31, 1995 and 1994 were comprised of federal, state and foreign income taxes currently payable. The decrease in the provision for income taxes in 1995 reflects a decrease in federal income taxes currently payable due to the deductibility of accrued interest on the Discount Debentures that were repurchased in 1995. NET INCOME. As a result of the items discussed above, net loss before the extraordinary charge for the year ended December 31, 1995 was $16.0 million, as compared to a net loss of $13.0 million for the year ended December 31, 1994. As a result of the early extinguishment of amounts owed under its secured debt facilities, the Company incurred an extraordinary charge of $5.8 million (net of tax of $2.6 million) in 1995. QUARTERLY RESULTS OF OPERATIONS The Company's business is affected by seasonal variations as a result of the timing of the harvest. Accordingly, the Company experiences higher unit sales volume in the second and third quarters and, as a result, the Company has historically generated a disproportionate amount of its annual income from operations during these quarters. See "Risk Factors--Dependence on Agricultural Harvest; Seasonality". 34 The following table presents certain of the Company's unaudited consolidated quarterly financial data for the years 1996, 1995 and 1994.
1996 ----------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------ ------ (DOLLARS IN MILLIONS) Net sales....................................... $279.9 $327.1 $473.6 $325.1 Gross profit.................................... 36.5 48.7 58.8 38.1 Income from operations.......................... 23.7 34.3 43.6 21.7 Interest expense................................ 22.6 23.3 22.4 21.1 Income before extraordinary charges and pre- ferred stock dividend requirements.................... 0.1 9.5 20.7 0.3 Net income (loss) available to common stockhold- ers............................................ 0.1 9.5 17.3 (1.5) 1995 ----------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------ ------ (DOLLARS IN MILLIONS) Net sales....................................... $203.3 $201.7 $406.5 $290.4 Gross profit.................................... 29.0 29.8 41.7 30.9 Income from operations.......................... 18.8 22.3 28.3 0.4 Interest expense................................ 17.3 17.5 22.9 23.0 Income (loss) before extraordinary charges and preferred stock dividend requirements.................... (1.4) 3.5 3.7 (21.8) Net income (loss) available to common stockhold- ers............................................ (1.4) 3.5 (2.1) (21.8) 1994 ----------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------ ------ (DOLLARS IN MILLIONS) Net sales....................................... $186.2 $201.0 $286.0 $188.2 Gross profit.................................... 22.7 28.3 36.4 25.7 Income from operations.......................... 14.0 18.7 27.2 (1.5) Interest expense................................ 15.6 16.3 16.8 17.1 Income (loss) before extraordinary charges and preferred stock dividend requirements.................... (2.2) 1.5 9.0 (21.3) Net income (loss) available to common stockhold- ers............................................ (2.2) 1.5 9.0 (21.3)
The Company's income from operations includes charges for the write-down of the carrying value of certain underutilized and obsolete equipment to net realizable value of $14.7 million and $16.7 million in the fourth quarters of 1995 and 1994, respectively. Net income (loss) includes extraordinary charges for debt refinancing costs of $2.2 million incurred in the third quarter of 1996 and $5.8 million, net of taxes, incurred in the third quarter of 1995. CAPITAL RESOURCES AND LIQUIDITY The Company's liquidity requirements arise primarily from its obligations under the indebtedness incurred in connection with its acquisitions and the refinancing of such indebtedness, capital investment in new and existing equipment and the funding of the Company's seasonal working capital needs. Historically, the Company has met these liquidity requirements through cash flow generated from operating activities and working capital borrowings. On July 22, 1996, the Company completed the Preferred Stock Sale. With net proceeds of $47.8 million from the Preferred Stock Sale, the Company purchased the Holdings Class B Stock held by Mellon for $35.8 million pursuant to its right to purchase such stock for such amount under the Amended and Restated Organization Agreement dated as of December 21, 1993 among the Company and its stockholders and, on August 26, 1996, redeemed $12.0 million principal amount of Discount Debentures. 35 On August 1, 1995, Silgan, Containers and Plastics entered into the Silgan Credit Agreement (which originally provided Silgan with $225.0 million of A term loans and $225.0 million of B term loans and provided Containers and Plastics with a commitment of $225.0 million for working capital loans) to finance the acquisition by Containers of AN Can, to refinance and repay in full all amounts owing under the Company's previous credit agreement and under Silgan's Senior Secured Floating Rate Notes due 1997. With borrowings of $200.0 million under the Silgan Credit Agreement (as amended in May 1996 to include an additional $125.0 million of B term loans), Holdings repurchased and redeemed an aggregate of $204.1 million principal amount at maturity of Discount Debentures. The Silgan Credit Agreement also provided the Company with improved financial flexibility by (i) enabling Silgan to transfer funds to Holdings for payment by Holdings of cash dividends on the Exchangeable Preferred Stock (or, if issued, cash interest on the Exchange Debentures), (ii) extending the maturity of the Company's secured debt facilities until December 31, 2000, (iii) lowering the interest rate spread on its floating rate borrowings by 1/2%, as well as providing for further interest rate reductions in the event the Company attains certain financial targets, and (iv) lowering the Company's average cost of indebtedness by permitting Holdings to repurchase or redeem Discount Debentures. Upon completion of the Refinancing, the Company will have retired all of the Discount Debentures. By refinancing all of the Discount Debentures with borrowings under the Silgan Credit Agreement and proceeds from the Preferred Stock Sale and from the Offering, the Company will have lowered its average cost of indebtedness, will realize approximately $19.5 million of annual current cash interest savings (excluding non-cash interest on the Exchange Debentures), and will realize approximately $25.9 million of current cash tax savings as a result of the deduction by the Company of the accreted interest on the retired Discount Debentures. In addition, as a result of the Company's net operating loss carryforwards, the Company did not have any federal tax liability in 1996, and expects to incur minimal federal tax liability in 1997. For several years thereafter, the Company expects to incur federal tax liability at the alternative minimum tax rates then in effect. See "-- Overview--Income Tax Considerations". During 1996, cash generated from operations of $125.2 million, borrowings of $125.0 million of B term loans under the Silgan Credit Agreement, net proceeds of $47.8 million from the Preferred Stock Sale, net borrowings of working capital loans under the Silgan Credit Agreement of $20.7 million, proceeds of $1.6 million from the sale of assets and $1.1 million of cash balances were used to fund capital expenditures of $56.9 million, the purchase of Finger Lakes for $29.9 million and the purchase of ANC's St. Louis facility for $13.1 million, the redemption of $154.4 million of Discount Debentures, the repayment of $29.5 million of term loans under the Silgan Credit Agreement, the payment of $1.8 million of financing costs associated with the borrowing of additional B term loans under the Silgan Credit Agreement, and the purchase of Holdings Class B Stock held by Mellon for $35.8 million. The Company's Adjusted EBITDA for the year ended December 31, 1996 in comparison to 1995 increased by $53.6 million to $186.0 million. The increase in Adjusted EBITDA resulted primarily from increased cash earnings generated by both the metal container business (including earnings from the AN Can operations) and the plastic container business. Although the Adjusted EBITDA of the Company was higher in 1996 as compared to 1995 and the Company reduced the amount of finished goods inventory in 1996, cash flow from operations in 1996 would have remained constant with 1995 (assuming AN Can had been acquired at December 31, 1995 rather than at its seasonal peak). The Company incurred greater cash interest expense in 1996 due to the refinancings of Discount Debentures (for which no cash interest was required through June 15, 1996) with bank borrowings, and in 1995 the Company adopted similar year-end vendor payment terms to those of AN Can. During 1995, cash generated from operations of $209.6 million (including cash of $112.0 million generated by AN Can during the five month period from its acquisition on August 1, 1995), proceeds of $3.5 million realized from the sale of assets and a decrease of $0.6 million in cash balances were 36 used to repay $142.8 million of working capital borrowings used to fund the acquisition of AN Can, fund capital expenditures of $51.9 million, repay $9.7 million of term loans and $5.5 million of working capital loans, and make payments to former shareholders of $3.8 million in full settlement of outstanding litigation. The Company's Adjusted EBITDA for the year ended December 31, 1995 as compared to 1994 increased by $17.9 million to $132.4 million. The increase in Adjusted EBITDA reflected the generation of additional cash flow from AN Can since its acquisition on August 1, 1995, partially offset by a decline in the cash earnings of the Company's existing business principally as a result of lower unit volume due to the below normal 1995 vegetable pack. For the year ended December 31, 1995, the operating cash flow of the Company increased significantly from the prior year due to the generation of cash by AN Can since its acquisition on August 1, 1995 and the adoption by Silgan of similar year-end vendor payment terms to those of AN Can. At December 31, 1995, the trade receivable balance of AN Can was $44.2 million ($90.2 million on August 1, 1995), the inventory balance was $98.9 million ($137.9 million on August 1, 1995), and the trade payables balance was $58.2 million ($64.2 million on August 1, 1995). Because the Company sells metal containers used in fruit and vegetable pack processing, its sales are seasonal. As a result, a significant portion of the Company's revenues are generated in the first nine months of the year. As is common in the packaging industry, the Company must access working capital to build inventory and then carry accounts receivable for some customers beyond the end of the summer and fall packing season. Seasonal accounts are generally settled by year end. The acquisition of AN Can increased the Company's seasonal metal containers business. The Company's average outstanding trade receivables increased in 1996 as compared to 1995 due to the acquisition of AN Can which had more seasonal sales than the Company. As a result the Company increased the amount of working capital loans available to it under its credit facility to $225.0 million. Due to the Company's seasonal requirements, the Company expects to incur short term indebtedness to finance its working capital requirements. Approximately $182.5 million of the working capital revolver under the Silgan Credit Agreement, including letters of credit, was utilized at its peak in September 1996. As of December 31, 1996, the outstanding principal amount of working capital loans was $27.8 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 $190.0 million. In addition to its operating cash needs, the Company believes its cash requirements over the next several years consist primarily of (i) annual capital expenditures of $50.0 to $60.0 million, (ii) scheduled principal amortization payments of term loans under the Silgan Credit Agreement (without giving effect to the use of any of the net proceeds from the Offering to prepay bank terms loans) of $38.5 million, $53.4 million, $53.4 million, $126.1 million and $155.9 million over the next five years, respectively, (iii) expenditures of approximately $30.0 million over the next three years associated with plant rationalizations, employee severance and administrative workforce reductions, other plant exit costs and employee relocation costs of AN Can, (iv) the Company's interest requirements, including interest on working capital loans, the principal amount of which will vary depending upon seasonal requirements, the bank term loans, most of which bear fluctuating rates of interest, and the 11 3/4% Notes, and (v) payments of approximately $5.0 million (based on the Company's current estimate of its 1997 net income) for federal and state tax liabilities in 1997. Beginning in 1998, the Company expects to incur federal tax liability at the alternative minimum tax rates then in effect. See "--Overview--Income Tax Considerations". Management believes that cash generated by operations and funds from working capital borrowings under the Silgan Credit Agreement will be sufficient to meet the Company's expected operating needs, planned capital expenditures, debt service and tax obligations for the foreseeable future. 37 The Silgan Credit Agreement, the indenture with respect to the 11 3/4% Notes (the "11 3/4% Notes Indenture"), the Exchangeable Preferred Stock and, when issued, the Exchange 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 1997 with all such covenants. EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS Historically, inflation has not had a material effect on the Company, other than to increase its cost of borrowing. In general, the Company has been able to increase the sales prices of its products to reflect any increases in the prices of raw materials. See "--Overview--Net Sales--Long-term Contracts". Because the Company has indebtedness which bears interest at floating rates, the Company's financial results will be sensitive to changes in prevailing market rates of interest. As of December 31, 1996, on a pro forma basis after giving effect to the Refinancing and including working capital loans of $27.8 million, the Company had $748.6 million of indebtedness outstanding, of which $360.6 million bore interest at floating rates, taking into account interest rate swap agreements entered into by the Company to mitigate the effect of interest rate fluctuations. Under these agreements, floating rate interest was exchanged for fixed rates of interest ranging from 5.6% to 6.2% plus the Company's incremental margin, which currently ranges from 2.5% to 3.0%. The notional principal amounts of these agreements totaled $200.0 million, including interest rate swap agreements entered into during the fourth quarter of 1996 with a notional amount of $100.0 million, and mature in the year 1999. Depending upon market conditions, the Company may enter into additional interest rate swap or hedge agreements (with counterparties that, in the Company's judgment, have sufficient creditworthiness) to hedge its exposure against interest rate volatility. NEW ACCOUNTING PRONOUNCEMENTS LONG-LIVED ASSET IMPAIRMENT The Company adopted SFAS No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of," in the first quarter of 1996. Under SFAS No. 121, impairment losses will be recognized when events or changes in circumstances indicate that the undiscounted cash flows generated by assets are less than the carrying value of such assets. Impairment losses are then measured by comparing the fair value of assets to their carrying amount. There were no impairment losses recognized during 1996 as a result of the adoption of SFAS No. 121. See Note 2 to the Consolidated Financial Statements of the Company included elsewhere in this Prospectus. STOCK-BASED COMPENSATION In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the 1996 fiscal year. Under SFAS No. 123, compensation expense for all stock-based compensation plans would be recognized based on the fair value of the options at the date of grant using an option pricing model. As permitted under SFAS No. 123, the Company may either adopt the new pronouncement or follow the current accounting methods as prescribed under APB No. 25. The Company has not elected to adopt SFAS No. 123 and continues to recognize compensation expense in accordance with APB No. 25. In addition, the Company is required to include in its 1996 year end financial statements pro forma information regarding compensation expense recognizable under SFAS No. 123. See Note 17 to the Consolidated Financial Statements of the Company included elsewhere in this Prospectus. 38 BUSINESS GENERAL The Company is a leading North American manufacturer of consumer goods packaging products that currently produces (i) steel and aluminum containers for human and pet food, (ii) custom designed plastic containers for personal care, health, food, pharmaceutical and household chemical products and (iii) specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. The Company is the largest manufacturer of metal food containers in North America, with a unit sale market share for the twelve months ended October 31, 1996 of 35% in the United States, and is a leading manufacturer of plastic containers in North America for personal care products. The Company's strategy is to increase shareholder value by growing its existing businesses and expanding into other segments by applying its expertise in acquiring, financing, integrating and efficiently operating consumer goods packaging businesses. The Company was founded in 1987 by its current Co-Chief Executive Officers. Since its inception, the Company has acquired and successfully integrated ten businesses, including the recent acquisitions of AN Can in August 1995 for a purchase price of approximately $362.0 million (including net working capital of approximately $156.0 million) and DM Can in December 1993 for a purchase price of approximately $73.3 million (including net working capital of approximately $21.9 million). In addition, on October 9, 1996 the Company completed its acquisition of Finger Lakes, the metal food container manufacturing subsidiary of Curtice Burns. See "Prospectus Summary--Recent Developments". The Company's strategy has enabled it to rapidly increase its net sales and income from operations. The Company's net sales have increased from $630.0 million in 1992 to $1,405.7 million in 1996, representing a compound annual growth rate of approximately 22%. During this period, income from operations increased from $42.2 million in 1992 to $123.3 million in 1996, representing a compound annual growth rate of approximately 31%, while the Company's income from operations as a percentage of net sales increased 2.1 percentage points from 6.7% to 8.8% over the same period. The Company's philosophy, which has contributed to its strong performance since inception, is based on: (i) a significant equity ownership by management and an entrepreneurial approach to business, (ii) its low cost producer position and (iii) its long-term customer relationships. The Company's senior management has a significant ownership interest in the Company, which fosters an entrepreneurial management style and places a primary focus on creating shareholder value. The Company has achieved a low cost producer status through (i) the maintenance of a flat, efficient organizational structure, resulting in low selling, general and administrative expenses as a percentage of total net sales, (ii) purchasing economies, (iii) significant capital investments that have generated manufacturing and production efficiencies, (iv) plant consolidations and rationalizations and (v) the proximity of its plants to its customers. The Company's philosophy has also been to develop long-term customer relationships by acting in partnership with its customers, providing reliable quality and service and utilizing its low cost producer position. This philosophy has resulted in numerous long-term supply contracts, high retention of customers' business and recognition from its customers, as demonstrated by many quality and service awards. 39 COMPANY HISTORY Holdings is a Delaware corporation organized in April 1989, that, in June 1989, through a merger acquired all of the outstanding common stock of Silgan. Holdings' principal asset is all of the outstanding capital stock of Silgan. Prior to June 30, 1989, Holdings did not engage in any business. Silgan is a Delaware corporation formed in August 1987 as a holding company to acquire interests in various packaging manufacturers. Since its inception in 1987, the Company has completed the following acquisitions:
ACQUIRED BUSINESS YEAR PRODUCTS ----------------- ---- -------- Metal Container Manufacturing division 1987 of Nestle Metal food containers Monsanto Company's plastic container 1987 business Plastic containers Fort Madison Can Company of The Dial 1988 Metal food containers Corporation Seaboard Carton Division of Nestle 1988 Paper containers Aim Packaging, Inc. 1989 Plastic containers Fortune Plastics Inc. 1989 Plastic containers Express Plastic Containers Limited 1989 Plastic containers Amoco Container Company 1989 Plastic containers Del Monte's U.S. can manufacturing 1993 operations Metal food containers Food Metal and Specialty business of 1995 Metal food containers, metal caps ANC and closures and Omni plastic containers Finger Lakes, a subsidiary of Curtice 1996 Burns Metal food containers
The principal executive offices of Holdings are located at 4 Landmark Square, Stamford, Connecticut 06901, telephone number (203) 975-7110. GROWTH STRATEGY The Company intends to enhance its position as a leading supplier of consumer goods packaging products by aggressively pursuing a strategy designed to achieve future growth and to increase profitability. The key components of this strategy are to (i) increase the Company's market share in its current business lines through acquisitions and internal growth, (ii) expand into complementary business lines by applying the Company's acquisition and operating expertise to other areas of the North American consumer goods packaging market and (iii) improve the profitability of acquired businesses through integration, rationalization and capital investments to enhance their manufacturing and production efficiency. INCREASE MARKET SHARE THROUGH ACQUISITIONS AND INTERNAL GROWTH The Company has increased its revenues and market share in the metal container, plastic container and specialty markets through acquisitions and internal growth. As a result of this strategy, the Company has diversified its customer base, geographic presence and product line. Management believes that certain industry trends exist which will enable the Company to continue to acquire attractive businesses in its existing markets. For example, during the past ten years, the metal container market has experienced significant consolidation due to the desire by food processors to reduce costs and deploy resources to their core operations. Self-manufacturers are increasingly outsourcing their container needs by selling their operations to commercial container manufacturing companies and agreeing to purchase containers from the buyer pursuant to long-term contracts. The Company's acquisitions of the metal container manufacturing operations of Nestle, The Dial 40 Corporation and Del Monte reflect this trend. As a result of its growth strategy, the Company has more than tripled its overall share of the U.S. metal food container market from approximately 10% in 1987 to approximately 35% for the twelve months ended October 31, 1996. The Company expects this consolidation trend to continue, as evidenced by its October 9, 1996 acquisition of Finger Lakes. See "Prospectus Summary--Recent Developments". The Company's plastic container business has also increased its market position primarily through strategic acquisitions, from a sales base of $88.8 million in 1987 to $216.4 million in 1996. The plastic container segment of the consumer goods packaging industry is highly fragmented, and management intends to pursue consolidation opportunities in that segment. The Company also expects to generate internal growth due to its participation in certain higher growth segments of the consumer goods packaging market. For example, due to increasing consumer preference for plastic as a substitute for glass, the Company is aggressively pursuing opportunities for its custom designed PET and HDPE containers. These opportunities include producing PET containers for regional bottled water companies, and HDPE and PET containers for products such as shampoo, mouthwash, salad dressing and liquor. The Company also believes that there will be opportunities to expand its specialty business, which generated net sales of $90.7 million in 1996. Specialty products manufactured by the Company include metal closures for vacuum sealed glass containers, its licensed Omni plastic container, a plastic, microwaveable bowl with an easy-open metal end, and paper containers. EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS Management believes that it can successfully apply its acquisition and operating expertise to new segments of the consumer goods packaging industry. For example, with the AN Can acquisition, the Company expanded its specialty business into metal caps and closures and its licensed Omni plastic container. Management believes that certain trends in and characteristics of the North American consumer goods packaging industry will continue to generate attractive acquisition opportunities in complementary business lines. The Company is focused on the North American consumer goods packaging industry, which represents a significant part of the $95 billion North American packaging market (based on estimated total sales in 1994). Importantly, the industry is also fragmented, with numerous segments and multiple participants in each of them. In addition, many of these segments are experiencing consolidation. ENHANCE PROFITABILITY OF ACQUIRED COMPANIES The Company seeks to acquire businesses at reasonable cash flow multiples and to enhance profitability by rationalizing plants, by improving manufacturing and production efficiencies and through purchasing economies. The Company rationalizes plants by closing or downsizing certain plants and by consolidating production capacity within other plants. Since 1991, the Company has reduced costs by closing twelve smaller, higher cost facilities. Since its inception in 1987, the Company has invested approximately $272.3 million to upgrade acquired manufacturing facilities, aimed at generating manufacturing and production efficiencies and achieving a low cost producer position. As a result, the Company's acquisitions have generally been accretive to earnings and have produced high returns on assets. The AN Can acquisition illustrates the ability of the Company to enhance the profitability of acquired businesses. The Company estimates that it has reduced AN Can's operating costs from its historical 1994 level by at least $21.0 million, through selling and administrative cost reductions, improved manufacturing and production efficiencies and purchasing economies. The Company expects to further reduce AN Can's operating costs over the next few years by an aggregate of approximately $15.0 million (approximately half of which is expected to be realized in 1997) through the elimination of transitional administrative costs, the realization of additional manufacturing and production synergies with its metal container business and plant rationalizations. BUSINESS SEGMENTS The Company operates through two operating companies, Containers and Plastics. 41 CONTAINERS For 1996, Containers had net sales of $1,189.3 million (85% of the Company's net sales) and income from operations of $106.1 million (85% of the Company's income from operations) (without giving effect to corporate expense). Containers has realized compound annual unit sales growth in excess of 24% since 1992, despite the relative maturity of the U.S. food can industry. Containers is engaged in the manufacture and sale of steel and aluminum containers that are used primarily by processors and packagers for human and pet food. Containers manufactures metal containers for vegetables, fruit, pet food, meat, tomato based products, coffee, soup, seafood and evaporated milk. The Company estimates that approximately 80% of Containers' projected sales in 1997 will be pursuant to long-term supply arrangements. Containers has the Nestle Supply Agreements with Nestle pursuant to which Containers supplies a majority of Nestle's metal container requirements, and the DM Supply Agreement with Del Monte pursuant to which Containers supplies substantially all of Del Monte's metal container requirements. In addition to Nestle and Del Monte, Containers has multi-year supply arrangements with several other major food processors. Containers also manufactures certain specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. For 1996, Containers had net sales of specialty packaging items of $90.7 million. PLASTICS For 1996, Plastics had net sales of $216.4 million (15% of the Company's net sales) and income from operations of $18.4 million (15% of the Company's income from operations) (without giving effect to corporate expense). Plastics is aggressively pursuing opportunities in custom designed PET and HDPE containers. Plastics emphasizes value-added design, fabrication and decoration of custom containers in its business. Plastics manufactures custom designed HDPE containers for health and personal care products, including containers for shampoos, conditioners, hand creams, lotions, cosmetics and toiletries, household chemical products, including containers for scouring cleaners, cleaning agents and lawn and garden chemicals and pharmaceutical products, including containers for tablets, antacids and eye cleaning solutions. Plastics also manufactures PET custom designed containers for mouthwash, respiratory and gastrointestinal products, liquid soap, skin care lotions, salad dressings, condiments, instant coffee, bottled water and liquor. While many of Plastics' larger competitors that manufacture extrusion blow-molded plastic containers employ technology oriented to large bottles and long production runs, Plastics has focused on mid-sized, extrusion blow-molded plastic containers requiring special decoration and shorter production runs. Because these products are characterized by short product life and a demand for creative packaging, the containers manufactured for these products generally have more sophisticated designs and decorations. MANUFACTURING AND PRODUCTION As is the practice in the industry, most of the Company's can and plastic container customers provide it with quarterly or annual estimates of products and quantities pursuant to which periodic commitments are given. Such estimates enable the Company to effectively manage production and control working capital requirements. Containers estimates that approximately 80% of its projected 1997 sales will be pursuant to multi-year contracts. Plastics has purchase orders or contracts for containers with the majority of its customers. In general, these purchase orders and contracts are for containers made from proprietary molds and are for a duration of 2 to 5 years. Both Containers and Plastics schedule their production to meet their customers' requirements. Because the production time for the Company's products is short, the backlog of customer orders in relation to sales is not significant. 42 METAL CONTAINER BUSINESS The Company's manufacturing operations include cutting, coating, lithographing, fabricating, assembling and packaging finished cans. Three basic processes are used to produce cans. The traditional three-piece method requires three pieces of flat metal to form a cylindrical body with a welded side seam, a bottom and a top. High integrity of the side seam is assured by the use of sophisticated electronic weld monitors and organic coatings that are thermally cured by induction and convection processes. The other two methods of producing cans start by forming a shallow cup that is then formed into the desired height using either the draw and iron process or the draw and redraw process. Using the draw and redraw process, the Company manufactures steel and aluminum two-piece cans, the height of which does not exceed the diameter. For cans the height of which is greater than the diameter, the Company manufactures steel two-piece cans by using a drawing and ironing process. Quality and stackability of such cans are comparable to that of the shallow two-piece cans described above. Can bodies and ends are manufactured from thin, high-strength aluminum alloys and steels by utilizing proprietary tool and die designs and selected can making equipment. PLASTIC CONTAINER BUSINESS The Company utilizes two basic processes to produce plastic bottles. In the extrusion blow molding process, pellets of plastic resin are heated and extruded into a tube of plastic. A two-piece metal mold is then closed around the plastic tube and high pressure air is blown into it causing a bottle to form in the mold's shape. In the injection blow molding process, pellets of plastic resin are heated and injected into a mold, forming a plastic preform. The plastic preform is then blown into a bottle-shaped metal mold, creating a plastic bottle. The Company believes that its proprietary equipment for the production of HDPE containers is particularly well-suited for the use of post-consumer recycled ("PCR") resins because of the relatively low capital costs required to convert its equipment to utilize multi-layer container construction. The Company's decorating methods for its plastic products include (1) in- mold labeling which applies a paper or plastic film label to the bottle during the blowing process and (2) post-mold decoration. Post-mold decoration includes (i) silk screen decoration which enables the applications of images in multiple colors to the bottle, (ii) pressure sensitive decoration which uses a plastic film or paper label with an adhesive, (iii) heat transfer decoration which uses a plastic coated label applied by heat, and (iv) hot stamping decoration which transfers images from a die using metallic foils. The Company has state-of-the-art decorating equipment, including, management believes, one of the largest sophisticated decorating facilities in the country. RAW MATERIALS The Company does not believe that it is materially dependent upon any single supplier for any of its raw materials and, based upon the existing arrangements with suppliers, its current and anticipated requirements and market conditions, the Company believes that it has made adequate provisions for acquiring raw materials. Although increases in the prices of raw materials have generally been passed along to the Company's customers in accordance with the Company's long-term supply arrangements and otherwise, any inability to do so in the future could have a significant impact on the Company's operating margins. METAL CONTAINER BUSINESS The Company uses tin plated and chromium plated steel, aluminum, copper wire, organic coatings, lining compound and inks in the manufacture and decoration of its metal can products. The Company's material requirements are supplied through purchase orders with suppliers with whom the Company, through its predecessors, has long-term relationships. If its suppliers fail to deliver under 43 their arrangements, the Company will be forced to purchase raw materials on the open market, and no assurances can be given that it would be able to make such purchases at comparable prices or terms. The Company believes that it will be able to purchase sufficient quantities of steel and aluminum can sheet for the foreseeable future. PLASTIC CONTAINER BUSINESS The raw materials used by the Company for the manufacture of plastic containers are primarily resins in pellet form such as recycled PET, HDPE-PCR and virgin HDPE and PET and, to a lesser extent, low density polyethylene, extrudable polyethylene terephthalate, polyethylene terephthalate glycol, polypropylene, polyvinyl chloride and medium density polyethylene. The Company's resin requirements are acquired through multi-year arrangements for specific quantities of resins with several major suppliers of resins. The price the Company pays for resin raw materials is not fixed and is subject to market pricing. The Company believes that it will be able to purchase sufficient quantities of resins for the foreseeable future. SALES AND MARKETING The Company's philosophy has been to develop long-term customer relationships by acting in partnership with its customers, providing reliable quality and service and utilizing its low cost producer position. The Company markets its products in most areas of North America primarily by a direct sales force and for its plastic container business, to a lesser extent, through a network of distributors. Because of the high cost of transporting empty containers, the Company generally sells to customers within a 300 mile radius of its manufacturing plants. See also "--Competition" below. In 1996, 1995 and 1994, approximately 17%, 21% and 26%, respectively, of the Company's sales were to Nestle, and approximately 12%, 15% and 21%, respectively, of the Company's sales were to Del Monte. No other customer accounted for more than 10% of the Company's total sales during such years. METAL CONTAINER BUSINESS The Company is the largest manufacturer of metal food can containers in North America, with a unit sale market share for the twelve months ended October 31, 1996 of approximately 35% in the United States. Containers has entered into multi-year supply arrangements with many of its customers, including Nestle and Del Monte. The Company estimates that approximately 80% of its projected metal container sales in 1997 will be pursuant to such arrangements. In 1987, the Company, through Containers, and Nestle entered into nine Nestle Supply Agreements pursuant to which Containers has agreed to supply Nestle with, and Nestle has agreed to purchase from Containers, substantially all of the can requirements of the former Carnation operations of Nestle for a period of ten years, subject to certain conditions. In 1996, sales of metal cans by the Company to Nestle were $240.6 million. The Nestle Supply Agreements provide for certain prices and specify that such prices will be increased or decreased based upon cost change formulas set forth therein. The Nestle Supply Agreements contain provisions that require Containers to maintain certain levels of product quality, service and delivery in order to retain the Nestle business. In the event of a breach of a particular Nestle Supply Agreement, Nestle may terminate such Nestle Supply Agreement but the other Nestle Supply Agreements would remain in effect. 44 The Company has recently agreed with Nestle, subject to definitive documentation, to extend the term of certain of the Nestle Supply Agreements through 2004 (representing approximately 10% of the Company's estimated 1996 sales) in return for certain price concessions by the Company. The Company believes that these price concessions will not have a material adverse effect on its results of operations. Under certain limited circumstances, Nestle, beginning in January 2000 (with respect to all of the containers supplied under the Nestle Supply Agreements that have been extended through 2004), may receive competitive bids, and Containers has the right to match any such bids. If Containers matches a competitive bid, it may result in reduced sales prices with respect to the metal containers that are the subject of such competitive bid. In the event that Containers chooses not to match a competitive bid, such metal containers may be purchased from the competitive bidder at the competitive bid price for the term of the bid. Under the Company's recent agreement with Nestle, with respect to the remaining Nestle Supply Agreements that expire in August 1997 (representing approximately 6% of the Company's estimated 1996 sales), the Company has the right to submit a bid to Nestle, and to match any bid received by Nestle, for the 1998 supply year with respect to the metal containers that are the subject of such Nestle Supply Agreements. There can be no assurance that any such bid by the Company will be made at sales prices equivalent to those currently in effect or otherwise on terms similar to those currently in effect. In addition, the Company cannot predict the effect, if any, on its results of operations of matching or not matching any such bids. On December 21, 1993, Containers and Del Monte entered into the DM Supply Agreement. Under the DM Supply Agreement, Del Monte has agreed to purchase from Containers, and Containers has agreed to sell to Del Monte, substantially all of Del Monte's annual requirements for metal containers to be used for the packaging of food and beverages in the United States, subject to certain limited exceptions. In 1996, sales of metal containers by the Company to Del Monte were $168.0 million. The DM Supply Agreement provides for certain prices for all metal containers supplied by Containers to Del Monte thereunder and specifies that such prices will be increased or decreased based upon specified cost change formulas. Under the DM Supply Agreement, beginning in December 1998, Del Monte may, under certain circumstances, receive proposals with terms more favorable than those under the DM Supply Agreement from independent commercial can manufacturers for the supply of containers of a type and quality similar to the metal containers that Containers furnishes to Del Monte, which proposals shall be for the remainder of the term of the DM Supply Agreement and for 100% of the annual volume of containers at one or more of Del Monte's canneries. Containers has the right to retain the business subject to the terms and conditions of such competitive proposal. The sale of metal containers to vegetable and fruit processors is seasonal and monthly revenues increase during the months of June through October. As is common in the packaging industry, the Company must build inventory and then carry accounts receivable for some seasonal customers beyond the end of the season. The acquisition of AN Can increased the Company's seasonal metal container business. Consistent with industry practice, such customers may return unused containers. Historically, such returns have been minimal. PLASTIC CONTAINER BUSINESS The Company is one of the leading manufacturers of custom designed HDPE and PET containers sold in North America. The Company markets its plastic containers in most areas of North America through a direct sales force and through a large network of distributors. Management believes that the Company is a leading manufacturer of plastic containers in North America for personal care products. More than 70% of the Company's plastic containers are sold for health and personal care products, such as hair care, oral care, pharmaceutical and other health care applications. The Company's largest 45 customers in these product segments include the Helene Curtis and Chesebrough- Ponds USA divisions of Unilever United States, Inc., Procter & Gamble Co., Avon Products, Inc., Andrew Jergens Inc., The Dial Corporation, Warner-Lambert Company and Pfizer Inc. The Company also manufactures plastic containers for food and beverage products, such as salad dressings, condiments, instant coffee and bottled water and liquor. Customers in these product segments include Procter & Gamble Co., Kraft Foods Inc. and General Mills, Inc. As part of its marketing strategy, the Company has arrangements to sell some of its plastic products to distributors, which in turn sell such products primarily to regional customers. Plastic containers sold to distributors are manufactured by using generic molds with decoration, color and neck finishes added to meet the distributors' individual requirements. The distributors' warehouses and their sales personnel enable the Company to market and inventory a wide range of such products to a variety of customers. Plastics has written purchase orders or contracts for containers with the majority of its customers. In general, these purchase orders and contracts are for containers made from proprietary molds and are for a duration of 2 to 5 years. COMPETITION The packaging industry is highly competitive. The Company competes in this industry with other packaging manufacturers as well as fillers, food processors and packers who manufacture containers for their own use and for sale to others. The Company attempts to compete effectively through the quality of its products, competitive pricing and its ability to meet customer requirements for delivery, performance and technical assistance. The Company also pursues market niches such as the manufacture of easy-open ends and special feature cans, which may differentiate the Company's products from its competitors' products. Because of the high cost of transporting empty containers, the Company generally sells to customers within a 300 mile radius of its manufacturing plants. Strategically located existing plants give the Company an advantage over competitors from other areas, and the Company would be disadvantaged by the loss or relocation of a major customer. As of December 31, 1996, the Company operated 48 manufacturing facilities, geographically dispersed throughout the United States and Canada, that serve the distribution needs of its customers. METAL CONTAINER BUSINESS Of the commercial metal can manufacturers, Crown Cork and Seal Company, Inc. and Ball Corporation are the Company's most significant national competitors. As an alternative to purchasing cans from commercial can manufacturers, customers have the ability to invest in equipment to self-manufacture their cans. However, some self-manufacturers have sold or closed can manufacturing operations and entered into long-term supply agreements with the new owners or with commercial can manufacturers. Although metal containers face continued competition from plastic, paper and composite containers, management believes that metal containers are superior to plastic and paper containers in applications where the contents are processed at high temperatures, where the contents are packaged in large or institutional quantities (14 to 64 oz.) or where long-term storage of the product is desirable. Such applications include canned vegetables, fruits, meats and pet foods. These sectors are the principal areas for which the Company manufactures its products. PLASTIC CONTAINER BUSINESS Plastics competes with a number of large national producers of health, personal care, food, beverage, pharmaceutical and household chemical plastic container products, including Owens-Brockway Plastics Products, a division of Owens-Illinois, Inc., Constar Plastics Inc., a subsidiary of 46 Crown Cork and Seal Company, Inc., Johnson Controls Inc., Continental Plastics Inc. and Plastipak Packaging Inc. In order to compete effectively in the constantly changing market for plastic bottles, the Company must remain current with, and to some extent anticipate innovations in, resin composition and applications and changes in the technology for the manufacturing of plastic bottles. EMPLOYEES As of December 31, 1996, the Company employed approximately 1,080 salaried and 4,445 hourly employees on a full-time basis. Approximately 64% of the Company's hourly plant employees are represented by a variety of unions. The Company's labor contracts expire at various times between 1997 and 2008. Contracts covering approximately 15% of the Company's hourly employees presently expire during 1997. The Company expects no significant changes in its relations with these unions. Management believes that its relationship with its employees is good. REGULATION The Company is subject to federal, state and local environmental laws and regulations. In general, these laws and regulations limit the discharge of pollutants into the air and water and establish standards for the treatment, storage, and disposal of solid and hazardous waste. The Company believes that all of its facilities are either in compliance in all material respects with all presently applicable environmental laws and regulations or are operating in accordance with appropriate variances, delayed compliance orders or similar arrangements. In addition to costs associated with regulatory compliance, the Company may be held liable for alleged environmental damage associated with the past disposal of hazardous substances. Generators of hazardous substances disposed of at sites at which environmental problems are alleged to exist, as well as the owners of those sites and certain other classes of persons, are subject to claims under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the original disposal. Liability under CERCLA and under many similar state statutes is joint and several, and, therefore, any responsible party may be held liable for the entire cleanup cost at a particular site. Other state statutes may impose proportionate rather than joint and several liability. The federal Environmental Protection Agency or a state agency may also issue orders requiring responsible parties to undertake removal or remedial actions at certain sites. Pursuant to the agreement relating to the acquisition in 1987 of the can operations of Nestle ("Nestle Can"), the Company has assumed liability for the past waste disposal practices of Nestle Can. In 1989, the Company received notice that it is one of many potentially responsible parties (or similarly designated parties) for cleanup of hazardous waste at a site to which it (or its predecessor Nestle Can) is alleged to have shipped such waste and at which the Company's share of cleanup costs could exceed $100,000. See "--Legal Proceedings" below. Pursuant to the agreement relating to the acquisition in 1987 from Monsanto Company ("Monsanto") of substantially all of the business and related fixed assets and inventory of Monsanto's plastic containers business ("Monsanto Plastic Containers"), Monsanto has agreed to indemnify the Company for substantially all of the costs attributable to the past waste disposal practices of Monsanto Plastic Containers. In connection with the acquisition of DM Can, Del Monte has agreed to indemnify the Company for a period of three years for substantially all of the costs attributable to any noncompliance by DM Can with any environmental law prior to the closing, including all of the costs attributable to the past waste disposal practices of DM Can. In connection with the acquisition of AN Can, subject to certain limitations, ANC has agreed to indemnify the Company for a period of three years for the costs attributable to any noncompliance by AN Can with any environmental law prior to the closing, including costs attributable to the past waste disposal practices of AN Can. 47 The Company is subject to the Occupational Safety and Health Act and other laws regulating noise exposure levels and other safety and health concerns in the production areas of its plants. Management does not believe that any of the matters described above individually or in the aggregate will have a material effect on the Company's capital expenditures, earnings, financial position or competitive position. RESEARCH AND PRODUCT DEVELOPMENT METAL CONTAINER BUSINESS The Company's research, product development and product engineering efforts relating to its metal containers are currently conducted at its research centers at Oconomowoc, Wisconsin and Neenah, Wisconsin. The Company is building a state-of-the-art research facility in Oconomowoc, Wisconsin in order to consolidate its two main research centers into one facility. PLASTIC CONTAINER BUSINESS The Company's research, product development and product engineering efforts with respect to its plastic containers are currently performed by its manufacturing and engineering personnel located at its Norcross, Georgia facility. In addition to its own research and development staff, the Company participates in arrangements with three non-U.S. plastic container manufacturers that allow for an exchange of technology among these manufacturers. Pursuant to these arrangements, the Company licenses its blow molding technology to such manufacturers. 48 PROPERTIES Holdings' and Silgan's principal executive offices are located at 4 Landmark Square, Stamford, Connecticut 06901. The administrative headquarters and principal places of business for Containers and Plastics are located at 21800 Oxnard Street, Woodland Hills, California 91367 and 14515 N. Outer Forty, Chesterfield, Missouri 63017, respectively. All of these offices are leased by the Company. The Company owns and leases properties for use in the ordinary course of business. Such properties consist primarily of 33 metal container manufacturing facilities, 11 plastic container manufacturing facilities and 4 specialty packaging manufacturing facilities. Twenty of these facilities are owned and 28 are leased by the Company. The leases expire at various times through 2020. Some of these leases provide renewal options. Below is a list of the Company's operating facilities, including attached warehouses, as of December 31, 1996 for its metal container business:
APPROXIMATE BUILDING AREA LOCATION (SQUARE FEET) -------- ------------------------- City of Industry, CA............................. 50,000 (leased) Kingsburg, CA.................................... 37,783 (leased) Modesto, CA...................................... 35,585 (leased) Modesto, CA...................................... 128,000 (leased) Modesto, CA...................................... 150,000 (leased) Riverbank, CA.................................... 167,000 San Leandro, CA.................................. 200,000 (leased) Stockton, CA..................................... 243,500 Norwalk, CT...................................... 14,359 (leased) Broadview, IL.................................... 85,000 Hoopeston, IL.................................... 323,000 Rochelle, IL..................................... 175,000 Waukegan, IL..................................... 40,000 (leased) Woodstock, IL.................................... 160,000 (leased) Evansville, IN................................... 188,000 Hammond, IN...................................... 160,000 (leased) Laporte, IN...................................... 144,000 (leased) Fort Madison, IA................................. 66,000 Ft. Dodge, IA.................................... 49,500 (leased) Benton Harbor, MI................................ 20,246 (leased) Savage, MN....................................... 160,000 St. Paul, MN..................................... 470,000 West Point, MS................................... 25,000 (leased) Mt. Vernon, MO................................... 100,000 Northtown, MO.................................... 112,000 (leased) St. Joseph, MO................................... 173,725 St. Louis, MO.................................... 174,000 (leased) Edison, NJ....................................... 280,000 Lyons, NY........................................ 145,000 Crystal City, TX................................. 26,045 (leased) Toppenish, WA.................................... 98,000 Vancouver, WA.................................... 127,000 (leased) Menomonee Falls, WI.............................. 116,000 Menomonie, WI.................................... 60,000 (leased) Oconomowoc, WI................................... 105,200 Plover, WI....................................... 58,000 (leased) Waupun, WI....................................... 212,000
49 Below is a list of the Company's operating facilities, including attached warehouses, as of December 31, 1996 for its plastic container business:
APPROXIMATE BUILDING AREA LOCATION (SQUARE FEET) -------- ------------------------- Anaheim, CA...................................... 127,000 (leased) Deep River, CT................................... 140,000 Monroe, GA....................................... 117,000 Norcross, GA..................................... 59,000 (leased) Ligonier, IN..................................... 477,000 (284,000 leased) Seymour, IN...................................... 406,000 Franklin, KY..................................... 122,000 (leased) Port Clinton, OH................................. 336,000 (leased) Langhorne, PA.................................... 156,000 (leased) Mississauga, Ontario............................. 80,000 (leased) Mississauga, Ontario............................. 60,000 (leased)
The Company owns and leases certain other warehouse facilities that are detached from its manufacturing facilities. All of the Company's facilities are subject to liens in favor of the Banks. The Company believes that its plants, warehouses and other facilities are in good operating condition, adequately maintained, and suitable to meet its present needs and future plans. The Company believes that it has sufficient capacity to satisfy the demand for its products in the foreseeable future. To the extent that the Company needs additional capacity, management believes that the Company can convert certain facilities to continuous operation or make the appropriate capital expenditures to increase capacity. LEGAL PROCEEDINGS On October 17, 1989, the State of California, on behalf of the California Department of Health Services ("DHS"), filed a suit in the United States District Court for the Northern District of California against the owners and operators of a recycling facility operated by Summer del Caribe, Inc., Dale Summer and Lynn Rodich. The complaint also named 16 can manufacturing companies, including Containers, that had sent amounts of solder dross to the facility for recycling as "Potentially Responsible Parties" ("PRPs") under the Federal Superfund statute. Containers is one of the 15 defendant can companies which agreed to participate as a group in response to the DHS suit (the "PRP Group"). In the PRP Group agreement, Containers agreed with the other can company defendants that its apportioned share of cleanup costs would be 6.72% of the total cost of cleanup. The PRP Group has undertaken a feasibility study for the purpose of developing, designing and implementing a final remedy for the site. The feasibility study was approved by the California Department of Toxic Substances Control ("DTSC") in June 1994. On March 14, 1995, the court approved a settlement agreement and consent decree which ordered the PRP Group to submit a draft Remedial Action Plan to the DTSC for approval, which the PRP Group submitted to the DTSC on September 5, 1995. On September 13, 1995, the DTSC notified the PRP Group by letter that the Remedial Action Plan had been adopted for the Summer del Caribe site. According to the Remedial Action Plan, the overall cost of site cleanup is estimated to be $3,000,000. Site cleanup is near completion. However, monitoring at the site will be required for approximately one year, the expenses for which represent a small portion of the total expense of cleanup. The PRP Group has assessed approximately $201,264 as Containers' share of the cleanup cost, which amount has been paid. The Company believes that significant additional expenditures on its behalf are unlikely. Other than the action mentioned above, there are no other material pending legal proceedings to which the Company is a party or to which any of its properties are subject. 50 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS HOLDINGS AND SILGAN The following table sets forth certain information (ages as of December 31, 1996) concerning the directors and executive officers of Holdings and Silgan.
