<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1996
REGISTRATION NO. 333-11989
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
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. [_]
----------------
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.
- -------------------------------------------------------------------------------
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 NOVEMBER 4, 1996
3,500,000 SHARES
[LOGO OF SILGAN HOLDINGS INC. APPEARS HERE]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------
All of the shares of Common Stock offered hereby are being sold by the
Company. 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 $17 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.
Application has been made for quotation of the Common Stock 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.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total(3)................................ $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $1,277,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 525,000 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 and proceeds to Company 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 November , 1996, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
----------
The date of this Prospectus is November , 1996.
<PAGE>
[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.
<PAGE>
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 14.2569 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"; (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 $18.50; and (iv) all net sales, unit sales
and market share data for 1995 give pro forma effect to the acquisition of
substantially all of the assets of the Food Metal and Specialty business ("AN
Can") of American National Can Company ("ANC"). 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 during 1995 of 36% in the United States, and is a leading
manufacturer of plastic containers in North America for personal care products.
The Company's strategy is to 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 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 $678.2 million in 1991
to $1,404.4 million in 1995, representing a compound annual growth rate of
approximately 20%. During this period, pro forma for the AN Can acquisition,
income from operations increased from $39.3 million in 1991 to $107.4 million
in 1995, representing a 29%
3
<PAGE>
compound annual growth rate, while the Company's income from operations as a
percentage of net sales increased 1.9 percentage points from 5.8% to 7.7% over
the same period (in each case without giving effect to a charge of $14.7
million in 1995 to adjust the carrying value of certain assets).
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 36% in 1995. 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
$219.6 million in 1995. 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
4
<PAGE>
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 $83.6 million in 1995.
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 $254.1 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
beginning 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.
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,
5
<PAGE>
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 33.8% (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 42.3% (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 1995, Containers had net sales of $1,184.8 million (84% of
the Company's net sales) and pro forma income from operations of $95.7 million
(88% of the Company's pro forma income from operations) (without giving effect
to corporate expense and a charge of $14.7 million in 1995 to adjust the
carrying value of certain assets). Containers manufactures metal containers for
vegetables, fruit, pet food, meat, tomato based products, coffee, soup, seafood
and evaporated milk. The Company estimates that approximately 85% of
Containers' sales in 1996 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 1995, Containers had net sales of specialty packaging items
of $83.6 million.
PLASTICS. For 1995, Plastics had net sales of $219.6 million (16% of the
Company's net sales) and income from operations of $13.2 million (12% of the
Company's pro forma income from operations) (without giving effect to corporate
expense and a charge of $14.7 million in 1995 to adjust the carrying value of
certain assets). Plastics emphasizes value-added design, fabrication and
decoration of custom containers in its business. Plastics manufactures custom
designed HDPE containers for health and personal care products, including
containers for shampoos, conditioners, hand creams, lotions, cosmetics and
toiletries, household chemical products, including containers for scouring
cleaners, cleaning agents and lawn and garden chemicals and pharmaceutical
products, including containers for tablets, antacids and eye cleaning
solutions. Plastics also manufactures PET custom designed containers for
mouthwash, respiratory and gastrointestinal products, liquid soap, skin care
lotions, salad dressings, condiments, instant coffee, bottled water and liquor.
RECENT DEVELOPMENTS
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).
6
<PAGE>
FINANCIAL RESULTS
The Company recently announced its financial results for the nine months
ended September 30, 1996. For this period, net sales were $1,080.5 million
compared with $811.5 million and $1,114.0 million, historical and pro forma for
the AN Can acquisition, respectively, for the same period in the prior year.
Benefits realized from the acquisition of AN Can and improved operating
performance resulted in substantially higher income from operations for the
nine months ended September 30, 1996, which was $101.7 million compared with
$69.4 million and $92.4 million, historical and pro forma for the AN Can
acquisition, respectively, for the same period in the prior year. Net income
during this period increased to $27.0 million, compared with a net loss of
$0.024 million and net income of $16.2 million, historical and pro forma for
the AN Can acquisition, respectively, for the same period in the prior year.
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 $19.6
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.................... 3,500,000 shares
Common Stock to be
outstanding after this
offering (the
"Offering")................ 16,117,357 shares(a)
Use of Proceeds............. The net proceeds from the Offering will be
used to redeem the remaining Discount
Debentures. See "Use of Proceeds".
Proposed Nasdaq Symbol...... SLGN
- --------
(a) Excludes 2,939,416 shares of Common Stock reserved for issuance under the
Silgan Holdings Inc. Stock Option Plan (the "Stock Option Plan"). There are
currently 1,513,726 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
$2.618 per share.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical and pro forma consolidated financial
information of Holdings were derived from, and should be read in conjunction
with, the historical financial statements and pro forma financial information
of Holdings, including the notes thereto, included elsewhere in this
Prospectus.
The summary unaudited pro forma net income per common share data for the nine
months ended September 30, 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 September 30, 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 operating data and other data for the fiscal
year ended December 31, 1995 give effect to (i) the acquisition of AN Can, (ii)
borrowings under the Silgan Credit Agreement which were used to (a) finance the
acquisition of AN Can, (b) repay in full amounts owing under the Company's
previous credit agreement and Silgan's Senior Secured Floating Rate Notes due
1997 (the "Secured Notes"), and (c) repurchase $61.7 million principal amount
at maturity of Discount Debentures, and (iii) the Refinancing, as if such
events had occurred as of January 1, 1995.
The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if such events had in fact occurred as of such dates or at the
beginning of the periods presented, or to project the Company's financial
position or results of operations for any future date or period. The unaudited
pro forma financial data and accompanying notes should be read in conjunction
with the unaudited pro forma condensed statements of operations and the
historical financial information of Holdings, including the notes thereto,
included elsewhere in this Prospectus.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ----------------------
PRO FORMA
1995(A) 1995(B) 1994(C) 1993(C) 1996(B) 1995(B)
----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,404.4 $ 1,101.9 $ 861.4 $ 645.5 $ 1,080.5 $ 811.5
Cost of goods sold...... 1,239.6 970.5 748.3 571.2 936.4 711.0
---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 164.8 131.4 113.1 74.3 144.1 100.5
Selling, general and
administrative
expenses............... 57.4 46.9 38.0 32.5 42.4 31.1
Reduction in carrying
value of assets(d)..... 14.7 14.7 16.7 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Income from
operations(e).......... 92.7 69.8 58.4 41.8 101.7 69.4
Interest expense and
other related financing
costs.................. 79.6 80.7 65.8 54.3 68.3 57.7
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 13.1 (10.9) (7.4) (12.5) 33.4 11.7
Income tax provision.... 2.0 5.1 5.6 1.9 3.0 5.9
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 11.1 (16.0) (13.0) (14.4) 30.4 5.8
---------- ---------- ---------- ---------- ---------- ----------
Extraordinary charges
relating to early
extinguishment of
debt(f)................ -- (5.8) -- (1.3) (2.1) (5.8)
Cumulative effect of
changes in accounting
principles(g).......... -- -- -- (6.3) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) before
preferred stock
dividend
requirement(f)......... 11.1 (21.8) (13.0) (22.0) 28.3 --
Preferred stock dividend
requirement............ -- -- -- -- 1.3 --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders(f)........ $ 11.1 $ (21.8) $ (13.0) $ (22.0) $ 27.0 $ --
========== ========== ========== ========== ========== ==========
Net income (loss) per
common share(e)(f)(h):
Income (loss) before
extraordinary
charges............... $ 0.53 $ (0.93) $ (0.76) $ (1.05) $ 1.76 $ 0.34
Extraordinary charges.. -- (0.34) -- (0.10) (0.13) (0.34)
Cumulative effect of
accounting changes.... -- -- -- (0.46) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total................. $ 0.53 $ (1.27) $ (0.76) $ (1.61) $ 1.63 $ 0.00
========== ========== ========== ========== ========== ==========
Pro forma net income per
common
share(a)(e)(f)(h)...... $ 2.08
==========
Weighted average number
of common and
common equivalent
shares outstanding(i).. 20,981,092 17,138,927 17,138,927 13,662,587 16,560,874 17,138,927
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,184.8 $ 882.3 $ 657.1 $ 459.2 $ 917.8 $ 642.9
Plastic container
business.............. 219.6 219.6 204.3 186.3 162.7 168.6
Income (loss) from
operations:(e)(j)
Metal container
business.............. 81.0 58.2 59.8 42.3 89.4 60.6
Plastic container
business.............. 13.2 13.2 (0.1) 0.6 13.1 9.8
OTHER DATA:
Adjusted EBITDA(k)...... $ 169.0 $ 132.4 $ 114.5 $ 76.1 $ 148.0 $ 99.4
Adjusted EBITDA as a
percentage of net
sales.................. 12.0% 12.0% 13.3% 11.8% 13.7% 12.2%
Income (loss) from
operations as a
percentage of net
sales.................. 6.6 6.3 6.8 6.5 9.4 8.6
Capital expenditures.... $ 54.9 $ 51.9 $ 29.2 $ 42.5 $ 38.6 $ 30.4
Depreciation and
amortization(l)........ 57.9 45.4 37.2 33.8 43.5 28.6
Cash flows provided by
(used for) operating
activities............. -- 209.6 47.3 48.1 (48.0) 16.8
Cash flows used for
investing activities... -- (397.1) (27.9) (116.1) (50.2) (374.1)
Cash flows provided by
(used for) financing
activities............. -- 186.9 (17.0) 65.3 99.0 358.5
Number of employees (at
end of period)(m)...... 5,110 5,110 4,000 3,330 -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL PRO FORMA(A)
-------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA (at end of period):
Total assets............................................. $1,006.2 $1,005.3
Total long-term debt..................................... 732.3 724.7
Deficiency in stockholders' equity....................... (188.6) (127.8)
</TABLE>
(footnotes follow)
9
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) The unaudited pro forma net income per common share and balance sheet data
for the nine months ended September 30, 1996 and the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 assume
gross proceeds from the Offering of $64.75 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 nine months ended September 30, 1996 and the year ended
December 31, 1995, see the unaudited pro forma condensed statement of
operations, including the notes thereto, included elsewhere in this
Prospectus. The unaudited pro forma financial information for the year
ended December 31, 1995 does not give effect to adjustments for decreased
costs from manufacturing synergies resulting from the integration of AN Can
with Containers' existing can manufacturing operations and benefits the
Company may realize as a result of its planned rationalization of plant
operations.
(b) 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, 1995
included elsewhere in this Prospectus.
(c) 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. See Note 3 to
the Consolidated Financial Statements for the year ended December 31, 1995
included elsewhere in this Prospectus.
(d) 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.
(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
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 $16.1 million, assuming an initial public offering price of
$18.50 per share, net of $3.5 million previously accrued, at the time of
the Offering in the Company's fourth quarter in 1996, 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.
(f) The unaudited pro forma net income per common share data for the nine
months ended September 30, 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 fourth quarter
of 1996 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". In addition, the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 does not
include the historical extraordinary charge, net of taxes, incurred in 1995
as a result of the early extinguishment of amounts owing under the
Company's debt facilities.
10
<PAGE>
(g) 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.
(h) 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 feature as described in footnote (e) 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, 1995, was $(0.82) for the year ended December 31, 1995 and
$1.61 for the nine months ended September 30, 1996.
(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 (pro forma and historical) and 1994 and for the
plastic containers business of $9.5 million for the year ended December 31,
1994, as referred to in footnote (d) 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 $2.3 million and $0.8 million for the nine
months ended September 30, 1996 and 1995, respectively, and $1.7 million,
$0.7 million and $0.5 million for the years ended December 31, 1995, 1994
and 1993, respectively), 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 $0.6 million for each of the nine months ended September 30,
1996 and 1995, and $0.8 million and $1.5 million for the years ended
December 31, 1995 and 1994, respectively). 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
11
<PAGE>
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
<PAGE>
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
September 30, 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 $879.1 million of total consolidated indebtedness. The Company
may incur significant amounts of additional indebtedness in the future,
particularly in connection with acquisitions. 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
September 30, 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 $127.8 million. The Company has
experienced net losses in every year since its inception, primarily as a
result of interest expense on its indebtedness. See "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
<PAGE>
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. On a pro
forma basis after giving effect to the acquisition of AN Can in 1995,
approximately 17% and 11% of the Company's sales in 1995 would have been to
Nestle and Del Monte, respectively. Certain Nestle Supply Agreements expire in
August 1997 (representing approximately 6% of the Company's 1995 pro forma
sales). Although the Company intends to make every effort to extend the Nestle
Supply Agreements on reasonable terms and conditions, there can be no
assurance that these Nestle Supply Agreements will be extended. In addition,
there can be no assurance that the extension of any Nestle Supply Agreement
will be made with sales prices equivalent to those currently in effect or
otherwise on terms similar to those currently in effect. Under certain limited
circumstances, Nestle and, beginning in December 1998, Del Monte 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 Nestle Supply Agreements that expire in August 1997 are not extended or if
the Company otherwise 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
The Company's metal container business sales are dependent, in part, upon
the vegetable, tomato and fruit harvests in the midwest and western regions of
the United States. The size and quality of these harvests varies from year to
year, depending in large part upon the weather conditions in those regions,
and the Company's results of operations could be impacted accordingly. The
Company's results of operations could be materially adversely affected in a
year in which crop yields
14
<PAGE>
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".
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".
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 73.9% of
the outstanding Common Stock (approximately 71.5% 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 on the date of this Prospectus, 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",
"Securities Ownership of Certain Beneficial Owners and Management" and
"Description of Capital Stock".
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, the Company will have
outstanding 16,117,357 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
15
<PAGE>
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. 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 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% Senior Subordinated
Notes due 2002 (the "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 application has been made for quotation of the Common Stock on the
Nasdaq National Market, 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 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.
16
<PAGE>
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 Offering are estimated to be $59.0
million ($68.0 million if the Underwriters' over-allotment option is exercised
in full), after deducting the underwriting discount and estimated offering
expenses payable by the Company. 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. Pending the redemption of the
remaining Discount Debentures which is expected to occur prior to the end of
1996, 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 Guarantee (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" and "Description of
Certain Indebtedness".
17
<PAGE>
DILUTION
As of September 30, 1996, the Company had a deficit in net tangible book
value of approximately $284.1 million or $22.51 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
September 30, 1996, other than to give effect to (i) the sale by the Company
of the 3,500,000 shares of Common Stock offered hereby (at an assumed initial
public offering price of $18.50 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, the pro
forma deficit in net tangible book value of the Common Stock as of September
30, 1996 would have been approximately $225.1 million or $13.96 per share.
This represents an immediate decrease in pro forma deficit in net tangible
book value of $8.55 per share of Common Stock to existing stockholders and an
immediate dilution in pro forma net tangible book value of $32.46 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 September 30, 1996. The following
table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........ $ 18.50
Deficit in net tangible book value per share as of
September 30, 1996.................................... $(22.51)
Decrease in deficit in net tangible book value per
share attributable to the Offering and the application
of the proceeds therefrom............................. 8.55
-------
Pro forma deficit in net tangible book value per share
as of September 30, 1996 after giving effect to the
Offering and the application of the proceeds
therefrom............................................. (13.96)
-------
(Dilution) per share to new stockholders............... $(32.46)
=======
</TABLE>
The following table sets forth, on a pro forma basis as of September 30,
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.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 12,617,357 78.3% $18,618,000 22.3% $1.48
New stockholders........ 3,500,000 21.7 64,750,000 77.7 18.50
---------- ----- ----------- -----
Total................. 16,117,357 100.0% $83,368,000 100.0% $5.17
========== ===== =========== =====
</TABLE>
The calculations in the tables set forth above do not reflect an aggregate
of 2,939,416 shares of Common Stock reserved for issuance under the Stock
Option Plan. There are currently 1,513,726 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 $2.618 per share. See "Management--Executive Compensation". To
the extent outstanding options to purchase Common Stock are exercised, there
will be further dilution.
18
<PAGE>
CAPITALIZATION
The following table sets forth (i) the unaudited actual consolidated
capitalization of Holdings as of September 30, 1996, and (ii) the unaudited
pro forma consolidated capitalization of Holdings as of September 30, 1996,
giving effect to the Offering (assuming gross proceeds of $64.75 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.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
(UNAUDITED)
ACTUAL PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Term loans................................. $ 538,348 $ 538,348
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... -- 51,307
----------- -----------
Total long-term debt(a).................. 732,288 724,655
=========== ===========
Cumulative exchangeable redeemable preferred
stock....................................... 51,307 --
DEFICIENCY IN STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share,
100,000,000 shares authorized, 885,000
shares issued and outstanding (actual),
12,617,357 shares issued and outstanding
(as adjusted for the Stock Split), and
16,117,357 shares issued and outstanding
(pro forma)(b)............................ 9 161
Additional paid-in capital................. 18,609 96,062(c)
Accumulated deficit........................ (207,237) (224,024)(c)(d)
----------- -----------
Total deficiency in stockholders'
equity.................................. (188,619) (127,801)
----------- -----------
Total capitalization................... $ 594,976 $ 596,854
=========== ===========
</TABLE>
- --------
(a) 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 September 30, 1996, the outstanding
principal amount of revolving loans under the Silgan Credit Agreement was
$126.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity".
(b) Excludes 2,939,416 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 1,513,726 shares of Common
Stock. The weighted average exercise price for all of the options
currently outstanding under the Stock Option Plan is $2.618 per share.
(c) 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 $16.1 million
(assuming an initial public offering price of $18.50 per share), net of
$3.5 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.
(d) 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 will be incurred during the
fourth quarter of 1996.
19
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Set forth below are selected historical consolidated financial data of
Holdings at September 30, 1996 and 1995 and for the nine months then ended,
and at December 31, 1995, 1994, 1993, 1992 and 1991 and for the years then
ended. Also set forth below are unaudited pro forma consolidated financial
data of Holdings at September 30, 1996 and for the nine months then ended, and
for the fiscal year ended December 31, 1995.
The selected historical consolidated financial data of Holdings for the nine
months ended September 30, 1996 and 1995 is unaudited, but, in the opinion of
management, such information reflects all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the financial
data for the interim periods. The results for the interim periods presented
are not necessarily indicative of the results for the corresponding full
years. The selected historical consolidated financial data of Holdings at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 (with the exception of employee data) were derived from the
historical consolidated financial statements of Holdings for such periods that
were audited by Ernst & Young LLP, independent auditors, whose report appears
elsewhere in this Prospectus. The selected historical consolidated financial
data of Holdings at December 31, 1993, 1992 and 1991 and for the years ended
December 31, 1992 and 1991 were derived from the historical audited
consolidated financial statements of Holdings for such periods.
The unaudited pro forma net income per common share data for the nine months
ended September 30, 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
September 30, 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
selected unaudited pro forma operating data and other data for the fiscal year
ended December 31, 1995 give effect to (i) the acquisition of AN Can, (ii)
borrowings under the Silgan Credit Agreement which were used to (a) finance
the acquisition of AN Can, (b) repay in full amounts owing under the Company's
previous credit agreement and the Secured Notes, and (c) repurchase $61.7
million principal amount at maturity of Discount Debentures and (iii) the
Refinancing, as if such events had occurred as of January 1, 1995.
The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if such events had in fact occurred as of such dates or at the
beginning of the periods presented, or to project the Company's financial
position or results of operations for any future date or period. The selected
historical and pro forma consolidated financial information of Holdings were
derived from, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the unaudited
pro forma condensed statements of operations and the historical financial
statements and pro forma financial information of Holdings, including the
notes thereto, included elsewhere in this Prospectus.
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
(UNAUDITED)
1996 1995
--------------- ---------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Net sales............................... $ 1,080.5 $ 811.5
Cost of goods sold...................... 936.4 711.0
--------------- ---------------
Gross profit............................ 144.1 100.5
Selling, general and administrative
expenses............................... 42.4 31.1
--------------- ---------------
Income from operations(a)............... 101.7 69.4
Interest expense and other related
financing costs........................ 68.3 57.7
--------------- ---------------
Income before income taxes.............. 33.4 11.7
Income tax provision.................... 3.0 5.9
--------------- ---------------
Net income before extraordinary
charges................................ 30.4 5.8
Extraordinary charges relating to early
extinguishment of debt(b).............. (2.1) (5.8)
--------------- ---------------
Net income before preferred stock
dividend requirement(b)................ 28.3 --
Preferred stock dividend requirement.... 1.3 --
--------------- ---------------
Net income applicable to common
stockholders(b)........................ $ 27.0 $ --
--------------- ---------------
Net income per common share(c):
Income before extraordinary charges... $ 1.76 $ 0.34
Extraordinary charges................. (0.13) (0.34)
--------------- ---------------
Total............................... $ 1.63 $ 0.00
=============== ===============
Pro forma net income per common
share(a)(b)(c)(d)...................... $ 2.08
===============
Weighted average number of common and
common equivalent shares
outstanding(e)......................... 16,560,874 17,138,927
SELECTED SEGMENT DATA:
Net sales:
Metal container business.............. $ 917.8 $ 642.9
Plastic container business............ 162.7 168.6
Income from operations:(a)
Metal container business.............. 89.4 60.6
Plastic container business............ 13.1 9.8
OTHER DATA:
Adjusted EBITDA(f)...................... $ 148.0 $ 99.4
Adjusted EBITDA as a percentage of net
sales.................................. 13.7% 12.2%
Income from operations as a percentage
of net sales........................... 9.4 8.6
Capital expenditures.................... $ 38.6 $ 30.4
Depreciation and amortization(g)........ 43.5 28.6
Cash flows (used for) provided by
operating activities................... (48.0) 16.8
Cash flows used for investing
activities............................. (50.2) (374.1)
Cash flows provided by financing
activities............................. 99.0 358.5
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------------
(UNAUDITED)
PRO FORMA
1995 1996 1996(D)
-------- -------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets..................................... $1,067.3 $1,006.2 $1,005.3
Total long-term debt............................. 772.3 732.3 724.7
Deficiency in stockholders' equity............... (158.0) (188.6) (127.8)
</TABLE>
(footnotes follow)
21
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
PRO FORMA
1995(B)(D)(H)(I) 1995(J) 1994(K) 1993(K) 1992 1991(L)
---------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,404.4 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0 $ 678.2
Cost of goods sold...... 1,239.6 970.5 748.3 571.2 555.0 605.2
----------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 164.8 131.4 113.1 74.3 75.0 73.0
Selling, general and
administrative
expenses............... 57.4 46.9 38.0 32.5 32.8 33.7
Reduction in carrying
value of assets(m)..... 14.7 14.7 16.7 -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Income from
operations(a).......... 92.7 69.8 58.4 41.8 42.2 39.3
Interest expense and
other related financing
costs.................. 79.6 80.7 65.8 54.3 57.0 56.0
Minority interest
expense................ -- -- -- -- 2.7 3.9
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 13.1 (10.9) (7.4) (12.5) (17.5) (20.6)
Income tax provision.... 2.0 5.1 5.6 1.9 2.2 --
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 11.1 (16.0) (13.0) (14.4) (19.7) (20.6)
Extraordinary charges
relating to early
extinguishment of
debt(b)................ -- (5.8) -- (1.3) (23.6) --
Cumulative effect of
changes in accounting
principles(n).......... -- -- -- (6.3) -- --
----------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders(b)........ $ 11.1 $ (21.8) $ (13.0) $ (22.0) $ (43.3) $ (20.6)
=========== ========== ========== ========== ========== ==========
Net income (loss) per
common share(a)(b)(c):
Income (loss) before
extraordinary
charges............... $ 0.53 $ (0.93) $ (0.76) $ (1.05) $ (1.46) $ (1.52)
Extraordinary charges.. -- (0.34) -- (0.10) (1.74) --
Cumulative effect of
accounting changes.... -- -- -- (0.46) -- --
----------- ---------- ---------- ---------- ---------- ----------
Total.................. $ 0.53 $ (1.27) $ (0.76) $ (1.61) $ (3.20) $ (1.52)
=========== ========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares
outstanding(e)......... 20,981,092 17,138,927 17,138,927 13,662,587 13,574,702 13,574,702
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,184.8 $ 882.3 $ 657.1 $ 459.2 $ 437.4 $ 446.1
Plastic container
business.............. 219.6 219.6 204.3 186.3 192.6 232.1
Income (loss) from
operations:(a)(o)
Metal container
business.............. 81.0 58.2 59.8 42.3 40.7 36.6
Plastic container
business.............. 13.2 13.2 (0.1) 0.6 2.3 3.5
OTHER DATA:
Adjusted EBITDA(f)...... $ 169.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0 $ 72.1
Adjusted EBITDA as a
percentage of net
sales.................. 12.0% 12.0% 13.3% 11.8% 11.7% 10.6%
Income from operations
as a percentage of net
sales.................. 6.6 6.3 6.8 6.5 6.7 5.8
Capital expenditures.... $ 54.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4 $ 21.8
Depreciation and
amortization(g)........ 57.9 45.4 37.2 33.8 31.8 32.8
Cash flows provided by
operating activities... -- 209.6 47.3 48.1 15.4 61.2
Cash flows used for
investing activities... -- (397.1) (27.9) (116.1) (23.0) (9.8)
Cash flows provided by
(used for) financing
activities............. -- 186.9 (17.0) 65.3 8.6 (51.9)
Number of employees (at
end of period)(p)...... 5,110 5,110 4,000 3,330 3,340 3,560
BALANCE SHEET DATA (at
end of period):
Total assets............ -- $ 900.0 $ 504.3 $ 497.6 $ 389.0 $ 390.7
Total long-term debt.... -- 750.9 510.8 505.7 383.2 315.5
Redeemable preferred
stock of Silgan
(minority interest of
Holdings).............. -- -- -- -- -- 27.9
Deficiency in
stockholders' equity... -- (179.8) (158.0) (145.0) (138.0) (94.6)
</TABLE>
(footnotes follow)
22
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) 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 $16.1 million, assuming an
initial public offering price of $18.50 per share, net of $3.5 million
previously accrued, at the time of the Offering in the Company's fourth
quarter in 1996, for the excess of fair market value over grant price of
these options, less amounts previously accrued. The unaudited pro forma
financial data does 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.
