<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997
REGISTRATION NO. 333-11989
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 5
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SILGAN HOLDINGS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1269834
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
---------------
4 LANDMARK SQUARE
STAMFORD, CT 06901
(203) 975-7110
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
HARLEY RANKIN, JR.
4 LANDMARK SQUARE
STAMFORD, CT 06901
(203) 975-7110
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES OF ALL COMMUNICATIONS TO:
FRANK W. HOGAN, III, ESQ. JERRY V. ELLIOTT, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS SHEARMAN & STERLING
695 EAST MAIN STREET 599 LEXINGTON AVENUE
STAMFORD, CT 06901 NEW YORK, NY 10022
(203) 348-2300 (212) 848-4000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If the registrant elects to deliver its latest annual report to security-
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED PRICE (1) REGISTRATION FEE (2)
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per
share............................... $103,500,000 $34,970
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) $29,742 of the Registration Fee was paid in connection with the original
filing of the Registration Statement on Form S-2, which filing was made on
September 13, 1996. The remaining amount, $5,228, was paid by wire transfer
prior to this filing.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 FEBRUARY 13, 1997
4,500,000 SHARES
LOGO
[OF SILGAN HOLDINGS, INC.]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------
Of the 4,500,000 shares of Common Stock offered hereby, 3,700,000 shares are
being sold by the Company and 800,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $18 and $20. For factors considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "SLGN".
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
Total(3)................... $ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $1,000,000 payable by the Company.
(3) The Selling Stockholders have granted the Underwriters an option for 30
days to purchase up to an additional 675,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount, proceeds to Company and
proceeds to Selling Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting".
----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about February , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
----------
The date of this Prospectus is February , 1997.
<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 17.133145 to 1 stock split of the
outstanding Common Stock of Holdings effected by Holdings prior to the date of
this Prospectus (the "Stock Split"), as described under "Description of Capital
Stock"; and (iii) the information contained in this Prospectus (A) gives effect
to the amendment to Holdings' restated certificate of incorporation to convert
the separate classes of common stock of Holdings into one class of common stock
of Holdings (see "Description of Capital Stock"), (B) assumes the Underwriters'
over-allotment option is not exercised and (C) assumes a public offering price
per share of Common Stock equal to $19.00. Certain information contained in
this summary and elsewhere in this Prospectus, including information under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and information with respect to the Company's expected operations,
expected financial results, cost savings, plans and strategy for its business
and related financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors".
THE COMPANY
The Company is a leading North American manufacturer of consumer goods
packaging products that currently produces (i) steel and aluminum containers
for human and pet food, (ii) custom designed plastic containers for personal
care, health, food, pharmaceutical and household chemical products and (iii)
specialty packaging items, including metal caps and closures, plastic bowls and
paper containers used by processors in the food industry. The Company is the
largest manufacturer of metal food containers in North America, with a unit
sale market share for the twelve months ended October 31, 1996 of 35% in the
United States, and is a leading manufacturer of plastic containers in North
America for personal care products. The Company's strategy is to increase
shareholder value by growing its existing businesses and expanding into other
segments by applying its expertise in acquiring, financing, integrating and
efficiently operating consumer goods packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive Officers.
Since its inception, the Company has acquired and successfully integrated ten
businesses, including the recent acquisitions of substantially all of the
assets of the Food Metal and Specialty business ("AN Can") of American National
Can Company ("ANC") in August 1995 for a purchase price of approximately $362.0
million (including net working capital of approximately $156.0 million) and the
U.S. metal container manufacturing business ("DM Can") of Del Monte Corporation
("Del Monte") in December 1993 for a purchase price of approximately $73.3
million (including net working capital of approximately $21.9 million). In
addition, on October 9, 1996 the Company completed its acquisition of Finger
Lakes Packaging Company, Inc. ("Finger Lakes"), the metal food container
manufacturing subsidiary of Curtice Burns Foods, Inc. ("Curtice Burns"). See
"--Recent Developments". The Company's strategy has enabled it to rapidly
increase its net sales and income from operations. The Company's net sales have
increased from $630.0 million in 1992 to $1,405.7 million in 1996, representing
a compound annual growth rate of approximately 22%. During this period, income
from operations increased from
3
<PAGE>
$42.2 million in 1992 to $123.3 million in 1996, representing a compound annual
growth rate of approximately 31%, while the Company's income from operations as
a percentage of net sales increased 2.1 percentage points from 6.7% to 8.8%
over the same period.
The Company's philosophy, which has contributed to its strong performance
since inception, is based on: (i) a significant equity ownership by management
and an entrepreneurial approach to business, (ii) its low cost producer
position and (iii) its long-term customer relationships. The Company's senior
management has a significant ownership interest in the Company, which fosters
an entrepreneurial management style and places a primary focus on creating
shareholder value. The Company has achieved a low cost producer status through
(i) the maintenance of a flat, efficient organizational structure, resulting in
low selling, general and administrative expenses as a percentage of total net
sales, (ii) purchasing economies, (iii) significant capital investments that
have generated manufacturing and production efficiencies, (iv) plant
consolidations and rationalizations and (v) the proximity of its plants to its
customers. The Company's philosophy has also been to develop long-term customer
relationships by acting in partnership with its customers, providing reliable
quality and service and utilizing its low cost producer position. This
philosophy has resulted in numerous long-term supply contracts, high retention
of customers' business and recognition from its customers, as demonstrated by
many quality and service awards.
GROWTH STRATEGY
The Company intends to enhance its position as a leading supplier of consumer
goods packaging products by aggressively pursuing a strategy designed to
achieve future growth and to increase profitability. The key components of this
strategy are to (i) increase the Company's market share in its current business
lines through acquisitions and internal growth, (ii) expand into complementary
business lines by applying the Company's acquisition and operating expertise to
other areas of the North American consumer goods packaging market and (iii)
improve the profitability of acquired businesses through integration,
rationalization and capital investments to enhance their manufacturing and
production efficiency.
INCREASE MARKET SHARE THROUGH ACQUISITIONS AND INTERNAL GROWTH. The Company
has increased its revenues and market share in the metal container, plastic
container and specialty markets through acquisitions and internal growth. As a
result of this strategy, the Company has diversified its customer base,
geographic presence and product line. Management believes that certain industry
trends exist which will enable the Company to continue to acquire attractive
businesses in its existing markets. For example, during the past ten years, the
metal container market has experienced significant consolidation due to the
desire by food processors to reduce costs and deploy resources to their core
operations. Self-manufacturers are increasingly outsourcing their container
needs by selling their operations to commercial container manufacturing
companies and agreeing to purchase containers from the buyer pursuant to long-
term contracts. The Company's acquisitions of the metal container manufacturing
operations of the Nestle Food Company ("Nestle"), The Dial Corporation and Del
Monte reflect this trend. As a result of its growth strategy, the Company has
more than tripled its overall share of the U.S. metal food container market
from approximately 10% in 1987 to approximately 35% for the twelve months ended
October 31, 1996. The Company expects this consolidation trend to continue as
evidenced by its October 9, 1996 acquisition of Finger Lakes. See "--Recent
Developments". The Company's plastic container business has also increased its
market position primarily through strategic acquisitions, from a sales base of
$88.8 million in 1987 to $216.4 million in 1996. The plastic container segment
of the consumer goods packaging industry is highly fragmented, and management
intends to pursue consolidation opportunities in that segment.
4
<PAGE>
The Company also expects to generate internal growth due to its participation
in certain higher growth segments of the consumer goods packaging market. For
example, due to increasing consumer preference for plastic as a substitute for
glass, the Company is aggressively pursuing opportunities for its custom
designed polyethylene terephthalate ("PET") and high density polyethylene
("HDPE") containers. These opportunities include producing PET containers for
regional bottled water companies, and HDPE and PET containers for products such
as shampoo, mouthwash, salad dressing and liquor. The Company also believes
that there will be opportunities to expand its specialty business, which
generated net sales of $90.7 million in 1996. Specialty products manufactured
by the Company include metal closures for vacuum sealed glass containers, its
licensed Omni plastic container, a plastic, microwaveable bowl with an easy-
open metal end, and paper containers.
EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS. Management
believes that it can successfully apply its acquisition and operating expertise
to new segments of the consumer goods packaging industry. For example, with the
AN Can acquisition, the Company expanded its specialty business into metal caps
and closures and its licensed Omni plastic container. Management believes that
certain trends in and characteristics of the North American consumer goods
packaging industry will continue to generate attractive acquisition
opportunities in complementary business lines. The Company is focused on the
North American consumer goods packaging industry, which represents a
significant part of the $95 billion North American packaging market (based on
estimated total sales in 1994). Importantly, the industry is also fragmented,
with numerous segments and multiple participants in each of them. In addition,
many of these segments are experiencing consolidation.
ENHANCE PROFITABILITY OF ACQUIRED COMPANIES. The Company seeks to acquire
businesses at reasonable cash flow multiples and to enhance profitability by
rationalizing plants, by improving manufacturing and production efficiencies
and through purchasing economies. Since 1991, the Company has reduced costs by
closing twelve smaller, higher cost facilities. Since its inception in 1987,
the Company has invested approximately $272.3 million to upgrade acquired
manufacturing facilities, aimed at generating manufacturing and production
efficiencies and achieving a low cost producer position. As a result, the
Company's acquisitions have generally been accretive to earnings and have
produced high returns on assets. The AN Can acquisition illustrates the ability
of the Company to enhance the profitability of acquired businesses. The Company
estimates that it has reduced AN Can's operating costs from its historical 1994
level by at least $21.0 million, through selling and administrative cost
reductions, improved manufacturing and production efficiencies and purchasing
economies. The Company expects to further reduce AN Can's operating costs over
the next few years by an aggregate of approximately $15.0 million
(approximately half of which is expected to be realized in 1997) through the
elimination of transitional administrative costs, the realization of additional
manufacturing and production synergies with its metal container business and
plant rationalizations.
FINANCIAL STRATEGY
The Company's financial strategy has been to use leverage to support its
growth and optimize shareholder returns. The Company's stable and predictable
cash flow, generated largely as a result of its long-term customer
relationships, has supported its financial strategy. Management has
successfully operated its businesses and achieved its growth strategy while
managing the Company's indebtedness. Management intends to apply this strategy
to further expand its business. Additionally, the Offering will provide the
Company with improved financial flexibility to implement its growth strategy.
5
<PAGE>
MANAGEMENT
The Company was founded by R. Philip Silver and D. Greg Horrigan, former
members of senior management of the packaging operations of Continental Group
Inc. ("Continental Can Company"), which in 1986 was one of the largest
packaging companies in the world. At Continental Can Company, Mr. Silver served
as President, and Mr. Horrigan served as Executive Vice President and Operating
Officer. The Company's senior members of management have on average 24 years of
experience in the packaging industry. Mr. Silver, Mr. Horrigan and other
members of senior management have a large ownership interest in the Company.
After the Offering, Messrs. Silver and Horrigan will collectively own 34.6%
(assuming that all outstanding stock options have been exercised in full) of
the fully diluted Common Stock and senior management (including Messrs. Silver
and Horrigan) will collectively own 43.4% (assuming that all outstanding stock
options have been exercised in full) of the fully diluted Common Stock. The
Company's ownership structure and philosophy align management's interests with
those of its shareholders.
BUSINESS SEGMENTS
Holdings is a holding company that conducts its business through two
operating companies, Silgan Containers Corporation ("Containers") and Silgan
Plastics Corporation ("Plastics"), each of which is a wholly owned subsidiary
of Silgan.
CONTAINERS. For 1996, Containers had net sales of $1,189.3 million (85% of
the Company's net sales) and income from operations of $106.1 million (85% of
the Company's income from operations) (without giving effect to corporate
expense). Containers manufactures metal containers for vegetables, fruit, pet
food, meat, tomato based products, coffee, soup, seafood and evaporated milk.
The Company estimates that approximately 80% of Containers' projected sales in
1997 will be pursuant to long-term supply arrangements. Containers also
manufactures certain specialty packaging items, including metal caps and
closures, plastic bowls and paper containers used by processors in the food
industry. For 1996, Containers had net sales of specialty packaging items of
$90.7 million.
PLASTICS. For 1996, Plastics had net sales of $216.4 million (15% of the
Company's net sales) and income from operations of $18.4 million (15% of the
Company's income from operations) (without giving effect to corporate expense).
Plastics emphasizes value-added design, fabrication and decoration of custom
containers in its business. Plastics manufactures custom designed HDPE
containers for health and personal care products, including containers for
shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household chemical products, including containers for scouring cleaners,
cleaning agents and lawn and garden chemicals and pharmaceutical products,
including containers for tablets, antacids and eye cleaning solutions. Plastics
also manufactures PET custom designed containers for mouthwash, respiratory and
gastrointestinal products, liquid soap, skin care lotions, salad dressings,
condiments, instant coffee, bottled water and liquor.
6
<PAGE>
RECENT DEVELOPMENTS
ACQUISITION
On October 9, 1996, Containers acquired substantially all of the assets of
Finger Lakes, a metal food container manufacturer with facilities in Lyons, New
York and Benton Harbor, Michigan and a wholly owned subsidiary of Curtice
Burns, for a purchase price of approximately $29.9 million (including net
working capital of approximately $8.0 million). As part of the transaction,
Containers entered into a ten year supply agreement with Curtice Burns to
supply all of the metal food container requirements of Curtice Burns' Comstock
Michigan Fruit and Brooks Foods divisions. For its fiscal year ended June 29,
1996, Finger Lakes had net sales of $48.8 million. The Company financed this
acquisition through working capital borrowings under the Silgan Credit
Agreement (as defined herein).
The Company is continually evaluating and intends to continue to pursue
acquisition opportunities in the North American consumer goods packaging
market. Although the Company has no present agreements or commitments to make
any acquisition, the Company has expressed indications of interest or made
preliminary bids on three acquisition opportunities presented to it, which have
annual sales ranging from approximately $30 million to $250 million. Any such
acquisition may be financed through the incurrence of additional indebtedness.
No assurance can be given that the Company will complete any such acquisition.
See "Risk Factors--Risks Associated with Growth Strategy".
1996 FINANCIAL RESULTS
The Company's net sales for the year ended December 31, 1996 were $1,405.7
million, as compared to net sales of $1,101.9 million for the year ended
December 31, 1995. Net sales for the Company's metal container business for the
year ended December 31, 1996 were $1,189.3 million, an increase of $307.0
million from net sales of $882.3 million for the year ended December 31, 1995.
This increase was principally due to the fact that the Company had twelve
months of sales from AN Can in 1996 as compared to five months of sales in
1995. Net sales of the Company's metal container business for 1996 were also
slightly more than net sales, pro forma for the AN Can acquisition, of $1,184.8
million for 1995. Net sales of the Company's plastic container business for the
year ended December 31, 1996 were $216.4 million, as compared to net sales of
$219.6 million for the year ended December 31, 1995. This decrease was
principally due to the pass through of lower resin costs, offset by an increase
in unit volume.
Benefits realized from the AN Can acquisition and improved operating
performance in 1996 resulted in higher income from operations for the Company
for the year ended December 31, 1996, which was $123.3 million, as compared
with income from operations of $69.8 million and $92.7 million, historical and
pro forma for the AN Can acquisition respectively, for 1995 (in each case after
giving effect to a charge of $14.7 million in 1995 to adjust the carrying value
of certain assets).
The Company's net income applicable to common stockholders for the year ended
December 31, 1996 was $25.4 million. For the year ended December 31, 1995, the
Company incurred a historical net loss of $21.8 million (which included a
charge of $14.7 million to adjust the carrying value of certain assets). The
increase in net income in 1996 principally reflected the aforementioned
benefits realized from the acquisition of AN Can, improved operating
performance and plant consolidations, and the benefits of refinancing a portion
of the Discount Debentures in 1995 and 1996 with lower cost indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
7
<PAGE>
REFINANCING
The Company has actively refinanced its higher cost indebtedness with lower
cost indebtedness. Since 1995, the Company will have refinanced all of
Holdings' 13 1/4% Senior Discount Debentures due 2002 (the "Discount
Debentures"), with the following: (i) lower cost bank indebtedness, (ii)
proceeds from the sale of Holdings' Exchangeable Preferred Stock Mandatorily
Redeemable 2006 (the "Exchangeable Preferred Stock") and (iii) proceeds from
the Offering. The net result of this refinancing will be approximately $19.5
million of annual current cash interest savings (excluding non-cash interest on
obligations related to the Exchangeable Preferred Stock). Such refinancing will
also permit the Company to deduct accreted interest of approximately $103.5
million on the Discount Debentures from their time of issuance, which will
reduce the Company's tax liability by an estimated $25.9 million for 1996 and
1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Holdings also intends to issue Subordinated Debentures
due 2006 (the "Exchange Debentures") in exchange for its Exchangeable Preferred
Stock. This will allow the Company to deduct substantially all of the cash
payments of interest on the Exchange Debentures.
THE OFFERING
Common Stock offered by the
Company.................... 3,700,000 shares
Common Stock offered by the
Selling Stockholders....... 800,000 shares
Total..................... 4,500,000 shares
Common Stock to be
outstanding after this
offering (the
"Offering")................ 18,862,833 shares(a)
Use of Proceeds.............
The net proceeds from the Offering to the Company
will be used to redeem the remaining Discount
Debentures and to repay a portion of the term
loans under the Silgan Credit Agreement. See "Use
of Proceeds".
Nasdaq Symbol............... SLGN
- --------
(a) Excludes 3,534,568 shares of Common Stock reserved for issuance under the
Silgan Holdings Inc. Stock Option Plan (the "Stock Option Plan"). There are
currently 1,821,254 options outstanding under the Stock Option Plan, each
of which entitles the holder thereof to purchase one share of Common Stock.
See "Management--Stock Option Plan". The weighted average exercise price
for all of the options currently outstanding under the Stock Option Plan is
$2.18 per share.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical and pro forma financial data of Holdings
were derived from, and should be read in conjunction with, the historical
financial statements and pro forma financial information of Holdings, including
the notes thereto, included elsewhere in this Prospectus.
The summary unaudited pro forma net income per common share data for the year
ended December 31, 1996 give effect to (i) the Offering and the use of the
proceeds therefrom, (ii) the use of the proceeds from the sale (the "Preferred
Stock Sale") on July 22, 1996 by Holdings of 50,000 shares of Exchangeable
Preferred Stock to (a) purchase Holdings' Class B Common Stock, par value $.01
per share (the "Holdings Class B Stock"), held by Mellon Bank N.A. ("Mellon"),
as trustee for First Plaza Group Trust ("First Plaza"), and (b) redeem $12.0
million principal amount of Discount Debentures, (iii) the incurrence of $125.0
million of additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement, and the use of
such proceeds to redeem a portion of the Discount Debentures, and (iv) the
planned exchange of the Exchangeable Preferred Stock for Exchange Debentures
(collectively, the "Refinancing") as if such events had occurred as of January
1, 1996. The summary unaudited pro forma balance sheet data at December 31,
1996 give effect to the Refinancing (other than events that occurred prior to
such date) as if it had occurred as of such date.
The summary unaudited pro forma data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such events had in fact occurred as of such dates or at the beginning of the
periods presented, or to project the Company's financial position or results of
operations for any future date or period. The summary unaudited pro forma data
and accompanying notes should be read in conjunction with the unaudited pro
forma condensed statements of operations and the historical financial
information of Holdings, including the notes thereto, included elsewhere in
this Prospectus.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996(A) 1995(A) 1994(B) 1993(B) 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,405.7 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0
Cost of goods sold...... 1,223.6 970.5 748.3 571.2 555.0
---------- ---------- ---------- ---------- ----------
Gross profit............ 182.1 131.4 113.1 74.3 75.0
Selling, general and
administrative
expenses............... 58.8 46.9 38.0 32.5 32.8
Reduction in carrying
value of assets(c)..... -- 14.7 16.7 -- --
---------- ---------- ---------- ---------- ----------
Income from
operations(d).......... 123.3 69.8 58.4 41.8 42.2
Interest expense and
other related financing
costs.................. 89.4 80.7 65.8 54.3 57.0
Minority interest
expense................ -- -- -- -- 2.7
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 33.9 (10.9) (7.4) (12.5) (17.5)
Income tax provision.... 3.3 5.1 5.6 1.9 2.2
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 30.6 (16.0) (13.0) (14.4) (19.7)
Extraordinary charges
relating to early
extinguishment of
debt(e)................ (2.2) (5.8) -- (1.3) (23.6)
Cumulative effect of
changes in accounting
principles(f).......... -- -- -- (6.3) --
---------- ---------- ---------- ---------- ----------
Net income (loss) before
preferred stock
dividend requirement... 28.4 (21.8) (13.0) (22.0) (43.3)
Preferred stock dividend
requirement............ 3.0 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders........... $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3)
========== ========== ========== ========== ==========
Net income (loss) per
common share(g):
Income (loss) before
extraordinary
charges............... $ 1.60 $ (0.77) $ (0.63) $ (0.87) $ (1.21)
Extraordinary charges.. (0.11) (0.29) -- (0.08) (1.44)
Cumulative effect of
accounting changes.... -- -- -- (0.38) --
Preferred stock
dividend requirement.. (0.16) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total................. $ 1.33 $ (1.06) $ (0.63) $ (1.33) $ (2.65)
========== ========== ========== ========== ==========
Pro forma net income per
common
share(d)(e)(g)(h)...... $ 1.78
==========
Weighted average number
of common and
common equivalent
shares outstanding(i).. 19,169,455 20,647,599 20,647,599 16,469,928 16,364,313
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,189.3 $ 882.3 $ 657.1 $ 459.2 $ 437.4
Plastic container
business.............. 216.4 219.6 204.3 186.3 192.6
Income (loss) from
operations:(j)
Metal container
business.............. 106.1 58.2 59.8 42.3 40.7
Plastic container
business.............. 18.4 13.2 (0.1) 0.6 2.3
OTHER DATA:
Adjusted EBITDA(k)...... $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0
Adjusted EBITDA as a
percentage of net
sales.................. 13.2% 12.0% 13.3% 11.8% 11.7%
Income (loss) from
operations as a
percentage of net
sales.................. 8.8 6.3 6.8 6.5 6.7
Capital expenditures.... $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4
Depreciation and
amortization(l)........ 58.6 45.4 37.2 33.8 31.8
Cash flows provided by
operating activities... 125.2 209.6 47.3 48.1 15.4
Cash flows used for
investing activities... (98.3) (397.1) (27.9) (116.1) (23.0)
Cash flows (used for)
provided by financing
activities............. (27.9) 186.9 (17.0) 65.3 8.6
Number of employees (at
end of period)(m)...... 5,525 5,110 4,000 3,330 3,340
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------
ACTUAL PRO FORMA(H)
------ ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA (at end of period):
Total assets............................................... $913.5 $912.7
Total long-term debt....................................... 693.8 687.8
Deficiency in stockholders' equity......................... (190.2) (122.8)
</TABLE>
(footnotes follow)
10
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility
in May 1996 for $13.1 million). The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date. See Note 3 to
the Consolidated Financial Statements for the year ended December 31, 1996
included elsewhere in this Prospectus.
(b) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 million. The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date.
(c) Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable
values. In 1995, the metal container business recorded a write-down of
$14.7 million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had become
underutilized due to excess capacity. In 1994, charges of $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment.
(d) Under the terms of the stock option plans of Containers and Plastics, stock
options issued under such plans will be converted to options under the
Stock Option Plan at the time of the Offering. In accordance with
Accounting Principles Board ("APB") No. 25, options granted under these
plans are considered variable options with a final measurement date at the
time of conversion. The Company will recognize a non-cash charge of
approximately $21.1 million, assuming an initial public offering price of
$19.00 per share, net of $3.7 million previously accrued, at the time of
the Offering in the Company's first quarter in 1997, for the excess of fair
market value over grant price of these options less amounts previously
accrued. The unaudited pro forma financial data do not give effect to such
non-cash charge. Prior to the Offering, the Company recognized compensation
expense for the change in pro forma book value since the date of grant of
these options, amortized over the vesting period.
(e) The unaudited pro forma net income per common share data for the year ended
December 31, 1996 does not include the historical extraordinary charge, net
of tax, incurred in 1996 and an extraordinary charge, net of tax, that the
Company expects to incur in the first quarter of 1997 of $0.7 million, in
each case for the write-off of unamortized deferred financing costs related
to the early redemption of the Discount Debentures. See "Capitalization".
(f) During 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers Accounting for Postretirement
Benefits Other than Pensions," SFAS No. 109, "Accounting for Income Taxes"
and SFAS No. 112, "Employers Accounting for Postemployment Benefits". The
Company did not elect to restate prior years' financial statements for any
of these pronouncements.
(g) Actual and pro forma net income (loss) per share are based on the weighted
average number of shares outstanding during the period, as adjusted in all
periods for the Stock Split, and after giving effect to stock options
considered to be dilutive common stock equivalents using the treasury stock
method. Primary and fully diluted net income (loss) per share are the same
for each of the periods. Under the terms of the stock option plans of
Containers and Plastics, stock options issued under such plans will be
converted to options under the Stock Option Plan at the time of the
Offering. Such conversion will be made based upon the allocable value of
Containers and Plastics determined in relation to the value of the Company.
Weighted average number of shares outstanding includes the subsidiary
options which are considered to be issued within 12 months
11
<PAGE>
prior to the Offering at less than the assumed initial public offering
price due to their conversion feature as described in footnote (d) above.
Supplementary net income (loss) per share, assuming that sufficient shares
will be issued in the Offering to repay indebtedness as described in "Use
of Proceeds" as of January 1, 1996, was $1.41 for the year ended December
31, 1996.
(h) The unaudited pro forma net income per common share data for the year
ended December 31, 1996 and the unaudited pro forma balance sheet data at
December 31, 1996 assume gross proceeds from the Offering to the Company
of $70.3 million and the use of the net proceeds therefrom as described
under "Use of Proceeds". For a detailed presentation of the unaudited pro
forma results of operations of the Company for the year ended December 31,
1996, see the unaudited pro forma condensed statement of operations,
including the notes thereto, included elsewhere in this Prospectus. See
"Capitalization".
(i) The weighted average number of common and common equivalent shares
outstanding gives effect to the Stock Split.
(j) Income from operations in the selected segment data includes charges
incurred for the reduction in carrying value of certain assets for the
metal containers business of $14.7 million and $7.2 million for the years
ended December 31, 1995 and 1994 and for the plastic containers business
of $9.5 million for the year ended December 31, 1994, as referred to in
footnote (c) above. Income from operations for both the metal container
and plastic container businesses excludes corporate expense.
(k) "Adjusted EBITDA" means consolidated net income before extraordinary
charges, cumulative effect of changes in accounting principles and
preferred stock dividends plus, to the extent reflected in the income
statement for the applicable period, without duplication, consolidated
interest expense, income tax expense and depreciation and amortization
expense, as adjusted to add back expenses relating to postretirement
health care costs (which amounted to $2.6 million, $1.7 million, $0.7
million and $0.5 million for the years ended December 31, 1996, 1995, 1994
and 1993, respectively), the reduction in carrying value of assets (which
were $14.7 million and $16.7 million for the years ended December 31, 1995
and 1994, respectively) and certain other non-cash charges (which included
charges relating to the vesting of benefits under Stock Appreciation
Rights ("SARs") of $0.8 million for each of the years ended December 31,
1996 and 1995 and $1.5 million for the year ended December 31, 1994). The
Company has included information regarding Adjusted EBITDA because
management believes that many investors consider it to be important in
assessing a company's ability to service and incur debt. Accordingly, this
information has been disclosed herein to permit a more complete analysis
of the Company's financial condition. Adjusted EBITDA should not be
considered in isolation or as a substitute for net income or other
consolidated statement of operations or cash flows data prepared in
accordance with generally accepted accounting principles ("GAAP") as a
measure of the profitability or liquidity of the Company. See the
consolidated statements of operations and consolidated statements of cash
flows of Holdings, including the notes thereto, included elsewhere in this
Prospectus. Adjusted EBITDA does not take into account the Company's debt
service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses. Additionally, Adjusted EBITDA is not computed in accordance with
GAAP and may not be comparable to other similarly titled measures of other
companies.
(l) Depreciation and amortization excludes amortization of debt financing
costs.
(m) The number of employees at December 31, 1995 includes approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition by Containers of AN Can. The number of employees at December
31, 1993 excludes 650 employees who joined the Company on December 21,
1993 as a result of the acquisition by Containers of DM Can.
12
<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
December 31, 1996, on a pro forma basis after giving effect to the Refinancing
(assuming that the Refinancing occurred as of such date, other than such
events that occurred prior to such date), the Company would have had
approximately $748.6 million of total consolidated indebtedness. The Company
may incur significant amounts of additional indebtedness in the future,
particularly in connection with acquisitions. See "Prospectus Summary--Recent
Developments--Acquisition". A substantial portion of the Company's cash flow
must be used to service its indebtedness and is therefore not available to be
used in its business. In addition, a substantial portion of the Company's
indebtedness bears interest at floating rates, and therefore a substantial
increase in interest rates could have a material adverse effect on the
Company's results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". Also, as of December 31, 1996,
on a pro forma basis after giving effect to the Refinancing (assuming that the
Refinancing occurred as of such date, other than such events that occurred
prior to such date), Holdings' deficiency in stockholders' equity would have
been $122.8 million. Through 1995, the Company has experienced net losses for
each year since its inception, primarily as a result of interest expense on
its indebtedness. However, in 1996 the Company had net income of $25.4
million. See "Prospectus Summary--Recent Developments--1996 Financial
Results", "Capitalization" and "Selected Historical and Pro Forma Financial
Information".
The Company's instruments and agreements governing its indebtedness contain
numerous covenants, including financial and operating covenants, certain of
which are quite restrictive. In particular, certain financial covenants under
the credit agreement dated as of August 1, 1995 among Silgan and certain of
its subsidiaries, the lenders named therein (the "Banks"), Bankers Trust
Company ("Bankers Trust"), as Administrative Agent and Co-Arranger, and Bank
of America Illinois, as Documentation Agent and Co-Arranger, as amended (the
"Silgan Credit Agreement"), become more restrictive over time in anticipation
of scheduled debt amortization and improved operating results. These covenants
affect, and in many respects limit or prohibit, among other things, the
ability of the Company to incur additional indebtedness, create liens, sell
assets, engage in mergers and acquisitions, make certain capital expenditures
and pay dividends. Such covenants could restrict the Company in its pursuit of
its growth strategy. For a description of such covenants, see "Description of
Certain Indebtedness".
The obligations of each of Silgan, Plastics and Containers under the Silgan
Credit Agreement are guaranteed by Holdings and by each other subsidiary of
Holdings. Such obligations and guarantees under the Silgan Credit Agreement
are, and following consummation of the Offering will continue to be, secured
by first priority liens on all of the material assets of the Company and
pledges of the capital stock of all of Holdings' subsidiaries (collectively,
the "Collateral"). If an event of default under the Silgan Credit Agreement
were to occur, the Banks generally would have the right to accelerate and
declare due the Company's indebtedness thereunder. In such case, if the
indebtedness owed by the Company under the Silgan Credit Agreement were not
repaid or restructured, the Banks could proceed to foreclose on the
Collateral. See "Description of Certain Indebtedness".
RISKS ASSOCIATED WITH GROWTH STRATEGY
Historically, the Company has grown predominantly through acquisitions. The
Company's future growth will depend in large part on additional acquisitions
of consumer goods packaging businesses. There can be no assurance that the
Company will be able to locate or acquire other suitable
13
<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.
Approximately 17% and 12% of the Company's sales in 1996 were to Nestle and
Del Monte, respectively. The Company has recently agreed with Nestle, subject
to definitive documentation, to extend the term of certain of the Nestle
Supply Agreements through 2004 (representing approximately 10% of the
Company's 1996 sales) in return for certain price concessions by the Company.
The Company believes that these price concessions will not have a material
adverse effect on its results of operations. Under the Company's recent
agreement with Nestle, with respect to the remaining Nestle Supply Agreements
that expire in August 1997 (representing approximately 6% of the Company's
1996 sales), the Company has the right to submit a bid to Nestle, and to match
any bid received by Nestle, for the 1998 supply year with respect to the metal
containers that are the subject of such Nestle Supply Agreements. There can be
no assurance that any such bid by the Company will be made at sales prices
equivalent to those currently in effect or otherwise on terms similar to those
currently in effect. In addition, the Company cannot predict the effect, if
any, on its results of operations of matching or not matching any such bids.
Under certain limited circumstances, Del Monte, beginning in December 1998,
and Nestle, beginning in January 2000 (with respect to all of the metal
containers supplied under the Nestle Supply Agreements that have been extended
through 2004), may receive competitive bids, and Containers has the right to
match any such bids. If Containers matches a competitive bid, it may result in
reduced sales prices with respect to the metal containers that are the subject
of such competitive bid. In the event that Containers chooses not to match a
competitive bid, such metal containers may be purchased from the competitive
bidder at the competitive bid price for the term of the bid. See "Business--
Sales and Marketing". The Company's results of operations could be adversely
affected if the Company loses significant unit sales to Nestle and/or Del
Monte as a result of a competitive bid or otherwise. Neither the Nestle Supply
Agreements nor the DM Supply Agreement require the purchase of minimum
amounts, and should Nestle's or Del Monte's demand decrease, the Company's
consolidated sales could decrease. The loss by the Company of either Nestle or
Del Monte as a customer would have a material adverse effect on the Company's
results of operations.
DEPENDENCE ON AGRICULTURAL HARVEST; SEASONALITY
The Company's metal container business sales are dependent, in part, upon
the vegetable, tomato and fruit harvests in the midwest and western regions of
the United States. The size and quality
14
<PAGE>
of these harvests varies from year to year, depending in large part upon the
weather conditions in those regions, and the Company's results of operations
could be impacted accordingly. The Company's results of operations could be
materially adversely affected in a year in which crop yields are substantially
lower than normal in either of the prime agricultural regions of the United
States in which the Company operates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview--
Agricultural Harvest and Seasonality".
The Company's business is affected by seasonal variations as a result of the
timing of the harvest. Accordingly, the Company experiences higher unit sales
volume in the second and third quarters and, as a result, the Company has
historically generated a disproportionate amount of its annual income from
operations during these quarters. In 1996, the Company generated substantially
all of its net income in the second and third quarters. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview--Agricultural Harvest and Seasonality" and "--Quarterly Results of
Operations".
IMPACT OF HOLDING COMPANY STRUCTURE
Holdings is a holding company with no business operations of its own.
Holdings' principal asset is all the outstanding capital stock of Silgan. The
operations of Holdings are conducted through Silgan's operating subsidiaries,
Containers and Plastics, each of which is a wholly owned subsidiary of Silgan.
Accordingly, Holdings will be dependent upon the earnings and cash flows of
such operating subsidiaries, and dividends and distributions from Silgan and
such operating subsidiaries, to pay its expenses and meet its obligations and
to pay any cash dividends or distributions on the Common Stock that may be
authorized by the Board of Directors of Holdings. There can be no assurance
that such operating subsidiaries will generate sufficient earnings and cash
flows to pay dividends or distribute funds to Holdings to enable Holdings to
pay its expenses and meet its obligations, or that applicable state law and
contractual restrictions, including negative covenants contained in the
instruments and agreements governing the indebtedness of Silgan and such
operating subsidiaries, will permit such dividends or distributions. Subject
to certain limited exceptions, the terms of the Silgan Credit Agreement
currently restrict Silgan and its operating subsidiaries from paying dividends
or making distributions to Holdings and the terms of Silgan's 11 3/4% Senior
Subordinated Notes due 2002 (the "11 3/4% Notes") currently restrict Silgan
from paying dividends or making distributions to Holdings. See "--High
Leverage; Stockholders' Deficiency; Restrictive Covenants; Security Interests"
and "Description of Certain Indebtedness".
COMPETITION
The manufacture and sale of metal and plastic containers is highly
competitive and many of the Company's competitors have substantially greater
financial resources than the Company. In particular, price competition can be
an important factor and may affect the Company's results of operations. See
"Business--Competition".
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services provided
by R. Philip Silver, the Chairman of the Board and Co-Chief Executive Officer
of Holdings and Silgan, and D. Greg Horrigan, the President and Co-Chief
Executive Officer of Holdings and Silgan, could materially adversely affect
the Company. However, the Company's operations are conducted through
Containers and Plastics, each of which has its own independent management.
S&H, Inc. ("S&H"), a company wholly owned by Messrs. Silver and Horrigan, has
agreed to provide certain general management and administrative services to
each of Holdings, Silgan, Containers and Plastics pursuant to management
services agreements. See "Certain Transactions--Management Agreements".
15
<PAGE>
SIGNIFICANT STOCKHOLDERS
After completion of the Offering, Messrs. Silver and Horrigan and The Morgan
Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") (collectively, the
"Principal Common Stockholders") will collectively own approximately 72.1% of
the outstanding Common Stock (approximately 68.9% if the Underwriters over-
allotment option is exercised in full). Accordingly, if such persons act
together they will be able to control all matters submitted to the
stockholders for a vote, including the election of directors. Under a
stockholders agreement entered into by the Principal Common Stockholders (the
"Principals Stockholders Agreement"), Messrs. Silver and Horrigan agreed to
vote their shares of Common Stock for the election of two directors chosen by
MSLEF II so long as MSLEF II holds at least one-half of the number of shares
of Common Stock held by it immediately prior to the Offering, and MSLEF II
agreed to vote its shares of Common Stock for the election of two directors
chosen by Messrs. Silver and Horrigan so long as they hold in the aggregate at
least one-half of the number of shares of Common Stock held by them on the
date of this Prospectus. Holdings currently has four directors, but intends to
increase its board of directors after the Offering to six members to include
two additional independent directors. Under the Principals Stockholders
Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold
in the aggregate at least one-half of the number of shares of Common Stock
held by them on the date of this Prospectus, Messrs. Silver and Horrigan will
nominate the two independent directors, who must then be elected in accordance
with Holdings' Restated Certificate of Incorporation. See "Management",
"Principal and Selling Stockholders" and "Description of Capital Stock".
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, the Company will have
outstanding 18,862,833 shares of Common Stock. The shares of Common Stock sold
pursuant to the Offering may be resold without restriction by persons other
than "affiliates" of Holdings. The shares of Common Stock directly or
indirectly held by the Principal Common Stockholders and Bankers Trust New
York Corporation ("BTNY") following the Offering will be "restricted"
securities within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold in the absence of registration under
the Securities Act, or an exemption therefrom, including the exemptions
contained in Rule 144 under the Securities Act. The Principal Common
Stockholders and BTNY have agreed, subject to certain exceptions, for a period
of one year from the date of this Prospectus not to register for sale or
offer, sell, contract to sell, or otherwise dispose of any shares of Common
Stock without the prior written consent of Goldman, Sachs & Co., other than in
the Offering. See "Underwriting". Subject to such agreement and restrictions
under the Securities Act, the Principal Common Stockholders could sell shares
of Common Stock owned by them from time to time in the open market for any
reason. Holdings has granted MSLEF II and Messrs. Silver and Horrigan certain
registration rights with respect to the shares of Common Stock owned by them
which have been waived for a period of one year. Sales of substantial amounts
of Common Stock or the availability of such shares for sale could adversely
affect prevailing market prices for the Common Stock and the Company's ability
to issue additional equity securities. See "Shares Eligible for Future Sale".
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CERTAIN AGREEMENTS AND THE CERTIFICATE
OF INCORPORATION
Under the Principals Stockholders Agreement, MSLEF II agreed to vote its
shares of Common Stock against any unsolicited merger or sale of the Company's
business or its assets if Messrs. Silver and Horrigan oppose such transaction,
so long as Messrs. Silver and Horrigan hold at least 90% of the shares of
Common Stock held by them in the aggregate on the date of this Prospectus. See
"Description of Capital Stock--Description of Stockholders Agreements".
Certain provisions of Holdings' Restated Certificate of Incorporation may
have the effect of delaying or preventing transactions involving a change of
control of Holdings, including transactions in
16
<PAGE>
which stockholders might otherwise receive a substantial premium for their
shares over then current market prices, and may limit the ability of
stockholders to approve transactions that they may deem to be in their best
interests. In particular, under the Restated Certificate of Incorporation, the
Board of Directors is authorized to issue one or more classes of preferred
stock having such designations, rights and preferences as may be determined by
the Board. Under the Restated Certificate of Incorporation, the Board of
Directors is divided into three classes, and each year, one third of the
directors is elected for a term of three years. In addition, any action taken
by the holders of Common Stock must be taken at a meeting and may not be taken
by consent in writing, and a special meeting of the stockholders may only be
called by the Chairman of the Board or the President of the Company or by a
majority of the Board of Directors of the Company, and may not be called by
the holders of Common Stock. See "Description of Capital Stock".
Under the Silgan Credit Agreement, the occurrence of a Change of Control (as
defined in the Silgan Credit Agreement) constitutes an event of default
thereunder, permitting, among other things, the acceleration of amounts owed
thereunder. Additionally, upon the occurrence of a Change of Control under and
as defined in the instruments governing Silgan's 11 3/4% Notes and the
Exchange Debentures, the holders thereof have the right to require the
repurchase of such indebtedness at a purchase price equal to 101% of the
principal amount thereof, plus accrued interest thereon. See "Description of
Certain Indebtedness".
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "SLGN", there can be no assurance that an
active market for the Common Stock will be developed or sustained following
the Offering or that investors in the Common Stock will be able to resell
their shares of Common Stock at or above the initial public offering price.
The initial public offering price for the shares of Common Stock will be
determined through negotiations between the Company and the Selling
Stockholders and the representatives of the Underwriters, and may not be
indicative of the market price of the Common Stock after the Offering. See
"Underwriting". Morgan Stanley & Co. Incorporated ("Morgan Stanley") will not
act as a market maker for the Common Stock.