NAME AGE POSITION - ---- --- -------- R. Philip Silver................. 54 Chairman of the Board, Co-Chief Executive Officer and Director D. Greg Horrigan................. 53 President, Co-Chief Executive Officer and Director Robert H. Niehaus................ 41 Director Leigh J. Abramson................ 28 Director Harley Rankin, Jr................ 57 Executive Vice President, Chief Financial Officer and Treasurer Harold J. Rodriguez, Jr.......... 41 Vice President, Controller and Assistant Treasurer Glenn A. Paulson................. 53 Vice President
CONTAINERS The following table sets forth certain information (ages as of December 31, 1996) concerning the executive officers of Containers.
NAME AGE POSITION - ---- --- -------- James D. Beam...................... 53 President Gerald T. Wojdon................... 60 Vice President--Operations and Assistant Secretary Gary M. Hughes..................... 54 Vice President--Sales & Marketing H. Dennis Nerstad.................. 59 Vice President--Production Services Joseph A. Heaney................... 43 Vice President--Finance
PLASTICS The following table sets forth certain information (ages as of December 31, 1996) concerning the Directors and executive officers of Plastics.
NAME AGE POSITION - ---- --- -------- Russell F. Gervais......... 53 President Howard H. Cole............. 51 Vice President and Assistant Secretary Charles Minarik............ 59 Vice President--Operations and Commercial Development Alan H. Koblin............. 44 Vice President--Sales & Marketing Colleen J. Jones........... 36 Vice President--Finance, Chief Financial Officer and Assistant Secretary
Mr. Silver has been Chairman of the Board and Co-Chief Executive Officer of Holdings and Silgan since March 1994. Mr. Silver is one of the founders of the Company and was formerly President of Holdings and Silgan. Mr. Silver has been a Director of Holdings and Silgan since their inception in April 1989 and August 1987, respectively. Mr. Silver has been a Director of Containers since its inception in August 1987 and Vice President of Containers since May 1995. Mr. Silver has been a Director of Plastics since its inception in August 1987 and Chairman of the Board of Plastics since March 1994. Prior to founding the Company in 1987, Mr. Silver was a consultant to the packaging industry. 51 Mr. Silver was President of Continental Can Company from June 1983 to August 1986. From September 1989 through August 1993, Mr. Silver held various positions with Sweetheart Holdings Inc. and Sweetheart Cup Company, Inc., including Chairman of the Board and Director. Mr. Silver is a Director of Johnstown America Corporation. Mr. Horrigan has been President and Co-Chief Executive Officer of Holdings and Silgan since March 1994. Mr. Horrigan is one of the founders of the Company and was formerly Chairman of the Board of Holdings and Silgan. Mr. Horrigan has been a Director of Holdings and Silgan since their inception in April 1989 and August 1987, respectively. Mr. Horrigan has been Chairman of the Board of Containers and a Director of Containers and Plastics since their inception in August 1987. Mr. Horrigan was Executive Vice President and Operating Officer of Continental Can Company from 1984 to 1987. From September 1989 through August 1993, Mr. Horrigan held various positions with Sweetheart Holdings Inc. and Sweetheart Cup Company, Inc., including Chairman of the Board and Director. Mr. Niehaus has been a Director of Holdings since its inception in April 1989 and a Director of Silgan, Containers and Plastics since their inception in August 1987. Mr. Niehaus joined Morgan Stanley in 1982 and has been a Managing Director of Morgan Stanley since 1990. Mr. Niehaus has been a Vice Chairman and a Director of Morgan Stanley Leveraged Equity Fund II, Inc. ("MSLEF II, Inc.") since January 1990 and a Vice Chairman and a Director of the managing general partner of the general partner of Morgan Stanley Capital Partners III, L.P. ("MSCP III") since January 1994. Mr. Niehaus is also a Director of American Italian Pasta Company, Fort Howard Corporation and Waterford Crystal Ltd., and Chairman of Waterford Wedgewood UK plc. Mr. Abramson has been a Director of Holdings, Silgan, Containers and Plastics since September 1996. He has been an Associate of Morgan Stanley since 1994 and a Vice President of MSLEF II, Inc. and of the managing general partner of the general partner of MSCP III since 1995. Mr. Abramson has been with Morgan Stanley since 1990, first in the Corporate Finance Division and, since 1992, in the Merchant Banking Division. Mr. Abramson is also a Director of PageMart Wireless, Inc., PageMart, Inc. and Jefferson Smurfit Corporation. Mr. Rankin has been Executive Vice President and Chief Financial Officer of Holdings since its inception in April 1989 and Treasurer of Holdings since January 1992. Mr. Rankin has been Executive Vice President and Chief Financial Officer of Silgan since January 1989 and Treasurer of Silgan since January 1992. Mr. Rankin has been Vice President of Containers and Plastics since January 1989 and was Treasurer of Plastics from January 1994 to December 1994. Prior to joining the Company, Mr. Rankin was Senior Vice President and Chief Financial Officer of Armtek Corporation. Mr. Rankin was Vice President and Chief Financial Officer of Continental Can Company from November 1984 to August 1986. From September 1989 to August 1993, Mr. Rankin was Vice President, Chief Financial Officer and Treasurer of Sweetheart Holdings Inc. and Vice President of Sweetheart Cup Company, Inc. Mr. Rodriguez has been Vice President of Holdings and Silgan since March 1994 and Controller and Assistant Treasurer of Holdings and Silgan since March 1990. Prior to March 1990, Mr. Rodriguez was Assistant Controller and Assistant Treasurer of Holdings and Silgan from April 1989 and October 1987, respectively. Mr. Rodriguez has been Vice President of Containers and Plastics since March 1994. From September 1989 to August 1993, Mr. Rodriguez was Controller, Assistant Secretary and Assistant Treasurer of Sweetheart Holdings Inc. and Assistant Secretary and Assistant Treasurer of Sweetheart Cup Company, Inc. From 1978 to 1987, Mr. Rodriguez was employed by Ernst & Young LLP, last serving as Senior Manager specializing in taxation. Mr. Paulson has been Vice President of Holdings and Silgan since January 1996. Mr. Paulson was employed by Containers to manage the transition of AN Can from August 1995 to December 1995. From January 1989 to July 1995, Mr. Paulson was employed by ANC, last serving as Senior 52 Vice President and General Manager, Food Metal and Specialty, North America. Prior to his employment with ANC, Mr. Paulson was President of the beverage packaging operations of Continental Can Company. Mr. Beam has been President of Containers since July 1990. From September 1987 to July 1990, Mr. Beam was Vice President--Marketing & Sales of Containers. Mr. Beam was Vice President and General Manager of Continental Can Company, Western Food Can Division, from March 1986 to September 1987. Mr. Wojdon has been Vice President--Operations and Assistant Secretary of Containers since September 1987. From August 1982 to August 1987, Mr. Wojdon was General Manager of Manufacturing of the Can Division of the Carnation Company. Mr. Hughes has been Vice President--Sales & Marketing of Containers since July 1990. From February 1988 to July 1990, Mr. Hughes was Vice President, Sales and Marketing of the Beverage Division of Continental Can Company. Prior to February 1988, Mr. Hughes was employed by Continental Can Company in various regional sales positions. Mr. Nerstad has been a Vice President of Containers since December 1993. From August 1989 to December 1993, Mr. Nerstad was Vice President-- Distribution and Container Manufacturing of Del Monte and was Director of Container Manufacturing of Del Monte from November 1983 to July 1989. Prior to 1983, Mr. Nerstad was employed by Del Monte in various regional and plant positions. Mr. Heaney has been Vice President--Finance of Containers since October 1995. From September 1990 to October 1995, Mr. Heaney was Controller, Food Metal and Specialty Division of ANC. From August 1977 to August 1990, Mr. Heaney was employed by ANC and American Can Company in various divisional, regional and plant finance/accounting positions. Mr. Gervais has been President of Plastics since December 1992. From September 1989 to December 1992, Mr. Gervais was Vice President--Sales & Marketing of Plastics. From March 1984 to September 1989, Mr. Gervais was President and Chief Executive Officer of Aim Packaging, Inc. Mr. Cole has been Vice President and Assistant Secretary of Plastics since September 1987. From April 1986 to September 1987, Mr. Cole was Manager of Personnel of the Monsanto Engineered Products Division of Monsanto. Mr. Minarik has been Vice President--Operations and Commercial Development of Plastics since May 1993. From February 1991 to August 1992, Mr. Minarik was President of Wheaton Industries Plastics Group. Mr. Minarik was Vice President--Marketing of Constar International, Inc. from March 1983 to February 1991. Mr. Koblin has been Vice President--Sales & Marketing of Plastics since 1994. From 1992 to 1994, Mr. Koblin was Director of Sales & Marketing of Plastics. From 1990 to 1992, Mr. Koblin was Vice President of Churchill Industries. Ms. Jones has been Vice President--Finance and Chief Financial Officer of Plastics since December 1994 and Assistant Secretary of Plastics since November 1993. From October 1993 to December 1994, Ms. Jones was Corporate Controller of Plastics and from July 1989 to October 1993, she was Manager-- Finance of Plastics. From July 1982 to July 1989, Ms. Jones was an Audit Manager for Ernst & Young LLP. 53 BOARD OF DIRECTORS Holdings presently has a Board of Directors consisting of four members. Holdings intends to elect an additional two persons to serve as independent directors of Holdings following the completion of the Offering. Prior to the Offering, the Board of Directors will be divided into three classes (designated Class I, Class II and Class III). Initially, Class I will consist of Mr. Silver and Mr. Abramson, Class II will consist of Mr. Horrigan and Mr. Niehaus, and the two Class III directorships will remain vacant until the Board of Directors elects two independent persons to serve as Class III directors following the completion of the Offering. The Class I, Class II and Class III directors will serve until the annual stockholder meetings of Holdings to be held in 1998, 1999 and 2000, respectively, and until their successors are duly elected and qualified. At each annual stockholders' meeting, directors nominated to the class of directors whose term is expiring at that annual meeting will be elected for a term of three years, and the remaining directors will continue in office until their respective terms expire and until their successors are duly elected and qualified. Accordingly, at each annual meeting two of the Company's six directors will be elected, and each director will be required to stand for election once every three years. The four directors that are not independent will be elected pursuant to the Principals Stockholders Agreement. Under the Principals Stockholders Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold in the aggregate at least one-half of the number of shares of Common Stock held by them on the date of this Prospectus, Messrs. Silver and Horrigan will nominate the two independent directors, who must then be elected in accordance with Holdings' Restated Certificate of Incorporation. Officers are elected by the Board of Directors and serve at the discretion of the Board of Directors. See "Description of Capital Stock--Description of Stockholders Agreements". The Board of Directors has an Audit Committee, which is presently composed of Messrs. Silver and Niehaus. After the Offering, the Board of Directors will reconstitute its Audit Committee to consist of two Directors who are neither officers nor employees of Holdings. The Audit Committee has the responsibility of reviewing and supervising the financial controls of Holdings. The Audit Committee's responsibilities include (i) making recommendations to the Board of Directors with respect to its financial statements and the appointment of independent auditors, (ii) reviewing significant audit and accounting policies and practices of Holdings, (iii) meeting with the Company's independent public accountants concerning, among other things, the scope of audits and reports and (iv) reviewing the performance of overall accounting and financial controls of Holdings. The Board of Directors expects to establish a Compensation Committee and an Executive Committee. The Compensation Committee will consist of at least two Directors who are "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation Committee will have the responsibility of reviewing the performance of the executive officers of Holdings and recommending to the Board of Directors annual salary and bonus amounts for all officers of the Company. COMPENSATION OF DIRECTORS It is anticipated that directors who do not receive compensation as officers or employees of the Company or any of its affiliates will be paid an annual retainer fee of $20,000 for their service on the Board of Directors, and a fee of $2,000 for each meeting of the Board of Directors or any committee thereof that they attend, plus reasonable out-of-pocket expenses. 54 EXECUTIVE COMPENSATION The following table sets forth information concerning the annual and long term compensation for services rendered in all capacities to the Company during the fiscal years ended December 31, 1996, 1995 and 1994 of those persons who at December 31, 1996 were (i) the Chief Executive Officer of Holdings and (ii) the other four most highly compensated executive officers of Holdings and its subsidiaries. Prior to the Offering, no director of Holdings or its subsidiaries received 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 SECURITIES ANNUAL UNDERLYING STOCK ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY(A)(B) BONUS(A)(C) COMPENSATION OPTIONS/SARS(D) COMPENSATION(E) - --------------------------- ---- ------------ ----------- ------------ ---------------- --------------- R. Philip Silver......... 1996 $1,875,000 -- -- -- -- (Chairman of the Board and 1995 1,830,000 -- -- -- -- Co-Chief Executive Officer of 1994 1,684,135 -- -- -- -- Holdings and Silgan and Chairman of the Board of Plastics) D. Greg Horrigan......... 1996 1,875,000 -- -- -- -- (President and Co-Chief 1995 1,830,000 -- -- -- -- Executive Officer of Holdings 1994 1,684,135 -- -- -- -- and Silgan and Chairman of the Board of Containers) Harley Rankin, Jr. ...... 1996 425,007 -- -- -- -- (Executive Vice President, 1995 408,978 -- -- -- -- Chief Financial Officer and 1994 384,930 -- -- 102,799 -- and Treasurer of Holdings and Silgan) James D. Beam............ 1996 372,600 $112,339 -- -- $73,805 (President of Containers) 1995 361,200 -- -- -- 66,394 1994 350,000 169,092 -- -- 94,175 Russell F. Gervais....... 1996 234,000 111,400 -- -- 7,020 (President of Plastics) 1995 226,000 59,000 -- -- 5,085 1994 216,804 83,300 -- 137,066 --
- -------- (a) The compensation of Messrs. Horrigan, Silver, Rankin and Rodriguez reflects amounts as earned and was paid by S&H. Such persons received no direct compensation from Holdings, Silgan or their respective subsidiaries. See "Certain Transactions--Management Agreements". (b) The salaries of Messrs. Beam and Gervais were paid by Containers and Plastics, respectively. (c) Bonuses of Messrs. Beam and Gervais were earned by them in such year and paid in the following year, pursuant to the Silgan Containers Corporation Performance Incentive Plan and the Silgan Plastics Corporation Incentive Plan, respectively. Under such plans, executive officers and other key employees of Containers and Plastics may be awarded cash bonuses provided that such company achieves certain assigned financial targets. (d) Reflects options to purchase shares of Common Stock under the Stock Option Plan, and gives effect to the Stock Split. Such options are exercisable ratably over a five-year period which began on January 1, 1995. Mr. Gervais' options are estimated and have been calculated in accordance with Plastics' stock option plan to give effect to the conversion thereof to options under the Stock Option Plan (based on a preliminary allocation of value between subsidiaries and on an assumed initial public offering price of $19.00 per share). The exact amount of Mr. Gervais' options under the Stock Option Plan will be determined at the time of the Offering. (e) In the case of Mr. Beam, includes amounts contributed under the Silgan Containers Corporation Supplemental Executive Retirement Plan (the "Supplemental Plan") and used to pay premiums for split-dollar life insurance for Mr. Beam maintained in conjunction with the Supplemental Plan and includes amounts contributed by Containers under the Silgan Containers Corporation Deferred Incentive Savings Plan. In the case of Mr. Gervais, includes amounts allocated to Mr. Gervais under the Silgan Plastics Corporation Contributory Retirement Plan. 55 OPTION VALUES AT DECEMBER 31, 1996
VALUE OF UNEXERCISED NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS AT OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996(A) ----------------------------------- ------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ---------------- ---------------- ----------- ------------- R. Philip Silver........ -- -- -- -- D. Greg Horrigan........ -- -- -- -- Harley Rankin, Jr.(b)... 233,011 41,120 $3,858,649 $ 635,567 James D. Beam(b)(c)..... 582,526 -- 9,972,862 -- Russell F. Gervais(b)(c).......... 82,240 54,826 1,517,193 1,011,462
- -------- (a) For the purposes of this table, the fair market value per share of Common Stock at December 31, 1996 was estimated to be the assumed initial public offering price of $19.00 per share. (b) Options are for shares of Common Stock and give effect to the Stock Split. (c) Messrs. Beam's and Gervais' options are estimated and have been calculated in accordance with Containers' and Plastics' stock option plans, respectively, to give effect to the conversion thereof to options under the Stock Option Plan (based on a preliminary allocation of value between subsidiaries and an assumed initial public offering price of $19.00 per share). The exact amount of Messrs. Beam's and Gervais' options under the Stock Option Plan will be determined at the time of the Offering. STOCK OPTION PLAN The Board of Directors and stockholders of Holdings approved the establishment of the Stock Option Plan. Under the Stock Option Plan, as an additional means of attracting and retaining officers and key personnel, Holdings may grant options to purchase shares of Common Stock to participants. Options granted may be either non-qualified stock options or "incentive stock options". The Board of Directors of Holdings, through a committee (the "Stock Option Committee"), administers the Stock Option Plan and has the power to, among other things, choose participants and fix the type of grant and all the terms and conditions thereof, including number of shares covered by a grant and the exercise price. Only officers (including executive officers) and other key employees of the Company are eligible to participate in the Stock Option Plan. The stock issuable under the Stock Option Plan includes shares of Holdings' authorized and unissued or reacquired Common Stock. The number of shares for which options may be granted under the Stock Option Plan may not exceed 3,534,568 shares. Options are exercisable over such period as determined by the Stock Option Committee, and generally, except as otherwise determined by the Stock Option Committee, no option may remain exercisable more than ten years from the grant date, subject to earlier termination as provided in the Stock Option Plan. Options become exercisable no earlier than one year from the date of grant and in such installments as specified in the option agreement therefor. All options granted under the Stock Option Plan must be evidenced by an option agreement between Holdings and the option recipient embodying all the terms and conditions of the option grant, provided that (i) incentive stock options granted must comply with Section 422 of the Code, (ii) no option shall be transferable or assignable other 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, (iii) all options must expire upon or remain exercisable for a limited time after termination of employment, all as specified in the Stock Option Plan, and (iv) upon exercise of options, full payment for the shares covered thereby shall be made in cash or shares of Common Stock already owned or a combination of cash and shares of Common Stock. Concurrent with the Offering, all outstanding stock options issued under stock option plans of Containers and Plastics will be converted to stock options under Holdings' Stock Option Plan in accordance with the terms of such plans. Additionally, the holders of stock options under the 56 Containers' and Plastics' stock option plans have waived certain registration rights thereunder. At the time of the Offering, the Containers' and Plastics' stock option plans will terminate. As a result, the only stock options that will be outstanding after the Offering will be stock options under the Holdings' Stock Option Plan. As of the date of this Prospectus, options to purchase 1,821,254 shares of Common Stock were outstanding under the Stock Option Plan at exercise prices ranging from $0.55 to $4.35 per share. With respect to certain outstanding options, Holdings has an obligation to pay to the optionees an amount per option as specified in the applicable option agreement (determined in connection with the merger in which Holdings acquired Silgan with respect to the issuance of options under the Stock Option Plan in exchange for options under a predecessor plan) upon exercise of such options. An aggregate amount of $943,589 would be payable by Holdings to such optionees upon the exercise of such outstanding options. FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTION PLAN The following discussion sets forth a brief summary of the U.S. federal income tax aspects of options granted under the Stock Option Plan based on tax laws in effect on the date hereof. This summary is not intended to be exhaustive, and does not describe a number of special tax rules that could apply in certain circumstances (i.e., alternative minimum tax). State, local and foreign income tax consequences are not discussed, and may vary from locality to locality. Participants in the Stock Option Plan are urged to consult their own tax advisors with respect to the consequences of their participation in the Stock Option Plan. STOCK OPTIONS The grant of incentive stock options or non-qualified stock options will not result in taxable income for the optionee at the time the option is granted and Holdings will not be entitled to a deduction at that time. NON-QUALIFIED STOCK OPTIONS In general, an optionee will be subject to tax for the year of exercise of a non-qualified stock option on the amount of ordinary income equal to the difference between the purchase price and the fair market value of the Common Stock received at the time of such exercise. Holdings will be entitled to a deduction in a corresponding amount. Income tax withholding requirements apply upon exercise. The optionee's tax basis in the Common Stock acquired on exercise will be equal to the exercise price plus the amount of ordinary income subject to tax upon such exercise. Upon subsequent disposition of the Common Stock, the holder will realize capital gain or loss, long-term or short-term, depending upon the length of time the holder held the Common Stock received upon the option exercise. INCENTIVE STOCK OPTIONS In general, the exercise of an incentive stock option will not result in income for the optionee if the optionee (i) does not dispose of the Common Stock within two years after the date of grant or one year after the acquisition of the Common Stock upon exercise and (ii) is an employee of Holdings or a subsidiary of Holdings from the date of the option grant until three months before the exercise date. If these requirements are met, the tax basis of the Common Stock upon later disposition will be the exercise price. Any gain will be taxed to the holder as long-term capital gain and Holdings will not be entitled to a deduction. The excess of the fair market value on the exercise date over the exercise price is an item of tax preference, potentially subject to the alternative minimum tax. If an optionee disposes of the Common Stock acquired upon exercise prior to the expiration of either of the holding periods described in clause (i) in the immediately preceding paragraph, the optionee will recognize ordinary income and Holdings will be entitled to a corresponding deduction equal to the lesser of (a) the fair market value of the Common Stock on the exercise date minus the exercise price or (b) the amount realized on disposition minus the exercise price. Any gain in excess of the amount of the ordinary income portion will be taxable as long-term or short-term capital gain, depending upon the length of time the Common Stock was held after exercise. 57 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 following table illustrates the estimated annual normal retirement benefits that are payable under the Containers Pension Plan. 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. CONTAINERS PENSION PLAN TABLE
YEARS OF SERVICE FINAL 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
Benefits under the Containers Pension Plan are based on the participant's average base pay (the "Salary" column in the Summary Compensation Table) over the final three years of employment. The amount of average base pay taken into account for any year is limited by Section 401(a)(17) of the Code, which imposes a cap of $150,000 (to be indexed for inflation) on compensation taken into account for 1994 and later years (the limit for 1993 was $235,840). As of December 31, 1996, James D. Beam, the only eligible executive officer named in the Summary Compensation Table, had nine years of credited service under the Containers Pension Plan. Mr. Beam also participates in the Supplemental Plan, which is designed to make up for benefits not payable under the Containers Pension Plan due to Code limitations. Mr. Beam's benefits under the Supplemental Plan are funded through a split-dollar life insurance policy; income attributable to this life insurance policy is included in the "All Other Compensation" column of the Summary Compensation Table. The following table illustrates the estimated annual normal retirement benefits that are payable under the Plastics Pension Plan. 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. PLASTICS PENSION PLAN TABLE
YEARS OF SERVICE FINAL 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
58 Benefits under the Plastics Pension Plan are based on the participant's average total cash compensation (the "Salary" and "Bonus" columns in the Summary Compensation Table) over the final 36 months of employment or over the highest three of the final five calendar years of employment, whichever produces the greater average compensation. In computing this average, compensation for any year cannot exceed 125% of base pay. Compensation used in determining benefits is also limited by Section 401(a)(17) of the Code, which imposes the limits indicated above. Benefits under the Plastics Pension Plan may be offset by a social security amount (the plan provides benefits based on the greater of three formulas, only one of which provides for a social security offset). Each of the benefit estimates in the above table is based on the formula that produces the greatest benefit for individuals with the stated earnings and years of service. As of December 31, 1996, Russell F. Gervais, the only eligible executive officer named in the Summary Compensation Table, had seven years of credited service under the Plastics Pension Plan. CERTAIN EMPLOYMENT AGREEMENTS Certain executive officers and other key employees of Containers and Plastics (including Messrs. Beam and Gervais) have executed employment agreements. The initial term of each such employment agreement is generally three years from its effective date and is automatically extended for successive one year periods unless terminated pursuant to the terms of such agreement. Generally, these employment agreements provide for, among other things, a minimum severance benefit equal to the employee's base salary and benefits for, in most cases, a period of one year following termination (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 (as defined herein) of which this Prospectus is a part. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Holdings did not have a Compensation Committee during 1996. The compensation of Messrs. Silver, Horrigan, Rankin and Rodriguez was paid by S&H, which was paid by the Company for providing certain management services to the Company pursuant to the Management Agreements (as defined in "Certain Transactions-- Management Agreements"). See "Certain Transactions--Management Agreements". The compensation of all other executive officers of the Company was determined by the senior management of the Company. PRINCIPAL AND SELLING STOCKHOLDERS Prior to completion of the Offering, all of the issued and outstanding Common Stock of Holdings was owned by the Principal Common Stockholders and BTNY. Upon completion of the Offering, the Principal Common Stockholders will own 13,591,737 shares of Common Stock (12,988,930 shares if the over-allotment option granted to the Underwriters is exercised in full), or approximately 72.1% of the issued and outstanding shares of Common Stock (approximately 68.9% if the over-allotment option granted to the Underwriters is exercised in full). Under the Principals Stockholders Agreement, Messrs. Silver and Horrigan agreed to vote their shares of Common Stock for the election of two directors chosen by MSLEF II so long as MSLEF II holds at least one-half of the number of shares of Common Stock held by it immediately prior to the Offering, and MSLEF II agreed to vote its shares of Common Stock for the election of two directors 59 chosen by Messrs. Silver and Horrigan so long as they hold in the aggregate at least one-half of the number of shares of Common Stock held by them on the date of this Prospectus. Holdings currently has four directors, but intends to increase its board of directors after the Offering to six members to include two additional independent directors. See "Certain Transactions", "Description of Capital Stock--Description of Stockholders Agreements" and "Underwriting" for further discussion of the foregoing and for a discussion of other transactions between the Selling Stockholders and the Company during the last three years. The following table sets forth certain information regarding the beneficial ownership of the Common Stock prior to the Offering after giving effect to the Stock Split and after the Offering as adjusted to reflect the sale of the shares of Common Stock offered hereby, (i) by each person who is known by Holdings to own beneficially more than 5% of the Common Stock, (ii) by each current director of Holdings and each named executive officer, (iii) by all executive officers and directors as a group and (iv) by each of the Selling Stockholders. Each of the persons named in the table has sole voting and investment power with respect to the securities beneficially owned.