(b) The unaudited pro forma net income per common share data for the nine
months ended September 30, 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 fourth
quarter of 1996 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". In addition, the unaudited
pro forma consolidated operating data for the year ended December 31, 1995
does not include the historical extraordinary charge, net of taxes,
incurred in 1995 as a result of the early extinguishment of amounts owing
under the Company's debt facilities.
(c) 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 feature as described in footnote (e) 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, 1995, was $(0.82) for the year ended
December 31, 1995 and $1.61 for the nine months ended September 30, 1996.
(d) The unaudited pro forma net income per common share and balance sheet data
for the nine months ended September 30, 1996 and the unaudited pro forma
consolidated operating data for the year ended December 31, 1995 assume
gross proceeds from the Offering of $64.75 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 nine months ended September 30, 1996 and the year ended
December 31, 1995, see the unaudited pro forma condensed statement of
operations, including the notes thereto, included elsewhere in this
Prospectus. For purposes of the pro forma financial information for the
year ended December 31, 1995, balance sheet data is not included.
(e) The weighted average number of common and common equivalent shares
outstanding gives effect to the Stock Split.
(f) "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 (including minority 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
$2.3 million and $0.8 million for the nine months ended September 30,
23
<PAGE>
1996 and 1995, respectively, and $1.7 million, $0.7 million and $0.5
million for the years ended December 31, 1995, 1994 and 1993,
respectively), 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 $0.6 million for each of
the nine months ended September 30, 1996 and 1995, and $0.8 million and
$1.5 million for the years ended December 31, 1995 and 1994, respectively).
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.
(g) Depreciation and amortization excludes amortization of debt financing
costs.
(h) Historical interest expense is reconciled to pro forma interest expense
for the year ended December 31, 1995 as follows:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1995
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Historical interest expense........................... $ 80.7
Increase in interest expense to give effect to AN Can
acquisition(1)....................................... 8.4
Increase in interest expense related to bank
borrowings used to fund Discount Debenture
repurchase/redemption(1)............................. 13.3
Increase in interest expense related to the exchange
of the Exchangeable Preferred Stock for the Exchange
Debentures........................................... 6.8
Decrease in interest expense related to
the repurchase/
redemption of all of the Discount Debentures......... (28.7)
Net change in amortization of deferred financing
costs................................................ ( .9)
------
Pro forma interest expense............................ $ 79.6
======
</TABLE>
- --------
(1) For purposes of the above computations, the assumed interest rate for
borrowings under the Silgan Credit Agreement is based upon the three
month LIBOR of 5.53% per annum as of October 23, 1996 plus a fixed
spread of 2 1/2% per annum for the A term loans and working capital
loans and 3% per annum for the B term loans.
(i) The unaudited pro forma financial information for the year ended December
31, 1995 includes the historical results of the Company and AN Can and
gives effect to certain pro forma adjustments including purchase
accounting adjustments which are based on appraisals and valuations, the
financing of the acquisition of AN Can by the Company and the refinancing
of certain of the Company's debt obligations and certain other
adjustments, as if these events had occurred as of the beginning of 1995.
During the second quarter of 1996, the purchase price allocation for the
AN Can acquisition was adjusted 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 costs of plant
rationalizations, administrative workforce reductions and other matters,
which in aggregate
24
<PAGE>
resulted in an adjustment to increase goodwill by $20.7 million. Pro forma
cost of goods sold includes adjustments for (i) increased depreciation
charges of $2.3 million based upon the fair values of property, plant and
equipment and applying an estimated useful life of 25 years for buildings
and 5 to 11 years for machinery and equipment, (ii) increased amortization
of $0.4 million for the excess of fair value of net assets acquired over a
40-year period, and (iii) increased employee benefits costs for pension and
post-retirement medical of $0.2 million. Pro forma selling, general and
administrative expenses include adjustments for (i) increased depreciation
charges of $0.1 million and (ii) decreased administrative support costs of
$7.6 million realized as a result of integration of the Company's and AN
Can's sales, administrative and research functions. The unaudited pro forma
financial information for the year ended December 31, 1995 does not give
effect to adjustments for decreased costs from manufacturing synergies
resulting from the integration of AN Can with Containers' existing can
manufacturing operations and benefits the Company may realize as a result of
its planned rationalization of plant operations.
(j) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility
in May 1996 for $13.1 million). The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date. See Note 3 to
the Consolidated Financial Statements for the year ended December 31, 1995
included elsewhere in this Prospectus.
(k) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 million. The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date. See Note 3 to
the Consolidated Financial Statements for the year ended December 31, 1995
included elsewhere in this Prospectus.
(l) On November 15, 1991, the Company sold its PET carbonated beverage bottle
business. In 1991, sales from the PET carbonated beverage business were
$33.4 million. See "Business--Company History".
(m) 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.
(n) 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.
(o) 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 (pro forma and historical) and 1994 and for the
plastic containers business of $9.5 million for the year ended December 31,
1994, as referred to in footnote (m) above. Income from operations excludes
corporate expense for both the metal container and plastic container
businesses.
(p) 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.
25
<PAGE>
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 during 1995 of 36% in the United States, and is a
leading manufacturer of plastic containers in North America for personal care
products. The Company has focused on growth through acquisitions, followed by
plant rationalizations and consolidations and investment in the acquired
businesses to gain manufacturing and production efficiencies and to provide
for internal growth. Since its inception, the Company has acquired 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
has begun 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.
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 production 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
existing
26
<PAGE>
metal container business. The Company anticipates that it will fully realize
the benefits of integrating these selling, general and administrative
functions and certain of the manufacturing synergies by late 1996. On the
other hand, benefits which may be realized by rationalization of plant
operations will not begin to occur before 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 will be
incurring in 1996, other non-recurring costs which under current accounting
pronouncements will be charged against operating income. These costs, which
include redundant charges related to the integration of administrative and
general functions, as well as costs associated with plant rearrangement and
clean-up, were $3.2 million in 1995 and are expected to be approximately $5.0
million in 1996.
NET SALES
LONG-TERM CONTRACTS. The Company seeks to develop and maintain long-term
relationships with its customers. The Company estimates that approximately 85%
of Containers' sales in 1996 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 28% of net sales by
Containers in 1995. 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 is negotiating the
extension of supply arrangements with many customers, including certain supply
arrangements with Nestle that expire in 1997 and represent approximately 6% of
the Company's 1995 sales. There can be no assurance that the Company will be
successful in its efforts to maintain this volume on the same terms and
conditions that currently exist. 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. The Company's metal container business sales are
dependent, in part, upon the vegetable, tomato and fruit harvests in the
midwest and western regions of the United States. The size and quality of
these harvests varies from year to year, depending in large part upon the
weather conditions in those regions. The fruit and vegetable pack harvest in
1994 was better than the below normal fruit and vegetable pack harvest in
1995, resulting in greater sales to fruit and vegetable pack processing
customers in 1994 as compared to 1995. The 1996 midwest vegetable harvest was
better than in 1995, but, due to cool wet weather during the 1996 planting
season, was less than the harvest in 1994. See "Risk Factors--Dependence on
Agricultural Harvest". Although the Company's business is not affected to a
substantial degree by seasonal variations, the Company experiences higher unit
sales volume in the third quarter as a result of the harvest.
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
27
<PAGE>
have refinanced all of the Discount Debentures. The net result of these
refinancings will be approximately $19.6 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).
As of September 30, 1996, pro forma for the Refinancing, the Company will
have $879.1 million of indebtedness outstanding, including $126.0 million of
working capital loans. 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 September 30, 1996, on a pro forma basis after
giving effect to the Refinancing and including seasonal working capital of
$126.0 million, 67.4% 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 $100 million. Under these agreements, floating rate
interest was exchanged for fixed rates of interest ranging from 8.1% to 8.6%.
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.
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 during 1995 and 1996 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. Upon completion of the Refinancing, the Company estimates
it will have a regular net operating loss carryforward of approximately $185.0
million, which will have resulted principally from both the deduction of the
accreted interest on the Discount Debentures and significant tax depreciation
deductions from the acquisition of AN Can. 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.
28
<PAGE>
BOOK ACCOUNTING IMPLICATIONS. Although the Company has historically reported
book losses, it has not been permitted in accordance with SFAS 109 to record
an income tax credit for the benefit of its net operating loss carryforward,
but instead has provided a provision for income taxes based upon federal,
state and foreign taxes currently payable. In accordance with SFAS 109, the
Company will continue to provide for income taxes based upon taxes currently
payable, which are estimated to be approximately $3.0 million for 1996 and
$5.0 million for 1997. During 1997, management expects that it will meet the
requirements under SFAS 109 to record the benefit of its net operating loss
carryforward and as a result will record a net deferred tax asset and
offsetting income tax benefit in that year. Thereafter, the Company expects to
provide for income taxes at the statutory rate.
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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ------------------
(UNAUDITED)
PRO FORMA
1995 1995 1994 1993 1996 1995
----------- ----- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Metal container
business................ 84.4% 80.1% 76.3% 71.1% 84.9% 79.2%
Plastic container
business................ 15.6 19.9 23.7 28.9 15.1 20.8
----- ----- ----- ----- -------- --------
Total.................... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of goods sold........ 88.3 88.1 86.9 88.5 86.7 87.6
----- ----- ----- ----- -------- --------
Gross profit.............. 11.7 11.9 13.1 11.5 13.3 12.4
Selling, general and
administrative expenses.. 4.1 4.3 4.4 5.0 3.9 3.8
Reduction in carrying
value of assets.......... 1.0 1.3 1.9 -- -- --
----- ----- ----- ----- -------- --------
Income from operations.... 6.6 6.3 6.8 6.5 9.4 8.6
Interest expense and other
related financing costs.. 5.6 7.3 7.6 8.4 6.3 7.2
----- ----- ----- ----- -------- --------
Income (loss) before
income taxes............. 1.0 (1.0) (0.8) (1.9) 3.1 1.4
Income tax provision...... 0.1 0.5 0.7 0.3 0.3 0.7
----- ----- ----- ----- -------- --------
Income (loss) before
extraordinary charges and
cumulative effect of
changes in accounting
principles............... 0.9 (1.5) (1.5) (2.2) 2.8 0.7
Extraordinary charges
relating to early
extinguishment of debt... -- (0.5) -- (0.2) (0.2) (0.7)
Cumulative effect of
changes in accounting
principles............... -- -- -- (1.0) -- --
----- ----- ----- ----- -------- --------
Net income (loss) before
preferred stock dividend
requirement.............. 0.9 (2.0) (1.5) (3.4) 2.6 --
Preferred stock dividend
requirement.............. -- -- -- -- (0.1) --
----- ----- ----- ----- -------- --------
Net income (loss)
applicable to common
stockholders............. 0.9% (2.0)% (1.5)% (3.4)% 2.5% -- %
===== ===== ===== ===== ======== ========
Pro forma net income per
common share............. 3.3%
========
</TABLE>
29
<PAGE>
RESULTS OF OPERATIONS--NINE MONTHS
Summary unaudited historical results for the Company's two business
segments, metal and plastic containers, for the nine months ended September
30, 1996 and 1995 and summary pro forma results for these business segments
for the nine months ended September 30, 1995 (after giving effect to the
acquisition of AN Can as of the beginning of 1995) are provided below.
The pro forma data includes the historical results of the Company and AN Can
and reflects the effect of purchase accounting adjustments based on final
appraisals and valuations, the financing of the acquisition of AN Can, the
refinancing of certain of the Company's debt obligations, and certain other
adjustments, as if these events occurred as of the beginning of the period
presented. The 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
period indicated, or to project the Company's financial position or results of
operations for any future date or period. The pro forma financial data do not
give effect to adjustments for decreased costs from manufacturing synergies
resulting from the integration of AN Can with Containers' existing can
manufacturing operations and benefits the Company may realize as a result of
its planned rationalization of plant operations. The pro forma information
presented should be read in conjunction with the historical results of
operations of the Company for the periods ended September 30, 1996 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
HISTORICAL PRO FORMA
---------------------- -------------
1996 1995 1995
----------- --------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales:
Metal container business................ $ 917.8 $ 642.9 $ 945.4
Plastic container business.............. 162.7 168.6 168.6
----------- --------- -----------
Consolidated.......................... $ 1,080.5 $ 811.5 $ 1,114.0
Income from operations:
Metal container business................ $ 89.4 $ 60.6 $ 83.6
Plastic container business.............. 13.1 9.8 9.8
Corporate expense....................... (0.8) (1.0) (1.0)
----------- --------- -----------
Consolidated.......................... $ 101.7 $ 69.4 $ 92.4
</TABLE>
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH HISTORICAL NINE
MONTHS ENDED SEPTEMBER 30, 1995
NET SALES. Consolidated net sales increased $269.0 million, or 33.1%, to
$1,080.5 million for the nine months ended September 30, 1996, as compared to
net sales of $811.5 million for the same nine months in the prior year. 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 $66.2 million) were $917.8 million for the nine months
ended September 30, 1996, an increase of $274.9 million from net sales of
$642.9 million for the same period in 1995. Net sales of metal cans of $851.6
million for the nine months ended September 30, 1996 were $227.7 million
greater than net sales of metal cans of $623.9 million for the same period in
1995. This increase resulted from net sales of approximately $236.0 million
generated from the former AN Can operations 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
$47.2 million to $66.2 million during the nine months ended September 30, 1996
as compared to the same period in 1995, due predominantly to additional sales
generated by the former AN Can operations.
30
<PAGE>
Net sales for the plastic container business of $162.7 million during the
nine months ended September 30, 1996 decreased $5.9 million from net sales of
$168.6 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.
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 86.7% ($936.4 million) for the nine months ended September 30, 1996,
a decrease of 0.9 percentage points as compared to 87.6% ($711.0 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 increased
0.1 percentage points to 3.9% ($42.4 million) for the nine months ended
September 30, 1996, as compared to 3.8% ($31.1 million) for the nine months
ended September 30, 1995. This increase in selling, general and administrative
expenses as a percentage of net sales principally reflects redundant costs,
estimated to be $4.0 million, associated with the integration of the AN Can
operations. Beginning in 1997, redundant costs are expected to decline as the
Company 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 0.8 percentage points to 9.4% ($101.7
million) for the nine months ended September 30, 1996, as compared with 8.6%
($69.4 million) for the same period in the prior year. This increase in income
from operations as a percentage of consolidated net sales was primarily
attributable to the aforementioned improvement in gross margin.
Income from operations as a percentage of net sales for the metal container
business improved to 9.7% ($89.4 million) for the nine months ended September
30, 1996, from 9.4% ($60.6 million) for the same period in the prior year.
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 8.1% ($13.1 million) for the nine months ended
September 30, 1996, from 5.8% ($9.8 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 $10.6 million to $68.3 million
for the nine months ended September 30, 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. Due to the benefit of the redemption of the
Discount Debentures, interest expense for the fourth quarter of 1996 and the
first and second quarters of 1997 will decline significantly from the
comparable quarters in the prior years.
31
<PAGE>
INCOME TAXES. The provisions for income taxes for the nine months ended
September 30, 1996 and 1995 provide for federal, state and foreign taxes
currently payable. The decrease in the provision for income taxes of $2.9
million for the nine months ended September 30, 1996 as compared to the same
period in the prior year 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 $30.4
million (before extraordinary charges of $2.1 million and the preferred stock
dividend requirement of $1.3 million) increased $24.6 million for the nine
months ended September 30, 1996, as compared to net income of $5.8 million
(before extraordinary charges of $5.8 million) for the nine months ended
September 30, 1995.
During the third quarter of 1996 the Company incurred an extraordinary
charge of $2.1 million, net of taxes, for the write-off of unamortized debt
cost associated with the early redemption of Discount Debentures. In the third
quarter of 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 such Discount Debentures.
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH PRO FORMA NINE
MONTHS ENDED SEPTEMBER 30, 1995
NET SALES. Consolidated net sales for the nine months ended September 30,
1996 declined $33.5 million as compared to pro forma consolidated net sales
for the same period in the prior year. This decline in net sales resulted
primarily from a decline in sales by the metal container business of $27.6
million, which was principally attributable to the loss of an AN Can customer
whose product line was acquired by a company that manufactured its own cans
and, to a lesser extent, volume losses with certain other customers, offset,
in part, by increased unit sales due to a better vegetable pack harvest in
1996 as compared to 1995. Although the plastic container business had
increased unit volume in 1996, net sales declined $5.9 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 nine months ended September 30, 1996 was 9.4%
($101.7 million), as compared to pro forma income from operations as a
percentage of pro forma consolidated net sales of 8.3% ($92.4 million) for the
nine months ended September 30, 1995. The increase in income from operations
for the nine months ended September 30, 1996 as compared to pro forma income
from operations for the same period in the prior year 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.
RESULTS OF OPERATIONS--YEAR END
Summary historical results for the Company's two business segments, metal
and plastic containers, for the calendar years ended December 31, 1995, 1994
and 1993 and summary pro forma results for these business segments for the
calendar years ended December 31, 1995 and 1994 (after giving effect to the
acquisition of AN Can as of the beginning of such periods) are provided below.
The pro forma data includes the historical results of the Company and AN Can
and reflects the effect of purchase accounting adjustments based on 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. For a
32
<PAGE>
description of such adjustments, see the unaudited pro forma condensed
statements of operations of the Company, including the notes thereto, included
elsewhere in this Prospectus. The unaudited pro forma combined financial data
do not purport to represent what the Company's financial position or results
of operations would actually have been had these transactions in fact occurred
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
pro forma financial data do not give effect to adjustments for decreased costs
from manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company may
realize as a result of its planned rationalization of plant operations. The
pro forma information presented should be read in conjunction with the
historical results of operations of the Company for the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
HISTORICAL PRO FORMA
------------------------ ------------------
1995 1994 1993 1995 1994
-------- ------ ------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Metal container business........ $ 882.3 $657.1 $459.2 $1,184.8 $1,253.7
Plastic container business...... 219.6 204.3 186.3 219.6 204.3
-------- ------ ------ -------- --------
Consolidated.................. $1,101.9 $861.4 $645.5 $1,404.4 $1,458.0
======== ====== ====== ======== ========
Income from operations:
Metal container business........ $ 72.9 $ 67.0 $ 42.3 $ 95.7 $ 107.6
Plastic container business...... 13.2 9.4 0.6 13.2 9.4
Reduction in asset value(1)..... (14.7) (16.7) -- (14.7) (23.8)
Write-down of goodwill(2)....... -- -- -- -- (26.7)
Restructuring expense(3)........ -- -- -- -- (10.1)
Corporate expense............... (1.6) (1.3) (1.1) (1.5) (1.4)
-------- ------ ------ -------- --------
Consolidated.................. $ 69.8 $ 58.4 $ 41.8 $ 92.7 $ 55.0
======== ====== ====== ======== ========
</TABLE>
- --------
(1) Included in the historical and pro forma income from operations of the
Company are charges incurred for the reduction of the carrying value of
certain underutilized equipment to net realizable value of $14.7 million
in 1995 allocable to the metal container business, and of $16.7 million in
1994, of which $7.2 million was allocable to the metal container business
and $9.5 million to the plastic container business. Additionally, pro
forma income from operations for 1994 includes a charge of $7.1 million
for the write-down of certain technologically obsolete equipment by AN
Can.
(2) Included in the historical financial information of AN Can as of December
31, 1994 is a charge of $26.7 million for the write-down of goodwill.
(3) Included in the pro forma income from operations for 1994 is a charge
incurred by AN Can of $10.1 million for shut down costs necessary to
realign the assets of the business more closely with the existing customer
base.
HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Consolidated net sales increased $240.5 million, or 27.9%, to
$1.1 billion for the year ended December 31, 1995, as compared to net sales of
$861.4 million for the same period in 1994. This increase resulted from net
sales of $264.3 million generated by AN Can since its acquisition in August
1995 and a $15.3 million increase in sales of plastic containers offset, in
part, by a decline in sales of metal containers to 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
33
<PAGE>
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 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)
34
<PAGE>
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 face amount 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.
PRO FORMA YEAR ENDED DECEMBER 31, 1995 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1994
NET SALES. Pro forma consolidated net sales for the year ended December 31,
1995 declined $53.6 million as compared to pro forma consolidated net sales
for the prior year. The decrease in net sales was primarily attributable to
lower unit volume resulting from the below normal 1995 vegetable pack and the
loss of an AN Can customer whose product line was acquired by a company with a
self-manufacturing capacity for that product.
INCOME FROM OPERATIONS. Pro forma income from operations as a percentage of
consolidated net sales (before unusual charges) for the year ended December
31, 1995 was 7.6% ($107.4 million) as compared to pro forma income from
operations as a percentage of consolidated net sales (before unusual charges)
for the year ended December 31, 1994 of 7.9% ($115.6 million). Management
believes that the decrease in income from operations was primarily
attributable to lower demand in 1995 for vegetable pack containers.
HISTORICAL YEAR ENDED DECEMBER 31, 1994 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1993
NET SALES. Consolidated net sales increased $215.9 million, or 33.4%, to
$861.4 million for the year ended December 31, 1994, as compared to $645.5
million for the same period in 1993. Approximately 81% of this increase
related to sales to Del Monte pursuant to the DM Supply Agreement entered into
by the Company on December 21, 1993 to supply substantially all of Del Monte's
metal container requirements for a period of ten years. The remainder of this
increase resulted principally from greater unit sales in both the metal
container and plastic container businesses.