DILUTION
Purchasers of the Common Stock in the Offering will experience immediate and
substantial dilution in net tangible book value per share of Common Stock from
the initial public offering price. In addition, to the extent outstanding
options to purchase Common Stock are exercised, there will be further
dilution. See "Dilution".
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,700,000 shares of
Common Stock offered hereby by the Company are estimated to be $64.4 million,
after deducting the underwriting discount and estimated offering expenses
payable by the Company. The Company will not receive any of the net proceeds
from the sale of shares by MSLEF II and BTNY (collectively, the "Selling
Stockholders").
The net proceeds of the Offering will be used to redeem the remaining
outstanding Discount Debentures (approximately $59.0 million aggregate
principal amount). Accrued interest on such Discount Debentures will be paid
with working capital borrowings under the Silgan Credit Agreement. The
Discount Debentures bear interest at a rate of 13 1/4% per annum and mature on
December 15, 2002. A portion of the net proceeds from the Offering will be
used to prepay approximately $3.5 million principal amount of the B term loans
(together with accrued interest thereon) under the Silgan Credit Agreement,
which amount would have been due on December 31, 1997. Such B term loans had a
weighted average interest rate of 8.7% during the year ended December 31,
1996. The remaining net
17
<PAGE>
proceeds from the Offering will be used to prepay approximately $1.9 million
principal amount of the A term loans (together with accrued interest thereon)
under the Silgan Credit Agreement that would have been due on December 31,
1997. Such A term loans had a weighted average interest rate of 8.2% during
the year ended December 31, 1996. Pending the redemption of the remaining
Discount Debentures which is expected to occur no later than 45 days after the
completion of the Offering, the net proceeds will be used to repay working
capital loans under the Silgan Credit Agreement. Generally, the Company may
borrow, repay and reborrow working capital loans from time to time in
accordance with the Silgan Credit Agreement. The Company financed its recent
acquisition of Finger Lakes through working capital borrowings under the
Silgan Credit Agreement of approximately $29.9 million. See "Description of
Certain Indebtedness--Description of the Silgan Credit Agreement".
DIVIDEND POLICY
Holdings has never declared or paid cash dividends on its Common Stock. The
Company currently anticipates that it will retain all available funds for use
in the operation and expansion of its business and does not anticipate paying
any cash dividends on the Common Stock in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of Holdings'
Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant by Holdings' Board of Directors. The Holdings Guaranty (as
defined in "Description of Certain Indebtedness--Description of the Silgan
Credit Agreement") and the Exchangeable Preferred Stock (and, when issued, the
Exchange Debentures) limit the ability of Holdings to pay dividends, and the
Silgan Credit Agreement and the 11 3/4% Notes limit the ability of Silgan to
pay dividends to Holdings. See "Risk Factors--High Leverage; Stockholders'
Deficiency; Restrictive Covenants; Security Interests", "--Impact of Holding
Company Structure" and "Description of Certain Indebtedness".
18
<PAGE>
DILUTION
As of December 31, 1996, the Company had a deficit in net tangible book
value of approximately $289.7 million or $19.11 per share of Common Stock.
"Net tangible book value" per share of Common Stock represents the total
amount of tangible assets of the Company, less the total amount of liabilities
of the Company, divided by the number of shares of Common Stock outstanding.
Without taking into account any changes in net tangible book value after
December 31, 1996, other than to give effect to (i) the sale by the Company of
the 3,700,000 shares of Common Stock in the Offering (at an assumed initial
public offering price of $19.00 per share and after deducting the underwriting
discount and offering expenses) and (ii) the application of the net proceeds
therefrom to redeem the remaining outstanding Discount Debentures and to repay
a portion of the A and B term loans under the Silgan Credit Agreement, the pro
forma deficit in net tangible book value of the Common Stock as of December
31, 1996 would have been approximately $225.4 million or $11.95 per share.
This represents an immediate decrease in pro forma deficit in net tangible
book value of $7.16 per share of Common Stock to existing stockholders and an
immediate dilution in pro forma net tangible book value of $30.95 per share to
new stockholders. "Dilution" per share represents the difference between the
price per share to be paid by the new stockholders and the pro forma deficit
in net tangible book value per share as of December 31, 1996. The following
table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $ 19.00
Deficit in net tangible book value per share as of
December 31, 1996...................................... $(19.11)
Decrease in deficit in net tangible book value per share
attributable to the Offering and the application of the
proceeds therefrom..................................... 7.16
-------
Pro forma deficit in net tangible book value per share
as of December 31, 1996 after giving effect to the
Offering and the application of the proceeds
therefrom.............................................. (11.95)
-------
(Dilution) per share to new stockholders................ $(30.95)
=======
</TABLE>
The following table sets forth, on a pro forma basis as of December 31,
1996, the number of shares of Common Stock purchased from Holdings and the
total consideration and the average price per share paid by the existing
stockholders and to be paid by investors purchasing shares of Common Stock
offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 15,162,833 80.4% $18,618,000 20.9% $ 1.23
New stockholders........ 3,700,000 19.6 70,300,000 79.1 19.00
---------- ----- ----------- -----
Total................... 18,862,833 100.0% $88,918,000 100.0% $ 4.71
========== ===== =========== =====
</TABLE>
Sales by the Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to 14,362,833, or approximately 76.1% of
the total number of shares of Common Stock outstanding after the Offering (or
approximately 72.6% if the Underwriters' over-allotment option is exercised in
full), and will increase the number of shares held by new investors to
4,500,000, or approximately 23.9% of the total number of shares of Common
Stock outstanding after the Offering (or 5,175,000 shares and approximately
27.4% if the Underwriters' over-allotment option is exercised in full).
The calculations in the tables set forth above do not reflect an aggregate
of 3,534,568 shares of Common Stock reserved for issuance under the Stock
Option Plan. There are currently 1,821,254 options outstanding under the Stock
Option Plan, each of which entitles the holder thereof to purchase one share
of Common Stock. See "Management--Stock Option Plan". The weighted average
exercise price for all of the options currently outstanding under the Stock
Option Plan is $2.18 per share. See "Management--Executive Compensation". To
the extent outstanding options to purchase Common Stock are exercised, there
will be further dilution.
19
<PAGE>
CAPITALIZATION
The following table sets forth (i) the audited actual consolidated
capitalization of Holdings as of December 31, 1996, and (ii) the unaudited pro
forma consolidated capitalization of Holdings as of December 31, 1996, giving
effect to the Offering (assuming gross proceeds to the Company of $70.3
million) and the application of the proceeds therefrom, and the exchange of
all outstanding shares of Exchangeable Preferred Stock for Exchange
Debentures. This table should be read in conjunction with the historical and
pro forma consolidated financial information of Holdings included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL PRO FORMA
----------- ------------
(AUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Term loans(a)............... $ 499,843 $ 499,843 (b)
11 3/4% Senior Subordinated
Notes due 2002............. 135,000 135,000
13 1/4% Senior Discount
Debentures due 2002........ 58,940 --
13 1/4% Subordinated
Debentures due 2006........ -- 52,998
----------- -----------
Total long-term debt(c)... 693,783 687,841
----------- -----------
Cumulative exchangeable
redeemable preferred stock... 52,998 --
DEFICIENCY IN STOCKHOLDERS'
EQUITY:
Common stock, par value $.01
per share, 100,000,000
shares authorized, 885,000
shares issued and
outstanding (actual),
15,162,833 shares issued
and outstanding (as
adjusted for the Stock
Split), and 18,862,833
shares issued and
outstanding (pro
forma)(d).................. 9 189
Additional paid-in capital.. 18,609 107,647 (e)
Accumulated deficit......... (208,824) (230,614)(e)(f)
----------- -----------
Total deficiency in
stockholders' equity..... (190,206) (122,778)
----------- -----------
Total capitalization.... $ 556,575 $ 565,063
=========== ===========
</TABLE>
- --------
(a) The term loans exclude the current portion of the term loans under the
Silgan Credit Agreement. At December 31, 1996, the current portion of the
term loans was $38.4 million.
(b) Approximately $5.4 million of the net proceeds from the Offering will be
used to prepay a portion of the current portion of the term loans under
the Silgan Credit Agreement. See "Use of Proceeds".
(c) Pursuant to the Silgan Credit Agreement, the lenders thereunder have
agreed to lend to Plastics and Containers up to an aggregate of $225.0
million of revolving loans, which are reflected as short-term debt on the
Company's balance sheet. As of December 31, 1996, the outstanding
principal amount of revolving loans under the Silgan Credit Agreement was
$27.8 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Capital Resources and Liquidity".
(d) Excludes 3,534,568 shares of Common Stock reserved for issuance under the
Stock Option Plan, including shares reserved for issuance in connection
with currently outstanding options to purchase 1,821,254 shares of Common
Stock. The weighted average exercise price for all of the options
currently outstanding under the Stock Option Plan is $2.18 per share.
(e) Under the terms of the stock option plans of Containers and Plastics,
stock options issued under such plans will be converted to options under
the Stock Option Plan at the time of the Offering. In accordance with APB
No. 25, options granted under these plans are considered variable options
with a final measurement date at the time of conversion. The Company will
recognize a non-cash charge to earnings of approximately $21.1 million
(assuming an initial public offering price of $19.00 per share), net of
$3.7 million previously accrued, at the time of the Offering for the
excess of fair market value over grant price of these options, less
amounts previously accrued, which will be offset by an increase to paid-in
capital.
(f) Includes an extraordinary charge, net of tax, of $0.7 million for the
write-off of unamortized deferred financing costs related to the
redemption of Discount Debentures. Such charge is expected to be incurred
during the first quarter of 1997.
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below are selected historical consolidated financial data of
Holdings at December 31, 1996, 1995, 1994, 1993 and 1992 and for the years
then ended.
The selected historical consolidated financial data of Holdings at December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 (with the exception of employee data) were derived from the
historical consolidated financial statements of Holdings for such periods that
were audited by Ernst & Young LLP, independent auditors, whose report appears
elsewhere in this Prospectus. The selected historical consolidated financial
data of Holdings at December 31, 1994, 1993 and 1992 and for the years ended
December 31, 1993 and 1992 were derived from the historical audited
consolidated financial statements of Holdings for such periods.
The unaudited pro forma net income per common share data for the year ended
December 31, 1996 give effect to the Refinancing as if it had occurred as of
January 1, 1996. The summary unaudited pro forma balance sheet data at
December 31, 1996 give effect to the Refinancing (other than events that
occurred prior to such date) as if it had occurred as of such date.
The unaudited pro forma data do not purport to represent what the Company's
financial position or results of operations would actually have been if such
events had in fact occurred as of such dates or at the beginning of the
periods presented, or to project the Company's financial position or results
of operations for any future date or period. The selected historical and
unaudited pro forma data of Holdings were derived from, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the unaudited pro forma condensed statements of
operations and the historical financial statements and pro forma financial
information of Holdings, including the notes thereto, included elsewhere in
this Prospectus.
21
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996(A) 1995(A) 1994(B) 1993(B) 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $ 1,405.7 $ 1,101.9 $ 861.4 $ 645.5 $ 630.0
Cost of goods sold...... 1,223.6 970.5 748.3 571.2 555.0
---------- ---------- ---------- ---------- ----------
Gross profit............ 182.1 131.4 113.1 74.3 75.0
Selling, general and
administrative
expenses............... 58.8 46.9 38.0 32.5 32.8
Reduction in carrying
value of assets(c)..... -- 14.7 16.7 -- --
---------- ---------- ---------- ---------- ----------
Income from
operations(d).......... 123.3 69.8 58.4 41.8 42.2
Interest expense and
other related financing
costs.................. 89.4 80.7 65.8 54.3 57.0
Minority interest
expense................ -- -- -- -- 2.7
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 33.9 (10.9) (7.4) (12.5) (17.5)
Income tax provision.... 3.3 5.1 5.6 1.9 2.2
---------- ---------- ---------- ---------- ----------
Income (loss) before
extraordinary charges
and cumulative effect
of changes in
accounting principles.. 30.6 (16.0) (13.0) (14.4) (19.7)
Extraordinary charges
relating to early
extinguishment of
debt(e)................ (2.2) (5.8) -- (1.3) (23.6)
Cumulative effect of
changes in accounting
principles(f).......... -- -- -- (6.3) --
---------- ---------- ---------- ---------- ----------
Net income (loss) before
preferred stock
dividend requirement... 28.4 (21.8) (13.0) (22.0) (43.3)
Preferred stock dividend
requirement............ 3.0 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders........... $ 25.4 $ (21.8) $ (13.0) $ (22.0) $ (43.3)
========== ========== ========== ========== ==========
Net income (loss) per
common share(g):
Income (loss) before
extraordinary
charges............... $ 1.60 $ (0.77) $ (0.63) $ (0.87) $ (1.21)
Extraordinary charges.. (0.11) (0.29) -- (0.08) (1.44)
Cumulative effect of
accounting changes.... -- -- -- (0.38) --
Preferred stock
dividend requirement.. (0.16) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total................. $ 1.33 $ (1.06) $ (0.63) $ (1.33) $ (2.65)
========== ========== ========== ========== ==========
Pro forma net income per
common
share(d)(e)(g)(h)...... $ 1.78
==========
Weighted average number
of common and
common equivalent
shares outstanding(i).. 19,169,455 20,647,599 20,647,599 16,469,928 16,364,313
SELECTED SEGMENT DATA:
Net sales:
Metal container
business.............. $ 1,189.3 $ 882.3 $ 657.1 $ 459.2 $ 437.4
Plastic container
business.............. 216.4 219.6 204.3 186.3 192.6
Income (loss) from
operations:(j)
Metal container
business.............. 106.1 58.2 59.8 42.3 40.7
Plastic container
business.............. 18.4 13.2 (0.1) 0.6 2.3
OTHER DATA:
Adjusted EBITDA(k)...... $ 186.0 $ 132.4 $ 114.5 $ 76.1 $ 74.0
Adjusted EBITDA as a
percentage of net
sales.................. 13.2% 12.0% 13.3% 11.8% 11.7%
Income (loss) from
operations as a
percentage of net
sales.................. 8.8 6.3 6.8 6.5 6.7
Capital expenditures.... $ 56.9 $ 51.9 $ 29.2 $ 42.5 $ 23.4
Depreciation and
amortization(l)........ 58.6 45.4 37.2 33.8 31.8
Cash flows provided by
operating activities... 125.2 209.6 47.3 48.1 15.4
Cash flows used for
investing activities... (98.3) (397.1) (27.9) (116.1) (23.0)
Cash flows (used for)
provided by financing
activities............. (27.9) 186.9 (17.0) 65.3 8.6
Number of employees (at
end of period)(m)...... 5,525 5,110 4,000 3,330 3,340
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
PRO FORMA
1996(H) 1996 1995 1994 1993 1992
----------- ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (at end
of period):
Total assets.............. $912.7 $913.5 $900.0 $504.3 $497.6 $389.0
Total long-term debt...... 687.8 693.8 750.9 510.8 505.7 383.2
Deficiency in
stockholders' equity..... (122.8) (190.2) (179.8) (158.0) (145.0) (138.0)
</TABLE>
(footnotes follow)
22
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) On August 1, 1995, the Company acquired AN Can for a purchase price of
$362.0 million (including the purchase from ANC of its St. Louis facility
in May 1996 for $13.1 million). The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date. See Note 3 to
the Consolidated Financial Statements for the year ended December 31, 1996
included elsewhere in this Prospectus.
(b) On December 21, 1993, the Company acquired DM Can for a purchase price of
approximately $73.3 million. The acquisition was accounted for as a
purchase transaction and the results of operations have been included with
the Company's historical results from the acquisition date.
(c) Based upon a review of its depreciable assets, the Company determined that
certain adjustments were necessary to properly reflect net realizable
values. In 1995, the metal container business recorded a write-down of
$14.7 million for the excess of carrying value over estimated realizable
value of machinery and equipment at existing facilities which had become
underutilized due to excess capacity. In 1994, charges of $7.2 million and
$9.5 million were recorded by the metal container business and plastic
container business, respectively, to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale
and for technologically obsolete and inoperable machinery and equipment.
(d) Under the terms of the stock option plans of Containers and Plastics,
stock options issued under such plans will be converted to options under
the Stock Option Plan at the time of the Offering. In accordance with APB
No. 25, options granted under these plans are considered variable options
with a final measurement date at the time of conversion. The Company will
recognize a non-cash charge of approximately $21.1 million, assuming an
initial public offering price of $19.00 per share, net of $3.7 million
previously accrued, at the time of the Offering in the Company's first
quarter in 1997, for the excess of fair market value over grant price of
these options less amounts previously accrued. The unaudited pro forma
financial data do not give effect to such non-cash charge. Prior to the
Offering, the Company recognized compensation expense for the change in
pro forma book value since the date of grant of these options, amortized
over the vesting period.
(e) The unaudited pro forma net income per common share data for the year
ended December 31, 1996 does not include the historical extraordinary
charge, net of tax, incurred in 1996 and an extraordinary charge, net of
tax, that the Company expects to incur in the first quarter of 1997 of
$0.7 million, in each case for the write-off of unamortized deferred
financing costs related to the early redemption of the Discount
Debentures. See "Capitalization".
(f) During 1993, the Company adopted SFAS No. 106, "Employers Accounting for
Postretirement Benefits Other than Pensions," SFAS No. 109, "Accounting
for Income Taxes" and SFAS No. 112, "Employers Accounting for
Postemployment Benefits". The Company did not elect to restate prior
years' financial statements for any of these pronouncements.
(g) Actual and pro forma net income (loss) per share are based on the weighted
average number of shares outstanding during the period, as adjusted in all
periods for the Stock Split, and after giving effect to stock options
considered to be dilutive common stock equivalents using the treasury
stock method. Primary and fully diluted net income (loss) per share are
the same for each of the periods. Under the terms of the stock option
plans of Containers and Plastics, stock options issued under such plans
will be converted to options under the Stock Option Plan at the time of
the Offering. Such conversion will be made based upon the allocable value
of Containers and Plastics determined in relation to the value of the
Company. Weighted average number of shares outstanding includes the
subsidiary options which are considered to be issued within 12 months
prior to the Offering at less than the assumed initial public offering
price due to their conversion
23
<PAGE>
feature as described in footnote (d) above. Supplementary net income (loss)
per share, assuming that sufficient shares will be issued in the Offering
to repay indebtedness as described in "Use of Proceeds" as of January 1,
1996, was $1.41 for the year ended December 31, 1996.
(h) The unaudited pro forma net income per common share data for the year
ended December 31, 1996 and the unaudited pro forma balance sheet data at
December 31, 1996 assume gross proceeds from the Offering to the Company
of $70.3 million and the use of the net proceeds therefrom as described
under "Use of Proceeds". For a detailed presentation of the unaudited pro
forma results of operations of the Company for the year ended December 31,
1996, see the unaudited pro forma condensed statement of operations,
including the notes thereto, included elsewhere in this Prospectus. See
"Capitalization".
(i) The weighted average number of common and common equivalent shares
outstanding gives effect to the Stock Split.
(j) Income from operations in the selected segment data includes charges
incurred for the reduction in carrying value of certain assets for the
metal containers business of $14.7 million and $7.2 million for the years
ended December 31, 1995 and 1994 and for the plastic containers business
of $9.5 million for the year ended December 31, 1994, as referred to in
footnote (c) above. Income from operations for both the metal container
and plastic container businesses excludes corporate expense.
(k) "Adjusted EBITDA" means consolidated net income before extraordinary
charges, cumulative effect of changes in accounting principles and
preferred stock dividends plus, to the extent reflected in the income
statement for the applicable period, without duplication, consolidated
interest expense, income tax expense and depreciation and amortization
expense, as adjusted to add back expenses relating to postretirement
health care costs (which amounted to $2.6 million, $1.7 million, $0.7
million and $0.5 million for the years ended December 31, 1996, 1995, 1994
and 1993, respectively), the reduction in carrying value of assets (which
were $14.7 million and $16.7 million for the years ended December 31, 1995
and 1994, respectively) and certain other non-cash charges (which included
charges relating to the vesting of benefits under SARs of $0.8 million for
each of the years ended December 31, 1996 and 1995 and $1.5 million for
the year ended December 31, 1994). The Company has included information
regarding Adjusted EBITDA because management believes that many investors
consider it to be important in assessing a company's ability to service
and incur debt. Accordingly, this information has been disclosed herein to
permit a more complete analysis of the Company's financial condition.
Adjusted EBITDA should not be considered in isolation or as a substitute
for net income or other consolidated statement of operations or cash flows
data prepared in accordance with GAAP as a measure of the profitability or
liquidity of the Company. See the consolidated statements of operations
and consolidated statements of cash flows of Holdings, including the notes
thereto, included elsewhere in this Prospectus. Adjusted EBITDA does not
take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts
that may be available for discretionary uses. Additionally, Adjusted
EBITDA is not computed in accordance with GAAP and may not be comparable
to other similarly titled measures of other companies.
(l) Depreciation and amortization excludes amortization of debt financing
costs.
(m) The number of employees at December 31, 1995 includes approximately 1,400
employees who joined the Company on August 1, 1995 as a result of the
acquisition by Containers of AN Can. The number of employees at December
31, 1993 excludes 650 employees who joined the Company on December 21,
1993 as a result of the acquisition by Containers of DM Can.
24
<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 for the twelve months ended October 31, 1996 of 35% in
the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company has focused on growth
through acquisitions, followed by plant rationalizations and consolidations
and investment in the acquired businesses to gain manufacturing and production
efficiencies and to provide for internal growth. Since its inception, the
Company has acquired and successfully integrated ten businesses, including the
recent acquisitions of AN Can in August 1995 for a purchase price of
approximately $362.0 million (including net working capital of approximately
$156.0 million) and DM Can in December 1993 for a purchase price of
approximately $73.3 million (including net working capital of approximately
$21.9 million). In addition, on October 9, 1996 the Company completed its
acquisition of Finger Lakes, the metal container manufacturing subsidiary of
Curtice Burns. See "Prospectus Summary--Recent Developments". The Company's
future growth will depend in large part on additional acquisitions of consumer
goods packaging businesses.
Holdings is a holding company that conducts its business through two
operating companies, Containers and Plastics, each of which is a wholly owned
subsidiary of Silgan.
COST REDUCTIONS AND INVESTMENTS FOLLOWING ACQUISITIONS
The Company believes that its acquisitions and investments have enabled it
to achieve a low cost position in the metal food container segment. To further
enhance its low cost position, the Company has realized cost reduction
opportunities through plant rationalizations and capital improvements, as well
as from improved production scheduling and line reconfiguration. Since 1991,
Containers has closed eight smaller, higher cost metal container facilities,
including five facilities that were closed in 1995 as a result of the
integration of the manufacturing operations of DM Can. Because most of the
facilities that were closed in 1995 were closed late in the year, the Company
began to realize the benefits from the closing of such facilities in 1996.
From 1991 through 1993, Plastics closed three manufacturing facilities and
consolidated the technical and administrative functions of its plastic
container businesses. An additional facility was closed in 1995. In 1994,
Plastics began to realize the benefits of this consolidation and
rationalization program, as well as from its capital investment program. In
the fourth quarter of 1996, the Company initiated further downsizing and
rationalizations of certain of its facilities. Management expects that these
actions, along with improved production scheduling, will enable the Company to
achieve lower manufacturing costs in 1997 as compared to 1996.
AN CAN ACQUISITION
Management believes that the acquisition of AN Can, which has seventeen
manufacturing facilities, provides the Company with further cost reduction
opportunities, not only through purchasing economies and manufacturing
synergies which it will realize from the combined operations, but also through
the integration of selling, general and administrative operations of AN Can
into the Company's
25
<PAGE>
existing metal container business. In 1996, the Company realized certain of
the manufacturing synergies. In 1997, the Company expects to complete the
integration of the selling, general and administrative functions. The Company
believes that it will realize the full benefits of the integration of the
selling, general and administrative functions in 1998, and that benefits to be
realized by the rationalization of plant operations will begin to occur in
1997.
Although employee termination costs in connection with plant
rationalizations, administrative workforce reductions and other plant exit
costs associated with the acquisition of AN Can have been accrued through
purchase accounting adjustments, the Company incurred in 1995 and in 1996
other non-recurring costs which under current accounting pronouncements will
be charged against operating income. These costs, which include transitional
charges related to the integration of selling and administrative functions, as
well as costs associated with plant rearrangement and clean-up, were $3.2
million in 1995 and were approximately $3.5 million in 1996. The Company
expects that it will eliminate the redundant charges related to the
integration of selling and administrative functions in 1997.
NET SALES
LONG-TERM CONTRACTS. The Company seeks to develop and maintain long-term
relationships with its customers. The Company estimates that approximately 80%
of Containers' projected sales in 1997 will be pursuant to long-term supply
arrangements. Containers' has agreements with Nestle pursuant to which
Containers supplies a majority of Nestle's metal container requirements, and
an agreement with Del Monte pursuant to which Containers supplies
substantially all of Del Monte's U.S. metal container requirements. Revenues
from these two customers represented approximately 29% of net sales by
Containers in 1996. In addition to Nestle and Del Monte, Containers has multi-
year supply arrangements with several other customers, including contracts
which AN Can had with many of its customers. The Company has recently agreed
with Nestle, subject to definitive documentation, to extend the term of
certain of the Nestle Supply Agreements through 2004 (representing
approximately 10% of the Company's 1996 sales) in return for certain price
concessions by the Company. See "Risk Factors--Reliance on Major Customers"
and "Business--Sales and Marketing". The Company believes that these price
concessions will not have a material adverse effect on its results of
operations. Under the Company's recent agreement with Nestle, with respect to
the remaining Nestle Supply Agreements that expire in August 1997
(representing approximately 6% of the Company's 1996 sales), the Company has
the right to submit a bid to Nestle, and to match any bid received by Nestle,
for the 1998 supply year with respect to the metal containers that are the
subject of such Nestle Supply Agreements. There can be no assurance that any
such bid by the Company will be made at sales prices equivalent to those
currently in effect or otherwise on terms similar to those currently in
effect. The loss by the Company of either Nestle or Del Monte as a customer
would have a material adverse effect on the Company's results of operations.
See "Risk Factors--Reliance on Major Customers" and "Business--Sales and
Marketing".
The Company's long-term supply contracts generally provide for pricing
changes in accordance with cost change formulas, thereby significantly
reducing the exposure of the Company's results from operations to the
volatility of raw material costs. In addition, the terms of the Company's
long-term supply contracts limit the Company's ability to increase margins.
AGRICULTURAL HARVEST AND SEASONALITY. The Company's metal container business
sales are dependent, in part, upon the vegetable, tomato and fruit harvests in
the midwest and western regions of the United States. The size and quality of
these harvests varies from year to year, depending in large part upon the
weather conditions in those regions. The fruit and vegetable pack harvest in
1994 was better than the below normal fruit and vegetable pack harvest in
1995, resulting in greater sales to fruit and vegetable pack processing
customers in 1994 as compared to 1995. The 1996 midwest
26
<PAGE>
vegetable harvest was better than in 1995, but, due to cool wet weather during
the 1996 planting season, was less than the harvest in 1994. See "Risk
Factors--Dependence on Agricultural Harvest; Seasonality".
The Company's business is affected by seasonal variations as a result of the
timing of the harvest. Accordingly, the Company experiences higher unit sales
volume in the second and third quarters and, as a result, the Company has
historically generated a disproportionate amount of its annual income from
operations during these quarters. In 1996, the Company generated substantially
all of its net income in the second and third quarters. See "Risk Factors--
Dependence on Agricultural Harvest; Seasonality" and "--Quarterly Results of
Operations".
INTEREST EXPENSE
In order to increase its financial flexibility, during 1995 and 1996 the
Company refinanced portions of its higher cost capital with lower cost
capital. Upon completion of the Refinancing, the Company will have refinanced
all of the Discount Debentures. The net result of these refinancings will be
approximately $19.5 million of annual current cash interest savings (excluding
non-cash interest relating to the Exchange Debentures) and approximately $25.9
million of current cash tax savings (as a result of the deduction by the
Company of the accreted interest of approximately $103.5 million on the
retired Discount Debentures).
The Company's aggregate interest expense and the preferred stock dividend
requirement in 1996 was $92.4 million. On a pro forma basis after giving
effect to the Refinancing, the Company's interest expense for 1996 (including
interest on the Exchange Debentures which, as part of the Refinancing, are
assumed to have been exchanged for the Exchangeable Preferred Stock as of the
beginning of the year) would have been $83.5 million. For 1997, assuming that
the floating rates of interest to be borne by the Company's indebtedness in
1997 are comparable to 1996 rates and without giving effect to incremental
borrowings to finance acquisitions, if any, the Company expects that its
interest expense will decline by approximately $10.0 million as compared to
1996. Since the Company refinanced a substantial amount of the Discount
Debentures in the third quarter of 1996, the Company expects that most of this
reduction in interest expense will occur during the first and second quarters
of 1997 as compared to the same periods in 1996.
As of December 31, 1996, on a pro forma basis after giving effect to the
Refinancing, the Company would have had approximately $748.6 million of
indebtedness outstanding, including $27.8 million of working capital loans.
Historically, the Company's working capital loans are at their lowest amount
at year-end. Because the Company sells metal containers used in vegetable and
fruit processing, the Company must access working capital to build inventory
and then carry accounts receivable for some customers beyond the end of the
summer and fall packing season. Due to these seasonal requirements, the
Company incurs short term indebtedness to finance its working capital
requirements. At its peak in September 1996, approximately $182.5 million of
the working capital revolver under the Silgan Credit Agreement, including
letters of credit, was utilized.
The Company's financial results are sensitive to changes in prevailing
market rates of interest. At December 31, 1996, on a pro forma basis after
giving effect to the Refinancing and including working capital loans of $27.8
million, 48.2% of the Company's indebtedness bore interest at floating rates,
taking into account interest rate swap agreements entered into by the Company
to mitigate the effect of interest rate fluctuations. These agreements have a
notional amount of $200.0 million, including interest rate swap agreements
entered into during the fourth quarter of 1996 with a notional amount of
$100.0 million. Under these agreements, floating rate interest was exchanged
for fixed rates of interest ranging from 5.6% to 6.2% plus the Company's
incremental margin, which currently ranges from 2.5% to 3.0%. Depending upon
market conditions, the Company may enter into additional interest rate swap or
hedge agreements in the future to hedge its exposure to interest rate
volatility.
27
<PAGE>
INCOME TAX CONSIDERATIONS
FEDERAL TAX LIABILITY. Because the Discount Debentures represent "applicable
high yield discount obligations," the tax deduction that would otherwise have
been available to the Company for the accreted interest on the Discount
Debentures during the five years that no cash interest was paid thereon was
not available until the retirement of the Discount Debentures. After giving
effect to the Refinancing, the Company will have redeemed or repurchased all
of the Discount Debentures from 1995 to 1997, providing the Company with an
allowable deduction of approximately $103.5 million for the amount of accreted
interest on such indebtedness, and resulting in no federal tax liability for
the Company in 1996. At December 31, 1996, the Company had a regular net
operating loss carryforward of approximately $164.0 million. This net
operating loss carryforward resulted principally from both the deduction of
the accreted interest on the Discount Debentures refinanced in 1996 and 1995
and significant tax depreciation deductions from the acquisition of AN Can.
Upon completion of the Refinancing, after giving effect to the deduction of
accreted interest on the remaining Discount Debentures, the Company estimates
it will have a regular net operating loss carryforward of approximately $185.0
million. Subject to certain limitations, this net operating loss carryforward
will be available to offset taxable income that the Company expects to
generate in 1997 and in the future until such time as the regular net
operating loss carryforward is fully utilized.
Effective in 1993, however, the Company became subject to alternative
minimum tax ("AMT") for federal income tax purposes. Due to the availability
of an AMT net operating loss carryforward, the Company incurred an AMT
liability at the rate of 2% of AMT taxable income for 1993 through 1995.
Beginning in 1996, the Company would have fully utilized its AMT net operating
loss carryforwards and would have incurred an AMT liability at the statutory
rate of 20% of AMT taxable income if it had not realized the benefit of the
deduction of accreted interest on the retired Discount Debentures. As a result
of this deduction, the Company will have reduced its federal tax liability by
approximately $20.7 million and state tax liability by approximately $5.2
million for 1996 and 1997. Management expects that the Company will fully
utilize the benefit of this deduction in late 1997 or early 1998 at which time
it will then become subject to AMT at the statutory rate.
BOOK ACCOUNTING IMPLICATIONS. SFAS No. 109 of the Financial Accounting
Standards Board ("FASB") requires that a valuation allowance be recorded when
it is more likely than not that some portion or all of the future tax benefits
arising from the deferred tax assets will not be realized. Because the Company
incurred losses from its inception through 1995, SFAS No. 109 required the
Company to record a valuation allowance. Although the Company reported net
income for 1996, it has not yet met the criteria under SFAS No. 109 to release
any of its valuation allowance. The ultimate realization of all or part of the
Company's deferred income tax assets depends on the Company's ability to
generate sufficient taxable income in the future. When preparing future period
interim and annual financial statements, the Company will evaluate its
strategic plans, in light of evolving business conditions, and the valuation
allowance will be adjusted based on such evaluation. The Company expects that
it will meet the realization criteria of SFAS No. 109 in 1997, and that it
will release a portion of its deferred tax asset valuation allowance,
resulting in the recognition of a tax benefit. After the expected release of a
portion of its valuation allowance in 1997, the Company expects to provide for
federal income taxes at the statutory rate.
The Company's income tax rate varied from the U.S. statutory rate in 1996
due to the utilization of net operating loss carryforwards. In 1995 and 1994,
the Company's income tax rate varied from the U.S. statutory rate due to
losses which resulted in temporary differences between book and taxable income
for which recognition of a deferred tax asset was not considered appropriate
at the time. In accordance with SFAS No. 109, the Company has provided a
provision for income taxes based upon
28
<PAGE>
federal, state and foreign taxes currently payable. See Note 14 to the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented, and should be read in conjunction with the historical and pro forma
financial information and related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Metal container business................... 84.6% 80.1 % 76.3 %
Plastic container business................. 15.4 19.9 23.7
------ ------ ------
Total.................................... 100.0 100.0 100.0
Cost of goods sold........................... 87.0 88.1 86.9
------ ------ ------
Gross profit................................. 13.0 11.9 13.1
Selling, general and administrative
expenses.................................... 4.2 4.3 4.4
Reduction in carrying value of assets........ -- 1.3 1.9
------ ------ ------
Income from operations....................... 8.8 6.3 6.8
Interest expense and other related financing
costs....................................... 6.4 7.3 7.6
------ ------ ------
Income (loss) before income taxes............ 2.4 (1.0) (0.8)
Income tax provision......................... 0.2 0.5 0.7
------ ------ ------
Income (loss) before extraordinary charges... 2.2 (1.5) (1.5)
Extraordinary charges relating to early
extinguishment of debt...................... (0.2) (0.5) --
------ ------ ------
Net income (loss) before preferred stock
dividend requirement........................ 2.0 (2.0) (1.5)
Preferred stock dividend requirement......... (0.2) -- --
------ ------ ------
Net income (loss) applicable to common
stockholders................................ 1.8% (2.0)% (1.5)%
====== ====== ======
Pro forma net income......................... 2.6%
======
</TABLE>
Summary historical results for the Company's two business segments, metal
and plastic containers, for the calendar years ended December 31, 1996, 1995
and 1994 and summary pro forma results for these business segments for the
calendar year ended December 31, 1995 (after giving effect to the acquisition
of AN Can as of the beginning of such period) are provided below.
The unaudited pro forma financial data includes the historical results of
the Company and AN Can and reflects the effect of purchase accounting
adjustments based on appraisals and valuations, the financing of the
acquisition of AN Can, the refinancing of certain of the Company's debt
obligations, and certain other adjustments, as if these events occurred as of
the beginning of the periods presented. The unaudited pro forma financial data
do not purport to represent what the Company's financial position or results
of operations would actually have been had these transactions in fact occurred
at the beginning of the periods indicated, or to project the Company's
financial position or results of operations for any future date or period. The
unaudited pro forma financial data do not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration of
AN Can with Containers' existing can manufacturing operations and benefits the
Company may
29
<PAGE>
realize as a result of its planned rationalization of plant operations. The
pro forma information presented should be read in conjunction with the
historical results of operations of the Company included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
HISTORICAL PRO FORMA
-------------------------- -------------
1996 1995 1994 1995
-------- -------- ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Metal container business........... $1,189.3 $ 882.3 $657.1 $1,184.8
Plastic container business......... 216.4 219.6 204.3 219.6
-------- -------- ------ --------
Consolidated..................... $1,405.7 $1,101.9 $861.4 $1,404.4
======== ======== ====== ========
Income from operations:
Metal container business........... $ 106.1 $ 72.9 $ 67.0 $ 95.7
Plastic container business......... 18.4 13.2 9.4 13.2
Reduction in asset value(1)........ -- (14.7) (16.7) (14.7)
Corporate expense.................. (1.2) (1.6) (1.3) (1.5)
-------- -------- ------ --------
Consolidated..................... $ 123.3 $ 69.8 $ 58.4 $ 92.7
======== ======== ====== ========
</TABLE>
- --------
(1) Included in the historical and pro forma income from operations of the
Company in 1995 are charges incurred for the reduction of the carrying
value of certain underutilized equipment to net realizable value of $14.7
million allocable to the metal container business. Included in the
historical income from operations of the Company in 1994 are charges
incurred for the reduction of the carrying value of certain underutilized
and obsolete equipment to net realizable value of $16.7 million in 1994,
of which $7.2 million was allocable to the metal container business and
$9.5 million to the plastic container business.
HISTORICAL YEAR ENDED DECEMBER 31, 1996 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1995
NET SALES. Consolidated net sales increased $303.8 million, or 27.6%, to
$1.4 billion for the year ended December 31, 1996, as compared to net sales of
$1.1 billion for the same period in 1995. This increase resulted predominantly
from net sales generated by the former AN Can operations.
Net sales for the metal container business (including net sales of its
specialty business of $90.7 million) were $1,189.3 million for the year ended
December 31, 1996, an increase of $307.0 million from net sales of $882.3
million for the same period in 1995. Net sales of metal cans of $1,098.6
million for the year ended December 31, 1996 were $253.1 million greater than
net sales of metal cans of $845.5 million for the same period in 1995. This
increase resulted from the inclusion of a full year of sales generated from
the former AN Can operations, including net sales of approximately $236.0
million during the first seven months of 1996, and increased unit sales due to
a better vegetable pack harvest in 1996 as compared to 1995, offset to a
limited extent by volume losses with certain customers.
Sales of specialty items included in the metal container segment increased
$53.9 million to $90.7 million during the year ended December 31, 1996 as
compared to the same period in 1995, due predominantly to additional sales
generated by the former AN Can operations.
Net sales for the plastic container business of $216.4 million during the
year ended December 31, 1996 decreased $3.2 million from net sales of $219.6
million for the same period in 1995. Despite an increase in unit sales, net
sales of plastic containers declined as a result of the pass through of lower
resin costs.
30
<PAGE>
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 87.0% ($1.2 billion) for the year ended December 31, 1996, a
decrease of 1.1 percentage points as compared to 88.1% ($970.5 million) for
the same period in 1995. The decrease in cost of goods sold as a percentage of
net sales was principally attributable to synergies realized from the AN Can
acquisition, improved operating efficiencies due to can plant consolidations
as well as the improved manufacturing performance by the plastic container
business, offset, in part, by the higher cost base of the former AN Can
operations and the realization of higher per unit costs due to the Company's
one-time planned reduction in finished goods inventory. The additional
production capacity provided by AN Can has enabled the Company to produce its
product closer to the time of sale and, as a result, during 1996 the Company
reduced the amount of finished goods that it carries.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of consolidated net sales decreased
0.1 percentage points to 4.2% ($58.8 million) for the year ended December 31,
1996, as compared to 4.3% ($46.9 million) for the year ended December 31,
1995. This decrease in selling, general and administrative expenses as a
percentage of net sales reflects the expected lower administrative expenses
realized as a result of the integration of the administrative functions of AN
Can with the Company, despite the incurrence of certain redundant costs,
estimated to be $3.5 million, associated with the integration of the AN Can
operations. In 1997, the Company expects to eliminate all of these redundant
costs as it completes its integration of the administrative functions of AN
Can with the Company.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales increased 2.5 percentage points to 8.8% ($123.3
million) for the year ended December 31, 1996, as compared with 6.3% ($69.8
million) for the same period in the prior year. Included in income from
operations for 1995 was a charge of $14.7 million for the write-off of certain
underutilized assets. Without giving effect to this charge, income from
operations as a percentage of consolidated net sales would have increased 1.1
percentage points in 1996 as compared to 1995, primarily as a result of the
aforementioned improvement in gross margin.
Income from operations as a percentage of net sales for the metal container
business improved to 8.9% ($106.1 million) for the year ended December 31,
1996, from 8.3% ($72.9 million) (without giving effect to the charge of $14.7
million to adjust the carrying value of certain assets) for the same period in
1995. This increase in income from operations as a percentage of net sales for
the metal container business was principally attributable to synergies
resulting from the acquisition of AN Can, improved operating efficiencies due
to plant consolidations and the benefit of cost reductions provided by the
Company's capital investment program, offset, in part, by the higher cost base
of the AN Can operations and the negative impact of the Company's one-time
planned reduction in the amount of finished goods inventory.