BEFORE THE OFFERING AFTER THE OFFERING(1) ------------------------------ ------------------------------ NUMBER OF SHARES PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF OF COMMON STOCK COMMON STOCK OF COMMON STOCK COMMON STOCK BENEFICIALLY BENEFICIALLY SHARES TO BE BENEFICIALLY BENEFICIALLY OWNED OWNED(2) OFFERED(3) OWNED OWNED(2) ---------------- ------------- ------------ ---------------- ------------- R. Philip Silver(4)..... 3,576,544 23.59% -- 3,576,544 18.96% D. Greg Horrigan(4)..... 3,576,544 23.59% -- 3,576,544 18.96% Robert H. Niehaus(5).... -- -- -- -- -- Leigh J. Abramson(5).... -- -- -- -- -- Harley Rankin, Jr.(6)... 233,011 1.51% -- 233,011 1.22% James D. Beam(7)........ 582,526 3.70% -- 582,526 3.00% Russell F. Gervais(8)... 82,240 * % -- 82,240 * % The Morgan Stanley Leveraged Equity Fund II, L.P.(9)............ 7,153,088 47.18% 714,439 6,438,649 34.13% Bankers Trust New York Corporation(10)........ 856,657 5.6% 85,561 771,096 4.1% All officers and directors as a group... 8,731,051 52.15% -- 8,731,051 42.71%
- -------- (1) Assumes no purchase of shares in the Offering and no exercise of the Underwriters' over-allotment option. (2) An asterisk denotes beneficial ownership of 1% or less of the Common Stock. (3) If the Underwriters over-allotment option is exercised in full, the number of shares to be offered by MSLEF II and BTNY will be 1,317,246 and 157,754, respectively. (4) Director of Holdings, Silgan, Containers and Plastics. Messrs. Silver and Horrigan are parties to a voting agreement pursuant to which they have agreed to use their best efforts to vote their shares as a block. The address for such person is 4 Landmark Square, Stamford, CT 06901. (5) Director of Holdings, Silgan, Containers and Plastics. The address for such person is c/o Morgan Stanley & Co. Incorporated, 1221 Avenue of the Americas, New York, NY 10020. (6) Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to the Stock Option Plan. The address for such person is 4 Landmark Square, Stamford, CT 06901. (7) Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to the Stock Option Plan. The address for such person is 21800 Oxnard Street, Woodland Hills, CA 91367. (8) Reflects shares that may be acquired through the exercise of vested stock options granted pursuant to the Stock Option Plan. The address for such person is 14515 N. Outer Forty, Chesterfield, MO 63017. (9) The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1221 Avenue of the Americas, New York, NY 10020. (10) The address for Bankers Trust New York Corporation is 130 Liberty Street, New York, NY 10006. 60 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 then existing management services agreement, as amended, with S&H. Pursuant to the Management Agreements, S&H provides Holdings, Silgan, Containers and Plastics and their respective subsidiaries with general management and administrative services (the "Services"). The Management Agreements provide for payments to S&H (i) on a monthly basis, of $5,000 plus an amount equal to 2.475% of consolidated earnings before depreciation, interest and taxes of Holdings and its subsidiaries ("Holdings EBDIT"), for such calendar month until Holdings EBDIT for the calendar year shall have reached an amount set forth in the Management Agreements for such calendar year (the "Scheduled Amount") and 1.65% of Holdings EBDIT for such calendar month to the extent that Holdings EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall not have been greater than an amount (the "Maximum Amount") set forth in the Management Agreements and (ii) on a quarterly basis, of an amount equal to 2.475% of Holdings EBDIT for such calendar quarter until Holdings EBDIT for the calendar year shall have reached the Scheduled Amount and 1.65% of Holdings EBDIT for such calendar quarter to the extent that Holdings EBDIT for the calendar year shall have exceeded the Scheduled Amount but shall not have been greater than the Maximum Amount (the "Quarterly Management Fee"). The Scheduled Amount was $83.5 million for the calendar year 1996, and the Maximum Amount was $98.101 million for the calendar year 1996. The Scheduled Amount is $89.5 million for the calendar year 1997, and the Maximum Amount is $100.504 million for the calendar year 1997. 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. 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. Concurrent with the Offering, each of Holdings, Silgan, Containers and Plastics will enter into an amended and restated management services agreement (collectively, the "New Management Agreements") with S&H to replace in their entirety the Management Agreements. The New Management Agreements will contain substantially the same terms as the Management Agreements, except that after the initial term of the New Management Agreements (which will continue until June 30, 1999), the New Management Agreements will be automatically renewed for successive one-year terms unless either party gives written notice at least 180 days prior to the end of the then current term of its election not to renew. The independent directors of Holdings will determine on behalf of the companies whether to give such written notice not to renew. The New Management Agreements may be terminated (i) at the option of each of the respective companies upon the failure or refusal of S&H 61 to perform its obligations under the New Management Agreements, if such failure or refusal continues unremedied for more than 60 days after written notice of its existence shall have been given; (ii) at the option of S&H upon the failure or refusal of any of the respective companies to perform its obligations under the New Management Agreements, if such failure or refusal continues unremedied for more than 60 days after written notice of its existence shall have been given; (iii) at the option of S&H or the respective companies (a) if S&H or one of the companies is declared insolvent or bankrupt or a voluntary bankruptcy petition is filed by any of them, (b) upon the occurrence of any of the following events with respect to S&H or one of the companies if not cured, dismissed or stayed within 45 days: the filing of an involuntary petition in bankruptcy, the appointment of a trustee or receiver or the institution of a proceeding seeking a reorganization, arrangement, liquidation or dissolution, (c) if S&H or one of the companies voluntarily seeks a reorganization or arrangement or makes an assignment for the benefit of creditors or (d) upon the death or permanent disability of both of Messrs. Silver and Horrigan; (iv) upon at least 180 days prior written notice at the option of each of the respective companies for any reason; (v) upon at least 180 days prior written notice at the option of S&H for any reason other than Cause or a Change of Control (each as defined in the New Management Agreements); (vi) at the option of S&H after a Change of Control; (vii) at the option of the respective companies in the event of criminal conduct or gross negligence by S&H in the performance of the Services; or (viii) at the option of S&H or the respective companies upon the termination of any of the New Management Agreements for Cause (as defined therein). The New Management Agreements will prohibit S&H from competing with the Company during the term thereof and, only if S&H terminates the New Management Agreements pursuant to clause (v) above, for a period of one year after such termination. The New Management Agreements will provide that, in the event that they are terminated pursuant to clause (iv) above, each of the respective companies will be required to pay to S&H the present value of the amount of the payments that would have been payable to S&H thereunder through the end of the initial term or renewed term, as the case may be, thereof. In addition, under the New Management Agreements the Scheduled Amount will be $89.5 million, $95.5 million and $101.5 million for the calendar years 1997, 1998 and 1999, respectively, and the Maximum Amount will be $100.504 million, $102.964 million and $105.488 million for the calendar years 1997, 1998 and 1999, respectively. For the calendar year 2000, the Scheduled Amount and the Maximum Amount will be $108.653 million, and for each calendar year thereafter the Scheduled Amount and Maximum Amount will increase by 3% from that of the previous year. The Company believes that it is difficult to determine whether the Management Agreements and the New Management Agreements are on terms no less favorable than those available from unaffiliated parties because of the personal nature of the services provided thereunder and the expertise and skills of the individuals providing such services. The Company believes that arrangements under the Management Agreements and the New Management Agreements are fair to both parties. For the years ended December 31, 1996, 1995 and 1994, under the Management Agreements, S&H earned aggregate fees, including reimbursable expenses and fees payable to Morgan Stanley, of $5.3 million, $5.4 million and $5.0 million, respectively, from Holdings, Silgan, Containers and Plastics, and during 1996, 1995 and 1994 Morgan Stanley earned fees of $425,000, $409,000 and $383,000, respectively. OTHER In connection with the refinancings of the Company's bank credit agreement in 1995 and 1993, the banks thereunder (including Bankers Trust) received certain fees amounting to $17.2 million and $8.1 million in 1995 and 1993, respectively. In connection with a recent amendment to the Silgan Credit Agreement in May 1996, the banks thereunder (including Bankers Trust) received certain fees amounting to $1.6 million. In connection with the Preferred Stock Sale, Morgan Stanley, which acted as the placement agent in connection therewith, received certain fees amounting to $1.8 million. See 62 "Principal and Selling Stockholders" for a description of the ownership by MSLEF II, an affiliate of Morgan Stanley, of certain securities of Holdings. Morgan Stanley, an affiliate of MSLEF II, is one of the several Underwriters and will receive fees in connection with the Offering. See "Underwriting". Messrs. Silver and Horrigan, BTNY, MSLEF II and Holdings are parties to the Stockholders Agreement, which provides for certain rights and obligations among them and between them and Holdings. See "Description of Capital Stock-- Description of Stockholders Agreements". 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. In the event that the Company enters into any future transactions with any of its affiliates, the Company expects to enter into any such transactions on terms no less favorable than those available from unaffiliated parties. DESCRIPTION OF CAPITAL STOCK GENERAL The Company is incorporated under the laws of the State of Delaware. Immediately prior to the closing of the Offering, Holdings will amend its Certificate of Incorporation to change its authorized capital stock to 100,000,000 shares of Common Stock, par value $.01 per share (the "Common Stock"), and 10,000,000 shares of preferred stock, par value $.01 per share. Prior to the sale of shares of Common Stock in the Offering, there are 15,162,833 shares of Common Stock issued and outstanding, 14,306,176 of which are beneficially owned by the Principal Common Stockholders. Such number of outstanding shares reflects the Stock Split. Upon consummation of the Offering, 18,862,833 shares of Common Stock will be issued and outstanding. There are 53,258 shares of Exchangeable Preferred Stock issued and outstanding, of which none are owned by the Principal Common Stockholders. All outstanding shares of capital stock are, and the shares issued in the Offering will be, fully paid and nonassessable. COMMON STOCK Each outstanding share of Common Stock entitles the holder thereof to one vote on all matters submitted to a vote of stockholders, including the election of directors. There is no cumulative voting in the election of directors; consequently, the holders of a majority of the outstanding shares of Common Stock can elect all of the directors then standing for election. See "--Description of Stockholders Agreements". Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. See "Dividend Policy". In the event of any liquidation, dissolution or winding-up of the affairs of the Company, holders of Common Stock will be entitled to share ratably in the assets of the Company remaining after provision for payment of liabilities to creditors and obligations to holders of preferred stock. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights and are not liable for further calls or assessments. In addition, any action taken by the holders of Common Stock must be taken at a meeting and may not be taken by consent in writing, and a special meeting of the stockholders may only be called by the Chairman of the Board or the President of the Company or by a majority of the Board of Directors of the Company, and may not be called by the holders of Common Stock. PREFERRED STOCK GENERAL The Company's Board of Directors, without stockholder authorization, is authorized to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the preferences, rights and privileges thereof, including any dividend rights, conversion rights, voting rights, redemption rights and 63 terms of any sinking fund provisions, liquidation preferences, the number of shares constituting a series and the designation of such series. The Board may, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of Common Stock. Currently, 53,258 shares of Exchangeable Preferred Stock are issued and outstanding. However, after the Offering, Holdings intends to exchange its outstanding Exchangeable Preferred Stock for the Exchange Debentures. See "Description of Certain Indebtedness--Description of the Exchange Debentures". The Company has no present plans to issue any additional shares of preferred stock other than shares that may be issued to pay dividend obligations on the Exchangeable Preferred Stock. TERMS OF OUTSTANDING PREFERRED STOCK The following is a summary of the terms of the Exchangeable Preferred Stock. The Exchangeable Preferred Stock has a liquidation preference of $1,000 per share and ranks senior to all outstanding capital stock of Holdings. Holdings is required to redeem the Exchangeable Preferred Stock at its liquidation preference of $1,000 per share, plus accrued and unpaid dividends, on July 15, 2006. Dividends on the Exchangeable Preferred Stock are cumulative from the date of issuance at 13 1/4% per annum on the liquidation preference thereof, and are payable quarterly in cash or, on or prior to July 15, 2000 at the sole option of Holdings, in additional shares of Exchangeable Preferred Stock, on January 15, April 15, July 15 and October 15, commencing October 15, 1996. The Exchangeable Preferred Stock is generally exchangeable into Exchange Debentures at any time at the option of Holdings, in whole but not in part. If by July 22, 1997 the Exchangeable Preferred Stock has not been exchanged for the Exchange Debentures, the dividend rate on the Exchangeable Preferred Stock will increase by 0.5% per annum to 13 3/4% per annum of the liquidation preference thereof until such exchange occurs. The Company currently plans to exchange the Exchangeable Preferred Stock for the Exchange Debentures after completion of the Offering. For a summary of the terms of the Exchange Debentures, see "Description of Certain Indebtedness--Description of the Exchange Debentures". On or after July 15, 2000, the Exchangeable Preferred Stock is redeemable, at the option of Holdings, in whole or in part, at the rate of 109.938% (declining ratably to 100% by July 15, 2003) of the liquidation preference thereof, plus accrued and unpaid dividends to the redemption date. In addition, at any time, or from time to time, on or prior to July 15, 2000, Holdings may, at its option, redeem all (but not less than all) of the outstanding shares of Exchangeable Preferred Stock at a redemption price equal to 110% of the liquidation preference thereof, plus accrued and unpaid dividends to the redemption date, with the proceeds of one or more sales of common stock of Holdings. Upon a Change of Control (as defined in the Certificate of Designation), Holdings is required to make an offer to purchase all shares of Exchangeable Preferred Stock at a purchase price equal to 101% of their liquidation preference, plus accrued and unpaid dividends to the date of purchase. Holders of the Exchangeable Preferred Stock have no voting rights except as provided by law and as provided in Holdings' Restated Certificate of Incorporation or in the Certificate of Designation relating to the Exchangeable Preferred Stock (the "Certificate of Designation"). In the event that dividends are not paid for four consecutive quarters or upon certain other events as described in the Certificate of Designation (including failure to comply with covenants under the Certificate of Designation and failure to pay the mandatory redemption price on the Exchangeable Preferred Stock when due), then the number of directors constituting Holdings' Board of Directors will be adjusted to permit the holders of the majority of the then outstanding Exchangeable Preferred Stock, voting separately as a class, to elect the number of directors that is equal to the greater of (i) one and (ii) the whole number obtained (rounding down to the nearest whole number) by (a) multiplying 1/6 by the number of directors then in office and (b) adding one. 64 The Certificate of Designation contains certain covenants which, among other things, restricts the ability of Holdings and its subsidiaries to incur additional indebtedness and issue preferred stock; pay dividends or make distributions in respect of their capital stock; purchase, redeem or otherwise acquire for value shares of capital stock; make investments in any affiliate or unrestricted subsidiary; enter into transactions with shareholders or affiliates; create restrictions on the ability of Holdings' subsidiaries to make certain payments; issue or sell stock of Holdings' subsidiaries; engage in sales of assets; and engage in mergers or consolidations. DESCRIPTION OF STOCKHOLDERS AGREEMENTS Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan are parties to the Stockholders Agreement dated as of December 21, 1993 (as amended, the "Stockholders Agreement") which provides for certain rights and obligations among such stockholders and between such stockholders and Holdings. The operative provisions of the Stockholders Agreement take effect upon the completion of the Offering. The following is a summary of the material provisions of the Stockholders Agreement, which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Stockholders Agreement provides that for a period of eight years after the Offering, MSLEF II shall have the right to demand two separate registrations of its shares of Common Stock; provided, however, that such demand right will terminate at such time as MSLEF II, together with its affiliates, owns less than five percent of the issued and outstanding shares of Common Stock. If, at any time or from time to time for a period of eight years after the Offering, Holdings shall determine to register additional shares of Common Stock (other than in connection with certain non-underwritten offerings), Holdings will offer each of MSLEF II, BTNY and Messrs. Silver and Horrigan the opportunity to register shares of Common Stock it holds in a "piggyback registration". The Stockholders Agreement prohibits the transfer prior to June 30, 1999 by MSLEF II or by Messrs. Silver or Horrigan of Holdings' Common Stock without the prior written consent of the others, 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 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) certain transfers by MSLEF II to an Investment Entity or, in the event of certain defaults under the Management Agreement between S&H and Holdings, to a third party, in each case that comply with certain rights of first refusal granted to the Group (the "Group" is 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 another member of the Group) set forth in the Stockholders Agreement, (iv) certain transfers by either member of the Group to a third party that comply with certain rights of first refusal granted to the other member of the Group and MSLEF II set forth in the Stockholders Agreement, and (v) 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, each of Messrs. Silver and Horrigan and MSLEF II may pledge his or its shares of Holdings' Common Stock to a lender or lenders reasonably acceptable to Holdings to secure a loan or loans to him or it. In the event of any proposed foreclosure of such pledge, such shares will be subject to certain rights of first refusal set forth in the Stockholders Agreement. Concurrent with the Offering, MSLEF II and Messrs. Silver and Horrigan entered into the Principals Stockholders Agreement. The Principals Stockholders Agreement provides that (i) for so long as MSLEF II and its affiliates (excluding the non-affiliated limited partners of MSLEF II who 65 acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at least one-half of the number of shares of Common Stock held by MSLEF II immediately prior to the Offering, each of Messrs. Silver and Horrigan will use his best efforts (including to vote any shares of Common Stock owned or controlled by him) to cause the nomination and election of two members of the Board of Directors of Holdings to be chosen by MSLEF II; provided, however, that each such nominee shall be either (a) an employee of Morgan Stanley whose primary responsibility is managing investments for MSLEF II (or a successor or related partnership) or (b) 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, and (ii) from and after the time that MSLEF II and its affiliates (excluding the non-affiliated limited partners of MSLEF II who acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold less than one-half of the number of shares of Common Stock held by MSLEF II immediately prior to the Offering and until such time that MSLEF II and its affiliates (excluding the non-affiliated limited partners of MSLEF II who acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold less than five percent (5%) of the outstanding Common Stock beneficially owned, each of Messrs. Silver and Horrigan will use his best efforts (including to vote any shares of Common Stock owned or controlled by him) to cause the nomination and election of one member of the Board of Directors of Holdings to be chosen by MSLEF II; provided, however, that 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, the Principals Stockholders Agreement provides that (i) for so long as the Group holds at least one-half of the number of shares of Common Stock held by it in the aggregate on the date of this Prospectus, MSLEF II will use its best efforts (including to vote any shares of Common Stock owned or controlled by it) to cause the nomination and election of two individuals nominated by the holders of a majority of the shares of Common Stock held by the Group as members of the Board of Directors of Holdings; provided, however, that at least one of such nominees shall be Mr. Silver or Mr. Horrigan and the other person, if not Mr. Silver or Mr. Horrigan, will be a person reasonably acceptable to MSLEF II, so long as MSLEF II and its affiliates (excluding the non-affiliated limited partners of MSLEF II who may acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at least one-half of the number of shares of Common Stock held by MSLEF II immediately prior to the Offering, (ii) from and after the time that the Group holds less than one-half of the number of shares of Common Stock held by it in the aggregate on the date hereof and until such time that the Group holds less than five percent (5%) of the outstanding Common Stock beneficially owned, MSLEF II will use its best efforts (including to vote any shares of Common Stock owned or controlled by it) to cause the nomination and election of one individual nominated by the holders of a majority of the shares of Common Stock held by the Group as a member of the Board of Directors of Holdings; provided, however, that such nominee shall be Silver or Horrigan or, if not Silver or Horrigan, a person reasonably acceptable to MSLEF II, so long as MSLEF II and its affiliates (excluding the non-affiliated limited partners of MSLEF II who acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at least one-half of the number of shares of Common Stock held by MSLEF II immediately prior to the Offering, and (iii) so long as the Group holds at least one-half of the number of shares of Common Stock held by it in the aggregate on the date of this Prospectus, the Group will have the right to nominate for election all directors of Holdings other than the directors referred to above in this paragraph and in the preceding paragraph, and upon such nomination by the Group such nominees will stand for election to Holdings' Board of Directors in accordance with Holdings' Restated Certificate of Incorporation, and MSLEF II will vote all shares of Common Stock owned or controlled by it and its affiliates against any director standing for election for Holdings' Board of Directors that has not been nominated by the Group, other than the directors referred to above in this paragraph and in the preceding paragraph. 66 The Principals Stockholders Agreement further provides that MSLEF II will vote all shares of Common Stock held by it against any unsolicited merger, or sale of Holdings' business or 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 of the number of shares of Common Stock held by it in the aggregate at the date of this Prospectus. The foregoing provisions of the Principals Stockholders Agreement could have the effect of delaying, deferring or preventing a change of control of the Company and preventing the stockholders from receiving a premium for their shares of Common Stock in any proposed acquisition of the Company. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW Section 203 ("Section 203") of the General Corporation Law of the State of Delaware (the "DGCL") provides, in general, that a stockholder acquiring more than 15% of the outstanding voting stock of a corporation subject to Section 203 (an "Interested Stockholder") but less than 85% of such stock may not engage in certain Business Combinations (as defined in Section 203) with the corporation for a period of three years subsequent to the date on which the stockholder became an Interested Stockholder unless (i) prior to such date the corporation's board of directors approved either the Business Combination or the transaction in which the stockholder became an Interested Stockholder or (ii) the Business Combination is approved by the corporation's board of directors and authorized by a vote of at least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. LIMITATIONS ON DIRECTORS' LIABILITY Holdings' Restated Certificate of Incorporation contains a provision which eliminates the personal liability of a director to Holdings and its stockholders for certain breaches of his or her fiduciary duty of care as a director. This provision does not, however, eliminate or limit the personal liability of a director (i) for any breach of such director's duty of loyalty to Holdings or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Delaware statutory provisions making directors personally liable, under a negligence standard, for unlawful dividends or unlawful stock repurchases or redemptions, or (iv) for any transaction from which the director derived an improper personal benefit. This provision offers persons who serve on the Board of Directors of Holdings protection against awards of monetary damages resulting from breaches of their duty of care (except as indicated above), including grossly negligent business decisions made in connection with takeover proposals for Holdings. As a result of this provision, the ability of Holdings or a stockholder thereof to successfully prosecute an action against a director for a breach of his duty of care has been limited. However, the provision does not affect the availability of equitable remedies such as an injunction or recision based upon a director's breach of his duty of care. The Commission has taken the position that the provision will have no effect on claims arising under the federal securities laws. In addition, the Restated Certificate of Incorporation and By-Laws provide mandatory indemnification rights, subject to limited exceptions, to any person who was or is party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person is or was a director or officer of Holdings, or is or was serving at the request of Holdings as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Such indemnification rights include reimbursement for expenses incurred by such person in advance of the final disposition of such proceeding in accordance with the applicable provisions of the DGCL. TRANSFER AGENT AND REGISTRAR The Bank of New York is the transfer agent and registrar for the Common Stock. 67 SHARES ELIGIBLE FOR FUTURE SALE Immediately after consummation of the Offering, Holdings will have outstanding 18,862,833 shares of Common Stock. Of these shares, the 4,500,000 shares of Common Stock sold in the Offering (or 5,175,000 shares if the over- allotment option is exercised in full) will be freely tradeable without restrictions or further registration under the Securities Act, unless such shares are purchased by "affiliates" of the Company (as that term is defined under the Securities Act). The 14,362,833 shares of Common Stock owned by the Principal Common Stockholders and BTNY (13,687,833 shares, if the over- allotment option is exercised in full) are "restricted securities" as defined in Rule 144 under the Securities Act, and may not be sold in the absence of registration under the Securities Act other than pursuant to Rule 144 under the Securities Act or another exemption from registration under the Securities Act. In general, under Rule 144, as currently in effect, (i) a person (or persons whose shares are required to be aggregated) who has beneficially owned shares of Common Stock as to which at least two years have elapsed since such shares were sold by Holdings or by an affiliate of Holdings in a transaction or chain of transactions not involving a public offering ("restricted securities") or (ii) an affiliate of Holdings who holds shares of Common Stock that are not restricted securities may, without regard to the holding period, sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of Holdings' Common Stock then outstanding (188,628 shares after completion of the Offering) or the average weekly trading volume in the Common Stock during the four calendar weeks preceding the date on which notice of such sale required under Rule 144 was filed. Sales under Rule 144 are also subject to certain provisions relating to the manner and notice of sale and availability of current public information about Holdings. Affiliates of Holdings must comply with the requirements of Rule 144, including the two-year holding period requirement, to sell shares of Common Stock that are restricted securities. Furthermore, if a period of at least three years has elapsed from the date restricted securities were acquired from Holdings or an affiliate of Holdings, a holder of such restricted securities who is not an affiliate of Holdings at the time of the sale and has not been an affiliate of Holdings at any time during the three months prior to such sale would be entitled to sell such shares without regard to the volume limitation and other conditions described above. All shares of Common Stock owned by each of the Principal Common Stockholders and BTNY will immediately after consummation of the Offering be eligible (subject to the one year lock-up arrangement described below) for sale in the public market pursuant to, and in accordance with the volume, manner of sale and other conditions of, Rule 144 described above. The Stockholders Agreement provides for restrictions on transfers of Common Stock by the Principal Common Stockholders other than sales pursuant to Rule 144 or public offerings. Holdings has granted MSLEF II and Messrs. Silver and Horrigan certain registration rights with respect to the shares of Common Stock owned by them. See "Risk Factors--Shares Eligible for Future Sale" and "Description of Capital Stock--Description of Stockholders Agreements". Holdings and each of the Principal Common Stockholders and BTNY have agreed that, subject to certain exceptions, they will not offer, sell or otherwise dispose of any shares of Common Stock, other than in the Offering, or any security convertible into or exchangeable or exercisable for shares of Common Stock without the prior written consent of Goldman, Sachs & Co. on behalf of the Underwriters for a period of one year after the date of this Prospectus. See "Underwriting". Holdings intends to register under the Securities Act the shares of Common Stock issuable upon the exercise of options granted pursuant to the Stock Option Plan. See "Management--Executive Compensation". Prior to the Offering, there has been no public market for the Common Stock. Sales of substantial amounts of Common Stock or the availability of such shares for sale could adversely affect prevailing market prices of the Common Stock and the ability of the Company to issue additional equity securities. See "Risk Factors--Shares Eligible for Future Sale". 68 DESCRIPTION OF CERTAIN INDEBTEDNESS DESCRIPTION OF THE SILGAN CREDIT AGREEMENT Pursuant to the Silgan Credit Agreement, the Banks loaned to Silgan (i) $225 million of term loans designated as "A Term Loans" and (ii) $350 million of term loans designated as "B Term Loans" (together with the A Term Loans, the "Term Loans"), and agreed to lend to Containers or Plastics up to an aggregate of $225 million of revolving loans (the "Revolving Loans"). As of December 31, 1996, the outstanding principal amounts of A Term Loans, B Term Loans and Revolving Loans under the Silgan Credit Agreement were $194.6 million, 343.7 million and $27.8 million, respectively. The A Term Loans mature on December 31, 2000 and are payable in varying increasing installments from December 31, 1996 through December 31, 2000. The B Term Loans mature on March 15, 2002 and are payable in varying installments from December 31, 1996 through March 15, 2002. The Revolving Loans mature and are payable in full on December 31, 2000. To secure the obligations of Silgan, Containers and Plastics (the "Borrowers") under the Silgan Credit Agreement: (i) Silgan pledged to the Banks all of the capital stock of Containers and Plastics held by Silgan; (ii) Plastics pledged to the Banks 65% of the capital stock of 827599 Ontario Inc. ("Canadian Holdco") held by Plastics; (iii) Containers pledged to the Banks all of the capital stock of SCCW Can Corporation ("SCCW Can"), a California corporation and a wholly owned subsidiary of Containers, held by Containers; (iv) Containers pledged to the Banks all of the capital stock of California- Washington Can Corporation ("C-W Can"), a California corporation and a wholly owned subsidiary of Containers, held by Containers; (v) Silgan, Containers, Plastics, C-W Can and SCCW Can each granted to the Banks security interests in substantially all of their respective real and personal property; and (vi) Holdings pledged to the Banks all of the capital stock of Silgan held by Holdings. In addition, each of Holdings, Silgan, Containers, Plastics, C-W Can and SCCW Can have guaranteed the obligations of the Borrowers under the Silgan Credit Agreement. Each of the Term Loans and each of the Revolving Loans, at the respective Borrower's election, consists of loans designated as Eurodollar rate loans or as Base Rate (as defined in the Silgan Credit Agreement) loans. Subject to certain conditions, each of the Term Loans and each of the Revolving Loans can be converted from a Base Rate loan into a Eurodollar rate loan and vice versa. Interest on Term Loans maintained as Base Rate loans accrues at floating rates of 1.5% less the then applicable Interest Reduction Discount (as defined in the Silgan Credit Agreement) (in the case of A Term Loans) and 2% (in the case of B Term Loans) over the Base Rate. Interest on Term Loans maintained as Eurodollar rate loans accrues at floating rates of 2.5% less the then applicable Interest Reduction Discount (in the case of A Term Loans) and 3% (in the case of B Term Loans) over a formula rate (the "Eurodollar Rate") determined with reference to the rate offered by Bankers Trust for dollar deposits in the New York interbank Eurodollar market. Interest on Revolving Loans maintained as (i) Base Rate loans accrues at floating rates of 1.5%, less the then applicable Interest Reduction Discount, plus the Base Rate or (ii) Eurodollar Rate loans accrues at floating rates of 2.5%, less the then applicable Interest Reduction Discount, plus the Eurodollar Rate. Under the Silgan Credit Agreement, Silgan is required to repay the Terms Loans in an amount equal to (i) 50% of Silgan's Excess Cash Flow (as defined in the Silgan Credit Agreement) in any fiscal year during the Silgan Credit Agreement, (ii) 80% of the net sale proceeds received from certain asset sales (increasing to 100% of such net sale proceeds under certain circumstances as described in the Silgan Credit Agreement), and (iii) 100% of the net equity proceeds received from certain sales of equity (subject to certain exceptions permitting the use of such proceeds to repay certain indebtedness (including the Discount Debentures), decreasing to 50% of net equity proceeds received after the occurrence of certain events as described in the Silgan Credit Agreement. 69 The financial covenants contained in the Silgan Credit Agreement include the requirement to maintain a ratio of Consolidated Current Assets to Consolidated Current Liabilities (each as defined in the Silgan Credit Agreement), a ratio of EBITDA to Interest Expense (each as defined in the Silgan Credit Agreement) which becomes more restrictive over time and a Leverage Ratio (as defined in the Silgan Credit Agreement) which also becomes more restrictive over time. The Silgan Credit Agreement restricts or limits each of the Borrowers' and their respective subsidiaries' abilities, among other things: (i) to create certain liens; (ii) subject to certain exceptions, to consolidate, merge or sell its assets and to purchase assets; (iii) to pay dividends on, or repurchase shares of, its capital stock, except for, among other things, dividends in amounts to allow Holdings to pay cash dividends on the Exchangeable Preferred Stock (or interest on the Exchange Debentures) as provided in the Silgan Credit Agreement and dividends from Containers and Plastics to Silgan as long as they remain wholly owned subsidiaries of Silgan; (iv) to lease real and personal property; (v) to create additional indebtedness, except for, among other things, unsecured subordinated indebtedness of Silgan used to refinance 11 3/4% Notes; (vi) to make certain advances, investments and loans, except for, among other things, certain limited acquisitions and investments as provided in the Silgan Credit Agreement; (vii) to enter into transactions with affiliates; (viii) to make certain capital expenditures, except for, among other things, capital expenditures which do not exceed in the aggregate for the Borrowers $65 million (plus amounts permitted and not utilized in the prior year) for each calendar year; (ix) except as otherwise permitted under the Silgan Credit Agreement, to make any voluntary payments, prepayments, acquire for value, redeem or exchange, among other things, any 11 3/4% Notes, any of the Exchangeable Preferred Stock or Exchange Debentures or to make certain amendments to the 11 3/4% Notes, the Borrowers' or their respective subsidiaries' respective certificates of incorporation and by-laws, or to certain other agreements; (x) with certain exceptions, to have any additional subsidiaries; and (xi) 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 ability of Holdings to take certain actions is restricted or limited pursuant to the terms of the Second Amended and Restated Holdings Guaranty dated as of August 1, 1995 made by Holdings (the "Holdings Guaranty"). The Holdings Guaranty restricts or limits Holdings' ability to, among other things: (i) create certain liens; (ii) incur additional indebtedness, except that, among other things, Holdings may exchange the Exchangeable Preferred Stock for the Exchange Debentures on or after the earlier of the third anniversary of the issuance of the Exchangeable Preferred Stock or the consummation by Holdings of a registered public offering of its common stock in an amount equal to or greater than the principal amount of the Exchange Debentures and Holdings may incur unsecured subordinated Indebtedness (as defined in the Silgan Credit Agreement) the proceeds of which are used to refinance, redeem or repay the Exchange Debentures or any Refinancing Indebtedness (as defined in the Silgan Credit Agreement) of Holdings; (iii) consolidate, merge or sell its assets and purchase or lease assets, except that Holdings may merge with Silgan to the extent that such merger is permitted under the Silgan Credit Agreement; (iv) pay cash dividends, except that, among other things, Holdings may pay cash dividends on the Exchangeable Preferred Stock to the extent that Silgan is permitted to pay cash dividends or make advances to Holdings under the Silgan Credit Agreement for such purpose and dividends to the holders of its common stock in amounts and at the times as provided in the Silgan Credit Agreement after the consummation of a registered public equity offering by Holdings; (v) repurchase any of its capital stock; (vi) make loans or advances, except that, among other things; Holdings may make advances to Silgan as permitted under the Silgan Credit Agreement; and (vii) engage in any business other than holding Silgan's common stock and certain other limited matters permitted by the Holding Guaranty. 70 Events of default under the Silgan Credit Agreement include, with respect to each of the Borrowers, as the case may be, among others: (i) the failure to pay any principal on the Term Loans or the Revolving Loans, the failure to reimburse drawings under any letters of credit when due or the failure to pay within two business days after the date such payment is due interest on the Term Loans, the Revolving Loans or any unpaid drawings under any letter of credit or any fees or other amounts owing under the Silgan Credit Agreement; (ii) subject to certain limited exceptions, any failure to pay amounts due under certain other agreements or any defaults that result in or permit the acceleration of certain other indebtedness; (iii) subject to certain limited exceptions, the breach of any covenants, representations or warranties contained in the Silgan Credit Agreement or any related document; (iv) certain events of bankruptcy, insolvency or dissolution; (v) the occurrence of certain judgments, writs of attachment or similar process against any of the Borrowers or any of their respective subsidiaries; (vi) the occurrence of certain Employee Retirement Income Security Act related liabilities; (vii) a default under or invalidity of the guarantees (including an event of default under the Holdings Guaranty) or of the security interests granted to the Banks pursuant to the Silgan Credit Agreement; (viii) the failure of Holdings to own 100% of the capital stock of Silgan; (ix) a Change of Control (as defined in the Silgan Credit Agreement) shall occur; and (x) the requirement that Silgan repurchase any 11 3/4% Note or that Holdings repurchase any Exchange Debenture, in any case as a result of a Change of Control (as defined in the agreements and indentures relating thereto). DESCRIPTION OF THE 11 3/4% NOTES Silgan sold the 11 3/4% Notes ($135 million principal amount) 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 (as defined in the 11 3/4% Notes Indenture), each holder of the 11 3/4% Notes may require Silgan to repurchase its 11 3/4% Notes at 101% of the principal amount plus accrued interest. The 11 3/4% Notes Indenture contains certain covenants that, among other things, direct the application of the proceeds from certain asset sales, limit the ability of Silgan and its subsidiaries to incur indebtedness, make certain 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. Generally, these covenants are no more restrictive than the covenants contained in the Silgan Credit Agreement. DESCRIPTION OF THE EXCHANGE DEBENTURES Upon completion of the Offering and the redemption of the remaining Discount Debentures (which is expected to occur no later than 45 days after the completion of the Offering), Holdings intends to exchange all of the outstanding Exchangeable Preferred Stock for Exchange Debentures. As a result, Holdings will realize tax benefits resulting from the deductibility of interest paid on the Exchange Debentures. The aggregate principal amount of the Exchange Debentures will be equal to the aggregate liquidation preference of, and accrued but unpaid dividends on, the Exchangeable Preferred Stock outstanding on the date that the Exchangeable Preferred Stock is exchanged for the Exchange Debentures (the "Exchange Date"). The Exchange Debentures will mature on July 15, 2006. Each Exchange Debenture will bear interest at the dividend rate in effect with respect to the Exchangeable Preferred Stock on the date the Exchange Debentures are issued from the Exchange Date or from the most recent interest payment date to which interest has been paid or provided for. Interest will be payable on January 15 and July 15 of each year, commencing with the first of such dates to occur after the Exchange Date. On or prior to July 15, 2000, Holdings will be permitted to pay interest on the Exchange Debentures by issuing additional Exchange Debentures. 71 On or after July 15, 2000, the Exchange Debentures will be redeemable, at the option of Holdings, in whole or in part, at the rate of 109.938% of the principal amount thereof plus accrued interest, declining ratably to 100% by July 15, 2003. In addition, at any time, or from time to time, on or prior to July 15, 2000, Holdings will be able, at its option, to redeem all (but not less than all) outstanding Exchange Debentures at a redemption price equal to 110% of the principal amount thereof plus accrued interest, with the proceeds of one or more sales of common stock of Holdings. Upon a Change of Control (as defined in the Indenture with respect to the Exchange Debentures (the "Exchange Debenture Indenture")), Holdings will be required to make an offer to purchase all of the Exchange Debentures at a purchase price equal to 101% of their principal amount on the date of purchase, plus accrued and unpaid interest to the date of purchase. The Exchange Debenture Indenture will contain certain covenants that, among other things, will direct the application of the proceeds from certain asset sales, limit the ability of Holdings and its subsidiaries to incur indebtedness, make certain payments with respect to their capital stock, make prepayments of certain indebtedness, make loans or investments to entities other than Restricted Subsidiaries (as such term will be defined in the Exchange Debenture Indenture), enter into transactions with affiliates, engage in mergers or consolidations, and, with respect to Holdings' subsidiaries, issue stock. Generally, these covenants will be no more restrictive than the covenants contained in the Silgan Credit Agreement. LEGAL MATTERS The legality of the Common Stock offered hereby will be passed upon by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street, Stamford, Connecticut 06904-6760. G. William Sisley, a partner in Winthrop, Stimson, Putnam & Roberts, is Secretary of Holdings and Silgan. Winthrop, Stimson from time to time represents certain of the Underwriters in connection with certain legal matters unrelated to its representation of Holdings. Certain legal matters are being passed upon for the Underwriters by Shearman & Sterling, New York, New York. Shearman & Sterling has performed, and will continue to perform, legal services for MSLEF II, Morgan Stanley and companies controlled by MSLEF II and Morgan Stanley. EXPERTS The consolidated financial statements of Silgan Holdings Inc. at December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of American National Can Company's Food Metal & Specialty Division as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, incorporated by reference in this Prospectus and Registration Statement have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 72 AVAILABLE INFORMATION 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 with the Securities and Exchange Commission (the "Commission"). Reports filed by Holdings may be inspected without charge and copied, upon payment of prescribed rates, at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such materials may be obtained from the web site that the Commission maintains at http://www.sec.gov. Holdings has filed with the Commission a registration statement on Form S-2 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission (File No. 33-28409) pursuant to the Exchange Act are incorporated herein by reference: 1. Holdings' Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (excluding the Financial Statements of Silgan Corporation included therein); 2. Holdings' Annual Report on Form 10-K/A-1 for the fiscal year ended December 31, 1995 (excluding the Financial Statements of Silgan Corporation included therein); 3. Holdings' Annual Report on Form 10-K/A-2 for the fiscal year ended December 31, 1995; 4. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996; 5. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996; 6. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996; 7. Holdings' Current Report on Form 8-K dated August 14, 1995, as amended by Amendment to Current Report on Form 8-K/A dated October 16, 1995; 8. Holdings' Current Report on Form 8-K dated May 31, 1996; 9. Holdings' Current Report on Form 8-K dated August 2, 1996; 10. Holdings' Current Report on Form 8-K dated September 16, 1996; 11. Holdings' Current Report on Form 8-K dated January 27, 1997; and 12. Holdings' Current Report on Form 8-K dated February 5, 1997. Holdings will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents which are incorporated herein by reference, other than exhibits to such information (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: Silgan Holdings Inc., 4 Landmark Square, Stamford, CT 06901, Attention: Chief Financial Officer (Telephone Number (203) 975-7110). Statements contained in this Prospectus as to the contents of any contract or document are not necessarily complete, and in each instance reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Any statement contained in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified shall not be deemed to constitute a part of this Prospectus except as so modified, and any statement so superseded shall not be deemed to constitute part of this Prospectus. 73 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors........................................... F-2 Consolidated Balance Sheets at December 31, 1996 and 1995................ F-3 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994.......................................................F-4 Consolidated Statements of Deficiency in Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994..............................F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.......................................................F-6 Notes to Consolidated Financial Statements............................... F-7 Unaudited Pro Forma Condensed Statement of Operations for the year ended December 31, 1996....................................................... F-27 Notes to Unaudited Pro Forma Condensed Statement of Operations........... F-30