Net sales for the metal container business (including paper containers) were
$657.1 million for the year ended December 31, 1994, an increase of $197.9
million (43.1%) over net sales for the metal
35
<PAGE>
container business of $459.2 million for the same period in 1993. Sales of
metal containers increased $201.6 million primarily as a result of the DM
Supply Agreement, which represented $174.7 million of this increase, and an
increase of $26.9 million in sales to all other customers. Sales of metal
containers increased principally from higher unit volume and reflected
continued growth in sales of pet food containers, as well as greater sales to
vegetable pack customers due to a larger than normal pack in 1994. Sales of
specialty items included in the metal container segment declined $3.7 million
to $9.6 million during 1994.
Net sales for the plastic container business of $204.3 million during the
year ended December 31, 1994 increased $18.0 million, or 9.7%, over net sales
of plastic containers of $186.3 million for the same period in 1993. The
increase in net sales of plastic containers was attributable to increased unit
sales to new and existing customers, particularly PET customers, and to a
lesser extent, higher average sales prices due to the pass through of
increased resin costs.
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 86.9% ($748.3 million) for the year ended December 31, 1994, a
decrease of 1.6 percentage points as compared to 88.5% of consolidated net
sales ($571.2 million) for the same period in 1993. The decrease in cost of
goods sold as a percentage of consolidated net sales principally resulted from
synergistic benefits resulting from the acquisition of DM Can, lower per unit
manufacturing costs realized on higher sales and production volumes and
improved manufacturing efficiencies in the plastic container business
resulting from larger cost reduction and productivity investments in 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of consolidated net sales declined 0.6
percentage points to 4.4% of consolidated net sales ($38.0 million) for the
year ended December 31, 1994, as compared to 5.0% ($32.5 million) for the same
period in 1993. The decrease as a percentage of consolidated net sales
resulted principally from a modest increase in selling, general and
administrative functions relative to the increased sales associated with the
acquisition of DM Can, offset in part by an increase of $1.3 million in
benefits accrued under SARs.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales increased 0.3 percentage points to 6.8% ($58.4 million)
for the year ended December 31, 1994, compared with 6.5% ($41.8 million) for
the same period in 1993. During 1994 the Company incurred a charge of $16.7
million to write-down certain properties held for sale to their net realizable
value and to reduce the carrying value of certain technologically obsolete and
inoperable equipment. Without giving effect to this nonrecurring charge,
income from operations in 1994 would have been 8.7% ($75.1 million), an
increase of 2.2 percentage points as compared to 1993, and was principally
attributable to the aforementioned improvement in gross margin.
Income from operations as a percentage of net sales for the metal container
business (without giving effect to the $7.2 million charge to write-down the
carrying value of certain assets) increased 1.0% to 10.2% ($67.0 million)
during 1994 as compared to 1993, principally due to operating synergies
realized from the acquisition of DM Can and lower per unit manufacturing costs
incurred as a result of higher production volumes in 1994. Income from
operations as a percentage of net sales attributable to the plastic container
business (without giving effect to the $9.5 million charge to write-down the
carrying value of certain assets) in 1994 was 4.6% ($9.4 million), as compared
to 0.3% ($0.6 million) in 1993. The improved operating performance of the
plastic container business resulted from production efficiencies realized as a
result of rationalizations and capital investment made in prior periods, and
lower unit manufacturing costs.
INTEREST EXPENSE. Interest expense, including amortization of debt financing
costs, increased by approximately $11.5 million to $65.8 million for the year
ended December 31, 1994. This increase resulted from the incurrence of
additional bank borrowings to finance the acquisition of DM Can, higher
36
<PAGE>
average bank borrowing rates, higher accretion of interest on the Discount
Debentures and increased charges for the amortization of debt financing costs.
INCOME TAXES. The provisions for income taxes for the years ended December
31, 1994 and 1993 were comprised of federal, state and foreign income taxes
currently payable. The increase in the provision for income taxes in 1994
reflects an increase in federal income taxes currently payable. During 1994,
the Company fully utilized its alternative minimum tax net operating loss
carryovers and, therefore, was subject to tax at the rate of 20% on its
alternative minimum taxable income.
NET INCOME. As a result of the items discussed above, the net loss for the
year ended December 31, 1994 was $13.0 million, $1.4 million less than the
loss before extraordinary charges and cumulative effect of changes in
accounting principles for the year ended December 31, 1993 of $14.4 million.
In conjunction with the acquisition of DM Can in 1993, the Company incurred
an extraordinary charge of $1.3 million for the early extinguishment of debt.
Also, during 1993 the Company adopted SFAS No. 106, SFAS No. 109 and SFAS No.
112. The cumulative effect of these accounting changes, for years prior to
1993, was to decrease net income by $6.3 million. As a result of these
charges, the net loss for 1993 was $22.0 million.
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 and, on August 26,
1996, redeemed $12.0 million principal amount of Discount Debentures.
On August 1, 1995, Silgan, Containers and Plastics entered into the Silgan
Credit Agreement (which originally provided Silgan with $225 million of A term
loans and $225 million of B term loans and provided Containers and Plastics
with a commitment of $225 million for working capital loans) to finance the
acquisition by Containers of AN Can, to refinance and repay in full all
amounts owing under the Company's previous credit agreement (the "Silgan 1993
Credit Agreement") and under the Secured Notes. With borrowings of $200
million under the Silgan Credit Agreement (as amended in May 1996 to include
an additional $125 million of B term loans), Holdings repurchased and redeemed
an aggregate of $204.1 million principal amount of Discount Debentures.
The Silgan Credit Agreement provides the Company with improved financial
flexibility by (i) enabling Silgan to transfer funds to Holdings for payment
by Holdings of cash 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 $19.6 million of annual
current cash interest
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<PAGE>
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 does not expect to 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".
For the first nine months of 1996, net borrowings of working capital loans
under the Silgan Credit Agreement of $118.9 million, borrowings of $125.0
million of additional B term loans under the Silgan Credit Agreement, net
proceeds of $47.8 million from the Preferred Stock Sale and proceeds of $1.5
million from the sale of assets were used to fund cash used by operations of
$48.0 million for the Company's seasonal working capital needs, capital
expenditures of $38.6 million, the purchase by the Company of ANC's St. Louis
facility for $13.1 million, the redemption of $154.4 million of Discount
Debentures, the repurchase of Holdings' Class B Stock held by Mellon for $35.8
million, the repayment of $0.9 million of term loans under the Silgan Credit
Agreement, the payment of $1.6 million of financing costs associated with the
borrowing of additional B term loans under the Silgan Credit Agreement, and an
increase in cash balances of $0.8 million.
The Company's Adjusted EBITDA for the nine months ended September 30, 1996
in comparison to the same period in 1995 increased by $48.6 million to $148.0
million. The increase in Adjusted EBITDA resulted primarily from the
generation of additional cash flow from the former AN Can operations and, to a
lesser extent, from increased cash earnings by both the metal container
business and the plastic container business.
For the nine months ended September 30, 1996, the operating cash flow of the
Company declined from the same period in the prior year primarily as a result
of the increased working capital needed, mainly for trade receivables and
trade payables, to support the former AN Can operations which are more
seasonal than the Company's existing business. Due to the seasonal nature of
some of the Company's business, a significant portion of the Company's cash
flow is generated in the fourth quarter. The Company expects that the change
in its fourth quarter net working capital position will be similar to last
year.
During 1995, cash generated from operations of $209.6 million (including
cash of $112.0 million generated by AN Can since its acquisition on August 1,
1995), proceeds of $3.5 million realized from the sale of assets and a
decrease of $0.6 million in cash balances were used to repay $142.8 million of
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).
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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 have 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 September 30, 1996, the outstanding principal amount of working
capital loans was $126.0 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 $91.6 million.
In addition to its operating cash needs, the Company's cash requirements
over the next several years consist primarily of (i) annual capital
expenditures of $50.0 to $60.0 million, (ii) scheduled principal amortization
payments of term loans under the Silgan Credit Agreement of $28.5 million,
$38.5 million, $53.4 million, $53.4 million and $126.1 million over the next
five years, respectively, (iii) expenditures of approximately $30.0 million
over the next three years associated with plant rationalizations, 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 $3.0 million for state tax liabilities in 1996 and
approximately $5.0 million (based on the Company's current estimate of its
1997 net income) for federal and state tax liabilities in 1997.
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.
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 1996 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 September 30, 1996, on a pro forma basis after
giving effect to the Refinancing and including seasonal working capital
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<PAGE>
of $126.0 million, the Company had $879.1 million of indebtedness outstanding,
of which $592.8 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 8.1% to 8.6%.
The notional principal amounts of these agreements totaled $100 million and
mature in the year 1999. Depending upon market conditions, the Company may
enter into additional interest rate swap 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 the
first nine months of 1996 as a result of the adoption of SFAS No. 121. See
Note 5 to the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the
1996 fiscal year. Under SFAS No. 123, compensation expense for all stock-based
compensation plans would be recognized based on the fair value of the options
at the date of grant using an option pricing model. 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 will be required to
include in its 1996 year end financial statements pro forma information
regarding compensation expense recognizable under SFAS No. 123. See Note 15 to
the Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
40
<PAGE>
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 during 1995 of 36% in the United States, and is a
leading manufacturer of plastic containers in North America for personal care
products. The Company's strategy is to 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 $678.2 million in 1991 to $1,404.4 million in 1995, representing a
compound annual growth rate of approximately 20%. During this period, pro
forma for the AN Can acquisition, income from operations increased from $39.3
million in 1991 to $107.4 million in 1995, representing a 29% compound annual
growth rate, while the Company's income from operations as a percentage of net
sales increased 1.9 percentage points from 5.8% to 7.7% over the same period
(in each case without giving effect to a charge of $14.7 million in 1995 to
adjust the carrying value of certain assets).
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.
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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:
<TABLE>
<CAPTION>
ACQUIRED BUSINESS YEAR PRODUCTS
----------------- ---- --------
<S> <C> <C>
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
</TABLE>
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 Corporation and Del
Monte reflect this trend. As a result of its growth strategy, the Company has
more
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<PAGE>
than tripled its overall share of the U.S. metal food container market from
approximately 10% in 1987 to approximately 36% in 1995. 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 $219.6 million in 1995. 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 $83.6 million in 1995. 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 $254.1 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 beginning 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.
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<PAGE>
BUSINESS SEGMENTS
The Company operates through two operating companies, Containers and
Plastics.
CONTAINERS
For 1995, Containers had net sales of $1,184.8 million (84% of the Company's
net sales) and pro forma income from operations of $95.7 million (88% of the
Company's pro forma income from operations) (without giving effect to
corporate expense and a charge of $14.7 million in 1995 to adjust the carrying
value of certain assets). Containers has realized compound annual unit sales
growth in excess of 16% since 1987, despite the relative maturity of the U.S.
food can industry. 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 85% of
Containers' sales in 1996 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 1995, Containers had net sales of specialty
packaging items of $83.6 million.
PLASTICS
For 1995, Plastics had net sales of $219.6 million (16% of the Company's net
sales) and income from operations of $13.2 million (12% of the Company's pro
forma income from operations) (without giving effect to corporate expense and
a charge of $14.7 million in 1995 to adjust the carrying value of certain
assets). 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. At December 31, 1995, Containers had
approximately 85% of its projected 1996 sales under multi-year contracts.
Plastics has purchase orders or contracts for containers with the majority of
its customers. In general, these purchase orders and contracts are for
containers made from proprietary molds and are for a duration of 2 to 5 years.
Both Containers and Plastics schedule their production to meet their
customers' requirements. Because the production time for the Company's
products is short, the backlog of customer orders in relation to sales is not
significant.
44
<PAGE>
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
45
<PAGE>
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 1995, 1994 and 1993, approximately 21%, 26% and 34%, respectively, of the
Company's actual sales were to Nestle and in 1995 and 1994 approximately 15%
and 21%, respectively, of the Company's actual sales were to Del Monte. On a
pro forma basis after giving effect to the acquisition of AN Can, in 1995
approximately 17% and 11% of the Company's sales would have been to Nestle and
Del Monte, respectively. No other customer accounted for more than 10% of the
Company's total sales during such years.
METAL CONTAINER BUSINESS
The Company is the largest manufacturer of metal food can containers in
North America, with a unit sale market share during 1995 of 36% in the United
States. Containers has entered into multi-year supply arrangements with many
of its customers, including Nestle and Del Monte. The Company estimates that
approximately 85% of its metal container sales in 1996 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 1995, sales of metal
cans by the Company to Nestle were $236.0 million.
The Nestle Supply Agreements provide for certain prices and specify that
such prices will be increased or decreased based upon cost change formulas set
forth therein. The Nestle Supply Agreements contain provisions that require
Containers to maintain certain levels of product quality, service and delivery
in order to retain the Nestle business. In the event of a breach of a
particular Nestle Supply Agreement, Nestle may terminate such Nestle Supply
Agreement but the other Nestle Supply Agreements would remain in effect.
46
<PAGE>
In 1994, the term of certain of the Nestle Supply Agreements (representing
approximately 70% of the Company's 1995 unit sales to Nestle) was extended
through 2001. Under these Nestle Supply Agreements, Nestle has the right to
receive competitive bids under narrowly limited circumstances, and Containers
has the right to match any such bids. In the event that Containers chooses not
to match a competitive bid, Nestle may purchase cans from the competitive
bidder at the competitive bid price for the term of the bid. The Company
cannot predict the effect, if any, of such bids upon its financial condition
or results of operations. The Company is currently engaged in discussions with
Nestle regarding the extension beyond 2001 of the term for the can
requirements under these Nestle Supply Agreements in return for certain price
concessions by the Company. On a pro forma basis after giving effect to the
acquisition of AN Can, such can requirements would have represented
approximately 11% of the Company's 1995 sales.
The term of the other Nestle Supply Agreements expires in August 1997. The
Company has also commenced discussions with Nestle with respect to the
continuation beyond 1997 of these Nestle Supply Agreements, which would have
represented approximately 6% of the Company's sales in 1995 on a pro forma
basis after giving effect to the acquisition of AN Can. Although the Company
intends to make every effort to extend these Nestle Supply Agreements on
reasonable terms and conditions, there can be no assurance that these Nestle
Supply Agreements will be extended or that they will be extended on terms
favorable to the Company.
On December 21, 1993, Containers and Del Monte entered into the DM Supply
Agreement. Under the DM Supply Agreement, Del Monte has agreed to purchase
from Containers, and Containers has agreed to sell to Del Monte, 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 1995, sales of metal containers by the Company to Del
Monte were $159.4 million.
The DM Supply Agreement provides for certain prices for all metal containers
supplied by Containers to Del Monte thereunder and specifies that such prices
will be increased or decreased based upon specified cost change formulas.
Under the DM Supply Agreement, beginning in December 1998, Del Monte may,
under certain circumstances, receive proposals with terms more favorable than
those under the DM Supply Agreement from independent commercial can
manufacturers for the supply of containers of a type and quality similar to
the metal containers that Containers furnishes to Del Monte, which proposals
shall be for the remainder of the term of the DM Supply Agreement and for 100%
of the annual volume of containers at one or more of Del Monte's canneries.
Containers has the right to retain the business subject to the terms and
conditions of such competitive proposal.
The sale of metal containers to vegetable and fruit processors is seasonal
and monthly revenues increase during the months of June through October. As is
common in the packaging industry, the Company must build inventory and then
carry accounts receivable for some seasonal customers beyond the end of the
season. The acquisition of AN Can increased the Company's seasonal metal
container business. Consistent with industry practice, such customers may
return unused containers. Historically, such returns have been minimal.
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
47
<PAGE>
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 October 15, 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
48
<PAGE>
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, 1995, the Company employed approximately 940 salaried and
4,170 hourly employees on a full-time basis, including approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition of AN Can. Approximately 63% of the Company's hourly plant
employees are represented by a variety of unions.
The Company's labor contracts expire at various times between 1996 and 2008.
Contracts covering approximately 4% of the Company's hourly employees
presently expire during the remainder of 1996. The Company expects no
significant changes in its relations with these unions. Management believes
that its relationship with its employees is good.
REGULATION
The Company is subject to federal, state and local environmental laws and
regulations. In general, these laws and regulations limit the discharge of
pollutants into the air and water and establish standards for the treatment,
storage, and disposal of solid and hazardous waste. The Company believes that
all of its facilities are either in compliance in all material respects with
all presently applicable environmental laws and regulations or are operating
in accordance with appropriate variances, delayed compliance orders or similar
arrangements.
In addition to costs associated with regulatory compliance, the Company may
be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances disposed
of at sites at which environmental problems are alleged to exist, as well as
the owners of those sites and certain other classes of persons, are subject to
claims under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the
original disposal. Liability under CERCLA and under many similar state
statutes is joint and several, and, therefore, any responsible party may be
held liable for the entire cleanup cost at a particular site. Other state
statutes may impose proportionate rather than joint and several liability. The
federal Environmental Protection Agency or a state agency may also issue
orders requiring responsible parties to undertake removal or remedial actions
at certain sites. Pursuant to the agreement relating to the acquisition in
1987 of 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.
49
<PAGE>
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.
50
<PAGE>
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 October 15, 1996 for its metal container business:
<TABLE>
<CAPTION>
APPROXIMATE BUILDING AREA
LOCATION (SQUARE FEET)
-------- -------------------------
<S> <C>
City of Industry, CA............................. 50,000 (leased)
Kingsburg, CA.................................... 37,783 (leased)
Modesto, CA...................................... 35,585 (leased)
Modesto, CA...................................... 128,000 (leased)
Modesto, CA...................................... 150,000 (leased)
Riverbank, CA.................................... 167,000
San Leandro, CA.................................. 200,000 (leased)
Stockton, CA..................................... 243,500
Norwalk, CT...................................... 14,359 (leased)
Broadview, IL.................................... 85,000
Hoopeston, IL.................................... 323,000
Rochelle, IL..................................... 175,000
Waukegan, IL..................................... 40,000 (leased)
Woodstock, IL.................................... 160,000 (leased)
Evansville, IN................................... 188,000
Hammond, IN...................................... 160,000 (leased)
Laporte, IN...................................... 144,000 (leased)
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
</TABLE>
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<PAGE>
Below is a list of the Company's operating facilities, including attached
warehouses, as of October 15, 1996 for its plastic container business:
<TABLE>
<CAPTION>
APPROXIMATE BUILDING AREA
LOCATION (SQUARE FEET)
-------- -------------------------
<S> <C>
Anaheim, CA...................................... 127,000 (leased)
Deep River, CT................................... 140,000
Monroe, GA....................................... 117,000
Norcross, GA..................................... 59,000 (leased)
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)
</TABLE>
The Company owns and leases certain other warehouse facilities that are
detached from its manufacturing facilities. All of the Company's facilities
are subject to liens in favor of the Banks.
The Company believes that its plants, warehouses and other facilities are in
good operating condition, adequately maintained, and suitable to meet its
present needs and future plans. The Company believes that it has sufficient
capacity to satisfy the demand for its products in the foreseeable future. To
the extent that the Company needs additional capacity, management believes
that the Company can convert certain facilities to continuous operation or
make the appropriate capital expenditures to increase capacity.
LEGAL PROCEEDINGS
On October 17, 1989, the State of California, on behalf of the California
Department of Health Services ("DHS"), filed a suit in the United States
District Court for the Northern District of California against the owners and
operators of a recycling facility operated by Summer del Caribe, Inc., Dale
Summer and Lynn Rodich. The complaint also named 16 can manufacturing
companies, including Containers, that had sent amounts of solder dross to the
facility for recycling as "Potentially Responsible Parties" ("PRPs") under the
Federal Superfund statute. Containers is one of the 15 defendant can companies
which agreed to participate as a group in response to the DHS suit (the "PRP
Group"). In the PRP Group agreement, Containers agreed with the other can
company defendants that its apportioned share of cleanup costs would be 6.72%
of the total cost of cleanup. The PRP Group has undertaken a feasibility study
for the purpose of developing, designing and implementing a final remedy for
the site. The feasibility study was approved by the California Department of
Toxic Substances Control ("DTSC") in June 1994. On March 14, 1995, the court
approved a settlement agreement and consent decree which ordered the PRP Group
to submit a draft Remedial Action Plan to the DTSC for approval, which the PRP
Group submitted to the DTSC on September 5, 1995. On September 13, 1995, the
DTSC notified the PRP Group by letter that the Remedial Action Plan had been
adopted for the Summer del Caribe site. According to the Remedial Action Plan,
the overall cost of site cleanup is estimated to be in a range of $2,500,000
to $3,000,000. Since cleanup is ongoing, a more precise estimate is
unavailable at this time. However, based on the estimate, the Company believes
that Containers' apportioned share of liability will range from approximately
$165,000 to $200,000.
Other than the action mentioned above, there are no other material pending
legal proceedings to which the Company is a party or to which any of its
properties are subject.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
HOLDINGS AND SILGAN
The following table sets forth certain information (ages as of September 30,
1996) concerning the directors and executive officers of Holdings and Silgan.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R. Philip Silver................. 54 Chairman of the Board, Co-Chief Executive
Officer and Director
D. Greg Horrigan................. 53 President, Co-Chief Executive Officer and
Director
Robert H. Niehaus................ 41 Director
Leigh J. Abramson................ 28 Director
Harley Rankin, Jr................ 56 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
</TABLE>
CONTAINERS
The following table sets forth certain information (ages as of September 30,
1996) concerning the executive officers of Containers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James D. Beam...................... 53 President
Gerald T. Wojdon................... 60 Vice President--Operations and Assistant
Secretary
Gary M. Hughes..................... 54 Vice President--Sales & Marketing
Dennis Nerstad..................... 58 Vice President--Product Services
Joseph A. Heaney................... 43 Vice President--Finance
</TABLE>
PLASTICS
The following table sets forth certain information (ages as of September 30,
1996) concerning the Directors and executive officers of Plastics.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Russell F. Gervais......... 53 President
Howard H. Cole............. 51 Vice President and Assistant Secretary
Charles Minarik............ 59 Vice President--Operations and Commercial
Development
Alan H. Koblin............. 44 Vice President--Sales & Marketing
Colleen J. Jones........... 36 Vice President--Finance, Chief Financial Officer
and Assistant Secretary
</TABLE>
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.
53
<PAGE>
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. and PageMart, Inc.
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 1990 to July 1995, Mr.
Paulson was employed by ANC, last serving as Senior
54
<PAGE>
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 1995. 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 Arthur Young & Company.
55
<PAGE>
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 1997, 1998 and 1999, 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.
56
<PAGE>
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, 1995, 1994 and 1993 of those
persons who at December 31, 1995 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
<TABLE>
<CAPTION>
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)
- --------------------------- ---- ------------ ----------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
R. Philip Silver......... 1995 $1,830,000 -- -- -- --
(Chairman of the Board
and 1994 1,684,135 -- -- -- --
Co-Chief Executive
Officer of 1993 1,608,799 -- -- -- --
Holdings and Silgan and
Chairman of the Board of
Plastics)
D. Greg Horrigan......... 1995 1,830,000 -- -- -- --
(President and Co-Chief 1994 1,684,135 -- -- -- --
Executive Officer of
Holdings 1993 1,608,799 -- -- -- --
and Silgan and Chairman
of the Board of
Containers)
Harley Rankin, Jr. ...... 1995 408,978 -- -- -- --
(Executive Vice
President, 1994 384,930 -- -- 85,541 --
Chief Financial Officer
and 1993 347,598 -- -- -- --
and Treasurer of
Holdings and Silgan)
James D. Beam............ 1995 361,200 -- -- -- $66,394
(President of
Containers) 1994 350,000 $169,092 -- -- 94,175
1993 239,949 65,277 -- -- 24,883
Russell F. Gervais....... 1995 226,000 59,000 -- -- 5,085
(President of Plastics) 1994 216,804 83,300 -- 110,063 --
1993 210,000 -- -- -- --
</TABLE>
- --------
(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 an assumed initial public
offering price of $18.50 per share). The exact amount of Mr. Gervais'
options under the Stock Option Plan will be determined at the time of the
Offering based upon the actual initial public offering price.