Income from operations as a percentage of net sales for the plastic
container business improved to 8.5% ($18.4 million) for the year ended
December 31, 1996, from 6.0% ($13.2 million) for the same period in 1995. The
improvement in the operating performance of the plastic container business was
principally attributable to increased production volumes as well as the
benefits realized through capital investment and improved production planning
and scheduling efficiencies.
INTEREST EXPENSE. Interest expense increased $8.7 million to $89.4 million
for the year ended December 31, 1996, principally as a result of increased
borrowings to finance the acquisition of AN Can in August 1995, offset, in
part, by the benefit realized from the redemption of $154.4 million of the
Discount Debentures with lower cost bank borrowings (additional B term loans
of $125.0 million and working capital loans of $17.4 million) and with $12.0
million of the proceeds from the Preferred Stock Sale, and by lower average
bank borrowing rates.
31
<PAGE>
Upon completion of the Refinancing, the Company will have refinanced all of
the Discount Debentures with lower cost borrowings and proceeds from the
Preferred Stock Sale and the Offering. Since a substantial portion of the
Discount Debentures were refinanced in the third quarter of 1996, the Company
expects that its interest expense will decline significantly in the first and
second quarters of 1997 as compared to the same quarters in the prior year.
INCOME TAXES. The provisions for income taxes for the years ended December
31, 1996 and 1995 provide for federal, state and foreign taxes currently
payable. The decrease in the provision for income taxes of $1.8 million for
the year ended December 31, 1996 as compared to the same period in 1995
reflects the benefit of the current cash tax savings realized from the
deduction of accreted interest on the retired Discount Debentures.
NET INCOME. As a result of the items discussed above, net income of $30.6
million (before extraordinary charges of $2.2 million and the preferred stock
dividend requirement of $3.0 million) increased $46.6 million for the year
ended December 31, 1996, as compared to a net loss of $16.0 million (before
extraordinary charges, net of taxes, of $5.8 million) for the year ended
December 31, 1995.
During 1996, the Company incurred an extraordinary charge of $2.2 million
for the write-off of unamortized debt costs associated with the early
redemption of Discount Debentures. In 1995, the Company incurred an
extraordinary charge of $5.8 million, net of taxes, for the write-off of
unamortized debt costs related to the refinancing of its secured debt
facilities to fund the AN Can acquisition, the repurchase of a portion of the
Discount Debentures, and premiums paid on the repurchase of a portion of such
Discount Debentures.
HISTORICAL YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995
NET SALES. Consolidated net sales for the year ended December 31, 1996 of
$1.4 billion were comparable to pro forma consolidated net sales for the same
period in 1995. Increased unit sales of metal containers due to a better
vegetable pack harvest in 1996 as compared to 1995 offset the loss of an AN
Can customer whose product line was acquired by a company that manufactured
its own cans and volume losses with certain other customers. Although the
plastic container business had increased unit volume in 1996, net sales
declined $3.2 million due to the pass through of lower resin costs.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales for the year ended December 31, 1996 increased 1.2
percentage points to 8.8% ($123.3 million), as compared to pro forma income
from operations as a percentage of pro forma consolidated net sales of 7.6%
($107.4 million) (without giving effect to the charge to adjust the carrying
value of certain assets of $14.7 million) for the year ended December 31,
1995. The increase in income from operations for the year ended December 31,
1996 as compared to pro forma income from operations for the same period in
1995 was attributable to more efficient production planning, the realization
of can manufacturing synergies resulting from the acquisition of AN Can, the
benefits realized from plant consolidations and capital investments, and the
improved operating performance of the plastic container business, offset, in
part, by redundant costs associated with the AN Can operations and the
negative impact of the Company's one-time planned reduction of the amount of
finished goods inventory.
HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Consolidated net sales increased $240.5 million, or 27.9%, to
$1.1 billion for the year ended December 31, 1995, as compared to net sales of
$861.4 million for the same period in 1994.
32
<PAGE>
This increase resulted from net sales of $264.3 million generated by AN Can
since its acquisition in August 1995 and a $15.3 million increase in sales of
plastic containers offset, in part, by a decline in sales of metal containers
to Silgan's existing customer base of $39.1 million.
Net sales for the metal container business (including its specialty
business) were $882.3 million for the year ended December 31, 1995, an
increase of $225.2 million from net sales of $657.1 million for the same
period in 1994. Excluding net sales of metal cans of $236.0 million generated
by AN Can since its acquisition, net sales of metal cans to the Company's
customers were $609.5 million during the year ended December 31, 1995, as
compared to $647.5 million for the same period in 1994. Net sales to the
Company's customers in 1995 decreased principally due to lower unit volume
resulting from the below normal 1995 vegetable pack offset, in part, by
slightly higher sales prices due to the pass through of raw material cost
increases.
Sales of specialty items included in the metal container segment increased
$27.2 million to $36.8 million during the year ended December 31, 1995 as
compared to the same period in 1994, due to the acquisition of AN Can which
generated sales of $28.3 million of specialty items since its acquisition.
Net sales for the plastic container business of $219.6 million during the
year ended December 31, 1995 increased $15.3 million over net sales of $204.3
million for the same period in 1994. This increase was attributable to
increased unit sales for new customer products and to higher average sales
prices due to the pass through of higher average resin costs.
COST OF GOODS SOLD. Cost of goods sold as a percentage of consolidated net
sales was 88.1% ($970.5 million) for the year ended December 31, 1995, an
increase of 1.2 percentage points as compared to 86.9% ($748.3 million) for
the same period in 1994. The increase in cost of goods sold as a percentage of
net sales principally resulted from increased per unit manufacturing costs
resulting from reduced can production volumes, lower margins realized on
certain products due to competitive market conditions and lower margins on
sales made by AN Can, offset, in part, by improved manufacturing operating
efficiencies due to plant consolidations and lower depreciation expense due to
a change in the estimated useful life of certain equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of consolidated net sales declined 0.1
percentage points to 4.3% ($46.9 million) for the year ended December 31, 1995
as compared to 4.4% ($38.0 million) for the year ended December 31, 1994. The
decrease in selling, general and administrative expenses as a percentage of
net sales resulted from the Company's continued control of these expenses in
respect of the Company's existing business, offset partially by a temporarily
higher level of expenses incurred during the integration of AN Can. The
Company expects that its selling, general and administration costs as a
percentage of sales will decline in 1997 after it completes the integration of
the administrative functions of its metal container business.
INCOME FROM OPERATIONS. Income from operations as a percentage of
consolidated net sales was 6.3% ($69.8 million) for the year ended December
31, 1995, as compared with 6.8% ($58.4 million) for the same period in 1994.
Included in income from operations were charges for the write-off of certain
underutilized assets of $14.7 million and $16.7 million in 1995 and 1994,
respectively. Without giving effect to these charges, income from operations
as a percentage of consolidated net sales would have declined 1.0% in 1995,
primarily as a result of the aforementioned decline in gross margin.
Income from operations as a percentage of net sales for the metal container
business (without giving effect to charges of $14.7 million and $7.2 million
in 1995 and 1994, respectively, to adjust the carrying value of certain
assets) was 8.3% ($72.9 million) for the year ended December 31, 1995, as
compared to 10.2% ($67.0 million) for the same period in the prior year. The
decrease in income from
33
<PAGE>
operations as a percentage of net sales principally resulted from higher per
unit manufacturing costs realized on lower production volume, lower margins
realized on certain products due to competitive market conditions,
inefficiencies caused by work stoppages at two of the Company's California
facilities, and lower margins realized on sales made by AN Can, offset, in
part, by operating efficiencies due to plant consolidations.
Income from operations as a percentage of net sales attributable to the
plastic container business (without giving effect to the charge of $9.5
million in 1994 to adjust the carrying value of certain assets) was 6.0%
($13.2 million) for the year ended December 31, 1995, as compared to 4.6%
($9.4 million) for the same period in 1994. The operating performance of the
plastic container business improved as a result of production planning and
scheduling efficiencies and benefits realized from capital investment, offset,
in part, by increased unit production costs incurred as a result of an
inventory reduction program.
INTEREST EXPENSE. Interest expense, including amortization of debt financing
costs, increased by approximately $14.9 million to $80.7 million for the year
ended December 31, 1995, principally as a result of increased borrowings to
finance the acquisition of AN Can and to fund higher working capital needs as
a result of the increased seasonality of the Company's metal container
business, and higher average interest rates. Accretion of interest on the
Discount Debentures in 1995 approximated the prior year's accretion due to the
repurchase of $61.7 million principal amount at maturity of Discount
Debentures in the third quarter of 1995.
INCOME TAXES. The provisions for income taxes for the years ended December
31, 1995 and 1994 were comprised of federal, state and foreign income taxes
currently payable. The decrease in the provision for income taxes in 1995
reflects a decrease in federal income taxes currently payable due to the
deductibility of accrued interest on the Discount Debentures that were
repurchased in 1995.
NET INCOME. As a result of the items discussed above, net loss before the
extraordinary charge for the year ended December 31, 1995 was $16.0 million,
as compared to a net loss of $13.0 million for the year ended December 31,
1994.
As a result of the early extinguishment of amounts owed under its secured
debt facilities, the Company incurred an extraordinary charge of $5.8 million
(net of tax of $2.6 million) in 1995.
QUARTERLY RESULTS OF OPERATIONS
The Company's business is affected by seasonal variations as a result of the
timing of the harvest. Accordingly, the Company experiences higher unit sales
volume in the second and third quarters and, as a result, the Company has
historically generated a disproportionate amount of its annual income from
operations during these quarters. See "Risk Factors--Dependence on
Agricultural Harvest; Seasonality".
34
<PAGE>
The following table presents certain of the Company's unaudited consolidated
quarterly financial data for the years 1996, 1995 and 1994.
<TABLE>
<CAPTION>
1996
-----------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales....................................... $279.9 $327.1 $473.6 $325.1
Gross profit.................................... 36.5 48.7 58.8 38.1
Income from operations.......................... 23.7 34.3 43.6 21.7
Interest expense................................ 22.6 23.3 22.4 21.1
Income before extraordinary charges and pre-
ferred
stock dividend requirements.................... 0.1 9.5 20.7 0.3
Net income (loss) available to common stockhold-
ers............................................ 0.1 9.5 17.3 (1.5)
<CAPTION>
1995
-----------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales....................................... $203.3 $201.7 $406.5 $290.4
Gross profit.................................... 29.0 29.8 41.7 30.9
Income from operations.......................... 18.8 22.3 28.3 0.4
Interest expense................................ 17.3 17.5 22.9 23.0
Income (loss) before extraordinary charges and
preferred
stock dividend requirements.................... (1.4) 3.5 3.7 (21.8)
Net income (loss) available to common stockhold-
ers............................................ (1.4) 3.5 (2.1) (21.8)
<CAPTION>
1994
-----------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales....................................... $186.2 $201.0 $286.0 $188.2
Gross profit.................................... 22.7 28.3 36.4 25.7
Income from operations.......................... 14.0 18.7 27.2 (1.5)
Interest expense................................ 15.6 16.3 16.8 17.1
Income (loss) before extraordinary charges and
preferred
stock dividend requirements.................... (2.2) 1.5 9.0 (21.3)
Net income (loss) available to common stockhold-
ers............................................ (2.2) 1.5 9.0 (21.3)
</TABLE>
The Company's income from operations includes charges for the write-down of
the carrying value of certain underutilized and obsolete equipment to net
realizable value of $14.7 million and $16.7 million in the fourth quarters of
1995 and 1994, respectively. Net income (loss) includes extraordinary charges
for debt refinancing costs of $2.2 million incurred in the third quarter of
1996 and $5.8 million, net of taxes, incurred in the third quarter of 1995.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity requirements arise primarily from its obligations
under the indebtedness incurred in connection with its acquisitions and the
refinancing of such indebtedness, capital investment in new and existing
equipment and the funding of the Company's seasonal working capital needs.
Historically, the Company has met these liquidity requirements through cash
flow generated from operating activities and working capital borrowings.
On July 22, 1996, the Company completed the Preferred Stock Sale. With net
proceeds of $47.8 million from the Preferred Stock Sale, the Company purchased
the Holdings Class B Stock held by Mellon for $35.8 million pursuant to its
right to purchase such stock for such amount under the Amended and Restated
Organization Agreement dated as of December 21, 1993 among the Company and its
stockholders and, on August 26, 1996, redeemed $12.0 million principal amount
of Discount Debentures.
35
<PAGE>
On August 1, 1995, Silgan, Containers and Plastics entered into the Silgan
Credit Agreement (which originally provided Silgan with $225.0 million of A
term loans and $225.0 million of B term loans and provided Containers and
Plastics with a commitment of $225.0 million for working capital loans) to
finance the acquisition by Containers of AN Can, to refinance and repay in
full all amounts owing under the Company's previous credit agreement and under
Silgan's Senior Secured Floating Rate Notes due 1997. With borrowings of
$200.0 million under the Silgan Credit Agreement (as amended in May 1996 to
include an additional $125.0 million of B term loans), Holdings repurchased
and redeemed an aggregate of $204.1 million principal amount at maturity of
Discount Debentures.
The Silgan Credit Agreement also provided the Company with improved
financial flexibility by (i) enabling Silgan to transfer funds to Holdings for
payment by Holdings of cash dividends on the Exchangeable Preferred Stock (or,
if issued, cash interest on the Exchange Debentures), (ii) extending the
maturity of the Company's secured debt facilities until December 31, 2000,
(iii) lowering the interest rate spread on its floating rate borrowings by
1/2%, as well as providing for further interest rate reductions in the event
the Company attains certain financial targets, and (iv) lowering the Company's
average cost of indebtedness by permitting Holdings to repurchase or redeem
Discount Debentures.
Upon completion of the Refinancing, the Company will have retired all of the
Discount Debentures. By refinancing all of the Discount Debentures with
borrowings under the Silgan Credit Agreement and proceeds from the Preferred
Stock Sale and from the Offering, the Company will have lowered its average
cost of indebtedness, will realize approximately $19.5 million of annual
current cash interest savings (excluding non-cash interest on the Exchange
Debentures), and will realize approximately $25.9 million of current cash tax
savings as a result of the deduction by the Company of the accreted interest
on the retired Discount Debentures. In addition, as a result of the Company's
net operating loss carryforwards, the Company did not have any federal tax
liability in 1996, and expects to incur minimal federal tax liability in 1997.
For several years thereafter, the Company expects to incur federal tax
liability at the alternative minimum tax rates then in effect. See "--
Overview--Income Tax Considerations".
During 1996, cash generated from operations of $125.2 million, borrowings of
$125.0 million of B term loans under the Silgan Credit Agreement, net proceeds
of $47.8 million from the Preferred Stock Sale, net borrowings of working
capital loans under the Silgan Credit Agreement of $20.7 million, proceeds of
$1.6 million from the sale of assets and $1.1 million of cash balances were
used to fund capital expenditures of $56.9 million, the purchase of Finger
Lakes for $29.9 million and the purchase of ANC's St. Louis facility for $13.1
million, the redemption of $154.4 million of Discount Debentures, the
repayment of $29.5 million of term loans under the Silgan Credit Agreement,
the payment of $1.8 million of financing costs associated with the borrowing
of additional B term loans under the Silgan Credit Agreement, and the purchase
of Holdings Class B Stock held by Mellon for $35.8 million.
The Company's Adjusted EBITDA for the year ended December 31, 1996 in
comparison to 1995 increased by $53.6 million to $186.0 million. The increase
in Adjusted EBITDA resulted primarily from increased cash earnings generated
by both the metal container business (including earnings from the AN Can
operations) and the plastic container business. Although the Adjusted EBITDA
of the Company was higher in 1996 as compared to 1995 and the Company reduced
the amount of finished goods inventory in 1996, cash flow from operations in
1996 would have remained constant with 1995 (assuming AN Can had been acquired
at December 31, 1995 rather than at its seasonal peak). The Company incurred
greater cash interest expense in 1996 due to the refinancings of Discount
Debentures (for which no cash interest was required through June 15, 1996)
with bank borrowings, and in 1995 the Company adopted similar year-end vendor
payment terms to those of AN Can.
During 1995, cash generated from operations of $209.6 million (including
cash of $112.0 million generated by AN Can during the five month period from
its acquisition on August 1, 1995), proceeds of $3.5 million realized from the
sale of assets and a decrease of $0.6 million in cash balances were
36
<PAGE>
used to repay $142.8 million of working capital borrowings used to fund the
acquisition of AN Can, fund capital expenditures of $51.9 million, repay $9.7
million of term loans and $5.5 million of working capital loans, and make
payments to former shareholders of $3.8 million in full settlement of
outstanding litigation. The Company's Adjusted EBITDA for the year ended
December 31, 1995 as compared to 1994 increased by $17.9 million to $132.4
million. The increase in Adjusted EBITDA reflected the generation of
additional cash flow from AN Can since its acquisition on August 1, 1995,
partially offset by a decline in the cash earnings of the Company's existing
business principally as a result of lower unit volume due to the below normal
1995 vegetable pack.
For the year ended December 31, 1995, the operating cash flow of the Company
increased significantly from the prior year due to the generation of cash by
AN Can since its acquisition on August 1, 1995 and the adoption by Silgan of
similar year-end vendor payment terms to those of AN Can. At December 31,
1995, the trade receivable balance of AN Can was $44.2 million ($90.2 million
on August 1, 1995), the inventory balance was $98.9 million ($137.9 million on
August 1, 1995), and the trade payables balance was $58.2 million ($64.2
million on August 1, 1995).
Because the Company sells metal containers used in fruit and vegetable pack
processing, its sales are seasonal. As a result, a significant portion of the
Company's revenues are generated in the first nine months of the year. As is
common in the packaging industry, the Company must access working capital to
build inventory and then carry accounts receivable for some customers beyond
the end of the summer and fall packing season. Seasonal accounts are generally
settled by year end. The acquisition of AN Can increased the Company's
seasonal metal containers business. The Company's average outstanding trade
receivables increased in 1996 as compared to 1995 due to the acquisition of AN
Can which had more seasonal sales than the Company. As a result the Company
increased the amount of working capital loans available to it under its credit
facility to $225.0 million. Due to the Company's seasonal requirements, the
Company expects to incur short term indebtedness to finance its working
capital requirements. Approximately $182.5 million of the working capital
revolver under the Silgan Credit Agreement, including letters of credit, was
utilized at its peak in September 1996.
As of December 31, 1996, the outstanding principal amount of working capital
loans was $27.8 million and, subject to a borrowing base limitation and taking
into account outstanding letters of credit, the unused portion of working
capital commitments at such date was $190.0 million.
In addition to its operating cash needs, the Company believes its cash
requirements over the next several years consist primarily of (i) annual
capital expenditures of $50.0 to $60.0 million, (ii) scheduled principal
amortization payments of term loans under the Silgan Credit Agreement (without
giving effect to the use of any of the net proceeds from the Offering to
prepay bank terms loans) of $38.5 million, $53.4 million, $53.4 million,
$126.1 million and $155.9 million over the next five years, respectively,
(iii) expenditures of approximately $30.0 million over the next three years
associated with plant rationalizations, employee severance and administrative
workforce reductions, other plant exit costs and employee relocation costs of
AN Can, (iv) the Company's interest requirements, including interest on
working capital loans, the principal amount of which will vary depending upon
seasonal requirements, the bank term loans, most of which bear fluctuating
rates of interest, and the 11 3/4% Notes, and (v) payments of approximately
$5.0 million (based on the Company's current estimate of its 1997 net income)
for federal and state tax liabilities in 1997. Beginning in 1998, the Company
expects to incur federal tax liability at the alternative minimum tax rates
then in effect. See "--Overview--Income Tax Considerations".
Management believes that cash generated by operations and funds from working
capital borrowings under the Silgan Credit Agreement will be sufficient to
meet the Company's expected operating needs, planned capital expenditures,
debt service and tax obligations for the foreseeable future.
37
<PAGE>
The Silgan Credit Agreement, the indenture with respect to the 11 3/4% Notes
(the "11 3/4% Notes Indenture"), the Exchangeable Preferred Stock and, when
issued, the Exchange Debentures each contain restrictive covenants that, among
other things, limit the Company's ability to incur debt, sell assets and
engage in certain transactions. Management does not expect these limitations
to have a material effect on the Company's business or results of operations.
The Company is in compliance with all financial and operating covenants
contained in such financing agreements and believes that it will continue to
be in compliance during 1997 with all such covenants.
EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS
Historically, inflation has not had a material effect on the Company, other
than to increase its cost of borrowing. In general, the Company has been able
to increase the sales prices of its products to reflect any increases in the
prices of raw materials. See "--Overview--Net Sales--Long-term Contracts".
Because the Company has indebtedness which bears interest at floating rates,
the Company's financial results will be sensitive to changes in prevailing
market rates of interest. As of December 31, 1996, on a pro forma basis after
giving effect to the Refinancing and including working capital loans of $27.8
million, the Company had $748.6 million of indebtedness outstanding, of which
$360.6 million bore interest at floating rates, taking into account interest
rate swap agreements entered into by the Company to mitigate the effect of
interest rate fluctuations. Under these agreements, floating rate interest was
exchanged for fixed rates of interest ranging from 5.6% to 6.2% plus the
Company's incremental margin, which currently ranges from 2.5% to 3.0%. The
notional principal amounts of these agreements totaled $200.0 million,
including interest rate swap agreements entered into during the fourth quarter
of 1996 with a notional amount of $100.0 million, and mature in the year 1999.
Depending upon market conditions, the Company may enter into additional
interest rate swap or hedge agreements (with counterparties that, in the
Company's judgment, have sufficient creditworthiness) to hedge its exposure
against interest rate volatility.
NEW ACCOUNTING PRONOUNCEMENTS
LONG-LIVED ASSET IMPAIRMENT
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," in the first
quarter of 1996. Under SFAS No. 121, impairment losses will be recognized when
events or changes in circumstances indicate that the undiscounted cash flows
generated by assets are less than the carrying value of such assets.
Impairment losses are then measured by comparing the fair value of assets to
their carrying amount. There were no impairment losses recognized during 1996
as a result of the adoption of SFAS No. 121. See Note 2 to the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant using
an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or follow the current accounting methods as
prescribed under APB No. 25. The Company has not elected to adopt SFAS No. 123
and continues to recognize compensation expense in accordance with APB No. 25.
In addition, the Company is required to include in its 1996 year end financial
statements pro forma information regarding compensation expense recognizable
under SFAS No. 123. See Note 17 to the Consolidated Financial Statements of
the Company included elsewhere in this Prospectus.
38
<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 for the twelve months ended October 31, 1996 of 35% in
the United States, and is a leading manufacturer of plastic containers in
North America for personal care products. The Company's strategy is to
increase shareholder value by growing its existing businesses and expanding
into other segments by applying its expertise in acquiring, financing,
integrating and efficiently operating consumer goods packaging businesses.
The Company was founded in 1987 by its current Co-Chief Executive Officers.
Since its inception, the Company has acquired and successfully integrated ten
businesses, including the recent acquisitions of AN Can in August 1995 for a
purchase price of approximately $362.0 million (including net working capital
of approximately $156.0 million) and DM Can in December 1993 for a purchase
price of approximately $73.3 million (including net working capital of
approximately $21.9 million). In addition, on October 9, 1996 the Company
completed its acquisition of Finger Lakes, the metal food container
manufacturing subsidiary of Curtice Burns. See "Prospectus Summary--Recent
Developments". The Company's strategy has enabled it to rapidly increase its
net sales and income from operations. The Company's net sales have increased
from $630.0 million in 1992 to $1,405.7 million in 1996, representing a
compound annual growth rate of approximately 22%. During this period, income
from operations increased from $42.2 million in 1992 to $123.3 million in
1996, representing a compound annual growth rate of approximately 31%, while
the Company's income from operations as a percentage of net sales increased
2.1 percentage points from 6.7% to 8.8% over the same period.
The Company's philosophy, which has contributed to its strong performance
since inception, is based on: (i) a significant equity ownership by management
and an entrepreneurial approach to business, (ii) its low cost producer
position and (iii) its long-term customer relationships. The Company's senior
management has a significant ownership interest in the Company, which fosters
an entrepreneurial management style and places a primary focus on creating
shareholder value. The Company has achieved a low cost producer status through
(i) the maintenance of a flat, efficient organizational structure, resulting
in low selling, general and administrative expenses as a percentage of total
net sales, (ii) purchasing economies, (iii) significant capital investments
that have generated manufacturing and production efficiencies, (iv) plant
consolidations and rationalizations and (v) the proximity of its plants to its
customers. The Company's philosophy has also been to develop long-term
customer relationships by acting in partnership with its customers, providing
reliable quality and service and utilizing its low cost producer position.
This philosophy has resulted in numerous long-term supply contracts, high
retention of customers' business and recognition from its customers, as
demonstrated by many quality and service awards.
39
<PAGE>
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
40
<PAGE>
Corporation and Del Monte reflect this trend. As a result of its growth
strategy, the Company has more than tripled its overall share of the U.S.
metal food container market from approximately 10% in 1987 to approximately
35% for the twelve months ended October 31, 1996. The Company expects this
consolidation trend to continue, as evidenced by its October 9, 1996
acquisition of Finger Lakes. See "Prospectus Summary--Recent Developments".
The Company's plastic container business has also increased its market
position primarily through strategic acquisitions, from a sales base of $88.8
million in 1987 to $216.4 million in 1996. The plastic container segment of
the consumer goods packaging industry is highly fragmented, and management
intends to pursue consolidation opportunities in that segment.
The Company also expects to generate internal growth due to its
participation in certain higher growth segments of the consumer goods
packaging market. For example, due to increasing consumer preference for
plastic as a substitute for glass, the Company is aggressively pursuing
opportunities for its custom designed PET and HDPE containers. These
opportunities include producing PET containers for regional bottled water
companies, and HDPE and PET containers for products such as shampoo,
mouthwash, salad dressing and liquor. The Company also believes that there
will be opportunities to expand its specialty business, which generated net
sales of $90.7 million in 1996. Specialty products manufactured by the Company
include metal closures for vacuum sealed glass containers, its licensed Omni
plastic container, a plastic, microwaveable bowl with an easy-open metal end,
and paper containers.
EXPAND INTO COMPLEMENTARY BUSINESS LINES THROUGH ACQUISITIONS
Management believes that it can successfully apply its acquisition and
operating expertise to new segments of the consumer goods packaging industry.
For example, with the AN Can acquisition, the Company expanded its specialty
business into metal caps and closures and its licensed Omni plastic container.
Management believes that certain trends in and characteristics of the North
American consumer goods packaging industry will continue to generate
attractive acquisition opportunities in complementary business lines. The
Company is focused on the North American consumer goods packaging industry,
which represents a significant part of the $95 billion North American
packaging market (based on estimated total sales in 1994). Importantly, the
industry is also fragmented, with numerous segments and multiple participants
in each of them. In addition, many of these segments are experiencing
consolidation.
ENHANCE PROFITABILITY OF ACQUIRED COMPANIES
The Company seeks to acquire businesses at reasonable cash flow multiples
and to enhance profitability by rationalizing plants, by improving
manufacturing and production efficiencies and through purchasing economies.
The Company rationalizes plants by closing or downsizing certain plants and by
consolidating production capacity within other plants. Since 1991, the Company
has reduced costs by closing twelve smaller, higher cost facilities. Since its
inception in 1987, the Company has invested approximately $272.3 million to
upgrade acquired manufacturing facilities, aimed at generating manufacturing
and production efficiencies and achieving a low cost producer position. As a
result, the Company's acquisitions have generally been accretive to earnings
and have produced high returns on assets. The AN Can acquisition illustrates
the ability of the Company to enhance the profitability of acquired
businesses. The Company estimates that it has reduced AN Can's operating costs
from its historical 1994 level by at least $21.0 million, through selling and
administrative cost reductions, improved manufacturing and production
efficiencies and purchasing economies. The Company expects to further reduce
AN Can's operating costs over the next few years by an aggregate of
approximately $15.0 million (approximately half of which is expected to be
realized in 1997) through the elimination of transitional administrative
costs, the realization of additional manufacturing and production synergies
with its metal container business and plant rationalizations.
BUSINESS SEGMENTS
The Company operates through two operating companies, Containers and
Plastics.
41
<PAGE>
CONTAINERS
For 1996, Containers had net sales of $1,189.3 million (85% of the Company's
net sales) and income from operations of $106.1 million (85% of the Company's
income from operations) (without giving effect to corporate expense).
Containers has realized compound annual unit sales growth in excess of 24%
since 1992, despite the relative maturity of the U.S. food can industry.
Containers is engaged in the manufacture and sale of steel and aluminum
containers that are used primarily by processors and packagers for human and
pet food. Containers manufactures metal containers for vegetables, fruit, pet
food, meat, tomato based products, coffee, soup, seafood and evaporated milk.
The Company estimates that approximately 80% of Containers' projected sales in
1997 will be pursuant to long-term supply arrangements. Containers has the
Nestle Supply Agreements with Nestle pursuant to which Containers supplies a
majority of Nestle's metal container requirements, and the DM Supply Agreement
with Del Monte pursuant to which Containers supplies substantially all of Del
Monte's metal container requirements. In addition to Nestle and Del Monte,
Containers has multi-year supply arrangements with several other major food
processors.
Containers also manufactures certain specialty packaging items, including
metal caps and closures, plastic bowls and paper containers used by processors
in the food industry. For 1996, Containers had net sales of specialty
packaging items of $90.7 million.
PLASTICS
For 1996, Plastics had net sales of $216.4 million (15% of the Company's net
sales) and income from operations of $18.4 million (15% of the Company's
income from operations) (without giving effect to corporate expense). Plastics
is aggressively pursuing opportunities in custom designed PET and HDPE
containers. Plastics emphasizes value-added design, fabrication and decoration
of custom containers in its business. Plastics manufactures custom designed
HDPE containers for health and personal care products, including containers
for shampoos, conditioners, hand creams, lotions, cosmetics and toiletries,
household chemical products, including containers for scouring cleaners,
cleaning agents and lawn and garden chemicals and pharmaceutical products,
including containers for tablets, antacids and eye cleaning solutions.
Plastics also manufactures PET custom designed containers for mouthwash,
respiratory and gastrointestinal products, liquid soap, skin care lotions,
salad dressings, condiments, instant coffee, bottled water and liquor. While
many of Plastics' larger competitors that manufacture extrusion blow-molded
plastic containers employ technology oriented to large bottles and long
production runs, Plastics has focused on mid-sized, extrusion blow-molded
plastic containers requiring special decoration and shorter production runs.
Because these products are characterized by short product life and a demand
for creative packaging, the containers manufactured for these products
generally have more sophisticated designs and decorations.
MANUFACTURING AND PRODUCTION
As is the practice in the industry, most of the Company's can and plastic
container customers provide it with quarterly or annual estimates of products
and quantities pursuant to which periodic commitments are given. Such
estimates enable the Company to effectively manage production and control
working capital requirements. Containers estimates that approximately 80% of
its projected 1997 sales will be pursuant to multi-year contracts. Plastics
has purchase orders or contracts for containers with the majority of its
customers. In general, these purchase orders and contracts are for containers
made from proprietary molds and are for a duration of 2 to 5 years. Both
Containers and Plastics schedule their production to meet their customers'
requirements. Because the production time for the Company's products is short,
the backlog of customer orders in relation to sales is not significant.
42
<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
43
<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 1996, 1995 and 1994, approximately 17%, 21% and 26%, respectively, of the
Company's sales were to Nestle, and approximately 12%, 15% and 21%,
respectively, of the Company's sales were to Del Monte. No other customer
accounted for more than 10% of the Company's total sales during such years.
METAL CONTAINER BUSINESS
The Company is the largest manufacturer of metal food can containers in
North America, with a unit sale market share for the twelve months ended
October 31, 1996 of approximately 35% in the United States. Containers has
entered into multi-year supply arrangements with many of its customers,
including Nestle and Del Monte. The Company estimates that approximately 80%
of its projected metal container sales in 1997 will be pursuant to such
arrangements.
In 1987, the Company, through Containers, and Nestle entered into nine
Nestle Supply Agreements pursuant to which Containers has agreed to supply
Nestle with, and Nestle has agreed to purchase from Containers, substantially
all of the can requirements of the former Carnation operations of Nestle for a
period of ten years, subject to certain conditions. In 1996, sales of metal
cans by the Company to Nestle were $240.6 million.
The Nestle Supply Agreements provide for certain prices and specify that
such prices will be increased or decreased based upon cost change formulas set
forth therein. The Nestle Supply Agreements contain provisions that require
Containers to maintain certain levels of product quality, service and delivery
in order to retain the Nestle business. In the event of a breach of a
particular Nestle Supply Agreement, Nestle may terminate such Nestle Supply
Agreement but the other Nestle Supply Agreements would remain in effect.
44
<PAGE>
The Company has recently agreed with Nestle, subject to definitive
documentation, to extend the term of certain of the Nestle Supply Agreements
through 2004 (representing approximately 10% of the Company's estimated 1996
sales) in return for certain price concessions by the Company. The Company
believes that these price concessions will not have a material adverse effect
on its results of operations. Under certain limited circumstances, Nestle,
beginning in January 2000 (with respect to all of the containers supplied
under the Nestle Supply Agreements that have been extended through 2004), may
receive competitive bids, and Containers has the right to match any such bids.
If Containers matches a competitive bid, it may result in reduced sales prices
with respect to the metal containers that are the subject of such competitive
bid. In the event that Containers chooses not to match a competitive bid, such
metal containers may be purchased from the competitive bidder at the
competitive bid price for the term of the bid.
Under the Company's recent agreement with Nestle, with respect to the
remaining Nestle Supply Agreements that expire in August 1997 (representing
approximately 6% of the Company's estimated 1996 sales), the Company has the
right to submit a bid to Nestle, and to match any bid received by Nestle, for
the 1998 supply year with respect to the metal containers that are the subject
of such Nestle Supply Agreements. There can be no assurance that any such bid
by the Company will be made at sales prices equivalent to those currently in
effect or otherwise on terms similar to those currently in effect. In
addition, the Company cannot predict the effect, if any, on its results of
operations of matching or not matching any such bids.
On December 21, 1993, Containers and Del Monte entered into the DM Supply
Agreement. Under the DM Supply Agreement, Del Monte has agreed to purchase
from Containers, and Containers has agreed to sell to Del Monte, substantially
all of Del Monte's annual requirements for metal containers to be used for the
packaging of food and beverages in the United States, subject to certain
limited exceptions. In 1996, sales of metal containers by the Company to Del
Monte were $168.0 million.
The DM Supply Agreement provides for certain prices for all metal containers
supplied by Containers to Del Monte thereunder and specifies that such prices
will be increased or decreased based upon specified cost change formulas.
Under the DM Supply Agreement, beginning in December 1998, Del Monte may,
under certain circumstances, receive proposals with terms more favorable than
those under the DM Supply Agreement from independent commercial can
manufacturers for the supply of containers of a type and quality similar to
the metal containers that Containers furnishes to Del Monte, which proposals
shall be for the remainder of the term of the DM Supply Agreement and for 100%
of the annual volume of containers at one or more of Del Monte's canneries.
Containers has the right to retain the business subject to the terms and
conditions of such competitive proposal.
The sale of metal containers to vegetable and fruit processors is seasonal
and monthly revenues increase during the months of June through October. As is
common in the packaging industry, the Company must build inventory and then
carry accounts receivable for some seasonal customers beyond the end of the
season. The acquisition of AN Can increased the Company's seasonal metal
container business. Consistent with industry practice, such customers may
return unused containers. Historically, such returns have been minimal.
PLASTIC CONTAINER BUSINESS
The Company is one of the leading manufacturers of custom designed HDPE and
PET containers sold in North America. The Company markets its plastic
containers in most areas of North America through a direct sales force and
through a large network of distributors. Management believes that the Company
is a leading manufacturer of plastic containers in North America for personal
care products. More than 70% of the Company's plastic containers are sold for
health and personal care products, such as hair care, oral care,
pharmaceutical and other health care applications. The Company's largest
45
<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 December 31, 1996, the
Company operated 48 manufacturing facilities, geographically dispersed
throughout the United States and Canada, that serve the distribution needs of
its customers.
METAL CONTAINER BUSINESS
Of the commercial metal can manufacturers, Crown Cork and Seal Company, Inc.
and Ball Corporation are the Company's most significant national competitors.
As an alternative to purchasing cans from commercial can manufacturers,
customers have the ability to invest in equipment to self-manufacture their
cans. However, some self-manufacturers have sold or closed can manufacturing
operations and entered into long-term supply agreements with the new owners or
with commercial can manufacturers.
Although metal containers face continued competition from plastic, paper and
composite containers, management believes that metal containers are superior
to plastic and paper containers in applications where the contents are
processed at high temperatures, where the contents are packaged in large or
institutional quantities (14 to 64 oz.) or where long-term storage of the
product is desirable. Such applications include canned vegetables, fruits,
meats and pet foods. These sectors are the principal areas for which the
Company manufactures its products.
PLASTIC CONTAINER BUSINESS
Plastics competes with a number of large national producers of health,
personal care, food, beverage, pharmaceutical and household chemical plastic
container products, including Owens-Brockway Plastics Products, a division of
Owens-Illinois, Inc., Constar Plastics Inc., a subsidiary of
46
<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, 1996, the Company employed approximately 1,080 salaried
and 4,445 hourly employees on a full-time basis. Approximately 64% of the
Company's hourly plant employees are represented by a variety of unions.
The Company's labor contracts expire at various times between 1997 and 2008.
Contracts covering approximately 15% of the Company's hourly employees
presently expire during 1997. The Company expects no significant changes in
its relations with these unions. Management believes that its relationship
with its employees is good.
REGULATION
The Company is subject to federal, state and local environmental laws and
regulations. In general, these laws and regulations limit the discharge of
pollutants into the air and water and establish standards for the treatment,
storage, and disposal of solid and hazardous waste. The Company believes that
all of its facilities are either in compliance in all material respects with
all presently applicable environmental laws and regulations or are operating
in accordance with appropriate variances, delayed compliance orders or similar
arrangements.
In addition to costs associated with regulatory compliance, the Company may
be held liable for alleged environmental damage associated with the past
disposal of hazardous substances. Generators of hazardous substances disposed
of at sites at which environmental problems are alleged to exist, as well as
the owners of those sites and certain other classes of persons, are subject to
claims under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 ("CERCLA") regardless of fault or the legality of the
original disposal. Liability under CERCLA and under many similar state
statutes is joint and several, and, therefore, any responsible party may be
held liable for the entire cleanup cost at a particular site. Other state
statutes may impose proportionate rather than joint and several liability. The
federal Environmental Protection Agency or a state agency may also issue
orders requiring responsible parties to undertake removal or remedial actions
at certain sites. Pursuant to the agreement relating to the acquisition in
1987 of the can operations of Nestle ("Nestle Can"), the Company has assumed
liability for the past waste disposal practices of Nestle Can. In 1989, the
Company received notice that it is one of many potentially responsible parties
(or similarly designated parties) for cleanup of hazardous waste at a site to
which it (or its predecessor Nestle Can) is alleged to have shipped such waste
and at which the Company's share of cleanup costs could exceed $100,000. See
"--Legal Proceedings" below.
Pursuant to the agreement relating to the acquisition in 1987 from Monsanto
Company ("Monsanto") of substantially all of the business and related fixed
assets and inventory of Monsanto's plastic containers business ("Monsanto
Plastic Containers"), Monsanto has agreed to indemnify the Company for
substantially all of the costs attributable to the past waste disposal
practices of Monsanto Plastic Containers. In connection with the acquisition
of DM Can, Del Monte has agreed to indemnify the Company for a period of three
years for substantially all of the costs attributable to any noncompliance by
DM Can with any environmental law prior to the closing, including all of the
costs attributable to the past waste disposal practices of DM Can. In
connection with the acquisition of AN Can, subject to certain limitations, ANC
has agreed to indemnify the Company for a period of three years for the costs
attributable to any noncompliance by AN Can with any environmental law prior
to the closing, including costs attributable to the past waste disposal
practices of AN Can.
47
<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.
48
<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 December 31, 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>
49
<PAGE>
Below is a list of the Company's operating facilities, including attached
warehouses, as of December 31, 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 $3,000,000. Site cleanup
is near completion. However, monitoring at the site will be required for
approximately one year, the expenses for which represent a small portion of
the total expense of cleanup. The PRP Group has assessed approximately
$201,264 as Containers' share of the cleanup cost, which amount has been paid.
The Company believes that significant additional expenditures on its behalf
are unlikely.
Other than the action mentioned above, there are no other material pending
legal proceedings to which the Company is a party or to which any of its
properties are subject.
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
HOLDINGS AND SILGAN
The following table sets forth certain information (ages as of December 31,
1996) concerning the directors and executive officers of Holdings and Silgan.
<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................ 57 Executive Vice President, Chief Financial
Officer and Treasurer
Harold J. Rodriguez, Jr.......... 41 Vice President, Controller and Assistant
Treasurer
Glenn A. Paulson................. 53 Vice President
</TABLE>
CONTAINERS
The following table sets forth certain information (ages as of December 31,
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
H. Dennis Nerstad.................. 59 Vice President--Production Services
Joseph A. Heaney................... 43 Vice President--Finance
</TABLE>
PLASTICS
The following table sets forth certain information (ages as of December 31,
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.
51
<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., PageMart, Inc. and Jefferson Smurfit Corporation.
Mr. Rankin has been Executive Vice President and Chief Financial Officer of
Holdings since its inception in April 1989 and Treasurer of Holdings since
January 1992. Mr. Rankin has been Executive Vice President and Chief Financial
Officer of Silgan since January 1989 and Treasurer of Silgan since January
1992. Mr. Rankin has been Vice President of Containers and Plastics since
January 1989 and was Treasurer of Plastics from January 1994 to December 1994.