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Silgan Holdings Inc. We have audited the accompanying consolidated balance sheets of Silgan Holdings Inc. as of December 31, 1996 and 1995, and the related consolidated statements of operations, deficiency in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Silgan Holdings Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Stamford, Connecticut January 31, 1997 F-2 SILGAN HOLDINGS INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
PRO FORMA 1996 1996 1995 ----------- -------- -------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.................... $ 1,017 $ 2,102 Accounts receivable, less allowances for doubtful accounts of $4,045 and $4,832 for 1996 and 1995, respectively................. 101,436 109,929 Inventories.................................. 195,981 210,471 Prepaid expenses and other current assets.... 7,403 5,801 -------- -------- Total current assets....................... 305,837 328,303 Property, plant and equipment, net............. 499,781 487,301 Goodwill, net.................................. 77,176 53,562 Other assets................................... 30,752 30,880 -------- -------- $913,546 $900,046 ======== ======== LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable....................... $122,623 $138,195 Accrued payroll and related costs............ 41,799 32,805 Accrued interest payable..................... 9,522 4,358 Accrued expenses and other current liabili- ties........................................ 35,456 43,457 Bank working capital loans................... 27,800 7,100 Current portion of long-term debt............ 38,427 28,140 -------- -------- Total current liabilities.................. 275,627 254,055 Long-term debt................................. 693,783 750,873 Deferred income taxes.......................... 6,836 6,836 Other long-term liabilities.................... 74,508 68,086 Cumulative exchangeable redeemable preferred stock (90,000 shares authorized, 51,556 shares issued and outstanding)....................... 52,998 -- Deficiency in stockholders' equity: Common Stock, $0.01 par value per share: Class A (500,000 shares authorized, 417,500 shares issued and outstanding)............. 4 4 Class B (667,500 shares authorized, 417,500 and 667,500 shares issued and outstanding in 1996 and 1995, respectively)............ 4 7 Class C (1,000,000 shares authorized, 50,000 shares issued and outstanding)............. 1 1 Pro Forma Common Stock (100,000,000 shares authorized, 15,162,833 shares issued and outstanding)............................... 152 -- -- Additional paid-in capital................... 18,466 18,609 33,606 Accumulated deficit.......................... (208,824) (213,422) -------- -------- Total deficiency in stockholders' equity....... (190,206) (179,804) -------- -------- $913,546 $900,046 ======== ========
See accompanying notes. F-3 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994 ---------- ---------- -------- Net sales................................... $1,405,742 $1,101,905 $861,374 Cost of goods sold.......................... 1,223,684 970,491 748,290 ---------- ---------- -------- Gross profit.............................. 182,058 131,414 113,084 Selling, general and administrative expenses................................... 58,768 46,848 37,997 Reduction in carrying value of assets....... -- 14,745 16,729 ---------- ---------- -------- Income from operations.................... 123,290 69,821 58,358 Interest expense and other related financing costs...................................... 89,353 80,710 65,789 ---------- ---------- -------- Income (loss) before income taxes......... 33,937 (10,889) (7,431) Income tax provision........................ 3,300 5,100 5,600 ---------- ---------- -------- Income (loss) before extraordinary charge................................... 30,637 (15,989) (13,031) Extraordinary charges relating to early extinguishment of debt, net of taxes....... (2,222) (5,817) -- ---------- ---------- -------- Net income (loss) before preferred stock dividend requirement..................... 28,415 $ (21,806) $(13,031) Preferred stock dividend requirement........ (3,006) -- -- ---------- ---------- -------- Net income (loss) available to common stockholders............................. $ 25,409 $ (21,806) $(13,031) ========== ========== ========
See accompanying notes. F-4 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
TOTAL ADDITIONAL DEFICIENCY IN COMMON PAID-IN ACCUMULATED STOCKHOLDERS' STOCK CAPITAL DEFICIT EQUITY ------ ---------- ----------- ------------- Balance at December 31, 1993...... $12 $33,606 $(178,585) $(144,967) Net loss.......................... -- -- (13,031) (13,031) --- ------- --------- --------- Balance at December 31, 1994...... 12 33,606 (191,616) (157,998) Net loss.......................... -- -- (21,806) (21,806) --- ------- --------- --------- Balance at December 31, 1995...... 12 33,606 (213,422) (179,804) Purchase and retirement of 250,000 shares of Class B Common Stock... (3) (14,997) (20,811) (35,811) Net income........................ -- -- 25,409 25,409 --- ------- --------- --------- Balance at December 31, 1996...... $ 9 $18,609 $(208,824) $(190,206) === ======= ========= =========
See accompanying notes. F-5 SILGAN HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994 --------- --------- --------- Cash flows from operating activities: Net income (loss) before preferred stock div- idend requirement........................... $ 28,415 $ (21,806) $ (13,031) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation................................ 54,830 42,217 35,392 Amortization................................ 8,993 8,083 7,075 Accretion of discount on discount deben- tures...................................... 12,077 28,672 27,477 Reduction in carrying value of assets....... -- 14,745 16,729 Extraordinary charge relating to early ex- tinguishment of debt....................... 2,222 6,301 -- Changes in assets and liabilities, net of effect of acquisitions: Decrease (increase) in accounts receiv- able...................................... 15,102 (1,011) (21,267) Decrease (increase) in inventories......... 20,348 10,852 (16,741) (Decrease) increase in trade accounts pay- able...................................... (17,145) 43,108 4,478 Net working capital provided by AN Can from 8/1/95 to 12/31/95........................ -- 85,213 -- Other, net increase (decrease)............. 357 (6,745) 7,221 --------- --------- --------- Total adjustments......................... 96,784 231,435 60,364 --------- --------- --------- Net cash provided by operating activities... 125,199 209,629 47,333 --------- --------- --------- Cash flows from investing activities: Acquisition of businesses.................... (43,043) (348,762) 519 Capital expenditures......................... (56,851) (51,897) (29,184) Proceeds from sale of assets................. 1,557 3,541 765 --------- --------- --------- Net cash used in investing activities....... (98,337) (397,118) (27,900) --------- --------- --------- Cash flows from financing activities: Borrowings under working capital loans...... 952,050 669,260 393,250 Repayments under working capital loans...... (931,350) (674,760) (382,850) Proceeds from issuance of long-term debt.... 125,000 450,000 -- Repayments of long-term debt................ (183,880) (234,506) (20,464) Proceeds from issuance of cumulative redeem- able exchangeable preferred stock............... 50,000 -- -- Repurchase of common stock.................. (35,811) -- -- Debt financing costs........................ (3,956) (19,290) -- Payments to former shareholders of Silgan... -- (3,795) (6,911) --------- --------- --------- Net cash (used by) provided for financing activities................................. (27,947) 186,909 (16,975) --------- --------- --------- Net (decrease) increase in cash and cash equivalents................................... (1,085) (580) 2,458 Cash and cash equivalents at beginning of year.......................................... 2,102 2,682 224 --------- --------- --------- Cash and cash equivalents at end of year...... $ 1,017 $ 2,102 $ 2,682 ========= ========= ========= Supplementary data: Interest paid............................... $ 68,390 $45,293 $ 30,718 Income tax (refunds) payments, net.......... (4,836) 8,967 2,588 Preferred stock dividend in lieu of cash dividend................................... 2,998 -- --
See accompanying notes. F-6 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 1. BASIS OF PRESENTATION Silgan Holdings Inc. ("Holdings", together with its wholly-owned subsidiaries, the "Company") is a company controlled by Silgan management and The Morgan Stanley Leveraged Equity Fund II, L. P. ("MSLEF II"), an affiliate of Morgan Stanley & Co., Incorporated ("MS & Co."). Holdings owns all of the outstanding common stock of Silgan Corporation ("Silgan"). The Company, together with Silgan and its wholly-owned operating subsidiaries Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"), is predominantly engaged in the manufacture and sale of steel and aluminum containers for human and pet food products. The Company also manufactures custom designed plastic containers used for health and personal care products and specialty packaging items, including metal caps and closures, plastic bowls and paper containers used by processors in the food industry. Principally, all of the Company's businesses are based in the United States. Foreign subsidiaries are not significant to the consolidated results of operations or financial position of the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated. Assets and liabilities of the Company's foreign subsidiary are translated at rates of exchange in effect at the balance sheet date. Income statement amounts are translated at the average of monthly exchange rates. CASH AND CASH EQUIVALENTS Cash equivalents represent short-term, highly liquid investments having original maturities of three months or less from the time of purchase. The carrying values of these assets approximate their fair values. As a result of the Company's cash management system, checks issued and presented to the banks for payment may create negative cash balances. Checks outstanding in excess of related cash balances totaling approximately $49.6 million at December 31, 1996 and $30.0 million at December 31, 1995 are included in trade accounts payable. INVENTORIES Inventories are stated at the lower of cost or market (net realizable value) and are principally accounted for by the last-in, first-out method (LIFO). PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation. Major renewals and betterments that extend the life of an asset are capitalized and repairs and maintenance expenditures are charged to expense as incurred. Depreciation is computed using the straight-line method over their estimated useful lives. The principal estimated useful lives are 35 years for buildings and range between 3 to 18 years for machinery and equipment. Leasehold improvements are amortized over the shorter of the life of the related asset or the life of the lease. F-7 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 GOODWILL The Company has classified as goodwill the cost in excess of fair value of net assets acquired in purchase transactions. Goodwill is stated at cost less accumulated amortization. Amortization is computed on a straight-line basis over periods ranging from 20 to 40 years. The Company periodically evaluates the existence of goodwill impairment to access whether goodwill is fully recoverable from projected, undiscounted net cash flows of the related business unit. Impairments would be recognized in operating results if a permanent reduction in values were to occur. LONG-LIVED ASSETS Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of". Under SFAS No. 121, impairment losses will be recognized when events or changes in circumstances indicate that the undiscounted cash flows generated by the assets are less than the carrying value of such assets. Impairment losses are then measured by comparing the fair value of assets to their carrying amount. There were no impairment losses recognized during 1996. OTHER ASSETS Other assets consist principally of debt issuance costs which are being amortized on a straight-line basis over the terms of the related debt agreements (5 to 10 years). Other intangible assets are amortized over their expected useful lives using the straight-line method. INCOME TAXES The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes". The provision for income taxes includes federal, state, and foreign income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. STOCK BASED COMPENSATION SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October 1995, effective for the 1996 fiscal year. Under SFAS No. 123, compensation expense for all stock-based compensation plans would be recognized based on the fair value of the options at the date of grant using an option pricing model. As permitted under SFAS No. 123, the Company may either adopt the new pronouncement or may continue to follow the accounting method as prescribed under APB No. 25, "Accounting for Stock Issued to Employees". The Company has chosen to continue to recognize compensation expense in accordance with APB No. 25. DERIVATIVE FINANCIAL INSTRUMENTS The Company's use of derivative financial instruments is limited to interest rate swap agreements which assist in managing exposure to adverse movement in interest rates on a portion of its indebtedness. The Company does not utilize financial instruments for speculative purposes. The difference between amounts to be paid or received on interest rate swap agreements are recorded as adjustments to interest expense. The methods and assumptions used to estimate fair values of these and other debt instruments reflected in the financial statements are discussed in Note 10. F-8 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, as well as footnote disclosures in the financial statements. Actual results may differ from those estimates. PROPOSED INITIAL PUBLIC OFFERING The financial information does not give effect to the amendment to Holdings' Restated Certificate of Incorporation, the conversion of Holdings' Class A, Class B and Class C Common Stock into Common Stock on a one for one basis or the stock split, all as proposed in connection with the initial public offering. For a discussion of the proposed initial public offering, see Note 22. 3. ACQUISITIONS On October 9, 1996, the Company acquired substantially all of the assets of Finger Lakes Packaging Company, Inc. ("Finger Lakes"), a metal food container manufacturer, which had net sales of $48.8 million for its fiscal year ended June 29, 1996. The purchase price was $29.9 million (including net working capital of $8.0 million) and was primarily allocated to property, plant, and equipment, and net working capital acquired based on fair market value as of the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was $5.2 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 20 years. On August 1, 1995, Containers acquired from American National Can Company ("ANC") substantially all of the fixed assets and working capital, and assumed certain specified limited liabilities, of ANC's Food Metal & Specialty business ("AN Can"), which manufactures, markets and sells metal food containers and rigid plastic containers for a variety of food products and metal caps and closures for food and beverage products. The final purchase price for the assets acquired and the assumption of certain specified liabilities was $362.0 million (including $13.1 million paid in 1996). The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values. The purchase price allocation was adjusted in 1996 for differences between the actual and preliminary valuations for the asset appraisals and for projected employee benefit costs as well as for a revision in estimated costs of plant rationalizations, administrative workforce reductions and various other acquisition liabilities. The final purchase price allocation resulted in an adjustment to increase goodwill by $20.7 million. The aggregate excess of the purchase price over the fair value of the assets acquired and liabilities assumed for AN Can was $45.6 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 40 years. The Finger Lakes and AN Can acquisitions were accounted for using the purchase method of accounting and accordingly, the results of operations for Finger Lakes and AN Can have been included in the consolidated financial statements of the Company from the dates of acquisition. Set forth below are the Company's summary unaudited pro forma results of operations for the year ended December 31, 1995, giving effect to the acquisition of AN Can. The summary unaudited pro forma results of operations include the historical results of the Company and AN Can and reflect the effect of purchase accounting adjustments based on appraisals and valuations, the financing of the acquisition of AN Can by the Company, the refinancing of the Company's related debt obligations, and F-9 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 certain other adjustments as if these events occurred as of the beginning of 1995. Pro forma results of operations for Finger Lakes have not been presented for 1996 or included in the 1995 summary unaudited pro forma results of operations since the impact of such acquisition was not significant. The pro forma results of operations do not give effect to adjustments for decreased costs from manufacturing synergies resulting from the integration of AN Can with the Company's existing can manufacturing operations and benefits the Company may realize as a result of its planned rationalization of plant operations. Pro forma adjustments have not been made to interest expense for the year ended December 31, 1995 for the portion of Holdings' 13 1/4% Senior Discount Debentures due 2002 ("Discount Debentures") redeemed in 1996 as described in Note 8 or for the subsequent events discussed in Note 22. The pro forma information does not purport to represent what the Company's results of operations actually would have been if the operations were combined as of January 1, 1995, or to project the Company's results of operations for any future period:
1995 ---------------------- (DOLLARS IN THOUSANDS) Net sales.......................................... $1,404,382 Income from operations............................. 92,749(1) Income before income taxes......................... 4,064 Net loss........................................... (2,736)
- -------- (1) Included in pro forma income from operations for the year ended December 31, 1995 is a charge of $14.7 million to adjust the carrying value of certain underutilized machinery and equipment at Silgan facilities (existing prior to the AN Can acquisition) to net realizable value. 4. INVENTORIES The components of inventories at December 31, 1996 and 1995 consist of the following:
1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Raw materials........................................ $ 40,280 $ 46,027 Work-in-process...................................... 27,861 24,869 Finished goods....................................... 116,498 135,590 Spare parts and other................................ 7,771 6,344 -------- -------- 192,410 212,830 Adjustment to value inventory at cost on the LIFO method.............................................. 3,571 (2,359) -------- -------- $195,981 $210,471 ======== ========
The amount of inventory recorded on the first-in first-out method at December 31, 1996 and 1995 was $19.8 million and $17.6 million, respectively. F-10 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 1996 and 1995 consist of the following:
1996 1995 --------- --------- (DOLLARS IN THOUSANDS) Land............................................... $ 6,425 $ 6,355 Buildings and improvements......................... 79,923 68,860 Machinery and equipment............................ 621,232 584,526 Construction in progress........................... 49,771 33,764 --------- --------- 757,351 693,505 Accumulated depreciation and amortization.......... (257,570) (206,204) --------- --------- Property, plant and equipment, net................. $ 499,781 $ 487,301 ========= =========
For the years ended December 31, 1996, 1995, and 1994, depreciation expense was $54.8 million, $42.2 million and $35.4 million, respectively. The total amount of repairs and maintenance expense was $32.0 million in 1996, $26.9 million in 1995 and $19.9 million in 1994. In 1995 and 1994, based on a review of depreciable assets, the Company determined that certain adjustments were necessary to properly reflect net fixed asset realizable values. In 1995, the Company recorded a write-down of $14.7 million for the excess of carrying value over estimated realizable value of machinery and equipment at existing facilities which had become underutilized due to excess capacity. In 1994, charges of $16.7 million were recorded which included $2.6 million to write-down the excess carrying value over estimated realizable value of various plant facilities held for sale and $14.1 million for technologically obsolete and inoperable machinery and equipment. 6. GOODWILL Goodwill amortization charged to operations was $2.3 million in 1996; $1.3 million in 1995; and $1.2 million in 1994. Accumulated amortization of goodwill at December 31, 1996, 1995, and 1994 was $7.7 million; $5.0 million; and $3.7 million, respectively. 7. OTHER ASSETS Other assets at December 31, 1996 and 1995 consist of the following:
1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS) Debt issuance costs............................ $ 30,515 $ 30,148 Other.......................................... 8,576 8,027 ----------- ----------- 39,091 38,175 Less: accumulated amortization................. (8,339) (7,295) ----------- ----------- $ 30,752 $ 30,880 =========== ===========
During 1996, the Company wrote off $2.2 million of unamortized debt issuance costs, with no tax benefit, and capitalized $4.0 million of new debt issuance costs in connection with the refinancing of Discount Debentures. As part of the acquisition of AN Can and the related refinancing of its secured debt facilities and Discount Debentures in 1995, the Company wrote off $6.3 million of unamortized debt issuance costs and capitalized $19.3 million of new debt issuance costs. Amortization expense F-11 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 relating to debt issuance for the years ended December 31, 1996, 1995, and 1994 was $4.5 million, $4.9 million, and $5.3 million, respectively. 8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT The Company has a revolving credit facility which it uses to finance its seasonal liquidity needs. As of December 31, 1996 and 1995, the Company had $27.8 million and $7.1 million, respectively, of loans outstanding under the revolving credit facility ("Working Capital Loans"). Long-term debt consists of the following:
1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Bank A Term Loans...................................... $194,554 $220,000 Bank B Term Loans...................................... 343,716 222,750 11 3/4% Senior Subordinated Notes due June 15, 2002.... 135,000 135,000 13 1/4% Senior Subordinated Debentures due December 15, 2002..................................... 58,940 201,263 -------- -------- 732,210 779,013 Less: Amounts due within one year...................... 38,427 28,140 -------- -------- $693,783 $750,873 ======== ========
The aggregate annual maturities of long-term debt at December 31, 1996 are as follows (in thousands): 1997..................................... $ 38,427 1998..................................... 53,393 1999..................................... 53,393 2000..................................... 126,112 2001..................................... 155,880 2002 and thereafter...................... 305,005 -------- $732,210 ========
REFINANCINGS Effective August 1, 1995, Silgan, Containers and Plastics entered into a $675.0 million credit agreement (the "Credit Agreement") with various banks to finance the acquisition by Containers of AN Can, to refinance and repay in full all amounts owing under the previous bank credit agreement and Silgan's Senior Secured Notes (the "Secured Notes"), and to repurchase up to $75.0 million of Discount Debentures. The Credit Agreement, as entered into during 1995, provided the Company with (i) $225.0 million of A Term Loans, (ii) $225.0 million of B Term Loans and (iii) Working Capital Loans of up to $225.0 million. The Company used proceeds from the Credit Agreement to acquire AN Can for $348.9 million (excluding $13.1 million paid in 1996), repay $117.1 million of term loans under the previous credit agreement, repay in full $50.0 million of Secured Notes, repurchase $61.7 million principal amount at maturity of Discount Debentures for $57.6 million, and incur debt issuance costs of $19.3 million. As a result of the early redemption of the Secured Notes and a portion of the Discount Debentures in 1995, the Company incurred an extraordinary charge of $5.8 million, net of taxes, for the write-off of unamortized deferred financing costs of $6.4 million and premiums of $2.0 million paid on the redemption of the Discount Debentures. F-12 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 In 1996, the Credit Agreement was amended to provide the Company with additional B Term Loans of $125.0 million. With borrowings of $17.4 million of Working Capital Loans, $12.0 million representing a portion of the proceeds from the issuance of Holdings' 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock ("Preferred Stock"), and the additional B Term Loans, the Company redeemed $154.4 million principal amount of Discount Debentures at par. As a result of the early redemption of a portion of the Discount Debentures in 1996, the Company incurred an extraordinary charge of $2.2 million for the write-off of unamortized deferred financing costs. BANK CREDIT AGREEMENT The A Term Loans mature on December 31, 2000, and the B Term Loans mature on March 15, 2002. Principal repayments of $25.4 million and $5.0 million on the A Term Loans and $4.0 million and $2.3 million on the B Term Loans were made in 1996 and 1995, respectively. Principal is to be repaid on each of the A and B Term Loans in installments in accordance with the Credit Agreement until maturity. As provided in the Credit Agreement, the Company is required to repay the term loans (ratably allocated between the A Term Loans and the B Term Loans) in an amount equal to 80% of the net sale proceeds from certain asset sales and up to 100% of the net equity proceeds from certain sales of equity. Effective for the year ended December 31, 1996 and each year thereafter during the term of the Credit Agreement, the Company is required to prepay the term loans (ratably allocated between the A Term Loans and the B Term Loans) in an amount equal to 50% of the Company's excess cash flow. Amounts repaid under the term loans cannot be reborrowed. The Credit Agreement provides Containers and Plastics, together, a revolving credit facility of up to $225.0 million for working capital needs. Borrowings available under the revolving credit facility were $190.0 million at December 31, 1996, after taking into account outstanding Working Capital Loans of $27.8 million and outstanding letters of credit of $7.2 million. The Company may utilize up to a maximum of $20.0 million in letters of credit as long as the aggregate amount of borrowings of Working Capital Loans and letters of credit do not exceed the amount of the commitment under the revolving credit facility. The aggregate amount of Working Capital Loans and letters of credit which may be outstanding at any time is also limited to the aggregate of 85% of eligible accounts receivable and 50% of eligible inventory. Working Capital Loans may be borrowed, repaid, and reborrowed over the life of the Credit Agreement until final maturity on December 31, 2000. The borrowings under the Credit Agreement may be designated by the respective borrowers as Base Rate or Eurodollar Rate borrowings. The Base Rate is the higher of (i) 1/2 of 1% in excess of Adjusted Certificate of Deposit Rate, or (ii) Bankers Trust Company's prime lending rate. Base Rate borrowings bear interest at the Base Rate plus a margin of 1.50% in the case of A Term Loans and Working Capital Loans; and a margin of 2.0% in the case of B Term Loans. Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus a margin of 2.50% in the case of A Term Loans and Working Capital Loans; and a margin of 3.0% in the case of B Term Loans. In accordance with the Credit Agreement, if the Company meets certain financial tests, the interest rate margin on Base Rate and Eurodollar Rate borrowings may be reduced from the existing margin. As of December 31, 1996, the interest rate for Base Rate borrowings was 9.75% and the interest rate for Eurodollar Rate borrowings ranged between 8.0% and 8.63%. During 1996, the Company entered into interest rate swap agreements to convert interest rate exposure from variable to fixed rates of interest on A Term Loans and B Term Loans in an aggregate amount of $200.0 million (for a discussion of the interest rate swap agreements, see Note 9). For 1996, 1995 and 1994, respectively, the average amount of borrowings of Working Capital Loans was $104.1 million, $67.6 million and $14.4 million; the weighted average annual interest rate F-13 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 paid on such borrowings was 8.4%, 8.9%, and 8.4%; and the highest amount of such borrowings was $175.1 million, $188.1 million, and $46.0 million.The Credit Agreement provides for the payment of a commitment fee of 0.5% per annum on the daily average unused portion of commitments available under the working capital revolving credit facility as well as a 2.75% per annum fee on outstanding letters of credit. The indebtedness under the Credit Agreement is guaranteed by Holdings and each of Silgan, Containers and Plastics and secured by a security interest in substantially all of the real and personal property of Silgan, Containers and Plastics. The stock of Silgan and the stock of principally all of its subsidiaries have been pledged to the lenders under the Credit Agreement. The Credit Agreement contains various covenants which limit or restrict, among other things, investments, indebtedness, liens, dividends, leases, capital expenditures, and the use of proceeds from asset sales, as well as requiring the Company to meet certain specified financial covenants. The Company is currently in compliance with all covenants under the Credit Agreement. 11 3/4% SENIOR SUBORDINATED NOTES The Company's 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes"), which mature on June 15, 2002, represent unsecured general obligations of Silgan, subordinate in right of payment to obligations of the Company under the Credit Agreement and effectively subordinate to all ofthe obligations of the subsidiaries of Silgan. Interest is payable semi-annually on June 15 and December 15. The 11 3/4% Notes are redeemable at the option of the Company, in whole or in part, at any time during the twelve months commencing June 15 of the following years at the indicated percentages of their principal amount, plus accrued interest:
REDEMPTION YEAR PERCENTAGE ---- ---------- 1997................................... 105.8750% 1998................................... 102.9375% 1999 and thereafter.................... 100.0000%
The 11 3/4% Notes Indenture contains covenants which are comparable to or less restrictive than those under the terms of the Credit Agreement. 13 1/4% SENIOR DISCOUNT DEBENTURES The 13 1/4% Senior Discount Debentures, which are due on December 15, 2002, represent unsecured general obligations of Holdings, subordinate in right of payment to the obligations of Silgan and its subsidiaries. The original issue discount was amortized through June 15, 1996 with a yield to maturity of 13 1/4%. From and after June 15, 1996, interest on the Discount Debentures accrues on the principal amount thereof at the rate of 13 1/4% and is payable in cash semiannually. The Discount Debentures are redeemable at any time, at the option of Holdings, in whole or in part, at 100% of their principal amount plus accrued interest to the redemption date. The Company redeemed $154.4 million principal amount of its Discount Debentures in 1996 and repurchased $61.7 million principal amount at maturity of its Discount Debentures for $57.6 million. F-14 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 The Discount Debenture Indenture contains covenants which are comparable to or less restrictive than those under the Credit Agreement and the 11 3/4% Notes. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company has entered into interest rate swap agreements with various banks to manage its exposure to interest rate fluctuations. The agreements are with major financial institutions which are expected to fully perform under the terms thereof. The interest rate swap agreements effectively convert interest rate exposure from variable rates to fixed rates of interest without the exchange of the underlying principal amounts. A portion of the Company's term debt instruments carries a variable rate of interest based on the London interbank offered rate ("LIBOR") plus a margin currently ranging from 2.5% to 3.0%. The interest rate swap agreements require the Company to pay fixed rates of interest ranging from 5.6% to 6.2% plus the aforementioned margin. Notional principal amounts of these agreements total $200.0 million and these agreements mature in the year 1999. The notional amounts are used to measure the interest to be paid or received and do not represent the amount of exposure to credit loss. Net payments or receipts under these agreements were recorded as adjustments to interest expense. CONCENTRATION OF CREDIT RISK The Company derives a significant portion of its revenue from multi-year supply agreements with many of its customers. Aggregate revenues from its two largest customers accounted for approximately 29.1% of its net sales in 1996 and 36.0% of its net sales in 1995. The receivable balances from these customers collectively represented 20.3% and 28.2% of the Company's accounts receivable before allowances at December 31, 1996 and 1995, respectively. As is common in the packaging industry, the Company provides extended payment terms for some of its customers due to the seasonality of the vegetable and fruit pack business. Exposure to losses is dependent on each customer's financial position. The Company performs ongoing credit evaluations of its customer's financial condition and its receivables are not collateralized. The Company maintains an allowance for doubtful accounts which management believes is adequate to cover potential credit losses based on customer credit evaluations, collection history, and other information. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1996 and 1995 are as follows:
1996 1995 ----------------- ----------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- (DOLLARS IN THOUSANDS) Working Capital Facility............... $ 27,800 $ 27,800 $ 7,100 $ 7,100 Bank A Term Loans...................... 194,554 194,554 220,000 220,000 Bank B Term Loans...................... 343,716 343,716 222,750 222,750 11 3/4% Senior Subordinated Notes due June 15, 2002......................... 135,000 144,500 135,000 144,500 13 1/4% Senior Subordinated Debentures due December 15, 2002................. 58,940 59,235 201,263 205,873 Cumulative Exchangeable Redeemable Pre- ferred Stock.......................... 52,998 58,671 -- -- Interest Rate Swap Agreements.......... -- 504 -- --
F-15 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 Methods and assumptions used in estimating fair values are as follows: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value due to the short duration of those investments. Short and long-term debt: The carrying amounts of the Company's borrowings under its working capital loans and variable-rate borrowings approximate their fair value. The fair values of fixed-rate borrowings are based on quoted market prices. Convertible exchangeable preferred stock: The fair value of the preferred stock is estimated based on quoted market prices. Interest rate swap agreements: Fair values of interest rate swap agreements reflect the estimated amounts that the Company would receive to terminate the contracts at the reporting date based on quoted market prices. 11. COMMITMENTS The Company has a number of noncancelable operating leases for office and plant facilities, equipment and automobiles that expire at various dates through 2020. Certain operating leases have renewal options. Minimum future rental payments under these leases are (dollars in thousands): 1997................................. $13,779 1998................................. 10,615 1999................................. 8,181 2000................................. 6,257 2001................................. 4,431 2002 and thereafter.................. 9,213 ------- $52,476 =======
Rent expense was approximately $13.9 million in 1996; $10.8 million in 1995; and $9.1 million in 1994. 12. RETIREMENT PLANS The Company sponsors pension and defined contribution plans which cover substantially all employees, other than union employees covered by multi- employer defined benefit pension plans under collective bargaining agreements. Pension benefits are provided based on either a career average, final pay or years of service formula. With respect to certain hourly employees, pension benefits are provided for based on stated amounts for each year of service. It is the Company's policy to fund accrued pension and defined contribution costs in compliance with ERISA requirements. Assets of the plans consist primarily of equity and bond funds. F-16 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 The following table sets forth the funded status of the Company's retirement plans as of December 31, 1996 and 1995:
PLANS IN WHICH PLANS IN WHICH ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS ---------------- ---------------- 1996 1995 1996 1995 ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Actuarial present value of benefit ob- ligations: Vested benefit obligations........... $14,009 $12,135 $33,558 $31,465 Non-vested benefit obligations....... 383 547 4,718 3,158 ------- ------- ------- ------- Accumulated benefit obligations........ 14,392 12,682 38,276 34,623 Additional benefits due to future salary levels.......................... 6,255 5,667 6,526 7,132 ------- ------- ------- ------- Projected benefit obligations.......... 20,647 18,349 44,802 41,755 Plan assets at fair value.............. 15,055 12,988 31,265 23,535 ------- ------- ------- ------- Projected benefit obligation in excess of plan assets........................... 5,592 5,361 13,537 18,220 Unrecognized actuarial gain (loss)..... 110 (165) 3,476 1,237 Unrecognized prior service costs....... (565) (615) (2,052) (2,128) Additional minimum liability........... -- -- 1,124 1,990 ------- ------- ------- ------- Accrued pension liability recognized in the balance sheet......................... $ 5,137 $ 4,581 $16,085 $19,319 ======= ======= ======= =======
For certain pension plans with accumulated benefits in excess of plan assets at December 31, 1996 and December 31, 1995, the balance sheet reflects an additional minimum pension liability and related intangible asset of $1.1 million and $2.0 million, respectively. The components of net periodic pension costs for defined benefit plans are as follows:
1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Service cost.................................... $ 5,229 $ 3,067 $ 2,947 Interest cost................................... 4,452 3,887 3,334 Actual loss (return) on assets.................. (3,946) (7,284) 539 Net amortization and deferrals.................. 650 5,008 (2,698) ------- ------- ------- Net periodic pension cost....................... $ 6,385 $ 4,678 $ 4,122 ======= ======= =======
The Company participates in several multi-employer pension plans which provide defined benefits to certain of its union employees. The composition of total pension cost for 1996, 1995, and 1994 in the Company's Consolidated Statements of Operations is as follows:
1996 1995 1994 ------- ------ ------ (DOLLARS IN THOUSANDS) Net periodic pension cost.......................... $ 6,385 $4,678 $4,122 Settlement and curtailment losses, net............. 48 418 -- Contributions to multi-employer union plans........ 3,813 2,708 2,700 ------- ------ ------ Total pension costs................................ $10,246 $7,804 $6,822 ======= ====== ======
F-17 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 The assumptions used in determining the actuarial present value of plan benefit obligations as of December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994 ---- ---- ---- Discount rate........................................... 7.5% 7.5% 8.5% Weighted average rate of compensation increase.......... 4.0% 4.0% 4.5% Expected long-term rate of return on plan assets........ 9.0% 8.5% 8.5%
The Company also sponsors defined contribution pension and profit sharing plans covering substantially all employees. Company contributions to these plans are based upon employee contributions and operating profitability. Contributions charged to income for these plans were $4.5 million in 1996; $1.7 million in 1995; and $2.5 million in 1994. Improved operating performance in 1996 as compared to 1995 resulted in greater contributions to the Company's profit sharing plans. 13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company has defined benefit health care and life insurance plans that provide postretirement benefits to certain employees. The plans are contributory, with retiree contributions adjusted annually, and contain cost sharing features including deductibles and coinsurance. Retiree health benefits are paid as covered expenses are incurred. The following table presents the funded status of the postretirement plans and amounts recognized in the Company's balance sheet as of December 31, 1996 and 1995:
1996 1995 ----------- ----------- (DOLLARS IN THOUSANDS) Accumulated postretirement benefit obligation: Retirees................ $ 2,691 $ 1,587 Fully eligible active plan participants...... 5,576 11,647 Other active plan par- ticipants.............. 18,214 14,770 ----------- ----------- Total accumulated postretirement benefit obligation............... 26,481 28,004 Unrecognized net loss (gain).................... 2,993 (2,929) Unrecognized prior service costs..................... (275) (298) ----------- ----------- Accrued postretirement benefit liability......... $ 29,199 $ 24,777 =========== ===========
Net periodic postretirement benefit cost include the following components:
1996 1995 1994 ------ ------ ---- (DOLLARS IN THOUSANDS) Service cost.......................................... $ 871 $ 372 $321 Interest cost......................................... 1,766 1,097 412 Net amortization and deferral......................... 25 42 (14) ------ ------ ---- Net periodic postretirement benefit cost.............. $2,662 $1,511 $719 ====== ====== ====
The weighted average discount rate used to determine the accumulated postretirement benefit obligation as of December 31, 1996 and 1995 was 7.5%. The net periodic postretirement benefit costs were calculated using a discount rate of 7.5% in 1996 and discount rates ranging from 7.5% to 8.5% for 1995. The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation in 1996 ranged from 10% to 9.5% for pre-age 65 retirees and was 9.0% for post-age 65 retirees, declining gradually to an ultimate rate of 5.5% over the next 12 years. F-18 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 A 1% increase in the health care cost trend rate assumption would increase the accumulated postretirement benefit obligation as of December 31, 1996 by approximately $1.7 million and increase the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for 1996 by approximately $0.2 million. 14. INCOME TAXES The components of income tax expense are as follows:
1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Current Federal.................................... $ -- $ 500 $ 2,500 State...................................... 3,000 1,900 3,200 Foreign.................................... 300 100 (100) ------- ------- ------- 3,300 2,500 5,600 Deferred Federal.................................... -- -- -- State...................................... -- -- -- Foreign.................................... -- -- -- ------- ------- ------- -- -- -- ------- ------- ------- $ 3,300 $ 2,500 $ 5,600 ======= ======= ======= Income tax expense is included in the financial statements as follows: 1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Income before extraordinary charges.......... $ 3,300 $ 5,100 $ 5,600 Extraordinary charges........................ -- (2,600) -- ------- ------- ------- $ 3,300 $ 2,500 $ 5,600 ======= ======= ======= The income tax provision varied from that computed by using the U.S. statutory rate as a result of the following: 1996 1995 1994 ------- ------- ------- (DOLLARS IN THOUSANDS) Income tax benefit at the U.S. Federal income tax rate............................. $11,100 $(3,811) $(2,601) State and foreign tax expense, net of Federal income benefit.............................. 2,145 1,820 2,015 Amortization of goodwill..................... 621 471 576 Change in valuation allowance................ (10,566) 6,620 5,610 ------- ------- ------- $ 3,300 $ 5,100 $ 5,600 ======= ======= =======
F-19 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets at December 31, 1996 and 1995 are as follows:
1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Deferred tax liabilities: Tax over book depreciation........................... $ 65,000 $ 53,400 Book over tax basis of assets acquired............... 13,200 16,100 Other................................................ 4,100 3,900 -------- -------- Total deferred tax liabilities..................... 82,300 73,400 Deferred tax assets: Book reserves not yet deductible for tax purposes.... 59,200 56,300 Deferred interest on high yield obligations.......... 7,700 25,100 Net operating loss carryforwards..................... 57,200 35,600 Other................................................ 500 1,200 -------- -------- Total deferred tax assets.......................... 124,600 118,200 Valuation allowance for deferred tax assets.......... 49,136 51,636 -------- -------- Net deferred tax assets............................ 75,464 66,564 -------- -------- Net deferred tax liabilities........................... $ 6,836 $ 6,836 ======== ========
The Company has a net deferred tax asset position primarily as a result of its net operating loss carryforwards and net temporary differences. In years prior to 1996 the Company reported book losses, therefore, under current accounting principles the full amount of the deferred tax asset has been offset by a valuation allowance. The valuation allowance will be reduced at the time it is more likely than not that the Company will generate taxable income sufficient to realize a portion of the tax benefits associated with the net operating loss carryforwards and future deductible temporary differences. The Company believes this will occur in 1997. At the time the valuation allowance is reduced a portion of the benefit will be recorded as a reduction to income tax expense and the remainder will be recorded as a reduction to goodwill. The valuation allowance decline in 1996 represented the reversal of the reserve for prior years' operating losses not previously recognized, net of the additional deferred tax asset recorded as a result of the finalization of the purchase price allocation for AN Can. The Company files a consolidated federal income tax return. At December 31, 1996, the Company has net operating loss carryforwards of approximately $164.0 million which are available to offset future consolidated taxable income of the group and expire from 2001 through 2011. The Company also has $3.9 million of alternative minimum tax credits which are available indefinitely to reduce future tax payments for regular federal income tax purposes. 15. ACQUISITION RESERVES In connection with the acquisition of AN Can, the Company has finalized its plant rationalization and integration plans. These plans consist primarily of the closing or downsizing of certain manufacturing plants and the integration of the selling, general and administrative functions of the former AN Can operations with the Company. Provisions were established for such planned costs which include approximately $22.6 million related to employee severance and relocation costs, $3.5 million related to administrative workforce reductions, and $23.4 million related to plant exit costs and other acquisition liabilities. The timing of the plant rationalizations, among other things, will be F-20 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 dependent on covenants in existing labor agreements and accordingly these costs will be incurred during the period through 1998. During 1996 and 1995, respectively, costs of $6.5 million and $0.9 million were incurred primarily for relocation and severance in connection with administrative workforce reductions. 16. CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK On July 22, 1996, the Company issued 50,000 shares of Preferred Stock, mandatorily redeemable in 2006, at $1,000 per share which represents the liquidation preference of the Preferred Stock. The Company used $35.8 million of these proceeds to purchase 250,000 shares of its Class B Common Stock held by Mellon Bank, as trustee for First Plaza Group Trust, pursuant to its right to purchase such stock for such amount under the Organization Agreement. In aggregate, common stock and additional paid in capital were reduced by $15.0 million, the original issuance amount received for such Class B Common Stock, and the remainder of the payment was applied to Holdings' accumulated deficit. The Preferred Stock holders are entitled to receive cumulative dividends of 13 1/4% per annum, which are payable quarterly in cash or, on or prior to July 15, 2000 at the sole option of the Company, in additional shares of Preferred Stock. After July 15, 2000, dividends may be paid only in cash. During 1996, dividends of $1.6 million were paid in additional shares of Preferred Stock. As of December 31, 1996, the Company accrued dividends of $1.4 million, which it intends to pay in additional shares of Preferred Stock. The Preferred Stock is exchangeable into Holdings' Subordinated Debentures due 2006 (the "Exchange Debentures"), in whole but not in part, at any time at the option of the Company, subject to certain conditions. The Exchange Debentures will bear interest at the dividend rate in effect with respect to the Preferred Stock. Interest on the Exchange Debentures will be payable semi- annually and, on or prior to July 15, 2000, the Company may pay such interest by issuing additional Exchange Debentures. If by July 22, 1997 the Preferred Stock has not been exchanged for Exchange Debentures, the dividend rate on the Preferred Stock will increase by 0.5% per annum to 13 3/4% per annum until such exchange occurs. The Company is required to redeem the Preferred Stock or Exchange Debentures on July 15, 2006, but may elect to redeem the Preferred Stock or Exchange Debentures, in whole or in part, at any time during the twelve month period beginning July 15 of each of the years set forth below, at a redemption price (expressed as a percentage of the liquidation preference of the Preferred Stock or principal amount of the Exchange Debentures), plus an amount equal to all the accumulated and unpaid dividends or accrued and unpaid interest.