(e) In the case of Mr. Beam, includes for 1995 and 1994 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.
57
<PAGE>
OPTION VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995(A)
----------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver........ -- -- -- --
D. Greg Horrigan........ -- -- -- --
Harley Rankin, Jr.(b)... 176,786 51,325 $2,774,837 $ 730,954
James D. Beam(b)(c)..... 487,928 -- 7,931,531 --
Russell F.
Gervais(b)(c).......... 44,025 66,038 784,223 1,176,343
</TABLE>
- --------
(a) For the purposes of this table, the fair market value per share of Common
Stock at December 31, 1995 was estimated to be the assumed initial public
offering price of $18.50 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 an assumed initial public offering price
of $18.50 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 based upon the actual initial public offering price.
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
2,939,416 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
58
<PAGE>
Containers' and Plastics' stock option plans have waived certain registration
rights thereunder. At such time, 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 1,513,726 shares of
Common Stock were outstanding under the Stock Option Plan at exercise prices
ranging from $0.69 to $5.41 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.
59
<PAGE>
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
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE -----------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
- ------------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
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, 1995, James D. Beam, the only eligible executive officer
named in the Summary Compensation Table, had eight 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
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
- ------------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 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
</TABLE>
60
<PAGE>
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, 1995, Russell F. Gervais, the only eligible executive
officer named in the Summary Compensation Table, had six 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 1995. 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.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 11,904,512 shares of Common Stock, or approximately 73.9% of the issued
and outstanding shares of Common Stock (approximately 71.5% 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 on the date of this Prospectus, and MSLEF
II agreed to vote its shares of Common Stock for the election of two directors
61
<PAGE>
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" and
"Description of Capital Stock--Description of Stockholders Agreements".
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 and (iii) by all
executive officers and directors as a group.
Each of the persons named in the table has sole voting and investment power
with respect to the securities beneficially owned.
<TABLE>
<CAPTION>
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 BENEFICIALLY BENEFICIALLY
OWNED OWNED(2) OWNED OWNED(2)
---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver(3)..... 2,976,128 23.59% 2,976,128 18.47%
D. Greg Horrigan(3)..... 2,976,128 23.59% 2,976,128 18.47%
Robert H. Niehaus(4).... -- -- -- --
Leigh J. Abramson(4).... -- -- -- --
Harley Rankin, Jr.(5)... 193,894 1.51% 193,894 1.19%
James D. Beam(6)........ 487,928 3.72% 487,928 2.94%
Russell F. Gervais(7)... 66,038 * % 66,038 * %
The Morgan Stanley
Leveraged Equity Fund
II, L.P.(8)............ 5,952,256 47.18% 5,952,256 36.94%
All officers and
directors as a group... 7,277,842 52.20% 7,277,842 41.72%
</TABLE>
- --------
(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) 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.
(4) 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.
(5) 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.
(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 21800 Oxnard Street, Woodland Hills, CA 91367.
(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 14515 N. Outer Forty, Chesterfield, MO 63017.
(8) The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is 1221
Avenue of the Americas, New York, NY 10020.
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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 is $83.5 million for the
calendar year 1996, and the Maximum Amount is $98.101 million for the calendar
year 1996. 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
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to perform its obligations under the New Management Agreements, if such
failure 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 of
any of the respective companies to perform its obligations under the New
Management Agreements, if such failure 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 upon a Change of Control
(as defined in the New Management Agreements); (vi) at the option of S&H upon
a Change of Control; or (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. 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
$83.5 million, $89.5 million, $95.5 million and $101.5 million for the
calendar years 1996, 1997, 1998 and 1999, respectively, and the Maximum Amount
will be $98.101 million, $100.504 million, $102.964 million and $105.488
million for the calendar years 1996, 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, 1995, 1994 and 1993, under the Management
Agreements, S&H earned aggregate fees, including reimbursable expenses and
fees payable to Morgan Stanley, of $5.4 million, $5.0 million and $4.4
million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1995, 1994 and 1993 Morgan Stanley earned fees of $409,000, $383,000
and $337,000, respectively.
OTHER
In connection with the 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 "Securities
Ownership of Certain Beneficial Owners and Management" for a description of
the ownership by MSLEF II, an affiliate of Morgan Stanley, of certain
securities of Holdings.
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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 issuance of shares of Common Stock in the Offering, there are
12,617,357 shares of Common Stock issued and outstanding, 11,904,512 of which
are beneficially owned by the Principal Common Stockholders. Such number of
outstanding shares reflects the Stock Split. Upon consummation of the
Offering, 16,117,357 shares of Common Stock will be issued and outstanding
(assuming that the Underwriters' over-allotment option will not be exercised).
There are 50,000 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
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<PAGE>
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, 50,000 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.
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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, MSLEF II may pledge its shares
of Holdings' Common Stock to a lender or lenders reasonably acceptable to
Holdings to secure a loan or loans to MSLEF II. In the event of any proposed
foreclosure of such pledge, such shares will be subject to certain rights of
first refusal of the Group set forth in the Stockholders Agreement.
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
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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 on the
date of this Prospectus, 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 on
the date of this Prospectus 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 on the date of this
Prospectus, (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 on the
date of this Prospectus, 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.
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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.
69
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, Holdings will have
outstanding 16,117,357 shares of Common Stock, assuming no exercise of the
over-allotment option granted to the Underwriters. Of these shares, the
3,500,000 shares of Common Stock sold in the Offering (or 4,025,000 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 12,617,357 shares of Common Stock owned
by the Principal Common Stockholders and BTNY 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 (161,173 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".
70
<PAGE>
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 September
30, 1996, the outstanding principal amounts of A Term Loans, B Term Loans and
Revolving Loans under the Silgan Credit Agreement were $219.5 million, $347.3
million and $126.0 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.
71
<PAGE>
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.
72
<PAGE>
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.
73
<PAGE>
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 for
Holdings by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East
Main Street, Stamford, Connecticut 06904-6760. G. William Sisley, a partner in
Winthrop, Stimson, Putnam & Roberts, is Secretary of Holdings and Silgan.
Winthrop, Stimson 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, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of American National Can Company's Food Metal &
Specialty Division as of December 31, 1994 and 1993, and for each of the three
years in the period ended December 31, 1994, incorporated by reference in this
Prospectus and Registration Statement have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
74
<PAGE>
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' Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996;
4. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996;
5. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996;
6. 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;
7. Holdings' Current Report on Form 8-K dated May 31, 1996;
8. Holdings' Current Report on Form 8-K dated August 2, 1996; and
9. Holdings' Current Report on Form 8-K dated September 16, 1996.
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.
75
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1995 and 1994................. F-3
Consolidated Statements of Operations for the years ended December 31,
1995, 1994 and 1993...................................................... F-4
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Condensed Consolidated Balance Sheets (Unaudited) at September 30, 1996
and 1995................................................................. F-27
Condensed Consolidated Statements of Operations (Unaudited) for the nine
months ended September 30, 1996 and 1995................................. F-28
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended September 30, 1996 and 1995................................. F-29
Notes to Condensed Consolidated Financial Statements (Unaudited).......... F-30
Unaudited Pro Forma Condensed Statements of Operations for the nine months
ended September 30, 1996 and for the year ended December 31, 1995........ F-34
Notes of Unaudited Pro Forma Condensed Statements of Operations........... F-37
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan
Holdings Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of operations, deficiency in stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Silgan Holdings Inc. at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes 2 and 12 to the consolidated financial statements, in
1993 the Company changed its method of accounting for income taxes,
postemployment benefits and postretirement benefits other than pensions.
Ernst & Young LLP
Stamford, Connecticut
March 8, 1996, except for Note 20, as to which date is , 1996
The foregoing report is in the form that will be signed at the time of the
initial public offering described in Note 20 to the consolidated financial
statements.
Stamford, Connecticut
November 1, 1996
/s/ Ernst & Young LLP
F-2
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 2,102 $ 2,682
Accounts receivable, less allowances for doubtful
accounts of $4,832 and $1,557 for 1995 and 1994,
respectively.......................................... 109,929 64,700
Inventories............................................ 210,471 122,429
Prepaid expenses and other current assets.............. 5,801 8,044
--------- ---------
Total current assets................................. 328,303 197,855
Property, plant and equipment, net....................... 487,301 251,810
Goodwill, net............................................ 53,562 30,009
Other assets............................................. 30,880 24,618
--------- ---------
$ 900,046 $ 504,292
========= =========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................. $ 138,195 $ 36,845
Accrued payroll and related costs...................... 32,805 26,019
Accrued interest payable............................... 4,358 1,713
Other accrued expenses................................. 43,457 21,976
Bank working capital loans............................. 7,100 12,600
Current portion of long-term debt...................... 28,140 21,968
--------- ---------
Total current liabilities............................ 254,055 121,121
Long-term debt........................................... 750,873 510,763
Deferred income taxes.................................... 6,836 6,836
Other long-term liabilities.............................. 68,086 23,570
Deficiency in stockholders' equity:
Preferred stock; 10,000,000 shares authorized,
none issued and outstanding........................... -- --
Common stock ($0.01 par value per share; 100,000,000
shares authorized, 16,181,582 shares issued and
outstanding).......................................... 162 162
Additional paid-in capital............................. 33,456 33,456
Accumulated deficit.................................... (213,422) (191,616)
--------- ---------
Total deficiency in stockholders' equity................. (179,804) (157,998)
--------- ---------
$ 900,046 $ 504,292
========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $1,101,905 $ 861,374 $ 645,468
Cost of goods sold......................... 970,491 748,290 571,174
---------- ---------- ----------
Gross profit............................. 131,414 113,084 74,294
Selling, general and administrative
expenses.................................. 46,848 37,997 32,495
Reduction in carrying value of assets...... 14,745 16,729 --
---------- ---------- ----------
Income from operations................... 69,821 58,358 41,799
Interest expense and other related
financing costs........................... 80,710 65,789 54,265
---------- ---------- ----------
Loss before income taxes................. (10,889) (7,431) (12,466)
Income tax provision....................... 5,100 5,600 1,900
---------- ---------- ----------
Loss before extraordinary charges and
cumulative effect of changes in
accounting principles................... (15,989) (13,031) (14,366)
Extraordinary charges relating to early
extinguishment of debt.................... (5,817) -- (1,341)
Cumulative effect of changes in accounting
principles................................ -- -- (6,276)
---------- ---------- ----------
Net loss................................. $ (21,806) $ (13,031) $ (21,983)
========== ========== ==========
Net loss per common share:
Loss before extraordinary charges and
cumulative effect of accounting
changes................................. $ (0.93) $ (0.76) $ (1.05)
Extraordinary charges.................... (0.34) -- (0.10)
Cumulative effect of accounting changes.. -- -- (0.46)
---------- ---------- ----------
Net loss................................. $ (1.27) $ (0.76) $ (1.61)
========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding...... 17,138,927 17,138,927 13,662,587
========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL DEFICIENCY IN
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992...... $ 9 $18,609 $(156,602) $(137,984)
Issuance of 250,000 shares of
Class B Common Stock............. 3 14,997 -- 15,000
Net loss.......................... -- -- (21,983) (21,983)
--- ------- --------- ---------
Balance at December 31, 1993...... 12 33,606 (178,585) (144,967)
Net loss.......................... -- -- (13,031) (13,031)
--- ------- --------- ---------
Balance at December 31, 1994...... 12 33,606 (191,616) (157,998)
Net loss.......................... -- -- (21,806) (21,806)
--- ------- --------- ---------
Balance at December 31, 1995...... $12 $33,606 $(213,422) $(179,804)
=== ======= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $ (21,806) $(13,031) $ (21,983)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation................................. 42,217 35,392 31,607
Amortization................................. 8,083 7,075 5,488
Accretion of discount on discount
debentures.................................. 28,672 27,477 24,167
Reduction in carrying value of assets........ 14,745 16,729 --
Extraordinary charges relating to early
extinguishment of debt...................... 6,301 -- 1,341
Cumulative effect of changes in accounting
principles.................................. -- -- 6,276
Changes in assets and liabilities, net of
effect of acquisitions:
(Increase) decrease in accounts receivable.. (1,011) (21,267) 707
Decrease (increase) in inventories.......... 10,852 (16,741) (4,316)
Increase in trade accounts payable.......... 43,108 4,478 3,757
Net working capital provided by AN Can since
acquisition date........................... 85,213 -- --
Other, net (decrease) increase.............. (6,745) 7,221 1,091
--------- -------- ---------
Total adjustments.......................... 231,435 60,364 70,118
--------- -------- ---------
Net cash provided by operating activities.... 209,629 47,333 48,135
--------- -------- ---------
Cash flows from investing activities:
Acquisition of ANC's Food Metal & Specialty
business..................................... (348,762) -- --
Acquisition of Del Monte Can manufacturing
assets....................................... -- 519 (73,865)
Capital expenditures.......................... (51,897) (29,184) (42,480)
Proceeds from sale of assets.................. 3,541 765 262
--------- -------- ---------
Net cash used in investing activities........ $(397,118) $(27,900) $(116,083)
--------- -------- ---------
Cash flows from financing activities:
Borrowings under working capital loans........ $ 669,260 $393,250 $ 328,050
Repayments under working capital loans........ (674,760) (382,850) (366,250)
Proceeds from issuance of long-term debt...... 450,000 -- 140,000
Proceeds from issuance of common stock........ -- -- 15,000
Repayments of long-term debt.................. (234,506) (20,464) (42,580)
Debt financing costs.......................... (19,290) -- (8,935)
Payments to former shareholders of Silgan..... (3,795) (6,911) --
--------- -------- ---------
Net cash provided (used) by financing
activities................................... 186,909 (16,975) 65,285
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (580) 2,458 (2,663)
Cash and cash equivalents at beginning of
year.......................................... 2,682 224 2,887
--------- -------- ---------
Cash and cash equivalents at end of year....... $ 2,102 $ 2,682 $ 224
========= ======== =========
Supplementary data:
Interest paid................................. $ 45,293 $ 30,718 $ 25,733
Income taxes paid, net of refunds............. 8,967 2,588 722
</TABLE>
See accompanying notes.
F-6
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. BASIS OF PRESENTATION
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
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"). Since 1993, Silgan
has made two significant acquisitions. Silgan acquired the U.S. metal
container manufacturing business of Del Monte Corporation ("Del Monte") in
1993 and it acquired the Food Metal and Specialty business from American
National Can Company ("ANC") in 1995. Both acquisitions were accounted for
using the purchase method of accounting (see Note 3--Acquisitions).
The Company, through Silgan Containers Corporation ("Containers") and Silgan
Plastics Corporation ("Plastics"), is predominantly engaged in the manufacture
and sale of steel and aluminum containers for human and pet food products and
also manufactures custom designed plastic containers used for health and
personal care products. Principally, all of the Company's businesses are based
in the United States. Foreign subsidiaries are not significant to the
consolidated results of operations or financial position of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions have been eliminated. Assets and liabilities of the
Company's foreign subsidiary are translated at rates of exchange in effect at
the balance sheet date. Income statement amounts are translated at the average
of monthly exchange rates.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation. In addition, share and
per share information have been adjusted to give effect to the proposed
amendment to Holdings' Restated Certificate of Incorporation and the Stock
Split (see Note 20--Subsequent Events).
CASH AND CASH EQUIVALENTS
Cash equivalents represent short-term, highly liquid investments having
original maturities of three months or less from the time of purchase. The
carrying values of these assets approximate their fair values. As a result of
the Company's cash management system, checks issued and presented to the banks
for payment may create negative cash balances. Checks outstanding in excess of
related cash balances totaling approximately $30.0 million at December 31,
1995 and $5.4 million at December 31, 1994 are included in trade accounts
payable.
INVENTORIES
Inventories are stated at the lower of cost or market (net realizable value)
and are principally accounted for by the last-in, first-out method (LIFO).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less accumulated
depreciation. Major renewals and betterments that extend the life of an asset
are capitalized and repairs and maintenance expenditures are charged to
expense as incurred. Depreciation is computed using the straight-line
F-7
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
method over their estimated useful lives. The principal estimated useful lives
are 35 years for buildings and range between 3 to 18 years for machinery and
equipment. Leasehold improvements are amortized over the shorter of the life
of the related asset or the life of the lease.
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is stated at cost less
accumulated amortization. Amortization is computed on a straight-line basis
over periods ranging from 20 to 40 years. The Company periodically evaluates
the existence of goodwill impairment to access whether goodwill is fully
recoverable from projected, undiscounted net cash flows of the related
business unit. Impairments would be recognized in operating results if a
permanent reduction in values were to occur.
OTHER ASSETS
Other assets consist principally of debt issuance costs which are being
amortized on a straight-line basis over the terms of the related debt
agreements (5 to 10 years). Other intangible assets are amortized over their
expected useful lives using the straight-line method.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes". Under
SFAS No. 109, the liability method is used to calculate deferred income taxes.
The provision for income taxes includes federal, state and foreign income
taxes currently payable and those deferred because of temporary differences
between the financial statement and tax bases of assets and liabilities. The
Company had previously reported under SFAS No. 96, "Accounting for Income
Taxes". There was no effect for the difference in methods at the date of
adoption.
POSTEMPLOYMENT BENEFITS
During 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". SFAS No. 112 requires accrual accounting for
employee benefits that are paid between the termination of active employment
but prior to retirement. Such benefits include salary continuation,
disability, severance, and health care. The cumulative effect as of January 1,
1993 of this accounting change was to decrease net income by $1.3 million.
There was no tax effect for this charge due to the net operating loss position
of the Company.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, accounts receivable, accounts payable, and
other accrued liabilities are reflected in the financial statements and
reasonably approximate fair value due to the short maturity of these items.
The carrying value for short and long-term debt also approximates fair value
but may vary due to changing market conditions. Methods and assumptions used
to estimate fair value and the fair value of the Company's debt instruments
are disclosed in Note 9.
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
F-8
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
and liabilities, revenues and expenses, as well as footnote disclosures in the
financial statements. Actual results may differ from those estimates.
PER SHARE DATA
Per share data is based upon the weighted average number of common and
common equivalent shares outstanding for all periods presented. Weighted
average shares include options to purchase shares which were issued within the
twelve month period prior to the initial public offering at less than the
initial public offering price.
3. ACQUISITIONS
During the three years ended December 31, 1995, the Company made two
acquisitions, as discussed below. Both were accounted for using the purchase
method of accounting and the results of operations have been included with the
Company's results from the respective acquisition dates. The excess of the
purchase price over the fair value of net assets acquired was allocated to
goodwill.
FISCAL YEAR 1995 ACQUISITION
On August 1, 1995, Containers acquired from ANC substantially all of the
fixed assets and working capital, and assumed certain specified limited
liabilities, of ANC's Food Metal & Specialty business ("AN Can"), which
manufactures, markets and sells metal food containers and rigid plastic
containers for a variety of food products and metal caps and closures for food
and beverage products. The purchase price for the assets acquired and the
assumption of certain specified liabilities, including related transaction
costs, was $364.0 million (including $15.2 million for the operations of ANC's
St. Louis, MO facility which the Company intends to purchase by mid-1996 upon
completion of a rationalization project undertaken at that location).
The purchase price was allocated to the tangible and identifiable assets
acquired and liabilities assumed based upon their estimated fair values as
determined from preliminary appraisals and valuations which management
believes are reasonable. The purchase price allocation will be finalized
within one year of the acquisition date. Differences between actual and
preliminary valuations will cause adjustments to the AN Can purchase price
allocation as shown below. Estimated items subject to change include employee
benefit costs and termination costs associated with plant rationalization and
administrative workforce reductions and other plant exit costs. The aggregate
purchase price and its preliminary allocation to the assets and liabilities is
as follows for AN Can (dollars in thousands):
<TABLE>
<S> <C>
Net working capital acquired..................................... $155,967
Property, plant and equipment.................................... 240,079
Goodwill......................................................... 24,832
Other liabilities assumed........................................ (56,916)
--------
$363,962
========
</TABLE>
Set forth below are the Company's summary unaudited pro forma results of
operations for the years ended December 31, 1995 and 1994. The pro forma
results include the historical results of the Company and AN Can and reflect
the effect of purchase accounting adjustments based on preliminary appraisals
and valuations, the financing of the acquisition, the refinancing of the
Company's debt obligations, and certain other adjustments as if these events
occurred as of the beginning of the periods presented. The pro forma results
of operations do not give effect to adjustments for decreased costs from
manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company may
realize as a result of its planned rationalization of plant operations. The
pro forma data does not purport to represent what the Company's results of
operations actually would have been if the operations were combined as of
January 1, 1995 or 1994, or to project the Company's results of operations for
any future period.
F-9
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales............... $ 1,404,382 $ 1,457,968
Income from operations.. 92,749(1) 54,886(2)
Income (loss) before
income taxes........... 4,064 (34,636)
Net loss................ (2,736) (36,536)
Net loss per share...... $ (0.16) $ (2.13)
=========== ===========
</TABLE>
- --------
(1) Included in pro forma income from operations for the year ended December
31, 1995 is a charge incurred by the Company of $14.7 million to adjust
the carrying value of certain underutilized machinery and equipment at
Silgan facilities (existing prior to the AN Can acquisition) to net
realizable value.
(2) Included in pro forma income from operations for the year ended December
31, 1994 are charges incurred by AN Can of $10.1 million for shut down
costs necessary to realign the assets of the business more closely with
the existing customer base, $16.7 million related to Silgan and $7.1
million related to AN Can to adjust the carrying value of certain
technologically obsolete and inoperable equipment to realizable value, and
$26.7 million for the write-down of goodwill by AN Can.
FISCAL YEAR 1993 ACQUISITION
On December 21, 1993, Containers acquired from Del Monte substantially all
of the fixed assets and certain working capital of Del Monte's container
manufacturing business in the United States ("DM Can"). The final purchase
price for the assets acquired and the assumption of certain specified
liabilities, including related transaction costs, was $73.3 million. The
detail of the assets acquired is as follows (dollars in thousands):
<TABLE>
<S> <C>
Net working capital............................................... $21,944
Property, plant and equipment..................................... 47,167
Goodwill.......................................................... 13,729
Other liabilities assumed......................................... (9,494)
-------
$73,346
=======
</TABLE>
4. INVENTORIES
The components of inventories at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials.................................. $ 46,027 $ 38,575
Work-in-process................................ 24,869 19,045
Finished goods................................. 135,590 63,409
Spare parts and other.......................... 6,344 1,621
----------- -----------
212,830 122,650
Adjustment to value inventory at cost on the
LIFO method................................... (2,359) (221)
----------- -----------
$ 210,471 $ 122,429
=========== ===========
</TABLE>
F-10
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
The amount of inventory recorded on the first-in first-out method at
December 31, 1995 and 1994 was $14.9 million and $6.5 million, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land............................................. $ 6,355 $ 3,707
Buildings and improvements....................... 68,860 51,665
Machinery and equipment.......................... 584,526 346,061
Construction in progress......................... 33,764 18,124
----------- -----------
693,505 419,557
Accumulated depreciation and amortization........ (206,204) (167,747)
----------- -----------
Property, plant and equipment, net............. $ 487,301 $ 251,810
=========== ===========
</TABLE>
For the years ended December 31, 1995, 1994, and 1993, depreciation expense
was $42.2 million, $35.4 million, and $31.6 million, respectively. The total
amount of repairs and maintenance expense was $26.9 million in 1995, $19.9
million in 1994, and $17.1 million in 1993.