Prior to joining the Company, Mr. Rankin was Senior Vice President and Chief
Financial Officer of Armtek Corporation. Mr. Rankin was Vice President and
Chief Financial Officer of Continental Can Company from November 1984 to
August 1986. From September 1989 to August 1993, Mr. Rankin was Vice
President, Chief Financial Officer and Treasurer of Sweetheart Holdings Inc.
and Vice President of Sweetheart Cup Company, Inc.
Mr. Rodriguez has been Vice President of Holdings and Silgan since March
1994 and Controller and Assistant Treasurer of Holdings and Silgan since March
1990. Prior to March 1990, Mr. Rodriguez was Assistant Controller and
Assistant Treasurer of Holdings and Silgan from April 1989 and October 1987,
respectively. Mr. Rodriguez has been Vice President of Containers and Plastics
since March 1994. From September 1989 to August 1993, Mr. Rodriguez was
Controller, Assistant Secretary and Assistant Treasurer of Sweetheart Holdings
Inc. and Assistant Secretary and Assistant Treasurer of Sweetheart Cup
Company, Inc. From 1978 to 1987, Mr. Rodriguez was employed by Ernst & Young
LLP, last serving as Senior Manager specializing in taxation.
Mr. Paulson has been Vice President of Holdings and Silgan since January
1996. Mr. Paulson was employed by Containers to manage the transition of AN
Can from August 1995 to December 1995. From January 1989 to July 1995, Mr.
Paulson was employed by ANC, last serving as Senior
52
<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 1993. From October 1993 to December 1994, Ms. Jones was Corporate
Controller of Plastics and from July 1989 to October 1993, she was Manager--
Finance of Plastics. From July 1982 to July 1989, Ms. Jones was an Audit
Manager for Ernst & Young LLP.
53
<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 1998, 1999 and 2000, respectively, and until their
successors are duly elected and qualified. At each annual stockholders'
meeting, directors nominated to the class of directors whose term is expiring
at that annual meeting will be elected for a term of three years, and the
remaining directors will continue in office until their respective terms
expire and until their successors are duly elected and qualified. Accordingly,
at each annual meeting two of the Company's six directors will be elected, and
each director will be required to stand for election once every three years.
The four directors that are not independent will be elected pursuant to the
Principals Stockholders Agreement. Under the Principals Stockholders
Agreement, MSLEF II agreed that, so long as Messrs. Silver and Horrigan hold
in the aggregate at least one-half of the number of shares of Common Stock
held by them on the date of this Prospectus, Messrs. Silver and Horrigan will
nominate the two independent directors, who must then be elected in accordance
with Holdings' Restated Certificate of Incorporation. Officers are elected by
the Board of Directors and serve at the discretion of the Board of Directors.
See "Description of Capital Stock--Description of Stockholders Agreements".
The Board of Directors has an Audit Committee, which is presently composed
of Messrs. Silver and Niehaus. After the Offering, the Board of Directors will
reconstitute its Audit Committee to consist of two Directors who are neither
officers nor employees of Holdings. The Audit Committee has the responsibility
of reviewing and supervising the financial controls of Holdings. The Audit
Committee's responsibilities include (i) making recommendations to the Board
of Directors with respect to its financial statements and the appointment of
independent auditors, (ii) reviewing significant audit and accounting policies
and practices of Holdings, (iii) meeting with the Company's independent public
accountants concerning, among other things, the scope of audits and reports
and (iv) reviewing the performance of overall accounting and financial
controls of Holdings.
The Board of Directors expects to establish a Compensation Committee and an
Executive Committee. The Compensation Committee will consist of at least two
Directors who are "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation
Committee will have the responsibility of reviewing the performance of the
executive officers of Holdings and recommending to the Board of Directors
annual salary and bonus amounts for all officers of the Company.
COMPENSATION OF DIRECTORS
It is anticipated that directors who do not receive compensation as officers
or employees of the Company or any of its affiliates will be paid an annual
retainer fee of $20,000 for their service on the Board of Directors, and a fee
of $2,000 for each meeting of the Board of Directors or any committee thereof
that they attend, plus reasonable out-of-pocket expenses.
54
<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, 1996, 1995 and 1994 of those
persons who at December 31, 1996 were (i) the Chief Executive Officer of
Holdings and (ii) the other four most highly compensated executive officers of
Holdings and its subsidiaries. Prior to the Offering, no director of Holdings
or its subsidiaries received any compensation for serving as a director of
Holdings or its subsidiaries. See "Certain Transactions--Management
Agreements".
SUMMARY COMPENSATION TABLE
<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......... 1996 $1,875,000 -- -- -- --
(Chairman of the Board
and 1995 1,830,000 -- -- -- --
Co-Chief Executive
Officer of 1994 1,684,135 -- -- -- --
Holdings and Silgan and
Chairman of the Board of
Plastics)
D. Greg Horrigan......... 1996 1,875,000 -- -- -- --
(President and Co-Chief 1995 1,830,000 -- -- -- --
Executive Officer of
Holdings 1994 1,684,135 -- -- -- --
and Silgan and Chairman
of the Board of
Containers)
Harley Rankin, Jr. ...... 1996 425,007 -- -- -- --
(Executive Vice
President, 1995 408,978 -- -- -- --
Chief Financial Officer
and 1994 384,930 -- -- 102,799 --
and Treasurer of
Holdings and Silgan)
James D. Beam............ 1996 372,600 $112,339 -- -- $73,805
(President of
Containers) 1995 361,200 -- -- -- 66,394
1994 350,000 169,092 -- -- 94,175
Russell F. Gervais....... 1996 234,000 111,400 -- -- 7,020
(President of Plastics) 1995 226,000 59,000 -- -- 5,085
1994 216,804 83,300 -- 137,066 --
</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 a preliminary allocation of
value between subsidiaries and on an assumed initial public offering price
of $19.00 per share). The exact amount of Mr. Gervais' options under the
Stock Option Plan will be determined at the time of the Offering.
(e) In the case of Mr. Beam, includes amounts contributed under the Silgan
Containers Corporation Supplemental Executive Retirement Plan (the
"Supplemental Plan") and used to pay premiums for split-dollar life
insurance for Mr. Beam maintained in conjunction with the Supplemental
Plan and includes amounts contributed by Containers under the Silgan
Containers Corporation Deferred Incentive Savings Plan. In the case of Mr.
Gervais, includes amounts allocated to Mr. Gervais under the Silgan
Plastics Corporation Contributory Retirement Plan.
55
<PAGE>
OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(A)
----------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
R. Philip Silver........ -- -- -- --
D. Greg Horrigan........ -- -- -- --
Harley Rankin, Jr.(b)... 233,011 41,120 $3,858,649 $ 635,567
James D. Beam(b)(c)..... 582,526 -- 9,972,862 --
Russell F.
Gervais(b)(c).......... 82,240 54,826 1,517,193 1,011,462
</TABLE>
- --------
(a) For the purposes of this table, the fair market value per share of Common
Stock at December 31, 1996 was estimated to be the assumed initial public
offering price of $19.00 per share.
(b) Options are for shares of Common Stock and give effect to the Stock Split.
(c) Messrs. Beam's and Gervais' options are estimated and have been calculated
in accordance with Containers' and Plastics' stock option plans,
respectively, to give effect to the conversion thereof to options under
the Stock Option Plan (based on a preliminary allocation of value between
subsidiaries and an assumed initial public offering price of $19.00 per
share). The exact amount of Messrs. Beam's and Gervais' options under the
Stock Option Plan will be determined at the time of the Offering.
STOCK OPTION PLAN
The Board of Directors and stockholders of Holdings approved the
establishment of the Stock Option Plan. Under the Stock Option Plan, as an
additional means of attracting and retaining officers and key personnel,
Holdings may grant options to purchase shares of Common Stock to participants.
Options granted may be either non-qualified stock options or "incentive stock
options".
The Board of Directors of Holdings, through a committee (the "Stock Option
Committee"), administers the Stock Option Plan and has the power to, among
other things, choose participants and fix the type of grant and all the terms
and conditions thereof, including number of shares covered by a grant and the
exercise price. Only officers (including executive officers) and other key
employees of the Company are eligible to participate in the Stock Option Plan.
The stock issuable under the Stock Option Plan includes shares of Holdings'
authorized and unissued or reacquired Common Stock. The number of shares for
which options may be granted under the Stock Option Plan may not exceed
3,534,568 shares.
Options are exercisable over such period as determined by the Stock Option
Committee, and generally, except as otherwise determined by the Stock Option
Committee, no option may remain exercisable more than ten years from the grant
date, subject to earlier termination as provided in the Stock Option Plan.
Options become exercisable no earlier than one year from the date of grant and
in such installments as specified in the option agreement therefor.
All options granted under the Stock Option Plan must be evidenced by an
option agreement between Holdings and the option recipient embodying all the
terms and conditions of the option grant, provided that (i) incentive stock
options granted must comply with Section 422 of the Code, (ii) no option shall
be transferable or assignable other than by will or the laws of descent and
distribution and, during the lifetime of the recipient, such option shall be
exercisable only by the recipient, (iii) all options must expire upon or
remain exercisable for a limited time after termination of employment, all as
specified in the Stock Option Plan, and (iv) upon exercise of options, full
payment for the shares covered thereby shall be made in cash or shares of
Common Stock already owned or a combination of cash and shares of Common
Stock.
Concurrent with the Offering, all outstanding stock options issued under
stock option plans of Containers and Plastics will be converted to stock
options under Holdings' Stock Option Plan in accordance with the terms of such
plans. Additionally, the holders of stock options under the
56
<PAGE>
Containers' and Plastics' stock option plans have waived certain registration
rights thereunder. At the time of the Offering, the Containers' and Plastics'
stock option plans will terminate. As a result, the only stock options that
will be outstanding after the Offering will be stock options under the
Holdings' Stock Option Plan.
As of the date of this Prospectus, options to purchase 1,821,254 shares of
Common Stock were outstanding under the Stock Option Plan at exercise prices
ranging from $0.55 to $4.35 per share. With respect to certain outstanding
options, Holdings has an obligation to pay to the optionees an amount per
option as specified in the applicable option agreement (determined in
connection with the merger in which Holdings acquired Silgan with respect to
the issuance of options under the Stock Option Plan in exchange for options
under a predecessor plan) upon exercise of such options. An aggregate amount
of $943,589 would be payable by Holdings to such optionees upon the exercise
of such outstanding options.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTION PLAN
The following discussion sets forth a brief summary of the U.S. federal
income tax aspects of options granted under the Stock Option Plan based on tax
laws in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe a number of special tax rules that could
apply in certain circumstances (i.e., alternative minimum tax). State, local
and foreign income tax consequences are not discussed, and may vary from
locality to locality. Participants in the Stock Option Plan are urged to
consult their own tax advisors with respect to the consequences of their
participation in the Stock Option Plan.
STOCK OPTIONS
The grant of incentive stock options or non-qualified stock options will not
result in taxable income for the optionee at the time the option is granted
and Holdings will not be entitled to a deduction at that time.
NON-QUALIFIED STOCK OPTIONS
In general, an optionee will be subject to tax for the year of exercise of a
non-qualified stock option on the amount of ordinary income equal to the
difference between the purchase price and the fair market value of the Common
Stock received at the time of such exercise. Holdings will be entitled to a
deduction in a corresponding amount. Income tax withholding requirements apply
upon exercise. The optionee's tax basis in the Common Stock acquired on
exercise will be equal to the exercise price plus the amount of ordinary
income subject to tax upon such exercise. Upon subsequent disposition of the
Common Stock, the holder will realize capital gain or loss, long-term or
short-term, depending upon the length of time the holder held the Common Stock
received upon the option exercise.
INCENTIVE STOCK OPTIONS
In general, the exercise of an incentive stock option will not result in
income for the optionee if the optionee (i) does not dispose of the Common
Stock within two years after the date of grant or one year after the
acquisition of the Common Stock upon exercise and (ii) is an employee of
Holdings or a subsidiary of Holdings from the date of the option grant until
three months before the exercise date. If these requirements are met, the tax
basis of the Common Stock upon later disposition will be the exercise price.
Any gain will be taxed to the holder as long-term capital gain and Holdings
will not be entitled to a deduction. The excess of the fair market value on
the exercise date over the exercise price is an item of tax preference,
potentially subject to the alternative minimum tax.
If an optionee disposes of the Common Stock acquired upon exercise prior to
the expiration of either of the holding periods described in clause (i) in the
immediately preceding paragraph, the optionee will recognize ordinary income
and Holdings will be entitled to a corresponding deduction equal to the lesser
of (a) the fair market value of the Common Stock on the exercise date minus
the exercise price or (b) the amount realized on disposition minus the
exercise price. Any gain in excess of the amount of the ordinary income
portion will be taxable as long-term or short-term capital gain, depending
upon the length of time the Common Stock was held after exercise.
57
<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, 1996, James D. Beam, the only eligible executive officer
named in the Summary Compensation Table, had nine years of credited service
under the Containers Pension Plan. Mr. Beam also participates in the
Supplemental Plan, which is designed to make up for benefits not payable under
the Containers Pension Plan due to Code limitations. Mr. Beam's benefits under
the Supplemental Plan are funded through a split-dollar life insurance policy;
income attributable to this life insurance policy is included in the "All
Other Compensation" column of the Summary Compensation Table.
The following table illustrates the estimated annual normal retirement
benefits that are payable under the Plastics Pension Plan. Such benefit levels
assume retirement age at 65, the years of service shown, continued existence
of the Plastics Pension Plan without substantial change and payment in the
form of a single life annuity.
PLASTICS PENSION PLAN TABLE
<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>
58
<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, 1996, Russell F. Gervais, the only eligible executive
officer named in the Summary Compensation Table, had seven years of credited
service under the Plastics Pension Plan.
CERTAIN EMPLOYMENT AGREEMENTS
Certain executive officers and other key employees of Containers and
Plastics (including Messrs. Beam and Gervais) have executed employment
agreements. The initial term of each such employment agreement is generally
three years from its effective date and is automatically extended for
successive one year periods unless terminated pursuant to the terms of such
agreement. Generally, these employment agreements provide for, among other
things, a minimum severance benefit equal to the employee's base salary and
benefits for, in most cases, a period of one year following termination (or
the remainder of the term of the agreement, if longer) (i) if the employee is
terminated by his employer for any reason other than disability or for cause
as specified in the agreement or (ii) if the employee voluntarily terminates
employment due to a demotion and, in some cases, significant relocation, all
as specified in the agreement.
The foregoing summaries of the various benefit plans and agreements of the
Company are qualified by reference to such plans and agreements, copies of
certain of which have been filed as exhibits to the Registration Statement (as
defined herein) of which this Prospectus is a part.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Holdings did not have a Compensation Committee during 1996. The compensation
of Messrs. Silver, Horrigan, Rankin and Rodriguez was paid by S&H, which was
paid by the Company for providing certain management services to the Company
pursuant to the Management Agreements (as defined in "Certain Transactions--
Management Agreements"). See "Certain Transactions--Management Agreements".
The compensation of all other executive officers of the Company was determined
by the senior management of the Company.
PRINCIPAL AND SELLING STOCKHOLDERS
Prior to completion of the Offering, all of the issued and outstanding
Common Stock of Holdings was owned by the Principal Common Stockholders and
BTNY. Upon completion of the Offering, the Principal Common Stockholders will
own 13,591,737 shares of Common Stock (12,988,930 shares if the over-allotment
option granted to the Underwriters is exercised in full), or approximately
72.1% of the issued and outstanding shares of Common Stock (approximately
68.9% if the over-allotment option granted to the Underwriters is exercised in
full).
Under the Principals Stockholders Agreement, Messrs. Silver and Horrigan
agreed to vote their shares of Common Stock for the election of two directors
chosen by MSLEF II so long as MSLEF II holds at least one-half of the number
of shares of Common Stock held by it immediately prior to the Offering, and
MSLEF II agreed to vote its shares of Common Stock for the election of two
directors
59
<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", "Description
of Capital Stock--Description of Stockholders Agreements" and "Underwriting"
for further discussion of the foregoing and for a discussion of other
transactions between the Selling Stockholders and the Company during the last
three years.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock prior to the Offering after giving effect to the
Stock Split and after the Offering as adjusted to reflect the sale of the
shares of Common Stock offered hereby, (i) by each person who is known by
Holdings to own beneficially more than 5% of the Common Stock, (ii) by each
current director of Holdings and each named executive officer, (iii) by all
executive officers and directors as a group and (iv) by each of the Selling
Stockholders.
Each of the persons named in the table has sole voting and investment power
with respect to the securities beneficially owned.
<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 SHARES TO BE BENEFICIALLY BENEFICIALLY
OWNED OWNED(2) OFFERED(3) OWNED OWNED(2)
---------------- ------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C>
R. Philip Silver(4)..... 3,576,544 23.59% -- 3,576,544 18.96%
D. Greg Horrigan(4)..... 3,576,544 23.59% -- 3,576,544 18.96%
Robert H. Niehaus(5).... -- -- -- -- --
Leigh J. Abramson(5).... -- -- -- -- --
Harley Rankin, Jr.(6)... 233,011 1.51% -- 233,011 1.22%
James D. Beam(7)........ 582,526 3.70% -- 582,526 3.00%
Russell F. Gervais(8)... 82,240 * % -- 82,240 * %
The Morgan Stanley
Leveraged Equity Fund
II, L.P.(9)............ 7,153,088 47.18% 714,439 6,438,649 34.13%
Bankers Trust New York
Corporation(10)........ 856,657 5.6% 85,561 771,096 4.1%
All officers and
directors as a group... 8,731,051 52.15% -- 8,731,051 42.71%
</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) If the Underwriters over-allotment option is exercised in full, the
number of shares to be offered by MSLEF II and BTNY will be 1,317,246 and
157,754, respectively.
(4) Director of Holdings, Silgan, Containers and Plastics. Messrs. Silver and
Horrigan are parties to a voting agreement pursuant to which they have
agreed to use their best efforts to vote their shares as a block. The
address for such person is 4 Landmark Square, Stamford, CT 06901.
(5) Director of Holdings, Silgan, Containers and Plastics. The address for
such person is c/o Morgan Stanley & Co. Incorporated, 1221 Avenue of the
Americas, New York, NY 10020.
(6) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 4 Landmark Square, Stamford, CT 06901.
(7) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 21800 Oxnard Street, Woodland Hills, CA 91367.
(8) Reflects shares that may be acquired through the exercise of vested stock
options granted pursuant to the Stock Option Plan. The address for such
person is 14515 N. Outer Forty, Chesterfield, MO 63017.
(9) The address for The Morgan Stanley Leveraged Equity Fund II, L.P., is
1221 Avenue of the Americas, New York, NY 10020.
(10) The address for Bankers Trust New York Corporation is 130 Liberty Street,
New York, NY 10006.
60
<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS
Holdings, Silgan, Containers and Plastics each entered into an amended and
restated management services agreement dated as of December 21, 1993
(collectively, the "Management Agreements") with S&H to replace in its
entirety its then existing management services agreement, as amended, with
S&H. Pursuant to the Management Agreements, S&H provides Holdings, Silgan,
Containers and Plastics and their respective subsidiaries with general
management and administrative services (the "Services"). The Management
Agreements provide for payments to S&H (i) on a monthly basis, of $5,000 plus
an amount equal to 2.475% of consolidated earnings before depreciation,
interest and taxes of Holdings and its subsidiaries ("Holdings EBDIT"), for
such calendar month until Holdings EBDIT for the calendar year shall have
reached an amount set forth in the Management Agreements for such calendar
year (the "Scheduled Amount") and 1.65% of Holdings EBDIT for such calendar
month to the extent that Holdings EBDIT for the calendar year shall have
exceeded the Scheduled Amount but shall not have been greater than an amount
(the "Maximum Amount") set forth in the Management Agreements and (ii) on a
quarterly basis, of an amount equal to 2.475% of Holdings EBDIT for such
calendar quarter until Holdings EBDIT for the calendar year shall have reached
the Scheduled Amount and 1.65% of Holdings EBDIT for such calendar quarter to
the extent that Holdings EBDIT for the calendar year shall have exceeded the
Scheduled Amount but shall not have been greater than the Maximum Amount (the
"Quarterly Management Fee"). The Scheduled Amount was $83.5 million for the
calendar year 1996, and the Maximum Amount was $98.101 million for the
calendar year 1996. The Scheduled Amount is $89.5 million for the calendar
year 1997, and the Maximum Amount is $100.504 million for the calendar year
1997. The Management Agreements provide that upon receipt by Silgan of a
notice from Bankers Trust that certain events of default under the Silgan
Credit Agreement have occurred, the Quarterly Management Fee shall continue to
accrue, but shall not be paid to S&H until the fulfillment of certain
conditions, as set forth in the Management Agreements.
Additionally, the Management Agreements provide that Holdings, Silgan,
Containers, Plastics and their respective subsidiaries shall reimburse S&H, on
a monthly basis, for all out-of-pocket expenses paid by S&H in providing the
Services, including fees and expenses to consultants, subcontractors and other
third parties, in connection with such Services. All fees and expenses paid to
S&H under each of the Management Agreements are credited against amounts paid
to S&H under the other Management Agreements. Under the terms of the
Management Agreements, Holdings, Silgan, Containers and Plastics have agreed,
subject to certain exceptions, to indemnify S&H and its affiliates, officers,
directors, employees, subcontractors, consultants or controlling persons
against any losses, damages, costs and expenses they may sustain arising in
connection with the Management Agreements.
The Management Agreements also provide that S&H may select a consultant,
subcontractor or agent to provide the Services. S&H has retained Morgan
Stanley to render financial advisory services to S&H. In connection with such
retention, S&H has agreed to pay Morgan Stanley a fee equal to 9.1% of the
fees paid to S&H under the Management Agreements.
Concurrent with the Offering, each of Holdings, Silgan, Containers and
Plastics will enter into an amended and restated management services agreement
(collectively, the "New Management Agreements") with S&H to replace in their
entirety the Management Agreements. The New Management Agreements will contain
substantially the same terms as the Management Agreements, except that after
the initial term of the New Management Agreements (which will continue until
June 30, 1999), the New Management Agreements will be automatically renewed
for successive one-year terms unless either party gives written notice at
least 180 days prior to the end of the then current term of its election not
to renew. The independent directors of Holdings will determine on behalf of
the companies whether to give such written notice not to renew. The New
Management Agreements may be terminated (i) at the option of each of the
respective companies upon the failure or refusal of S&H
61
<PAGE>
to perform its obligations under the New Management Agreements, if such
failure or refusal continues unremedied for more than 60 days after written
notice of its existence shall have been given; (ii) at the option of S&H upon
the failure or refusal of any of the respective companies to perform its
obligations under the New Management Agreements, if such failure or refusal
continues unremedied for more than 60 days after written notice of its
existence shall have been given; (iii) at the option of S&H or the respective
companies (a) if S&H or one of the companies is declared insolvent or bankrupt
or a voluntary bankruptcy petition is filed by any of them, (b) upon the
occurrence of any of the following events with respect to S&H or one of the
companies if not cured, dismissed or stayed within 45 days: the filing of an
involuntary petition in bankruptcy, the appointment of a trustee or receiver
or the institution of a proceeding seeking a reorganization, arrangement,
liquidation or dissolution, (c) if S&H or one of the companies voluntarily
seeks a reorganization or arrangement or makes an assignment for the benefit
of creditors or (d) upon the death or permanent disability of both of Messrs.
Silver and Horrigan; (iv) upon at least 180 days prior written notice at the
option of each of the respective companies for any reason; (v) upon at least
180 days prior written notice at the option of S&H for any reason other than
Cause or a Change of Control (each as defined in the New Management
Agreements); (vi) at the option of S&H after a Change of Control; (vii) at the
option of the respective companies in the event of criminal conduct or gross
negligence by S&H in the performance of the Services; or (viii) at the option
of S&H or the respective companies upon the termination of any of the New
Management Agreements for Cause (as defined therein). The New Management
Agreements will prohibit S&H from competing with the Company during the term
thereof and, only if S&H terminates the New Management Agreements pursuant to
clause (v) above, for a period of one year after such termination. The New
Management Agreements will provide that, in the event that they are terminated
pursuant to clause (iv) above, each of the respective companies will be
required to pay to S&H the present value of the amount of the payments that
would have been payable to S&H thereunder through the end of the initial term
or renewed term, as the case may be, thereof. In addition, under the New
Management Agreements the Scheduled Amount will be $89.5 million, $95.5
million and $101.5 million for the calendar years 1997, 1998 and 1999,
respectively, and the Maximum Amount will be $100.504 million, $102.964
million and $105.488 million for the calendar years 1997, 1998 and 1999,
respectively. For the calendar year 2000, the Scheduled Amount and the Maximum
Amount will be $108.653 million, and for each calendar year thereafter the
Scheduled Amount and Maximum Amount will increase by 3% from that of the
previous year.
The Company believes that it is difficult to determine whether the
Management Agreements and the New Management Agreements are on terms no less
favorable than those available from unaffiliated parties because of the
personal nature of the services provided thereunder and the expertise and
skills of the individuals providing such services. The Company believes that
arrangements under the Management Agreements and the New Management Agreements
are fair to both parties.
For the years ended December 31, 1996, 1995 and 1994, under the Management
Agreements, S&H earned aggregate fees, including reimbursable expenses and
fees payable to Morgan Stanley, of $5.3 million, $5.4 million and $5.0
million, respectively, from Holdings, Silgan, Containers and Plastics, and
during 1996, 1995 and 1994 Morgan Stanley earned fees of $425,000, $409,000
and $383,000, respectively.
OTHER
In connection with the refinancings of the Company's bank credit agreement
in 1995 and 1993, the banks thereunder (including Bankers Trust) received
certain fees amounting to $17.2 million and $8.1 million in 1995 and 1993,
respectively. In connection with a recent amendment to the Silgan Credit
Agreement in May 1996, the banks thereunder (including Bankers Trust) received
certain fees amounting to $1.6 million. In connection with the Preferred Stock
Sale, Morgan Stanley, which acted as the placement agent in connection
therewith, received certain fees amounting to $1.8 million. See
62
<PAGE>
"Principal and Selling Stockholders" for a description of the ownership by
MSLEF II, an affiliate of Morgan Stanley, of certain securities of Holdings.
Morgan Stanley, an affiliate of MSLEF II, is one of the several Underwriters
and will receive fees in connection with the Offering. See "Underwriting".
Messrs. Silver and Horrigan, BTNY, MSLEF II and Holdings are parties to the
Stockholders Agreement, which provides for certain rights and obligations
among them and between them and Holdings. See "Description of Capital Stock--
Description of Stockholders Agreements".
G. William Sisley, Secretary of Holdings and Silgan, is a partner in the law
firm of Winthrop, Stimson, Putnam & Roberts. Winthrop, Stimson, Putnam &
Roberts provides legal services to Holdings, Silgan and their subsidiaries.
In the event that the Company enters into any future transactions with any
of its affiliates, the Company expects to enter into any such transactions on
terms no less favorable than those available from unaffiliated parties.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is incorporated under the laws of the State of Delaware.
Immediately prior to the closing of the Offering, Holdings will amend its
Certificate of Incorporation to change its authorized capital stock to
100,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares of preferred stock, par value $.01 per share.
Prior to the sale of shares of Common Stock in the Offering, there are
15,162,833 shares of Common Stock issued and outstanding, 14,306,176 of which
are beneficially owned by the Principal Common Stockholders. Such number of
outstanding shares reflects the Stock Split. Upon consummation of the
Offering, 18,862,833 shares of Common Stock will be issued and outstanding.
There are 53,258 shares of Exchangeable Preferred Stock issued and
outstanding, of which none are owned by the Principal Common Stockholders. All
outstanding shares of capital stock are, and the shares issued in the Offering
will be, fully paid and nonassessable.
COMMON STOCK
Each outstanding share of Common Stock entitles the holder thereof to one
vote on all matters submitted to a vote of stockholders, including the
election of directors. There is no cumulative voting in the election of
directors; consequently, the holders of a majority of the outstanding shares
of Common Stock can elect all of the directors then standing for election. See
"--Description of Stockholders Agreements". Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy". In the event of any liquidation, dissolution
or winding-up of the affairs of the Company, holders of Common Stock will be
entitled to share ratably in the assets of the Company remaining after
provision for payment of liabilities to creditors and obligations to holders
of preferred stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights and are not liable for further calls or
assessments. In addition, any action taken by the holders of Common Stock must
be taken at a meeting and may not be taken by consent in writing, and a
special meeting of the stockholders may only be called by the Chairman of the
Board or the President of the Company or by a majority of the Board of
Directors of the Company, and may not be called by the holders of Common
Stock.
PREFERRED STOCK
GENERAL
The Company's Board of Directors, without stockholder authorization, is
authorized to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the preferences, rights and privileges thereof, including
any dividend rights, conversion rights, voting rights, redemption rights and
63
<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, 53,258 shares of Exchangeable Preferred Stock are issued and
outstanding. However, after the Offering, Holdings intends to exchange its
outstanding Exchangeable Preferred Stock for the Exchange Debentures. See
"Description of Certain Indebtedness--Description of the Exchange Debentures".
The Company has no present plans to issue any additional shares of preferred
stock other than shares that may be issued to pay dividend obligations on the
Exchangeable Preferred Stock.
TERMS OF OUTSTANDING PREFERRED STOCK
The following is a summary of the terms of the Exchangeable Preferred Stock.
The Exchangeable Preferred Stock has a liquidation preference of $1,000 per
share and ranks senior to all outstanding capital stock of Holdings. Holdings
is required to redeem the Exchangeable Preferred Stock at its liquidation
preference of $1,000 per share, plus accrued and unpaid dividends, on July 15,
2006.
Dividends on the Exchangeable Preferred Stock are cumulative from the date
of issuance at 13 1/4% per annum on the liquidation preference thereof, and
are payable quarterly in cash or, on or prior to July 15, 2000 at the sole
option of Holdings, in additional shares of Exchangeable Preferred Stock, on
January 15, April 15, July 15 and October 15, commencing October 15, 1996. The
Exchangeable Preferred Stock is generally exchangeable into Exchange
Debentures at any time at the option of Holdings, in whole but not in part. If
by July 22, 1997 the Exchangeable Preferred Stock has not been exchanged for
the Exchange Debentures, the dividend rate on the Exchangeable Preferred Stock
will increase by 0.5% per annum to 13 3/4% per annum of the liquidation
preference thereof until such exchange occurs. The Company currently plans to
exchange the Exchangeable Preferred Stock for the Exchange Debentures after
completion of the Offering. For a summary of the terms of the Exchange
Debentures, see "Description of Certain Indebtedness--Description of the
Exchange Debentures".
On or after July 15, 2000, the Exchangeable Preferred Stock is redeemable,
at the option of Holdings, in whole or in part, at the rate of 109.938%
(declining ratably to 100% by July 15, 2003) of the liquidation preference
thereof, plus accrued and unpaid dividends to the redemption date. In
addition, at any time, or from time to time, on or prior to July 15, 2000,
Holdings may, at its option, redeem all (but not less than all) of the
outstanding shares of Exchangeable Preferred Stock at a redemption price equal
to 110% of the liquidation preference thereof, plus accrued and unpaid
dividends to the redemption date, with the proceeds of one or more sales of
common stock of Holdings. Upon a Change of Control (as defined in the
Certificate of Designation), Holdings is required to make an offer to purchase
all shares of Exchangeable Preferred Stock at a purchase price equal to 101%
of their liquidation preference, plus accrued and unpaid dividends to the date
of purchase.
Holders of the Exchangeable Preferred Stock have no voting rights except as
provided by law and as provided in Holdings' Restated Certificate of
Incorporation or in the Certificate of Designation relating to the
Exchangeable Preferred Stock (the "Certificate of Designation"). In the event
that dividends are not paid for four consecutive quarters or upon certain
other events as described in the Certificate of Designation (including failure
to comply with covenants under the Certificate of Designation and failure to
pay the mandatory redemption price on the Exchangeable Preferred Stock when
due), then the number of directors constituting Holdings' Board of Directors
will be adjusted to permit the holders of the majority of the then outstanding
Exchangeable Preferred Stock, voting separately as a class, to elect the
number of directors that is equal to the greater of (i) one and (ii) the whole
number obtained (rounding down to the nearest whole number) by (a) multiplying
1/6 by the number of directors then in office and (b) adding one.
64
<PAGE>
The Certificate of Designation contains certain covenants which, among other
things, restricts the ability of Holdings and its subsidiaries to incur
additional indebtedness and issue preferred stock; pay dividends or make
distributions in respect of their capital stock; purchase, redeem or otherwise
acquire for value shares of capital stock; make investments in any affiliate
or unrestricted subsidiary; enter into transactions with shareholders or
affiliates; create restrictions on the ability of Holdings' subsidiaries to
make certain payments; issue or sell stock of Holdings' subsidiaries; engage
in sales of assets; and engage in mergers or consolidations.
DESCRIPTION OF STOCKHOLDERS AGREEMENTS
Holdings, MSLEF II, BTNY and Messrs. Silver and Horrigan are parties to the
Stockholders Agreement dated as of December 21, 1993 (as amended, the
"Stockholders Agreement") which provides for certain rights and obligations
among such stockholders and between such stockholders and Holdings. The
operative provisions of the Stockholders Agreement take effect upon the
completion of the Offering. The following is a summary of the material
provisions of the Stockholders Agreement, which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Stockholders Agreement provides that for a period of eight years after
the Offering, MSLEF II shall have the right to demand two separate
registrations of its shares of Common Stock; provided, however, that such
demand right will terminate at such time as MSLEF II, together with its
affiliates, owns less than five percent of the issued and outstanding shares
of Common Stock. If, at any time or from time to time for a period of eight
years after the Offering, Holdings shall determine to register additional
shares of Common Stock (other than in connection with certain non-underwritten
offerings), Holdings will offer each of MSLEF II, BTNY and Messrs. Silver and
Horrigan the opportunity to register shares of Common Stock it holds in a
"piggyback registration".
The Stockholders Agreement prohibits the transfer prior to June 30, 1999 by
MSLEF II or by Messrs. Silver or Horrigan of Holdings' Common Stock without
the prior written consent of the others, except for (i) transfers made in
connection with a public offering or a Rule 144 Open Market Transaction (as
defined in the Stockholders Agreement), (ii) transfers made to an affiliate,
which, in the case of a transfer by MSLEF II to an affiliate, must be an
Investment Entity (defined generally to be any person who is primarily engaged
in the business of investing in securities of other companies and not taking
an active role in the management or operations of such companies), (iii)
certain transfers by MSLEF II to an Investment Entity or, in the event of
certain defaults under the Management Agreement between S&H and Holdings, to a
third party, in each case that comply with certain rights of first refusal
granted to the Group (the "Group" is defined generally to mean, collectively,
Messrs. Silver and Horrigan and their respective affiliates and certain
related family transferees and estates, with Mr. Silver and his affiliates and
certain related family transferees and estates being deemed to be collectively
one member of the Group, and Mr. Horrigan and his affiliates and certain
related family transferees and estates being deemed to be collectively another
member of the Group) set forth in the Stockholders Agreement, (iv) certain
transfers by either member of the Group to a third party that comply with
certain rights of first refusal granted to the other member of the Group and
MSLEF II set forth in the Stockholders Agreement, and (v) in the case of MSLEF
II, a distribution of all or substantially all of the shares of Holdings'
Common Stock then owned by MSLEF II to the partners of MSLEF II (a "MSLEF
Distribution"). Notwithstanding the foregoing, each of Messrs. Silver and
Horrigan and MSLEF II may pledge his or its shares of Holdings' Common Stock
to a lender or lenders reasonably acceptable to Holdings to secure a loan or
loans to him or it. In the event of any proposed foreclosure of such pledge,
such shares will be subject to certain rights of first refusal set forth in
the Stockholders Agreement.
Concurrent with the Offering, MSLEF II and Messrs. Silver and Horrigan
entered into the Principals Stockholders Agreement. The Principals
Stockholders Agreement provides that (i) for so long as MSLEF II and its
affiliates (excluding the non-affiliated limited partners of MSLEF II who
65
<PAGE>
acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold at
least one-half of the number of shares of Common Stock held by MSLEF II
immediately prior to the Offering, each of Messrs. Silver and Horrigan will
use his best efforts (including to vote any shares of Common Stock owned or
controlled by him) to cause the nomination and election of two members of the
Board of Directors of Holdings to be chosen by MSLEF II; provided, however,
that each such nominee shall be either (a) an employee of Morgan Stanley whose
primary responsibility is managing investments for MSLEF II (or a successor or
related partnership) or (b) a person reasonably acceptable to the Group not
engaged in (as a director, officer, employee, agent or consultant or as a
holder of more than five percent of the equity securities of) a business
competitive with that of Holdings, and (ii) from and after the time that MSLEF
II and its affiliates (excluding the non-affiliated limited partners of MSLEF
II who acquire shares of Common Stock from MSLEF II in a MSLEF Distribution)
hold less than one-half of the number of shares of Common Stock held by MSLEF
II immediately prior to the Offering and until such time that MSLEF II and its
affiliates (excluding the non-affiliated limited partners of MSLEF II who
acquire shares of Common Stock from MSLEF II in a MSLEF Distribution) hold
less than five percent (5%) of the outstanding Common Stock beneficially
owned, each of Messrs. Silver and Horrigan will use his best efforts
(including to vote any shares of Common Stock owned or controlled by him) to
cause the nomination and election of one member of the Board of Directors of
Holdings to be chosen by MSLEF II; provided, however, that such nominee shall
be (i) either an employee of Morgan Stanley whose primary responsibility is
managing investments for MSLEF II (or a successor or related partnership) or
(ii) a person reasonably acceptable to the Group not engaged in (as a
director, officer, employee, agent or consultant or as a holder of more than
five percent of the equity securities of) a business competitive with that of
Holdings.
In addition, the Principals Stockholders Agreement provides that (i) for so
long as the Group holds at least one-half of the number of shares of Common
Stock held by it in the aggregate on the date of this Prospectus, MSLEF II
will use its best efforts (including to vote any shares of Common Stock owned
or controlled by it) to cause the nomination and election of two individuals
nominated by the holders of a majority of the shares of Common Stock held by
the Group as members of the Board of Directors of Holdings; provided, however,
that at least one of such nominees shall be Mr. Silver or Mr. Horrigan and the
other person, if not Mr. Silver or Mr. Horrigan, will be a person reasonably
acceptable to MSLEF II, so long as MSLEF II and its affiliates (excluding the
non-affiliated limited partners of MSLEF II who may acquire shares of Common
Stock from MSLEF II in a MSLEF Distribution) hold at least one-half of the
number of shares of Common Stock held by MSLEF II immediately prior to the
Offering, (ii) from and after the time that the Group holds less than one-half
of the number of shares of Common Stock held by it in the aggregate on the
date hereof and until such time that the Group holds less than five percent
(5%) of the outstanding Common Stock beneficially owned, MSLEF II will use its
best efforts (including to vote any shares of Common Stock owned or controlled
by it) to cause the nomination and election of one individual nominated by the
holders of a majority of the shares of Common Stock held by the Group as a
member of the Board of Directors of Holdings; provided, however, that such
nominee shall be Silver or Horrigan or, if not Silver or Horrigan, a person
reasonably acceptable to MSLEF II, so long as MSLEF II and its affiliates
(excluding the non-affiliated limited partners of MSLEF II who acquire shares
of Common Stock from MSLEF II in a MSLEF Distribution) hold at least one-half
of the number of shares of Common Stock held by MSLEF II immediately prior to
the Offering, and (iii) so long as the Group holds at least one-half of the
number of shares of Common Stock held by it in the aggregate on the date of
this Prospectus, the Group will have the right to nominate for election all
directors of Holdings other than the directors referred to above in this
paragraph and in the preceding paragraph, and upon such nomination by the
Group such nominees will stand for election to Holdings' Board of Directors in
accordance with Holdings' Restated Certificate of Incorporation, and MSLEF II
will vote all shares of Common Stock owned or controlled by it and its
affiliates against any director standing for election for Holdings' Board of
Directors that has not been nominated by the Group, other than the directors
referred to above in this paragraph and in the preceding paragraph.
66
<PAGE>
The Principals Stockholders Agreement further provides that MSLEF II will
vote all shares of Common Stock held by it against any unsolicited merger, or
sale of Holdings' business or assets, if such transaction is opposed by the
holders of a majority of the shares of Common Stock held by the Group, unless
as of the applicable record date for such vote, the Group holds less than
ninety percent of the number of shares of Common Stock held by it in the
aggregate at the date of this Prospectus.
The foregoing provisions of the Principals Stockholders Agreement could have
the effect of delaying, deferring or preventing a change of control of the
Company and preventing the stockholders from receiving a premium for their
shares of Common Stock in any proposed acquisition of the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to Section
203 (an "Interested Stockholder") but less than 85% of such stock may not
engage in certain Business Combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or
the transaction in which the stockholder became an Interested Stockholder or
(ii) the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the Interested Stockholder.
LIMITATIONS ON DIRECTORS' LIABILITY
Holdings' Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of a director to Holdings and its
stockholders for certain breaches of his or her fiduciary duty of care as a
director. This provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty
to Holdings or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Delaware statutory provisions making directors personally liable, under
a negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the
Board of Directors of Holdings protection against awards of monetary damages
resulting from breaches of their duty of care (except as indicated above),
including grossly negligent business decisions made in connection with
takeover proposals for Holdings. As a result of this provision, the ability of
Holdings or a stockholder thereof to successfully prosecute an action against
a director for a breach of his duty of care has been limited. However, the
provision does not affect the availability of equitable remedies such as an
injunction or recision based upon a director's breach of his duty of care. The
Commission has taken the position that the provision will have no effect on
claims arising under the federal securities laws.