YEAR PERCENTAGE ---- ---------- 2000................................... 109.938% 2001................................... 106.625% 2002................................... 103.313% 2003 and thereafter.................... 100.000%
In addition, all (but not less than all) of the outstanding Preferred Stock or Exchange Debentures may be redeemed prior to July 15, 2000 at the option of the Company for a redemption price equal to 110% of the liquidation preference of the Preferred Stock plus accrued and unpaid dividends, or 110% of the principal amount of the Exchange Debentures plus accrued and unpaid interest, to the redemption date with the proceeds of any sale by Holdings of its common stock. Upon the occurrence of a Change of Control (as defined in the Certificate of Designation relating to the Preferred Stock or F-21 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 the indenture relating to the Exchange Debentures), the Company is required to make an offer to purchase all of the shares of Preferred Stock or all of the Exchange Debentures at a purchase price equal to 101% of the liquidation preference of the Preferred Stock, plus accrued and unpaid dividends to the date of purchase, or 101% of the principal amount of the Exchange Debentures, plus accrued and unpaid interest to the date of purchase. The Preferred Stock will rank senior to all common stock of Holdings and upon conversion, the Exchange Debentures will be subordinate to the indebtedness of Holdings. The holders of the Preferred Stock do not have voting rights except in certain limited circumstances. The Company's Credit Agreement and various debt indentures restrict the Company's ability to, among other things, pay dividends, incur additional indebtedness, and purchase or redeem shares of capital stock. 17. STOCK OPTION PLANS Holdings, Containers and Plastics have established stock option plans for their key employees pursuant to which options to purchase shares of common stock of Holdings and its subsidiaries and stock appreciation rights ("SARs") may be granted. Options granted under the plans may be either incentive stock options or non-qualified stock options. To date, all stock options granted have been non- qualified stock options. Under the plans, Holdings has reserved 24,000 shares of its Class C Common Stock and Containers and Plastics have each reserved 1,200 shares of their common stock for issuance under their respective plans. Containers has 13,764 shares and Plastics has 13,800 shares of $0.01 par value common stock currently issued, and all such shares are owned by Silgan. The SARs extend to the shares covered by the options for the Containers and Plastics plans and provide for the payment to the holders of the options of an amount in cash equal to the excess of, in the case of Containers' plans, the pro forma book value, as defined, of a share of common stock (or in the event of a public offering or a change of control (as defined in such plan), the fair market value of a share of common stock) over the exercise price of the option, with certain adjustments for the portion of vested stock appreciation rights not paid at the time of the recapitalization in June 1989; or, in the case of Plastics' plan, in the event of a public offering or a change in control (as defined in such plan), the fair market value of a share of common stock over the exercise price of the option. Prior to a public offering or change in control, should an employee leave Containers, Containers has the right to repurchase, and the employee has the right to require Containers to repurchase, the common stock of Containers held by the employee at the then pro forma book value. At December 31, 1996, there were outstanding options for 24,000 shares under the Holdings plan, 936 shares under the Containers plan, and 1,200 shares under the Plastics plan. The exercise prices per share range from $35 to $61 for the Holdings options, $2,122 to $4,933 for the Containers options and $126 to $993 for the Plastics options. The stock options and SARs generally become exercisable ratably over a five-year period. At December 31, 1996, there were 18,600 options exercisable under the Holdings plan, 846 options/SARs exercisable under the Containers plan, and 420 options/SARs exercisable under the Plastics plan. For the year ended December 31, 1994, 9,000 options were granted under the Holdings plan, 240 options were granted under the Containers plan, and 900 options were granted under the Plastics plan. For the year ended December 31, 1995, 300 options were granted under the Plastics plan. There were no grants in 1996. For the years ended December 31, 1996, 1995, and 1994, no options were exercised under any of the plans. The Company incurred charges relating to the vesting of benefits under the stock option plans of $0.8 million in 1996 and 1995, and $1.5 million in 1994. F-22 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 In the event of a public offering of any of Holdings' capital stock or a change in control of Holdings, (i) the options granted by Containers and Plastics pursuant to the plans and (ii) any stock issued by Containers upon exercise of such options are convertible into either stock options or common stock of Holdings, as the case may be. The conversion of such options or shares will be based upon a valuation of Holdings and an allocation of such value between the subsidiaries after giving affect to, among other things, that portion of the outstanding indebtedness of Holdings allocable to each such subsidiary. For the year ended December 31, 1995, the fair value of the options granted under the Plastic plan were not significant. Accordingly, the impact on net income and earnings per share from the issuance of these options would not be materially different from amounts currently reported and would not require SFAS No. 123 pro forma disclosure. 18. DEFICIENCY IN STOCKHOLDERS' EQUITY Deficiency in stockholders' equity includes the following classes of common stock ($.01 par value):
SHARES ISSUED AND OUTSTANDING DECEMBER 31, SHARES ----------------- CLASS AUTHORIZED 1996 1995 ----- ---------- ------- --------- A........................................... 500,000 417,500 417,500 B........................................... 667,500 417,500 667,500 C........................................... 1,000,000 50,000 50,000 --------- ------- --------- 2,167,500 885,000 1,135,000 ========= ======= =========
The rights, privileges and powers of the Class A Common Stock and the Class B Common Stock are identical, with shares of each class being entitled to one vote on all matters to come before the stockholders of Holdings. The Class C Common Stock does not have voting rights except in certain circumstances. 19. RELATED PARTY TRANSACTIONS Pursuant to various management services agreements (the "Management Agreements") entered into between Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company wholly-owned by Mr. Silver, the Chairman and Co- Chief Executive Officer of Holdings and Silgan, and Mr. Horrigan, the President and Co-Chief Executive Officer of Holdings and Silgan, S&H provides Holdings, Silgan and its subsidiaries with general management, supervision and administrative services. In consideration for its services, S&H receives a fee of 4.95% (of which 0.45% is payable to MS & Co.) of Holdings' consolidated earnings before depreciation, amortization, interest and taxes ("EBIDTA") until EBIDTA has reached the Scheduled Amount set forth in the Management Agreements and 3.3% (of which 0.3% is payable to MS & Co.) after EBIDTA has exceeded the Scheduled Amount up to the Maximum Amount as set forth in the Management Agreements, plus reimbursement for all related out-of-pocket expenses. The total amount incurred under the Management Agreements was $5.3 million in 1996, $5.4 million in 1995, and $5.0 million in 1994, and was allocated, based upon EBIDTA, as a charge to operating income of each business segment. Included in accounts payable at December 31, 1996 and 1995, was $0.1 million payable to S&H. Under the terms of the Management Agreements, the Company has agreed, subject to certain exceptions, to indemnify S&H and any of its affiliates, officers, directors, employees, subcontractors, consultants or controlling persons against any loss or damage they may sustain arising in connection with the Management Agreements. F-23 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 In connection with the Credit Agreement and its related amendments entered into during 1996 and 1995, the banks thereunder (including Bankers Trust Company) received fees totaling $1.6 million in 1996 and $17.2 million in 1995. 20. LITIGATION In connection with the acquisition by Holdings of Silgan as of June 30, 1989 (the "Merger"), a decision was rendered in 1995 by the Delaware Court of Chancery with respect to appraisal proceedings filed by certain former stockholders of 400,000 shares of stock of Silgan. Pursuant to that decision, these former holders were awarded $5.94 per share, plus simple interest at a rate of 9.5%. This award was less than the amount, $6.50 per share, that these former holders would have received in the Merger. The right of these former holders to appeal the Chancery Court's decision has expired, and the Company tendered payment of $3.8 million to these former holders in 1995. In 1994, prior to the trial for appraisal, the Company and the former holders of an additional 650,000 shares of stock of Silgan agreed to a settlement in respect of their appraisal rights, and the Company made a payment of $6.9 million, including interest, in respect of the settlement. Other than the actions mentioned above, there are no other pending legal proceedings to which the Company is a party or to which any of its properties are subject which would have a material effect on the Company's financial position. 21. BUSINESS SEGMENT INFORMATION The Company is engaged in the packaging industry and operates principally in two business segments. Both segments operate in North America. There are no intersegment sales. Presented below is a tabulation of business segment information for each of the past three years:
NET OPER. IDENTIFIABLE DEP.& CAPITAL SALES PROFIT ASSETS AMORT. EXPEND. -------- ------ ------------ ------ ------- (DOLLARS IN MILLIONS) 1996 Metal container & specialty(1)............... $1,189.3 $106.1 $750.7 $44.7 $39.1 Plastic container.......... 216.4 18.4 158.5 14.6 17.6 -------- ------ ------ ----- ----- Total..................... $1,405.7 $124.5 $909.2 $59.3 $56.7 1995 Metal container & specialty(1)............... $ 882.3 $ 58.2(2) $736.7 $31.6 $32.5 Plastic container.......... 219.6 13.2 159.4 13.8 19.4 -------- ------ ------ ----- ----- Total..................... $1,101.9 $ 71.4 $896.1 $45.4 $51.9 1994 Metal container & specialty(1)............... $ 657.1 $ 59.8(3) $335.3 $23.1 $16.9 Plastic container.......... 204.3 (0.1)(3) 162.8 14.1 12.3 -------- ------ ------ ----- ----- Total..................... $ 861.4 $ 59.7 $498.1 $37.2 $29.2
- -------- (1) Specialty packaging sales include closures, plastic bowls, and paper containers used by processors and packagers in the food industry and are not significant enough to be reported as a separate segment. (2) Includes charge for reduction in carrying value of assets of $14.7 million for the metal container segment. (3) Includes charges for reduction in carrying value of assets of $7.2 million for the metal container segment and $9.5 million for the plastic container segment, respectively. F-24 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 Operating profit is reconciled to income before tax as follows:
1996 1995 1994 ------ ------ ------ (DOLLARS IN MILLIONS) Operating profit..................................... $124.5 $ 71.4 $ 59.7 Interest expense..................................... 89.4 80.7 65.8 Corporate expense.................................... 1.2 1.5 1.3 ------ ------ ------ Income (loss) before income taxes.................. $ 33.9 $(10.8) $ (7.4) ====== ====== ====== Identifiable assets are reconciled to total assets as follows: 1996 1995 1994 ------ ------ ------ (DOLLARS IN MILLIONS) Identifiable assets.................................. $909.2 $896.1 $498.1 Corporate assets..................................... 4.3 3.9 6.2 ------ ------ ------ Total assets....................................... $913.5 $900.0 $504.3 ====== ====== ======
Metal container and other segment sales to Nestle Food Company accounted for 17.1%, 21.4%, and 25.9% of net sales of the Company during the years ended December 31, 1996, 1995, and 1994, respectively. Sales to Del Monte Corporation accounted for 12.0%, 14.5%, and 21.4% of net sales of the Company during the years ended December 31, 1996, 1995, and 1994, respectively. 22. PROPOSED INITIAL PUBLIC OFFERING (Unaudited) The Company has filed a registration statement for a proposed initial public offering ("IPO") of 4,500,000 shares of its Common Stock, of which 3,700,000 shares will be sold by the Company and 800,000 will be sold by the Selling Stockholders. In connection with the IPO, Holdings intends to amend its Restated Certificate of Incorporation to change its authorized capital stock to 100,000,000 shares of Common Stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01 per share. In addition, immediately prior to the closing of the IPO, Holdings intends to convert its existing Class A, Class B and Class C Common Stock to Common Stock on a one for one basis, and thereafter, to effect a 17.133145 to 1 stock split. Holdings intends to use the estimated net proceeds that it receives from the IPO to redeem the remaining Discount Debentures outstanding (approximately $59.0 million) and to repay a portion of the bank term loans. Upon completion of the proposed IPO, the Company will recognize a non-cash charge of approximately $21.1 million (assuming an initial public offering price of $19.00 per share in the IPO), net of $3.7 million previously accrued, for the excess of the fair market value over the grant price of the variable stock options under the Containers and Plastics option plans which convert to Holdings options. In connection with the aforementioned transactions and the proposed IPO, the Company will recognize an extraordinary charge of approximately $0.7 million, net of tax, for the write-off of unamortized deferred financing costs related to the early redemption of the remaining Discount Debentures. F-25 SILGAN HOLDINGS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996, 1995 AND 1994 Presented below is the income per common share of the Company for the year ended December 31, 1996 (assuming that the initial public offering is completed as proposed) based upon the weighted average number of common and common equivalent shares that would have been outstanding for the period presented. Common stock equivalents include options that would have been outstanding under Holdings' stock option plan upon completion of the IPO.
DECEMBER 31, 1996 ---------- Income per common share: Income before extraordinary charges................................ $ 1.60 Extraordinary charges.............................................. (0.11) Preferred stock dividend requirement............................... (0.16) ---------- Net income......................................................... $ 1.33 ========== Weighted average common shares outstanding......................... 17,556,780 Common stock equivalents........................................... 1,612,675 ---------- Shares used to compute income per share............................ 19,169,455 ==========
F-26 SILGAN HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS INTRODUCTORY NOTE Set forth below is the Company's unaudited pro forma condensed statement of operations for the year ended December 31, 1996. The unaudited pro forma results of operations of the Company include the historical results of the Company for such period and give effect to certain pro forma adjustments. All share and per share data have been adjusted to give effect to the 17.133145 stock split to be effected at the time of the initial public offering. The unaudited pro forma condensed statement of operations for the year ended December 31, 1996 gives effect to (i) the sale of $70.3 million of Common Stock offered by the Company hereby, (ii) the sale of $50.0 million of Exchangeable Preferred Stock (and the planned exchange of the Exchangeable Preferred Stock for Exchange Debentures), and (iii) the incurrence of $125.0 million of additional B term loans in July 1996 and $17.4 million of working capital loans in June 1996 under the Company's Credit Agreement, and the use of such proceeds to redeem in full the remaining outstanding amount of Discount Debentures, to purchase the Holdings' Class B Common Stock held by Mellon Bank N.A. for $35.8 million and to repay $5.4 million of bank term loans, as if such events had occurred as of January 1, 1996. The unaudited pro forma financial data do not purport to represent what the Company's financial position or results of operations would actually have been had such transactions been completed at the beginning of the period presented, or to project the Company's financial position or results of operations at any future date or for any future period. The unaudited pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The unaudited pro forma financial data and accompanying notes should be read in conjunction with the historical financial information of Holdings, including notes thereto, included elsewhere in this Prospectus. F-27 SILGAN HOLDINGS INC. UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
PRO FORMA ADJUSTMENTS ------------------------------------------------------- DEBT HISTORICAL RECAPITALIZATION(A) OFFERING(B) PRO FORMA ---------- ------------------- ----------- ---------- Net sales............... $1,405,742 $ -- $ -- $1,405,742 Cost of goods sold...... 1,223,684 -- -- 1,223,684 ---------- ------- ------- ---------- Gross profit.......... 182,058 -- -- 182,058 Selling, general and administrative expenses............... 58,768 -- -- 58,768 ---------- ------- ------- ---------- Income from operations........... 123,290 -- -- (c) 123,290 Interest expense and other related financing costs(d)(e)............ 89,353 (4,435) (1,436) 83,482 ---------- ------- ------- ---------- Income before income taxes................ 33,937 4,435 1,436 39,808 Income tax provision(f)........... 3,300 -- -- 3,300 ---------- ------- ------- ---------- Net income(g)......... 30,637 4,435 1,436 36,508 Preferred stock dividend requirement............ 3,006 3,794 (6,800) -- ---------- ------- ------- ---------- Net income applicable to common stockholders(g)...... $ 27,631 $ 641 $ 8,236 $ 36,508 ========== ======= ======= ========== Net income per common share(h)............... $ 1.44 $ 1.78 ========== ========== Weighted average number of common and common equivalent shares outstanding............ 19,169,455 20,475,509
F-28 SILGAN HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (a) Debt recapitalization includes adjustments for (i) the sale of $50.0 million of Exchangeable Preferred Stock and (ii) the incurrence of $125.0 million of additional B term loans and $17.4 million of working capital loans under the Silgan Credit Agreement, and the use of such proceeds to redeem a portion of the Discount Debentures and to purchase the Holdings Class B Stock held by Mellon Bank N.A., as if such events had occurred as of the beginning of the periods presented. (b) The Offering includes adjustments for (i) the sale of $70.3 million of Common Stock offered by the Company hereby and (ii) the planned exchange of the Exchangeable Preferred Stock for Exchange Debentures. The net proceeds from the Offering will be used to redeem in full the remaining outstanding amount of Discount Debentures and to repay a portion of the bank term loans. (c) Under the terms of the Containers and Plastics option plans, stock options issued under such plans will be converted to options under Holdings' Stock Option Plan at the time of the offering. In accordance with APB No. 25, options granted under the plans of the operating companies are considered variable options with a final measurement date at the time of conversion. The Company will recognize a non-cash charge of approximately $21.1 million (assuming an initial public offering price of $19.00 per share) for the excess of fair market value over grant price of these options, less amounts previously accrued, at the time of the Offering. Prior to the Offering, the Company recognized compensation expense for the change in pro forma book value, as defined, since the date of grant of these options, amortized over the vesting period. (d) Pro forma adjustments made to the historical data for interest expense consist of the following (in thousands):
FOR THE YEAR ENDED DECEMBER 31, 1996(1) -------------------- Historical interest expense............................ $ 89,353 Increase in interest expense related to additional bank borrowings of B term loans and working capital loans used to fund the redemption of a portion of the Discount Debentures at current borrowing rates(2)..... 6,193 Increase in interest expense related to the Exchange Debentures(3)......................................... 6,844 Net increase (decrease) in deferred financing costs related to amortization of new indebtedness less retired debt costs.................................... 84 Decrease in interest expense due to the redemption of the Discount Debentures(4)............................ (17,563) Decrease in interest expense due to the repayment of bank term loans from the excess proceeds of the Offering(5)........................................... (1,429) -------- Pro forma interest expense............................. $ 83,482 ========
F-29 SILGAN HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS--(CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 -------- (1) Pro forma interest expense for the year ended December 31, 1996 gives effect to (i) the sale of $70.3 million of Common Stock offered by the Company hereby, (ii) the sale of $50.0 million of Exchangeable Preferred Stock (and the planned exchange of the Exchangeable Preferred Stock for Exchange Debentures), (iii) the incurrence of $125.0 million of additional B term loans in July 1996 and $17.4 million of working capital loans in June 1996 under the Silgan Credit Agreement, and the use of such proceeds to redeem the remaining outstanding amount of Discount Debentures, to purchase the Holdings Class B Stock held by Mellon Bank N.A. for $35.8 million and to repay $5.4 million of bank term loans, as if such events had occurred as of January 1, 1996. (2) For the computations above, the assumed interest rates for borrowings under the Silgan Credit Agreement are based upon the three month LIBOR of 5.563% per annum as of February 5, 1997 plus a fixed spread of 2 1/2% per annum for the A term loans and working capital loans and 3% per annum for the B term loans. (3) In conjunction with the Offering, it was assumed that the outstanding shares of Exchangeable Preferred Stock were exchanged for 13 1/4% Subordinated Debentures due July 2006. (4) The adjustment in interest expense related to the Discount Debentures has been calculated to eliminate the amount of historical interest incurred. (5) Pursuant to the Company's Credit Agreement, net equity proceeds in excess of the amount required to redeem the remaining balance of Discount Debentures were applied to repay bank term loans. (e) The unaudited pro forma statement of operations for the year ended December 31, 1996 assumes that the redemption of the Discount Debentures occurred as of the beginning of the period presented. Since the redemption of the Discount Debentures did not actually occur as of the beginning of the period presented and because the Discount Debentures accrete in value, the aggregate principal amount used to calculate interest expense for the pro forma calculations for the year ended December 31, 1996 differ from the principal amount of Discount Debentures that will be outstanding at the time of their redemption. Therefore, actual interest expense of the Company will also differ from the interest expense reflected in the pro forma statement of operations. Set forth below is a table estimating annual interest expense based upon the obligations outstanding after the occurrence of the Offering: F-30 SILGAN HOLDINGS INC. NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS--(CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996
ESTIMATED ANNUAL PRINCIPAL INTEREST INTEREST DEBT OBLIGATION AMOUNT RATE EXPENSE --------------- ------------- -------- ------------- (IN MILLIONS) (IN MILLIONS) Bank Working Capital Loan(1)(2)........ $110.0 8.06% $ 8.9 Bank A Term Loan(1)(3)................. 194.6 8.06% 15.7 Bank B Term Loan(1)(3)................. 343.7 8.56% 29.4 11 3/4% Subordinated Debentures........ 135.0 11.75% 15.9 Exchange Debentures(4)................. 53.0 13.25% 7.3 ----- $77.2 Amortization of debt financing costs(5).............................. 4.5 ----- Total interest expense and related financing costs..................... $81.7 =====
-------- (1) Assumes borrowing rates set forth in footnote (c)(3) above. (2) Assumes average amount of working capital loans outstanding during the year. (3) Excludes effect of an interest rate swap agreements for $200.0 million of indebtedness entered into by the Company in 1996 under which floating rate interest was exchanged for fixed rates of interest in order to mitigate the effect of interest rate fluctuations. (4) Interest on the Exchange Debentures is payable semi-annually and, on or prior to July 15, 2000, the Company may pay such interest by issuing additional Exchange Debentures. For purposes of the estimated annual interest expense, the Company has assumed that interest will be paid in additional Exchange Debentures. (5) Amortization of debt financing costs assumes average annual balance outstanding. (f) The income tax provision is comprised of federal, state and foreign income taxes currently payable. The income tax provision for the year ended December 31, 1996 has been adjusted to reflect the federal and state income tax benefits realized from the deduction of the accreted interest available to the Company as a result of the redemption of the Discount Debentures. For 1996, there were no federal taxes currently payable due to the deduction of the accreted interest on the retired Discount Debentures. (g) The pro forma condensed statement of operations does not include historical extraordinary charge of $2.2 million for 1996 for the write-off of unamortized deferred financing costs related to the early redemption of Discount Debentures and an extraordinary charge, net of tax, of $0.7 million expected to be incurred in the first quarter of 1997 related to the redemption of the remaining Discount Debentures. (h) Actual and pro forma earnings per share are based on the weighted average number of shares outstanding during the period, as adjusted in all periods for the Stock Split, and after giving effect to stock options considered to be dilutive common stock equivalents using the treasury stock method. Primary and fully diluted net income (loss) per share are the same for each of the periods. F-31 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, Holdings and the Selling Stockholders have agreed to sell to each of the Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated and Salomon Brothers Inc are acting as representatives, has severally agreed to purchase from Holdings and the Selling Stockholders, the respective number of shares of Common Stock set forth opposite its name below:
NUMBER OF SHARES UNDERWRITER OF COMMON STOCK ----------- ---------------- Goldman, Sachs & Co....................................... Morgan Stanley & Co. Incorporated......................... Salomon Brothers Inc...................................... --------- Total................................................. 4,500,000 =========
Pursuant to the terms of the Underwriting Agreement, Morgan Stanley & Co. Incorporated will not purchase, underwrite or sell any shares of Common Stock being sold by MSLEF II and will not receive any underwriting discounts, commissions or fees related to the purchase, underwriting or sale of such shares by the other Underwriters named above. Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the shares offered hereby, if any are taken. The Underwriters propose to offer the shares of Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain brokers and dealers. After the shares of Common Stock are released for sale to the public, the offering price and other selling terms may from time to time be varied by the representatives. The Selling Stockholders have granted to the Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase up to an aggregate of 675,000 additional shares of Common Stock solely to cover over- allotments, if any. If the Underwriters exercise their over-allotment option, the Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them, as shown in the foregoing table, bears to the 4,500,000 shares of Common Stock offered. Holdings, the Principal Common Stockholders and BTNY have agreed that, during the period beginning from the date of this Prospectus and continuing to and including the date one year after the date of the Prospectus, they will not offer, sell, contract to sell or otherwise dispose of any securities of Holdings (other than, in respect of Holdings, pursuant to employee stock option plans existing, or on the conversion or exchange of convertible or exchangeable securities outstanding, on the date of this Prospectus and shares of Common Stock or securities convertible into such shares issued in connection with acquisitions, if the holder thereof executes and delivers a lock-up agreement covering a period of six months after the date of the Prospectus as contemplated by the Underwriting Agreement) which are substantially similar to the shares of Common Stock or which are convertible into or exchangeable for securities which are substantially similar to the shares of Common Stock, without the prior written consent of Goldman, Sachs & Co., except for the shares of Common Stock offered in connection with the Offering. The Underwriters have reserved up to 111,000 shares of Common Stock offered hereby for sale to certain employees of the Company at the initial public offering price. The number of shares available to the general public will be reduced to the extent such employees purchase reserved shares. Any reserved shares that are not so purchased by such employees will be offered by the Underwriters to the general public on the same terms as the other shares offered hereby. U-1 The general partner of MSLEF II is a wholly owned subsidiary of Morgan Stanley Group Inc. ("MS Group"). Two of the Company's directors are employees of wholly owned subsidiaries of MS Group. Morgan Stanley & Co. Incorporated acted as the placement agent for the offering of the Exchangeable Preferred Stock and received compensation for acting in such capacity. See "Management", "Certain Transactions" and "Description of Capital Stock--Description of Stockholders Agreements". Under Rule 2720 of the National Association of Securities Dealers, Inc. (the "NASD"), the Company may be deemed an affiliate of Morgan Stanley & Co. Incorporated. This offering is being conducted in accordance with Rule 2720, which provides that, among other things, when an NASD member participates in the underwriting of an affiliate's equity securities, the initial public offering price can be no higher than that recommended by a "qualified independent underwriter" meeting certain standards. In accordance with this requirement, Goldman, Sachs & Co. has served in such role and has recommended a price in compliance with the requirements of Rule 2720. Goldman, Sachs & Co. will receive compensation from the Company in the amount of $10,000 for serving in such role. In connection with the Offering, Goldman, Sachs & Co. in its role as qualified independent underwriter has performed due diligence investigations and reviewed and participated in the preparation of this Prospectus and the Registration Statement of which this Prospectus forms a part. In addition, the Underwriters may not confirm sales to any discretionary account without the prior specific written approval of the customer. Prior to the Offering, there has been no public market for the shares. The initial public offering price will be negotiated among Holdings, the Selling Stockholders and the representatives of the Underwriters. Among the factors to be considered in determining the initial public offering price of the Common Stock, in addition to prevailing market conditions, will be the Company's historical performance, estimates of the business potential and earnings prospects of the Company, an assessment of the Company's management and the consideration of the above factors in relation to market valuation of companies in related businesses. The Common Stock has been approved for quotation on the Nasdaq National Market under the symbol "SLGN". The Company and the Selling Stockholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. U-2 [RESERVED FOR MAP SHOWING THE COMPANY'S LOCATIONS] - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR- MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 13 Use of Proceeds.......................................................... 17 Dividend Policy.......................................................... 18 Dilution................................................................. 19 Capitalization........................................................... 20 Selected Historical and Pro Forma Financial Data.......................................................... 21 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 25 Business................................................................. 39 Management............................................................... 51 Principal and Selling Stockholders....................................... 59 Certain Transactions..................................................... 61 Description of Capital Stock............................................. 63 Shares Eligible for Future Sale.......................................... 68 Description of Certain Indebtedness...................................... 69 Legal Matters............................................................ 72 Experts.................................................................. 72 Available Information.................................................... 73 Incorporation of Certain Documents by Reference.......................... 73 Index to Consolidated Financial Statements............................... F-1 Underwriting............................................................. U-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 4,500,000 SHARES LOGO [OF SILGAN HOLDINGS, INC.] COMMON STOCK (PAR VALUE $.01 PER SHARE) ------------ PROSPECTUS ------------ GOLDMAN, SACHS & CO. MORGAN STANLEY & CO. INCORPORATED SALOMON BROTHERS INC REPRESENTATIVES OF THE UNDERWRITERS - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II: INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Set forth below is an estimate of the fees and expenses payable by Holdings in connection with the distribution of the Common Stock: Securities and Exchange Commission registration fee............ $ 34,970 NASD filing fee................................................ 9,125 NASDAQ listing fee............................................. 50,000 Legal fees and expenses........................................ 350,000 Accountants' fees and expenses................................. 165,000 Printing and engraving expenses................................ 300,000 Blue sky fees and expenses..................................... 22,500 Transfer Agent and Registrar fees and expenses................. 4,500 Miscellaneous.................................................. 63,905 ---------- Total...................................................... $1,000,000 ==========
- -------- * To be completed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the DGCL makes provision for the indemnification of officers and directors in terms sufficiently broad to indemnify officers and directors of Holdings under certain circumstances from liabilities (including reimbursement for expenses incurred) arising under the Securities Act. The Restated Certificate of Incorporation and By-laws of Holdings provide for indemnification of officers and directors against costs and expenses incurred in connection with any action or suit to which such person is a party to the fullest extent permitted by the DGCL. The Company has purchased directors' and officers' liability insurance covering certain liabilities which may be incurred by the directors and officers of the Company in connection with the performance of their duties. Certain of Holdings' affiliates also maintain insurance and provide indemnification substantially similar to the foregoing. See item 17(a) of this Registration Statement regarding the position of the Commission on indemnification for liabilities arising under the Securities Act. ITEM 16. EXHIBITS. (a) Exhibits:
EXHIBIT NUMBER DESCRIPTION ------- ----------- *1 Form of Underwriting Agreement among Holdings, Silgan, Containers, Plastics, the Selling Stockholders and the Underwriters. 4.1 Indenture, dated as of June 29, 1992, between Holdings and Fleet 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 Fleet National Bank, as Trustee, with respect to the 11 3/4% Notes (incorporated by reference to Exhibit 1 filed with Silgan's Current Report on Form 8-K dated July 15, 1992, Commission File No. 33-46499). 4.3 Silgan Holdings Inc. Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock and Qualifications, Limitations and Restrictions Thereof (incorporated by reference to Exhibit 3 filed with Holdings' Current Report on Form 8-K dated August 2, 1996, Commission File No. 33-28409).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 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 July 22, 1996, between Holdings and Morgan Stanley (incorporated by reference to Exhibit 5 filed with Holdings' Current Report on Form 8-K dated August 2, 1996, Commission File No. 33-28409). 4.7 Form of Holdings' 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock Certificate (incorporated by reference to Amendment No. 1 to Holdings' Registration Statement on Form S-4, dated September 9, 1996, Commission File No. 333-9979). 4.8 Indenture, dated as of July 22, 1996, between Holdings and Fleet National Bank, as Trustee, with respect to the Exchange Debentures (incorporated by reference to Exhibit 4.10 filed with Holdings' Amendment No. 2 to Registration Statement on Form S-4, dated October 31, 1996, Registration Statement No. 33-9979). 4.9 Form of Holdings' Subordinated Debentures due 2006 (incorporated by reference to Exhibit 4.11 filed with Holdings' Amendment No. 2 to Registration Statement on Form S-4, dated October 31, 1996, Registration Statement No. 33-9979). *5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality of the Common Stock. 10.1 Supply Agreement between Containers and Nestle for Hanford, California, effective August 31, 1987 (incorporated by reference to Exhibit 10(xi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.2 Amendment to Supply Agreement for Hanford, California, dated July 1, 1990 (incorporated by reference to Exhibit 10.31 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.3 Supply Agreement between Containers and Nestle for Riverbank, California, effective August 31, 1987 (incorporated by reference to Exhibit 10(xii) filed with Silgan's Registration Statement on Form S- 1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.4 Supply Agreement between Containers and Nestle for Morton, Illinois, effective August 31, 1987 (incorporated by reference to Exhibit 10(vii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.5 Amendment to Supply Agreement for Morton, Illinois, dated July 1, 1990 (incorporated by reference to Exhibit 10.36 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.6 Supply Agreement between Containers and Nestle for Ft. Dodge, Iowa, effective August 31, 1987 (incorporated by reference to Exhibit 10(xiv) filed with Silgan'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).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.7 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). 10.8 Supply Agreement between Containers and Nestle for St. Joseph, Missouri, effective August 31, 1987 (incorporated by reference to Exhibit 10(xvii) filed with Silgan's Registration Statement on Form S- 1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.9 Amendment to Supply Agreement for St. Joseph, Missouri, dated March 1, 1990 (incorporated by reference to Exhibit 10.42 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to con- fidential treatment pursuant to order of the Commission). 10.10 Supply Agreement between Containers and Nestle for Trenton, Missouri, effective August 31, 1987 (incorporated by reference to Exhibit 10(xviii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.11 Amendment to Supply Agreement for Trenton, Missouri, dated March 1, 1990 (incorporated by reference to Exhibit 10.44 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.12 Supply Agreement between Containers and Nestle for Moses Lake, Washington, effective August 31, 1987 (incorporated by reference to Exhibit 10(xxii) filed with Silgan's Registration Statement on Form S- 1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.13 Amendment to Supply Agreement for Moses Lake, Washington, dated March 1, 1990 (incorporated by reference to Exhibit 10.51 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.14 Supply Agreement between Containers and Nestle for Jefferson, Wisconsin, effective August 31, 1987 (incorporated by reference to Exhibit 10(xxiii) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.15 Amendment to Supply Agreement for Jefferson, Wisconsin, dated March 1, 1990 (incorporated by reference to Exhibit 10.53 filed with Silgan's Registration Statement on Form S-1, dated March 18, 1992, Registration Statement No. 33-46499) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.16 Amendment to Supply Agreements, dated November 17, 1989 for Ft. Dodge, Iowa; Hillsboro, Oregon; Jefferson, Wisconsin; St. Joseph, Missouri; and Trenton, Missouri (incorporated by reference to Exhibit 10.49 filed with Silgan's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 33-18719) (Portions of this Exhibit are subject to confidential treatment pursuant to order of the Commission). 10.17 Employment Agreement, dated as of September 14, 1987, between James Beam and Canaco Corporation (Containers) (incorporated by reference to Exhibit 10(vi) filed with Silgan's Registration Statement on Form S-1, dated January 11, 1988, Registration Statement No. 33-18719).
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.18 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, Commission File No. 33-28409). 10.19 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). 10.20 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). 10.21 Silgan Holdings Inc. Third Amended and Restated 1989 Stock Option Plan (incorporated by reference to Exhibit 10.84 filed with Holdings' Annual Report on Form 10-K for the year ended December 31, 1995, Commission File No. 33-28409). 10.22 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). 10.23 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). 10.24 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). 10.25 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). 10.26 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). 10.27 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). 10.28 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). 10.29 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). 10.30 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.) 10.31 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.)
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EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.32 Credit Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics, the lenders from time to time party thereto, Bankers Trust, as Administrative Agent and as a Co-Arranger, and Bank of America Illinois, as Documentation Agent and as a Co-Arranger (incorporated by reference to Exhibit 2 filed with Holdings' Current Report on Form 8-K, dated August 14, 1995, Commission File No. 33- 28409). 10.33 Amended and Restated Holdings Guaranty, dated as of August 1, 1995, made by Holdings (incorporated by reference to Exhibit 4 filed with Holdings' Current Report on Form 8-K, dated August 14, 1995, Commission File No. 33-28409). 10.34 Amended and Restated Borrowers Guaranty, dated as of August 1, 1995, made by Silgan, Containers, Plastics, C-W Can and SCCW Can Corporation (incorporated by reference to Exhibit 3 filed with Holdings' Current Report on Form 8-K, dated August 14, 1995, Commission File No. 33- 28409). 10.35 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). 10.36 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). 10.37 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). 10.38 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). 10.39 Asset Purchase Agreement, dated as of June 2, 1995, between ANC and Containers (incorporated by reference to Exhibit 1 filed with Holdings' Current Report on Form 8-K, dated August 14, 1995, Commission File No. 33-28409). 10.40 Placement Agreement between Holdings and Morgan Stanley, dated July 17, 1996 (incorporated by reference to Exhibit 6 filed with Holdings' Current Report on Form 8-K dated August 2, 1996, Commission File No. 33-28409). *10.41 Form of Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock Option Plan. +10.42 Form of Amended and Restated Management Services Agreement between Holdings and S&H. *10.43 Form of Amended and Restated Management Services Agreement between Silgan and S&H. *10.44 Form of Amended and Restated Management Services Agreement between Plastics and S&H. *10.45 Form of Amended and Restated Management Services Agreement between Containers and S&H. +10.46 Form of Amendment to Stockholders Agreement among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY and Holdings. +11 Statement of Computation of Earnings per Share for the years ended December 31, 1996, 1995 and 1994. *23.1 Consent of Ernst & Young LLP.
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EXHIBIT NUMBER DESCRIPTION ------- ----------- *23.2 Consent of Price Waterhouse LLP. *23.3 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit 5). +24 Power of Attorney. +27 Financial Data Schedule. +99.1 Form of Restated Certificate of Incorporation of Holdings. +99.2 Form of Amended and Restated By-laws of Holdings.
- -------- * Filed herewith. + Previously filed. ** To be filed by amendment. ITEM 17. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on February 13, 1997. SILGAN HOLDINGS INC. /s/ R. Philip Silver By: _________________________________ R. PHILIP SILVER CHAIRMAN OF THE BOARD AND CO-CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ R. Philip Silver Chairman of the - ------------------------------------- Board and Co-Chief February 13, (R. PHILIP SILVER) Executive Officer 1997 (Principal Executive Officer) /s/ D. Greg Horrigan* President, Co-Chief - ------------------------------------- Executive Officer February 13, (D. GREG HORRIGAN) and Director 1997 /s/ Robert H. Niehaus* Director - ------------------------------------- February 13, (ROBERT H. NIEHAUS) 1997 /s/ Leigh J. Abramson* Director - ------------------------------------- February 13, (LEIGH J. ABRAMSON) 1997 /s/ Harley Rankin, Jr.* Executive Vice - ------------------------------------- President, Chief February 13, (HARLEY RANKIN, JR.) Financial Officer 1997 and Treasurer (Principal Financial Officer) II-7 SIGNATURE TITLE DATE /s/ Harold J. Rodriguez, Jr.* Vice President, - ------------------------------------- Controller and February 13, (HAROLD J. RODRIGUEZ, JR.) Assistant Treasurer 1997 (Principal Accounting Officer) /s/ R. Philip Silver *By: ________________________________ R. PHILIP SILVER ATTORNEY-IN-FACT II-8 INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT ----------- ------- 1 Form of Underwriting Agreement among Holdings, Silgan, Containers, Plastics, the Selling Stockholders and the Underwriters. 5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality of the Common Stock. 10.41 Form of Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock Option Plan. 10.43 Form of Amended and Restated Management Services Agreement between Silgan and S&H. 10.44 Form of Amended and Restated Management Services Agreement between Plastics and S&H. 10.45 Form of Amended and Restated Management Services Agreement between Containers and S&H. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Price Waterhouse LLP.