Effective October 1, 1994, the Company extended the estimated useful lives
of certain fixed assets to more properly reflect the true economic lives of
the assets and to better align the Company's depreciable lives with the
predominate practice in the industry. The change had the effect of decreasing
depreciation expense and increasing net income in 1994 by approximately $1.3
million.
Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable values.
In 1995, the Company recorded a write-down of $14.7 million for the excess of
carrying value over estimated realizable value of machinery and equipment at
existing facilities which have become underutilized due to excess capacity. In
1994, charges of $16.7 million were recorded which included $2.6 million to
write-down the excess carrying value over estimated realizable value of
various plant facilities held for sale and $14.1 million for technologically
obsolete and inoperable machinery and equipment.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" which is
effective for the 1996 fiscal year. As required by this standard, impairment
losses will be recognized when events or changes in circumstances indicate
that the fair value of identified assets is less than the carrying amount. In
making such a determination, the Company will compare the undiscounted cash
flows generated by specified assets to the carrying value of such assets. The
Company will adopt SFAS No. 121 in 1996 and believes the effect of adoption
will not be material.
6. GOODWILL
Goodwill amortization charged to operations was $1.3 million in 1995; $1.2
million in 1994; and $0.5 million in 1993. Accumulated amortization of
goodwill at December 31, 1995, 1994, and 1993 was $5.0 million; $3.7 million;
and $2.5 million, respectively.
F-11
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
7. OTHER ASSETS
Other assets at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt issuance costs.............................. $ 30,148 $ 25,142
Other............................................ 8,027 8,275
----------- -----------
38,175 33,417
Less: accumulated amortization................... (7,295) (8,799)
----------- -----------
$ 30,880 $ 24,618
=========== ===========
</TABLE>
During 1995, as part of the acquisition of AN Can and the related
refinancing of its secured debt facilities and its Discount Debentures, the
Company wrote off $6.3 million of unamortized debt issuance costs and
capitalized $19.3 million in new debt issuance costs. Amortization expense
relating to debt issuance for the years ended December 31, 1995, 1994, and
1993 was $4.9 million, $5.3 million, and $3.3 million, respectively.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company has a working capital revolving credit facility which it uses to
finance its seasonal liquidity needs. As of December 31, 1995 and 1994, the
Company had $7.1 million and $12.6 million of working capital loans
outstanding, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Bank A Term Loans................................ $ 220,000 $ 39,845
Bank B Term Loans................................ 222,750 79,691
Senior Secured Floating Rate Notes due June 30,
1997............................................ -- 50,000
11 3/4% Senior Subordinated Notes due June 15,
2002............................................ 135,000 135,000
13 1/4% Senior Subordinated Debentures due
December 15, 2002............................... 201,263 228,195
----------- -----------
779,013 532,731
Less: Amounts due within one year................ 28,140 21,968
----------- -----------
$ 750,873 $ 510,763
=========== ===========
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1995 are
as follows (dollars in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,140
1997................................ 37,170
1998................................ 52,138
1999................................ 52,138
2000................................ 102,281
2001 and thereafter................. 507,146
--------
$779,013
========
</TABLE>
F-12
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
1995 BANK CREDIT AGREEMENT
Effective August 1, 1995, Silgan, Containers, and Plastics entered into a
$675.0 million credit agreement (the "Credit Agreement") with various banks to
finance the acquisition by Containers of AN Can, to refinance and repay in
full all amounts owing under the previous bank credit agreement and the Senior
Secured Notes and to repurchase up to $75.0 million of its 13 1/4% Senior
Discount Debentures ("Discount Debentures"). In connection with the
refinancing of the Credit Agreement, the Company incurred a charge of $5.8
million (net of taxes of $2.6 million) in 1995 for the early extinguishment of
amounts owed under existing secured debt facilities and for the repurchase of
a portion of its Discount Debentures.
The Credit Agreement provided the Company with (i) $225.0 million of A Term
Loans, (ii) $225.0 million of B Term Loans, and (iii) a working capital
revolving credit facility of up to $225.0 million ("Working Capital Loans").
The Company used proceeds from the Credit Agreement to repay $117.1 million of
term loans under the previous bank credit agreement, repay in full $50.0
million of its Senior Secured Notes due 1997, acquire AN Can for $348.8
million (excluding $15.2 million for the St. Louis operations which the
Company expects to purchase by mid-1996), repurchase $57.6 million of its
Discount Debentures, and incur debt issuance costs of $19.3 million. The
Company is currently permitted under the debt facilities to make additional
repurchases of its Discount Debentures prior to June 30, 1996.
The A Term Loans mature on December 31, 2000, and the B Term Loans mature on
March 15, 2002. During 1995, principal repayments of $5.0 million were made on
the A Term Loans and $2.3 million on the B Term Loans. Principal is to be
repaid on each term loan in installments in accordance with the Credit
Agreement until maturity.
As defined in the Credit Agreement, the Company is required to repay the
term loans (ratably allocated between the A Term Loans and the B Term Loans)
in an amount equal to 80% of the net sale proceeds from certain asset sales
and up to 100% of the net equity proceeds from certain sales of equity.
Effective for the year ended December 31, 1996 and each year thereafter during
the term of the Credit Agreement, the Company is required to pre-pay the term
loans (ratably allocated between the A Term Loans and the B Term Loans) in an
amount equal to 50% of the Company's excess cash flow. Amounts repaid under
the term loans cannot be reborrowed.
The Credit Agreement provides Containers and Plastics, together, a revolving
credit facility of $225.0 million for working capital needs. The commitment
under the Credit Agreement for Working Capital Loans was initially $150.0
million. This initial commitment will increase at the time and by the amount
the Company repurchases its Discount Debentures (up to a maximum commitment of
$225.0 million). As of December 31, 1995, Holdings had repurchased $57.6
million of Discount Debentures, thereby increasing the commitment under the
revolving credit facility to $207.6 million. After taking into account
outstanding letters of credit of $6.6 million and Working Capital Loans of
$7.1 million, the borrowings available under the revolving credit facility
were $193.9 million at December 31, 1995. In addition to borrowings of Working
Capital Loans, the Company may utilize up to a maximum of $20.0 million in
letters of credit as long as the aggregate amount of borrowings and letters of
credit do not exceed the amount of the commitment. The aggregate amount of
Working Capital Loans and letters of credit which may be outstanding at any
time is also limited to the aggregate of 85% of eligible accounts receivable
and 50% of eligible inventory. Working Capital Loans may be borrowed, repaid,
and reborrowed over the life of the Credit Agreement until final maturity on
December 31, 2000.
F-13
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
The borrowings under the Credit Agreement may be designated by the
respective Borrowers as Base Rate or Eurodollar Rate borrowings. The Base Rate
is the higher of (i) 1/2 of 1% in excess of Adjusted Certificate of Deposit
Rate, or (ii) Bankers Trust Company's prime lending rate. Base Rate borrowings
bear interest at the Base Rate plus 1.50%, in the case of A Term Loans and
Working Capital Loans; and 2.0%, in the case of B Term Loans. Eurodollar Rate
borrowings bear interest at the Eurodollar Rate plus 2.50% in the case of A
Term Loans and Working Capital Loans; and 3.0%, in the case of B Term Loans.
At December 31, 1995, the interest rate for Base Rate borrowings was 10.0% and
the interest rate for Eurodollar Rate borrowings ranged between 8.1875% and
8.9375%.
For 1995, 1994 and 1993, respectively, the average amount of borrowings of
Working Capital Loans was $67.6 million, $14.4 million and $51.9 million; the
average annual interest rate paid on such borrowings was 8.9%, 8.4%, and 6.0%;
and the highest amount of such borrowings at any month-end was $184.0 million,
$43.9 million, and $80.3 million.
The Credit Agreement provides for the payment of a commitment fee of 0.5%
per annum on the daily average unused portion of commitments available under
the working capital revolving credit facility as well as a 2.75% per annum fee
on outstanding letters of credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of the Borrowers and secured by a security interest in substantially all
of the real and personal property of the Borrowers. The stock of Silgan and
the stock of principally all of its subsidiaries have been pledged to the
lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, investments, indebtedness, liens, dividends, leases,
capital expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
1993 BANK CREDIT AGREEMENT
Effective December 21, 1993, Silgan, Containers, and Plastics entered into a
credit agreement with a group of banks for $140.0 million in term loans and
$70.0 million in working capital loans to finance in part the acquisition of
DM Can and repay $41.6 million of term loans owed under a previous bank credit
agreement. In addition, Holdings issued and sold 250,000 shares of its Class B
Common Stock for $15.0 million and, in turn, contributed such amount to
Silgan. As a result of the early extinguishment of debt, the Company incurred
a net charge of $1.3 million.
According to the terms of this bank credit agreement, 80% of amounts
received from the sale or disposal of assets was to be used to repay term
loans. Prior to the refinancing and repayment of this bank facility, an
additional principal payment of $2.5 million was made early in 1995 from net
proceeds received from asset sales.
SENIOR SECURED FLOATING RATE NOTES
The Company redeemed its Senior Secured Notes on August 30, 1995 for a
premium of $0.1 million.
F-14
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
11 3/4% SENIOR SUBORDINATED NOTES
The Company's 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes") which
mature on June 15, 2002, represent unsecured general obligations, subordinate
in right of payment to obligations of the Company under the Credit Agreement
and effectively subordinate to all of the obligations of the subsidiaries of
the Company. Interest is payable semi-annually on June 15 and December 15.
The 11 3/4% Notes are redeemable at the option of the Company, in whole or
in part, at any time during the twelve months commencing June 15 of the
following years at the indicated percentages of their principal amount, plus
accrued interest:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
---- ----------
<S> <C>
1997.............................. 105.8750%
1998.............................. 102.9375%
1999 and thereafter............... 100.0000%
</TABLE>
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the terms of the existing Credit Agreement.
13 1/4% SENIOR DISCOUNT DEBENTURES
The 13 1/4% Senior Discount Debentures, which are due on December 15, 2002,
represent unsecured general obligations of Holdings, subordinate in right of
payment to the obligations of Silgan and its subsidiaries. The original issue
discount is being amortized through June 15, 1996 with a yield to maturity of
13 1/4%. During the year ended December 31, 1995, the Company repurchased
$61.7 million face amount of its Discount Debentures for $57.6 million,
including a premium of $2.0 million. The carrying amount at December 31, 1995
of the Discount Debentures represents the face amount less an unamortized
discount of $12.1 million. From and after June 15, 1996, interest on the
Discount Debentures will accrue on the principal amount at the rate of 13 1/4%
and be payable in cash semiannually. The Discount Debentures are redeemable at
any time, at the option of Holdings, in whole or in part, at 100% of their
principal amount plus accrued interest to the redemption date.
The Discount Debentures Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement and the 11 3/4%
Notes.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value due to the short
duration of those investments.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate their
fair value. The fair values of fixed-rate borrowings are based on quoted
market prices.
Letters of Credit: Fair values of the Company's outstanding letters of
credit are based on current contractual amounts outstanding.
F-15
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
The following table presents the carrying amounts and fair values of the
Company's financial instruments recorded at December 31, 1995 and 1994,
respectively:
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Working Capital Facility............... $ 7,100 $ 7,100 $ 12,600 $ 12,600
Current Portion of long-term debt...... 28,140 28,140 21,968 21,968
Bank A Term Loans...................... 220,000 220,000 39,845 39,845
Bank B Term Loans...................... 222,750 222,750 79,691 79,691
Senior Secured Floating Rate Notes due
June 30, 1997......................... -- -- 50,000 50,000
11 3/4% Senior Subordinated Notes due
June 15, 2002......................... 135,000 144,500 135,000 140,400
13 1/4% Senior Subordinated Debentures
due December 15, 2002................. 201,263 205,873 228,195 235,100
</TABLE>
The Company has had limited involvement with derivative financial
instruments and does not use them for trading purposes. During 1995 and 1994,
the Company was not party to any interest rate hedge agreements, nor did it
use derivative instruments to hedge commodity or foreign exchange risks.
Subsequent to December 31, 1995, the Company entered into interest rate swap
agreements in order to manage its exposure to interest rate fluctuations.
These agreements effectively convert interest rate exposure from variable rate
to a fixed rate without the exchange of the underlying principal amounts. The
Company has agreed to pay fixed rates of interest ranging from 8.1% to 8.6% on
notional principal amounts totaling $100.0 million which mature in the year
1999. Net payments or receipts under these agreements will be recorded as
adjustments to interest expense.
CONCENTRATION OF CREDIT RISK
The Company derives a significant portion of its revenue from multi-year
supply agreements with many of its customers. Revenues from its two largest
customers accounted for approximately 36.0% of sales in 1995 and 47.3% in
1994. The receivable balances from these customers collectively represented
28.2% and 34.4% of accounts receivable before allowances at December 31, 1995
and 1994, respectively. As is common in the packaging industry, the Company
provides extended payment terms for some of its customers due to the
seasonality of the vegetable and fruit pack business. Exposure to losses is
dependent on each customer's financial position. The Company performs ongoing
credit evaluations of its customer's financial condition and its receivables
are not collateralized. The Company maintains an allowance for doubtful
accounts which management believes is adequate to cover potential credit
losses based on customer credit evaluations, collection history, and other
information.
F-16
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
10. COMMITMENTS
The Company has a number of noncancelable operating leases for office and
plant facilities, equipment and automobiles that expire at various dates
through 2020. Certain operating leases have renewal options. Minimum future
rental payments under these leases are (dollars in thousands):
<TABLE>
<S> <C>
1996................................. $13,442
1997................................. 10,768
1998................................. 7,973
1999................................. 5,778
2000................................. 4,928
2001 and thereafter.................. 7,159
-------
$50,048
=======
</TABLE>
Rent expense was approximately $10.8 million in 1995; $9.1 million in 1994;
and $8.0 million in 1993.
11. RETIREMENT PLANS
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining agreements.
Pension benefits are provided based on either a career average, final pay or
years of service formula. With respect to certain hourly employees, pension
benefits are provided for based on stated amounts for each year of service. It
is the Company's policy to fund accrued pension and defined contribution costs
in compliance with ERISA requirements. Assets of the plans consist primarily
of equity and bond funds.
The following table sets forth the funded status of the Company's retirement
plans as of December 31:
<TABLE>
<CAPTION>
PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
--------------- ----------------
1995 1994 1995 1994
------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligations............ $12,135 $9,182 $31,465 $19,876
Non-vested benefit obligations........ 547 871 3,158 1,889
------- ------ ------- -------
Accumulated benefit obligations......... 12,682 10,053 34,623 21,765
Additional benefits due to future salary
levels................................. 5,667 5,358 7,132 3,557
------- ------ ------- -------
Projected benefit obligations........... 18,349 15,411 41,755 25,322
Plan assets at fair value............... 12,988 11,612 23,535 17,249
------- ------ ------- -------
Projected benefit obligation in excess
of plan assets......................... 5,361 3,799 18,220 8,073
Unrecognized actuarial gain (loss)...... (165) 504 1,237 3,916
Unrecognized prior service costs........ (615) (665) (2,128) (2,461)
Additional minimum liability............ -- -- 1,990 1,677
------- ------ ------- -------
Accrued pension liability recognized in
the balance sheet...................... $ 4,581 $3,638 $19,319 $11,205
======= ====== ======= =======
</TABLE>
F-17
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
As of the AN Can acquisition date, the Company assumed an accrued pension
liability of $6.8 million related to the active employee population
transferred to the Company from AN Can. Under the terms of the acquisition,
ANC retained the liability for the retired population as of August 1, 1995.
For certain pension plans with accumulated benefits in excess of plan assets
at December 31, 1995 and December 31, 1994, the balance sheet reflects an
additional minimum pension liability and related intangible asset of $2.0
million and $1.7 million, respectively,
The components of net periodic pension costs for defined benefit plans are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 3,067 $ 2,947 $ 1,809
Interest cost................................... 3,887 3,334 2,144
Actual loss (return) on assets.................. (7,284) 539 (1,784)
Net amortization and deferrals.................. 5,008 (2,698) 317
------- ------- -------
Net periodic pension cost..................... $ 4,678 $ 4,122 $ 2,486
======= ======= =======
</TABLE>
During 1995, the Company recognized settlement and curtailment losses of
$0.4 million from the termination of participation in certain plans as a
result of plant closings and changes in pension benefit provisions. The
Company participates in several multi-employer pension plans which provide
defined benefits to certain of its union employees. The composition of total
pension cost for 1995, 1994, and 1993 in the Consolidated Statements of
Operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net periodic pension cost......................... $ 4,678 $ 4,122 $ 2,486
Settlement and curtailment losses, net............ 418 -- --
Contributions to multi-employer union plans....... 2,708 2,700 2,000
------- ------- -------
Total pension costs............................. $ 7,804 $ 6,822 $ 4,486
======= ======= =======
</TABLE>
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.5% 8.5% 7.5%
Weighted average rate of compensation increase.............. 4.0% 4.5% 4.5%
Expected long-term rate of return on plan assets............ 8.5% 8.5% 8.5%
</TABLE>
The Company also sponsors defined contribution pension and profit sharing
plans covering substantially all employees. Company contributions to these
plans are based upon employee contributions and operating profitability.
Contributions charged to income for these plans were $1.7 million in 1995;
$2.5 million in 1994; and $1.5 million in 1993. The decline in defined
contributions in 1995 as compared to 1994 resulted from lower profit-sharing
contributions made for Company employees since target financial objectives
were not achieved. This decrease was partially offset by an increase in the
contribution base attributable to additional employee participation as a
result of the acquisition of AN Can.
F-18
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, the Company changed its method of accounting for
postretirement health care and other insurance benefits to conform to the
provisions of SFAS No. 106 "Employers' Accounting for Post Retirement Benefits
Other Than Pensions", which requires accrual of these benefits over the period
during which active employees become eligible for such benefits. Previously,
the Company recognized the cost of providing such benefits on the pay-as-you-
go basis. The Company elected to immediately recognize a cumulative charge of
$5.0 million for this change in accounting principle which represents the
accumulated postretirement benefit obligation existing as of January 1, 1993.
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:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................... $ 1,587 $ 1,183
Fully eligible active plan participants........ 11,647 1,521
Other active plan participants................. 14,770 2,577
----------- ----------
Total accumulated postretirement benefit
obligation..................................... 28,004 5,281
Unrecognized net gain........................... (2,929) (219)
Unrecognized prior service costs................ (298) (79)
----------- ----------
Accrued postretirement benefit liability........ $ 24,777 $ 4,983
=========== ==========
</TABLE>
As of the AN Can acquisition date, the Company assumed a postretirement
benefit liability in the amount of $19.6 million for the active population
transferred to the Company from AN Can. Under the terms of the acquisition,
ANC retained the liability for the retired population as of August 1, 1995.
Net periodic postretirement benefit cost include the following components:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost....................................... $ 372 $ 321
Interest cost...................................... 1,097 412
Net amortization and deferral...................... 42 (14)
------------ ----------
Net periodic postretirement benefit cost......... $ 1,511 $ 719
============ ==========
</TABLE>
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation as of December 31, 1995 and 1994 were 7.5%
and 8.5%, respectively. The net periodic postretirement benefit costs were
calculated using a discount rate ranging from 7.5% to 8.5% for 1995 and 8.5%
for 1994. The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation ranged from 7.14% to 10.0% in
1995 and was 14% in 1994, declining to a rate ranging from 5.0% to 6.0% in the
year 2003 and thereafter.
F-19
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
A 1% increase in the health care cost trend rate assumption would increase
the accumulated postretirement benefit obligation as of December 31, 1995 by
approximately $3.7 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
1995 by approximately $0.2 million.
13. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal........................................ $ 500 $ 2,500 $ 300
State.......................................... 1,900 3,200 1,900
Foreign........................................ 100 (100) (400)
------- ------- -------
2,500 5,600 1,800
Deferred
Federal........................................ -- -- --
State.......................................... -- -- 100
Foreign........................................ -- -- --
------- ------- -------
-- -- 100
------- ------- -------
$ 2,500 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
Income tax expense is included in the financial statements as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary charges.............. $ 5,100 $ 5,600 $ 1,900
Extraordinary charges............................ (2,600) -- --
------- ------- -------
$ 2,500 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
The income tax provision varied from that computed by using the U.S.
statutory rate as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at the U.S. Federal income
tax rate..................................... $(3,811) $(2,601) $(4,363)
State and foreign tax expense net of Federal
income benefit............................... 1,820 2,015 1,235
Amortization of goodwill...................... 471 576 154
Losses with no benefit........................ 6,620 5,610 4,874
------- ------- -------
$ 5,100 $ 5,600 $ 1,900
======= ======= =======
</TABLE>
F-20
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation...................... $ 27,800 $ 21,900
Book over tax basis of assets acquired.......... 41,700 21,400
Other........................................... 3,900 4,100
----------- ----------
Total deferred tax liabilities................ 73,400 47,400
Deferred tax assets:
Book reserves not yet deductible for tax
purposes....................................... 56,300 24,800
Deferred interest on high yield obligations..... 25,100 21,300
Net operating loss carryforwards................ 35,600 26,200
Other........................................... 1,200 4,100
----------- ----------
Total deferred tax assets..................... 118,200 76,400
Valuation allowance for deferred tax assets..... 51,636 35,836
----------- ----------
Net deferred tax assets....................... 66,564 40,564
----------- ----------
Net deferred tax liabilities...................... $ 6,836 $ 6,836
=========== ==========
</TABLE>
The Company files a consolidated Federal income tax return. At December 31,
1995, the Company has net operating loss carryforwards of approximately $100.0
million which are available to offset future consolidated taxable income of
the group and expire from 2001 through 2010. The Company had an alternative
minimum tax liability of $0.5 million in 1995 and $1.5 million in 1994. At
December 31, 1995, the Company had $3.9 million of alternative minimum tax
credits which are available indefinitely to reduce future tax payments for
regular federal income tax purposes.
14. ACQUISITION RESERVES
In connection with the acquisition of AN Can, the Company plans to improve
operating efficiencies through production and facility consolidation and
through workforce reductions. As part of its preliminary purchase price
allocation, the Company established a reserve for $25.0 million which
primarily consists of $20.5 million for severance and $4.5 million of facility
exit costs. The provision for severance includes employee termination
benefits, such as, salary continuation, pension, and medical. Plant exit costs
include planned expenditures relating to facility shut down, equipment
removal, and compliance with environmental regulations. During the year, $0.9
million of costs were expended for severance. As of December 31, 1995, $7.1
million remained in other accrued expenses for costs expected to be paid
within one year and $17.0 million remained in long term liabilities.
Management believes that the operating improvements will not be fully
implemented until 1997 and the remaining reserve balance will be adequate to
cover anticipated costs.
15. STOCK OPTION PLANS
Holdings, Containers and Plastics have established stock option plans for
their key employees pursuant to which options to purchase shares of common
stock of Holdings and its subsidiaries and stock appreciation rights ("SARs")
may be granted.
F-21
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
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 342,166 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 in control (as defined), the fair market
value of a share of common stock) over the exercise price of the option, with
certain adjustments for the portion of vested stock appreciation rights not
paid at the time of the recapitalization in June 1989; or, in the case of the
Plastics plan, in the event of a public offering or a change in control (as
defined), the fair market value of a share of common stock over the exercise
price of the option.