In addition, the Restated Certificate of Incorporation and By-Laws provide
mandatory indemnification rights, subject to limited exceptions, to any person
who was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that
such person is or was a director or officer of Holdings, or is or was serving
at the request of Holdings as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Such indemnification rights include reimbursement for expenses incurred by
such person in advance of the final disposition of such proceeding in
accordance with the applicable provisions of the DGCL.
TRANSFER AGENT AND REGISTRAR
The Bank of New York is the transfer agent and registrar for the Common
Stock.
67
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Offering, Holdings will have
outstanding 18,862,833 shares of Common Stock. Of these shares, the 4,500,000
shares of Common Stock sold in the Offering (or 5,175,000 shares if the over-
allotment option is exercised in full) will be freely tradeable without
restrictions or further registration under the Securities Act, unless such
shares are purchased by "affiliates" of the Company (as that term is defined
under the Securities Act). The 14,362,833 shares of Common Stock owned by the
Principal Common Stockholders and BTNY (13,687,833 shares, if the over-
allotment option is exercised in full) are "restricted securities" as defined
in Rule 144 under the Securities Act, and may not be sold in the absence of
registration under the Securities Act other than pursuant to Rule 144 under
the Securities Act or another exemption from registration under the Securities
Act.
In general, under Rule 144, as currently in effect, (i) a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares
of Common Stock as to which at least two years have elapsed since such shares
were sold by Holdings or by an affiliate of Holdings in a transaction or chain
of transactions not involving a public offering ("restricted securities") or
(ii) an affiliate of Holdings who holds shares of Common Stock that are not
restricted securities may, without regard to the holding period, sell, within
any three-month period, a number of such shares that does not exceed the
greater of 1% of Holdings' Common Stock then outstanding (188,628 shares after
completion of the Offering) or the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of
such sale required under Rule 144 was filed. Sales under Rule 144 are also
subject to certain provisions relating to the manner and notice of sale and
availability of current public information about Holdings. Affiliates of
Holdings must comply with the requirements of Rule 144, including the two-year
holding period requirement, to sell shares of Common Stock that are restricted
securities. Furthermore, if a period of at least three years has elapsed from
the date restricted securities were acquired from Holdings or an affiliate of
Holdings, a holder of such restricted securities who is not an affiliate of
Holdings at the time of the sale and has not been an affiliate of Holdings at
any time during the three months prior to such sale would be entitled to sell
such shares without regard to the volume limitation and other conditions
described above.
All shares of Common Stock owned by each of the Principal Common
Stockholders and BTNY will immediately after consummation of the Offering be
eligible (subject to the one year lock-up arrangement described below) for
sale in the public market pursuant to, and in accordance with the volume,
manner of sale and other conditions of, Rule 144 described above. The
Stockholders Agreement provides for restrictions on transfers of Common Stock
by the Principal Common Stockholders other than sales pursuant to Rule 144 or
public offerings. Holdings has granted MSLEF II and Messrs. Silver and
Horrigan certain registration rights with respect to the shares of Common
Stock owned by them. See "Risk Factors--Shares Eligible for Future Sale" and
"Description of Capital Stock--Description of Stockholders Agreements".
Holdings and each of the Principal Common Stockholders and BTNY have agreed
that, subject to certain exceptions, they will not offer, sell or otherwise
dispose of any shares of Common Stock, other than in the Offering, or any
security convertible into or exchangeable or exercisable for shares of Common
Stock without the prior written consent of Goldman, Sachs & Co. on behalf of
the Underwriters for a period of one year after the date of this Prospectus.
See "Underwriting".
Holdings intends to register under the Securities Act the shares of Common
Stock issuable upon the exercise of options granted pursuant to the Stock
Option Plan. See "Management--Executive Compensation".
Prior to the Offering, there has been no public market for the Common Stock.
Sales of substantial amounts of Common Stock or the availability of such
shares for sale could adversely affect prevailing market prices of the Common
Stock and the ability of the Company to issue additional equity securities.
See "Risk Factors--Shares Eligible for Future Sale".
68
<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 December 31,
1996, the outstanding principal amounts of A Term Loans, B Term Loans and
Revolving Loans under the Silgan Credit Agreement were $194.6 million, 343.7
million and $27.8 million, respectively. The A Term Loans mature on December
31, 2000 and are payable in varying increasing installments from December 31,
1996 through December 31, 2000. The B Term Loans mature on March 15, 2002 and
are payable in varying installments from December 31, 1996 through March 15,
2002. The Revolving Loans mature and are payable in full on December 31, 2000.
To secure the obligations of Silgan, Containers and Plastics (the
"Borrowers") under the Silgan Credit Agreement: (i) Silgan pledged to the
Banks all of the capital stock of Containers and Plastics held by Silgan; (ii)
Plastics pledged to the Banks 65% of the capital stock of 827599 Ontario Inc.
("Canadian Holdco") held by Plastics; (iii) Containers pledged to the Banks
all of the capital stock of SCCW Can Corporation ("SCCW Can"), a California
corporation and a wholly owned subsidiary of Containers, held by Containers;
(iv) Containers pledged to the Banks all of the capital stock of California-
Washington Can Corporation ("C-W Can"), a California corporation and a wholly
owned subsidiary of Containers, held by Containers; (v) Silgan, Containers,
Plastics, C-W Can and SCCW Can each granted to the Banks security interests in
substantially all of their respective real and personal property; and (vi)
Holdings pledged to the Banks all of the capital stock of Silgan held by
Holdings. In addition, each of Holdings, Silgan, Containers, Plastics, C-W Can
and SCCW Can have guaranteed the obligations of the Borrowers under the Silgan
Credit Agreement.
Each of the Term Loans and each of the Revolving Loans, at the respective
Borrower's election, consists of loans designated as Eurodollar rate loans or
as Base Rate (as defined in the Silgan Credit Agreement) loans. Subject to
certain conditions, each of the Term Loans and each of the Revolving Loans can
be converted from a Base Rate loan into a Eurodollar rate loan and vice versa.
Interest on Term Loans maintained as Base Rate loans accrues at floating rates
of 1.5% less the then applicable Interest Reduction Discount (as defined in
the Silgan Credit Agreement) (in the case of A Term Loans) and 2% (in the case
of B Term Loans) over the Base Rate. Interest on Term Loans maintained as
Eurodollar rate loans accrues at floating rates of 2.5% less the then
applicable Interest Reduction Discount (in the case of A Term Loans) and 3%
(in the case of B Term Loans) over a formula rate (the "Eurodollar Rate")
determined with reference to the rate offered by Bankers Trust for dollar
deposits in the New York interbank Eurodollar market. Interest on Revolving
Loans maintained as (i) Base Rate loans accrues at floating rates of 1.5%,
less the then applicable Interest Reduction Discount, plus the Base Rate or
(ii) Eurodollar Rate loans accrues at floating rates of 2.5%, less the then
applicable Interest Reduction Discount, plus the Eurodollar Rate.
Under the Silgan Credit Agreement, Silgan is required to repay the Terms
Loans in an amount equal to (i) 50% of Silgan's Excess Cash Flow (as defined
in the Silgan Credit Agreement) in any fiscal year during the Silgan Credit
Agreement, (ii) 80% of the net sale proceeds received from certain asset sales
(increasing to 100% of such net sale proceeds under certain circumstances as
described in the Silgan Credit Agreement), and (iii) 100% of the net equity
proceeds received from certain sales of equity (subject to certain exceptions
permitting the use of such proceeds to repay certain indebtedness (including
the Discount Debentures), decreasing to 50% of net equity proceeds received
after the occurrence of certain events as described in the Silgan Credit
Agreement.
69
<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.
70
<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.
71
<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 by
Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main Street,
Stamford, Connecticut 06904-6760. G. William Sisley, a partner in Winthrop,
Stimson, Putnam & Roberts, is Secretary of Holdings and Silgan. Winthrop,
Stimson from time to time represents certain of the Underwriters in connection
with certain legal matters unrelated to its representation of Holdings.
Certain legal matters are being passed upon for the Underwriters by Shearman &
Sterling, New York, New York. Shearman & Sterling has performed, and will
continue to perform, legal services for MSLEF II, Morgan Stanley and companies
controlled by MSLEF II and Morgan Stanley.
EXPERTS
The consolidated financial statements of Silgan Holdings Inc. at December
31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial statements of American National Can Company's Food Metal &
Specialty Division as of December 31, 1994 and 1993, and for each of the three
years in the period ended December 31, 1994, incorporated by reference in this
Prospectus and Registration Statement have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
72
<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' Annual Report on Form 10-K/A-2 for the fiscal year ended
December 31, 1995;
4. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996;
5. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996;
6. Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996;
7. Holdings' Current Report on Form 8-K dated August 14, 1995, as amended
by Amendment to Current Report on Form 8-K/A dated October 16, 1995;
8. Holdings' Current Report on Form 8-K dated May 31, 1996;
9. Holdings' Current Report on Form 8-K dated August 2, 1996;
10. Holdings' Current Report on Form 8-K dated September 16, 1996;
11. Holdings' Current Report on Form 8-K dated January 27, 1997; and
12. Holdings' Current Report on Form 8-K dated February 5, 1997.
Holdings will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to: Silgan
Holdings Inc., 4 Landmark Square, Stamford, CT 06901, Attention: Chief
Financial Officer (Telephone Number (203) 975-7110).
Statements contained in this Prospectus as to the contents of any contract
or document are not necessarily complete, and in each instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Any statement contained in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified shall not be
deemed to constitute a part of this Prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute part of this
Prospectus.
73
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995................ F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994.......................................................F-4
Consolidated Statements of Deficiency in Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994..............................F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.......................................................F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Pro Forma Condensed Statement of Operations for the year ended
December 31, 1996....................................................... F-27
Notes to Unaudited Pro Forma Condensed Statement of Operations........... F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Silgan Holdings Inc.
We have audited the accompanying consolidated balance sheets of Silgan
Holdings Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, deficiency in stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Silgan Holdings Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 31, 1997
F-2
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
1996 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 1,017 $ 2,102
Accounts receivable, less allowances for
doubtful accounts of $4,045 and $4,832 for
1996 and 1995, respectively................. 101,436 109,929
Inventories.................................. 195,981 210,471
Prepaid expenses and other current assets.... 7,403 5,801
-------- --------
Total current assets....................... 305,837 328,303
Property, plant and equipment, net............. 499,781 487,301
Goodwill, net.................................. 77,176 53,562
Other assets................................... 30,752 30,880
-------- --------
$913,546 $900,046
======== ========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS'
EQUITY
Current liabilities:
Trade accounts payable....................... $122,623 $138,195
Accrued payroll and related costs............ 41,799 32,805
Accrued interest payable..................... 9,522 4,358
Accrued expenses and other current liabili-
ties........................................ 35,456 43,457
Bank working capital loans................... 27,800 7,100
Current portion of long-term debt............ 38,427 28,140
-------- --------
Total current liabilities.................. 275,627 254,055
Long-term debt................................. 693,783 750,873
Deferred income taxes.......................... 6,836 6,836
Other long-term liabilities.................... 74,508 68,086
Cumulative exchangeable redeemable preferred
stock (90,000 shares authorized, 51,556 shares
issued and outstanding)....................... 52,998 --
Deficiency in stockholders' equity:
Common Stock, $0.01 par value per share:
Class A (500,000 shares authorized, 417,500
shares issued and outstanding)............. 4 4
Class B (667,500 shares authorized, 417,500
and 667,500 shares issued and outstanding
in 1996 and 1995, respectively)............ 4 7
Class C (1,000,000 shares authorized, 50,000
shares issued and outstanding)............. 1 1
Pro Forma Common Stock (100,000,000 shares
authorized, 15,162,833 shares issued and
outstanding)............................... 152 -- --
Additional paid-in capital................... 18,466 18,609 33,606
Accumulated deficit.......................... (208,824) (213,422)
-------- --------
Total deficiency in stockholders' equity....... (190,206) (179,804)
-------- --------
$913,546 $900,046
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Net sales................................... $1,405,742 $1,101,905 $861,374
Cost of goods sold.......................... 1,223,684 970,491 748,290
---------- ---------- --------
Gross profit.............................. 182,058 131,414 113,084
Selling, general and administrative
expenses................................... 58,768 46,848 37,997
Reduction in carrying value of assets....... -- 14,745 16,729
---------- ---------- --------
Income from operations.................... 123,290 69,821 58,358
Interest expense and other related financing
costs...................................... 89,353 80,710 65,789
---------- ---------- --------
Income (loss) before income taxes......... 33,937 (10,889) (7,431)
Income tax provision........................ 3,300 5,100 5,600
---------- ---------- --------
Income (loss) before extraordinary
charge................................... 30,637 (15,989) (13,031)
Extraordinary charges relating to early
extinguishment of debt, net of taxes....... (2,222) (5,817) --
---------- ---------- --------
Net income (loss) before preferred stock
dividend requirement..................... 28,415 $ (21,806) $(13,031)
Preferred stock dividend requirement........ (3,006) -- --
---------- ---------- --------
Net income (loss) available to common
stockholders............................. $ 25,409 $ (21,806) $(13,031)
========== ========== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL DEFICIENCY IN
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993...... $12 $33,606 $(178,585) $(144,967)
Net loss.......................... -- -- (13,031) (13,031)
--- ------- --------- ---------
Balance at December 31, 1994...... 12 33,606 (191,616) (157,998)
Net loss.......................... -- -- (21,806) (21,806)
--- ------- --------- ---------
Balance at December 31, 1995...... 12 33,606 (213,422) (179,804)
Purchase and retirement of 250,000
shares of Class B Common Stock... (3) (14,997) (20,811) (35,811)
Net income........................ -- -- 25,409 25,409
--- ------- --------- ---------
Balance at December 31, 1996...... $ 9 $18,609 $(208,824) $(190,206)
=== ======= ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
SILGAN HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) before preferred stock div-
idend requirement........................... $ 28,415 $ (21,806) $ (13,031)
Adjustments to reconcile net income (loss) to
net cash provided
by operating activities:
Depreciation................................ 54,830 42,217 35,392
Amortization................................ 8,993 8,083 7,075
Accretion of discount on discount deben-
tures...................................... 12,077 28,672 27,477
Reduction in carrying value of assets....... -- 14,745 16,729
Extraordinary charge relating to early ex-
tinguishment of debt....................... 2,222 6,301 --
Changes in assets and liabilities, net of
effect of acquisitions:
Decrease (increase) in accounts receiv-
able...................................... 15,102 (1,011) (21,267)
Decrease (increase) in inventories......... 20,348 10,852 (16,741)
(Decrease) increase in trade accounts pay-
able...................................... (17,145) 43,108 4,478
Net working capital provided by AN Can from
8/1/95 to 12/31/95........................ -- 85,213 --
Other, net increase (decrease)............. 357 (6,745) 7,221
--------- --------- ---------
Total adjustments......................... 96,784 231,435 60,364
--------- --------- ---------
Net cash provided by operating activities... 125,199 209,629 47,333
--------- --------- ---------
Cash flows from investing activities:
Acquisition of businesses.................... (43,043) (348,762) 519
Capital expenditures......................... (56,851) (51,897) (29,184)
Proceeds from sale of assets................. 1,557 3,541 765
--------- --------- ---------
Net cash used in investing activities....... (98,337) (397,118) (27,900)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under working capital loans...... 952,050 669,260 393,250
Repayments under working capital loans...... (931,350) (674,760) (382,850)
Proceeds from issuance of long-term debt.... 125,000 450,000 --
Repayments of long-term debt................ (183,880) (234,506) (20,464)
Proceeds from issuance of cumulative redeem-
able
exchangeable preferred stock............... 50,000 -- --
Repurchase of common stock.................. (35,811) -- --
Debt financing costs........................ (3,956) (19,290) --
Payments to former shareholders of Silgan... -- (3,795) (6,911)
--------- --------- ---------
Net cash (used by) provided for financing
activities................................. (27,947) 186,909 (16,975)
--------- --------- ---------
Net (decrease) increase in cash and cash
equivalents................................... (1,085) (580) 2,458
Cash and cash equivalents at beginning of
year.......................................... 2,102 2,682 224
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 1,017 $ 2,102 $ 2,682
========= ========= =========
Supplementary data:
Interest paid............................... $ 68,390 $45,293 $ 30,718
Income tax (refunds) payments, net.......... (4,836) 8,967 2,588
Preferred stock dividend in lieu of cash
dividend................................... 2,998 -- --
</TABLE>
See accompanying notes.
F-6
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. BASIS OF PRESENTATION
Silgan Holdings Inc. ("Holdings", together with its wholly-owned
subsidiaries, the "Company") is a company controlled by Silgan management and
The Morgan Stanley Leveraged Equity Fund II, L. P. ("MSLEF II"), an affiliate
of Morgan Stanley & Co., Incorporated ("MS & Co."). Holdings owns all of the
outstanding common stock of Silgan Corporation ("Silgan").
The Company, together with Silgan and its wholly-owned operating
subsidiaries Silgan Containers Corporation ("Containers") and Silgan Plastics
Corporation ("Plastics"), is predominantly engaged in the manufacture and sale
of steel and aluminum containers for human and pet food products. The Company
also manufactures custom designed plastic containers used for health and
personal care products and specialty packaging items, including metal caps and
closures, plastic bowls and paper containers used by processors in the food
industry. Principally, all of the Company's businesses are based in the United
States. Foreign subsidiaries are not significant to the consolidated results
of operations or financial position of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions have been eliminated. Assets and liabilities of the
Company's foreign subsidiary are translated at rates of exchange in effect at
the balance sheet date. Income statement amounts are translated at the average
of monthly exchange rates.
CASH AND CASH EQUIVALENTS
Cash equivalents represent short-term, highly liquid investments having
original maturities of three months or less from the time of purchase. The
carrying values of these assets approximate their fair values. As a result of
the Company's cash management system, checks issued and presented to the banks
for payment may create negative cash balances. Checks outstanding in excess of
related cash balances totaling approximately $49.6 million at December 31,
1996 and $30.0 million at December 31, 1995 are included in trade accounts
payable.
INVENTORIES
Inventories are stated at the lower of cost or market (net realizable value)
and are principally accounted for by the last-in, first-out method (LIFO).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less accumulated
depreciation. Major renewals and betterments that extend the life of an asset
are capitalized and repairs and maintenance expenditures are charged to
expense as incurred. Depreciation is computed using the straight-line method
over their estimated useful lives. The principal estimated useful lives are 35
years for buildings and range between 3 to 18 years for machinery and
equipment. Leasehold improvements are amortized over the shorter of the life
of the related asset or the life of the lease.
F-7
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is stated at cost less
accumulated amortization. Amortization is computed on a straight-line basis
over periods ranging from 20 to 40 years. The Company periodically evaluates
the existence of goodwill impairment to access whether goodwill is fully
recoverable from projected, undiscounted net cash flows of the related
business unit. Impairments would be recognized in operating results if a
permanent reduction in values were to occur.
LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". Under SFAS No. 121,
impairment losses will be recognized when events or changes in circumstances
indicate that the undiscounted cash flows generated by the assets are less
than the carrying value of such assets. Impairment losses are then measured by
comparing the fair value of assets to their carrying amount. There were no
impairment losses recognized during 1996.
OTHER ASSETS
Other assets consist principally of debt issuance costs which are being
amortized on a straight-line basis over the terms of the related debt
agreements (5 to 10 years). Other intangible assets are amortized over their
expected useful lives using the straight-line method.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes". The provision for
income taxes includes federal, state, and foreign income taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities.
STOCK BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October 1995, effective for the 1996 fiscal year. Under SFAS No. 123,
compensation expense for all stock-based compensation plans would be
recognized based on the fair value of the options at the date of grant using
an option pricing model. As permitted under SFAS No. 123, the Company may
either adopt the new pronouncement or may continue to follow the accounting
method as prescribed under APB No. 25, "Accounting for Stock Issued to
Employees". The Company has chosen to continue to recognize compensation
expense in accordance with APB No. 25.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is limited to interest
rate swap agreements which assist in managing exposure to adverse movement in
interest rates on a portion of its indebtedness. The Company does not utilize
financial instruments for speculative purposes. The difference between amounts
to be paid or received on interest rate swap agreements are recorded as
adjustments to interest expense. The methods and assumptions used to estimate
fair values of these and other debt instruments reflected in the financial
statements are discussed in Note 10.
F-8
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
revenues and expenses, as well as footnote disclosures in the financial
statements. Actual results may differ from those estimates.
PROPOSED INITIAL PUBLIC OFFERING
The financial information does not give effect to the amendment to Holdings'
Restated Certificate of Incorporation, the conversion of Holdings' Class A,
Class B and Class C Common Stock into Common Stock on a one for one basis or
the stock split, all as proposed in connection with the initial public
offering. For a discussion of the proposed initial public offering, see Note
22.
3. ACQUISITIONS
On October 9, 1996, the Company acquired substantially all of the assets of
Finger Lakes Packaging Company, Inc. ("Finger Lakes"), a metal food container
manufacturer, which had net sales of $48.8 million for its fiscal year ended
June 29, 1996. The purchase price was $29.9 million (including net working
capital of $8.0 million) and was primarily allocated to property, plant, and
equipment, and net working capital acquired based on fair market value as of
the date of acquisition. The excess of the purchase price over the fair value
of the net assets acquired was $5.2 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 20 years.
On August 1, 1995, Containers acquired from American National Can Company
("ANC") substantially all of the fixed assets and working capital, and assumed
certain specified limited liabilities, of ANC's Food Metal & Specialty
business ("AN Can"), which manufactures, markets and sells metal food
containers and rigid plastic containers for a variety of food products and
metal caps and closures for food and beverage products. The final purchase
price for the assets acquired and the assumption of certain specified
liabilities was $362.0 million (including $13.1 million paid in 1996). The
aggregate purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values. The purchase price allocation
was adjusted in 1996 for differences between the actual and preliminary
valuations for the asset appraisals and for projected employee benefit costs
as well as for a revision in estimated costs of plant rationalizations,
administrative workforce reductions and various other acquisition liabilities.
The final purchase price allocation resulted in an adjustment to increase
goodwill by $20.7 million. The aggregate excess of the purchase price over the
fair value of the assets acquired and liabilities assumed for AN Can was $45.6
million and has been recorded as goodwill, which is being amortized on a
straight-line basis over 40 years.
The Finger Lakes and AN Can acquisitions were accounted for using the
purchase method of accounting and accordingly, the results of operations for
Finger Lakes and AN Can have been included in the consolidated financial
statements of the Company from the dates of acquisition.
Set forth below are the Company's summary unaudited pro forma results of
operations for the year ended December 31, 1995, giving effect to the
acquisition of AN Can. The summary unaudited pro forma results of operations
include the historical results of the Company and AN Can and reflect the
effect of purchase accounting adjustments based on appraisals and valuations,
the financing of the acquisition of AN Can by the Company, the refinancing of
the Company's related debt obligations, and
F-9
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
certain other adjustments as if these events occurred as of the beginning of
1995. Pro forma results of operations for Finger Lakes have not been presented
for 1996 or included in the 1995 summary unaudited pro forma results of
operations since the impact of such acquisition was not significant.
The pro forma results of operations do not give effect to adjustments for
decreased costs from manufacturing synergies resulting from the integration of
AN Can with the Company's existing can manufacturing operations and benefits
the Company may realize as a result of its planned rationalization of plant
operations. Pro forma adjustments have not been made to interest expense for
the year ended December 31, 1995 for the portion of Holdings' 13 1/4% Senior
Discount Debentures due 2002 ("Discount Debentures") redeemed in 1996 as
described in Note 8 or for the subsequent events discussed in Note 22.
The pro forma information does not purport to represent what the Company's
results of operations actually would have been if the operations were combined
as of January 1, 1995, or to project the Company's results of operations for
any future period:
<TABLE>
<CAPTION>
1995
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Net sales.......................................... $1,404,382
Income from operations............................. 92,749(1)
Income before income taxes......................... 4,064
Net loss........................................... (2,736)
</TABLE>
- --------
(1) Included in pro forma income from operations for the year ended December
31, 1995 is a charge of $14.7 million to adjust the carrying value of
certain underutilized machinery and equipment at Silgan facilities
(existing prior to the AN Can acquisition) to net realizable value.
4. INVENTORIES
The components of inventories at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Raw materials........................................ $ 40,280 $ 46,027
Work-in-process...................................... 27,861 24,869
Finished goods....................................... 116,498 135,590
Spare parts and other................................ 7,771 6,344
-------- --------
192,410 212,830
Adjustment to value inventory at cost on the LIFO
method.............................................. 3,571 (2,359)
-------- --------
$195,981 $210,471
======== ========
</TABLE>
The amount of inventory recorded on the first-in first-out method at
December 31, 1996 and 1995 was $19.8 million and $17.6 million, respectively.
F-10
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Land............................................... $ 6,425 $ 6,355
Buildings and improvements......................... 79,923 68,860
Machinery and equipment............................ 621,232 584,526
Construction in progress........................... 49,771 33,764
--------- ---------
757,351 693,505
Accumulated depreciation and amortization.......... (257,570) (206,204)
--------- ---------
Property, plant and equipment, net................. $ 499,781 $ 487,301
========= =========
</TABLE>
For the years ended December 31, 1996, 1995, and 1994, depreciation expense
was $54.8 million, $42.2 million and $35.4 million, respectively. The total
amount of repairs and maintenance expense was $32.0 million in 1996, $26.9
million in 1995 and $19.9 million in 1994.
In 1995 and 1994, based on a review of depreciable assets, the Company
determined that certain adjustments were necessary to properly reflect net
fixed asset realizable values. In 1995, the Company recorded a write-down of
$14.7 million for the excess of carrying value over estimated realizable value
of machinery and equipment at existing facilities which had become
underutilized due to excess capacity. In 1994, charges of $16.7 million were
recorded which included $2.6 million to write-down the excess carrying value
over estimated realizable value of various plant facilities held for sale and
$14.1 million for technologically obsolete and inoperable machinery and
equipment.
6. GOODWILL
Goodwill amortization charged to operations was $2.3 million in 1996; $1.3
million in 1995; and $1.2 million in 1994. Accumulated amortization of
goodwill at December 31, 1996, 1995, and 1994 was $7.7 million; $5.0 million;
and $3.7 million, respectively.
7. OTHER ASSETS
Other assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt issuance costs............................ $ 30,515 $ 30,148
Other.......................................... 8,576 8,027
----------- -----------
39,091 38,175
Less: accumulated amortization................. (8,339) (7,295)
----------- -----------
$ 30,752 $ 30,880
=========== ===========
</TABLE>
During 1996, the Company wrote off $2.2 million of unamortized debt issuance
costs, with no tax benefit, and capitalized $4.0 million of new debt issuance
costs in connection with the refinancing of Discount Debentures. As part of
the acquisition of AN Can and the related refinancing of its secured debt
facilities and Discount Debentures in 1995, the Company wrote off $6.3 million
of unamortized debt issuance costs and capitalized $19.3 million of new debt
issuance costs. Amortization expense
F-11
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
relating to debt issuance for the years ended December 31, 1996, 1995, and
1994 was $4.5 million, $4.9 million, and $5.3 million, respectively.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company has a revolving credit facility which it uses to finance its
seasonal liquidity needs. As of December 31, 1996 and 1995, the Company had
$27.8 million and $7.1 million, respectively, of loans outstanding under the
revolving credit facility ("Working Capital Loans").
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Bank A Term Loans...................................... $194,554 $220,000
Bank B Term Loans...................................... 343,716 222,750
11 3/4% Senior Subordinated Notes due June 15, 2002.... 135,000 135,000
13 1/4% Senior Subordinated Debentures due
December 15, 2002..................................... 58,940 201,263
-------- --------
732,210 779,013
Less: Amounts due within one year...................... 38,427 28,140
-------- --------
$693,783 $750,873
======== ========
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1996 are
as follows (in thousands):
<TABLE>
<S> <C>
1997..................................... $ 38,427
1998..................................... 53,393
1999..................................... 53,393
2000..................................... 126,112
2001..................................... 155,880
2002 and thereafter...................... 305,005
--------
$732,210
========
</TABLE>
REFINANCINGS
Effective August 1, 1995, Silgan, Containers and Plastics entered into a
$675.0 million credit agreement (the "Credit Agreement") with various banks to
finance the acquisition by Containers of AN Can, to refinance and repay in
full all amounts owing under the previous bank credit agreement and Silgan's
Senior Secured Notes (the "Secured Notes"), and to repurchase up to $75.0
million of Discount Debentures.
The Credit Agreement, as entered into during 1995, provided the Company with
(i) $225.0 million of A Term Loans, (ii) $225.0 million of B Term Loans and
(iii) Working Capital Loans of up to $225.0 million. The Company used proceeds
from the Credit Agreement to acquire AN Can for $348.9 million (excluding
$13.1 million paid in 1996), repay $117.1 million of term loans under the
previous credit agreement, repay in full $50.0 million of Secured Notes,
repurchase $61.7 million principal amount at maturity of Discount Debentures
for $57.6 million, and incur debt issuance costs of $19.3 million. As a result
of the early redemption of the Secured Notes and a portion of the Discount
Debentures in 1995, the Company incurred an extraordinary charge of $5.8
million, net of taxes, for the write-off of unamortized deferred financing
costs of $6.4 million and premiums of $2.0 million paid on the redemption of
the Discount Debentures.
F-12
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
In 1996, the Credit Agreement was amended to provide the Company with
additional B Term Loans of $125.0 million. With borrowings of $17.4 million of
Working Capital Loans, $12.0 million representing a portion of the proceeds
from the issuance of Holdings' 13 1/4% Cumulative Exchangeable Redeemable
Preferred Stock ("Preferred Stock"), and the additional B Term Loans, the
Company redeemed $154.4 million principal amount of Discount Debentures at
par. As a result of the early redemption of a portion of the Discount
Debentures in 1996, the Company incurred an extraordinary charge of $2.2
million for the write-off of unamortized deferred financing costs.
BANK CREDIT AGREEMENT
The A Term Loans mature on December 31, 2000, and the B Term Loans mature on
March 15, 2002. Principal repayments of $25.4 million and $5.0 million on the
A Term Loans and $4.0 million and $2.3 million on the B Term Loans were made
in 1996 and 1995, respectively. Principal is to be repaid on each of the A and
B Term Loans in installments in accordance with the Credit Agreement until
maturity.
As provided in the Credit Agreement, the Company is required to repay the
term loans (ratably allocated between the A Term Loans and the B Term Loans)
in an amount equal to 80% of the net sale proceeds from certain asset sales
and up to 100% of the net equity proceeds from certain sales of equity.
Effective for the year ended December 31, 1996 and each year thereafter during
the term of the Credit Agreement, the Company is required to prepay the term
loans (ratably allocated between the A Term Loans and the B Term Loans) in an
amount equal to 50% of the Company's excess cash flow. Amounts repaid under
the term loans cannot be reborrowed.
The Credit Agreement provides Containers and Plastics, together, a revolving
credit facility of up to $225.0 million for working capital needs. Borrowings
available under the revolving credit facility were $190.0 million at December
31, 1996, after taking into account outstanding Working Capital Loans of $27.8
million and outstanding letters of credit of $7.2 million. The Company may
utilize up to a maximum of $20.0 million in letters of credit as long as the
aggregate amount of borrowings of Working Capital Loans and letters of credit
do not exceed the amount of the commitment under the revolving credit
facility. The aggregate amount of Working Capital Loans and letters of credit
which may be outstanding at any time is also limited to the aggregate of 85%
of eligible accounts receivable and 50% of eligible inventory. Working Capital
Loans may be borrowed, repaid, and reborrowed over the life of the Credit
Agreement until final maturity on December 31, 2000.
The borrowings under the Credit Agreement may be designated by the
respective borrowers as Base Rate or Eurodollar Rate borrowings. The Base Rate
is the higher of (i) 1/2 of 1% in excess of Adjusted Certificate of Deposit
Rate, or (ii) Bankers Trust Company's prime lending rate. Base Rate borrowings
bear interest at the Base Rate plus a margin of 1.50% in the case of A Term
Loans and Working Capital Loans; and a margin of 2.0% in the case of B Term
Loans. Eurodollar Rate borrowings bear interest at the Eurodollar Rate plus a
margin of 2.50% in the case of A Term Loans and Working Capital Loans; and a
margin of 3.0% in the case of B Term Loans. In accordance with the Credit
Agreement, if the Company meets certain financial tests, the interest rate
margin on Base Rate and Eurodollar Rate borrowings may be reduced from the
existing margin. As of December 31, 1996, the interest rate for Base Rate
borrowings was 9.75% and the interest rate for Eurodollar Rate borrowings
ranged between 8.0% and 8.63%. During 1996, the Company entered into interest
rate swap agreements to convert interest rate exposure from variable to fixed
rates of interest on A Term Loans and B Term Loans in an aggregate amount of
$200.0 million (for a discussion of the interest rate swap agreements, see
Note 9).
For 1996, 1995 and 1994, respectively, the average amount of borrowings of
Working Capital Loans was $104.1 million, $67.6 million and $14.4 million; the
weighted average annual interest rate
F-13
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
paid on such borrowings was 8.4%, 8.9%, and 8.4%; and the highest amount of
such borrowings was $175.1 million, $188.1 million, and $46.0 million.The
Credit Agreement provides for the payment of a commitment fee of 0.5% per
annum on the daily average unused portion of commitments available under the
working capital revolving credit facility as well as a 2.75% per annum fee on
outstanding letters of credit.
The indebtedness under the Credit Agreement is guaranteed by Holdings and
each of Silgan, Containers and Plastics and secured by a security interest in
substantially all of the real and personal property of Silgan, Containers and
Plastics. The stock of Silgan and the stock of principally all of its
subsidiaries have been pledged to the lenders under the Credit Agreement.
The Credit Agreement contains various covenants which limit or restrict,
among other things, investments, indebtedness, liens, dividends, leases,
capital expenditures, and the use of proceeds from asset sales, as well as
requiring the Company to meet certain specified financial covenants. The
Company is currently in compliance with all covenants under the Credit
Agreement.
11 3/4% SENIOR SUBORDINATED NOTES
The Company's 11 3/4% Senior Subordinated Notes (the "11 3/4% Notes"), which
mature on June 15, 2002, represent unsecured general obligations of Silgan,
subordinate in right of payment to obligations of the Company under the Credit
Agreement and effectively subordinate to all ofthe obligations of the
subsidiaries of Silgan. Interest is payable semi-annually on June 15 and
December 15.
The 11 3/4% Notes are redeemable at the option of the Company, in whole or in
part, at any time during the twelve months commencing June 15 of the following
years at the indicated percentages of their principal amount, plus accrued
interest:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PERCENTAGE
---- ----------
<S> <C>
1997................................... 105.8750%
1998................................... 102.9375%
1999 and thereafter.................... 100.0000%
</TABLE>
The 11 3/4% Notes Indenture contains covenants which are comparable to or
less restrictive than those under the terms of the Credit Agreement.
13 1/4% SENIOR DISCOUNT DEBENTURES
The 13 1/4% Senior Discount Debentures, which are due on December 15, 2002,
represent unsecured general obligations of Holdings, subordinate in right of
payment to the obligations of Silgan and its subsidiaries. The original issue
discount was amortized through June 15, 1996 with a yield to maturity of 13
1/4%. From and after June 15, 1996, interest on the Discount Debentures
accrues on the principal amount thereof at the rate of 13 1/4% and is payable
in cash semiannually. The Discount Debentures are redeemable at any time, at
the option of Holdings, in whole or in part, at 100% of their principal amount
plus accrued interest to the redemption date. The Company redeemed $154.4
million principal amount of its Discount Debentures in 1996 and repurchased
$61.7 million principal amount at maturity of its Discount Debentures for
$57.6 million.
F-14
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
The Discount Debenture Indenture contains covenants which are comparable to
or less restrictive than those under the Credit Agreement and the 11 3/4%
Notes.
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company has entered into interest rate swap agreements with various
banks to manage its exposure to interest rate fluctuations. The agreements are
with major financial institutions which are expected to fully perform under
the terms thereof. The interest rate swap agreements effectively convert
interest rate exposure from variable rates to fixed rates of interest without
the exchange of the underlying principal amounts. A portion of the Company's
term debt instruments carries a variable rate of interest based on the London
interbank offered rate ("LIBOR") plus a margin currently ranging from 2.5% to
3.0%. The interest rate swap agreements require the Company to pay fixed rates
of interest ranging from 5.6% to 6.2% plus the aforementioned margin. Notional
principal amounts of these agreements total $200.0 million and these
agreements mature in the year 1999. The notional amounts are used to measure
the interest to be paid or received and do not represent the amount of
exposure to credit loss. Net payments or receipts under these agreements were
recorded as adjustments to interest expense.
CONCENTRATION OF CREDIT RISK
The Company derives a significant portion of its revenue from multi-year
supply agreements with many of its customers. Aggregate revenues from its two
largest customers accounted for approximately 29.1% of its net sales in 1996
and 36.0% of its net sales in 1995. The receivable balances from these
customers collectively represented 20.3% and 28.2% of the Company's accounts
receivable before allowances at December 31, 1996 and 1995, respectively. As
is common in the packaging industry, the Company provides extended payment
terms for some of its customers due to the seasonality of the vegetable and
fruit pack business. Exposure to losses is dependent on each customer's
financial position. The Company performs ongoing credit evaluations of its
customer's financial condition and its receivables are not collateralized. The
Company maintains an allowance for doubtful accounts which management believes
is adequate to cover potential credit losses based on customer credit
evaluations, collection history, and other information.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Working Capital Facility............... $ 27,800 $ 27,800 $ 7,100 $ 7,100
Bank A Term Loans...................... 194,554 194,554 220,000 220,000
Bank B Term Loans...................... 343,716 343,716 222,750 222,750
11 3/4% Senior Subordinated Notes due
June 15, 2002......................... 135,000 144,500 135,000 144,500
13 1/4% Senior Subordinated Debentures
due December 15, 2002................. 58,940 59,235 201,263 205,873
Cumulative Exchangeable Redeemable Pre-
ferred Stock.......................... 52,998 58,671 -- --
Interest Rate Swap Agreements.......... -- 504 -- --
</TABLE>
F-15
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Methods and assumptions used in estimating fair values are as follows:
Cash and cash equivalents: The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value due to the short
duration of those investments.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its working capital loans and variable-rate borrowings approximate their
fair value. The fair values of fixed-rate borrowings are based on quoted
market prices.
Convertible exchangeable preferred stock: The fair value of the preferred
stock is estimated based on quoted market prices.
Interest rate swap agreements: Fair values of interest rate swap agreements
reflect the estimated amounts that the Company would receive to terminate the
contracts at the reporting date based on quoted market prices.
11. COMMITMENTS
The Company has a number of noncancelable operating leases for office and
plant facilities, equipment and automobiles that expire at various dates
through 2020. Certain operating leases have renewal options. Minimum future
rental payments under these leases are (dollars in thousands):
<TABLE>
<S> <C>
1997................................. $13,779
1998................................. 10,615
1999................................. 8,181
2000................................. 6,257
2001................................. 4,431
2002 and thereafter.................. 9,213
-------
$52,476
=======
</TABLE>
Rent expense was approximately $13.9 million in 1996; $10.8 million in 1995;
and $9.1 million in 1994.
12. RETIREMENT PLANS
The Company sponsors pension and defined contribution plans which cover
substantially all employees, other than union employees covered by multi-
employer defined benefit pension plans under collective bargaining agreements.
Pension benefits are provided based on either a career average, final pay or
years of service formula. With respect to certain hourly employees, pension
benefits are provided for based on stated amounts for each year of service. It
is the Company's policy to fund accrued pension and defined contribution costs
in compliance with ERISA requirements. Assets of the plans consist primarily
of equity and bond funds.
F-16
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
The following table sets forth the funded status of the Company's retirement
plans as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit ob-
ligations:
Vested benefit obligations........... $14,009 $12,135 $33,558 $31,465
Non-vested benefit obligations....... 383 547 4,718 3,158
------- ------- ------- -------
Accumulated benefit obligations........ 14,392 12,682 38,276 34,623
Additional benefits due to future
salary levels.......................... 6,255 5,667 6,526 7,132
------- ------- ------- -------
Projected benefit obligations.......... 20,647 18,349 44,802 41,755
Plan assets at fair value.............. 15,055 12,988 31,265 23,535
------- ------- ------- -------
Projected benefit obligation in excess
of
plan assets........................... 5,592 5,361 13,537 18,220
Unrecognized actuarial gain (loss)..... 110 (165) 3,476 1,237
Unrecognized prior service costs....... (565) (615) (2,052) (2,128)
Additional minimum liability........... -- -- 1,124 1,990
------- ------- ------- -------
Accrued pension liability recognized in
the
balance sheet......................... $ 5,137 $ 4,581 $16,085 $19,319
======= ======= ======= =======
</TABLE>
For certain pension plans with accumulated benefits in excess of plan assets
at December 31, 1996 and December 31, 1995, the balance sheet reflects an
additional minimum pension liability and related intangible asset of $1.1
million and $2.0 million, respectively.