EX-1 2 FORM OF UNDERWRITING AGREEMENT AMONG HOLDINGS, SILGAN, CONTAINERS, PLASTICS, THE SELLING STOCKHOLDERS AND THE UNDERWRITERS EXHIBIT 1 SILGAN HOLDINGS INC. COMMON STOCK PAR VALUE $.01 PER SHARE Underwriting Agreement ---------------------- , 1997 Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Salomon Brothers Inc, As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 Ladies and Gentlemen: Silgan Holdings Inc., a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 3,700,000 shares of Common Stock, par value $.01 per share ("Stock"), of the Company and the stockholders of the Company named in Schedule II hereto (the "Selling Stockholders") propose, subject to the terms and conditions stated herein, to sell to the Underwriters an aggregate of 800,000 shares of Stock and at the election of the Underwriters, up to 675,000 additional shares of Stock. The aggregate of shares to be sold by the Company and the Selling Stockholders is herein called the "Firm Shares" and the aggregate of 675,000 additional shares to be sold by the Selling Stockholders is herein called the "Optional Shares". The Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the "Shares". Silgan Corporation ("Silgan"), Silgan Containers Corporation ("Containers") and Silgan Plastics Corporation ("Plastics"), each a Delaware corporation, and the Company are each referred to as a "Member of the Silgan Group." 1. (a) Each Member of the Silgan Group represents and warrants to, and agrees with, each of the Underwriters that: (i) A registration statement on Form S-2 (File No. 333-11989) (the "Initial Registration Statement") in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in the prospectus contained therein, to you for each of the other Underwriters, have been declared effective by the 2 Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing, no other document with respect to the Initial Registration Statement or any document incorporated by reference therein has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post- effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act, is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) of the rules and regulations of the Commission under the Act in accordance with Section 6(a) hereof and deemed by virtue of Rule 430A of the rules and regulations of the Commission under the Act to be part of the Initial Registration Statement at the time it was declared effective or such part of the Rule 462(b) Registration Statement, if any, at the time it became or hereafter becomes effective and (ii) the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of the registration statement became effective, each as amended at the time such part of the registration statement became effective, is hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) of the rules and regulations of the Commission under the Act, is hereinafter called the "Prospectus"; and any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-2 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be); (ii) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder expressly for use in the preparation of the answers therein to Item 7 of Form S-2; (iii) The documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended (the 3 "Exchange Act"), and the rules and regulations of the Commission thereunder, and none of such documents when filed with the Commission contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto, and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder expressly for use in the preparation of the answers therein to Item 7 of Form S-2; (v) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, management, financial position, stockholders' equity (deficiency) or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus; (vi) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; (vii) Each of the Company and its subsidiaries has all necessary consents, authorizations, approval, orders, certificates and permits of and from, 4 and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent where the failure to obtain any such consent, authorization, approval, order, certificate or permit or make any such declaration or filing would not have a material adverse effect on the Company and its subsidiaries; (viii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business in and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries; and each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, has the power and authority (corporate and other) to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries; (ix) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims other than such pledges of such capital stock existing on the date hereof made in connection with the Credit Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics and the banks parties thereto; (x) The Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; (xi) The issue and sale of the Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of 5 its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (xii) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound, except for such defaults as do not and will not have a material adverse effect on the Company and its subsidiaries; (xiii) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock and under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (xiv) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (xv) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"), assuming The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF") is not an "investment company" and is not "controlled" by an "investment company"; (xvi) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; 6 (xvii) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries, and Price Waterhouse LLP, who have certified certain financial statements of American National Can Company's Food Metal & Specialty Division, are each independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (xviii) Except as described in the Prospectus, the Company and its subsidiaries (A) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (B) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries; and (xix) In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any material capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any material permit, license or approval, any related constraints on operating activities material to the Company and its subsidiaries, and any potential material liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries. (b) Each of the Selling Stockholders severally represents and warrants to, and agrees with, each of the Underwriters and the Company that: (i) All consents, approvals, authorizations and orders necessary for the execution and delivery by such Selling Stockholder of this Agreement and for the sale and delivery of the Shares to be sold by such Selling Stockholder have been obtained; and such Selling Stockholder has full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder hereunder; (ii) The sale of the Shares to be sold by such Selling Stockholder hereunder and the compliance by such Selling Stockholder with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder is bound, or to which any of the property or assets of such Selling Stockholder 7 is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of such Selling Stockholder if such Selling Stockholder is a corporation, the Limited Partnership Agreement of such Selling Stockholder if such Selling Stockholder is a limited partnership or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over such Selling Stockholder or the property of such Selling Stockholder; (iii) Such Selling Stockholder has, and immediately prior to each Time of Delivery (as defined in Section 4 hereof) such Selling Stockholder will have, valid title to the Shares to be sold by such Selling Stockholder hereunder, free and clear of all liens, encumbrances, equities or claims; and, upon delivery of such Shares and payment therefor pursuant hereto and thereto, valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, will pass to the several Underwriters, as the case may be; (iv) Such Selling Stockholder has not taken and will not take, directly or indirectly (other than any action taken by Morgan Stanley & Co. Incorporated ("MS&Co.") in connection with the performance of its obligations as an Underwriter hereunder), any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (v) To the extent that any statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto are made in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder expressly for use therein, such Preliminary Prospectus and the Registration Statement did, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and (vi) In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 with respect to the transactions herein contemplated, such Selling Stockholder will deliver to you prior to or at the First Time of Delivery (as hereinafter defined) a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof). 2. Subject to the terms and conditions herein set forth, (a) the Company and each of the Selling Stockholders agree, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company and each of the Selling Stockholders, in each case as and to the extent indicated in Schedule I hereto, at a purchase price per share of $______, the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Firm Shares to 8 be sold by the Company and each of the Selling Stockholders as set forth opposite their respective names in Schedule II hereto by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm Shares to be purchased by all of the Underwriters from the Company and all of the Selling Stockholders hereunder and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, each of the Selling Stockholders agrees, severally and not jointly, to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from each of the Selling Stockholders, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Selling Stockholders, as and to the extent indicated in Schedule II hereto, hereby grant, severally and not jointly, to the Underwriters the right to purchase at their election up to 675,000 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares shall be made in proportion to the maximum number of Optional Shares to be sold by each Selling Stockholder as set forth in Schedule II hereto. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Selling Stockholders, given within a period of 30 calendar days after the date of this Agreement and setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. With respect to any Shares sold by MSLEF (the "MSLEF Shares"), it is understood that MS&Co. shall not purchase, underwrite or sell any MSLEF Shares and shall not receive any underwriting discounts, commissions or fees related to the purchase, underwriting or sale of MSLEF Shares hereunder. 3. The Company hereby confirms its engagement of Goldman, Sachs & Co. as, and Goldman, Sachs & Co. hereby confirms its agreement with the Company to render services as, a "qualified independent underwriter" within the meaning of Section 2(o) of Rule 2720 of the National Association of Securities Dealers, Inc. (the "NASD") with respect to the offering and sale of the Shares. Goldman, Sachs & Co., in its capacity as qualified independent underwriter and not otherwise, is referred to herein as the "QIU". As compensation for the services of the QIU hereunder, the Company agrees to pay the QIU $10,000 on the Closing Date. 4. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 9 5. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior notice to the Company and the Selling Stockholders shall be delivered by or on behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co., for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer or by certified or official bank check or checks, payable to the order of the Company and the Selling Stockholders in Federal (same day) funds. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on .........., 1997 or such other time and date as Goldman, Sachs & Co., the Company and the Selling Stockholders may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co., and the Selling Stockholders may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 8(o) hereof, will be delivered at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Agreement, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 6. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) of the rules and regulations of the Commission under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) of the rules and regulations of the Commission under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed and becomes effective or any supplement to the Prospectus or any 10 amended Prospectus has been filed and to furnish you with copies thereof; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or Prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or Prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, furnish the Underwriters with copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) of the rules and regulations of the Commission under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158); 11 (e) During the period beginning from the date hereof and continuing to and including the date one year after the date of the Prospectus, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of this Agreement and shares of Stock or securities convertible into such shares issued in connection with acquisitions, if the holder thereof executes and delivers a lock-up letter to you in the form attached hereto as Exhibit A), without your prior written consent; (f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (g) During a period of five years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; (i) To use its best efforts to list for quotation the Shares on the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ"); (j) To file with the Commission such reports on Form SR as may be required by Rule 463 under the Act; and (k) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. 7. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Shares 12 under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 6(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey; (iv) all fees and expenses in connection with listing the Shares on the NASDAQ; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and charges of any transfer agent or registrar; and (viii) other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section; and (b) each of the Selling Stockholders covenants and agrees that such Selling Stockholder will pay or cause to be paid all costs and expenses incident to the performance of such Selling Stockholder's obligations hereunder which are not otherwise specifically provided for in this Section, including (i) any fees and expenses of counsel for such Selling Stockholder and (ii) all taxes incident to the sale and delivery of the Shares to be sold by such Selling Stockholder to the Underwriters hereunder. In connection with Clause (b)(iii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax, and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment is not rebated on the day of payment and for any portion of such tax payments not rebated. It is understood, however, that the Company shall bear, and the Selling Stockholders shall not be required to pay or to reimburse the Company for, the cost of any other matters not directly relating to the sale and purchase of the Shares pursuant to this Agreement, and that, except as provided in this Section, and Sections 9 and 13 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 8. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of each Member of the Silgan Group and each Selling Stockholder herein are, at and as of such Time of Delivery, true and correct, the condition that the Company and the Selling Stockholders shall have performed all of its and their obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 6(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests 13 for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; (b) Shearman & Sterling, counsel for the Underwriters, shall have furnished to you such opinion or opinions (a draft of each such opinion is attached as Annex II(a) hereto), dated such Time of Delivery, with respect to the matters covered in paragraphs (i), (ii), (vi), (x) and (xiii) of subsection (c) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Winthrop, Stimson, Putnam & Roberts, counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex II(b) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares being delivered at such Time of Delivery) have been duly and validly authorized and issued and are fully paid and non-assessable; and the Shares conform to the description of the Stock contained in the Prospectus; (iii) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business as described in the Prospectus so as to require such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries (such counsel being entitled to rely in respect of matters of fact upon certificates of officers of the Company, provided that such counsel shall state that they believe that both you and they are justified in relying upon such certificates); (iv) Each of Silgan, Containers and Plastics has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to own its property and to conduct its business as described in the Prospectus; and all of the issued shares of capital stock of each of Silgan, Containers and Plastics have been duly and validly authorized and issued, are fully paid and non- assessable, and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims other than such pledges of such capital stock existing on the date hereof made in connection with the Credit Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics and the banks parties thereto (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect to matters of fact upon certificates of officers of the Company or its subsidiaries, provided that such counsel shall state that they 14 believe that both you and they are justified in relying upon such opinions and certificates); (v) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the best of such counsel's knowledge, no such proceedings are threatened by governmental authorities or others; (vi) This Agreement has been duly authorized, executed and delivered by the Company; (vii) The issue and sale of the Shares being delivered at such Time of Delivery by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body of the United States or the states of Connecticut, New York or (only with respect to the General Corporation Law) Delaware having jurisdiction over the Company or any of its subsidiaries or any of their properties; (viii) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body of the United States or the states of Connecticut, New York or (only with respect to the General Corporation Law) Delaware is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (ix) After reasonable due inquiry, to the best of such counsel's knowledge, neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except for such defaults as do not and will not have a material adverse effect on the Company and its subsidiaries; 15 (x) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock and under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (xi) The Company is not an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act, assuming MSLEF is not an "investment company" and is not "controlled" by an "investment company"; (xii) The documents incorporated by reference in the Prospectus (other than the financial statements and schedules and other financial data therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder; and they have no reason to believe that any of such documents, when such documents were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; and (xiii) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to such Time of Delivery (other than the financial statements and schedules and other financial data therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder; although they do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except for those referred to in the opinion in subsection (x) of this Section 8(c), they have no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to such Time of Delivery (other than the financial statements and schedules and other financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and schedules and other financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of such Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and schedules and other financial data therein, as to which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were 16 made, not misleading; and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be incorporated by reference into the Prospectus or required to be described in the Registration Statement or the Prospectus which are not filed or incorporated by reference or described as required; (d) McKenna & Cuneo, L.L.P. independent counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex II(c) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Based on such counsel's knowledge, the Company and its subsidiaries: (x) are in compliance with any and all applicable federal, state and local laws and regulations relating to the protection of human health, safety, the environment, and hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"); and (y) have received and comply with all terms and conditions of all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses - - except as otherwise described in or contemplated by this Agreement and except where McKenna & Cuneo L.L.P. believes such noncompliance with Environmental Laws, and failure to receive or comply with the terms and conditions of required permits, licenses or other approvals does not likely, singly or in the aggregate and taken as a whole, have a material adverse effect on the Company and its subsidiaries; (ii) No opinion or other assessment (other than audit response letters) has been provided as to any pending or threatened litigation against the Company or any subsidiary; (iii) Each of California-Washington Can Corporation and SCCW Can Corporation (the "California Subsidiaries") is a corporation incorporated, validly existing and in good standing under the laws of the State of California; (iv) To such counsel's current, actual knowledge, each of the California Subsidiaries has full corporate power and authority to conduct its business as currently conducted in accordance with its articles of incorporation. The articles of incorporation of each California Subsidiary provides that "[t]he purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code." (e) Proskauer Rose Goetz & Mendelsohn LLP, independent counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex II(d) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: Nothing has come to such counsel's attention which would lead them to conclude that the first paragraph under the caption "Legal Proceedings", insofar as such paragraph constitutes a summary of the legal matters, documents or proceedings referred to therein, does not fairly summarize the matter referred to therein. 17 (f) The respective counsel for each of the Selling Stockholders, as indicated in Schedule II hereto, each shall have furnished to you their written opinion with respect to each of the Selling Stockholders for whom they are acting as counsel, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) This Agreement has been duly executed and delivered by or on behalf of such Selling Stockholder; and the sale of the Shares to be sold by such Selling Stockholder hereunder and thereunder and the compliance by such Selling Stockholder with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which such Selling Stockholder is a party or by which such Selling Stockholder is bound, or to which any of the property or assets of such Selling Stockholder is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of such Selling Stockholder if such Selling Stockholder is a corporation, the Limited Partnership Agreement of such Selling Stockholder if such Selling Stockholder is a limited partnership or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over such Selling Stockholder or the property of such Selling Stockholder; (ii) No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement in connection with the Shares to be sold by such Selling Stockholder hereunder or thereunder, except [name any such consent, approval, authorization or order] which [has] [have] been duly obtained and [is] [are] in full force and effect, such as have been obtained under the Act and such as may be required under state or foreign securities or Blue Sky laws in connection with the purchase and distribution of such Shares by the Underwriters; (iii) Immediately prior to such Time of Delivery such Selling Stockholder had valid title to the Shares to be sold at such Time of Delivery by such Selling Stockholder under this Agreement, free and clear of all liens, encumbrances, equities or claims, and full right, power and authority to sell, assign, transfer and deliver the Shares to be sold by such Selling Stockholder hereunder and thereunder; and (iv) Valid title to such Shares, free and clear of all liens, encumbrances, equities or claims, has been transferred to each of the several Underwriters, who have purchased such Shares in good faith and without notice of any such lien, encumbrance, equity or claim or any other adverse claim within the meaning of the Uniform Commercial Code. In rendering such opinion, such counsel may state that they express no opinion as to the laws of any jurisdiction outside the United States and in rendering the opinion in subparagraph (iv) such counsel may rely upon a certificate of such Selling Stockholder in respect of matters of fact as to ownership of, and liens, encumbrances, equities or claims on the Shares sold by such Selling Stockholder, 18 provided that such counsel shall state that they believe that both you and they are justified in relying upon such certificate; (g) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Ernst & Young LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I hereto); (h) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m. New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Price Waterhouse LLP, shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you. (i)(i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (j) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities or preferred stock; (k) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on the NASDAQ; (ii) a suspension or material limitation in trading in the Company's securities on the NASDAQ; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in your judgment makes it impracticable or 19 inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (l) The Shares to be sold by the Company and the Selling Stockholders at such Time of Delivery shall have been duly listed for quotation on NASDAQ; (m) The Company has obtained and delivered to the Underwriters executed copies of an agreement from MSLEF, D. Greg Horrigan, R. Philip Silver, Bankers Trust New York Corporation ("BTNY"), Harley Rankin, Jr., James D. Beam and Russel F. Gervais, substantially to the effect set forth in Section 6(e) hereof (except, in respect of Harley Rankin, Jr., James D. Beam and Russel F. Gervais, the duration of the lock-up shall be 180 days) in form and substance satisfactory to you; (n) The Company shall have complied with the provisions of Section 6(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and (o) The Company and the Selling Stockholders shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company or any other Member of the Silgan Group and of the Selling Stockholders, respectively, satisfactory to you as to the accuracy of the representations and warranties of each Member of the Silgan Group and each Selling Stockholder, respectively herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (i) of this Section and as to such other matters as you may reasonably request. 9. (a) Each Member of the Silgan Group will jointly and severally indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that no Member of the Silgan Group shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (b) Each of MSLEF and BTNY will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact 20 contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder expressly for use therein; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that such Selling Stockholder shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (c) Each Underwriter will indemnify and hold harmless the Company and each Selling Stockholder against any losses, claims, damages or liabilities to which the Company or such Seller Stockholder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and each Selling Stockholder for any legal or other expenses reasonably incurred by the Company or such Selling Stockholder in connection with investigating or defending any such action or claim as such expenses are incurred. (d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the 21 indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by any Member of the Silgan Group or Selling Stockholder on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each Member of the Silgan Group, each of the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above 22 in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of each Member of the Silgan Group and the Selling Stockholders under this Section 9 shall be in addition to any liability which such Member of the Silgan Group and the respective Selling Stockholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company or any Selling Stockholder within the meaning of the Act. 10. (a) Each Member of the Silgan Group and each Selling Stockholder will jointly and severally indemnify and hold harmless Goldman, Sachs & Co., in its capacity as QIU, against any losses, claims, damages or liabilities, joint or several, to which the QIU may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case, as to the Selling Stockholders, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Selling Stockholder expressly for use therein; and will reimburse the QIU for any legal or other expenses reasonably incurred by the QIU in connection with investigating or defending any such action or claim as such expenses are incurred. (b) Promptly after receipt by the QIU of notice of the commencement of any action, the QIU shall, if a claim in respect thereof is to be made against any Member of the Silgan Group or any Selling Stockholder under subsection (a) above, notify the Company or the Selling Stockholder, as the case may be, in writing of the commencement thereof; but the omission so to notify the Company or the Selling Stockholder, as the case may be, shall not relieve any Member of the Silgan Group or any Selling Stockholder from any liability which it may have to the QIU otherwise than under such subsection. In case any such action shall be brought against the QIU and 23 it shall notify the Company and the Selling Stockholders of the commencement thereof, the Company or the Selling Stockholder, as the case may be, shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to the QIU (who shall not, except with the consent of the QIU, be counsel to any Member of the Silgan Group), and, after notice from the indemnifying party to the QIU of its election so to assume the defense thereof, the indemnifying party shall not be liable to the QIU under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by the QIU, in connection with the defense thereof other than reasonable costs of investigation. No Member of the Silgan Group or Selling Stockholder shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the QIU is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the QIU from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the QIU. (c) If the indemnification provided for in this Section 10 is unavailable to or insufficient to hold harmless Goldman, Sachs & Co., in its capacity as QIU, under subsection (a) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each Member of the Silgan Group and each Selling Stockholder shall contribute to the amount paid or payable by the QIU as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the QIU on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the QIU failed to give the notice required under subsection (b) above, then each Member of the Silgan Group and each Selling Stockholder shall contribute to such amount paid or payable by the QIU in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the QIU on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Members of the Silgan Group on a collective basis and the Selling Stockholders on the one hand and the QIU on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholders, as set forth in the table on the cover page of the Prospectus, bear to the fee payable to the QIU pursuant to Section 3 hereof. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by any Member of the Silgan Group or Selling Stockholder on the one hand or the QIU on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each Member of the Silgan Group, each Selling Stockholder and the QIU agree that it 24 would not be just and equitable if contributions pursuant to this subsection (c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (c). The amount paid or payable by the QIU as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (d) The obligations of each Member of the Silgan Group and each Selling Stockholder under this Section 10 shall be in addition to any liability which such Member of the Silgan Group and such Selling Stockholder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the QIU within the meaning of the Act. 11. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company and the Selling Stockholders shall be entitled to a further period of thirty-six hours within which to procure another party or other parties reasonably satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company and the Selling Stockholders that you have so arranged for the purchase of such Shares, or the Company and the Selling Stockholders notify you that it has so arranged for the purchase of such Shares, you or the Company and the Selling Stockholders shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default or require MS&Co. to purchase, underwrite or sell any MSLEF Shares. 25 (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company and the Selling Stockholders as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one- eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Selling Stockholders to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Selling Stockholders, except for the expenses to be borne by the Company and the Selling Stockholders and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default or require MS&Co. to purchase, underwrite or sell any MSLEF Shares. 12. The respective indemnities, agreements, representations, warranties and other statements of the Members of the Silgan Group, the Selling Stockholders and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or any Member of the Silgan Group, or any Selling Stockholder, or any officer or director or controlling person of any Member of the Silgan Group, or any controlling person of any Selling Stockholder and shall survive delivery of and payment for the Shares. 13. If this Agreement shall be terminated pursuant to Section 11 hereof, no Member of the Silgan Group nor the Selling Stockholders shall then be under any liability to any Underwriter except as provided in Sections 7 and 9 hereof and to the QIU except as provided in Section 10 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company and the Selling Stockholders as provided herein, the Company and each of the Selling Stockholders pro rata (based on the number of Shares to be sold by the Company and such Selling Stockholder hereunder) will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but no Member of the Silgan Group or Selling Stockholder shall then be under any further liability to any Underwriter except as provided in Sections 7 and 9 hereof and to the QIU except as provided in Section 10 hereof. 14. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives; and in all dealings with any Selling Stockholder hereunder, you and the Company shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of such Selling Stockholder made or given by any or all of the Attorneys-in-Fact for such Selling Stockholder. 26 All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; if to any Selling Stockholder shall be delivered or sent by mail, telex or facsimile transmission to counsel for such Selling Stockholder at its address set forth in Schedule II hereto; and if to any Member of the Silgan Group shall be delivered or sent by mail to the address of the Company set forth in the Registration Statement, Attention: Chief Financial Officer; provided, however, that any notice to an Underwriter pursuant to Section 9(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Selling Stockholders by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 15. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Members of the Silgan Group and the Selling Stockholders and, to the extent provided in Sections 9, 10 and 12 hereof, the officers and directors of the Company and each person who controls the Company, any Selling Stockholder or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 16. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 18. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 27 If the foregoing is in accordance with your understanding, please sign and return to us nine (9) counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters, each Member of the Silgan Group and each of the Selling Stockholders. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company and the Selling Stockholders for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, Silgan Holdings Inc. By: ---------------------------------- Name: Title: Silgan Corporation By: ---------------------------------- Name: Title: Silgan Containers Corporation By: ---------------------------------- Name: Title: Silgan Plastics Corporation By: ---------------------------------- Name: Title: The Morgan Stanley Leveraged Equity Fund II, L.P. By: The Morgan Stanley Leveraged Equity Fund II, Inc. as general partner By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: Bankers Trust New York Corporation By: ---------------------------------------- Name: Title: Accepted as of the date hereof: Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Salomon Brothers Inc By: ---------------------------- (Goldman, Sachs & Co.) On behalf of each of the Underwriters SCHEDULE I
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF PURCHASED IF FIRM SHARES MAXIMUM OPTION UNDERWRITER TO BE PURCHASED EXERCISED ----------- ------------------------- --------------------------------- Non-MSLEF MSLEF Non-MSLEF MSLEF Firm Shares Firm Shares Optional Shares Optional Shares ----------- ----------- --------------- --------------- Goldman, Sachs & Co. [ ] [ ] [ ] [ ] Morgan Stanley & Co. Incorporated [ ] 0 [ ] 0 Salomon Brothers Inc. [ ] [ ] [ ] [ ] [Names of other Underwriters] [ ] [ ] [ ] [ ] Total 3,785,561 714,439 72,193 602,807
SCHEDULE II
TOTAL NUMBER NUMBER OF OPTIONAL OF SHARES TO BE SOLD IF FIRM SHARES TO MAXIMUM OPTION BE SOLD EXERCISED --------------- --------------------- The Company................................ 3,700,000 0 The Selling Stockholders: The Morgan Stanley Leveraged Equity Fund II, L.P. (a)...................... 714,439 602,807 Bankers Trust New York Corporation (b).. 85,561 72,193 Total................................... 4,500,000 675,000 ========= =======
(a) This Selling Stockholder is represented by Davis, Polk & Wardwell, 450 Lexington Avenue, New York, New York. (b) This Selling Stockholder is represented by [Name and Address of Counsel]. EXHIBIT A FORM OF LOCK-UP LETTER ___________, 1997 Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated Salomon Brothers Inc c/o Goldman, Sachs & Co. 85 Broad Street New York, NY 10004 Ladies and Gentlemen: The undersigned understands that Goldman, Sachs & Co. ("Goldman"), as representative of the several Underwriters, has entered into an Underwriting Agreement (the "Underwriting Agreement") with Silgan Holdings Inc., a Delaware corporation (the "Company"), which provided for the public offering (the "Public Offering") by the several Underwriters, including Goldman, of 3,700,000 shares (the "Shares") of Common Stock, par value $.01 per share, of the Company (the "Common Stock"). The undersigned further understands that the Company has agreed pursuant to Section 6(e) of the Underwriting Agreement, among other things, not to offer, sell, contract to sell or otherwise dispose of shares of Common Stock or securities convertible into Common Stock in connection with acquisitions unless the transferee executes and delivers to Goldman this letter. In satisfaction of this requirement, the undersigned hereby agrees that, without the prior written consent of Goldman on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending six months after the date of the final prospectus relating to the Public Offering (the "Prospectus"), offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any shares of Common Stock or any securities that are substantially similar to the Common Stock, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or any such substantially similar securities. In addition, the undersigned agrees that, without the prior written consent of Goldman on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending six months after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any securities that are substantially similar to the Common Stock, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or any such substantially similar securities. Very truly yours, _______________________________ (Name) _______________________________ (Print Name) _______________________________ (Address) Accepted as of the date first set forth above: Goldman, Sachs & Co. By: ANNEX I Pursuant to Section 8(g) of the Underwriting Agreement, the accountants shall furnish letters to the Underwriters to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Company for the periods specified in such letter, as indicated in their reports thereon, copies of which have been separately furnished to the representatives of the Underwriters (the "Representatives"); (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Company's quarterly report on Form 10-Q incorporated by reference into the Prospectus as indicated in their reports thereon copies of which have been separately furnished to the Representatives; and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in the related in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) They have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included or incorporated by reference in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus or included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus, for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest balance sheet included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. ANNEX II(a) FORM OF OPINION OF SHEARMAN & STERLING ANNEX II(b) FORM OF OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS ANNEX II(c) FORM OF OPINION OF MCKENNA & CUNEO, L.L.P. ANNEX II(d) FORM OF OPINION OF PROSKAUER ROSE GOETZ & MENDELSOHN LLP EX-5 3 OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS AS TO THE LEGALITY OF THE COMMON STOCK EXHIBIT 5 Winthrop, Stimson, Putnam & Roberts Financial Centre 695 East Main Street P.O. Box 6760 Stamford, CT 06904-6760 (203) 348-2300 February 12, 1997 Silgan Holdings Inc. 4 Landmark Square Stamford, CT 06901 Re: Registration Statement on Form S-2 (Registration No. 333-11989) of Silgan Holdings Inc. ---------------------------------- Dear Sirs: We refer to the above-referenced Registration Statement on Form S-2, as amended through the date hereof (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Act"), relating to the registration of 5,175,000 shares (including 675,000 shares which the underwriters have an option to purchase to cover over-allotments, if any) of common stock, par value $.01 per share (the "Shares"), of Silgan Holdings Inc., a Delaware corporation (the "Company"). In connection with this opinion, we have examined copies of (i) the Restated Certificate of Incorporation and Amended and Restated By-laws of the Company, each in the form filed as an exhibit to the Registration Statement, and (ii) certain resolutions of the Board of Directors of the Company relating to the proposed issuance of the Shares. We have also examined and relied upon originals or photostatic or certified copies of such records of the Company, certificates of officers of the Company, certificates and statements of public officials and such other documents as we have deemed relevant and necessary as the basis for the opinion set forth below. In such examinations, we have assumed the completion of all requisite corporate actions and authorizations prior to the effectiveness of the Registration Statement, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all copies submitted to us as certified, conformed or photostatic copies, and the authenticity of all originals of such copies. Based upon the foregoing, we are of the opinion that when the Registration Statement becomes effective under the Act and the Shares are duly issued and sold as contemplated by the Registration Statement, the Shares will be validly issued, fully paid and nonassessable. The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Delaware and we express no opinion as to the effect of the laws of any other jurisdiction. We consent to the filing of this opinion with the Securities and Exchange Commission as Exhibit 5 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus constituting a part of the Registration Statement. Very truly yours, /s/ Winthrop, Stimson, Putnam & Roberts EX-10.41 4 FORM OF SILGAN HOLDINGS INC. FOURTH AMENDED AND RESTATED 1989 STOCK OPTION PLAN Exhibit 10.41 SILGAN HOLDINGS INC. FOURTH AMENDED AND RESTATED 1989 STOCK OPTION PLAN I. PURPOSE OF PLAN; DEFINITIONS. 1.1 Purpose. ------- The purpose of the Silgan Holdings Inc. Fourth Amended and Restated 1989 Stock Option Plan (the "Plan") is to strengthen Silgan Holdings Inc., a Delaware corporation (the "Company"), by providing an additional means of attracting and retaining officers and key personnel. It is intended that this purpose be achieved by extending to designated officers or employees of the Company an added long-term incentive for high levels of performance and for unusual efforts designed to improve the financial performance of the Company, through the grant of options to purchase shares of common stock of the Company (as described herein). It is further intended that pursuant to this Plan, the Committee may grant either ISOs or Nonstatutory Options (both as defined herein). 1.2 Definitions. ----------- For purposes of this Plan, the following terms shall be defined as indicated, unless otherwise clearly required by the context in which the term appears: "Board of Directors" shall mean the Board of Directors of the Company. ------------------ "Carryover Amount" shall mean, in the case of all persons to whom Options ---------------- were granted effective as of June 30, 1989, an amount per share determined by the Committee, and in the case of all other persons, zero. "Change of Control" shall mean any sale of the assets or voting stock of ----------------- the Company, whether by purchase, merger, consolidation or other similar transaction, pursuant to which there is a transfer of ownership of more than fifty percent (50%) of the assets or the voting stock of the Company to a Person which theretofore did not own, directly or indirectly, any of the voting stock of the Company; provided, however, that a merger or consolidation of the Company with or into Silgan Corporation or other restructuring of the Company in which the stockholders of the Company retain at least fifty percent (50%) of the voting stock of the surviving Person shall not be deemed a Change of Control. "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Committee" shall mean the committee of three or more persons selected by --------- the Board of Directors to administer this Plan. "Common Stock" shall mean the authorized and issuable common stock of the ------------ Company ($.01 par value). "Fair Market Value" shall mean (i) if the stock is listed or admitted to ----------------- trade on a national securities exchange, the closing price of the stock on the composite tape of the principal national securities exchange on which the stock is so listed or admitted to trade, (ii) if the stock is not listed or admitted to trade on a national securities exchange, the mean between the last reported bid and asked price for the stock as furnished by the National Association of Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting such information, or (iii) if the stock is not listed or admitted to trade on a national securities exchange and if bid and asked prices for the stock are not so furnished through NASDAQ or a similar organization, the fair market value of the stock as determined in good faith by the Committee in such manner as it deems appropriate, taking into consideration, among other things, recent sales of the stock. "ISO" shall mean incentive stock option(s) within the meaning of Section --- 422 of the Code. "Nonstatutory Options" shall mean an option granted pursuant to the Plan -------------------- which does not qualify as an ISO. "Option(s)" shall mean option(s) to purchase Common Stock under this Plan --------- and shall include Options that result from the conversion of options under and as provided in stock option plans of any Subsidiary to which the Company is a party. "Option Price" shall have the meaning set forth in Section 3.1 hereof. ------------ "Person" shall mean any individual, partnership, joint venture, ------ corporation, association, trust, or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof. "Public Offering" shall mean a primary, public offering of shares of Common --------------- Stock, pursuant to an effective registration statement, registered under the Securities Act of 1933, as amended. "S&H Stockholders" shall mean R. Philip Silver and D. Greg Horrigan. ---------------- -2- "Subsidiary" shall mean any corporation if 50% or more of the total ---------- combined voting power and value of all classes of stock is owned, either directly or indirectly, by the Company or another Subsidiary. II. ADMINISTRATION; PARTICIPATION. 2.1 Administration. -------------- This Plan shall be administered by the Committee, none of the members of which are currently eligible to receive Options and have not been eligible to receive Options for at least twelve (12) months prior to their selection to the Committee. The action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or the written consent of a majority of its members. In the event action by the Committee is taken by written consent of its members, the action by the Committee shall be deemed to have been taken at the time the last member required for valid action by the Committee signs the consent. Subject to the express provisions of this Plan, the Committee shall have the authority to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and participants under this Plan, to further define the terms used in this Plan, to prescribe, amend and rescind rules and regulations relating to the administration of this Plan, to determine the duration and purposes of leaves of absence which may be granted to participants without constituting a termination of their employment for purposes of this Plan and to make all other determinations necessary or advisable for the administration of this Plan. The determinations of the Committee on the foregoing matters shall be conclusive. Subject to the express provisions of this Plan, the Committee shall select from the eligible class of employees of the Company or a Subsidiary and make corresponding recommendations to the Board of Directors concerning the individuals to whom Options shall be granted and the terms and provisions of such Options (which need not be identical) including, but not by way of limitation, the time at which such Options shall be granted, whether an Option granted hereunder shall be intended to be treated as an ISO or a Nonstatutory Option, the number of shares subject to each Option and the Option Price and the consideration acceptable in payment of the Option Price. The Committee shall also determine, as to each individual to whom Options shall be granted effective as of June 30, 1989, the Carryover Amount, if any, applicable to such individual. No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to this Plan or any transaction -3- hereunder. The Company hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred by any member in connection with defending against, responding to, negotiating the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with the member's actions in administering this Plan or authorizing or denying authorization to any transaction hereunder. The Board of Directors, at any time it so desires, may increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation or otherwise. 2.2 Participation. ------------- Only officers or key employees of the Company, or of a Subsidiary, whose responsibility levels indicate their ability to substantially contribute to the Company's growth and development shall be eligible for selection by the Committee to participate in this Plan; provided, however, that members of the Committee shall not, while members of this Committee, be eligible to receive Options under this Plan. In addition, members of the Board of Directors who are not officers or employees of the Company or of any Subsidiary shall not be eligible to receive Options under this Plan. An individual who has been granted an Option may, if otherwise eligible, be granted additional Options if the Committee so determines. Notwithstanding anything herein to the contrary, during the initial term of the Amended and Restated Management Services Agreement dated as of February 12, 1997 by and between S&H, Inc. and the Company (i.e., until June 30, 1999, unless such initial term is terminated for any reason prior to the expiration thereof), Options may be granted under this Plan to either of the S&H Stockholders if, and only if, any such grant of Options is approved by (i) a majority of the members of the Committee (which majority must include a majority of the members of the Committee excluding any of the S&H Stockholders that are members of the Committee) and (ii) a majority of the members of the Board of Directors (which majority must include a majority of the members of the Board of Directors excluding any of the S&H Stockholders that are members of the Board of Directors). 