Prior to a public offering or change in control, should an employee leave
Containers, Containers has the right to repurchase, and the employee has the
right to require Containers to repurchase, the common stock at the then pro
forma book value.
At December 31, 1995, there were outstanding options for 342,166 shares
under the Holdings plan, 936 shares under the Containers plan and 1,200 shares
under the Plastics plan. The exercise prices per share range from $2.45 to
$4.26 for the Holdings options, range from $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,
1995, there were 265,178 options exercisable under the Holdings plans, 840
options/SARs exercisable under the Containers plan and 180 options/SARs
exercisable under the Plastics plan. For the years ended December 31, 1995,
1994, and 1993, no stock options or SARs were exercised. The Company incurred
charges relating to the vesting of benefits under the stock option plans of
$0.8 million in 1995; $1.5 million in 1994; and $0.2 million in 1993.
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans and (ii) any stock issued upon exercise of such
options issued by Containers are convertible into either stock options or
common stock of Holdings, as the case may be. The conversion of such options
or shares will be based upon a valuation of Holdings and an allocation of such
value among the subsidiaries after giving affect to, among other things, that
portion of the outstanding indebtedness of Holdings allocable to each such
subsidiary.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant using
an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or may continue to follow the current
accounting method as prescribed under APB. Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company does not intend to adopt SFAS No. 123
for expense recognition purposes in 1996.
F-22
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
16. DEFICIENCY IN STOCKHOLDERS' EQUITY
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value):
<TABLE>
<CAPTION>
SHARES
ISSUED AND OUTSTANDING
CLASS DECEMBER 31, 1995 AND 1994
----- --------------------------
<S> <C>
A............................................... 5,952,256
B............................................... 9,516,481
C............................................... 712,845
----------
16,181,582
==========
</TABLE>
The rights, privileges and powers of the Class A Common Stock and the Class
B Common Stock are identical, with shares of each class being entitled to one
vote on all matters to come before the stockholders of Holdings. The Class C
common stockholders do not have voting rights except in certain circumstances.
As discussed in Note 20, in connection with the proposed initial public
offering, Holdings will amend its Restated Certificate of Incorporation and
convert Class A, Class B and Class C Common Stock into Common Stock on a one
for one basis.
17. RELATED PARTY TRANSACTIONS
Pursuant to various management services agreements entered into between
Holdings, Silgan, Containers, Plastics, and S&H, Inc. ("S&H"), a company
wholly-owned by Mr. Silver, the Chairman and Co-Chief Executive Officer 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 ("EBDIT") until EBDIT has reached the Scheduled Amount set forth in
the Management Agreements and 3.3% (of which 0.3% is payable to MS & Co.)
after EBDIT has exceeded the Scheduled Amount up to the Maximum Amount as set
forth in the Management Agreements, plus reimbursement for all related out-of-
pocket expenses. The total amount incurred under the Management Agreements was
$5.4 million in 1995, $5.0 million in 1994, and $4.4 million in 1993 and was
allocated, based upon EBDIT, as a charge to operating income of each business
segment. Included in accounts payable at December 31, 1995 and 1994, was $0.1
million payable to S&H.
Under the terms of the Management Agreements, the Company has agreed,
subject to certain exceptions, to indemnify S&H and any of its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any loss or damage they may sustain arising in connection with
the Management Agreements.
In connection with the refinancings and bank credit agreements entered into
during 1995 and 1993, the banks thereunder (including Bankers Trust Company)
received fees totaling $17.2 million in 1995 and $8.1 million in 1993.
18. LITIGATION
In connection with the acquisition by Holdings of Silgan as of June 30, 1989
(the "Merger"), a decision was rendered in 1995 by the Delaware Court of
Chancery with respect to appraisal
F-23
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
proceedings filed by certain former stockholders of 5,702,760 shares of stock
of Silgan. Pursuant to that decision, these former holders were awarded $0.42
per share, plus simple interest at a rate of 9.5%. This award was less than
the amount, $0.46 per share, that these former holders would have received in
the Merger. The right of these former holders to appeal the Chancery Court's
decision has expired, and the Company has tendered payment of $3.8 million to
these former holders. In 1994, prior to the trial for appraisal, the Company
and the former holders of an additional 9,266,985 shares of stock of Silgan
agreed to a settlement in respect of their appraisal rights, and the Company
made a payment of $6.9 million, including interest, in respect of the
settlement.
With respect to a complaint filed by limited partners of The Morgan Stanley
Leveraged Equity Fund, L.P. against a number of defendants, including Silgan
and Holdings, all claims against Silgan and Holdings related to this action
were dismissed on January 14, 1993. The plaintiff's time to appeal the
dismissal of the claims against Holdings and Silgan expired following the
dismissal of the claims against certain other defendants in June 1995.
Other than the actions mentioned above, there are no other pending legal
proceedings to which the Company is a party or to which any of its properties
are subject which would have a material effect on the Company's financial
position.
19. BUSINESS SEGMENT INFORMATION
The Company is engaged in the packaging industry and operates principally in
two business segments. Both segments operate in North America. There are no
intersegment sales. Presented below is a tabulation of business segment
information for each of the past three years (in millions):
<TABLE>
<CAPTION>
NET OPER. IDENTIFIABLE DEP.& CAPITAL
SALES PROFIT ASSETS AMORT. EXPEND.
-------- ------ ------------ ------ -------
<S> <C> <C> <C> <C> <C>
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
-------- ----- ------ ----- -----
Consolidated............. $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
-------- ----- ------ ----- -----
Consolidated............. $ 861.4 $59.7 $498.1 $37.2 $29.2
======== ===== ====== ===== =====
1993
Metal container &
specialty(1).............. $ 459.2 $42.3 $324.5 $17.3 $25.3
Plastic container.......... 186.3 0.6 165.9 16.5 17.2
-------- ----- ------ ----- -----
Consolidated............. $ 645.5 $42.9 $490.4 $33.8 $42.5
======== ===== ====== ===== =====
</TABLE>
- --------
(1) Specialty packaging sales include closures, plastic bowls, and paper
containers used by processors and packagers in the food industry and are
not significant enough to be reported as a separate segment.
(2) Includes charge for reduction in carrying value of assets of $14.7 million
for the metal container segment.
(3) Includes charges for reduction in carrying value of assets of $7.2 million
for the metal container segment and $9.5 million for the plastic container
segment, respectively.
F-24
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 1994 AND 1993
Operating profit is reconciled to income before tax as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ----- ------
<S> <C> <C> <C>
Operating profit................................... $ 71.4 $59.7 $ 42.9
Interest expense................................... 80.7 65.8 54.3
Corporate expense.................................. 1.5 1.3 1.1
------ ----- ------
Loss before income taxes......................... $(10.8) $(7.4) $(12.5)
====== ===== ======
</TABLE>
Identifiable assets are reconciled to total assets as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Identifiable assets................................... $896.1 $498.1 $490.4
Corporate assets...................................... 3.9 6.2 7.2
------ ------ ------
Total assets........................................ $900.0 $504.3 $497.6
====== ====== ======
</TABLE>
Metal container and other segment sales to Nestle Food Company accounted for
21.4%, 25.9% and 34.1%, of net sales of the Company during the years ended
December 31, 1995, 1994 and 1993, respectively. Similarly, sales to Del Monte
accounted for 14.5% and 21.4% of net sales of the Company during the years
ended December 31, 1995 and 1994, respectively.
20. SUBSEQUENT EVENTS
EXCHANGEABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of 13 1/4% Exchangeable
Preferred Stock, mandatorily redeemable in 2006 ("Preferred Stock"), for net
proceeds of $47.8 million. The Company used $35.8 million of these proceeds to
purchase its Class B Common Stock held by Mellon Bank, as trustee for First
Plaza Group Trust, pursuant to the right the Company had to purchase such
stock under the Organization Agreement entered into as of December 21, 1993
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and
Holdings. As of September 30, 1996, additional paid in capital was reduced by
$15.0 million, the original issuance amount received for the Class B Common
Stock, and the remainder of the payment was applied to Holdings' accumulated
deficit. Additionally, the balance of the proceeds received from the issuance
of Preferred Stock was used to redeem $12.0 million principal amount of
Discount Debentures.
REFINANCINGS
During 1996, the Company redeemed $154.4 million principal amount of
Discount Debentures at par. These redemptions were funded through the
borrowing of $125.0 million of additional B term loans under the Company's
Credit Agreement, excess proceeds of $12.0 million from the issuance of
Preferred Stock, and the borrowing of $17.4 million of working capital loans
under the Company's Credit Agreement. In connection with the early redemption
of the Discount Debentures, the Company incurred an extraordinary charge of
$2.1 million, net of tax, for the write-off of unamortized deferred financing
costs.
F-25
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
DECEMBER 31, 1995 1994 AND 1993
As a result of these refinancings, the aggregate annual maturities of long-
term debt of the Company are as follows (in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,454
1997................................ 38,433
1998................................ 53,401
1999................................ 53,401
2000................................ 126,130
2001 and thereafter................. 460,923
--------
$760,742
========
</TABLE>
1996 ACQUISITION
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging, Inc. ("Finger Lakes"), a metal food container
manufacturer and a wholly-owned subsidiary of Curtice Burns Foods, Inc.
("Curtice Burns") for approximately $29.9 million. As part of the transaction,
the Company 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 its Credit Agreement.
PROPOSED INITIAL PUBLIC OFFERING
In connection with the proposed initial public offering ("IPO") of Holdings'
Common Stock, Holdings will 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, the
existing Class A, Class B, and Class C Common Stock will be converted to
Common Stock on a one for one basis, and thereafter, Holdings will effect a
14.2569 for 1 stock split. The estimated net proceeds from the IPO will be
used to redeem Holdings' remaining Discount Debentures outstanding
(approximately $59.0 million). Share information and per share data have been
adjusted to give effect to the proposed amendment to Holdings' Restated
Certificate of Incorporation and the Stock Split.
Upon the closing of the IPO, the Company will recognize a non-cash charge of
approximately $16.1 million (assuming an initial public offering price of
$18.50 per share), net of $3.5 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 additional 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-26
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 2,874 $ 3,860
Accounts receivable, net........................... 218,883 262,819
Inventories........................................ 190,690 196,584
Prepaid expenses and other current assets.......... 9,801 21,142
---------- ----------
Total current assets............................. 422,248 484,405
Property, plant and equipment, net................... 479,505 496,392
Goodwill, net........................................ 72,218 53,966
Other assets......................................... 32,208 32,491
---------- ----------
$1,006,179 $1,067,254
========== ==========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable............................. $ 86,609 $ 96,159
Accrued payroll and related costs.................. 40,811 35,400
Accrued interest payable........................... 16,543 10,449
Accrued expenses and other current liabilities..... 32,496 35,719
Bank working capital loans......................... 126,000 184,000
Current portion of long-term debt.................. 28,454 7,250
---------- ----------
Total current liabilities........................ 330,913 368,977
Long-term debt....................................... 732,288 772,292
Deferred income taxes................................ 6,836 6,836
Other long-term liabilities.......................... 73,454 77,171
Cumulative exchangeable redeemable preferred stock... 51,307 --
Deficiency in stockholders' equity:
Common stock....................................... 126 162
Additional paid-in capital......................... 18,492 33,456
Accumulated deficit................................ (207,237) (191,640)
---------- ----------
Total deficiency in stockholders' equity............. (188,619) (158,022)
---------- ----------
$1,006,179 $1,067,254
========== ==========
</TABLE>
See accompanying notes.
F-27
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPT. 30, SEPT. 30,
1996 1995
---------- ----------
<S> <C> <C>
Net sales............................................. $1,080,486 $ 811,505
Cost of goods sold.................................... 936,397 710,975
---------- ----------
Gross profit........................................ 144,089 100,530
Selling, general and administrative expenses.......... 42,411 31,095
---------- ----------
Income from operations.............................. 101,678 69,435
Interest expense and other related financing costs.... 68,286 57,722
---------- ----------
Income before income taxes.......................... 33,392 11,713
Income tax provision.................................. 3,000 5,900
---------- ----------
Income before extraordinary charge.................. 30,392 5,813
Extraordinary charge relating to early extinguishment
of debt,
net of taxes......................................... 2,089 5,837
---------- ----------
Net income (loss) before preferred stock dividend
requirement........................................ 28,303 (24)
Preferred stock dividend requirement.................. 1,307 --
---------- ----------
Net income (loss) available to common stockholders.. $ 26,996 $ (24)
========== ==========
Net income (loss) per common share:
Income before extraordinary charges................. $ 1.76 $ 0.34
Extraordinary charges............................... (0.13) (0.34)
---------- ----------
Net income per common share......................... $ 1.63 $ --
========== ==========
Weighted average number of common and common
equivalent shares outstanding........................ 16,560,874 17,138,927
========== ==========
</TABLE>
See accompanying notes.
F-28
<PAGE>
SILGAN HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------
SEPT. 30, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 28,303 $ (24)
Adjustments to reconcile net income (loss) to net cash
(used) provided by operating activities:
Depreciation........................................... 40,009 27,233
Amortization........................................... 6,803 5,321
Accretion of discount on discount debentures........... 12,077 21,931
Extraordinary charge relating to early extinguishment
of debt,
net of taxes.......................................... 2,089 5,837
Changes in assets and liabilities:
(Increase) in accounts receivable..................... (106,461) (55,512)
Decrease in inventories............................... 21,238 14,472
(Decrease) increase in trade accounts payable......... (51,586) 2,508
Net working capital used by AN Can from 8/1/95 to
9/30/95.............................................. -- (11,195)
Other, net............................................ (461) 6,193
--------- ---------
Total adjustments.................................... (76,292) 16,788
--------- ---------
Net cash (used) provided by operating activities....... (47,989) 16,764
--------- ---------
Cash flows from investing activities:
Acquisition of ANC's Food Metal & Specialty business.... (13,121) (347,052)
Capital expenditures.................................... (38,624) (30,414)
Proceeds from sale of assets............................ 1,521 3,398
--------- ---------
Net cash used in investing activities.................. (50,224) (374,068)
--------- ---------
Cash flows from financing activities:
Borrowings under working capital loans.................. 710,550 490,410
Repayments under working capital loans.................. (591,650) (333,672)
Proceeds from issuance of long-term debt................ 125,000 450,000
Repayment of long-term debt............................. (155,348) (227,256)
Proceeds from issuance of preferred stock............... 50,000 --
Repurchase of common stock.............................. (35,811) --
Debt issuance costs..................................... (3,756) (21,000)
--------- ---------
Net cash provided by financing activities.............. 98,985 358,482
--------- ---------
Net increase in cash and cash equivalents................ 772 1,178
Cash and cash equivalents at beginning of year........... 2,102 2,682
--------- ---------
Cash and cash equivalents at end of period............... $ 2,874 $ 3,860
========= =========
Supplementary data:
Interest paid........................................... $ 41,112 $ 23,017
Income taxes paid....................................... 568 8,592
Preferred stock issued in lieu of cash dividend......... 1,307 --
</TABLE>
See accompanying notes.
F-29
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND
FOR THE NINE MONTHS THEN ENDED IS UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed unaudited consolidated financial statements of
Silgan Holdings Inc. ("Holdings" or the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and, therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. All adjustments of a normal recurring nature
have been made, including appropriate estimates for reserves and provisions
which are normally determined or settled at year end. In the opinion of the
Company, however, the accompanying financial statements contain all
adjustments (consisting solely of a normal recurring nature) necessary to
present fairly Holdings' financial position as of September 30, 1996 and 1995
and, the results of operations for the three and nine months ended September
30, 1996 and 1995, and the statements of cash flows for the nine months ended
September 30, 1996 and 1995.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with Holdings' financial statements and
notes included in its Annual Report on Form 10-K for the year ended December
31, 1995.
Certain reclassifications have been made to prior year's financial
statements to conform with current year presentation. In addition, share and
per share information have been adjusted to give effect to the proposed
amendment to Holdings' Restated Certificate of Incorporation and the Stock
Split (See Note 6--Subsequent Events).
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" in the first quarter of 1996. Under SFAS No. 121,
impairment losses will be recognized when events or changes in circumstances
indicate that the undiscounted cash flows generated by the assets are less
than the carrying value of such assets. Impairment losses are then measured by
comparing the fair value of assets to their carrying amount. There were no
impairment losses recognized during the first nine months of 1996 as a result
of the adoption of SFAS No. 121.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", effective for the
1996 fiscal year. Under SFAS No. 123, compensation expense for all stock-based
compensation plans would be recognized based on the fair value of the options
at the date of grant using an option pricing model. As permitted under SFAS
No. 123, the Company may either adopt the new pronouncement or follow the
current accounting methods as prescribed under APB No. 25. The Company
continues to recognize compensation expense in accordance with APB No. 25.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1995
--------- ---------
<S> <C> <C>
Raw materials and supplies........................... $ 37,314 $ 39,675
Work-in-process...................................... 32,792 22,588
Finished goods....................................... 111,229 132,804
Spare parts and other................................ 7,663 6,345
-------- --------
188,998 201,412
Adjustment to value inventory at cost on the LIFO
Method.............................................. 1,692 (4,828)
-------- --------
$190,690 $196,584
======== ========
</TABLE>
F-30
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
3. ACQUISITIONS
Set forth below is the Company's summary unaudited pro forma results of
operations for the nine months ended September 30, 1995. The unaudited pro
forma results of operations of the Company for the nine months ended September
30, 1995 include the historical results of the Company and the Food Metal &
Specialty business of American National Can Company ("AN Can") for such period
and give effect to certain pro forma adjustments. The pro forma adjustments
made to the historical results of operations for September 30, 1995 reflect
the effect of purchase accounting adjustments based upon appraisals and
valuations, the financing of the acquisition of AN Can by the Company, the
refinancing of certain of the Company's debt obligations, and certain other
adjustments as if these events had occurred as of the beginning of 1995. The
pro forma adjustments are based upon available information and upon certain
assumptions that the Company believes are reasonable. 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
Containers' 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 nine months
ended September 30, 1995 for the refinancings as described in Note 5 or for
the subsequent events discussed in Note 6. The following unaudited pro forma
results of operations do not purport to represent what the Company's results
of operations would actually have been had the transactions in fact occurred
on January 1, 1995, or to project the Company's results of operations for any
future period (in thousands except per share data):
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, 1995
------------------
<S> <C>
Net sales............................................... $1,113,982
Income from operations.................................. 92,359
Income before income taxes.............................. 25,880
Net income.............................................. 16,155
Net income per common share............................. 0.77
</TABLE>
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. The Company estimates that costs related to such
plans include approximately $6.6 million related to plant exit costs, $22.6
million related to employee severance and relocation costs, and $3.5 million
related to administrative workforce reductions. The timing of the plant
rationalizations, among other things, will be dependent on covenants in
existing labor agreements and accordingly these costs will be incurred during
the period from late 1996 through early 1998. Through September 30, 1996,
costs of $3.3 million related to administrative workforce reductions and
relocation were incurred.
During 1996, the purchase price allocation for the AN Can acquisition was
adjusted 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 other various matters. The final purchase price
allocation resulted in an adjustment to increase goodwill by $20.7 million.
4. EXCHANGEABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of 13 1/4% Exchangeable
Preferred Stock ("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
F-31
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
purchase its Class B Common Stock held by Mellon Bank, as trustee for First
Plaza Group Trust, pursuant to the right the Company had to purchase such
stock under the Organization Agreement entered into as of December 21, 1993
among R. Philip Silver, D. Greg Horrigan, MSLEF II, BTNY, First Plaza and
Holdings. As of September 30, 1996, additional paid in capital was reduced by
$15.0 million, the original issuance amount received for the Class B Common
Stock, and the remainder of the payment was applied to Holdings' accumulated
deficit. Additionally, the balance of the proceeds received from the issuance
of Preferred Stock was used to redeem $12.0 million principal amount of
Holdings' 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures").
The Preferred Stock holders are entitled to receive cumulative dividends at
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. As of
September 30, 1996, the Company accrued $1.3 million for a dividend on the
Preferred Stock, payable in additional shares of Preferred Stock issued on
October 15, 1996.
The Company is required to use its best efforts to cause the Preferred Stock
to be registered under the Securities Act of 1933. If the Preferred Stock is
not so registered by December 22, 1996, the per annum dividend rate on the
Preferred Stock will increase by 0.5%, payable in additional shares of
Preferred Stock on each dividend payment date until the Preferred Stock is
registered.
The Preferred Stock is exchangeable into Holdings' Subordinated Debentures
due 2006 (the "Exchange Debentures"), in whole but not in part, 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 prior to this date for a redemption price (expressed as a
percentage of the liquidation preference of the Preferred Stock or principal
amount of the Exchange Debentures) set forth below, plus an amount equal to
all the accumulated and unpaid dividends or accrued and unpaid interest.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000......................................................... 109.938%
2001......................................................... 106.625%
2002......................................................... 103.313%
2003 and thereafter.......................................... 100.000%
</TABLE>
In addition, all (but not less than all) of the outstanding Preferred Stock
or Exchange Debentures may be redeemed prior to July 15, 2000 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 of its common stock.
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.
F-32
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AT SEPTEMBER 30, 1996 AND 1995 AND FOR THE NINE MONTHS THEN ENDED
IS UNAUDITED)
5. REFINANCINGS
During 1996, the Company redeemed $154.4 million principal amount of
Discount Debentures at par. These redemptions were funded through the
borrowing of $125.0 million of additional B term loans under the Company's
Credit Agreement, excess proceeds of $12.0 million from the issuance of
Preferred Stock, and the borrowing of $17.4 million of working capital loans
under the Company's Credit Agreement. In connection with the early redemption
of the Discount Debentures, the Company incurred an extraordinary charge of
$2.1 million, net of tax, for the write-off of unamortized deferred financing
costs.
As a result of these refinancings, the aggregate annual maturities of long-
term debt of the Company are as follows (in thousands):
<TABLE>
<S> <C>
1996................................ $ 28,454
1997................................ 38,433
1998................................ 53,401
1999................................ 53,401
2000................................ 126,130
2001 and thereafter................. 460,923
--------
$760,742
========
</TABLE>
6. SUBSEQUENT EVENTS
1996 ACQUISITION
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging, Inc. ("Finger Lakes"), a metal food container
manufacturer and a wholly-owned subsidiary of Curtice Burns Foods, Inc.
("Curtice Burns") for approximately $29.9 million. As part of the transaction,
the Company 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 its Credit Agreement.
1996 PUBLIC OFFERING
In connection with the proposed initial public offering ("IPO") of Holdings'
Common Stock, 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, and 10,000,000 shares of preferred stock, par value $.01 per
share. In addition, immediately prior to the closing of the IPO, the existing
Class A, Class B, and Class C Common Stock will be converted to Common Stock
on a one for one basis, and thereafter, Holdings will effect a 14.2569 for 1
stock split. The estimated net proceeds from the IPO will be used to redeem
Holdings' remaining Discount Debentures outstanding (approximately $59.0
million). Share information and per share data have been adjusted to give
effect to the proposed amendment to Holdings' Restated Certificate of
Incorporation and the Stock Split.
Upon the closing of the IPO, the Company will recognize a non-cash charge of
approximately $16.1 million (assuming an initial public offering price of
$18.50 per share), net of $3.5 million previously accrued, for the excess of
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
addition, to the extent the net proceeds of the IPO are used as expected, the
Company will recognize an additional 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-33
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
INTRODUCTORY NOTE
Set forth below is the Company's unaudited pro forma condensed statements of
operations for the nine months ended September 30, 1996 and the year ended
December 31, 1995. The unaudited pro forma results of operations of the
Company include the historical results of the Company for such periods and
give effect to certain pro forma adjustments.