The components of net periodic pension costs for defined benefit plans are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................... $ 5,229 $ 3,067 $ 2,947
Interest cost................................... 4,452 3,887 3,334
Actual loss (return) on assets.................. (3,946) (7,284) 539
Net amortization and deferrals.................. 650 5,008 (2,698)
------- ------- -------
Net periodic pension cost....................... $ 6,385 $ 4,678 $ 4,122
======= ======= =======
</TABLE>
The Company participates in several multi-employer pension plans which
provide defined benefits to certain of its union employees. The composition of
total pension cost for 1996, 1995, and 1994 in the Company's Consolidated
Statements of Operations is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Net periodic pension cost.......................... $ 6,385 $4,678 $4,122
Settlement and curtailment losses, net............. 48 418 --
Contributions to multi-employer union plans........ 3,813 2,708 2,700
------- ------ ------
Total pension costs................................ $10,246 $7,804 $6,822
======= ====== ======
</TABLE>
F-17
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
The assumptions used in determining the actuarial present value of plan
benefit obligations as of December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate........................................... 7.5% 7.5% 8.5%
Weighted average rate of compensation increase.......... 4.0% 4.0% 4.5%
Expected long-term rate of return on plan assets........ 9.0% 8.5% 8.5%
</TABLE>
The Company also sponsors defined contribution pension and profit sharing
plans covering substantially all employees. Company contributions to these
plans are based upon employee contributions and operating profitability.
Contributions charged to income for these plans were $4.5 million in 1996;
$1.7 million in 1995; and $2.5 million in 1994. Improved operating performance
in 1996 as compared to 1995 resulted in greater contributions to the Company's
profit sharing plans.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has defined benefit health care and life insurance plans that
provide postretirement benefits to certain employees. The plans are
contributory, with retiree contributions adjusted annually, and contain cost
sharing features including deductibles and coinsurance. Retiree health
benefits are paid as covered expenses are incurred.
The following table presents the funded status of the postretirement plans
and amounts recognized in the Company's balance sheet as of December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees................ $ 2,691 $ 1,587
Fully eligible active
plan participants...... 5,576 11,647
Other active plan par-
ticipants.............. 18,214 14,770
----------- -----------
Total accumulated
postretirement benefit
obligation............... 26,481 28,004
Unrecognized net loss
(gain).................... 2,993 (2,929)
Unrecognized prior service
costs..................... (275) (298)
----------- -----------
Accrued postretirement
benefit liability......... $ 29,199 $ 24,777
=========== ===========
</TABLE>
Net periodic postretirement benefit cost include the following components:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 871 $ 372 $321
Interest cost......................................... 1,766 1,097 412
Net amortization and deferral......................... 25 42 (14)
------ ------ ----
Net periodic postretirement benefit cost.............. $2,662 $1,511 $719
====== ====== ====
</TABLE>
The weighted average discount rate used to determine the accumulated
postretirement benefit obligation as of December 31, 1996 and 1995 was 7.5%.
The net periodic postretirement benefit costs were calculated using a discount
rate of 7.5% in 1996 and discount rates ranging from 7.5% to 8.5% for 1995.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation in 1996 ranged from 10% to 9.5% for pre-age
65 retirees and was 9.0% for post-age 65 retirees, declining gradually to an
ultimate rate of 5.5% over the next 12 years.
F-18
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
A 1% increase in the health care cost trend rate assumption would increase
the accumulated postretirement benefit obligation as of December 31, 1996 by
approximately $1.7 million and increase the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for
1996 by approximately $0.2 million.
14. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.................................... $ -- $ 500 $ 2,500
State...................................... 3,000 1,900 3,200
Foreign.................................... 300 100 (100)
------- ------- -------
3,300 2,500 5,600
Deferred
Federal.................................... -- -- --
State...................................... -- -- --
Foreign.................................... -- -- --
------- ------- -------
-- -- --
------- ------- -------
$ 3,300 $ 2,500 $ 5,600
======= ======= =======
Income tax expense is included in the financial statements as follows:
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before extraordinary charges.......... $ 3,300 $ 5,100 $ 5,600
Extraordinary charges........................ -- (2,600) --
------- ------- -------
$ 3,300 $ 2,500 $ 5,600
======= ======= =======
The income tax provision varied from that computed by using the U.S.
statutory rate as a result of the following:
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax benefit at the U.S. Federal
income tax rate............................. $11,100 $(3,811) $(2,601)
State and foreign tax expense, net of Federal
income benefit.............................. 2,145 1,820 2,015
Amortization of goodwill..................... 621 471 576
Change in valuation allowance................ (10,566) 6,620 5,610
------- ------- -------
$ 3,300 $ 5,100 $ 5,600
======= ======= =======
</TABLE>
F-19
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation........................... $ 65,000 $ 53,400
Book over tax basis of assets acquired............... 13,200 16,100
Other................................................ 4,100 3,900
-------- --------
Total deferred tax liabilities..................... 82,300 73,400
Deferred tax assets:
Book reserves not yet deductible for tax purposes.... 59,200 56,300
Deferred interest on high yield obligations.......... 7,700 25,100
Net operating loss carryforwards..................... 57,200 35,600
Other................................................ 500 1,200
-------- --------
Total deferred tax assets.......................... 124,600 118,200
Valuation allowance for deferred tax assets.......... 49,136 51,636
-------- --------
Net deferred tax assets............................ 75,464 66,564
-------- --------
Net deferred tax liabilities........................... $ 6,836 $ 6,836
======== ========
</TABLE>
The Company has a net deferred tax asset position primarily as a result of
its net operating loss carryforwards and net temporary differences. In years
prior to 1996 the Company reported book losses, therefore, under current
accounting principles the full amount of the deferred tax asset has been
offset by a valuation allowance. The valuation allowance will be reduced at
the time it is more likely than not that the Company will generate taxable
income sufficient to realize a portion of the tax benefits associated with the
net operating loss carryforwards and future deductible temporary differences.
The Company believes this will occur in 1997. At the time the valuation
allowance is reduced a portion of the benefit will be recorded as a reduction
to income tax expense and the remainder will be recorded as a reduction to
goodwill.
The valuation allowance decline in 1996 represented the reversal of the
reserve for prior years' operating losses not previously recognized, net of
the additional deferred tax asset recorded as a result of the finalization of
the purchase price allocation for AN Can.
The Company files a consolidated federal income tax return. At December 31,
1996, the Company has net operating loss carryforwards of approximately $164.0
million which are available to offset future consolidated taxable income of
the group and expire from 2001 through 2011. The Company also has $3.9 million
of alternative minimum tax credits which are available indefinitely to reduce
future tax payments for regular federal income tax purposes.
15. ACQUISITION RESERVES
In connection with the acquisition of AN Can, the Company has finalized its
plant rationalization and integration plans. These plans consist primarily of
the closing or downsizing of certain manufacturing plants and the integration
of the selling, general and administrative functions of the former AN Can
operations with the Company. Provisions were established for such planned
costs which include approximately $22.6 million related to employee severance
and relocation costs, $3.5 million related to administrative workforce
reductions, and $23.4 million related to plant exit costs and other
acquisition liabilities. The timing of the plant rationalizations, among other
things, will be
F-20
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
dependent on covenants in existing labor agreements and accordingly these
costs will be incurred during the period through 1998. During 1996 and 1995,
respectively, costs of $6.5 million and $0.9 million were incurred primarily
for relocation and severance in connection with administrative workforce
reductions.
16. CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK
On July 22, 1996, the Company issued 50,000 shares of Preferred Stock,
mandatorily redeemable in 2006, at $1,000 per share which represents the
liquidation preference of the Preferred Stock. The Company used $35.8 million
of these proceeds to purchase 250,000 shares of its Class B Common Stock held
by Mellon Bank, as trustee for First Plaza Group Trust, pursuant to its right
to purchase such stock for such amount under the Organization Agreement. In
aggregate, common stock and additional paid in capital were reduced by $15.0
million, the original issuance amount received for such Class B Common Stock,
and the remainder of the payment was applied to Holdings' accumulated deficit.
The Preferred Stock holders are entitled to receive cumulative dividends of
13 1/4% per annum, which are payable quarterly in cash or, on or prior to July
15, 2000 at the sole option of the Company, in additional shares of Preferred
Stock. After July 15, 2000, dividends may be paid only in cash. During 1996,
dividends of $1.6 million were paid in additional shares of Preferred Stock.
As of December 31, 1996, the Company accrued dividends of $1.4 million, which
it intends to pay in additional shares of Preferred Stock.
The Preferred Stock is exchangeable into Holdings' Subordinated Debentures
due 2006 (the "Exchange Debentures"), in whole but not in part, at any time at
the option of the Company, subject to certain conditions. The Exchange
Debentures will bear interest at the dividend rate in effect with respect to
the Preferred Stock. Interest on the Exchange Debentures will be payable semi-
annually and, on or prior to July 15, 2000, the Company may pay such interest
by issuing additional Exchange Debentures. If by July 22, 1997 the Preferred
Stock has not been exchanged for Exchange Debentures, the dividend rate on the
Preferred Stock will increase by 0.5% per annum to 13 3/4% per annum until
such exchange occurs.
The Company is required to redeem the Preferred Stock or Exchange Debentures
on July 15, 2006, but may elect to redeem the Preferred Stock or Exchange
Debentures, in whole or in part, at any time during the twelve month period
beginning July 15 of each of the years set forth below, at a redemption price
(expressed as a percentage of the liquidation preference of the Preferred
Stock or principal amount of the Exchange Debentures), plus an amount equal to
all the accumulated and unpaid dividends or accrued and unpaid interest.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000................................... 109.938%
2001................................... 106.625%
2002................................... 103.313%
2003 and thereafter.................... 100.000%
</TABLE>
In addition, all (but not less than all) of the outstanding Preferred Stock
or Exchange Debentures may be redeemed prior to July 15, 2000 at the option of
the Company for a redemption price equal to 110% of the liquidation preference
of the Preferred Stock plus accrued and unpaid dividends, or 110% of the
principal amount of the Exchange Debentures plus accrued and unpaid interest,
to the redemption date with the proceeds of any sale by Holdings of its common
stock. Upon the occurrence of a Change of Control (as defined in the
Certificate of Designation relating to the Preferred Stock or
F-21
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
the indenture relating to the Exchange Debentures), the Company is required to
make an offer to purchase all of the shares of Preferred Stock or all of the
Exchange Debentures at a purchase price equal to 101% of the liquidation
preference of the Preferred Stock, plus accrued and unpaid dividends to the
date of purchase, or 101% of the principal amount of the Exchange Debentures,
plus accrued and unpaid interest to the date of purchase.
The Preferred Stock will rank senior to all common stock of Holdings and
upon conversion, the Exchange Debentures will be subordinate to the
indebtedness of Holdings. The holders of the Preferred Stock do not have
voting rights except in certain limited circumstances. The Company's Credit
Agreement and various debt indentures restrict the Company's ability to, among
other things, pay dividends, incur additional indebtedness, and purchase or
redeem shares of capital stock.
17. STOCK OPTION PLANS
Holdings, Containers and Plastics have established stock option plans for
their key employees pursuant to which options to purchase shares of common
stock of Holdings and its subsidiaries and stock appreciation rights ("SARs")
may be granted.
Options granted under the plans may be either incentive stock options or
non-qualified stock options. To date, all stock options granted have been non-
qualified stock options. Under the plans, Holdings has reserved 24,000 shares
of its Class C Common Stock and Containers and Plastics have each reserved
1,200 shares of their common stock for issuance under their respective plans.
Containers has 13,764 shares and Plastics has 13,800 shares of $0.01 par value
common stock currently issued, and all such shares are owned by Silgan.
The SARs extend to the shares covered by the options for the Containers and
Plastics plans and provide for the payment to the holders of the options of an
amount in cash equal to the excess of, in the case of Containers' plans, the
pro forma book value, as defined, of a share of common stock (or in the event
of a public offering or a change of control (as defined in such plan), the
fair market value of a share of common stock) over the exercise price of the
option, with certain adjustments for the portion of vested stock appreciation
rights not paid at the time of the recapitalization in June 1989; or, in the
case of Plastics' plan, in the event of a public offering or a change in
control (as defined in such plan), the fair market value of a share of common
stock over the exercise price of the option.
Prior to a public offering or change in control, should an employee leave
Containers, Containers has the right to repurchase, and the employee has the
right to require Containers to repurchase, the common stock of Containers held
by the employee at the then pro forma book value.
At December 31, 1996, there were outstanding options for 24,000 shares under
the Holdings plan, 936 shares under the Containers plan, and 1,200 shares
under the Plastics plan. The exercise prices per share range from $35 to $61
for the Holdings options, $2,122 to $4,933 for the Containers options and $126
to $993 for the Plastics options. The stock options and SARs generally become
exercisable ratably over a five-year period. At December 31, 1996, there were
18,600 options exercisable under the Holdings plan, 846 options/SARs
exercisable under the Containers plan, and 420 options/SARs exercisable under
the Plastics plan. For the year ended December 31, 1994, 9,000 options were
granted under the Holdings plan, 240 options were granted under the Containers
plan, and 900 options were granted under the Plastics plan. For the year ended
December 31, 1995, 300 options were granted under the Plastics plan. There
were no grants in 1996. For the years ended December 31, 1996, 1995, and 1994,
no options were exercised under any of the plans. The Company incurred charges
relating to the vesting of benefits under the stock option plans of $0.8
million in 1996 and 1995, and $1.5 million in 1994.
F-22
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
In the event of a public offering of any of Holdings' capital stock or a
change in control of Holdings, (i) the options granted by Containers and
Plastics pursuant to the plans and (ii) any stock issued by Containers upon
exercise of such options are convertible into either stock options or common
stock of Holdings, as the case may be. The conversion of such options or shares
will be based upon a valuation of Holdings and an allocation of such value
between the subsidiaries after giving affect to, among other things, that
portion of the outstanding indebtedness of Holdings allocable to each such
subsidiary.
For the year ended December 31, 1995, the fair value of the options granted
under the Plastic plan were not significant. Accordingly, the impact on net
income and earnings per share from the issuance of these options would not be
materially different from amounts currently reported and would not require
SFAS No. 123 pro forma disclosure.
18. DEFICIENCY IN STOCKHOLDERS' EQUITY
Deficiency in stockholders' equity includes the following classes of common
stock ($.01 par value):
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
DECEMBER 31,
SHARES -----------------
CLASS AUTHORIZED 1996 1995
----- ---------- ------- ---------
<S> <C> <C> <C>
A........................................... 500,000 417,500 417,500
B........................................... 667,500 417,500 667,500
C........................................... 1,000,000 50,000 50,000
--------- ------- ---------
2,167,500 885,000 1,135,000
========= ======= =========
</TABLE>
The rights, privileges and powers of the Class A Common Stock and the Class
B Common Stock are identical, with shares of each class being entitled to one
vote on all matters to come before the stockholders of Holdings. The Class C
Common Stock does not have voting rights except in certain circumstances.
19. RELATED PARTY TRANSACTIONS
Pursuant to various management services agreements (the "Management
Agreements") entered into between Holdings, Silgan, Containers, Plastics, and
S&H, Inc. ("S&H"), a company wholly-owned by Mr. Silver, the Chairman and Co-
Chief Executive Officer of Holdings and Silgan, and Mr. Horrigan, the
President and Co-Chief Executive Officer of Holdings and Silgan, S&H provides
Holdings, Silgan and its subsidiaries with general management, supervision and
administrative services.
In consideration for its services, S&H receives a fee of 4.95% (of which
0.45% is payable to MS & Co.) of Holdings' consolidated earnings before
depreciation, amortization, interest and taxes ("EBIDTA") until EBIDTA has
reached the Scheduled Amount set forth in the Management Agreements and 3.3%
(of which 0.3% is payable to MS & Co.) after EBIDTA has exceeded the Scheduled
Amount up to the Maximum Amount as set forth in the Management Agreements,
plus reimbursement for all related out-of-pocket expenses. The total amount
incurred under the Management Agreements was $5.3 million in 1996, $5.4
million in 1995, and $5.0 million in 1994, and was allocated, based upon
EBIDTA, as a charge to operating income of each business segment. Included in
accounts payable at December 31, 1996 and 1995, was $0.1 million payable to
S&H. Under the terms of the Management Agreements, the Company has agreed,
subject to certain exceptions, to indemnify S&H and any of its affiliates,
officers, directors, employees, subcontractors, consultants or controlling
persons against any loss or damage they may sustain arising in connection with
the Management Agreements.
F-23
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
In connection with the Credit Agreement and its related amendments entered
into during 1996 and 1995, the banks thereunder (including Bankers Trust
Company) received fees totaling $1.6 million in 1996 and $17.2 million in
1995.
20. LITIGATION
In connection with the acquisition by Holdings of Silgan as of June 30, 1989
(the "Merger"), a decision was rendered in 1995 by the Delaware Court of
Chancery with respect to appraisal proceedings filed by certain former
stockholders of 400,000 shares of stock of Silgan. Pursuant to that decision,
these former holders were awarded $5.94 per share, plus simple interest at a
rate of 9.5%. This award was less than the amount, $6.50 per share, that these
former holders would have received in the Merger. The right of these former
holders to appeal the Chancery Court's decision has expired, and the Company
tendered payment of $3.8 million to these former holders in 1995. In 1994,
prior to the trial for appraisal, the Company and the former holders of an
additional 650,000 shares of stock of Silgan agreed to a settlement in respect
of their appraisal rights, and the Company made a payment of $6.9 million,
including interest, in respect of the settlement.
Other than the actions mentioned above, there are no other pending legal
proceedings to which the Company is a party or to which any of its properties
are subject which would have a material effect on the Company's financial
position.
21. BUSINESS SEGMENT INFORMATION
The Company is engaged in the packaging industry and operates principally in
two business segments. Both segments operate in North America. There are no
intersegment sales. Presented below is a tabulation of business segment
information for each of the past three years:
<TABLE>
<CAPTION>
NET OPER. IDENTIFIABLE DEP.& CAPITAL
SALES PROFIT ASSETS AMORT. EXPEND.
-------- ------ ------------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1996
Metal container &
specialty(1)............... $1,189.3 $106.1 $750.7 $44.7 $39.1
Plastic container.......... 216.4 18.4 158.5 14.6 17.6
-------- ------ ------ ----- -----
Total..................... $1,405.7 $124.5 $909.2 $59.3 $56.7
1995
Metal container &
specialty(1)............... $ 882.3 $ 58.2(2) $736.7 $31.6 $32.5
Plastic container.......... 219.6 13.2 159.4 13.8 19.4
-------- ------ ------ ----- -----
Total..................... $1,101.9 $ 71.4 $896.1 $45.4 $51.9
1994
Metal container &
specialty(1)............... $ 657.1 $ 59.8(3) $335.3 $23.1 $16.9
Plastic container.......... 204.3 (0.1)(3) 162.8 14.1 12.3
-------- ------ ------ ----- -----
Total..................... $ 861.4 $ 59.7 $498.1 $37.2 $29.2
</TABLE>
- --------
(1) Specialty packaging sales include closures, plastic bowls, and paper
containers used by processors and packagers in the food industry and are
not significant enough to be reported as a separate segment.
(2) Includes charge for reduction in carrying value of assets of $14.7 million
for the metal container segment.
(3) Includes charges for reduction in carrying value of assets of $7.2 million
for the metal container segment and $9.5 million for the plastic container
segment, respectively.
F-24
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Operating profit is reconciled to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Operating profit..................................... $124.5 $ 71.4 $ 59.7
Interest expense..................................... 89.4 80.7 65.8
Corporate expense.................................... 1.2 1.5 1.3
------ ------ ------
Income (loss) before income taxes.................. $ 33.9 $(10.8) $ (7.4)
====== ====== ======
Identifiable assets are reconciled to total assets as follows:
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Identifiable assets.................................. $909.2 $896.1 $498.1
Corporate assets..................................... 4.3 3.9 6.2
------ ------ ------
Total assets....................................... $913.5 $900.0 $504.3
====== ====== ======
</TABLE>
Metal container and other segment sales to Nestle Food Company accounted for
17.1%, 21.4%, and 25.9% of net sales of the Company during the years ended
December 31, 1996, 1995, and 1994, respectively. Sales to Del Monte
Corporation accounted for 12.0%, 14.5%, and 21.4% of net sales of the Company
during the years ended December 31, 1996, 1995, and 1994, respectively.
22. PROPOSED INITIAL PUBLIC OFFERING (Unaudited)
The Company has filed a registration statement for a proposed initial public
offering ("IPO") of 4,500,000 shares of its Common Stock, of which 3,700,000
shares will be sold by the Company and 800,000 will be sold by the Selling
Stockholders. In connection with the IPO, Holdings intends to amend its
Restated Certificate of Incorporation to change its authorized capital stock
to 100,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share. In addition,
immediately prior to the closing of the IPO, Holdings intends to convert its
existing Class A, Class B and Class C Common Stock to Common Stock on a one
for one basis, and thereafter, to effect a 17.133145 to 1 stock split.
Holdings intends to use the estimated net proceeds that it receives from the
IPO to redeem the remaining Discount Debentures outstanding (approximately
$59.0 million) and to repay a portion of the bank term loans.
Upon completion of the proposed IPO, the Company will recognize a non-cash
charge of approximately $21.1 million (assuming an initial public offering
price of $19.00 per share in the IPO), net of $3.7 million previously accrued,
for the excess of the fair market value over the grant price of the variable
stock options under the Containers and Plastics option plans which convert to
Holdings options. In connection with the aforementioned transactions and the
proposed IPO, the Company will recognize an extraordinary charge of
approximately $0.7 million, net of tax, for the write-off of unamortized
deferred financing costs related to the early redemption of the remaining
Discount Debentures.
F-25
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Presented below is the income per common share of the Company for the year
ended December 31, 1996 (assuming that the initial public offering is
completed as proposed) based upon the weighted average number of common and
common equivalent shares that would have been outstanding for the period
presented. Common stock equivalents include options that would have been
outstanding under Holdings' stock option plan upon completion of the IPO.
<TABLE>
<CAPTION>
DECEMBER
31, 1996
----------
<S> <C>
Income per common share:
Income before extraordinary charges................................ $ 1.60
Extraordinary charges.............................................. (0.11)
Preferred stock dividend requirement............................... (0.16)
----------
Net income......................................................... $ 1.33
==========
Weighted average common shares outstanding......................... 17,556,780
Common stock equivalents........................................... 1,612,675
----------
Shares used to compute income per share............................ 19,169,455
==========
</TABLE>
F-26
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
INTRODUCTORY NOTE
Set forth below is the Company's unaudited pro forma condensed statement of
operations for the year ended December 31, 1996. The unaudited pro forma
results of operations of the Company include the historical results of the
Company for such period and give effect to certain pro forma adjustments. All
share and per share data have been adjusted to give effect to the 17.133145
stock split to be effected at the time of the initial public offering.
The unaudited pro forma condensed statement of operations for the year ended
December 31, 1996 gives effect to (i) the sale of $70.3 million of Common
Stock offered by the Company hereby, (ii) the sale of $50.0 million of
Exchangeable Preferred Stock (and the planned exchange of the Exchangeable
Preferred Stock for Exchange Debentures), and (iii) the incurrence of $125.0
million of additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Company's Credit Agreement, and the use
of such proceeds to redeem in full the remaining outstanding amount of
Discount Debentures, to purchase the Holdings' Class B Common Stock held by
Mellon Bank N.A. for $35.8 million and to repay $5.4 million of bank term
loans, as if such events had occurred as of January 1, 1996.
The unaudited pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
had such transactions been completed at the beginning of the period presented,
or to project the Company's financial position or results of operations at any
future date or for any future period. The unaudited pro forma adjustments are
based upon available information and upon certain assumptions that the Company
believes are reasonable. The unaudited pro forma financial data and
accompanying notes should be read in conjunction with the historical financial
information of Holdings, including notes thereto, included elsewhere in this
Prospectus.
F-27
<PAGE>
SILGAN HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------
DEBT
HISTORICAL RECAPITALIZATION(A) OFFERING(B) PRO FORMA
---------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales............... $1,405,742 $ -- $ -- $1,405,742
Cost of goods sold...... 1,223,684 -- -- 1,223,684
---------- ------- ------- ----------
Gross profit.......... 182,058 -- -- 182,058
Selling, general and
administrative
expenses............... 58,768 -- -- 58,768
---------- ------- ------- ----------
Income from
operations........... 123,290 -- -- (c) 123,290
Interest expense and
other related financing
costs(d)(e)............ 89,353 (4,435) (1,436) 83,482
---------- ------- ------- ----------
Income before income
taxes................ 33,937 4,435 1,436 39,808
Income tax
provision(f)........... 3,300 -- -- 3,300
---------- ------- ------- ----------
Net income(g)......... 30,637 4,435 1,436 36,508
Preferred stock dividend
requirement............ 3,006 3,794 (6,800) --
---------- ------- ------- ----------
Net income applicable
to common
stockholders(g)...... $ 27,631 $ 641 $ 8,236 $ 36,508
========== ======= ======= ==========
Net income per common
share(h)............... $ 1.44 $ 1.78
========== ==========
Weighted average number
of common and common
equivalent shares
outstanding............ 19,169,455 20,475,509
</TABLE>
F-28
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(a) Debt recapitalization includes adjustments for (i) the sale of $50.0
million of Exchangeable Preferred Stock and (ii) the incurrence of $125.0
million of additional B term loans and $17.4 million of working capital
loans under the Silgan Credit Agreement, and the use of such proceeds to
redeem a portion of the Discount Debentures and to purchase the Holdings
Class B Stock held by Mellon Bank N.A., as if such events had occurred as
of the beginning of the periods presented.
(b) The Offering includes adjustments for (i) the sale of $70.3 million of
Common Stock offered by the Company hereby and (ii) the planned exchange
of the Exchangeable Preferred Stock for Exchange Debentures. The net
proceeds from the Offering will be used to redeem in full the remaining
outstanding amount of Discount Debentures and to repay a portion of the
bank term loans.
(c) Under the terms of the Containers and Plastics option plans, stock options
issued under such plans will be converted to options under Holdings' Stock
Option Plan at the time of the offering. In accordance with APB No. 25,
options granted under the plans of the operating companies are considered
variable options with a final measurement date at the time of conversion.
The Company will recognize a non-cash charge of approximately $21.1
million (assuming an initial public offering price of $19.00 per share)
for the excess of fair market value over grant price of these options,
less amounts previously accrued, at the time of the Offering. Prior to the
Offering, the Company recognized compensation expense for the change in
pro forma book value, as defined, since the date of grant of these
options, amortized over the vesting period.
(d) Pro forma adjustments made to the historical data for interest expense
consist of the following (in thousands):
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1996(1)
--------------------
<S> <C>
Historical interest expense............................ $ 89,353
Increase in interest expense related to additional bank
borrowings of B term loans and working capital loans
used to fund the redemption of a portion of the
Discount Debentures at current borrowing rates(2)..... 6,193
Increase in interest expense related to the Exchange
Debentures(3)......................................... 6,844
Net increase (decrease) in deferred financing costs
related to amortization of new indebtedness less
retired debt costs.................................... 84
Decrease in interest expense due to the redemption of
the Discount Debentures(4)............................ (17,563)
Decrease in interest expense due to the repayment of
bank term loans from the excess proceeds of the
Offering(5)........................................... (1,429)
--------
Pro forma interest expense............................. $ 83,482
========
</TABLE>
F-29
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
--------
(1) Pro forma interest expense for the year ended December 31, 1996 gives
effect to (i) the sale of $70.3 million of Common Stock offered by the
Company hereby, (ii) the sale of $50.0 million of Exchangeable
Preferred Stock (and the planned exchange of the Exchangeable Preferred
Stock for Exchange Debentures), (iii) the incurrence of $125.0 million
of additional B term loans in July 1996 and $17.4 million of working
capital loans in June 1996 under the Silgan Credit Agreement, and the
use of such proceeds to redeem the remaining outstanding amount of
Discount Debentures, to purchase the Holdings Class B Stock held by
Mellon Bank N.A. for $35.8 million and to repay $5.4 million of bank
term loans, as if such events had occurred as of January 1, 1996.
(2) For the computations above, the assumed interest rates for borrowings
under the Silgan Credit Agreement are based upon the three month LIBOR
of 5.563% per annum as of February 5, 1997 plus a fixed spread of 2
1/2% per annum for the A term loans and working capital loans and 3%
per annum for the B term loans.
(3) In conjunction with the Offering, it was assumed that the outstanding
shares of Exchangeable Preferred Stock were exchanged for 13 1/4%
Subordinated Debentures due July 2006.
(4) The adjustment in interest expense related to the Discount Debentures
has been calculated to eliminate the amount of historical interest
incurred.
(5) Pursuant to the Company's Credit Agreement, net equity proceeds in
excess of the amount required to redeem the remaining balance of
Discount Debentures were applied to repay bank term loans.
(e) The unaudited pro forma statement of operations for the year ended
December 31, 1996 assumes that the redemption of the Discount Debentures
occurred as of the beginning of the period presented. Since the redemption
of the Discount Debentures did not actually occur as of the beginning of
the period presented and because the Discount Debentures accrete in value,
the aggregate principal amount used to calculate interest expense for the
pro forma calculations for the year ended December 31, 1996 differ from
the principal amount of Discount Debentures that will be outstanding at
the time of their redemption. Therefore, actual interest expense of the
Company will also differ from the interest expense reflected in the pro
forma statement of operations. Set forth below is a table estimating
annual interest expense based upon the obligations outstanding after the
occurrence of the Offering:
F-30
<PAGE>
SILGAN HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<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)........ $110.0 8.06% $ 8.9
Bank A Term Loan(1)(3)................. 194.6 8.06% 15.7
Bank B Term Loan(1)(3)................. 343.7 8.56% 29.4
11 3/4% Subordinated Debentures........ 135.0 11.75% 15.9
Exchange Debentures(4)................. 53.0 13.25% 7.3
-----
$77.2
Amortization of debt financing
costs(5).............................. 4.5
-----
Total interest expense and related
financing costs..................... $81.7
=====
</TABLE>
--------
(1) Assumes borrowing rates set forth in footnote (c)(3) above.
(2) Assumes average amount of working capital loans outstanding during the
year.
(3) Excludes effect of an interest rate swap agreements for $200.0 million
of indebtedness entered into by the Company in 1996 under which
floating rate interest was exchanged for fixed rates of interest in
order to mitigate the effect of interest rate fluctuations.
(4) Interest on the Exchange Debentures is payable semi-annually and, on or
prior to July 15, 2000, the Company may pay such interest by issuing
additional Exchange Debentures. For purposes of the estimated annual
interest expense, the Company has assumed that interest will be paid in
additional Exchange Debentures.
(5) Amortization of debt financing costs assumes average annual balance
outstanding.
(f) The income tax provision is comprised of federal, state and foreign income
taxes currently payable. The income tax provision for the year ended
December 31, 1996 has been adjusted to reflect the federal and state
income tax benefits realized from the deduction of the accreted interest
available to the Company as a result of the redemption of the Discount
Debentures. For 1996, there were no federal taxes currently payable due to
the deduction of the accreted interest on the retired Discount Debentures.
(g) The pro forma condensed statement of operations does not include
historical extraordinary charge of $2.2 million for 1996 for the write-off
of unamortized deferred financing costs related to the early redemption of
Discount Debentures and an extraordinary charge, net of tax, of $0.7
million expected to be incurred in the first quarter of 1997 related to
the redemption of the remaining Discount Debentures.
(h) Actual and pro forma earnings per share are based on the weighted average
number of shares outstanding during the period, as adjusted in all periods
for the Stock Split, and after giving effect to stock options considered
to be dilutive common stock equivalents using the treasury stock method.
Primary and fully diluted net income (loss) per share are the same for
each of the periods.
F-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Holdings
and the Selling Stockholders have agreed to sell to each of the Underwriters
named below, and each of such Underwriters, for whom Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc are acting as
representatives, has severally agreed to purchase from Holdings and the
Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
----------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................
Morgan Stanley & Co. Incorporated.........................
Salomon Brothers Inc......................................
---------
Total................................................. 4,500,000
=========
</TABLE>
Pursuant to the terms of the Underwriting Agreement, Morgan Stanley & Co.
Incorporated will not purchase, underwrite or sell any shares of Common Stock
being sold by MSLEF II and will not receive any underwriting discounts,
commissions or fees related to the purchase, underwriting or sale of such
shares by the other Underwriters named above.
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
The Selling Stockholders have granted to the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 675,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise their over-allotment option,
the Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
4,500,000 shares of Common Stock offered.
Holdings, the Principal Common Stockholders and BTNY have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date one year after the date of the Prospectus, they will
not offer, sell, contract to sell or otherwise dispose of any securities of
Holdings (other than, in respect of Holdings, pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus and shares
of Common Stock or securities convertible into such shares issued in
connection with acquisitions, if the holder thereof executes and delivers a
lock-up agreement covering a period of six months after the date of the
Prospectus as contemplated by the Underwriting Agreement) which are
substantially similar to the shares of Common Stock or which are convertible
into or exchangeable for securities which are substantially similar to the
shares of Common Stock, without the prior written consent of Goldman, Sachs &
Co., except for the shares of Common Stock offered in connection with the
Offering.
The Underwriters have reserved up to 111,000 shares of Common Stock offered
hereby for sale to certain employees of the Company at the initial public
offering price. The number of shares available to the general public will be
reduced to the extent such employees purchase reserved shares. Any reserved
shares that are not so purchased by such employees will be offered by the
Underwriters to the general public on the same terms as the other shares
offered hereby.
U-1
<PAGE>
The general partner of MSLEF II is a wholly owned subsidiary of Morgan
Stanley Group Inc. ("MS Group"). Two of the Company's directors are employees
of wholly owned subsidiaries of MS Group. Morgan Stanley & Co. Incorporated
acted as the placement agent for the offering of the Exchangeable Preferred
Stock and received compensation for acting in such capacity. See "Management",
"Certain Transactions" and "Description of Capital Stock--Description of
Stockholders Agreements".
Under Rule 2720 of the National Association of Securities Dealers, Inc. (the
"NASD"), the Company may be deemed an affiliate of Morgan Stanley & Co.
Incorporated. This offering is being conducted in accordance with Rule 2720,
which provides that, among other things, when an NASD member participates in
the underwriting of an affiliate's equity securities, the initial public
offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Goldman, Sachs & Co. has served in such role and has recommended
a price in compliance with the requirements of Rule 2720. Goldman, Sachs & Co.
will receive compensation from the Company in the amount of $10,000 for
serving in such role. In connection with the Offering, Goldman, Sachs & Co. in
its role as qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of this
Prospectus and the Registration Statement of which this Prospectus forms a
part. In addition, the Underwriters may not confirm sales to any discretionary
account without the prior specific written approval of the customer.
Prior to the Offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Holdings, the Selling
Stockholders and the representatives of the Underwriters. Among the factors to
be considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of
companies in related businesses.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "SLGN".
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
U-2
<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.......................................................... 18
Dilution................................................................. 19
Capitalization........................................................... 20
Selected Historical and Pro Forma
Financial Data.......................................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 39
Management............................................................... 51
Principal and Selling Stockholders....................................... 59
Certain Transactions..................................................... 61
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 68
Description of Certain Indebtedness...................................... 69
Legal Matters............................................................ 72
Experts.................................................................. 72
Available Information.................................................... 73
Incorporation of Certain Documents by Reference.......................... 73
Index to Consolidated Financial Statements............................... F-1
Underwriting............................................................. U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,500,000 SHARES
LOGO
[OF SILGAN HOLDINGS, INC.]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------
PROSPECTUS
------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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............ $ 34,970
NASD filing fee................................................ 9,125
NASDAQ listing fee............................................. 50,000
Legal fees and expenses........................................ 350,000
Accountants' fees and expenses................................. 165,000
Printing and engraving expenses................................ 300,000
Blue sky fees and expenses..................................... 22,500
Transfer Agent and Registrar fees and expenses................. 4,500
Miscellaneous.................................................. 63,905
----------
Total...................................................... $1,000,000
==========
</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, the Selling Stockholders and the Underwriters.
4.1 Indenture, dated as of June 29, 1992, between Holdings and Fleet
National Bank, as trustee, with respect to the Discount Debentures
(incorporated by reference to Exhibit 1 filed with Holdings' Current
Report on Form 8-K dated July 15, 1992, Commission File No. 33-47632).
4.2 Indenture, dated as of June 29, 1992, between Silgan and Fleet
National Bank, as Trustee, with respect to the 11 3/4% Notes
(incorporated by reference to Exhibit 1 filed with Silgan's Current
Report on Form 8-K dated July 15, 1992, Commission File No. 33-46499).
4.3 Silgan Holdings Inc. Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of 13 1/4% Cumulative Exchangeable Redeemable Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (incorporated
by reference to Exhibit 3 filed with Holdings' Current Report on Form
8-K dated August 2, 1996, Commission File No. 33-28409).
</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 years ended
December 31, 1996, 1995 and 1994.
*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.
+27 Financial Data Schedule.
+99.1 Form of Restated Certificate of Incorporation of Holdings.
+99.2 Form of Amended and Restated By-laws of Holdings.
</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
February 13, 1997.
SILGAN HOLDINGS INC.
/s/ R. Philip Silver
By: _________________________________
R. PHILIP SILVER
CHAIRMAN OF THE BOARD AND CO-CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ R. Philip Silver Chairman of the
- ------------------------------------- Board and Co-Chief February 13,
(R. PHILIP SILVER) Executive Officer 1997
(Principal
Executive Officer)
/s/ D. Greg Horrigan* President, Co-Chief
- ------------------------------------- Executive Officer February 13,
(D. GREG HORRIGAN) and Director 1997
/s/ Robert H. Niehaus* Director
- ------------------------------------- February 13,
(ROBERT H. NIEHAUS) 1997
/s/ Leigh J. Abramson* Director
- ------------------------------------- February 13,
(LEIGH J. ABRAMSON) 1997
/s/ Harley Rankin, Jr.* Executive Vice
- ------------------------------------- President, Chief February 13,
(HARLEY RANKIN, JR.) Financial Officer 1997
and Treasurer
(Principal
Financial Officer)
II-7
<PAGE>
SIGNATURE TITLE DATE
/s/ Harold J. Rodriguez, Jr.* Vice President,
- ------------------------------------- Controller and February 13,
(HAROLD J. RODRIGUEZ, JR.) Assistant Treasurer 1997
(Principal
Accounting Officer)
/s/ R. Philip Silver
*By: ________________________________
R. PHILIP SILVER ATTORNEY-IN-FACT
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
1 Form of Underwriting Agreement among Holdings, Silgan, Containers,
Plastics, the Selling Stockholders and the Underwriters.
5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality
of the Common Stock.
10.41 Form of Silgan Holdings Inc. Fourth Amended and Restated 1989
Stock Option Plan.
10.43 Form of Amended and Restated Management Services Agreement between
Silgan and S&H.
10.44 Form of Amended and Restated Management Services Agreement between
Plastics and S&H.
10.45 Form of Amended and Restated Management Services Agreement between
Containers and S&H.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse LLP.
</TABLE>
<PAGE>
EXHIBIT 1
SILGAN HOLDINGS INC.
COMMON STOCK
PAR VALUE $.01 PER SHARE
Underwriting Agreement
----------------------
, 1997
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Silgan Holdings Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
3,700,000 shares of Common Stock, par value $.01 per share ("Stock"), of the
Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 800,000 shares of Stock and
at the election of the Underwriters, up to 675,000 additional shares of Stock.
The aggregate of shares to be sold by the Company and the Selling Stockholders
is herein called the "Firm Shares" and the aggregate of 675,000 additional
shares to be sold by the Selling Stockholders is herein called the "Optional
Shares". The Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof being collectively called the "Shares".
Silgan Corporation ("Silgan"), Silgan Containers Corporation ("Containers") and
Silgan Plastics Corporation ("Plastics"), each a Delaware corporation, and the
Company are each referred to as a "Member of the Silgan Group."