2.3 Stock Subject to the Plan. ------------------------- Subject to Section 4.1 hereof, the stock to be offered under this Plan shall be shares of authorized but unissued Common Stock or Common Stock held in treasury. The aggregate amount of Common Stock to be delivered upon exercise of all Options granted under the Plan shall not exceed the sum of (i) 124,000 shares plus (ii) such number of shares issuable upon exercise of all -4- Options that will be outstanding upon and in the event of the conversion to Options of options under and in accordance with stock option plans of all Subsidiaries, with such sum being subject to adjustment as set forth in Section 4.1 of this Plan. Such amount of Common Stock is hereby reserved for issuance under this Plan. If any Option shall expire or terminate for any reason without having been fully exercised, the unexercised shares subject thereto shall again be available for the purposes of this Plan. 2.4 Stock Option Agreements. ----------------------- Each Option granted pursuant to this Plan shall be evidenced by an Incentive Stock Option Agreement or a Nonstatutory Stock Option Agreement (any of which are at times herein referred to as an "Option Agreement" or, collectively, as "Option Agreements"), which shall set forth the terms and conditions of the option and specify whether such option is intended to be an ISO or a Nonstatutory Stock Option. III. OPTIONS. 3.1 Option Price. ------------ Except as otherwise provided herein, the purchase price per share of the Common Stock covered by each Option (the "Option Price") shall be determined by the Committee; provided, however, the Option Price for an ISO shall not be less than the Fair Market Value of the Common Stock covered by the Option at the time of grant. The Option Price of any share purchased shall be paid in full at the time of each purchase in cash, by check, or, provided that all necessary regulatory approvals have been received, and provided further that the Option Agreement provides for such exercise, the person exercising the Option may deliver in payment of all or a portion of the Option Price certificates for other shares of Common Stock which shall be valued at the Fair Market Value of such Common Stock as of the date of exercise of the Option. 3.2 Option Period. ------------- Except as otherwise provided herein or as otherwise determined by the Committee, each Option and all rights or obligations thereunder shall expire on such date as shall be provided in the Option Agreement, but not later than the tenth anniversary (fifth anniversary in the case of an ISO granted to an employee who owns or is deemed to own at the time of grant more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or a Subsidiary) of the date on which the Option is granted, and shall be subject to earlier termination as hereinafter provided. -5- 3.3 Exercise of Options. ------------------- Each Option shall become exercisable and the total number of shares subject thereto shall be purchasable no sooner than one year from the date of the grant of the Option, and only in such installments, which need not be equal, as specified in the Option Agreement. If the holder of an Option shall not in any given installment period purchase all of the shares which the holder is entitled to purchase in such installment period, the holder's right to purchase any shares not so purchased in such installment period shall continue until the expiration or earlier termination of the holder's Option. The Committee may, at any time after grant of the Option and from time to time, increase the number of shares purchasable in any installment so long as the total number of shares subject to the Option is not increased. No Option or installment thereof shall be exercisable except in respect of whole shares, and fractional share interests shall be disregarded except that they may be accumulated in accordance with the second sentence of this Section 3.3. No fewer than ten (10) shares may be purchased at one time unless the number purchased is the total number at the time available for purchase under the Option. The Committee may impose such conditions or limitations, as shall be specified in the applicable Option Agreement, on the sale or transfer of Common Stock acquired upon exercise of an Option as it may deem necessary or desirable. 3.4 Nontransferability of Options. ----------------------------- An Option granted under this Plan shall, by its terms, be nontransferable by the holder other than by will or the laws of descent and distribution, and shall be exercised during the holder's lifetime only by the holder or a duly appointed guardian or personal representative. 3.5 Termination of Employment. ------------------------- (a) If an Option holder ceases to be an officer of or employed by the Company or a Subsidiary because of the Option holder's voluntary termination of employment, the Option will be exercisable only until the date of resignation from office or termination of employment, to the extent, and only to the extent, installments had become exercisable as of the date of termination of employment or resignation from office. (b) If an Option holder ceases to be an officer of or employed by either the Company or a Subsidiary for any reason other than voluntary termination specified in Section 3.5(a), the Option holder shall have ninety (90) days, or such other period provided in the Option Agreement, from the date of termination of employment to exercise his or her Option, to the extent, and only to the extent, installments had become exercisable prior to the date of termination of employment or removal or resignation from office. -6- 3.6 Permanent Disability of Employee. -------------------------------- If an Option holder is no longer an officer of or employed by either the Company or a Subsidiary, as a result of permanent disability (as defined below), the holder shall have twelve (12) months, or such shorter period as is provided in the Option Agreement, from the date of termination of employment to exercise his or her Option. The Option shall expire at the end of such 12-month period (or such shorter period as is provided in the Option Agreement or as provided pursuant to Section 3.2 hereof) to the extent not exercised within that period. As used herein, "permanent disability" shall mean the inability of an Option holder by reason of illness or injury to perform substantially all of his or her duties as an employee of the Company or a Subsidiary during any continued period of one hundred eighty (180) days. 3.7 Death of Employee. ----------------- If an Option holder dies while an officer of or employed by the Company or a Subsidiary, or during the periods described in Section 3.5(b) or 3.6 hereof, the holder's Option shall be exercisable during the twelve-month period, or such shorter period as is provided in the Option Agreement, following the holder's death, by the executor of the holder's will, the administrator of the holder's estate, or as otherwise provided in the Option Agreement, (and not otherwise, regardless of any community property or other interest therein of the spouse of the holder or such spouse's successor in interest), provided that in no event shall the Option be exercised after the period provided for in Section 3.2 hereof. Unless sooner terminated pursuant to the Plan, the Option shall expire at the end of such twelve-month period (or such shorter period as is provided in the Option Agreement or as is provided pursuant to Section 3.2 hereof) to the extent not exercised within that period. In the event that the holder's spouse shall have acquired a community property interest in the Option, the holder, the executor of the holder's will, the administrator of the holder's estate, or such other Person as is otherwise provided in the Option Agreement, may exercise the option on behalf of the spouse of the holder or such spouse's successor in interest. 3.8 Limitation on Grant of ISOs. --------------------------- The aggregate Fair Market Value (determined as of the date or dates the ISO or ISOs are granted) of the Common Stock with respect to which the ISO or ISOs granted to an employee are exercisable for the first time by such employee during any one calendar year (under this Plan and all other incentive stock option plans of the Company or any Subsidiary) shall not exceed $100,000. -7- 3.9 Option Shall be Designated an ISO or Nonstatutory Option. -------------------------------------------------------- The Option Agreement for each option grant shall state whether the Options granted thereby are intended to be ISOs or Nonstatutory Options. IV. OTHER PROVISIONS. 4.1 Adjustments Upon Changes in Capitalization and Ownership. -------------------------------------------------------- Subject to Section 4.2 below, if the outstanding shares of Common Stock are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Company through a reorganization or merger in which the Company is the surviving entity, combination, recapitalization, reclassification, stock split-up, reverse stock split, stock dividend, stock consolidation or otherwise, an appropriate and proportionate adjustment shall be made in the number and kind of shares for which Options may be granted as set forth in Section 2.3 hereof and in the Carryover Amount. A corresponding adjustment changing the number or kind of shares and the exercise price per share allocated to unexercised Options or portions thereof, which shall have been granted prior to any such change, and the Carryover Amount, shall also be made. Subject, in the case of ISOs, to Section 424 of the Code, any such adjustment, however, shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the price for each share. Upon the dissolution or liquidation of the Company, or, subject to Section 4.2 below, upon a reorganization, merger or consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, in which such surviving corporation (or an affiliate), if applicable, does not assume all obligations of the Company under this Plan and substitute for the unexercised Options granted under the Plan options to purchase securities of such surviving corporation having a value substantially equivalent to or greater than the Common Stock issuable upon exercise of such Options and on terms substantially the same as or better than those granted under the Plan, such Options shall become immediately exercisable upon the occurrence of such an event, but in no event may such Options be exercised after the exercise period specified in each individual Option Agreement. Adjustments under this Section 4.1 shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Common Stock shall be issued under this Plan on account of any such adjustment. If for any reason any person becomes entitled to any interest in a -8- fractional share, a cash payment shall be made of an equivalent value of such interest. 4.2 Change of Control. ----------------- In the event of a Change of Control other than a Pooling Transaction (as hereinafter defined) during the term of one or more Options, such Options shall, subject to Section 4.1 above, remain outstanding and shall become exercisable by the holder thereof upon the terms and conditions of the Plan and the Option Agreement between such holder and the Company; provided, however, the -------- ------- Committee may, in its discretion, take one or more of the following actions in connection with a Change of Control (other than a Pooling Transaction): (a) The Committee may declare that any or all Options shall terminate as of a date to be fixed by the Committee and may require that the respective holders thereof surrender all or a portion of their unexercised Options for cancellation by the Company prior to such date and, upon such surrender, such holders shall receive (i) the cash, securities or other consideration they would have received had they exercised such Options immediately prior to such Change of Control and had they disposed of their shares of Common Stock issuable upon such exercise in connection with such Change of Control (subject to required deductions and withholdings), minus (ii) an amount of cash or fair market value of securities or other such consideration equal to the Option Price for such Options surrendered; or (b) The Committee may declare that, upon the exercise by a holder of any or all Options after a Change of Control in accordance with the provisions of the Plan, such holder shall be entitled to receive only the cash, securities or other consideration he would have been entitled to receive had he exercised such Options immediately prior to such Change of Control and had he disposed of the Common Stock issuable upon such exercise in connection with such Change of Control; or (c) The Committee may declare that any or all Options shall terminate as of a date to be fixed by the Committee and give the holders thereof the right to exercise their Options prior to such date as to all or any part thereof; or (d) The Committee may permit the successor corporation to assume the obligations of the Company under the Plan and to substitute for the unexercised Options granted under the Plan options to purchase securities of such successor corporation having a value substantially equivalent to or greater than the Common Stock issuable upon exercise of such Options and on terms substantially the same as or better than those granted under the Plan, all as determined by the Committee, whereupon all outstanding Options and all future Options granted under the Plan shall thenceforth become options to purchase such securities of such successor corporation on such terms. -9- Notwithstanding anything herein or in any Option Agreement to the contrary, if, during the term of one or more Options, there shall occur a Change of Control which is intended to qualify as a "pooling of interests" for accounting and financial reporting purposes (a "Pooling Transaction"), it shall be a condition to the effectiveness of such Change of Control transaction that the acquiror agree to assume the obligations of the Company under the Plan and to provide for the substitution of options to purchase securities equivalent to, and with terms the same as, those granted under the Plan, all as determined by the Committee. 4.3 Continuation of Employment. -------------------------- Nothing contained in this Plan (or in any Option granted pursuant to this Plan) or in any Option Agreement shall confer upon any employee any right to continue in the employ of the Company or a Subsidiary or constitute any contract or agreement of employment or interfere in any way with the right of the Company or a Subsidiary to reduce any person's compensation from the rate in existence at the time of the granting of an Option or Right or to change any person's position or duties or to demote or terminate such person's employment with or without cause, but nothing contained herein or in any Option Agreement shall effect any contractual rights of an employee obtained otherwise than under this Plan. 4.4 Government Regulations. ---------------------- This Plan and the grant and exercise of Options shall be subject to all applicable rules and regulations of governmental authorities. 4.5 Withholding. ----------- The Company may require, as a condition to (1) issuing or delivering to the holder of an Option shares or certificates evidencing the shares upon exercise of the Option or (2) allowing the transfer of shares subsequent to their issuance to the holder of an Option, that the holder of an Option or other person exercising the Option pay any sums that federal, state, or local tax law requires to be withheld with respect to such exercise or transfer. Neither the Company nor any Subsidiary shall be obligated to advise any holder of an Option of the existence of the tax or the amount which the Company will be so required to withhold. 4.6 Amendment, Termination, and Reissuance. -------------------------------------- (a) The Board of Directors may at any time suspend, amend or terminate this Plan (or any part thereof) and, with the consent of the holder of an Option, may make such modifications of the terms and conditions of such holder's Option as it shall deem advisable. No Option may be granted during any suspension -10- of this Plan or after such termination. The amendment, suspension or termination of this Plan shall not, without the consent of the holder of an Option, adversely alter or impair any rights or obligations under any Option theretofore granted under this Plan. The Committee shall have the power and may, with the consent of the holder of any Option, cancel any existing Option and reissue Options to the holder of those canceled Options, having a new and lower Option Price, but otherwise bearing substantially similar terms to the canceled Options. (b) In addition to the Board of Directors' approval of any amendment, if the amendment would (i) increase the benefits accruing to participants in this Plan, (ii) increase the aggregate number of shares which may be issued under this Plan, or (iii) modify the requirements of eligibility for participation in this Plan, then such amendment shall be approved by the holders of a majority of the Company's outstanding capital stock present, or represented, and entitled to vote at a meeting duly held for the purpose of approving such amendment. For purposes of this Subsection 4.6(b), any cancellation and reissuance of Options at the same, or a new or lower, Option Price pursuant to Subsection 4.6(a) hereof shall not constitute an amendment of the Plan. 4.7 Time of Grant and Exercise. -------------------------- (a) Except as the Committee or Board of Directors shall otherwise determine, the granting of an Option pursuant to the Plan shall take place at the time of the resolutions adopted by the Committee granting such Option; provided, however, that if the appropriate resolutions of the Committee indicate that an Option is to be granted as of or at some future date, the date of grant shall be such future date. (b) An Option shall be deemed to be exercised when the Secretary of the Company receives written notice of such exercise from the person entitled to exercise the Option, together with payment in full of the purchase price made in accordance with Section 3.1 of this Plan and all applicable withholding taxes. 4.8 Privileges of Stock Ownership; Nondistributive Intent. ----------------------------------------------------- The holder of an Option shall not be entitled to the privilege of stock ownership as to any shares of Common Stock not actually issued and delivered to him or her. Upon exercise of an Option, unless a registration statement is in effect under the Securities Act of 1933, as amended, relating to the Common Stock issuable upon exercise and there is available for delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act, the Common Stock may be issued to the option holder only if he or she represents and warrants in writing to the Company and its counsel that the shares purchased are being acquired for investment and not with a view to the resale or distribution thereof. No shares shall be issued upon the exercise of any -11- Option unless and until there shall have been full compliance with any then applicable requirements of the Securities and Exchange Commission, or any other regulatory agencies having jurisdiction over this Plan (and of any exchanges upon which stock of the Company may be listed). 4.9 Issuance of Stock Certificates. ------------------------------ Upon exercise of an Option, the person receiving Common Stock shall be entitled to one stock certificate evidencing the shares acquired upon such exercise; provided, however, that any person who tenders Common Stock to the Company in payment of a portion or all of the purchase price of stock purchased upon exercise of an Option, shall be entitled to receive two certificates, one representing a number of shares equal to the number of shares exchanged for the stock acquired upon exercise, and another representing the additional shares acquired upon exercise of the Option. 4.10 Effective Date of this Plan. --------------------------- This Plan shall, subject to its adoption by the Board of Directors and the Company's stockholders in accordance with applicable law and the Company's Certificate of Incorporation, be effective as of June 30, 1989. 4.11 Expiration. ---------- Unless previously terminated by the Board of Directors, this Plan shall expire at the close of business on the date that is ten (10) years less one day from the date executed below and no Option shall be granted under it thereafter, but such expiration shall not affect any Option theretofore granted. 4.12 Governing Law. ------------- This Plan and the Options issued hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed within such State, except as such laws may be supplanted by the laws of the United States of America, which laws shall then govern its effect and its construction to the extent they supplant New York law. EXECUTED as of the day of February, 1997. SILGAN HOLDINGS INC. By --------------------------------- Title ------------------------------ -12- EX-10.43 5 FORM OF AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT BETWEEN SILGAN AND S&H Exhibit 10.43 AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT This Amended and Restated Management Services Agreement (the "Agreement") is made as of this ___ day of February, 1997 by and between S&H INC., a Connecticut corporation ("S&H"), and SILGAN CORPORATION, a Delaware corporation ("Silgan"). W I T N E S S E T H: ------------------- WHEREAS, S&H and Silgan have entered into the Amended and Restated Management Services Agreement dated as of December 21, 1993 (the "Original Management Services Agreement"), pursuant to which S&H provides general management, supervision, administrative and other services to Silgan in accordance with the terms of the Original Management Services Agreement; WHEREAS, S&H also is a party to an Amended and Restated Management Services Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc., the parent holding company of Silgan ("Holdings"), Silgan Containers Corporation, a wholly owned subsidiary of Silgan ("Containers"), and Silgan Plastics Corporation, a wholly owned subsidiary of Silgan ("Plastics"); WHEREAS, S&H and each of Holdings, Containers and Plastics are entering into an amended and restated management services agreement dated as of the date hereof (collectively, as so amended and restated, the "Affiliate Management Services Agreements"); and WHEREAS, in contemplation of the consummation of an initial public offering of the common stock of Holdings pursuant to an effective registration statement under the Securities Act of 1933, as amended, S&H and Silgan desire to amend and restate hereby the Original Management Services Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, S&H and Silgan agree as follows: 1. Management Services. ------------------- (a) S&H and Silgan hereby agree that, during the period beginning on the date hereof and continuing throughout the term hereof, S&H and its Affiliates shall provide to Silgan general management, supervision and administrative services, including, without limitation, the preparation of the annual and long-term business plans, and perform such other duties and provide such other services as Silgan shall be permitted to request of S&H pursuant to the Restated Certificate of Incorporation or By-Laws of Holdings or pursuant to applicable law, which power and authority Silgan hereby grants to S&H ("General Management Services"). (The General Management Services are hereinafter collectively referred to as the "Services" and individually as a "Service"). (b) Any Service hereunder shall be provided to Silgan only by S&H or its Affiliates or such consultants, subcontractors or agents as may be selected from time to time by S&H to assist S&H in its provision of the Services. It is understood and agreed that S&H may retain the services of Morgan -2- Stanley & Co. Incorporated or another suitable investment bank as financial advisor to Silgan or as an underwriter or placement agent for offerings of securities by Silgan. 2. Fees; Payment. ------------- (a) In consideration for General Management Services provided by S&H to Silgan hereunder, Silgan shall pay to S&H aggregate fees or compensation therefor (not including any related out-of-pocket expenses), (i) on a monthly basis, an amount equal to five thousand dollars ($5,000) plus 2.475% of EBDIT (as defined in Paragraph 2(i) hereof) for such calendar month until EBDIT for the calendar year to date has reached the Scheduled Amount (as defined in Paragraph 2(d) hereof) for such calendar year, and 1.65% of EBDIT for such calendar month to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (as defined in Paragraph 2(d) hereof) (the "Monthly Management Fee"); and (ii) on a quarterly basis, an amount equal to 2.475% of EBDIT for such calendar quarter until EBDIT for the calendar year to date has reached the Scheduled Amount, and l.65% of EBDIT for such calendar quarter to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (the "Quarterly Management Fee"). (b) Such Quarterly Management Fee shall continue to accrue, but shall not be paid, to S&H by Silgan in the event that, and from the date on which, Silgan shall have received written notice ("Notice") from the Agent (as defined below) that an Event of Default (as such term is defined in the Credit -3- Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics, the lenders from time to time party thereto, Bankers Trust Company, as Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to time, and any refinancings, renewals, amendments or extensions thereof (the "Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10, and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit Agreement (each of the foregoing Events of Default, a "Financial Covenant Event of Default") until, and shall be paid by Silgan to S&H on, the earliest to occur of (x) the first date after receipt of such Notice upon which no Financial Covenant Event of Default to which the Notice related or otherwise known to S&H or Silgan shall be in existence (and so long as no such Financial Covenant Event of Default would be in existence after giving effect to the payment of such unpaid portion of the Quarterly Management Fee), (y) the first date occurring 180 days or more after receipt by Silgan of a written notice from the Agent stating that no Event of Default exists under Section 9.01 of the Credit Agreement, or (z) the date that Silgan, Containers, Plastics, California- Washington Can Corporation, a wholly owned subsidiary of Containers, and SCCW Can Corporation, a wholly owned subsidiary of Containers, shall have paid all outstanding Obligations (as such term is defined under the Credit Agreement). In the event that a Notice is delivered by the Agent, Silgan shall pay to S&H that portion of -4- any unpaid Quarterly Management Fee that has accrued with respect to that portion of such calendar quarter prior to the occurrence of any Financial Covenant Event of Default to which such Notice relates. (c) Nothing contained in Paragraph 2(b) shall prevent the Agent from giving successive Notices of the type described in Paragraph 2(b) (in which case the rules set forth in Paragraph 2(b) shall apply to, and the time periods set forth therein shall begin to run on, the date of such subsequent Notice); provided that only one Notice relating to a single Financial Covenant Event of - -------- Default and all other Financial Covenant Events of Default in existence at the date of the giving of any such Notice may be given. Notwithstanding anything to the contrary stated herein, if at any time after the giving of Notice by the Agent to Silgan, S&H shall certify in writing to Silgan that all Financial Covenant Events of Default to which such Notice relates have been cured or waived, and that S&H knows of no other Financial Covenant Event of Default then in existence, then Silgan shall, unless it knows of the existence of a Financial Covenant Event of Default which has not yet been cured or waived, pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof in the manner set forth in Paragraph 2(g) hereof unless a Financial Covenant Event of Default would result from such payment. S&H shall not be required to deliver any such certification to Silgan upon the occurrence of the dates or events set forth in clauses (y) or (z) of Paragraph 2(b), and promptly after the occurrence of such date or event, Silgan will -5- pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof. (d) For any given calendar year during the term of this Agreement, the Scheduled Amount and the Maximum Amount for such calendar year will be the amounts set forth in Schedule I hereto. (e) In addition to the Monthly Management Fee and the Quarterly Management Fee, Silgan shall also reimburse S&H in an amount equal to all out- of-pocket expenses paid by S&H in providing the Services hereunder, including fees and expenses paid to consultants, subcontractors and other third parties, in connection with such Services. Such expenses shall be payable by Silgan to S&H monthly in arrears. (f) (i) Not later than fifteen (15) days after the end of each calendar month during the term hereof with respect to the Monthly Management Fee and (ii) not later than thirty (30) days after the end of each full calendar quarter during the term hereof with respect to the Quarterly Management Fee, S&H shall furnish Silgan with a bill for an amount equal to the Monthly Management Fee and the Quarterly Management Fee, respectively, then owing with respect to periods ended on or before the end of such calendar month or such calendar quarter. (g) Each bill furnished to Silgan hereunder shall be paid in full within thirty (30) days of the receipt of such bill, except that any accrued and unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest date on which such payment is permitted to be made pursuant to Paragraphs 2(a), -6- 2(b) and 2(c) hereof. All payments of such bills shall be sent to: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver or to such other address as S&H may specify from time to time by written notice to Silgan. (h) All fees and expenses paid to S&H by Holdings, Containers and Plastics, pursuant to their respective Affiliate Management Services Agreements with S&H, shall be credited to the Monthly Management Fee, the Quarterly Management Fee and the expenses referred to in Paragraphs 2(a) and 2(e) hereof. (i) For purposes of this Section 2, EBDIT shall mean, for any period, the consolidated net income of Holdings and its subsidiaries, before interest expense and provision for income taxes and without giving effect to any extraordinary non-cash gains or extraordinary non-cash losses and any adjustments resulting from changes in the value of employee stock options and/or stock appreciation rights, and adjusted by adding thereto (i) the amount of any fees and expenses paid pursuant to this Agreement or the Affiliate Management Services Agreements, (ii) the amount of all charges and expenses incurred in connection with any refinancing, restructuring, recapitalization or reorganization involving Holdings and its subsidiaries (which charges and expenses have been charged against the consolidated net income of Holdings or its subsidiaries), and (iii) the amount -7- of all amortization of intangibles, covenants not to compete, goodwill and debt financing costs and all depreciation (which amortization and depreciation have been charged against the consolidated net income of Holdings and its subsidiaries, before interest expense), computed in accordance with generally accepted accounting principles. 3. Direct Expenses. --------------- It is understood that the consideration to be paid by Silgan to S&H for Services hereunder shall not be in lieu of, and that Silgan shall be directly liable for, direct expenses incurred by Silgan, or by S&H on Silgan's behalf (other than the out-of-pocket expenses billed to Silgan by S&H pursuant to Paragraph 2(e) hereof), for services rendered to Silgan by third parties, including, but not limited to, legal and accounting fees and insurance premiums. Silgan shall pay any compensation (including employee benefit costs and any related out-of-pocket expenses) to officers and other employees of Silgan who provide substantially full-time services to Silgan, other than Messrs. R. Philip Silver ("Silver"), D. Greg Horrigan ("Horrigan"), Harley Rankin, Jr. ("Rankin") and Harold J. Rodriguez, Jr. ("Rodriguez") who shall receive no salaries (it being understood, however, that Silgan shall reimburse S&H in respect of compensation paid by S&H to Messrs. Rankin and Rodriguez consistent with the reimbursement therefor by Silgan to S&H in 1996), notwithstanding that said officers and other employees may simultaneously be officers or employees of S&H or one of its subsidiaries or Affiliates. -8- 4. Term. ---- (a) The term of this Agreement shall commence on the date hereof and shall continue until June 30, 1999. Therefore, the term of this Agreement shall be automatically renewed for successive one-year terms unless prior to the date that is 180 days prior to the expiration of the initial term or the then current one-year term, as the case may be, either party shall have given the other party written notice of its election not to renew the term of this Agreement (it being understood that the determination by Silgan whether to give such written notice of its election not to renew the term of this Agreement will be made by the independent members of the Board of Directors of Holdings). For purposes hereof, the independent members of the Board of Directors of Holdings shall not include any employee or affiliate of S&H, any officer of Holdings or any member of the Board of Directors that is affiliated with any entity that is receiving or is entitled to receive any payment from Holdings under this Agreement or any payment from S&H in connection with this Agreement. The term of this Agreement may be terminated prior to the expiration of the initial term or the then current one-year term, as the case may be, by written notice to the other party as follows: (i) by Silgan for Cause, (ii) by S&H for Cause, (iii) by Silgan for any reason other than Cause, upon at least 180 days prior written notice, (iv) by S&H for any reason other than (A) Cause or (B) because of a Change of Control, upon at least 180 days prior written notice, or (v) by S&H at any time after a Change of Control. -9- (b) Upon termination of any Affiliate Management Services Agreement by the party thereto other than S&H for any reason other than "Cause" as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by Silgan pursuant to clause (iii) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. Upon termination by S&H of any Affiliate Management Services Agreement for any reason other than "Cause" or because of a "Change of Control," each as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. (c) For purposes of this Section 4, a "Change of Control" shall be deemed to have occurred when a majority of the Board of Directors of Holdings shall not consist of "Continuing Holdings Directors," which shall mean (i) the directors of Holdings on the date hereof and (ii) each other director of Holdings who is either recommended, approved or nominated for election, or is elected, to the Board of Directors of Holdings by a majority of the other Continuing Holdings Directors. 5. Events of Default. ----------------- Any one of the following defaults shall constitute an Event of Default (other than by reason of an Event of Force Majeure in the case of each of Paragraphs 5(a)-(f)): -10- (a) (i) The failure or refusal of S&H to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to S&H by Silgan or (ii) the failure or refusal of Silgan to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to Silgan by S&H; (b) S&H or Holdings is declared insolvent or bankrupt by any court of competent jurisdiction, or a voluntary petition in bankruptcy is filed in any court of competent jurisdiction by either of them; (c) An involuntary petition in bankruptcy is filed in any court of competent jurisdiction against S&H or Holdings and within forty-five (45) days thereafter shall not have been dismissed or stayed (and, in the event of any such stay, such stay shall not have been set aside and the petition dismissed within forty-five (45) days after the stay shall have been granted); (d) A trustee or receiver is appointed for S&H or Holdings and remains undischarged for more than forty-five (45) days after being appointed; (e) A proceeding seeking a reorganization, arrangement, liquidation or dissolution of S&H or Holdings is instituted in a court of competent jurisdiction and remains -11- undismissed for more than forty-five (45) days after being instituted; (f) S&H or Holdings voluntarily seeks any such reorganization or arrangement or makes an assignment for the benefit of creditors; or (g) Death or permanent disability of both Horrigan and Silver. For the purposes of this Agreement, "permanent disability" shall mean the inability of Horrigan or Silver, as the case may be, by reason of illness or injury to perform substantially all of his duties as Chairman of the Board or as President of Holdings (or in performing his duties in any other office in Holdings or any of its respective Affiliates to which he may be duly appointed) during any continuous period of one hundred eighty (180) days. 6. Cause. ----- (a) The occurrence of any of the following shall constitute "Cause" for purposes of clause (i) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(ii) of this Agreement; or (ii) Criminal conduct or gross negligence by S&H in the performance of the Services; or (iii) The termination of any Affiliate Management Services Agreement by Holdings, Containers or Plastics, as the case may be, for "Cause" as defined therein. -12- (b) The occurrence of either of the following shall constitute "Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(i) of this Agreement; or (ii) The termination of any Affiliate Management Services Agreement by S&H for "Cause" as defined therein. 7. Remedies. (a) In the event this Agreement is terminated (or deemed -------- terminated) by Silgan prior to June 30, 1999 for any reason other than for Cause, Silgan shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) that would have been payable by Silgan to S&H for each month (or any portion thereof) from the date of such termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any portion thereof) that would have been payable by Silgan to S&H for each quarter (or portion thereof) from the date of such termination through June 30, 1999, in each case calculated based on a discount rate of eight percent (8%) per annum. (b) In the event this Agreement is terminated by Silgan after June 30, 1999 for any reason other than for Cause, Silgan shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) payable by Silgan to S&H for each month (or any portion thereof) from the date of such termination through the end of the then -13- current one-year term and (ii) the Quarterly Management Fee (or any portion thereof) payable by Silgan to S&H for each quarter (or portion thereof) from the date of such termination through the end of the then current one-year term, in each case calculated based on a discount rate of eight percent (8%) per annum. (c) The amounts described in clauses (i) and (ii) of Sections 7(a) and 7(b) shall be calculated based upon the projections of EBDIT for the period from the date of such termination through June 30, 1999 or through the end of the then current one-year term, as the case may be, which projections are (1) included in Holdings' most recently prepared forecast statements required under the Credit Agreement or (2) if the Credit Agreement is not in existence, included in Holdings' most recently prepared forecast statements presented to its Board of Directors (provided such forecast statements are prepared on a basis consistent with the requirements under the Credit Agreement that was in effect last). 8. Force Majeure. ------------- The term "Event of Force Majeure" as used herein shall mean any failure of a party to perform any of its obligations hereunder if such failure is due to circumstances beyond its control, including but not limited to, any requisition by any government authority, act of war, strike, boycott, lockout, picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act of God, fire, flood, accident, explosion, earthquake, storm, failure of public utilities or common -14- carriers, mechanical failure, embargo, or prohibition imposed by any governmental body or agency having authority over the party, which would have constituted an Event of Default but for the fact that such events constituted an Event of Force Majeure. The party affected by an Event of Force Majeure shall give prompt notice thereof to the other parties hereto and each party shall use its best efforts to minimize the duration and consequences of, and to eliminate, any such Event of Force Majeure. At such time as an Event of Force Majeure no longer exists, the respective obligations of the parties hereto shall be reinstated and this Agreement shall continue in full force and effect. 9. Insurance. --------- S&H agrees that for the term of this Agreement it shall cause Silgan to obtain and maintain insurance for such risks and in such amounts similar to companies of comparable size which are engaged in similar business activities, provided that S&H shall be deemed to be in compliance with the provisions of - -------- this paragraph if Silgan maintains a level of insurance which complies with the applicable terms of the Credit Agreement. 10. Indemnification. --------------- (a) Silgan shall indemnify to the fullest extent permitted by law (as now or hereafter in effect) S&H and each of its Affiliates, officers, directors, employees, consultants and subcontractors, and any Person controlling S&H and each of its Affiliates or any such consultant or subcontractor (each, an "S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that any S&H Indemnitee is made, or threatened to be made, -15- a defendant to, or is involved in any manner in, any action, suit or proceeding (whether civil, criminal, administrative, investigative or otherwise) by reason of the fact that such S&H Indemnitee is or was an agent of Holdings. (b) In furtherance and not in limitation of the powers conferred by statute: (i) Silgan may purchase and maintain insurance on behalf of any S&H Indemnitee as an agent of Silgan against any liability asserted against any S&H Indemnitee and incurred by any S&H Indemnitee in such capacity, or arising out of any S&H Indemnitee's status as such, whether or not Silgan would have the power to indemnify such S&H Indemnitee against such liability under the provisions of law; and (ii) Silgan may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere. (c) The manner of any indemnification under this Agreement shall be in accordance with Section 2.8 of the Stockholders Agreement dated as of December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity Fund II, -16- L.P., Bankers Trust New York Corporation, First Plaza Group Trust and Holdings (as amended from time to time, the "Stockholders Agreement"). 11. Noncompetition. -------------- (a) During the term of this Agreement, S&H hereby agrees that it will not, directly or indirectly, own, render services to, manage, operate, control, or participate in the ownership, management, operation or control of a business that is engaged in any "Business". For purposes hereof, the term "Business" shall mean the manufacture and sale anywhere in the world of consumer goods packaging products. (b) In the event that this Agreement is terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby agrees that, for a period of one year beginning on the date of such termination, it will not, directly or indirectly: (i) own, render services to, manage, operate, control, or participate in the ownership, management, operation or control of a business that is engaged in any Business; (ii) interfere with any customer or supplier relationship between Holdings and/or its subsidiaries and any other person or business entity; or (iii) disclose or use any confidential or proprietary information relating to Holdings and its subsidiaries' businesses, except for any information already in the public domain through no act of S&H and except as may be required by law or governmental or court order. (c) Notwithstanding anything herein to the contrary, nothing herein, however, shall restrict S&H from making -17- any investments in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter markets, so long as such investment does not give S&H the right to control or influence the policy decisions of any such company engaged in any Business. (d) If any particular provision or portion of this Section 11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and such amendment will apply only with respect to the operation of such provision or portion in the particular jurisdiction in which such adjudication was sought. (e) The parties recognize that the performance of the obligations under this Section 11 by S&H is special, unique and extraordinary in character, and that in the event of a breach, or threatened breach, of any of the terms and conditions of this Section 11, Silgan shall be entitled, if it so elects, in addition to any other remedies available to Silgan, to enforce the specific performance thereof or to enjoin any breach thereof. 12. Notices. ------- All notices and other communications required by or specifically provided for in this Agreement shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) when sent by telex or telecopier with answerback received, or (c) seventy-two (72) hours after having been deposited in the U.S. mails, certified mail with return receipt requested and postage prepaid, and in any case addressed to the -18- party for which it is intended at that party's address as set forth below, or at such other address as the addressee shall have designated by notice hereunder to the other party. If to S&H: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If to Silgan: Silgan Corporation 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If a notice is sent to any of the above, a copy shall be sent to the following: Winthrop, Stimson, Putnam & Roberts Financial Centre 695 East Main Street P.O. Box 6760 Stamford, CT 06904-6760 Attention: Frank W. Hogan, III, Esq. Any notice or request sent by telecopier or similar facsimile telecommunication shall be confirmed promptly by the sending of a copy of such notice or request to the addressee thereof by prepaid certified mail, return receipt requested. 13. Definitions. ----------- Terms not defined herein which are defined in the Stockholders Agreement shall have the meanings ascribed to them therein. -19- 14. Amendment; Assignment; Binding Effect. ------------------------------------- This Agreement may be amended or modified only by a written instrument signed by the parties hereto. No party shall assign or transfer this Agreement, in whole or in part, or any of such party's rights or obligations hereunder, to any other person or entity without the prior written consent of the other party hereto, except that S&H may transfer or assign all of its rights and obligations hereunder to any entity directly or indirectly succeeding to S&H by merger, consolidation or reorganization. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns. 15. Waiver; Severability. -------------------- The failure of a party to insist in any instance upon the strict and punctual performance of any provision of this Agreement shall not constitute a continuing waiver of such provision. No party shall be deemed to have waived any right, power, or privilege under this Agreement or any provisions hereof unless such waiver shall have been in writing and duly executed by the party to be charged with such waiver, and such waiver shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the waiving party or the obligations of any other party in any other respect or at any other time. If any provision of this Agreement shall be waived, or be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unaffected thereby and shall remain binding and in full force and effect. -20- 16. Relationship of the Parties. --------------------------- In all matters relating to this Agreement, each party hereto shall be solely responsible for the acts of its employees, and employees of one party shall not be considered employees of the other party. Except as otherwise provided herein, no party shall have any right, or authority to create any obligation, express or implied, on behalf of any other party. 17. Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws rules and laws. 18. Entire Agreement; Termination of Original Management Services ------------------------------------------------------------- Agreement. - --------- This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, either oral or written, with respect thereto. Upon the execution and delivery of this Agreement, the Original Management Services Agreement shall be terminated and shall be of no effect whatsoever. -21- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. S&H INC. By: ----------------------------------------------- Title: SILGAN CORPORATION By: ----------------------------------------------- Title: -22- SCHEDULE I (000's Omitted)
Scheduled Amount/1/ Maximum Amount/1/ ---------------- - -------------- - 1997 $ 89,500 1997 $100,504 1998 95,500 1998 102,964 1999 101,500 1999 105,488 2000 108,653 2000 108,653