The unaudited pro forma condensed statement of operations for the nine
months ended September 30, 1996 gives effect to (i) the sale of $64.75 million
of Common Stock offered 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 and to purchase the Holdings' Class B Common Stock held by Mellon
Bank N.A. for $35.8 million, as if such events had occurred as of January 1,
1996.
The unaudited pro forma condensed statement of operations for the fiscal
year ended December 31, 1995 gives effect to (i) the acquisition of AN Can,
(ii) borrowings under the Silgan Credit Agreement which were used to finance
the acquisition of AN Can, repay in full amounts owing under the Company's
previous credit agreement, and repay the Secured Notes, and (iii) (A) the sale
of $64.75 million of Common Stock offered hereby, (B) the sale of $50.0
million of Exchangeable Preferred Stock (and the planned exchange of the
Exchangeable Preferred Stock for Exchange Debentures), and (C) the incurrence
of $125.0 million of additional B term loans and $75.0 million of working
capital loans under the Silgan Credit Agreement, and the use of such proceeds
to redeem in full the outstanding amount of Discount Debentures and to
purchase the Holdings Class B Stock held by Mellon Bank N.A. for $35.8
million, as if such events had occurred as of January 1, 1995.
In conjunction with the acquisition of AN Can, pro forma adjustments have
been made to reflect reduced selling, general and administrative expenditures
realized as a result of the integration of sales, administrative and research
functions of the Company and AN Can. Depreciation, goodwill amortization, and
interest expense (including debt amortization) have also been adjusted for the
allocated cost of the acquisition of AN Can and its related financing. 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 Containers' existing can manufacturing operations and benefits it may
realize as a result of the planned rationalization of its plant operations.
The Company will not begin to realize the benefit of the integration of the
can manufacturing facilities until 1997.
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 periods
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-34
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------
DEBT
HISTORICAL RECAPITALIZATION(A) OFFERING(B) PRO FORMA
---------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............... $1,080,486 $ -- $ -- $1,080,486
Cost of goods sold...... 936,397 -- -- 936,397
---------- ------ ------ ----------
Gross profit.......... 144,089 -- -- 144,089
Selling, general and
administrative
expenses............... 42,411 -- -- 42,411
---------- ------ ------ ----------
Income from
operations........... 101,678 -- -- 101,678
Interest expense and
other related financing
costs(c)(d)............ 68,286 (4,455) (593) 63,238
---------- ------ ------ ----------
Income before income
taxes................ 33,392 4,455 593 38,440
Income tax provision.... 3,000 (600)(e) (100)(e) 2,300
---------- ------ ------ ----------
Net income(j)......... 30,392 5,055 693 36,140
Preferred stock dividend
requirement............ 1,307 3,794 (5,101) --
---------- ------ ------ ----------
Net income applicable to
common stockholders.... $ 29,085 $1,261 $5,794 $ 36,140
========== ====== ====== ==========
Net income per common
share(i)............... $ 1.76 $ 2.08
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 16,560,874 17,416,867
</TABLE>
F-35
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
----------------------- ---------------------------------------------
ANC FOOD
SILGAN METAL & AN CAN DEBT
HOLDINGS INC. SPECIALTY ACQUISITION RECAPITALIZATION(A) OFFERING(B) PRO FORMA
------------- --------- ----------- ------------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $1,101,905 $302,477 $ -- $ -- $ -- $1,404,382
Cost of goods sold...... 970,491 266,156 2,882(f) -- -- 1,239,529
---------- -------- ------ ------- ------ ----------
Gross profit.......... 131,414 36,321 (2,882) -- -- 164,853
Selling, general and
administrative
expenses............... 46,848 17,982 (7,470)(g) -- -- 57,360
Reduction in asset
carrying value......... 14,745 -- -- -- -- 14,745
---------- -------- ------ ------- ------ ----------
Income from
operations........... 69,821 18,339 4,588 -- -- (h) 92,748
Interest expense and
other related financing
costs(c)(d)............ 80,710 7,476 87 (11,509) 2,903 79,667
---------- -------- ------ ------- ------ ----------
Income (loss) before
income taxes......... (10,889) 10,863 4,501 11,509 (2,903) 13,081
Income tax provision.... 5,100 4,023 (1,923) (5,200)(e) -- 2,000
---------- -------- ------ ------- ------ ----------
Net income (loss)(j).. (15,989) 6,840 6,424 16,709 (2,903) 11,081
Preferred stock dividend
requirement............ -- -- -- 6,962 (6,962) --
---------- -------- ------ ------- ------ ----------
Net income (loss)
applicable to common
stockholders........... $ (15,989) $ 6,840 $6,424 $ 9,747 $4,059 $ 11,081
========== ======== ====== ======= ====== ==========
Net income (loss) per
common share(i)........ $ (0.93) $ 0.53
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 17,138,927 20,981,092
</TABLE>
F-36
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
(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 $75.0 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 $64.75 million of
Common Stock offered 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.
(c) Pro forma adjustments made to the historical data for interest expense as
of September 30, 1996 and December 31, 1995 consist of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE FOR THE
MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996(1) DECEMBER 31, 1995(2)
--------------------- --------------------
<S> <C> <C>
Historical interest expense..... $ 68,286 $ 80,710
Increase in interest expense
related to additional bank
borrowings used to finance the
acquisition of AN Can at
current borrowing rates(3)..... -- 8,384
Increase in interest expense
related to additional bank
borrowings of B term loans and
working capital loans used to
fund the redemption of a
portion of the Discount
Debentures at current borrowing
rates(3)....................... 5,431 13,296
Increase in interest expense
related to the Exchange
Debentures(4).................. 5,078 6,844
Net increase (decrease) in
deferred financing costs
related to amortization of new
indebtedness less retired debt
costs.......................... 54 (895)
Decrease in interest expense due
to the redemption of the
Discount Debentures(5)......... (15,611) (28,672)
-------- --------
Pro forma interest expense...... $ 63,238 $ 79,667
======== ========
</TABLE>
--------
(1) Pro forma interest expense for the nine months ended September 30, 1996
gives effect to (i) the sale of $64.75 million of Common Stock offered
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 and to purchase the Holdings Class B Stock held by
Mellon Bank N.A. for $35.8 million, as if such events had occurred as
of January 1, 1996.
F-37
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
(2) Pro forma interest expense for the year ended December 31, 1995 gives
effect to (i) borrowings under the Silgan Credit Agreement which were
used to finance the acquisition of AN Can and repay in full amounts
owing under the Company's previous credit agreement and the Secured
Notes, and (ii) (A) the sale of $64.75 million of Common Stock offered
hereby, (B) the sale of $50.0 million of Exchangeable Preferred Stock
(and the planned exchange of the Exchangeable Preferred Stock for
Exchange Debentures), and (C) the incurrence of $125.0 million of
additional B term loans and $75.0 million of working capital loans
under the Silgan Credit Agreement, and the use of such proceeds to
redeem in full the outstanding amount of Discount Debentures and to
purchase the Holdings Class B Stock held by Mellon Bank N.A. for $35.8
million, as if such events had occurred as of January 1, 1995.
(3) For the computations above, the assumed interest rates for borrowings
under the Silgan Credit Agreement are based upon the three month LIBOR
of 5.531% per annum as of October 23, 1996 plus a fixed spread of 2
1/2% per annum for the A term loans and working capital loans and 3%
per annum for the B term loans.
(4) 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.
(5) The adjustment in interest expense related to the Discount Debentures
has been calculated to eliminate the amount of historical interest
incurred.
(d) The unaudited pro forma statement of operations for the nine months ended
September 30, 1996 and for the year ended December 31, 1995 assume that
the redemption of the Discount Debentures occurred as of the beginning of
the periods presented. Since the redemption of the Discount Debentures did
not actually occur as of the beginning of the periods 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 nine months ended September 30, 1996 and the year ended December
31, 1995 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:
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
PRINCIPAL INTEREST INTEREST
DEBT OBLIGATION AMOUNT RATE EXPENSE
--------------- ------------- -------- -------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Bank Working Capital Loan(1)(2)........ $ 90.0 8.03% $ 7.2
Bank A Term Loan(1)(3)................. 219.5 8.03% 17.6
Bank B Term Loan(1)(3)................. 347.3 8.53% 29.6
11 3/4% Subordinated Debentures........ 135.0 11.75% 15.9
Exchange Debentures(4)................. 50.0 13.25% 6.8
-----
$77.1
Amortization of debt financing
costs(5).............................. 4.5
-----
Total interest expense and related
financing costs..................... $81.6
=====
</TABLE>
F-38
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
--------
(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 agreement for $100.0 million
of indebtedness entered into by the Company 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. At September 30, 1996, the accrued
balance of Exchange Debentures would have been $51.3 million. 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.
(e) The income tax provision is comprised of federal, state and foreign income
taxes currently payable. The income tax provision for the nine months
ended September 30, 1996 and year ended December 31, 1995 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.
(f) Pro forma adjustments to cost of goods sold reflects adjustments for (i)
increased depreciation charges of $2.282 million from historical amounts
based upon the fair values of property, plant and equipment acquired,
applying an estimated useful life of 25 years for buildings and 5 to 11
years for machinery and equipment, (ii) increased charge for amortization
of goodwill of $0.361 million from the historical amount for the excess of
fair value of net assets acquired over a 40-year period and (iii)
increased employee benefits costs for pension and post-retirement medical
expense of $0.239 million to reflect change to Containers' employee
benefit plans. The pro forma statement of operations for the year ended
December 31, 1995 does not give effect to adjustments for decreased costs
from manufacturing synergies resulting from the integration of AN Can with
Containers' existing can manufacturing operations and benefits the Company
may realize as a result of its planned rationalization of plant
operations.
(g) Pro forma adjustments to selling, general and administrative expenses
reflects adjustments for (i) increased depreciation charges of $0.074
million from historical amounts for the reasons described in footnote (f)
above, (ii) increased employee benefits costs for pension and post-
retirement medical expense of $0.039 million to reflect change to
Containers' employee benefit plans, and (iii) decreased administrative
support costs of $7.583 million realized as a result of the integration of
Containers' and AN Can's sales, administrative and research functions.
In connection with the acquisition of AN Can, the Company consolidated the
administrative functions of AN Can with its existing operations, thereby
eliminating the corporate staffing costs included in AN Can's historical
operating income. As a result, a pro forma adjustment was made to eliminate
the historical corporate annual charge of $7.1 million incurred by AN Can
for services that were eliminated as part of the acquisition of AN Can. ANC
had provided AN Can with certain data processing, human resources,
purchasing, credit, accounting and tax services, all of which (except for
certain MIS costs as indicated below) are performed within the Company's
existing structure. Moreover, as permitted under the Asset Purchase
Agreement for the AN Can acquisition, the Company elected not to provide
employment to certain AN Can employees. A pro forma adjustment was made to
reduce administrative costs for the compensation and benefits
F-39
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS--(CONCLUDED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31,
1995
attributed to 77 AN Can employees who were not hired by the Company as a
result of the acquisition. Additionally, a pro forma adjustment was made
for increased rental expense incurred at the Company's technical support
facility and corporate office locations and increased MIS costs. A summary
of the adjustments allocable to the period prior to the acquisition of AN
Can are as follows (in millions):
<TABLE>
<S> <C>
Elimination of AN Can's historical corporate charge................. $4.1
Administrative workforce reduction.................................. 4.5
Increased corporate rent expense.................................... (0.5)
Increased MIS expense............................................... (0.5)
----
$7.6
====
</TABLE>
(h) 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 $16.1
million (assuming an initial public offering price of $18.50 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.
(i) 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.
(j) The pro forma condensed statement of operations does not include
historical extraordinary charges, net of taxes, of $2.1 million as of
September 30, 1996 and $5.8 million as of December 31, 1995 for the write-
off of unamortized deferred financing costs related to the early
redemption of Discount Debentures and for the early extinguishment of
amounts owing under the Company's debt facilities, respectively. The pro
forma condensed statement of operations as of September 30, 1996 also does
not include an extraordinary charge, net of tax, of $0.7 million expected
to be incurred in the fourth quarter of 1996 related to the redemption of
the remaining Discount Debentures.
F-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Holdings
has 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, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................
Morgan Stanley & Co. Incorporated.........................
Salomon Brothers Inc......................................
---------
Total................................................. 3,500,000
=========
</TABLE>
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.
Holdings has granted to the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 525,000
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 3,500,000 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 letter 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 105,000 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.
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".
U-1
<PAGE>
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 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.
It is expected that Common Stock will be quoted on the Nasdaq National
Market under the symbol "SLGN".
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
[RESERVED FOR MAP SHOWING THE COMPANY'S LOCATIONS]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 13
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Dilution................................................................. 18
Capitalization........................................................... 19
Selected Historical and Pro Forma Financial Information.................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 41
Management............................................................... 53
Securities Ownership of Certain Beneficial Owners and Management......... 61
Certain Transactions..................................................... 63
Description of Capital Stock............................................. 65
Shares Eligible for Future Sale.......................................... 70
Description of Certain Indebtedness...................................... 71
Legal Matters............................................................ 74
Experts.................................................................. 74
Available Information.................................................... 75
Incorporation of Certain Documents by Reference.......................... 75
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,500,000 SHARES
[LOGO OF SILGON APPEARS HERE]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------
PROSPECTUS
------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $29,742
NASD filing fee................................................... 9,125
NASDAQ listing fee................................................ *
Legal fees and expenses........................................... *
Accountants' fees and expenses.................................... *
Printing and engraving expenses................................... *
Blue sky fees and expenses........................................ *
Transfer Agent and Registrar fees and expenses.................... *
Miscellaneous..................................................... *
-------
Total......................................................... $ *
=======
</TABLE>
- --------
* 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:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1 Form of Underwriting Agreement among Holdings, Silgan, Containers,
Plastics 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).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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 nine months
ended September 30, 1996 and 1995 and for the years ended December 31,
1995, 1994 and 1993.
*23.1 Consent of Ernst & Young LLP.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*23.2 Consent of Price Waterhouse LLP.
**23.3 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit
5).
+24 Power of Attorney.
*99.1 Form of Restated Certificate of Incorporation of Holdings.
*99.2 Form of Amended and Restated By-laws of Holdings.
</TABLE>
- --------
* 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
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-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
November 4, 1996.
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 November 4,
(R. PHILIP SILVER) Executive Officer 1996
(Principal
Executive Officer)
/s/ D. Greg Horrigan* President, Co-Chief
- ------------------------------------- Executive Officer November 4,
(D. GREG HORRIGAN) and Director 1996
/s/ Robert H. Niehaus* Director
- ------------------------------------- November 4,
(ROBERT H. NIEHAUS) 1996
/s/ Leigh J. Abramson* Director
- ------------------------------------- November 4,
(LEIGH J. ABRAMSON) 1996
/s/ Harley Rankin, Jr.* Executive Vice
- ------------------------------------- President, Chief November 4,
(HARLEY RANKIN, JR.) Financial Officer 1996
and Treasurer
(Principal
Financial Officer)
II-7
<PAGE>
SIGNATURE TITLE DATE
/s/ Harold J. Rodriguez, Jr.* Vice President,
- ------------------------------------- Controller and November 4,
(HAROLD J. RODRIGUEZ, JR.) Assistant Treasurer 1996
(Principal
Accounting Officer)
/s/ R. Philip Silver
*By: ________________________________
R. PHILIP SILVER ATTORNEY-IN-FACT
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
*1 Form of Underwriting Agreement among Holdings, Silgan, Containers,
Plastics and the Underwriters.
*10.41 Form of Silgan Holdings Inc. Fourth Amended and Restated 1989
Stock Option Plan.
*11 Statement of Computation of Earnings per Share for the nine months
ended September 30, 1996 and 1995 and for the years ended December
31, 1995, 1994 and 1993.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Price Waterhouse LLP.
*99.1 Form of Restated Certificate of Incorporation of Holdings.
*99.2 Form of Amended and Restated By-laws of Holdings.
</TABLE>
- --------
* Filed herewith.
<PAGE>
EXHIBIT 1
SILGAN HOLDINGS INC.
COMMON STOCK
PAR VALUE $.01 PER SHARE
--------------------------------
Underwriting Agreement
----------------------
, 1996
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
........ shares (the "Firm Shares") and, at the election of the Underwriters, up
to ........ additional shares (the "Optional Shares"), of Common Stock, par
value $.01 per share ("Stock"), of the Company (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. Each Member of the Silgan Group represents and warrants to, and agrees
with, each of the Underwriters that:
(a) 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 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
<PAGE>
2
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);
(b) 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;
(c) 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
"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;
(d) 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
<PAGE>
3
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(e) 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;
(f) 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;
(g) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approval, orders, certificates and permits of and
from, 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;
(h) 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;
<PAGE>
4
(i) 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;
(j) 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;
(k) 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
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;
(l) 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;
(m) 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;
(n) 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
<PAGE>
5
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(o) 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";
(p) 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;
(q) 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;
(r) Except as described in the Prospectus, the Company and its
subsidiaries (i) 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"), (ii) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) 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
(s) 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.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $ ............... the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, 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
<PAGE>
6
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 Company hereby grants to the Underwriters the right to purchase at
their election up to ................... 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 may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
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 5
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
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.
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 shall be delivered by or on behalf of
the Company 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 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
............., 1996 or such other time and date as Goldman, Sachs & Co. and
the Company 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 Company 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(n)
<PAGE>
7
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 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,
<PAGE>
8
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);
(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";
<PAGE>
9
(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 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. It is understood, however, 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 herein are, at and as of such Time of Delivery,
true and correct, the condition that the Company shall have performed all of its
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 for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
<PAGE>
10
(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 power and authority (corporate and other) 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 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 the
opinion in this clause upon opinions of local counsel and 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 opinions and 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 power and
authority (corporate and other) 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 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
<PAGE>
11
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 state 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 material 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 may be bound, except for such
defaults as do not and will not have a material adverse effect on the
Company and its subsidiaries;
(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
<PAGE>
12
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 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
<PAGE>
13
respective businesses -- except as otherwise described in or contemplated
by the Underwriting 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.
(f) 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);
(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, 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.
(h)(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
<PAGE>
14
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;
(i) 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;
(j) 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 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;
(k) The Shares to be sold at such Time of Delivery shall have been
duly listed for quotation on NASDAQ;
(l) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from The Morgan Stanley Leveraged Equity
Fund, II L.P., D. Greg Horrigan, R. Philip Silver, Bankers Trust New York
Corporation, 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;
(m) 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
(n) The Company 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 satisfactory to you as to the accuracy of
the representations and warranties of each Member of the Silgan Group
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
(h) 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
<PAGE>
15
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 Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company 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 for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any
such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) 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 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,
<PAGE>
16
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.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) 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 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 (c) 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 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 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 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 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 and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (d) 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 (d). 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 in this subsection (d) 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 (d), 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
<PAGE>
17
fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of each Member of the Silgan Group under this
Section 9 shall be in addition to any liability which such Member of the
Silgan Group 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 within the meaning of the Act.
10. (a) Each Member of the Silgan Group 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, 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 under subsection (a) above, notify
the Company in writing of the commencement thereof; but the omission so to
notify the Company shall not relieve any Member of the Silgan Group 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
it shall notify the Company of the commencement thereof, the Company 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 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 shall contribute
<PAGE>
18
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 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 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 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 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, 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 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 and the QIU agree that it 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 under this
Section 10 shall be in addition to any liability which such Member of the
Silgan Group 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 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 that you have so arranged for the purchase of such
Shares, or the Company notifies you that it has so arranged for the
purchase of such Shares, you or the Company 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
<PAGE>
19
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 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.
(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 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 Company to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company 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.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Members of the Silgan Group 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 officer or director or
controlling person of any Member of the Silgan Group, 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 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 as provided herein, the Company
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 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
<PAGE>
20
agreement on behalf of any Underwriter made or given by you jointly or by
Goldman, Sachs & Co. on behalf of you as the representatives.
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; 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(c) 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 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, 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 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.
<PAGE>
21
If the foregoing is in accordance with your understanding, please sign and
return to us eight (8) 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 and
each Member of the Silgan Group. 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 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:
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
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ----------------------------------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
[Names of other Underwriters]
Total
</TABLE>
<PAGE>
EXHIBIT A
FORM OF LOCK-UP LETTER
<PAGE>
ANNEX I
Pursuant to Section 8(f) 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
<PAGE>
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
<PAGE>
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.
<PAGE>
ANNEX II(a)
FORM OF OPINION OF SHEARMAN & STERLING
<PAGE>
ANNEX II(b)
FORM OF OPINION OF WINTHROP, STIMSON, PUTNAM & ROBERTS
<PAGE>
ANNEX II(c)
FORM OF OPINION OF MCKENNA & CUNEO, L.L.P.
<PAGE>
ANNEX II(d)
FORM OF OPINION OF PROSKAUER ROSE GOETZ & MENDELSOHN LLP
<PAGE>
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
<PAGE>
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
-2-
<PAGE>
registration statement, registered under the Securities Act of 1933, as
amended.
"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.
-3-
<PAGE>
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 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.
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 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.
-4-
<PAGE>
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. 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.
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
-5-
<PAGE>
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 shorter 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.
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
-6-
<PAGE>
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.
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.
-7-
<PAGE>
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 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
-8-
<PAGE>
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.
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
-9-
<PAGE>
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 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,
-10-
<PAGE>
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 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).
-11-
<PAGE>
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 effective date 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 November, 1996.
SILGAN HOLDINGS INC.
By_________________________________
Title______________________________
-12-
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
Silgan Holdings Inc.
Computation of Per Share Earnings
(In thousands, except per share data)
Year Ended December 31,
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Net income (loss) (21,806) (13,031) (21,983)
========== ========== ==========
Weighted average shares
outstanding 16,181,582 16,181,582 12,705,242
Common stock
equivalents (1) 957,345 957,345 957,345
---------- ---------- ----------
Shares used to compute
net income (loss)
per share 17,138,927 17,138,927 13,662,587
========== ========== ==========
Earnings per share (1.27) (0.76) (1.61)
<CAPTION>
Nine Months Ended September 30,
1996 1995
---------- ----------
<S> <C> <C>
Net income (loss) 26,996 (24)
========== ==========
Weighted average shares
outstanding 15,261,363 16,181,582
Common stock
equivalents (1) 1,299,511 957,345
---------- ----------
Shares used to compute
net income (loss)
per share 16,560,874 17,138,927
========== ==========
Earnings per share 1.63 0.00
</TABLE>
(1) Stock Options outstanding under Plastics' and Containers' stock option
plans, which are convertible into stock options under Holdings' stock
option plan upon the closing of the Offering, are considered to be issued by
Holdings during the twelve months immediately preceding the Offering and
have been included in computing earnings per share as if they were
outstanding for all periods, using the treasury stock method. Stock options
issued by Holdings pursuant to its stock option plan are considered to be
anti-dilutive and, therefore, have not been included in periods in which the
Company had a net loss. In periods in which Holdings had net income,
stock options issued by Holdings have been included in computing earnings
using the treasury stock method.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the references to our firm under the captions "Selected Historical
and Pro Forma Financial Information" and "Experts" and to the use of our report
dated March 8, 1996, except for Note 20, as to which date is ____________, 1996
with respect to the consolidated financial statements of Silgan Holdings Inc.
included in Amendment No. 2 to the Registration Statement (Form S-2,
No. 333-11989) and related Prospectus of Silgan Holdings Inc. for the
registration of _________ shares of its common stock and to the incorporation by
reference therein of our report dated March 8, 1996 with respect to schedules of
Silgan Holdings Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Stamford, Connecticut
____________, 1996
The foregoing consent is in the form that will be signed upon the initial public
offering described in Note 20 to the consolidated financial statements.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
November 1, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 2 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
November 1, 1996
<PAGE>
EXHIBIT 99.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SILGAN HOLDINGS INC.