1. (a) Each Member of the Silgan Group represents and warrants to, and
agrees with, each of the Underwriters that:
(i) A registration statement on Form S-2 (File No. 333-11989) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the
<PAGE>
2
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration Statement or
any document incorporated by reference therein has heretofore been
filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-
effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including (i) the information contained in the
form of final prospectus filed with the Commission pursuant to Rule
424(b) of the rules and regulations of the Commission under the Act in
accordance with Section 6(a) hereof and deemed by virtue of Rule 430A
of the rules and regulations of the Commission under the Act to be
part of the Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration Statement, if
any, at the time it became or hereafter becomes effective and (ii) the
documents incorporated by reference in the prospectus contained in the
registration statement at the time such part of the registration
statement became effective, each as amended at the time such part of
the registration statement became effective, is hereinafter
collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act, is hereinafter
called the "Prospectus"; and any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of
Form S-2 under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be);
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-2;
(iii) The documents incorporated by reference in the Prospectus,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Securities Exchange Act of 1934,
as amended (the
<PAGE>
3
"Exchange Act"), and the rules and regulations of the Commission
thereunder, and none of such documents when filed with the Commission
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading;
(iv) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-2;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
business, management, financial position, stockholders' equity
(deficiency) or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(vii) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approval, orders, certificates and permits
of and from,
<PAGE>
4
and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its business
in the manner described in the Prospectus, except to the extent where
the failure to obtain any such consent, authorization, approval,
order, certificate or permit or make any such declaration or filing
would not have a material adverse effect on the Company and its
subsidiaries;
(viii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business in and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries; and each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, has the power and
authority (corporate and other) to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries;
(ix) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims other than such pledges of such
capital stock existing on the date hereof made in connection with the
Credit Agreement, dated as of August 1, 1995, among Silgan,
Containers, Plastics and the banks parties thereto;
(x) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable and will
conform to the description of the Stock contained in the Prospectus;
(xi) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of
<PAGE>
5
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act
of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xii) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties or assets may be
bound, except for such defaults as do not and will not have a material
adverse effect on the Company and its subsidiaries;
(xiii) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xiv) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries;
and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(xv) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), assuming The Morgan Stanley Leveraged
Equity Fund II, L.P. ("MSLEF") is not an "investment company" and is
not "controlled" by an "investment company";
(xvi) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
<PAGE>
6
(xvii) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, and Price Waterhouse
LLP, who have certified certain financial statements of American
National Can Company's Food Metal & Specialty Division, are each
independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
(xviii) Except as described in the Prospectus, the Company and its
subsidiaries (A) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (B) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (C) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries; and
(xix) In the ordinary course of its business, the Company conducts
a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any material capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any material permit, license or
approval, any related constraints on operating activities material to
the Company and its subsidiaries, and any potential material
liabilities to third parties). On the basis of such review, the
Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and for the sale and delivery of the Shares to be sold by
such Selling Stockholder have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of
the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling
Stockholder
<PAGE>
7
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of such
Selling Stockholder if such Selling Stockholder is a corporation, the
Limited Partnership Agreement of such Selling Stockholder if such
Selling Stockholder is a limited partnership or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property of
such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, valid title to the Shares to be sold by such
Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares
and payment therefor pursuant hereto and thereto, valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters, as the case may be;
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly (other than any action taken by Morgan Stanley
& Co. Incorporated ("MS&Co.") in connection with the performance of
its obligations as an Underwriter hereunder), any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Shares;
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement
and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
and
(vi) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not
jointly, to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and each of
the Selling Stockholders, in each case as and to the extent indicated in
Schedule I hereto, at a purchase price per share of $______, the number of
Firm Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares to
<PAGE>
8
be sold by the Company and each of the Selling Stockholders as set forth
opposite their respective names in Schedule II hereto by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased
by such Underwriter as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the aggregate number of
Firm Shares to be purchased by all of the Underwriters from the Company and
all of the Selling Stockholders hereunder and (b) in the event and to the
extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, each of the Selling Stockholders agrees,
severally and not jointly, to sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from each
of the Selling Stockholders, at the purchase price per share set forth in
clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you
so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum
number of Optional Shares which such Underwriter is entitled to purchase as
set forth opposite the name of such Underwriter in Schedule I hereto and
the denominator of which is the maximum number of Optional Shares that all
of the Underwriters are entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 675,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the maximum number of
Optional Shares to be sold by each Selling Stockholder as set forth in Schedule
II hereto. Any such election to purchase Optional Shares may be exercised only
by written notice from you to the Selling Stockholders, given within a period of
30 calendar days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
With respect to any Shares sold by MSLEF (the "MSLEF Shares"), it is
understood that MS&Co. shall not purchase, underwrite or sell any MSLEF Shares
and shall not receive any underwriting discounts, commissions or fees related to
the purchase, underwriting or sale of MSLEF Shares hereunder.
3. The Company hereby confirms its engagement of Goldman, Sachs & Co. as,
and Goldman, Sachs & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(o) of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the offering and sale of the Shares. Goldman,
Sachs & Co., in its capacity as qualified independent underwriter and not
otherwise, is referred to herein as the "QIU". As compensation for the services
of the QIU hereunder, the Company agrees to pay the QIU $10,000 on the Closing
Date.
4. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
<PAGE>
9
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company and the Selling Stockholders shall be
delivered by or on behalf of the Company and the Selling Stockholders to
Goldman, Sachs & Co., for the account of such Underwriter, against payment
by or on behalf of such Underwriter of the purchase price therefor by wire
transfer or by certified or official bank check or checks, payable to the
order of the Company and the Selling Stockholders in Federal (same day)
funds. The Company will cause the certificates representing the Shares to
be made available for checking and packaging at least twenty-four hours
prior to the Time of Delivery (as defined below) with respect thereto at
the office of Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on .........., 1997 or such other time and date as Goldman, Sachs &
Co., the Company and the Selling Stockholders may agree upon in writing,
and, with respect to the Optional Shares, 9:30 a.m., New York City time, on
the date specified by Goldman, Sachs & Co. in the written notice given by
Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Shares, or such other time and date as Goldman, Sachs & Co., and
the Selling Stockholders may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery",
such time and date for delivery of the Optional Shares, if not the First
Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(o) hereof, will be delivered at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at
the Closing Location at 2:00 p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Agreement, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act not later than the Commission's close of business
on the second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by Rule
430A(a)(3) of the rules and regulations of the Commission under the Act; to
make no further amendment or any supplement to the Registration Statement
or Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
and becomes effective or any supplement to the Prospectus or any
<PAGE>
10
amended Prospectus has been filed and to furnish you with copies thereof;
to advise you, promptly after it receives notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws
so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Shares, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time,
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) of
the rules and regulations of the Commission under the Act), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
<PAGE>
11
(e) During the period beginning from the date hereof and continuing to
and including the date one year after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement and shares of Stock or securities convertible
into such shares issued in connection with acquisitions, if the holder
thereof executes and delivers a lock-up letter to you in the form attached
hereto as Exhibit A), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ");
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
7. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares
<PAGE>
12
under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) all fees and expenses in connection with listing the
Shares on the NASDAQ; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; and (viii) other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section; and (b) each
of the Selling Stockholders covenants and agrees that such Selling Stockholder
will pay or cause to be paid all costs and expenses incident to the performance
of such Selling Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section, including (i) any fees and expenses
of counsel for such Selling Stockholder and (ii) all taxes incident to the sale
and delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection with Clause (b)(iii) of the preceding
sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax,
and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payments not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 9 and 13
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
each Member of the Silgan Group and each Selling Stockholder herein are, at and
as of such Time of Delivery, true and correct, the condition that the Company
and the Selling Stockholders shall have performed all of its and their
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 6(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests
<PAGE>
13
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Shearman & Sterling, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (vi), (x) and (xiii) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Winthrop, Stimson, Putnam & Roberts, counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business as described in the Prospectus so as to require
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries (such counsel being
entitled to rely in respect of matters of fact upon certificates of
officers of the Company, provided that such counsel shall state that
they believe that both you and they are justified in relying upon such
certificates);
(iv) Each of Silgan, Containers and Plastics has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus; and all of the issued shares
of capital stock of each of Silgan, Containers and Plastics have been
duly and validly authorized and issued, are fully paid and non-
assessable, and are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims other than
such pledges of such capital stock existing on the date hereof made in
connection with the Credit Agreement, dated as of August 1, 1995,
among Silgan, Containers, Plastics and the banks parties thereto (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect to matters of
fact upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they
<PAGE>
14
believe that both you and they are justified in relying upon such
opinions and certificates);
(v) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened by
governmental authorities or others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body of the United
States or the states of Connecticut, New York or (only with respect to
the General Corporation Law) Delaware having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States or the states of Connecticut, New York or (only with
respect to the General Corporation Law) Delaware is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(ix) After reasonable due inquiry, to the best of such counsel's
knowledge, neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound, except for such defaults as do not and will not have a material
adverse effect on the Company and its subsidiaries;
<PAGE>
15
(x) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
a summary of the terms of the Stock and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xi) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act, assuming MSLEF is not an "investment
company" and is not "controlled" by an "investment company";
(xii) The documents incorporated by reference in the Prospectus
(other than the financial statements and schedules and other financial
data therein, as to which such counsel need express no opinion), when
they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder; and they have no
reason to believe that any of such documents, when such documents were
so filed, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made
when such documents were so filed, not misleading; and
(xiii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
schedules and other financial data therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder; although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (x) of this Section 8(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
schedules and other financial data therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that, as
of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than
the financial statements and schedules and other financial data
therein, as to which such counsel need express no opinion) contained
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as
of such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and schedules and other financial data therein, as to which
such counsel need express no opinion) contains an untrue statement of
a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were
<PAGE>
16
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or incorporated by
reference or described as required;
(d) McKenna & Cuneo, L.L.P. independent counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(c) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) Based on such counsel's knowledge, the Company and its
subsidiaries: (x) are in compliance with any and all applicable
federal, state and local laws and regulations relating to the
protection of human health, safety, the environment, and hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"); and (y) have received and comply with all terms and conditions
of all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses -
- except as otherwise described in or contemplated by this Agreement
and except where McKenna & Cuneo L.L.P. believes such noncompliance
with Environmental Laws, and failure to receive or comply with the
terms and conditions of required permits, licenses or other approvals
does not likely, singly or in the aggregate and taken as a whole,
have a material adverse effect on the Company and its subsidiaries;
(ii) No opinion or other assessment (other than audit response
letters) has been provided as to any pending or threatened litigation
against the Company or any subsidiary;
(iii) Each of California-Washington Can Corporation and SCCW Can
Corporation (the "California Subsidiaries") is a corporation
incorporated, validly existing and in good standing under the laws of
the State of California;
(iv) To such counsel's current, actual knowledge, each of the
California Subsidiaries has full corporate power and authority to
conduct its business as currently conducted in accordance with its
articles of incorporation. The articles of incorporation of each
California Subsidiary provides that "[t]he purpose of this corporation
is to engage in any lawful act or activity for which a corporation may
be organized under the General Corporation Law of California other
than the banking business, the trust company business or the practice
of a profession permitted to be incorporated by the California
Corporations Code."
(e) Proskauer Rose Goetz & Mendelsohn LLP, independent counsel for the
Company, shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(d) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
Nothing has come to such counsel's attention which would lead them to
conclude that the first paragraph under the caption "Legal Proceedings",
insofar as such paragraph constitutes a summary of the legal matters,
documents or proceedings referred to therein, does not fairly summarize
the matter referred to therein.
<PAGE>
17
(f) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their
written opinion with respect to each of the Selling Stockholders for whom
they are acting as counsel, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder; and the sale of the Shares to be
sold by such Selling Stockholder hereunder and thereunder and the
compliance by such Selling Stockholder with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation
of any terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound,
or to which any of the property or assets of such Selling Stockholder
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of such
Selling Stockholder if such Selling Stockholder is a corporation, the
Limited Partnership Agreement of such Selling Stockholder if such
Selling Stockholder is a limited partnership or any order, rule or
regulation known to such counsel of any court or governmental agency
or body having jurisdiction over such Selling Stockholder or the
property of such Selling Stockholder;
(ii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement in connection with the
Shares to be sold by such Selling Stockholder hereunder or thereunder,
except [name any such consent, approval, authorization or order] which
[has] [have] been duly obtained and [is] [are] in full force and
effect, such as have been obtained under the Act and such as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters;
(iii) Immediately prior to such Time of Delivery such Selling
Stockholder had valid title to the Shares to be sold at such Time of
Delivery by such Selling Stockholder under this Agreement, free and
clear of all liens, encumbrances, equities or claims, and full right,
power and authority to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder and thereunder; and
(iv) Valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each of the
several Underwriters, who have purchased such Shares in good faith and
without notice of any such lien, encumbrance, equity or claim or any
other adverse claim within the meaning of the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they express
no opinion as to the laws of any jurisdiction outside the United States and
in rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares
sold by such Selling Stockholder,
<PAGE>
18
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such certificate;
(g) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Ernst &
Young LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I hereto);
(h) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m. New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Price
Waterhouse LLP, shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you.
(i)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i)
or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(j) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities or preferred stock by
any "nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(k) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
the NASDAQ; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this clause (iv) in your judgment
makes it impracticable or
<PAGE>
19
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(l) The Shares to be sold by the Company and the Selling Stockholders at
such Time of Delivery shall have been duly listed for quotation on NASDAQ;
(m) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from MSLEF, D. Greg Horrigan, R. Philip Silver,
Bankers Trust New York Corporation ("BTNY"), Harley Rankin, Jr., James D.
Beam and Russel F. Gervais, substantially to the effect set forth in
Section 6(e) hereof (except, in respect of Harley Rankin, Jr., James D.
Beam and Russel F. Gervais, the duration of the lock-up shall be 180 days)
in form and substance satisfactory to you;
(n) The Company shall have complied with the provisions of Section 6(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(o) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company or any other Member of the Silgan Group and of the
Selling Stockholders, respectively, satisfactory to you as to the accuracy
of the representations and warranties of each Member of the Silgan Group
and each Selling Stockholder, respectively herein at and as of such Time of
Delivery, as to the performance by the Company of all of its obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (i) of this Section and as to such
other matters as you may reasonably request.
9. (a) Each Member of the Silgan Group will jointly and severally
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal
or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses
are incurred; provided, however, that no Member of the Silgan Group shall
be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman,
Sachs & Co. expressly for use therein.
(b) Each of MSLEF and BTNY will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact
<PAGE>
20
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action
or claim as such expenses are incurred; provided, however, that such
Selling Stockholder shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein.
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such Seller Stockholder may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through Goldman, Sachs & Co. expressly for use therein;
and will reimburse the Company and each Selling Stockholder for any legal
or other expenses reasonably incurred by the Company or such Selling
Stockholder in connection with investigating or defending any such action
or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the
<PAGE>
21
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 9 is unavailable
to or insufficient to hold harmless an indemnified party under subsection
(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Members of the
Silgan Group on a collective basis and the Selling Stockholders on the one
hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law or if the indemnified party failed to
give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Members of the Silgan
Group on a collective basis and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Members of the
Silgan Group on a collective basis and the Selling Stockholders on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholders bear to the
total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by any Member of the Silgan Group or Selling
Stockholder on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Each Member of the
Silgan Group, each of the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
subsection (e) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above
<PAGE>
22
in this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(f) The obligations of each Member of the Silgan Group and the Selling
Stockholders under this Section 9 shall be in addition to any liability
which such Member of the Silgan Group and the respective Selling
Stockholders may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this
Section 9 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person,
if any, who controls the Company or any Selling Stockholder within the
meaning of the Act.
10. (a) Each Member of the Silgan Group and each Selling Stockholder
will jointly and severally indemnify and hold harmless Goldman, Sachs &
Co., in its capacity as QIU, against any losses, claims, damages or
liabilities, joint or several, to which the QIU may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case, as to the Selling Stockholders, to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein; and will reimburse the QIU for any legal or
other expenses reasonably incurred by the QIU in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(b) Promptly after receipt by the QIU of notice of the commencement of
any action, the QIU shall, if a claim in respect thereof is to be made
against any Member of the Silgan Group or any Selling Stockholder under
subsection (a) above, notify the Company or the Selling Stockholder, as the
case may be, in writing of the commencement thereof; but the omission so to
notify the Company or the Selling Stockholder, as the case may be, shall
not relieve any Member of the Silgan Group or any Selling Stockholder from
any liability which it may have to the QIU otherwise than under such
subsection. In case any such action shall be brought against the QIU and
<PAGE>
23
it shall notify the Company and the Selling Stockholders of the
commencement thereof, the Company or the Selling Stockholder, as the case
may be, shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to the QIU (who
shall not, except with the consent of the QIU, be counsel to any Member of
the Silgan Group), and, after notice from the indemnifying party to the QIU
of its election so to assume the defense thereof, the indemnifying party
shall not be liable to the QIU under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred
by the QIU, in connection with the defense thereof other than reasonable
costs of investigation. No Member of the Silgan Group or Selling
Stockholder shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the QIU is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the QIU from all liability arising out of such
action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of the QIU.
(c) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless Goldman, Sachs & Co., in
its capacity as QIU, under subsection (a) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each Member of the Silgan Group and each Selling Stockholder
shall contribute to the amount paid or payable by the QIU as a result of
such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits
received by the Members of the Silgan Group on a collective basis and the
Selling Stockholders on the one hand and the QIU on the other from the
offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
QIU failed to give the notice required under subsection (b) above, then
each Member of the Silgan Group and each Selling Stockholder shall
contribute to such amount paid or payable by the QIU in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Members of the Silgan Group on a collective basis and
the Selling Stockholders on the one hand and the QIU on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative benefits
received by the Members of the Silgan Group on a collective basis and the
Selling Stockholders on the one hand and the QIU on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the
Selling Stockholders, as set forth in the table on the cover page of the
Prospectus, bear to the fee payable to the QIU pursuant to Section 3
hereof. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by any Member of the Silgan Group or Selling
Stockholder on the one hand or the QIU on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Each Member of the Silgan
Group, each Selling Stockholder and the QIU agree that it
<PAGE>
24
would not be just and equitable if contributions pursuant to this
subsection (c) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (c). The amount paid
or payable by the QIU as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (c) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(d) The obligations of each Member of the Silgan Group and each Selling
Stockholder under this Section 10 shall be in addition to any liability
which such Member of the Silgan Group and such Selling Stockholder may
otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls the QIU within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery,
you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange
for the purchase of such Shares, then the Company and the Selling
Stockholders shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties reasonably
satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that it has
so arranged for the purchase of such Shares, you or the Company and the
Selling Stockholders shall have the right to postpone such Time of Delivery
for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased at
such Time of Delivery, then the Company shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of Shares which such Underwriter agreed to
purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from liability for its
default or require MS&Co. to purchase, underwrite or sell any MSLEF Shares.
<PAGE>
25
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Shares which remains unpurchased exceeds one-
eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Underwriters to purchase
Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part
of any non-defaulting Underwriter or the Company or the Selling
Stockholders, except for the expenses to be borne by the Company and the
Selling Stockholders and the Underwriters as provided in Section 7 hereof
and the indemnity and contribution agreements in Section 9 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for
its default or require MS&Co. to purchase, underwrite or sell any MSLEF
Shares.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Members of the Silgan Group, the Selling
Stockholders and the several Underwriters, as set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation (or
any statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or any Member of
the Silgan Group, or any Selling Stockholder, or any officer or director or
controlling person of any Member of the Silgan Group, or any controlling
person of any Selling Stockholder and shall survive delivery of and payment
for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11
hereof, no Member of the Silgan Group nor the Selling Stockholders shall
then be under any liability to any Underwriter except as provided in
Sections 7 and 9 hereof and to the QIU except as provided in Section 10
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number
of Shares to be sold by the Company and such Selling Stockholder hereunder)
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but no Member
of the Silgan Group or Selling Stockholder shall then be under any further
liability to any Underwriter except as provided in Sections 7 and 9 hereof
and to the QIU except as provided in Section 10 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter
made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as
the representatives; and in all dealings with any Selling Stockholder
hereunder, you and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling
Stockholder made or given by any or all of the Attorneys-in-Fact for such
Selling Stockholder.
<PAGE>
26
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to you as the representatives in care of
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention:
Registration Department; if to any Selling Stockholder shall be delivered
or sent by mail, telex or facsimile transmission to counsel for such
Selling Stockholder at its address set forth in Schedule II hereto; and if
to any Member of the Silgan Group shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Chief Financial Officer; provided, however, that any notice to an
Underwriter pursuant to Section 9(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address
set forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholders by you upon request. Any such statements, requests, notices
or agreements shall take effect upon receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Members of the Silgan Group and the
Selling Stockholders and, to the extent provided in Sections 9, 10 and 12
hereof, the officers and directors of the Company and each person who
controls the Company, any Selling Stockholder or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and
the same instrument.
<PAGE>
27
If the foregoing is in accordance with your understanding, please sign
and return to us nine (9) counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement between each of the
Underwriters, each Member of the Silgan Group and each of the Selling
Stockholders. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is pursuant to the authority set forth
in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholders for examination upon
request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
Silgan Holdings Inc.
By:
----------------------------------
Name:
Title:
Silgan Corporation
By:
----------------------------------
Name:
Title:
Silgan Containers Corporation
By:
----------------------------------
Name:
Title:
Silgan Plastics Corporation
By:
----------------------------------
Name:
Title:
<PAGE>
The Morgan Stanley Leveraged Equity Fund II, L.P.
By: The Morgan Stanley Leveraged Equity
Fund II, Inc.
as general partner
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Bankers Trust New York Corporation
By:
----------------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
By:
----------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<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
----------- ------------------------- ---------------------------------
Non-MSLEF MSLEF Non-MSLEF MSLEF
Firm Shares Firm Shares Optional Shares Optional Shares
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co. [ ] [ ] [ ] [ ]
Morgan Stanley & Co. Incorporated [ ] 0 [ ] 0
Salomon Brothers Inc. [ ] [ ] [ ] [ ]
[Names of other Underwriters] [ ] [ ] [ ] [ ]
Total 3,785,561 714,439 72,193 602,807
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
TOTAL NUMBER NUMBER OF OPTIONAL
OF SHARES TO BE SOLD IF
FIRM SHARES TO MAXIMUM OPTION
BE SOLD EXERCISED
--------------- ---------------------
<S> <C> <C>
The Company................................ 3,700,000 0
The Selling Stockholders:
The Morgan Stanley Leveraged Equity
Fund II, L.P. (a)...................... 714,439 602,807
Bankers Trust New York Corporation (b).. 85,561 72,193
Total................................... 4,500,000 675,000
========= =======
</TABLE>
(a) This Selling Stockholder is represented by Davis, Polk & Wardwell,
450 Lexington Avenue, New York, New York.
(b) This Selling Stockholder is represented by [Name and Address of
Counsel].
<PAGE>
EXHIBIT A
FORM OF LOCK-UP LETTER
___________, 1997
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Ladies and Gentlemen:
The undersigned understands that Goldman, Sachs & Co. ("Goldman"), as
representative of the several Underwriters, has entered into an
Underwriting Agreement (the "Underwriting Agreement") with Silgan Holdings
Inc., a Delaware corporation (the "Company"), which provided for the public
offering (the "Public Offering") by the several Underwriters, including
Goldman, of 3,700,000 shares (the "Shares") of Common Stock, par value $.01
per share, of the Company (the "Common Stock"). The undersigned further
understands that the Company has agreed pursuant to Section 6(e) of the
Underwriting Agreement, among other things, not to offer, sell, contract to
sell or otherwise dispose of shares of Common Stock or securities
convertible into Common Stock in connection with acquisitions unless the
transferee executes and delivers to Goldman this letter.
In satisfaction of this requirement, the undersigned hereby agrees
that, without the prior written consent of Goldman on behalf of the
Underwriters, it will not, during the period commencing on the date hereof
and ending six months after the date of the final prospectus relating to
the Public Offering (the "Prospectus"), offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
any securities that are substantially similar to the Common Stock,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Common Stock or
any such substantially similar securities. In addition, the undersigned
agrees that, without the prior written consent of Goldman on behalf of the
Underwriters, it will not, during the period commencing on the date hereof
and ending six months after the date of the Prospectus, make any demand for
or exercise any right with
<PAGE>
respect to, the registration of any shares of Common Stock or any
securities that are substantially similar to the Common Stock, including
but not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Common Stock or any such
substantially similar securities.
Very truly yours,
_______________________________
(Name)
_______________________________
(Print Name)
_______________________________
(Address)
Accepted as of the date
first set forth above:
Goldman, Sachs & Co.
By:
<PAGE>
ANNEX I
Pursuant to Section 8(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined
by them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been
separately furnished to the Representatives; and on the basis of
specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in the
related in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations, nothing came to their attention that caused
them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations;
<PAGE>
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by
reference in the Company's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
<PAGE>
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except in
each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the
specified date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (vi) above, they
have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear
in the Prospectus
<PAGE>
(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 5
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
(203) 348-2300
February 12, 1997
Silgan Holdings Inc.
4 Landmark Square
Stamford, CT 06901
Re: Registration Statement on Form S-2
(Registration No. 333-11989) of
Silgan Holdings Inc.
----------------------------------
Dear Sirs:
We refer to the above-referenced Registration Statement on Form S-2,
as amended through the date hereof (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Act"), relating to the registration of
5,175,000 shares (including 675,000 shares which the underwriters have an option
to purchase to cover over-allotments, if any) of common stock, par value $.01
per share (the "Shares"), of Silgan Holdings Inc., a Delaware corporation (the
"Company").
In connection with this opinion, we have examined copies of (i) the
Restated Certificate of Incorporation and Amended and Restated By-laws of the
Company, each in the form filed as an exhibit to the Registration Statement, and
(ii) certain resolutions of the Board of Directors of the Company relating to
the proposed issuance of the Shares. We have also examined and relied upon
originals or photostatic or certified copies of such records of the Company,
certificates of officers of the Company, certificates and statements of public
officials and such other documents as we have deemed relevant and necessary as
the basis for the opinion set forth below. In such examinations, we have
assumed the completion of all requisite corporate actions and authorizations
prior to the effectiveness of the Registration Statement, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us as certified,
conformed or photostatic copies, and the authenticity of all originals of such
copies.
Based upon the foregoing, we are of the opinion that when the
Registration Statement becomes effective under the Act and the Shares are duly
issued and sold as contemplated by the Registration Statement, the Shares will
be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Delaware and we express no opinion as to the
effect of the laws of any other jurisdiction.
We consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5 to the Registration Statement and to the
reference to our firm under the caption "Legal Matters" in the Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/ Winthrop, Stimson, Putnam & Roberts
<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 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.
----
<PAGE>
"Committee" shall mean the committee of three or more persons selected by
---------
the Board of Directors to administer this Plan.
"Common Stock" shall mean the authorized and issuable common stock of the
------------
Company ($.01 par value).
"Fair Market Value" shall mean (i) if the stock is listed or admitted to
-----------------
trade on a national securities exchange, the closing price of the stock on
the composite tape of the principal national securities exchange on which
the stock is so listed or admitted to trade, (ii) if the stock is not
listed or admitted to trade on a national securities exchange, the mean
between the last reported bid and asked price for the stock as furnished by
the National Association of Securities Dealers, Inc. through NASDAQ or a
similar organization if NASDAQ is no longer reporting such information, or
(iii) if the stock is not listed or admitted to trade on a national
securities exchange and if bid and asked prices for the stock are not so
furnished through NASDAQ or a similar organization, the fair market value
of the stock as determined in good faith by the Committee in such manner as
it deems appropriate, taking into consideration, among other things, recent
sales of the stock.
"ISO" shall mean incentive stock option(s) within the meaning of Section
---
422 of the Code.
"Nonstatutory Options" shall mean an option granted pursuant to the Plan
--------------------
which does not qualify as an ISO.
"Option(s)" shall mean option(s) to purchase Common Stock under this Plan
---------
and shall include Options that result from the conversion of options under
and as provided in stock option plans of any Subsidiary to which the
Company is a party.
"Option Price" shall have the meaning set forth in Section 3.1 hereof.
------------
"Person" shall mean any individual, partnership, joint venture,
------
corporation, association, trust, or any other entity or organization,
including a government or political subdivision or any agency or
instrumentality thereof.
"Public Offering" shall mean a primary, public offering of shares of Common
---------------
Stock, pursuant to an effective registration statement, registered under
the Securities Act of 1933, as amended.
"S&H Stockholders" shall mean R. Philip Silver and D. Greg Horrigan.
----------------
-2-
<PAGE>
"Subsidiary" shall mean any corporation if 50% or more of the total
----------
combined voting power and value of all classes of stock is owned, either
directly or indirectly, by the Company or another Subsidiary.
II. ADMINISTRATION; PARTICIPATION.
2.1 Administration.
--------------
This Plan shall be administered by the Committee, none of the members
of which are currently eligible to receive Options and have not been eligible to
receive Options for at least twelve (12) months prior to their selection to the
Committee. The action of the Committee with respect to the administration of
this Plan shall be taken pursuant to a majority vote or the written consent of a
majority of its members. In the event action by the Committee is taken by
written consent of its members, the action by the Committee shall be deemed to
have been taken at the time the last member required for valid action by the
Committee signs the consent.
Subject to the express provisions of this Plan, the Committee shall
have the authority to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and participants under this
Plan, to further define the terms used in this Plan, to prescribe, amend and
rescind rules and regulations relating to the administration of this Plan, to
determine the duration and purposes of leaves of absence which may be granted to
participants without constituting a termination of their employment for purposes
of this Plan and to make all other determinations necessary or advisable for the
administration of this Plan. The determinations of the Committee on the
foregoing matters shall be conclusive.
Subject to the express provisions of this Plan, the Committee shall
select from the eligible class of employees of the Company or a Subsidiary and
make corresponding recommendations to the Board of Directors concerning the
individuals to whom Options shall be granted and the terms and provisions of
such Options (which need not be identical) including, but not by way of
limitation, the time at which such Options shall be granted, whether an Option
granted hereunder shall be intended to be treated as an ISO or a Nonstatutory
Option, the number of shares subject to each Option and the Option Price and the
consideration acceptable in payment of the Option Price. The Committee shall
also determine, as to each individual to whom Options shall be granted effective
as of June 30, 1989, the Carryover Amount, if any, applicable to such
individual.
No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction
-3-
<PAGE>
hereunder. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred by any member in connection with defending against,
responding to, negotiating the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with the
member's actions in administering this Plan or authorizing or denying
authorization to any transaction hereunder.
The Board of Directors, at any time it so desires, may increase or
decrease the number of members of the Committee, may remove from membership on
the Committee all or any portion of its members, and may appoint such person or
persons as it desires to fill any vacancy existing on the Committee, whether
caused by removal, resignation or otherwise.
2.2 Participation.
-------------
Only officers or key employees of the Company, or of a Subsidiary,
whose responsibility levels indicate their ability to substantially contribute
to the Company's growth and development shall be eligible for selection by the
Committee to participate in this Plan; provided, however, that members of the
Committee shall not, while members of this Committee, be eligible to receive
Options under this Plan. In addition, members of the Board of Directors who are
not officers or employees of the Company or of any Subsidiary shall not be
eligible to receive Options under this Plan. An individual who has been granted
an Option may, if otherwise eligible, be granted additional Options if the
Committee so determines.
Notwithstanding anything herein to the contrary, during the initial
term of the Amended and Restated Management Services Agreement dated as of
February 12, 1997 by and between S&H, Inc. and the Company (i.e., until June 30,
1999, unless such initial term is terminated for any reason prior to the
expiration thereof), Options may be granted under this Plan to either of the S&H
Stockholders if, and only if, any such grant of Options is approved by (i) a
majority of the members of the Committee (which majority must include a majority
of the members of the Committee excluding any of the S&H Stockholders that are
members of the Committee) and (ii) a majority of the members of the Board of
Directors (which majority must include a majority of the members of the Board of
Directors excluding any of the S&H Stockholders that are members of the Board of
Directors).
2.3 Stock Subject to the Plan.
-------------------------
Subject to Section 4.1 hereof, the stock to be offered under this Plan
shall be shares of authorized but unissued Common Stock or Common Stock held in
treasury. The aggregate amount of Common Stock to be delivered upon exercise of
all Options granted under the Plan shall not exceed the sum of (i) 124,000
shares plus (ii) such number of shares issuable upon exercise of all
-4-
<PAGE>
Options that will be outstanding upon and in the event of the conversion to
Options of options under and in accordance with stock option plans of all
Subsidiaries, with such sum being subject to adjustment as set forth in Section
4.1 of this Plan. Such amount of Common Stock is hereby reserved for issuance
under this Plan. If any Option shall expire or terminate for any reason without
having been fully exercised, the unexercised shares subject thereto shall again
be available for the purposes of this Plan.
2.4 Stock Option Agreements.
-----------------------
Each Option granted pursuant to this Plan shall be evidenced by an
Incentive Stock Option Agreement or a Nonstatutory Stock Option Agreement (any
of which are at times herein referred to as an "Option Agreement" or,
collectively, as "Option Agreements"), which shall set forth the terms and
conditions of the option and specify whether such option is intended to be an
ISO or a Nonstatutory Stock Option.
III. OPTIONS.
3.1 Option Price.
------------
Except as otherwise provided herein, the purchase price per share of
the Common Stock covered by each Option (the "Option Price") shall be determined
by the Committee; provided, however, the Option Price for an ISO shall not be
less than the Fair Market Value of the Common Stock covered by the Option at the
time of grant. The Option Price of any share purchased shall be paid in full at
the time of each purchase in cash, by check, or, provided that all necessary
regulatory approvals have been received, and provided further that the Option
Agreement provides for such exercise, the person exercising the Option may
deliver in payment of all or a portion of the Option Price certificates for
other shares of Common Stock which shall be valued at the Fair Market Value of
such Common Stock as of the date of exercise of the Option.
3.2 Option Period.
-------------
Except as otherwise provided herein or as otherwise determined by the
Committee, each Option and all rights or obligations thereunder shall expire on
such date as shall be provided in the Option Agreement, but not later than the
tenth anniversary (fifth anniversary in the case of an ISO granted to an
employee who owns or is deemed to own at the time of grant more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or a Subsidiary) of the date on which the Option is granted, and shall be
subject to earlier termination as hereinafter provided.
-5-
<PAGE>
3.3 Exercise of Options.
-------------------
Each Option shall become exercisable and the total number of shares
subject thereto shall be purchasable no sooner than one year from the date of
the grant of the Option, and only in such installments, which need not be equal,
as specified in the Option Agreement. If the holder of an Option shall not in
any given installment period purchase all of the shares which the holder is
entitled to purchase in such installment period, the holder's right to purchase
any shares not so purchased in such installment period shall continue until the
expiration or earlier termination of the holder's Option. The Committee may, at
any time after grant of the Option and from time to time, increase the number of
shares purchasable in any installment so long as the total number of shares
subject to the Option is not increased. No Option or installment thereof shall
be exercisable except in respect of whole shares, and fractional share interests
shall be disregarded except that they may be accumulated in accordance with the
second sentence of this Section 3.3. No fewer than ten (10) shares may be
purchased at one time unless the number purchased is the total number at the
time available for purchase under the Option. The Committee may impose such
conditions or limitations, as shall be specified in the applicable Option
Agreement, on the sale or transfer of Common Stock acquired upon exercise of an
Option as it may deem necessary or desirable.
3.4 Nontransferability of Options.
-----------------------------
An Option granted under this Plan shall, by its terms, be
nontransferable by the holder other than by will or the laws of descent and
distribution, and shall be exercised during the holder's lifetime only by the
holder or a duly appointed guardian or personal representative.
3.5 Termination of Employment.
-------------------------
(a) If an Option holder ceases to be an officer of or employed by the
Company or a Subsidiary because of the Option holder's voluntary termination of
employment, the Option will be exercisable only until the date of resignation
from office or termination of employment, to the extent, and only to the extent,
installments had become exercisable as of the date of termination of employment
or resignation from office.
(b) If an Option holder ceases to be an officer of or employed by
either the Company or a Subsidiary for any reason other than voluntary
termination specified in Section 3.5(a), the Option holder shall have ninety
(90) days, or such other period provided in the Option Agreement, from the date
of termination of employment to exercise his or her Option, to the extent, and
only to the extent, installments had become exercisable prior to the date of
termination of employment or removal or resignation from office.
-6-
<PAGE>
3.6 Permanent Disability of Employee.
--------------------------------
If an Option holder is no longer an officer of or employed by either
the Company or a Subsidiary, as a result of permanent disability (as defined
below), the holder shall have twelve (12) months, or such shorter period as is
provided in the Option Agreement, from the date of termination of employment to
exercise his or her Option. The Option shall expire at the end of such 12-month
period (or such shorter period as is provided in the Option Agreement or as
provided pursuant to Section 3.2 hereof) to the extent not exercised within that
period. As used herein, "permanent disability" shall mean the inability of an
Option holder by reason of illness or injury to perform substantially all of his
or her duties as an employee of the Company or a Subsidiary during any continued
period of one hundred eighty (180) days.
3.7 Death of Employee.
-----------------
If an Option holder dies while an officer of or employed by the
Company or a Subsidiary, or during the periods described in Section 3.5(b) or
3.6 hereof, the holder's Option shall be exercisable during the twelve-month
period, or such shorter period as is provided in the Option Agreement, following
the holder's death, by the executor of the holder's will, the administrator of
the holder's estate, or as otherwise provided in the Option Agreement, (and not
otherwise, regardless of any community property or other interest therein of the
spouse of the holder or such spouse's successor in interest), provided that in
no event shall the Option be exercised after the period provided for in Section
3.2 hereof. Unless sooner terminated pursuant to the Plan, the Option shall
expire at the end of such twelve-month period (or such shorter period as is
provided in the Option Agreement or as is provided pursuant to Section 3.2
hereof) to the extent not exercised within that period. In the event that the
holder's spouse shall have acquired a community property interest in the Option,
the holder, the executor of the holder's will, the administrator of the holder's
estate, or such other Person as is otherwise provided in the Option Agreement,
may exercise the option on behalf of the spouse of the holder or such spouse's
successor in interest.
3.8 Limitation on Grant of ISOs.
---------------------------
The aggregate Fair Market Value (determined as of the date or dates
the ISO or ISOs are granted) of the Common Stock with respect to which the ISO
or ISOs granted to an employee are exercisable for the first time by such
employee during any one calendar year (under this Plan and all other incentive
stock option plans of the Company or any Subsidiary) shall not exceed $100,000.
-7-
<PAGE>
3.9 Option Shall be Designated an ISO or Nonstatutory Option.
--------------------------------------------------------
The Option Agreement for each option grant shall state whether the
Options granted thereby are intended to be ISOs or Nonstatutory Options.
IV. OTHER PROVISIONS.
4.1 Adjustments Upon Changes in Capitalization and Ownership.
--------------------------------------------------------
Subject to Section 4.2 below, if the outstanding shares of Common
Stock are increased, decreased or changed into, or exchanged for, a different
number or kind of shares or securities of the Company through a reorganization
or merger in which the Company is the surviving entity, combination,
recapitalization, reclassification, stock split-up, reverse stock split, stock
dividend, stock consolidation or otherwise, an appropriate and proportionate
adjustment shall be made in the number and kind of shares for which Options may
be granted as set forth in Section 2.3 hereof and in the Carryover Amount. A
corresponding adjustment changing the number or kind of shares and the exercise
price per share allocated to unexercised Options or portions thereof, which
shall have been granted prior to any such change, and the Carryover Amount,
shall also be made. Subject, in the case of ISOs, to Section 424 of the Code,
any such adjustment, however, shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the price for each share.
Upon the dissolution or liquidation of the Company, or, subject to
Section 4.2 below, upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which the Company is not the
surviving corporation, in which such surviving corporation (or an affiliate), if
applicable, does not assume all obligations of the Company under this Plan and
substitute for the unexercised Options granted under the Plan options to
purchase securities of such surviving corporation having a value substantially
equivalent to or greater than the Common Stock issuable upon exercise of such
Options and on terms substantially the same as or better than those granted
under the Plan, such Options shall become immediately exercisable upon the
occurrence of such an event, but in no event may such Options be exercised after
the exercise period specified in each individual Option Agreement.
Adjustments under this Section 4.1 shall be made by the Committee,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of Common
Stock shall be issued under this Plan on account of any such adjustment. If for
any reason any person becomes entitled to any interest in a
-8-
<PAGE>
fractional share, a cash payment shall be made of an equivalent value of such
interest.
4.2 Change of Control.
-----------------
In the event of a Change of Control other than a Pooling Transaction
(as hereinafter defined) during the term of one or more Options, such Options
shall, subject to Section 4.1 above, remain outstanding and shall become
exercisable by the holder thereof upon the terms and conditions of the Plan and
the Option Agreement between such holder and the Company; provided, however, the
-------- -------
Committee may, in its discretion, take one or more of the following actions in
connection with a Change of Control (other than a Pooling Transaction):
(a) The Committee may declare that any or all Options shall
terminate as of a date to be fixed by the Committee and may require that the
respective holders thereof surrender all or a portion of their unexercised
Options for cancellation by the Company prior to such date and, upon such
surrender, such holders shall receive (i) the cash, securities or other
consideration they would have received had they exercised such Options
immediately prior to such Change of Control and had they disposed of their
shares of Common Stock issuable upon such exercise in connection with such
Change of Control (subject to required deductions and withholdings), minus (ii)
an amount of cash or fair market value of securities or other such consideration
equal to the Option Price for such Options surrendered; or
(b) The Committee may declare that, upon the exercise by a
holder of any or all Options after a Change of Control in accordance with the
provisions of the Plan, such holder shall be entitled to receive only the cash,
securities or other consideration he would have been entitled to receive had he
exercised such Options immediately prior to such Change of Control and had he
disposed of the Common Stock issuable upon such exercise in connection with such
Change of Control; or
(c) The Committee may declare that any or all Options shall
terminate as of a date to be fixed by the Committee and give the holders thereof
the right to exercise their Options prior to such date as to all or any part
thereof; or
(d) The Committee may permit the successor corporation to assume
the obligations of the Company under the Plan and to substitute for the
unexercised Options granted under the Plan options to purchase securities of
such successor corporation having a value substantially equivalent to or greater
than the Common Stock issuable upon exercise of such Options and on terms
substantially the same as or better than those granted under the Plan, all as
determined by the Committee, whereupon all outstanding Options and all future
Options granted under the Plan shall thenceforth become options to purchase such
securities of such successor corporation on such terms.
-9-
<PAGE>
Notwithstanding anything herein or in any Option Agreement to the
contrary, if, during the term of one or more Options, there shall occur a Change
of Control which is intended to qualify as a "pooling of interests" for
accounting and financial reporting purposes (a "Pooling Transaction"), it shall
be a condition to the effectiveness of such Change of Control transaction that
the acquiror agree to assume the obligations of the Company under the Plan and
to provide for the substitution of options to purchase securities equivalent to,
and with terms the same as, those granted under the Plan, all as determined by
the Committee.
4.3 Continuation of Employment.
--------------------------
Nothing contained in this Plan (or in any Option granted pursuant to
this Plan) or in any Option Agreement shall confer upon any employee any right
to continue in the employ of the Company or a Subsidiary or constitute any
contract or agreement of employment or interfere in any way with the right of
the Company or a Subsidiary to reduce any person's compensation from the rate in
existence at the time of the granting of an Option or Right or to change any
person's position or duties or to demote or terminate such person's employment
with or without cause, but nothing contained herein or in any Option Agreement
shall effect any contractual rights of an employee obtained otherwise than under
this Plan.
4.4 Government Regulations.
----------------------
This Plan and the grant and exercise of Options shall be subject to
all applicable rules and regulations of governmental authorities.