- -------------------- /1/ For each calendar year after 2000, the Scheduled Amount for such calendar year shall be an amount equal to the Maximum Amount for such calendar year. For each calendar year after 2000, the Maximum Amount for such calendar year shall be equal to one hundred and three percent (103%) of the Maximum Amount for the prior calendar year. EX-10.44 6 FORM OF AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT BETWEEN PLASTICS AND S&H Exhibit 10.44 AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT This Amended and Restated Management Services Agreement (the "Agreement") is made as of this ___ day of February, 1997 by and between S&H INC., a Connecticut corporation ("S&H"), and SILGAN PLASTICS CORPORATION, a Delaware corporation ("Plastics"). W I T N E S S E T H: ------------------- WHEREAS, S&H and Plastics have entered into the Amended and Restated Management Services Agreement dated as of December 21, 1993 (the "Original Management Services Agreement"), pursuant to which S&H provides general management, supervision, administrative and other services to Plastics in accordance with the terms of the Original Management Services Agreement; WHEREAS, S&H also is a party to an Amended and Restated Management Services Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc. ("Holdings"), Silgan Corporation, a wholly owned subsidiary of Holdings and the parent company of Plastics ("Silgan"), and Silgan Containers Corporation, a wholly owned subsidiary of Silgan ("Containers"); WHEREAS, S&H and each of Holdings, Silgan and Containers are entering into an amended and restated management services agreement dated as of the date hereof (collectively, as so amended and restated, the "Affiliate Management Services Agreements"); and WHEREAS, in contemplation of the consummation of an initial public offering of the common stock of Holdings pursuant to an effective registration statement under the Securities Act of 1933, as amended, S&H and Plastics desire to amend and restate hereby the Original Management Services Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, S&H and Plastics agree as follows: 1. Management Services. ------------------- (a) S&H and Plastics hereby agree that, during the period beginning on the date hereof and continuing throughout the term hereof, S&H and its Affiliates shall provide to Plastics general management, supervision and administrative services, including, without limitation, the preparation of the annual and long-term business plans, and perform such other duties and provide such other services as Plastics shall be permitted to request of S&H pursuant to the Certificate of Incorporation or By-Laws of Holdings or pursuant to applicable law, which power and authority Plastics hereby grants to S&H ("General Management Services"). (The General Management Services are hereinafter collectively referred to as the "Services" and individually as a "Service"). (b) Any Service hereunder shall be provided to Plastics only by S&H or its Affiliates or such consultants, subcontractors or agents as may be selected from time to time by S&H to assist S&H in its provision of the Services. It is understood and agreed that S&H may retain the services of Morgan -2- Stanley & Co. Incorporated or another suitable investment bank as financial advisor to Plastics or as an underwriter or placement agent for offerings of securities by Plastics. 2. Fees; Payment. ------------- (a) In consideration for General Management Services provided by S&H to Plastics hereunder, Plastics shall pay to S&H aggregate fees or compensation therefor (not including any related out-of-pocket expenses), (i) on a monthly basis, an amount equal to Plastics' Proportionate Percentage (as defined below) of five thousand dollars ($5,000) plus 2.475% of EBDIT (as defined in Paragraph 2(i) hereof) for such calendar month until EBDIT for the calendar year to date has reached the Scheduled Amount (as defined in Paragraph 2(d) hereof) for such calendar year, and 1.65% of EBDIT for such calendar month to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (as defined in Paragraph 2(d) hereof) (the "Monthly Management Fee"); and (ii) on a quarterly basis, an amount equal to Plastics Proportionate Percentage of 2.475% of EBDIT for such calendar quarter until EBDIT for the calendar year to date has reached the Scheduled Amount, and l.65% of EBDIT for such calendar quarter to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (the "Quarterly Management Fee"). For purposes of this Section 2, "Proportionate Percentage" means such percentage of EBDIT for a given period that is attributable to the results of Plastics for such period. -3- (b) Such Quarterly Management Fee shall continue to accrue, but shall not be paid, to S&H by Plastics in the event that, and from the date on which, Plastics or Silgan shall have received written notice ("Notice") from the Agent (as defined below) that an Event of Default (as such term is defined in the Credit Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics, the lenders from time to time party thereto, Bankers Trust Company, as Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to time, and any refinancings, renewals, amendments or extensions thereof (the "Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10, and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit Agreement (each of the foregoing Events of Default, a "Financial Covenant Event of Default") until, and shall be paid by Plastics to S&H on, the earliest to occur of (x) the first date after receipt of such Notice upon which no Financial Covenant Event of Default to which the Notice related or otherwise known to S&H or Plastics shall be in existence (and so long as no such Financial Covenant Event of Default would be in existence after giving effect to the payment of such unpaid portion of the Quarterly Management Fee), (y) the first date occurring 180 days or more after receipt by Silgan of a written notice from the Agent stating that no Event of Default exists under Section 9.01 of the Credit Agreement, or (z) the date that Silgan, Containers, -4- Plastics, California-Washington Can Corporation, a wholly owned subsidiary of Containers, and SCCW Can Corporation, a wholly owned subsidiary of Containers, shall have paid all outstanding Obligations (as such term is defined under the Credit Agreement). In the event that a Notice is delivered by the Agent, Plastics shall pay to S&H that portion of any unpaid Quarterly Management Fee that has accrued with respect to that portion of such calendar quarter prior to the occurrence of any Financial Covenant Event of Default to which such Notice relates. (c) Nothing contained in Paragraph 2(b) shall prevent the Agent from giving successive Notices of the type described in Paragraph 2(b) (in which case the rules set forth in Paragraph 2(b) shall apply to, and the time periods set forth therein shall begin to run on, the date of such subsequent Notice); provided that only one Notice relating to a single Financial Covenant Event of - -------- Default and all other Financial Covenant Events of Default in existence at the date of the giving of any such Notice may be given. Notwithstanding anything to the contrary stated herein, if at any time after the giving of Notice by the Agent to Silgan, S&H shall certify in writing to Silgan that all Financial Covenant Events of Default to which such Notice relates have been cured or waived, and that S&H knows of no other Financial Covenant Event of Default then in existence, then Plastics shall, unless it knows of the existence of a Financial Covenant Event of Default which has not yet been cured or waived, pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof in the manner set forth in Paragraph 2(g) -5- hereof unless a Financial Covenant Event of Default would result from such payment. S&H shall not be required to deliver any such certification to Silgan upon the occurrence of the dates or events set forth in clauses (y) or (z) of Paragraph 2(b), and promptly after the occurrence of such date or event, Plastics will pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof. (d) For any given calendar year during the term of this Agreement, the Scheduled Amount and the Maximum Amount for such calendar year will be the amounts set forth in Schedule I hereto. (e) In addition to the Monthly Management Fee and the Quarterly Management Fee, Plastics shall also reimburse S&H in an amount equal to all out- of-pocket expenses paid by S&H in providing the Services hereunder, including fees and expenses paid to consultants, subcontractors and other third parties, in connection with such Services. Such expenses shall be payable by Plastics to S&H monthly in arrears. (f) (i) Not later than fifteen (15) days after the end of each calendar month during the term hereof with respect to the Monthly Management Fee and (ii) not later than thirty (30) days after the end of each full calendar quarter during the term hereof with respect to the Quarterly Management Fee, S&H shall furnish Plastics with a bill for an amount equal to the Monthly Management Fee and the Quarterly Management Fee, respectively, then owing with respect to periods ended on or before the end of such calendar month or such calendar quarter. -6- (g) Each bill furnished to Plastics hereunder shall be paid in full within thirty (30) days of the receipt of such bill, except that any accrued and unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest date on which such payment is permitted to be made pursuant to Paragraphs 2(a), 2(b) and 2(c) hereof. All payments of such bills shall be sent to: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver or to such other address as S&H may specify from time to time by written notice to Plastics. (h) All fees and expenses paid to S&H by Holdings and Silgan pursuant to their respective Affiliate Management Services Agreements with S&H, shall be credited to the Monthly Management Fee, the Quarterly Management Fee and the expenses referred to in Paragraphs 2(a) and 2(e) hereof. (i) For purposes of this Section 2, EBDIT shall mean, for any period, the consolidated net income of Holdings and its subsidiaries, before interest expense and provision for income taxes and without giving effect to any extraordinary non-cash gains or extraordinary non-cash losses and any adjustments resulting from changes in the value of employee stock options and/or stock appreciation rights, and adjusted by adding thereto (i) the amount of any fees and expenses paid pursuant to this Agreement or the Affiliate Management Services Agreements, (ii) the amount of all charges and expenses incurred in -7- connection with any refinancing, restructuring, recapitalization or reorganization involving Holdings and its subsidiaries (which charges and expenses have been charged against the consolidated net income of Holdings or its subsidiaries), and (iii) the amount of all amortization of intangibles, covenants not to compete, goodwill and debt financing costs and all depreciation (which amortization and depreciation have been charged against the consolidated net income of Holdings and its subsidiaries, before interest expense), computed in accordance with generally accepted accounting principles. 3. Direct Expenses. --------------- It is understood that the consideration to be paid by Plastics to S&H for Services hereunder shall not be in lieu of, and that Plastics shall be directly liable for, direct expenses incurred by Plastics, or by S&H on Plastics' behalf (other than the out-of-pocket expenses billed to Plastics by S&H pursuant to Paragraph 2(e) hereof), for services rendered to Plastics by third parties, including, but not limited to, legal and accounting fees and insurance premiums. Plastics shall pay any compensation (including employee benefit costs and any related out-of-pocket expenses) to officers and other employees of Plastics who provide substantially full-time services to Plastics, other than Messrs. R. Philip Silver ("Silver"), D. Greg Horrigan ("Horrigan"), Harley Rankin, Jr. ("Rankin") and Harold J. Rodriguez, Jr. ("Rodriguez") who shall receive no salaries (it being understood, however, that Plastics shall reimburse S&H in respect of compensation paid by S&H to Messrs. Rankin and -8- Rodriguez consistent with the reimbursement therefor by Plastics to S&H in 1996), notwithstanding that said officers and other employees may simultaneously be officers or employees of S&H or one of its subsidiaries or Affiliates. 4. Term. ---- (a) The term of this Agreement shall commence on the date hereof and shall continue until June 30, 1999. Thereafter, the term of this Agreement shall be automatically renewed for successive one-year terms unless prior to the date that is 180 days prior to the expiration of the initial term or the then current one-year term, as the case may be, either party shall have given the other party written notice of its election not to renew the term of this Agreement (it being understood that the determination by Plastics whether to give such written notice of its election not to renew the term of this Agreement will be made by the independent members of the Board of Directors of Holdings). For purposes hereof, the independent members of the Board of Directors of Holdings shall not include any employee or affiliate of S&H, any officer of Holdings or any member of the Board of Directors that is affiliated with any entity that is receiving or is entitled to receive any payment from Holdings under this Agreement or any payment from S&H in connection with this Agreement. The term of this Agreement may be terminated prior to the expiration of the initial term or the then current one-year term, as the case may be, by written notice to the other party as follows: (i) by Plastics for Cause, (ii) by S&H for Cause, (iii) by Plastics for any reason other than Cause, upon at -9- least 180 days prior written notice, (iv) by S&H for any reason other than (A) Cause or (B) because of a Change of Control, upon at least 180 days prior written notice, or (v) by S&H at any time after a Change of Control. (b) Upon termination of any Affiliate Management Services Agreement by the party thereto other than S&H for any reason other than "Cause" as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by Plastics pursuant to clause (iii) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. Upon termination by S&H of any Affiliate Management Services Agreement for any reason other than "Cause" or because of a "Change of Control," each as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. (c) For purposes of this Section 4, a "Change of Control" shall be deemed to have occurred when a majority of the Board of Directors of Holdings shall not consist of "Continuing Holdings Directors," which shall mean (i) the directors of Holdings on the date hereof and (ii) each other director of Holdings who is either recommended, approved or nominated for election, or is elected, to the Board of Directors of Holdings by a majority of the other Continuing Holdings Directors. -10- 5. Events of Default. ----------------- Any one of the following defaults shall constitute an Event of Default (other than by reason of an Event of Force Majeure in the case of each of Paragraphs 5(a)-(f)): (a) (i) The failure or refusal of S&H to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to S&H by Plastics or (ii) the failure or refusal of Plastics to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to Plastics by S&H; (b) S&H or Holdings is declared insolvent or bankrupt by any court of competent jurisdiction, or a voluntary petition in bankruptcy is filed in any court of competent jurisdiction by either of them; (c) An involuntary petition in bankruptcy is filed in any court of competent jurisdiction against S&H or Holdings and within forty-five (45) days thereafter shall not have been dismissed or stayed (and, in the event of any such stay, such stay shall not have been set aside and the petition dismissed within forty-five (45) days after the stay shall have been granted); -11- (d) A trustee or receiver is appointed for S&H or Holdings and remains undischarged for more than forty-five (45) days after being appointed; (e) A proceeding seeking a reorganization, arrangement, liquidation or dissolution of S&H or Holdings is instituted in a court of competent jurisdiction and remains undismissed for more than forty-five (45) days after being instituted; (f) S&H or Holdings voluntarily seeks any such reorganization or arrangement or makes an assignment for the benefit of creditors; or (g) Death or permanent disability of both Horrigan and Silver. For the purposes of this Agreement, "permanent disability" shall mean the inability of Horrigan or Silver, as the case may be, by reason of illness or injury to perform substantially all of his duties as Chairman of the Board or as President of Holdings (or in performing his duties in any other office in Holdings or any of its respective Affiliates to which he may be duly appointed) during any continuous period of one hundred eighty (180) days. 6. Cause. ----- (a) The occurrence of any of the following shall constitute "Cause" for purposes of clause (i) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(ii) of this Agreement; or -12- (ii) Criminal conduct or gross negligence by S&H in the performance of the Services; or (iii) The termination of any Affiliate Management Services Agreement by Holdings, Silgan, or Containers, as the case may be, for "Cause" as defined therein. (b) The occurrence of either of the following shall constitute "Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(i) of this Agreement; or (ii) The termination of any Affiliate Management Services Agreement by S&H for "Cause" as defined therein. 7. Remedies. (a) In the event this Agreement is terminated (or deemed -------- terminated) by Plastics prior to June 30, 1999 for any reason other than for Cause, Plastics shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) that would have been payable by Plastics to S&H for each month (or any portion thereof) from the date of such termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any portion thereof) that would have been payable by Plastics to S&H for each quarter (or portion thereof) from the date of such termination through June 30, 1999, in each case calculated based on a discount rate of eight percent (8%) per annum. -13- (b) In the event this Agreement is terminated by Plastics after June 30, 1999, for any reason other than for Cause, Plastics shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) payable by Plastics to S&H for each month (or any portion thereof) from the date of such termination through the end of the then current one-year term and (ii) the Quarterly Management Fee (or any portion thereof) payable by Plastics to S&H for each quarter (or portion thereof) from the date of such termination through the end of the then current one-year term, in each case calculated based on a discount rate of eight percent (8%) per annum. (c) The amounts described in clauses (i) and (ii) of Sections 7(a) and 7(b) shall be calculated based upon the projections of Holdings' EBDIT for the period from the date of such termination through June 30, 1999 or through the end of the then current one-year term, as the case may be, which projections are (1) included in Holdings' most recently prepared forecast statements required under the Credit Agreement or (2) if the Credit Agreement is not in existence, included in Holdings' most recently prepared forecast statements presented to its Board of Directors (provided such forecast statements are prepared on a basis consistent with the requirements under the Credit Agreement that was in effect last). -14- 8. Force Majeure. ------------- The term "Event of Force Majeure" as used herein shall mean any failure of a party to perform any of its obligations hereunder if such failure is due to circumstances beyond its control, including but not limited to, any requisition by any government authority, act of war, strike, boycott, lockout, picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act of God, fire, flood, accident, explosion, earthquake, storm, failure of public utilities or common carriers, mechanical failure, embargo, or prohibition imposed by any governmental body or agency having authority over the party, which would have constituted an Event of Default but for the fact that such events constituted an Event of Force Majeure. The party affected by an Event of Force Majeure shall give prompt notice thereof to the other parties hereto and each party shall use its best efforts to minimize the duration and consequences of, and to eliminate, any such Event of Force Majeure. At such time as an Event of Force Majeure no longer exists, the respective obligations of the parties hereto shall be reinstated and this Agreement shall continue in full force and effect. 9. Insurance. --------- S&H agrees that for the term of this Agreement it shall cause Plastics to obtain and maintain insurance for such risks and in such amounts similar to companies of comparable size which are engaged in similar business activities, provided that S&H shall be deemed to be in compliance with the provisions of - -------- this paragraph if Plastics maintains a level of insurance which -15- complies with the applicable terms of the Credit Agreement. 10. Indemnification. --------------- (a) Plastics shall indemnify to the fullest extent permitted by law (as now or hereafter in effect) S&H and each of its Affiliates, officers, directors, employees, consultants and subcontractors, and any Person controlling S&H and each of its Affiliates or any such consultant or subcontractor (each, an "S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that any S&H Indemnitee is made, or threatened to be made, a defendant to, or is involved in any manner in, any action, suit or proceeding (whether civil, criminal, administrative, investigative or otherwise) by reason of the fact that such S&H Indemnitee is or was an agent of Plastics. (b) In furtherance and not in limitation of the powers conferred by statute: (i) Plastics may purchase and maintain insurance on behalf of any S&H Indemnitee as an agent of Plastics against any liability asserted against any S&H Indemnitee and incurred by any S&H Indemnitee in such capacity, or arising out of any S&H Indemnitee's status as such, whether or not Plastics would have the power to indemnify such S&H Indemnitee against such liability under the provisions of law; and (ii) Plastics may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or -16- other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere. (c) The manner of any indemnification under this Agreement shall be in accordance with Section 2.8 of the Stockholders Agreement dated as of December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York Corporation, First Plaza Group Trust and Holdings (as amended from time to time, the "Stockholders Agreement"). 11. Noncompetition. -------------- (a) During the term of this Agreement, S&H hereby agrees that it will not, directly or indirectly, own, render services to, manage, operate, control, or participate in the ownership, management, operation or control of a business that is engaged in any "Business". For purposes hereof, the term "Business" shall mean the manufacture and sale anywhere in the world of consumer goods packaging products. (b) In the event that this Agreement is terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby agrees that, for a period of one year beginning on the date of such termination, it will not, directly or indirectly: (i) own, render services to, manage, operate, control, or participate in the ownership, management, -17- operation or control of a business that is engaged in any Business; (ii) interfere with any customer or supplier relationship between Holdings and/or its subsidiaries and any other person or business entity; or (iii) disclose or use any confidential or proprietary information relating to Holdings and its subsidiaries' businesses, except for any information already in the public domain through no act of S&H and except as may be required by law or governmental or court order. (c) Notwithstanding anything herein to the contrary, nothing herein, however, shall restrict S&H from making any investments in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter markets, so long as such investment does not give S&H the right to control or influence the policy decisions of any such company engaged in any Business. (d) If any particular provision or portion of this Section 11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and such amendment will apply only with respect to the operation of such provision or portion in the particular jurisdiction in which such adjudication was sought. (e) The parties recognize that the performance of the obligations under this Section 11 by S&H is special, unique and extraordinary in character, and that in the event of a breach, or threatened breach, of any of the terms and conditions of this Section 11, Plastics shall be entitled, if it so elects, -18- in addition to any other remedies available to Plastics, to enforce the specific performance thereof or to enjoin any breach thereof. 12. Notices. ------- All notices and other communications required by or specifically provided for in this Agreement shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) when sent by telex or telecopier with answerback received, or (c) seventy-two (72) hours after having been deposited in the U.S. mails, certified mail with return receipt requested and postage prepaid, and in any case addressed to the party for which it is intended at that party's address as set forth below, or at such other address as the addressee shall have designated by notice hereunder to the other party. If to S&H: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If to Plastics: Silgan Plastics Corporation 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If a notice is sent to any of the above, a copy shall be sent to the following: Winthrop, Stimson, Putnam & Roberts Financial Centre 695 East Main Street P.O. Box 6760 Stamford, CT 06904-6760 Attention: Frank W. Hogan, III, Esq. -19- Any notice or request sent by telecopier or similar facsimile telecommunication shall be confirmed promptly by the sending of a copy of such notice or request to the addressee thereof by prepaid certified mail, return receipt requested. 13. Definitions. ----------- Terms not defined herein which are defined in the Stockholders Agreement shall have the meanings ascribed to them therein. 14. Amendment; Assignment; Binding Effect. ------------------------------------- This Agreement may be amended or modified only by a written instrument signed by the parties hereto. No party shall assign or transfer this Agreement, in whole or in part, or any of such party's rights or obligations hereunder, to any other person or entity without the prior written consent of the other party hereto, except that S&H may transfer or assign all of its rights and obligations hereunder to any entity directly or indirectly succeeding to S&H by merger, consolidation or reorganization. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns. 15. Waiver; Severability. -------------------- The failure of a party to insist in any instance upon the strict and punctual performance of any provision of this Agreement shall not constitute a continuing waiver of such provision. No party shall be deemed to have waived any right, power, or privilege under this Agreement or any provisions hereof unless such waiver shall have been in writing and duly executed by the party to be charged with such waiver, and such waiver -20- shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the waiving party or the obligations of any other party in any other respect or at any other time. If any provision of this Agreement shall be waived, or be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unaffected thereby and shall remain binding and in full force and effect. 16. Relationship of the Parties. --------------------------- In all matters relating to this Agreement, each party hereto shall be solely responsible for the acts of its employees, and employees of one party shall not be considered employees of the other party. Except as otherwise provided herein, no party shall have any right, or authority to create any obligation, express or implied, on behalf of any other party. 17. Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws rules and laws. 18. Entire Agreement; Termination of Original Management Services ------------------------------------------------------------- Agreement. - --------- This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, either oral or written, with respect thereto. Upon the execution and delivery of this Agreement, the Original Management Services Agreement shall be terminated and shall be of no effect whatsoever. -21- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. S&H INC. By: ---------------------------------- Title: SILGAN PLASTICS CORPORATION By: ---------------------------------- Title: -22- SCHEDULE I (000's Omitted)
Scheduled Amount/1/ Maximum Amount/1/ - --------------------- ----------------- 1997 $ 89,500 1997 $100,504 1998 95,500 1998 102,964 1999 101,500 1999 105,488 2000 108,653 2000 108,653
- ------------------------ /1/ For each calendar year after 2000, the Scheduled Amount for such calendar year shall be an amount equal to the Maximum Amount for such calendar year. For each calendar year after 2000, the Maximum Amount for such calendar year shall be equal to one hundred and three percent (103%) of the Maximum Amount for the prior calendar year. EX-10.45 7 FORM OF AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT BETWEEN CONTAINERS AND S&H Exhibit 10.45 AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT This Amended and Restated Management Services Agreement (the "Agreement") is made as of this ___ day of February, 1997 by and between S&H INC., a Connecticut corporation ("S&H"), and SILGAN CONTAINERS CORPORATION, a Delaware corporation ("Containers"). W I T N E S S E T H: ------------------- WHEREAS, S&H and Containers have entered into the Amended and Restated Management Services Agreement dated as of December 21, 1993 (the "Original Management Services Agreement"), pursuant to which S&H provides general management, supervision, administrative and other services to Containers in accordance with the terms of the Original Management Services Agreement; WHEREAS, S&H also is a party to an Amended and Restated Management Services Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc. ("Holdings"), Silgan Corporation, a wholly owned subsidiary of Holdings and the parent holding company of Containers ("Silgan"), and Silgan Plastics Corporation, a wholly owned subsidiary of Silgan ("Plastics"); WHEREAS, S&H and each of Holdings, Silgan and Plastics are entering into an amended and restated management services agreement dated as of the date hereof (collectively, as so amended and restated, the "Affiliate Management Services Agreements"); and WHEREAS, in contemplation of the consummation of an initial public offering of the common stock of Holdings pursuant to an effective registration statement under the Securities Act of 1933, as amended, S&H and Containers desire to amend and restate hereby the Original Management Services Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, S&H and Containers agree as follows: 1. Management Services. ------------------- (a) S&H and Containers hereby agree that, during the period beginning on the date hereof and continuing throughout the term hereof, S&H and its Affiliates shall provide to Containers general management, supervision and administrative services, including, without limitation, the preparation of the annual and long-term business plans, and perform such other duties and provide such other services as Containers shall be permitted to request of S&H pursuant to the Certificate of Incorporation or By-Laws of Holdings or pursuant to applicable law, which power and authority Containers hereby grants to S&H ("General Management Services"). (The General Management Services are hereinafter collectively referred to as the "Services" and individually as a "Service"). (b) Any Service hereunder shall be provided to Containers only by S&H or its Affiliates or such consultants, subcontractors or agents as may be selected from time to time by -2- S&H to assist S&H in its provision of the Services. It is understood and agreed that S&H may retain the services of Morgan Stanley & Co. Incorporated or another suitable investment bank as financial advisor to Containers or as an underwriter or placement agent for offerings of securities by Containers. 2. Fees; Payment. ------------- (a) In consideration for General Management Services provided by S&H to Containers hereunder, Containers shall pay to S&H aggregate fees or compensation therefor (not including any related out-of-pocket expenses), (i) on a monthly basis, an amount equal to Containers' Proportionate Percentage (as defined below) of five thousand dollars ($5,000) plus 2.475% of EBDIT (as defined in Paragraph 2(i) hereof) for such calendar month until EBDIT for the calendar year to date has reached the Scheduled Amount (as defined in Paragraph 2(d) hereof) for such calendar year, and 1.65% of EBDIT for such calendar month to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (as defined in Paragraph 2(d) hereof) (the "Monthly Management Fee"); and (ii) on a quarterly basis, an amount equal to Containers' Proportionate Percentage of 2.475% of EBDIT for such calendar quarter until EBDIT for the calendar year to date has reached the Scheduled Amount, and 1.65% of EBDIT for such calendar quarter to the extent that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not greater than the Maximum Amount (the "Quarterly Management Fee"). For purposes of this Section 2, "Proportionate Percentage" means such percentage of EBDIT for a -3- given period that is attributable to the results of Containers for such period. (b) Such Quarterly Management Fee shall continue to accrue, but shall not be paid, to S&H by Containers in the event that, and from the date on which, Containers or Silgan shall have received written notice ("Notice") from the Agent (as defined below) that an Event of Default (as such term is defined in the Credit Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics, the lenders from time to time party thereto, Bankers Trust Company, as Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to time, and any refinancings, renewals, amendments or extensions thereof (the "Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10, and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit Agreement (each of the foregoing Events of Default, a "Financial Covenant Event of Default") until, and shall be paid by Containers to S&H on, the earliest to occur of (x) the first date after receipt of such Notice upon which no Financial Covenant Event of Default to which the Notice related or otherwise known to S&H or Containers shall be in existence (and so long as no such Financial Covenant Event of Default would be in existence after giving effect to the payment of such unpaid portion of the Quarterly Management Fee), (y) the first date occurring 180 days or more after receipt by Silgan of a written notice from the -4- Agent stating that no Event of Default exists under Section 9.01 of the Credit Agreement, or (z) the date that Silgan, Containers, Plastics, California- Washington Can Corporation, a wholly owned subsidiary of Containers, and SCCW Can Corporation, a wholly owned subsidiary of Containers, shall have paid all outstanding Obligations (as such term is defined under the Credit Agreement). In the event that a Notice is delivered by the Agent, Containers shall pay to S&H that portion of any unpaid Quarterly Management Fee that has accrued with respect to that portion of such calendar quarter prior to the occurrence of any Financial Covenant Event of Default to which such Notice relates. (c) Nothing contained in Paragraph 2(b) shall prevent the Agent from giving successive Notices of the type described in Paragraph 2(b) (in which case the rules set forth in Paragraph 2(b) shall apply to, and the time periods set forth therein shall begin to run on, the date of such subsequent Notice); provided that only one Notice relating to a single Financial Covenant Event of - -------- Default and all other Financial Covenant Events of Default in existence at the date of the giving of any such Notice may be given. Notwithstanding anything to the contrary stated herein, if at any time after the giving of Notice by the Agent to Silgan, S&H shall certify in writing to Silgan that all Financial Covenant Events of Default to which such Notice relates have been cured or waived, and that S&H knows of no other Financial Covenant Event of Default then in existence, then Containers shall, unless it knows of the existence of a Financial Covenant Event of Default which has not yet been cured -5- or waived, pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof in the manner set forth in Paragraph 2(g) hereof unless a Financial Covenant Event of Default would result from such payment. S&H shall not be required to deliver any such certification to Silgan upon the occurrence of the dates or events set forth in clauses (y) or (z) of Paragraph 2(b), and promptly after the occurrence of such date or event, Containers will pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof. (d) For any given calendar year during the term of this Agreement, the Scheduled Amount and the Maximum Amount for such calendar year will be the amounts set forth in Schedule I hereto. (e) In addition to the Monthly Management Fee and the Quarterly Management Fee, Containers shall also reimburse S&H in an amount equal to all out-of-pocket expenses paid by S&H in providing the Services hereunder, including fees and expenses paid to consultants, subcontractors and other third parties, in connection with such Services. Such expenses shall be payable by Containers to S&H monthly in arrears. (f) (i) Not later than fifteen (15) days after the end of each calendar month during the term hereof with respect to the Monthly Management Fee and (ii) not later than thirty (30) days after the end of each full calendar quarter during the term hereof with respect to the Quarterly Management Fee, S&H shall furnish Containers with a bill for an amount equal to the Monthly Management Fee and the Quarterly Management Fee, -6- respectively, then owing with respect to periods ended on or before the end of such calendar month or such calendar quarter. (g) Each bill furnished to Containers hereunder shall be paid in full within thirty (30) days of the receipt of such bill, except that any accrued and unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest date on which such payment is permitted to be made pursuant to Paragraphs 2(a), 2(b) and 2(c) hereof. All payments of such bills shall be sent to: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver or to such other address as S&H may specify from time to time by written notice to Containers. (h) All fees and expenses paid to S&H by Holdings and Silgan pursuant to their respective Affiliate Management Services Agreements with S&H, shall be credited to the Monthly Management Fee, the Quarterly Management Fee and the expenses referred to in Paragraphs 2(a) and 2(e) hereof. (i) For purposes of this Section 2, EBDIT shall mean, for any period, the consolidated net income of Holdings and its subsidiaries, before interest expense and provision for income taxes and without giving effect to any extraordinary non-cash gains or extraordinary non-cash losses and any adjustments resulting from changes in the value of employee stock options and/or stock appreciation rights, and adjusted by adding thereto (i) the amount of any fees and expenses paid pursuant to this -7- Agreement or the Affiliate Management Services Agreements, (ii) the amount of all charges and expenses incurred in connection with any refinancing, restructuring, recapitalization or reorganization involving Holdings and its subsidiaries (which charges and expenses have been charged against the consolidated net income of Holdings or its subsidiaries), and (iii) the amount of all amortization of intangibles, covenants not to compete, goodwill and debt financing costs and all depreciation (which amortization and depreciation have been charged against the consolidated net income of Holdings and its subsidiaries, before interest expense), computed in accordance with generally accepted accounting principles. 3. Direct Expenses. --------------- It is understood that the consideration to be paid by Containers to S&H for Services hereunder shall not be in lieu of, and that Containers shall be directly liable for, direct expenses incurred by Containers, or by S&H on Containers' behalf (other than the out-of-pocket expenses billed to Containers by S&H pursuant to Paragraph 2(e) hereof), for services rendered to Containers by third parties, including, but not limited to, legal and accounting fees and insurance premiums. Containers shall pay any compensation (including employee benefit costs and any related out-of-pocket expenses) to officers and other employees of Containers who provide substantially full-time services to Containers, other than Messrs. R. Philip Silver ("Silver"), D. Greg Horrigan ("Horrigan"), Harley Rankin, Jr. ("Rankin") and Harold J. Rodriguez, Jr. ("Rodriguez") who shall receive no -8- salaries (it being understood, however, that Containers shall reimburse S&H in respect of compensation paid by S&H to Messrs. Rankin and Rodriguez consistent with the reimbursement therefor by Containers to S&H in 1996), notwithstanding that said officers and other employees may simultaneously be officers or employees of S&H or one of its subsidiaries or Affiliates. 4. Term. ---- (a) The term of this Agreement shall commence on the date hereof and shall continue until June 30, 1999. Thereafter, the term of this Agreement shall be automatically renewed for successive one-year terms unless prior to the date that is 180 days prior to the expiration of the initial term or the then current one-year term, as the case may be, either party shall have given the other party written notice of its election not to renew the term of this Agreement (it being understood that the determination by Containers whether to give such written notice of its election not to renew the term of this Agreement will be made by the independent members of the Board of Directors of Holdings). For purposes hereof, the independent members of the Board of Directors of Holdings shall not include any employee or affiliate of S&H, any officer of Holdings or any member of the Board of Directors that is affiliated with any entity that is receiving or is entitled to receive any payment from Holdings under this Agreement or any payment from S&H in connection with this Agreement. The term of this Agreement may be terminated prior to the expiration of the initial term or the then current one-year term, as the case may be, by written notice to the other -9- party as follows: (i) by Containers for Cause, (ii) by S&H for Cause, (iii) by Containers for any reason other than Cause, upon at least 180 days prior written notice, (iv) by S&H for any reason other than (A) Cause or (B) because of a Change of Control, upon at least 180 days prior written notice, or (v) by S&H at any time after a Change of Control. (b) Upon termination of any Affiliate Management Services Agreement by the party thereto other than S&H for any reason other than "Cause" as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by Containers pursuant to clause (iii) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. Upon termination by S&H of any Affiliate Management Services Agreement for any reason other than "Cause" or because of a "Change of Control," each as defined in such Affiliate Management Services Agreement, this Agreement shall be deemed to have been terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, effective as of the date of termination of such Affiliate Management Services Agreement. (c) For purposes of this Section 4, a "Change of Control" shall be deemed to have occurred when a majority of the Board of Directors of Holdings shall not consist of "Continuing Holdings Directors," which shall mean (i) the directors of Holdings on the date hereof and (ii) each other director of Holdings who is either recommended, approved or nominated for -10- election, or is elected, to the Board of Directors of Holdings by a majority of the other Continuing Holdings Directors. 5. Events of Default. ----------------- Any one of the following defaults shall constitute an Event of Default (other than by reason of an Event of Force Majeure in the case of each of Paragraphs 5(a)-(f)): (a) (i) The failure or refusal of S&H to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to S&H by Containers or (ii) the failure or refusal of Containers to comply with or perform its obligations under this Agreement if such failure or refusal continues unremedied for more than 60 days after written notice of the existence of such failure or refusal shall have been given to Containers by S&H; (b) S&H or Holdings is declared insolvent or bankrupt by any court of competent jurisdiction, or a voluntary petition in bankruptcy is filed in any court of competent jurisdiction by either of them; (c) An involuntary petition in bankruptcy is filed in any court of competent jurisdiction against S&H or Holdings and within forty-five (45) days thereafter shall not have been dismissed or stayed (and, in the event of any such stay, such stay shall not have been set aside and the petition dismissed within forty-five (45) days after the stay shall have been granted); -11- (d) A trustee or receiver is appointed for S&H or Holdings and remains undischarged for more than forty-five (45) days after being appointed; (e) A proceeding seeking a reorganization, arrangement, liquidation or dissolution of S&H or Holdings is instituted in a court of competent jurisdiction and remains undismissed for more than forty-five (45) days after being instituted; (f) S&H or Holdings voluntarily seeks any such reorganization or arrangement or makes an assignment for the benefit of creditors; or (g) Death or permanent disability of both Horrigan and Silver. For the purposes of this Agreement, "permanent disability" shall mean the inability of Horrigan or Silver, as the case may be, by reason of illness or injury to perform substantially all of his duties as Chairman of the Board or as President of Holdings (or in performing his duties in any other office in Holdings or any of its respective Affiliates to which he may be duly appointed) during any continuous period of one hundred eighty (180) days. 6. Cause. ----- (a) The occurrence of any of the following shall constitute "Cause" for purposes of clause (i) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(ii) of this Agreement; or -12- (ii) Criminal conduct or gross negligence by S&H in the performance of the Services; or (iii) The termination of any Affiliate Management Services Agreement by Holdings, Silgan or Plastics, as the case may be, for "Cause" as defined therein. (b) The occurrence of either of the following shall constitute "Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this Agreement: (i) An Event of Default, except for the Event of Default described in Section 5(a)(i) of this Agreement; or (ii) The termination of any Affiliate Management Services Agreement by S&H for "Cause" as defined therein. 7. Remedies. (a) In the event this Agreement is terminated (or deemed -------- terminated) by Containers prior to June 30, 1999 for any reason other than for Cause, Containers shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) that would have been payable by Containers to S&H for each month (or any portion thereof) from the date of such termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any portion thereof) that would have been payable by Containers to S&H for each quarter (or portion thereof) from the date of such termination through June 30, 1999, in each case calculated based on a discount rate of eight percent (8%) per annum. -13- (b) In the event this Agreement is terminated by Containers after June 30, 1999 for any reason other than for Cause, Containers shall be required to pay to S&H as liquidated damages, within thirty (30) days of such termination, the present value of the sum of (i) the Monthly Management Fee (or any portion thereof) payable by Containers to S&H for each month (or any portion thereof) from the date of such termination through the end of the then current one-year term and (ii) the Quarterly Management Fee (or any portion thereof) payable by Containers to S&H for each quarter (or portion thereof) from the date of such termination through the end of the then current one-year term, in each case calculated based on a discount rate of eight percent (8%) per annum. (c) The amounts described in clauses (i) and (ii) of Sections 7(a) and 7(b) shall be calculated based upon the projections of Holdings' EBDIT for the period from the date of such termination through June 30, 1999 or through the end of the then current one-year term, as the case may be, which projections are (1) included in Holdings' most recently prepared forecast statements required under the Credit Agreement or (2) if the Credit Agreement is not in existence, included in Holdings' most recently prepared forecast statements presented to its Board of Directors (provided such forecast statements are prepared on a basis consistent with the requirements under the Credit Agreement that was in effect last). -14- 8. Force Majeure. ------------- The term "Event of Force Majeure" as used herein shall mean any failure of a party to perform any of its obligations hereunder if such failure is due to circumstances beyond its control, including but not limited to, any requisition by any government authority, act of war, strike, boycott, lockout, picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act of God, fire, flood, accident, explosion, earthquake, storm, failure of public utilities or common carriers, mechanical failure, embargo, or prohibition imposed by any governmental body or agency having authority over the party, which would have constituted an Event of Default but for the fact that such events constituted an Event of Force Majeure. The party affected by an Event of Force Majeure shall give prompt notice thereof to the other parties hereto and each party shall use its best efforts to minimize the duration and consequences of, and to eliminate, any such Event of Force Majeure. At such time as an Event of Force Majeure no longer exists, the respective obligations of the parties hereto shall be reinstated and this Agreement shall continue in full force and effect. 9. Insurance. --------- S&H agrees that for the term of this Agreement it shall cause Containers to obtain and maintain insurance for such risks and in such amounts similar to companies of comparable size which are engaged in similar business activities, provided that S&H shall be deemed to be in compliance with the -------- provisions of this paragraph if Containers maintains a level of insurance which -15- complies with the applicable terms of the Credit Agreement. 10. Indemnification. --------------- (a) Containers shall indemnify to the fullest extent permitted by law (as now or hereafter in effect) S&H and each of its Affiliates, officers, directors, employees, consultants and subcontractors, and any Person controlling S&H and each of its Affiliates or any such consultant or subcontractor (each, an "S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that any S&H Indemnitee is made, or threatened to be made, a defendant to, or is involved in any manner in, any action, suit or proceeding (whether civil, criminal, administrative, investigative or otherwise) by reason of the fact that such S&H Indemnitee is or was an agent of Containers. (b) In furtherance and not in limitation of the powers conferred by statute: (i) Containers may purchase and maintain insurance on behalf of any S&H Indemnitee as an agent of Containers against any liability asserted against any S&H Indemnitee and incurred by any S&H Indemnitee in such capacity, or arising out of any S&H Indemnitee's status as such, whether or not Containers would have the power to indemnify such S&H Indemnitee against such liability under the provisions of law; and (ii) Containers may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or -16- other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere. (c) The manner of any indemnification under this Agreement shall be in accordance with Section 2.8 of the Stockholders Agreement dated as of December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York Corporation, First Plaza Group Trust and Holdings (as amended from time to time, the "Stockholders Agreement"). 11. Noncompetition. -------------- (a) During the term of this Agreement, S&H hereby agrees that it will not, directly or indirectly, own, render services to, manage, operate, control, or participate in the ownership, management, operation or control of a business that is engaged in any "Business". For purposes hereof, the term "Business" shall mean the manufacture and sale anywhere in the world of consumer goods packaging products. (b) In the event that this Agreement is terminated by S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby agrees that, for a period of one year beginning on the date of such termination, it will not, directly or indirectly: (i) own, render services to, manage, operate, control, or participate in the ownership, management, -17- operation or control of a business that is engaged in any Business; (ii) interfere with any customer or supplier relationship between Holdings and/or its subsidiaries and any other person or business entity; or (iii) disclose or use any confidential or proprietary information relating to Holdings and its subsidiaries' businesses, except for any information already in the public domain through no act of S&H and except as may be required by law or governmental or court order. (c) Notwithstanding anything herein to the contrary, nothing herein, however, shall restrict S&H from making any investments in any company whose stock is listed on a national securities exchange or actively traded in the over-the-counter markets, so long as such investment does not give S&H the right to control or influence the policy decisions of any such company engaged in any Business. (d) If any particular provision or portion of this Section 11 shall be adjudicated to be invalid or unenforceable, this Section 11 shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable, and such amendment will apply only with respect to the operation of such provision or portion in the particular jurisdiction in which such adjudication was sought. (e) The parties recognize that the performance of the obligations under this Section 11 by S&H is special, unique and extraordinary in character, and that in the event of a breach, or threatened breach, of any of the terms and conditions of this Section 11, Containers shall be entitled, if it so -18- elects, in addition to any other remedies available to Containers, to enforce the specific performance thereof or to enjoin any breach thereof. 12. Notices. ------- All notices and other communications required by or specifically provided for in this Agreement shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) when sent by telex or telecopier with answerback received, or (c) seventy-two (72) hours after having been deposited in the U.S. mails, certified mail with return receipt requested and postage prepaid, and in any case addressed to the party for which it is intended at that party's address as set forth below, or at such other address as the addressee shall have designated by notice hereunder to the other party. If to S&H: S&H Inc. 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If to Containers: Silgan Containers Corporation 4 Landmark Square Suite 400 Stamford, CT 06901 Attention: R. Philip Silver If a notice is sent to any of the above, a copy shall be sent to the following: Winthrop, Stimson, Putnam & Roberts Financial Centre 695 East Main Street P.O. Box 6760 Stamford, CT 06904-6760 Attention: Frank W. Hogan, III, Esq. -19- Any notice or request sent by telecopier or similar facsimile telecommunication shall be confirmed promptly by the sending of a copy of such notice or request to the addressee thereof by prepaid certified mail, return receipt requested. 13. Definitions. ----------- Terms not defined herein which are defined in the Stockholders Agreement shall have the meanings ascribed to them therein. 14. Amendment; Assignment; Binding Effect. ------------------------------------- This Agreement may be amended or modified only by a written instrument signed by the parties hereto. No party shall assign or transfer this Agreement, in whole or in part, or any of such party's rights or obligations hereunder, to any other person or entity without the prior written consent of the other party hereto, except that S&H may transfer or assign all of its rights and obligations hereunder to any entity directly or indirectly succeeding to S&H by merger, consolidation or reorganization. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted assigns. 15. Waiver; Severability. -------------------- The failure of a party to insist in any instance upon the strict and punctual performance of any provision of this Agreement shall not constitute a continuing waiver of such provision. No party shall be deemed to have waived any right, power, or privilege under this Agreement or any provisions hereof unless such waiver shall have been in writing and duly executed by the party to be charged with such waiver, and such waiver -20- shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the waiving party or the obligations of any other party in any other respect or at any other time. If any provision of this Agreement shall be waived, or be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unaffected thereby and shall remain binding and in full force and effect. 16. Relationship of the Parties. --------------------------- In all matters relating to this Agreement, each party hereto shall be solely responsible for the acts of its employees, and employees of one party shall not be considered employees of the other party. Except as otherwise provided herein, no party shall have any right, or authority to create any obligation, express or implied, on behalf of any other party. 17. Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws rules and laws. 18. Entire Agreement; Termination of Original Management Services ------------------------------------------------------------- Agreement. - --------- This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, either oral or written, with respect thereto. Upon the execution and delivery of this Agreement, the Original Management Services Agreement shall be terminated and shall be of no effect whatsoever. -21- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. S&H INC. By: ------------------------------------ Title: SILGAN CONTAINERS CORPORATION By: ------------------------------------ Title: -22- SCHEDULE I (000's Omitted)
Scheduled Amount/1/ Maximum Amount/1/ ---------------- - -------------- - 1997 $ 89,500 1997 $100,504 1998 95,500 1998 102,964 1999 101,500 1999 105,488 2000 108,653 2000 108,653
- --------------- 1. For each calendar year after 2000, the Scheduled Amount for such calendar year shall be an amount equal to the Maximum Amount for such calendar year. For each calendar year after 2000, the Maximum Amount for such calendar year shall be equal to one hundred and three percent (103%) of the Maximum Amount for the prior calendar year. EX-23.1 8 CONSENT OF ERNST & YOUNG LLP. EXHIBIT 23.1 Consent of Independent Auditors We consent to the references to our firm under the captions "Selected Historical and Pro Forma Financial Data" and "Experts" and to the use of our report dated January 31, 1997 with respect to the consolidated financial statements of Silgan Holdings Inc. included in Amendment No. 5 to the Registration Statement (Form S-2, No. 333-11989) and related Prospectus of Silgan Holdings Inc. for the registration of 4,500,000 shares of its common stock. /s/ ERNST & YOUNG LLP Stamford, Connecticut February 12, 1997 EX-23.2 9 CONSENT OF PRICE WATERHOUSE LLP. EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of this Amendment No. 5 to the Registration Statement on Form S-2 of Silgan Holdings Inc. of our report dated September 14, 1995 relating to the financial statements of the Food Metal & Specialty Division of American National Can Company, as of December 31, 1994 and 1993 and for each of the three years in the period ended December 31, 1994, which appears in the Current Report on Form 8-K/A of Silgan Holdings Inc. dated October 16, 1995. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ PRICE WATERHOUSE LLP Chicago, Illinois February 10, 1997 -----END PRIVACY-ENHANCED MESSAGE-----