PURSUANT TO SECTIONS 242 AND 245
OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
SILGAN HOLDINGS INC., a Delaware corporation, the original Certificate
of Incorporation of which was filed with the Secretary of State of the State of
Delaware on April 6, 1989, HEREBY CERTIFIES that this Restated Certificate of
Incorporation, restating, integrating and amending its Certificate of
Incorporation, was duly proposed by its Board of Directors and adopted by its
stockholders in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware, and that the capital of the Corporation is not
being reduced under or by reason of any amendment in this Restated Certificate
of Incorporation.
FIRST: The name of this corporation (the "Corporation") is SILGAN
HOLDINGS INC.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL"), and, in general, to
possess and exercise all the powers and privileges granted by the GCL or by any
other law or by this Restated Certificate of Incorporation, together
<PAGE>
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business
or purposes of the Corporation.
FOURTH: A. The number of directors of the Corporation constituting
the entire Board of Directors shall be six. The Board of Directors shall be
divided into three equal classes, with the term of office of the first class
(the "Class I Directors") to expire at the 1997 annual meeting of stockholders,
the term of office of the second class (the "Class II Directors") to expire at
the 1998 annual meeting of stockholders and the term of office of the third
class (the "Class III Directors") to expire at the 1999 annual meeting of
stockholders. Any vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of directors, may be
filled only by the Board of Directors (and not by the stockholders), acting by a
majority of the directors then in office, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected and qualified.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock (as defined in Article
SIXTH) shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the terms of the director or directors elected by
such holders shall expire at the next succeeding annual meeting of stockholders.
Subject to the foregoing, at each annual meeting of stockholders the successors
to the class of directors whose term shall then expire shall be elected to hold
office for a term expiring at the third succeeding annual meeting.
-2-
<PAGE>
B. At all meetings of the Board of Directors, a majority of the
Directors then in office shall be required to constitute a quorum ("Quorum") for
the transaction of business. The approval of a majority of the entire Board of
Directors, at a meeting at which a Quorum is present and acting throughout,
shall be required to approve all matters submitted to the Board of Directors;
provided, however, that the approval of a majority of the members of any
- -------- -------
committee of the Board of Directors shall be required to approve all matters
submitted to such committee.
C. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of 75% or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the provisions of Section C of this Article shall not apply with respect to the
director or directors elected by such holders of Preferred Stock.
D. There shall be an Audit Committee consisting of two or more of the
directors of the Corporation, who shall
-3-
<PAGE>
perform such functions as shall be established by the Board of Directors.
FIFTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, provided that the
--------
Corporation may retain such qualified persons (as determined by the Board of
Directors) to provide the Corporation with general management, supervision and
administrative services relating to the operations of the Corporation.
Except as specifically authorized by the Board of Directors, approval
of the following actions shall not be delegated to any officer, employee or
agent of the Corporation:
1. Amendment of the Certificate of Incorporation or By-Laws of the
Corporation or any of its subsidiaries.
2. Issuance, sale, purchase or redemption of any capital stock,
warrants, options or other securities of the Corporation or any of its
subsidiaries (other than, in the case of any issuance or sale, to the
Corporation or any direct or indirect wholly owned subsidiary of the
Corporation) except as may be otherwise provided in this Restated Certificate of
Incorporation.
3. Sale of assets other than inventory to or from the Corporation or
any of its subsidiaries in excess of $2 million (i) in one or a series of
related transactions (regardless of the period of time in which such transaction
or series of related transactions take place) or (ii) in any number of
transactions within a six-month period.
4. Merger, consolidation, dissolution or liquidation of the
Corporation or any of its subsidiaries.
-4-
<PAGE>
5. Filing of any petition by or on behalf of the Corporation seeking
relief under the federal bankruptcy act or similar relief under any law or
statute of the United States or any state thereof.
6. Setting aside, declaration or making of any payment or
distribution by way of dividend or otherwise to the Corporation's stockholders
(or setting dividend policy).
7. Incurrence (other than in the ordinary course of business) of new
indebtedness (including capitalized leases, but excluding indebtedness incurred
pursuant to debt instruments of the Corporation in existence on the date hereof
and excluding indebtedness and guarantees thereof incurred under the Bank
Financing (as defined in Article NINTH) pursuant to commitments approved by the
Board of Directors) or any fixed or contingent liabilities in excess of $2
million.
8. Creation or incurrence of a lien or encumbrance on the property of
the Corporation or any of its subsidiaries, except for liens relating to the
Bank Financing or other minor liens, including liens for taxes or those arising
by operation of law, permitted to exist under the terms of the Bank Financing.
9. Guarantees in excess of $1 million of payment by or performance of
obligations of third parties other than in the ordinary course of business.
10. The Corporation's institution of, termination or settlement of
litigation not in the ordinary course of the Corporation's business (in each
case where such litigation represents a case or controversy in excess of $2
million).
11. Surrendering or abandoning any property, tangible or intangible,
or any rights having a book value in excess of $1 million.
-5-
<PAGE>
12. Except as set forth in subsection 16 below with respect to leases
which are not capitalized, any commitment of the Corporation (other than in the
ordinary course of its business) which creates a liability or commitment in
excess of $2 million.
13. Capital expenditures in excess of the amounts permitted under the
Bank Financing.
14. Donations of money or property in excess of $100,000 in a single
year.
15. Any investment of the Corporation or any of its subsidiaries in
another corporation, partnership or joint venture in excess of $2 million (in
one or a series or related transactions or in any number of transactions within
six months).
16. Entering into any lease (other than a capitalized lease which
shall be subject to the limitation set forth in subsection 12 above) of any
assets of the Corporation located in any one place having a book value in excess
of $4 million, or in excess of $1 million if the lease has a term of more than
five years.
17. Entering into agreements or material transactions between the
Corporation and a director or officer of any of the following companies or their
Affiliates (as defined in Article NINTH): the Corporation and The Morgan Stanley
Leveraged Equity Fund II, L.P., a Delaware limited partnership.
18. Replacement of independent accountants for the Corporation or any
of its subsidiaries.
19. Modification of significant accounting methods, practices,
procedures and policies.
20. Removal of officers.
-6-
<PAGE>
21. Termination of, or amendment or waiver of any provision of, the
Amended and Restated Management Services Agreement between the Corporation and
S&H Inc.
SIXTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 110,000,000 shares, consisting of
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 (the
"Preferred Stock").
A. The rights, privileges and powers, including the voting powers, of
each share of the Common Stock shall be identical, with each share of the Common
Stock being entitled to one vote on all matters to come before the stockholders
of the Corporation. Subject to any voting rights that may be conferred upon the
holders of any series of the Preferred Stock established by the Board of
Directors of the Corporation pursuant to authority herein provided, and except
as otherwise provided herein or by law, the affirmative vote of the holders of
not less than a majority of the outstanding shares of Common Stock shall be
required for the approval of any matter to come before the stockholders of the
Corporation. No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the stockholders of the Corporation may not consent in
writing, without a meeting, to the taking of any action.
B. The Board of Directors of the Corporation may cause dividends to
be paid to the holders of shares of Common Stock out of funds legally available
for the payment of dividends by declaring an amount per share as a dividend.
When and as dividends are declared, other than dividends declared with
-7-
<PAGE>
respect to any outstanding Preferred Stock, whether payable in cash, in property
or in shares of stock of the Corporation, the holders of Common Stock shall be
entitled to share equally, share for share, in such dividends.
C. Shares of Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors of the Corporation prior to the issuance of any shares thereof.
Each such class or series of Preferred Stock shall have such voting powers, full
or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution
providing for the issue of such class or series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to the issuance of any
shares thereof pursuant to the authority hereby expressly vested in it, all in
accordance with the laws of the State of Delaware.
SEVENTH: A. The Executive Officers of the Corporation shall be the
Chairman of the Board of Directors, who shall preside at all meetings of the
stockholders and of the Board of Directors, and the President. All officers of
the Corporation shall serve until voluntary resignation or retirement, or
removal by the Board of Directors in accordance with the provisions set forth
herein. Any number of offices may be held by the same person, unless otherwise
prohibited by law, this Restated Certificate of Incorporation or the By-Laws of
the Corporation. The officers of the Corporation need not be stockholders of
the
-8-
<PAGE>
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
B. The Chairman of the Board and the President of the Corporation
shall be nominated and elected to their positions, and may be removed from their
positions, by a majority of the Board of Directors. All of the other officers
of the Corporation shall be nominated by the Chairman of the Board and the
President, and such other officers shall be elected to their positions, and may
be removed from their positions, by a majority of the Board of Directors.
C. All officers of the Corporation shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and qualified,
or until their earlier resignation or removal. The salaries of all officers of
the Corporation shall be fixed by the Board of Directors.
EIGHTH: In furtherance and not in limitation of the powers conferred
by statute, the By-Laws of the Corporation may be altered, amended or repealed
in whole or in part, or new By-Laws may be adopted by approval of a majority of
the Board of Directors voting at a meeting of the Board of Directors at which a
Quorum is present and acting throughout.
NINTH: As used in this Restated Certificate of Incorporation, the
following terms shall have the meanings indicated below:
1. "Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. For the purpose of
-9-
<PAGE>
this definition, (i) the term "control" (including with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise, and (ii) the term "Person" shall mean any individual,
partnership, corporation, joint venture, firm, limited liability company,
association, trust or other enterprise or any government or political
subdivision or any agency, department or instrumentality thereof.
2. "Bank Financing" shall mean the Credit Agreement, dated as of
August 1, 1995, among Silgan Corporation, Silgan Containers Corporation, Silgan
Plastics Corporation, the lenders from time to time party thereto, Bank of
America Illinois, as Documentation Agent and a Co-Arranger, and Bankers Trust
Company, as Administrative Agent and a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof or
additional borrowings thereunder.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by law, provided that (i) the resolution
--------
approving such amendment, alteration, change or repeal be adopted by the Board
of Directors by approval of a majority of the entire Board of Directors, at a
meeting at which a Quorum is present and acting throughout and (ii) the proposed
amendment, alteration, change or repeal be approved by a majority of the
outstanding shares of Common Stock.
-10-
<PAGE>
ELEVENTH: A. The Corporation shall indemnify to the fullest extent
permitted by law (as now or hereafter in effect) any person, his testator or
intestate, made, or threatened to be made, a defendant or involved in any manner
in any action, suit or proceeding (whether civil, criminal, administrative,
investigative or otherwise) by reason of the fact that he, is or was a director,
officer, employee or agent of the Corporation or by reason of the fact that such
director, officer, employee or agent, at the request of the Corporation, is or
was serving any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, in any capacity. The payment of any amounts
to any person pursuant to this Article ELEVENTH shall subrogate the Corporation
to any right such person may have against any other person or entity. The
rights conferred in this Article ELEVENTH shall be contract rights. Nothing
contained herein shall affect any rights to indemnification to which employees
other than directors and officers may be entitled to by law. No amendment or
repeal of this paragraph A of Article ELEVENTH shall apply to or have any effect
on any right to indemnification provided hereunder with respect to any acts or
omissions occurring prior to such amendment or repeal.
B. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence,
a director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
GCL, or (iv) for any
-11-
<PAGE>
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this paragraph B of Article ELEVENTH shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
C. In furtherance and not in limitation of the powers conferred by
statute:
(i) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of law; and
(ii) the Corporation 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.
TWELFTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws of the Corporation may provide. The books of
the Corporation may be
-12-
<PAGE>
kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
IN WITNESS WHEREOF, SILGAN HOLDINGS INC. has caused this Restated
Certificate of Incorporation to be executed in its corporate name by its
Chairman and attested by its Secretary on the ___ day of November, 1996.
SILGAN HOLDINGS INC.
By: ------------------------------------
Name:
Title:
-13-
<PAGE>
EXHIBIT 99.2
AMENDED AND RESTATED BY-LAWS
OF
SILGAN HOLDINGS INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
--------- -----------------
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
--------- -------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
--------- -----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders
--------- ---------------
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect the class of directors of the Board of
<PAGE>
Directors standing for election, and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
--------- ----------------
by the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), special meetings of stockholders, for any purpose or purposes
may be called by either the Chairman of the Board or the President, and shall be
called by any such officer at the request in writing of a majority of the Board
of Directors. Such request shall state the purpose or purposes of the proposed
meeting. Stockholders are not permitted to call a special meeting of
stockholders, or to require that the Chairman of the Board or the President call
such a special meeting, or to require that the Board request the calling of such
a special meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
--------- ------
Certificate of Incorporation, the holders of a majority of the stock of the
Corporation, issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. In the event of a lack of quorum,
the chairman of the meeting or a majority in interest of the stockholders
present in person or represented by proxy may adjourn the meeting from time to
time without notice other than announcement at the meeting until a quorum shall
be obtained. At any such adjourned meeting at which there is a quorum, any
business may be transacted which might have been transacted at the meeting
originally called.
-2-
<PAGE>
Section 5. Voting. At each meeting of the stockholders, every
--------- ------
stockholder having the right to vote shall be entitled to vote, in person or by
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than three years prior to said meeting, unless said
instrument provides for a longer period. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall have one vote for each
share of stock having voting power registered in his name on the books of the
Corporation on the date fixed as the record date for the determination of
stockholders entitled to vote. The vote for directors, and, upon the demand of
any stockholder, the vote upon any question before the meeting, shall be by
ballot. Directors shall be elected by the vote of the holders of stock of the
Corporation having voting power with respect to the election of directors as
provided in the Certificate of Incorporation. Except as otherwise provided by
law, by the Certificate of Incorporation or by these By-Laws, all other matters
submitted to the meeting shall be decided by a majority of all outstanding
shares of stock of the Corporation entitled to vote on such matters. All
proxies shall be filed with the Secretary.
Section 6. List of Stockholders Entitled to Vote. The officer of the
--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
-3-
<PAGE>
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 7. Stock Ledger. The stock ledger of the Corporation shall
--------- ------------
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 6 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. The number of directors
--------- --------------------------------
of the Corporation shall be as prescribed in the Certificate of Incorporation.
The directors of the Corporation shall be elected as prescribed in the
Certificate of Incorporation.
Section 2. Vacancies. In the event that any vacancy among the
--------- ---------
Directors shall occur at any time prior to the next
-4-
<PAGE>
annual meeting of stockholders, such vacancy shall be filled in accordance with
the provisions of the Certificate of Incorporation.
Section 3. Duties and Powers. Except as otherwise prescribed by law
--------- -----------------
or by the Certificate of Incorporation, the Board of Directors shall have and
exercise all the powers belonging to or pertaining to the Corporation.
Section 4. Meetings. The Board of Directors of the Corporation may
--------- --------
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held with 48 hours
prior notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President or any
member of the Board of Directors. Written notice thereof stating the place,
date and hour of the meeting shall be given to each director not less than
seventy-two (72) hours before the date of the meeting.
Section 5. Quorum; Actions of Board at a Meeting. The requirements
--------- -------------------------------------
for a quorum and actions of the Board of Directors at a meeting of such Board
shall be as provided in the Certificate of Incorporation.
Section 6. Actions of Board Without a Meeting. Except as may be
--------- ----------------------------------
otherwise provided by the Certificate of Incorporation or these By-Laws, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting, if all the
members of the Board
-5-
<PAGE>
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Except as may
--------- -----------------------------------------
be otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. Except as may be otherwise specifically
--------- ----------
provided by the Certificate of Incorporation or these By-Laws, the Board of
Directors may designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. Any committee, to the extent
allowed by law and provided in the resolution establishing such committee, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation. Each committee
shall keep regular minutes and report to the Board of Directors when required.
A majority of the members of any such committee shall constitute a quorum for
the transaction of business by the committee and the act of a majority of the
members of the committee present at a meeting at which a quorum shall be present
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<PAGE>
shall be the act of the committee. Any director may be removed from any such
committee with or without cause by the affirmative vote of a majority of the
entire Board.
Section 9. Compensation. The directors may be paid their expenses,
--------- ------------
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
---------- --------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of
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<PAGE>
the disinterested directors, even though the disinterested directors be less
than a quorum; or (ii) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board of Directors or a committee thereof. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
--------
Section 1. General. Except as otherwise provided in the Certificate
--------- -------
of Incorporation, the day-to-day operations of the Corporation shall be managed
by its Executive Officers, who shall be the Chairman of the Board and the
President, and its other officers. These officers shall perform their duties in
a manner consistent with directions which may be given from time to time by the
Board of Directors.
Section 2. Chairman of the Board. The Chairman of the Board, if
--------- ---------------------
there shall be one, shall preside at all meetings of the stockholders and of the
Board of Directors. Except where by law the signature of the President is
required, the Chairman of the Board shall possess the same power as the
President to sign
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<PAGE>
all contracts, certificates and other instruments of the Corporation. During
the absence or disability of the President, the Chairman of the Board shall
exercise all the powers and discharge all the duties of the President. The
Chairman of the Board shall also perform such other duties and may exercise such
other powers as from time to time may be assigned to him by these By-Laws or by
the Board of Directors.
Section 3. President. The President shall supervise and manage the
--------- ---------
conduct of the current business of the Corporation and may exercise any of the
powers of the Chairman of the Board that shall have been delegated to him by
that officer or conferred upon him by the Board of Directors. He shall act for
and on behalf of the Corporation on matters in which action by the President, as
such, is required by law. He shall do and perform all acts and things incident
to the position of President, other than such as are charged upon the Chairman,
and such other duties as may be assigned to him from time to time by the
Chairman of the Board or by the Board of Directors.
Section 4. Vice-Presidents. At the request of the President or in
--------- ---------------
his absence or in the event of his inability or refusal to act (and if there
shall be no Chairman of the Board), the Vice-President, or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors),
shall perform the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from
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<PAGE>
time to time may prescribe. If there shall be no Chairman of the Board and no
Vice-President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 5. Controller. The Controller, if there shall be one, shall
--------- ----------
exercise general supervision of the bookkeeping methods of the Corporation and
shall supervise and be responsible for all matters pertaining to the auditing
and accounting functions of the Corporation. He shall render periodically such
balance sheets, earnings statements and other reports relating to the business
of the Corporation as may be required by the Board of Directors, the Chairman of
the Board, the President, the Audit Committee, if there shall be any, or any
other authorized officer of the Corporation.
Section 6. Secretary. The Secretary shall attend all meetings of the
--------- ---------
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President, under whose supervision he shall be. If the Secretary shall be unable
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<PAGE>
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there shall be no
Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there shall be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
Section 7. Treasurer. The Treasurer shall have the custody of the
--------- ---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account
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<PAGE>
of all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 8. Assistant Controller. An Assistant Controller, if there
--------- --------------------
shall be one, shall perform the duties and have the powers of the Controller
during the absence or disability of the Controller, and shall perform such other
duties and have such other powers as the Board of Directors or Controller shall
designate from time to time.
Section 9. Assistant Secretaries. Except as may be otherwise
--------- ---------------------
provided in these By-Laws, Assistant Secretaries, if there shall be any, shall
perform such duties and have such powers as may be assigned to them by the Board
of Directors, the Chairman of the Board, the President, any Vice-President, if
there shall be one, or the Secretary, and in the absence of the Secretary or in
the event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
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<PAGE>
Section 10. Assistant Treasurers. Assistant Treasurers, if there
---------- --------------------
shall be any, shall perform such duties and have such powers from time to time
as may be assigned to them by the Board of Directors, the Chairman of the Board,
the President, any Vice-President, if there shall be one, or the Treasurer, and
in the absence of the Treasurer or in the event of his disability or refusal to
act, shall perform the duties of the Treasurer and when so acting, shall have
all the powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
---------- --------------
Directors may choose shall perform such duties and have such powers from time to
time as may be assigned to them by the Board of Directors. The stockholders of
the Corporation may delegate to any other officer of the Corporation the power
to choose such other officers and to prescribe their respective duties and
powers.
Section 12. Voting Securities Owned by the Corporation. Powers of
---------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities
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<PAGE>
owned by the Corporation may be executed in the name of and on behalf of the
Corporation by the President or any Vice-President and any such officer may, in
the name of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any Corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities which, as the owner thereof
the Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the
--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board, the President or a Vice-President
and (ii) by the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
--------- ----------
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
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<PAGE>
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
--------- -----------------
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed, which affidavit shall be satisfactory in form and
substance to the Secretary or Assistant Secretary. When authorizing such issue
of a new certificate, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
--------- ---------
in the manner prescribed by law, by that certain Stockholders Agreement, dated
as of December 21, 1993, among R. Philip Silver, D. Greg Horrigan, The Morgan
Stanley Leveraged Equity Fund II, L.P., Bankers Trust New York Corporation,
First Plaza Group Trust and the Corporation, as the same may be amended from
time to time, and by these By-Laws. Transfers of stock
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<PAGE>
shall be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
--------- -----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors and which shall not be more
than sixty days nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
--------- -----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares
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<PAGE>
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
--------- -------
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
actually received. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
--------- -----------------
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of capital stock of
the Corporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
--------- -------------
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
--------- -----------
be the calendar year.
Section 4. Corporate Seal. The corporate seal shall have inscribed
--------- --------------
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
--------- ---------------------------------------------------------
than Those by or in the Right of the Corporation. Subject to Section 3 of this
- ------------------------------------------------
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
---- ----------
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
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proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
--------- ---------------------------------------------------------
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
- -------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
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<PAGE>
Section 3. Authorization of Indemnification. Any indemnification
--------- --------------------------------
under this Article VIII (unless ordered by a court) shall be made by the
Corporation as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article VIII. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. To the extent, however, that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination
--------- ------------------
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or
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<PAGE>
books of account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust or other enterprise of which such person is or was serving at the
request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have met the
applicable standards of conduct set forth in Sections 1 and 2 of this Article
VIII.
Section 5. Indemnification by a Court. Notwithstanding any contrary
--------- --------------------------
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the
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<PAGE>
circumstances because he has met the applicable standards of conduct set forth
in Sections 1 and 2 of this Article VIII. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director, officer, employee or agent seeking indemnification shall
also be entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by an
--------- ---------------------------
officer or director in defending a civil or criminal action, suit or proceeding
or administrative proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such action, suit, proceeding or
investigation upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
Section 7. Non-exclusivity and Survival of Indemnification. The
--------- -----------------------------------------------
indemnification and advancement of expenses provided by, or granted pursuant to,
the other subsections of this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to
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<PAGE>
action in his official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that indemnification
of the persons specified in Sections 1 and 2 of this Article VIII shall be made
to the fullest extent permitted by law. The provisions of this Article VIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Sections 1 or 2 of this Article VIII but whom the Corporation has
the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware, or otherwise. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article VIII
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
Section 8. Insurance. The Corporation may purchase and maintain
--------- ---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article VIII.
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<PAGE>
Section 9. Meaning of "Corporation" for Purposes of Article VIII.
--------- -----------------------------------------------------
For purposes of this Article VIII, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
Section 10. Subrogation. The payment of any amounts to any person
---------- -----------
pursuant to this Article VIII shall subrogate the Corporation to any right such
person may have against any other person or entity. The rights conferred in
this Article VIII shall be contract rights.
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ARTICLE IX
AMENDMENTS
----------
Section 1. These By-Laws may be altered, amended or repealed, in
---------
whole or in part, or new By-Laws may be adopted in accordance with the
provisions of the Certificate of Incorporation.
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