4.5 Withholding.
-----------
The Company may require, as a condition to (1) issuing or delivering
to the holder of an Option shares or certificates evidencing the shares upon
exercise of the Option or (2) allowing the transfer of shares subsequent to
their issuance to the holder of an Option, that the holder of an Option or other
person exercising the Option pay any sums that federal, state, or local tax law
requires to be withheld with respect to such exercise or transfer. Neither the
Company nor any Subsidiary shall be obligated to advise any holder of an Option
of the existence of the tax or the amount which the Company will be so required
to withhold.
4.6 Amendment, Termination, and Reissuance.
--------------------------------------
(a) The Board of Directors may at any time suspend, amend or
terminate this Plan (or any part thereof) and, with the consent of the holder of
an Option, may make such modifications of the terms and conditions of such
holder's Option as it shall deem advisable. No Option may be granted during any
suspension
-10-
<PAGE>
of this Plan or after such termination. The amendment, suspension or
termination of this Plan shall not, without the consent of the holder of an
Option, adversely alter or impair any rights or obligations under any Option
theretofore granted under this Plan. The Committee shall have the power and
may, with the consent of the holder of any Option, cancel any existing Option
and reissue Options to the holder of those canceled Options, having a new and
lower Option Price, but otherwise bearing substantially similar terms to the
canceled Options.
(b) In addition to the Board of Directors' approval of any amendment,
if the amendment would (i) increase the benefits accruing to participants in
this Plan, (ii) increase the aggregate number of shares which may be issued
under this Plan, or (iii) modify the requirements of eligibility for
participation in this Plan, then such amendment shall be approved by the holders
of a majority of the Company's outstanding capital stock present, or
represented, and entitled to vote at a meeting duly held for the purpose of
approving such amendment. For purposes of this Subsection 4.6(b), any
cancellation and reissuance of Options at the same, or a new or lower, Option
Price pursuant to Subsection 4.6(a) hereof shall not constitute an amendment of
the Plan.
4.7 Time of Grant and Exercise.
--------------------------
(a) Except as the Committee or Board of Directors shall otherwise
determine, the granting of an Option pursuant to the Plan shall take place at
the time of the resolutions adopted by the Committee granting such Option;
provided, however, that if the appropriate resolutions of the Committee indicate
that an Option is to be granted as of or at some future date, the date of grant
shall be such future date.
(b) An Option shall be deemed to be exercised when the Secretary of
the Company receives written notice of such exercise from the person entitled to
exercise the Option, together with payment in full of the purchase price made in
accordance with Section 3.1 of this Plan and all applicable withholding taxes.
4.8 Privileges of Stock Ownership; Nondistributive Intent.
-----------------------------------------------------
The holder of an Option shall not be entitled to the privilege of
stock ownership as to any shares of Common Stock not actually issued and
delivered to him or her. Upon exercise of an Option, unless a registration
statement is in effect under the Securities Act of 1933, as amended, relating to
the Common Stock issuable upon exercise and there is available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of said Act, the Common
Stock may be issued to the option holder only if he or she represents and
warrants in writing to the Company and its counsel that the shares purchased are
being acquired for investment and not with a view to the resale or distribution
thereof. No shares shall be issued upon the exercise of any
-11-
<PAGE>
Option unless and until there shall have been full compliance with any then
applicable requirements of the Securities and Exchange Commission, or any other
regulatory agencies having jurisdiction over this Plan (and of any exchanges
upon which stock of the Company may be listed).
4.9 Issuance of Stock Certificates.
------------------------------
Upon exercise of an Option, the person receiving Common Stock shall be
entitled to one stock certificate evidencing the shares acquired upon such
exercise; provided, however, that any person who tenders Common Stock to the
Company in payment of a portion or all of the purchase price of stock purchased
upon exercise of an Option, shall be entitled to receive two certificates, one
representing a number of shares equal to the number of shares exchanged for the
stock acquired upon exercise, and another representing the additional shares
acquired upon exercise of the Option.
4.10 Effective Date of this Plan.
---------------------------
This Plan shall, subject to its adoption by the Board of Directors and
the Company's stockholders in accordance with applicable law and the Company's
Certificate of Incorporation, be effective as of June 30, 1989.
4.11 Expiration.
----------
Unless previously terminated by the Board of Directors, this Plan
shall expire at the close of business on the date that is ten (10) years less
one day from the date executed below and no Option shall be granted under it
thereafter, but such expiration shall not affect any Option theretofore granted.
4.12 Governing Law.
-------------
This Plan and the Options issued hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed within such State, except as such laws may be
supplanted by the laws of the United States of America, which laws shall then
govern its effect and its construction to the extent they supplant New York law.
EXECUTED as of the day of February, 1997.
SILGAN HOLDINGS INC.
By
---------------------------------
Title
------------------------------
-12-
<PAGE>
Exhibit 10.43
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
This Amended and Restated Management Services Agreement (the "Agreement")
is made as of this ___ day of February, 1997 by and between S&H INC., a
Connecticut corporation ("S&H"), and SILGAN CORPORATION, a Delaware corporation
("Silgan").
W I T N E S S E T H:
-------------------
WHEREAS, S&H and Silgan have entered into the Amended and Restated
Management Services Agreement dated as of December 21, 1993 (the "Original
Management Services Agreement"), pursuant to which S&H provides general
management, supervision, administrative and other services to Silgan in
accordance with the terms of the Original Management Services Agreement;
WHEREAS, S&H also is a party to an Amended and Restated Management Services
Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc., the
parent holding company of Silgan ("Holdings"), Silgan Containers Corporation, a
wholly owned subsidiary of Silgan ("Containers"), and Silgan Plastics
Corporation, a wholly owned subsidiary of Silgan ("Plastics");
WHEREAS, S&H and each of Holdings, Containers and Plastics are entering
into an amended and restated management services agreement dated as of the date
hereof (collectively, as so amended and restated, the "Affiliate Management
Services Agreements"); and
<PAGE>
WHEREAS, in contemplation of the consummation of an initial public offering
of the common stock of Holdings pursuant to an effective registration statement
under the Securities Act of 1933, as amended, S&H and Silgan desire to amend and
restate hereby the Original Management Services Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, S&H and Silgan agree as follows:
1. Management Services.
-------------------
(a) S&H and Silgan hereby agree that, during the period beginning on
the date hereof and continuing throughout the term hereof, S&H and its
Affiliates shall provide to Silgan general management, supervision and
administrative services, including, without limitation, the preparation of the
annual and long-term business plans, and perform such other duties and provide
such other services as Silgan shall be permitted to request of S&H pursuant to
the Restated Certificate of Incorporation or By-Laws of Holdings or pursuant to
applicable law, which power and authority Silgan hereby grants to S&H ("General
Management Services"). (The General Management Services are hereinafter
collectively referred to as the "Services" and individually as a "Service").
(b) Any Service hereunder shall be provided to Silgan only by S&H or
its Affiliates or such consultants, subcontractors or agents as may be selected
from time to time by S&H to assist S&H in its provision of the Services. It is
understood and agreed that S&H may retain the services of Morgan
-2-
<PAGE>
Stanley & Co. Incorporated or another suitable investment bank as financial
advisor to Silgan or as an underwriter or placement agent for offerings of
securities by Silgan.
2. Fees; Payment.
-------------
(a) In consideration for General Management Services provided by S&H
to Silgan hereunder, Silgan shall pay to S&H aggregate fees or compensation
therefor (not including any related out-of-pocket expenses), (i) on a monthly
basis, an amount equal to five thousand dollars ($5,000) plus 2.475% of EBDIT
(as defined in Paragraph 2(i) hereof) for such calendar month until EBDIT for
the calendar year to date has reached the Scheduled Amount (as defined in
Paragraph 2(d) hereof) for such calendar year, and 1.65% of EBDIT for such
calendar month to the extent that EBDIT for the calendar year to date exceeds
the Scheduled Amount but is not greater than the Maximum Amount (as defined in
Paragraph 2(d) hereof) (the "Monthly Management Fee"); and (ii) on a quarterly
basis, an amount equal to 2.475% of EBDIT for such calendar quarter until EBDIT
for the calendar year to date has reached the Scheduled Amount, and l.65% of
EBDIT for such calendar quarter to the extent that EBDIT for the calendar year
to date exceeds the Scheduled Amount but is not greater than the Maximum Amount
(the "Quarterly Management Fee").
(b) Such Quarterly Management Fee shall continue to accrue, but shall
not be paid, to S&H by Silgan in the event that, and from the date on which,
Silgan shall have received written notice ("Notice") from the Agent (as defined
below) that an Event of Default (as such term is defined in the Credit
-3-
<PAGE>
Agreement, dated as of August 1, 1995, among Silgan, Containers, Plastics, the
lenders from time to time party thereto, Bankers Trust Company, as
Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America
Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof (the
"Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the
extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10,
and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit
Agreement (each of the foregoing Events of Default, a "Financial Covenant Event
of Default") until, and shall be paid by Silgan to S&H on, the earliest to occur
of (x) the first date after receipt of such Notice upon which no Financial
Covenant Event of Default to which the Notice related or otherwise known to S&H
or Silgan shall be in existence (and so long as no such Financial Covenant Event
of Default would be in existence after giving effect to the payment of such
unpaid portion of the Quarterly Management Fee), (y) the first date occurring
180 days or more after receipt by Silgan of a written notice from the Agent
stating that no Event of Default exists under Section 9.01 of the Credit
Agreement, or (z) the date that Silgan, Containers, Plastics, California-
Washington Can Corporation, a wholly owned subsidiary of Containers, and SCCW
Can Corporation, a wholly owned subsidiary of Containers, shall have paid all
outstanding Obligations (as such term is defined under the Credit Agreement).
In the event that a Notice is delivered by the Agent, Silgan shall pay to S&H
that portion of
-4-
<PAGE>
any unpaid Quarterly Management Fee that has accrued with respect to that
portion of such calendar quarter prior to the occurrence of any Financial
Covenant Event of Default to which such Notice relates.
(c) Nothing contained in Paragraph 2(b) shall prevent the Agent from
giving successive Notices of the type described in Paragraph 2(b) (in which case
the rules set forth in Paragraph 2(b) shall apply to, and the time periods set
forth therein shall begin to run on, the date of such subsequent Notice);
provided that only one Notice relating to a single Financial Covenant Event of
- --------
Default and all other Financial Covenant Events of Default in existence at the
date of the giving of any such Notice may be given. Notwithstanding anything to
the contrary stated herein, if at any time after the giving of Notice by the
Agent to Silgan, S&H shall certify in writing to Silgan that all Financial
Covenant Events of Default to which such Notice relates have been cured or
waived, and that S&H knows of no other Financial Covenant Event of Default then
in existence, then Silgan shall, unless it knows of the existence of a Financial
Covenant Event of Default which has not yet been cured or waived, pay to S&H any
accrued and unpaid Quarterly Management Fee or portion thereof in the manner set
forth in Paragraph 2(g) hereof unless a Financial Covenant Event of Default
would result from such payment. S&H shall not be required to deliver any such
certification to Silgan upon the occurrence of the dates or events set forth in
clauses (y) or (z) of Paragraph 2(b), and promptly after the occurrence of such
date or event, Silgan will
-5-
<PAGE>
pay to S&H any accrued and unpaid Quarterly Management Fee or portion thereof.
(d) For any given calendar year during the term of this Agreement,
the Scheduled Amount and the Maximum Amount for such calendar year will be the
amounts set forth in Schedule I hereto.
(e) In addition to the Monthly Management Fee and the Quarterly
Management Fee, Silgan shall also reimburse S&H in an amount equal to all out-
of-pocket expenses paid by S&H in providing the Services hereunder, including
fees and expenses paid to consultants, subcontractors and other third parties,
in connection with such Services. Such expenses shall be payable by Silgan to
S&H monthly in arrears.
(f) (i) Not later than fifteen (15) days after the end of each
calendar month during the term hereof with respect to the Monthly Management Fee
and (ii) not later than thirty (30) days after the end of each full calendar
quarter during the term hereof with respect to the Quarterly Management Fee, S&H
shall furnish Silgan with a bill for an amount equal to the Monthly Management
Fee and the Quarterly Management Fee, respectively, then owing with respect to
periods ended on or before the end of such calendar month or such calendar
quarter.
(g) Each bill furnished to Silgan hereunder shall be paid in full
within thirty (30) days of the receipt of such bill, except that any accrued and
unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest
date on which such payment is permitted to be made pursuant to Paragraphs 2(a),
-6-
<PAGE>
2(b) and 2(c) hereof. All payments of such bills shall be sent to:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
or to such other address as S&H may specify from time to time by written notice
to Silgan.
(h) All fees and expenses paid to S&H by Holdings, Containers and
Plastics, pursuant to their respective Affiliate Management Services Agreements
with S&H, shall be credited to the Monthly Management Fee, the Quarterly
Management Fee and the expenses referred to in Paragraphs 2(a) and 2(e) hereof.
(i) For purposes of this Section 2, EBDIT shall mean, for any period,
the consolidated net income of Holdings and its subsidiaries, before interest
expense and provision for income taxes and without giving effect to any
extraordinary non-cash gains or extraordinary non-cash losses and any
adjustments resulting from changes in the value of employee stock options and/or
stock appreciation rights, and adjusted by adding thereto (i) the amount of any
fees and expenses paid pursuant to this Agreement or the Affiliate Management
Services Agreements, (ii) the amount of all charges and expenses incurred in
connection with any refinancing, restructuring, recapitalization or
reorganization involving Holdings and its subsidiaries (which charges and
expenses have been charged against the consolidated net income of Holdings or
its subsidiaries), and (iii) the amount
-7-
<PAGE>
of all amortization of intangibles, covenants not to compete, goodwill and debt
financing costs and all depreciation (which amortization and depreciation have
been charged against the consolidated net income of Holdings and its
subsidiaries, before interest expense), computed in accordance with generally
accepted accounting principles.
3. Direct Expenses.
---------------
It is understood that the consideration to be paid by Silgan to S&H
for Services hereunder shall not be in lieu of, and that Silgan shall be
directly liable for, direct expenses incurred by Silgan, or by S&H on Silgan's
behalf (other than the out-of-pocket expenses billed to Silgan by S&H pursuant
to Paragraph 2(e) hereof), for services rendered to Silgan by third parties,
including, but not limited to, legal and accounting fees and insurance premiums.
Silgan shall pay any compensation (including employee benefit costs and any
related out-of-pocket expenses) to officers and other employees of Silgan who
provide substantially full-time services to Silgan, other than Messrs. R. Philip
Silver ("Silver"), D. Greg Horrigan ("Horrigan"), Harley Rankin, Jr. ("Rankin")
and Harold J. Rodriguez, Jr. ("Rodriguez") who shall receive no salaries (it
being understood, however, that Silgan shall reimburse S&H in respect of
compensation paid by S&H to Messrs. Rankin and Rodriguez consistent with the
reimbursement therefor by Silgan to S&H in 1996), notwithstanding that said
officers and other employees may simultaneously be officers or employees of S&H
or one of its subsidiaries or Affiliates.
-8-
<PAGE>
4. Term.
----
(a) The term of this Agreement shall commence on the date hereof and
shall continue until June 30, 1999. Therefore, the term of this Agreement shall
be automatically renewed for successive one-year terms unless prior to the date
that is 180 days prior to the expiration of the initial term or the then current
one-year term, as the case may be, either party shall have given the other party
written notice of its election not to renew the term of this Agreement (it being
understood that the determination by Silgan whether to give such written notice
of its election not to renew the term of this Agreement will be made by the
independent members of the Board of Directors of Holdings). For purposes
hereof, the independent members of the Board of Directors of Holdings shall not
include any employee or affiliate of S&H, any officer of Holdings or any member
of the Board of Directors that is affiliated with any entity that is receiving
or is entitled to receive any payment from Holdings under this Agreement or any
payment from S&H in connection with this Agreement. The term of this Agreement
may be terminated prior to the expiration of the initial term or the then
current one-year term, as the case may be, by written notice to the other party
as follows: (i) by Silgan for Cause, (ii) by S&H for Cause, (iii) by Silgan for
any reason other than Cause, upon at least 180 days prior written notice, (iv)
by S&H for any reason other than (A) Cause or (B) because of a Change of
Control, upon at least 180 days prior written notice, or (v) by S&H at any time
after a Change of Control.
-9-
<PAGE>
(b) Upon termination of any Affiliate Management Services Agreement
by the party thereto other than S&H for any reason other than "Cause" as defined
in such Affiliate Management Services Agreement, this Agreement shall be deemed
to have been terminated by Silgan pursuant to clause (iii) of the last sentence
of Section 4(a) hereof, effective as of the date of termination of such
Affiliate Management Services Agreement. Upon termination by S&H of any
Affiliate Management Services Agreement for any reason other than "Cause" or
because of a "Change of Control," each as defined in such Affiliate Management
Services Agreement, this Agreement shall be deemed to have been terminated by
S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof,
effective as of the date of termination of such Affiliate Management Services
Agreement.
(c) For purposes of this Section 4, a "Change of Control" shall be
deemed to have occurred when a majority of the Board of Directors of Holdings
shall not consist of "Continuing Holdings Directors," which shall mean (i) the
directors of Holdings on the date hereof and (ii) each other director of
Holdings who is either recommended, approved or nominated for election, or is
elected, to the Board of Directors of Holdings by a majority of the other
Continuing Holdings Directors.
5. Events of Default.
-----------------
Any one of the following defaults shall constitute an Event of Default
(other than by reason of an Event of Force Majeure in the case of each of
Paragraphs 5(a)-(f)):
-10-
<PAGE>
(a) (i) The failure or refusal of S&H to comply with or perform its
obligations under this Agreement if such failure or refusal continues unremedied
for more than 60 days after written notice of the existence of such failure or
refusal shall have been given to S&H by Silgan or (ii) the failure or refusal of
Silgan to comply with or perform its obligations under this Agreement if such
failure or refusal continues unremedied for more than 60 days after written
notice of the existence of such failure or refusal shall have been given to
Silgan by S&H;
(b) S&H or Holdings is declared insolvent or bankrupt by any court of
competent jurisdiction, or a voluntary petition in bankruptcy is filed in any
court of competent jurisdiction by either of them;
(c) An involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against S&H or Holdings and within forty-five (45) days
thereafter shall not have been dismissed or stayed (and, in the event of any
such stay, such stay shall not have been set aside and the petition dismissed
within forty-five (45) days after the stay shall have been granted);
(d) A trustee or receiver is appointed for S&H or Holdings and remains
undischarged for more than forty-five (45) days after being appointed;
(e) A proceeding seeking a reorganization, arrangement, liquidation or
dissolution of S&H or Holdings is instituted in a court of competent
jurisdiction and remains
-11-
<PAGE>
undismissed for more than forty-five (45) days after being instituted;
(f) S&H or Holdings voluntarily seeks any such reorganization or
arrangement or makes an assignment for the benefit of creditors; or
(g) Death or permanent disability of both Horrigan and Silver. For
the purposes of this Agreement, "permanent disability" shall mean the inability
of Horrigan or Silver, as the case may be, by reason of illness or injury to
perform substantially all of his duties as Chairman of the Board or as President
of Holdings (or in performing his duties in any other office in Holdings or any
of its respective Affiliates to which he may be duly appointed) during any
continuous period of one hundred eighty (180) days.
6. Cause.
-----
(a) The occurrence of any of the following shall constitute "Cause"
for purposes of clause (i) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described in
Section 5(a)(ii) of this Agreement; or
(ii) Criminal conduct or gross negligence by S&H in the performance
of the Services; or
(iii) The termination of any Affiliate Management Services Agreement
by Holdings, Containers or Plastics, as the case may be, for "Cause" as
defined therein.
-12-
<PAGE>
(b) The occurrence of either of the following shall constitute
"Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described in
Section 5(a)(i) of this Agreement; or
(ii) The termination of any Affiliate Management Services Agreement
by S&H for "Cause" as defined therein.
7. Remedies. (a) In the event this Agreement is terminated (or deemed
--------
terminated) by Silgan prior to June 30, 1999 for any reason other than for
Cause, Silgan shall be required to pay to S&H as liquidated damages, within
thirty (30) days of such termination, the present value of the sum of (i) the
Monthly Management Fee (or any portion thereof) that would have been payable by
Silgan to S&H for each month (or any portion thereof) from the date of such
termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any
portion thereof) that would have been payable by Silgan to S&H for each quarter
(or portion thereof) from the date of such termination through June 30, 1999, in
each case calculated based on a discount rate of eight percent (8%) per annum.
(b) In the event this Agreement is terminated by Silgan after June 30,
1999 for any reason other than for Cause, Silgan shall be required to pay to S&H
as liquidated damages, within thirty (30) days of such termination, the present
value of the sum of (i) the Monthly Management Fee (or any portion thereof)
payable by Silgan to S&H for each month (or any portion thereof) from the date
of such termination through the end of the then
-13-
<PAGE>
current one-year term and (ii) the Quarterly Management Fee (or any portion
thereof) payable by Silgan to S&H for each quarter (or portion thereof) from the
date of such termination through the end of the then current one-year term, in
each case calculated based on a discount rate of eight percent (8%) per annum.
(c) The amounts described in clauses (i) and (ii) of Sections 7(a)
and 7(b) shall be calculated based upon the projections of EBDIT for the period
from the date of such termination through June 30, 1999 or through the end of
the then current one-year term, as the case may be, which projections are (1)
included in Holdings' most recently prepared forecast statements required under
the Credit Agreement or (2) if the Credit Agreement is not in existence,
included in Holdings' most recently prepared forecast statements presented to
its Board of Directors (provided such forecast statements are prepared on a
basis consistent with the requirements under the Credit Agreement that was in
effect last).
8. Force Majeure.
-------------
The term "Event of Force Majeure" as used herein shall mean any
failure of a party to perform any of its obligations hereunder if such failure
is due to circumstances beyond its control, including but not limited to, any
requisition by any government authority, act of war, strike, boycott, lockout,
picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act
of God, fire, flood, accident, explosion, earthquake, storm, failure of public
utilities or common
-14-
<PAGE>
carriers, mechanical failure, embargo, or prohibition imposed by any
governmental body or agency having authority over the party, which would have
constituted an Event of Default but for the fact that such events constituted an
Event of Force Majeure. The party affected by an Event of Force Majeure shall
give prompt notice thereof to the other parties hereto and each party shall use
its best efforts to minimize the duration and consequences of, and to eliminate,
any such Event of Force Majeure. At such time as an Event of Force Majeure no
longer exists, the respective obligations of the parties hereto shall be
reinstated and this Agreement shall continue in full force and effect.
9. Insurance.
---------
S&H agrees that for the term of this Agreement it shall cause Silgan
to obtain and maintain insurance for such risks and in such amounts similar to
companies of comparable size which are engaged in similar business activities,
provided that S&H shall be deemed to be in compliance with the provisions of
- --------
this paragraph if Silgan maintains a level of insurance which complies with the
applicable terms of the Credit Agreement.
10. Indemnification.
---------------
(a) Silgan shall indemnify to the fullest extent permitted by law
(as now or hereafter in effect) S&H and each of its Affiliates, officers,
directors, employees, consultants and subcontractors, and any Person controlling
S&H and each of its Affiliates or any such consultant or subcontractor (each, an
"S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that
any S&H Indemnitee is made, or threatened to be made,
-15-
<PAGE>
a defendant to, or is involved in any manner in, any action, suit or proceeding
(whether civil, criminal, administrative, investigative or otherwise) by reason
of the fact that such S&H Indemnitee is or was an agent of Holdings.
(b) In furtherance and not in limitation of the powers conferred
by statute:
(i) Silgan may purchase and maintain insurance on behalf
of any S&H Indemnitee as an agent of Silgan against any liability asserted
against any S&H Indemnitee and incurred by any S&H Indemnitee in such
capacity, or arising out of any S&H Indemnitee's status as such, whether or
not Silgan would have the power to indemnify such S&H Indemnitee against
such liability under the provisions of law; and
(ii) Silgan may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to
any or all of the foregoing to ensure the payment of such amounts as may
become necessary to effect indemnification as provided therein, or
elsewhere.
(c) The manner of any indemnification under this Agreement shall
be in accordance with Section 2.8 of the Stockholders Agreement dated as of
December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity
Fund II,
-16-
<PAGE>
L.P., Bankers Trust New York Corporation, First Plaza Group Trust and Holdings
(as amended from time to time, the "Stockholders Agreement").
11. Noncompetition.
--------------
(a) During the term of this Agreement, S&H hereby agrees that it
will not, directly or indirectly, own, render services to, manage, operate,
control, or participate in the ownership, management, operation or control of a
business that is engaged in any "Business". For purposes hereof, the term
"Business" shall mean the manufacture and sale anywhere in the world of consumer
goods packaging products.
(b) In the event that this Agreement is terminated by S&H
pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby
agrees that, for a period of one year beginning on the date of such termination,
it will not, directly or indirectly: (i) own, render services to, manage,
operate, control, or participate in the ownership, management, operation or
control of a business that is engaged in any Business; (ii) interfere with any
customer or supplier relationship between Holdings and/or its subsidiaries and
any other person or business entity; or (iii) disclose or use any confidential
or proprietary information relating to Holdings and its subsidiaries'
businesses, except for any information already in the public domain through no
act of S&H and except as may be required by law or governmental or court order.
(c) Notwithstanding anything herein to the contrary, nothing
herein, however, shall restrict S&H from making
-17-
<PAGE>
any investments in any company whose stock is listed on a national securities
exchange or actively traded in the over-the-counter markets, so long as such
investment does not give S&H the right to control or influence the policy
decisions of any such company engaged in any Business.
(d) If any particular provision or portion of this Section 11
shall be adjudicated to be invalid or unenforceable, this Section 11 shall be
deemed amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable, and such amendment will apply only with respect to the
operation of such provision or portion in the particular jurisdiction in which
such adjudication was sought.
(e) The parties recognize that the performance of the obligations
under this Section 11 by S&H is special, unique and extraordinary in character,
and that in the event of a breach, or threatened breach, of any of the terms and
conditions of this Section 11, Silgan shall be entitled, if it so elects, in
addition to any other remedies available to Silgan, to enforce the specific
performance thereof or to enjoin any breach thereof.
12. Notices.
-------
All notices and other communications required by or specifically
provided for in this Agreement shall be in writing and shall be deemed to have
been given (a) when delivered in person, (b) when sent by telex or telecopier
with answerback received, or (c) seventy-two (72) hours after having been
deposited in the U.S. mails, certified mail with return receipt requested and
postage prepaid, and in any case addressed to the
-18-
<PAGE>
party for which it is intended at that party's address as set forth below, or at
such other address as the addressee shall have designated by notice hereunder to
the other party.
If to S&H:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If to Silgan:
Silgan Corporation
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If a notice is sent to any of the above, a copy shall
be sent to the following:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Attention: Frank W. Hogan, III, Esq.
Any notice or request sent by telecopier or similar facsimile telecommunication
shall be confirmed promptly by the sending of a copy of such notice or request
to the addressee thereof by prepaid certified mail, return receipt requested.
13. Definitions.
-----------
Terms not defined herein which are defined in the Stockholders
Agreement shall have the meanings ascribed to them therein.
-19-
<PAGE>
14. Amendment; Assignment; Binding Effect.
-------------------------------------
This Agreement may be amended or modified only by a written instrument
signed by the parties hereto. No party shall assign or transfer this Agreement,
in whole or in part, or any of such party's rights or obligations hereunder, to
any other person or entity without the prior written consent of the other party
hereto, except that S&H may transfer or assign all of its rights and obligations
hereunder to any entity directly or indirectly succeeding to S&H by merger,
consolidation or reorganization. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted assigns.
15. Waiver; Severability.
--------------------
The failure of a party to insist in any instance upon the strict and
punctual performance of any provision of this Agreement shall not constitute a
continuing waiver of such provision. No party shall be deemed to have waived
any right, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of any other party in any other respect or at
any other time. If any provision of this Agreement shall be waived, or be
invalid, illegal or unenforceable, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain binding and in full force and
effect.
-20-
<PAGE>
16. Relationship of the Parties.
---------------------------
In all matters relating to this Agreement, each party hereto shall be
solely responsible for the acts of its employees, and employees of one party
shall not be considered employees of the other party. Except as otherwise
provided herein, no party shall have any right, or authority to create any
obligation, express or implied, on behalf of any other party.
17. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to its conflict of laws
rules and laws.
18. Entire Agreement; Termination of Original Management Services
-------------------------------------------------------------
Agreement.
- ---------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either oral or written, with respect thereto.
Upon the execution and delivery of this Agreement, the Original Management
Services Agreement shall be terminated and shall be of no effect whatsoever.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
S&H INC.
By:
-----------------------------------------------
Title:
SILGAN CORPORATION
By:
-----------------------------------------------
Title:
-22-
<PAGE>
SCHEDULE I
(000's Omitted)
<TABLE>
<CAPTION>
Scheduled Amount/1/ Maximum Amount/1/
---------------- - -------------- -
<S> <C> <C> <C>
1997 $ 89,500 1997 $100,504
1998 95,500 1998 102,964
1999 101,500 1999 105,488
2000 108,653 2000 108,653
</TABLE>
- --------------------
/1/ For each calendar year after 2000, the Scheduled Amount for such calendar
year shall be an amount equal to the Maximum Amount for such calendar year. For
each calendar year after 2000, the Maximum Amount for such calendar year shall
be equal to one hundred and three percent (103%) of the Maximum Amount for the
prior calendar year.
<PAGE>
Exhibit 10.44
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
This Amended and Restated Management Services Agreement (the "Agreement")
is made as of this ___ day of February, 1997 by and between S&H INC., a
Connecticut corporation ("S&H"), and SILGAN PLASTICS CORPORATION, a Delaware
corporation ("Plastics").
W I T N E S S E T H:
-------------------
WHEREAS, S&H and Plastics have entered into the Amended and Restated
Management Services Agreement dated as of December 21, 1993 (the "Original
Management Services Agreement"), pursuant to which S&H provides general
management, supervision, administrative and other services to Plastics in
accordance with the terms of the Original Management Services Agreement;
WHEREAS, S&H also is a party to an Amended and Restated Management Services
Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc.
("Holdings"), Silgan Corporation, a wholly owned subsidiary of Holdings and the
parent company of Plastics ("Silgan"), and Silgan Containers Corporation, a
wholly owned subsidiary of Silgan ("Containers");
WHEREAS, S&H and each of Holdings, Silgan and Containers are entering into
an amended and restated management services agreement dated as of the date
hereof (collectively, as so amended and restated, the "Affiliate Management
Services Agreements"); and
<PAGE>
WHEREAS, in contemplation of the consummation of an initial public offering
of the common stock of Holdings pursuant to an effective registration statement
under the Securities Act of 1933, as amended, S&H and Plastics desire to amend
and restate hereby the Original Management Services Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, S&H and Plastics agree as follows:
1. Management Services.
-------------------
(a) S&H and Plastics hereby agree that, during the period beginning on
the date hereof and continuing throughout the term hereof, S&H and its
Affiliates shall provide to Plastics general management, supervision and
administrative services, including, without limitation, the preparation of the
annual and long-term business plans, and perform such other duties and provide
such other services as Plastics shall be permitted to request of S&H pursuant to
the Certificate of Incorporation or By-Laws of Holdings or pursuant to
applicable law, which power and authority Plastics hereby grants to S&H
("General Management Services"). (The General Management Services are
hereinafter collectively referred to as the "Services" and individually as a
"Service").
(b) Any Service hereunder shall be provided to Plastics only by S&H or
its Affiliates or such consultants, subcontractors or agents as may be selected
from time to time by S&H to assist S&H in its provision of the Services. It is
understood and agreed that S&H may retain the services of Morgan
-2-
<PAGE>
Stanley & Co. Incorporated or another suitable investment bank as financial
advisor to Plastics or as an underwriter or placement agent for offerings of
securities by Plastics.
2. Fees; Payment.
-------------
(a) In consideration for General Management Services provided by S&H
to Plastics hereunder, Plastics shall pay to S&H aggregate fees or compensation
therefor (not including any related out-of-pocket expenses), (i) on a monthly
basis, an amount equal to Plastics' Proportionate Percentage (as defined below)
of five thousand dollars ($5,000) plus 2.475% of EBDIT (as defined in Paragraph
2(i) hereof) for such calendar month until EBDIT for the calendar year to date
has reached the Scheduled Amount (as defined in Paragraph 2(d) hereof) for such
calendar year, and 1.65% of EBDIT for such calendar month to the extent that
EBDIT for the calendar year to date exceeds the Scheduled Amount but is not
greater than the Maximum Amount (as defined in Paragraph 2(d) hereof) (the
"Monthly Management Fee"); and (ii) on a quarterly basis, an amount equal to
Plastics Proportionate Percentage of 2.475% of EBDIT for such calendar quarter
until EBDIT for the calendar year to date has reached the Scheduled Amount, and
l.65% of EBDIT for such calendar quarter to the extent that EBDIT for the
calendar year to date exceeds the Scheduled Amount but is not greater than the
Maximum Amount (the "Quarterly Management Fee"). For purposes of this Section
2, "Proportionate Percentage" means such percentage of EBDIT for a given period
that is attributable to the results of Plastics for such period.
-3-
<PAGE>
(b) Such Quarterly Management Fee shall continue to accrue, but shall
not be paid, to S&H by Plastics in the event that, and from the date on which,
Plastics or Silgan shall have received written notice ("Notice") from the Agent
(as defined below) that an Event of Default (as such term is defined in the
Credit Agreement, dated as of August 1, 1995, among Silgan, Containers,
Plastics, the lenders from time to time party thereto, Bankers Trust Company, as
Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America
Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof (the
"Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the
extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10,
and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit
Agreement (each of the foregoing Events of Default, a "Financial Covenant Event
of Default") until, and shall be paid by Plastics to S&H on, the earliest to
occur of (x) the first date after receipt of such Notice upon which no Financial
Covenant Event of Default to which the Notice related or otherwise known to S&H
or Plastics shall be in existence (and so long as no such Financial Covenant
Event of Default would be in existence after giving effect to the payment of
such unpaid portion of the Quarterly Management Fee), (y) the first date
occurring 180 days or more after receipt by Silgan of a written notice from the
Agent stating that no Event of Default exists under Section 9.01 of the Credit
Agreement, or (z) the date that Silgan, Containers,
-4-
<PAGE>
Plastics, California-Washington Can Corporation, a wholly owned subsidiary of
Containers, and SCCW Can Corporation, a wholly owned subsidiary of Containers,
shall have paid all outstanding Obligations (as such term is defined under the
Credit Agreement). In the event that a Notice is delivered by the Agent,
Plastics shall pay to S&H that portion of any unpaid Quarterly Management Fee
that has accrued with respect to that portion of such calendar quarter prior to
the occurrence of any Financial Covenant Event of Default to which such Notice
relates.
(c) Nothing contained in Paragraph 2(b) shall prevent the Agent from
giving successive Notices of the type described in Paragraph 2(b) (in which case
the rules set forth in Paragraph 2(b) shall apply to, and the time periods set
forth therein shall begin to run on, the date of such subsequent Notice);
provided that only one Notice relating to a single Financial Covenant Event of
- --------
Default and all other Financial Covenant Events of Default in existence at the
date of the giving of any such Notice may be given. Notwithstanding anything to
the contrary stated herein, if at any time after the giving of Notice by the
Agent to Silgan, S&H shall certify in writing to Silgan that all Financial
Covenant Events of Default to which such Notice relates have been cured or
waived, and that S&H knows of no other Financial Covenant Event of Default then
in existence, then Plastics shall, unless it knows of the existence of a
Financial Covenant Event of Default which has not yet been cured or waived, pay
to S&H any accrued and unpaid Quarterly Management Fee or portion thereof in the
manner set forth in Paragraph 2(g)
-5-
<PAGE>
hereof unless a Financial Covenant Event of Default would result from such
payment. S&H shall not be required to deliver any such certification to Silgan
upon the occurrence of the dates or events set forth in clauses (y) or (z) of
Paragraph 2(b), and promptly after the occurrence of such date or event,
Plastics will pay to S&H any accrued and unpaid Quarterly Management Fee or
portion thereof.
(d) For any given calendar year during the term of this Agreement,
the Scheduled Amount and the Maximum Amount for such calendar year will be the
amounts set forth in Schedule I hereto.
(e) In addition to the Monthly Management Fee and the Quarterly
Management Fee, Plastics shall also reimburse S&H in an amount equal to all out-
of-pocket expenses paid by S&H in providing the Services hereunder, including
fees and expenses paid to consultants, subcontractors and other third parties,
in connection with such Services. Such expenses shall be payable by Plastics to
S&H monthly in arrears.
(f) (i) Not later than fifteen (15) days after the end of each
calendar month during the term hereof with respect to the Monthly Management Fee
and (ii) not later than thirty (30) days after the end of each full calendar
quarter during the term hereof with respect to the Quarterly Management Fee, S&H
shall furnish Plastics with a bill for an amount equal to the Monthly Management
Fee and the Quarterly Management Fee, respectively, then owing with respect to
periods ended on or before the end of such calendar month or such calendar
quarter.
-6-
<PAGE>
(g) Each bill furnished to Plastics hereunder shall be paid in full
within thirty (30) days of the receipt of such bill, except that any accrued and
unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest
date on which such payment is permitted to be made pursuant to Paragraphs 2(a),
2(b) and 2(c) hereof. All payments of such bills shall be sent to:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
or to such other address as S&H may specify from time to time by written notice
to Plastics.
(h) All fees and expenses paid to S&H by Holdings and Silgan pursuant
to their respective Affiliate Management Services Agreements with S&H, shall be
credited to the Monthly Management Fee, the Quarterly Management Fee and the
expenses referred to in Paragraphs 2(a) and 2(e) hereof.
(i) For purposes of this Section 2, EBDIT shall mean, for any period,
the consolidated net income of Holdings and its subsidiaries, before interest
expense and provision for income taxes and without giving effect to any
extraordinary non-cash gains or extraordinary non-cash losses and any
adjustments resulting from changes in the value of employee stock options and/or
stock appreciation rights, and adjusted by adding thereto (i) the amount of any
fees and expenses paid pursuant to this Agreement or the Affiliate Management
Services Agreements, (ii) the amount of all charges and expenses incurred in
-7-
<PAGE>
connection with any refinancing, restructuring, recapitalization or
reorganization involving Holdings and its subsidiaries (which charges and
expenses have been charged against the consolidated net income of Holdings or
its subsidiaries), and (iii) the amount of all amortization of intangibles,
covenants not to compete, goodwill and debt financing costs and all depreciation
(which amortization and depreciation have been charged against the consolidated
net income of Holdings and its subsidiaries, before interest expense), computed
in accordance with generally accepted accounting principles.
3. Direct Expenses.
---------------
It is understood that the consideration to be paid by Plastics to S&H
for Services hereunder shall not be in lieu of, and that Plastics shall be
directly liable for, direct expenses incurred by Plastics, or by S&H on
Plastics' behalf (other than the out-of-pocket expenses billed to Plastics by
S&H pursuant to Paragraph 2(e) hereof), for services rendered to Plastics by
third parties, including, but not limited to, legal and accounting fees and
insurance premiums. Plastics shall pay any compensation (including employee
benefit costs and any related out-of-pocket expenses) to officers and other
employees of Plastics who provide substantially full-time services to Plastics,
other than Messrs. R. Philip Silver ("Silver"), D. Greg Horrigan ("Horrigan"),
Harley Rankin, Jr. ("Rankin") and Harold J. Rodriguez, Jr. ("Rodriguez") who
shall receive no salaries (it being understood, however, that Plastics shall
reimburse S&H in respect of compensation paid by S&H to Messrs. Rankin and
-8-
<PAGE>
Rodriguez consistent with the reimbursement therefor by Plastics to S&H in
1996), notwithstanding that said officers and other employees may simultaneously
be officers or employees of S&H or one of its subsidiaries or Affiliates.
4. Term.
----
(a) The term of this Agreement shall commence on the date hereof and
shall continue until June 30, 1999. Thereafter, the term of this Agreement
shall be automatically renewed for successive one-year terms unless prior to the
date that is 180 days prior to the expiration of the initial term or the then
current one-year term, as the case may be, either party shall have given the
other party written notice of its election not to renew the term of this
Agreement (it being understood that the determination by Plastics whether to
give such written notice of its election not to renew the term of this Agreement
will be made by the independent members of the Board of Directors of Holdings).
For purposes hereof, the independent members of the Board of Directors of
Holdings shall not include any employee or affiliate of S&H, any officer of
Holdings or any member of the Board of Directors that is affiliated with any
entity that is receiving or is entitled to receive any payment from Holdings
under this Agreement or any payment from S&H in connection with this Agreement.
The term of this Agreement may be terminated prior to the expiration of the
initial term or the then current one-year term, as the case may be, by written
notice to the other party as follows: (i) by Plastics for Cause, (ii) by S&H for
Cause, (iii) by Plastics for any reason other than Cause, upon at
-9-
<PAGE>
least 180 days prior written notice, (iv) by S&H for any reason other than (A)
Cause or (B) because of a Change of Control, upon at least 180 days prior
written notice, or (v) by S&H at any time after a Change of Control.
(b) Upon termination of any Affiliate Management Services Agreement
by the party thereto other than S&H for any reason other than "Cause" as defined
in such Affiliate Management Services Agreement, this Agreement shall be deemed
to have been terminated by Plastics pursuant to clause (iii) of the last
sentence of Section 4(a) hereof, effective as of the date of termination of such
Affiliate Management Services Agreement. Upon termination by S&H of any
Affiliate Management Services Agreement for any reason other than "Cause" or
because of a "Change of Control," each as defined in such Affiliate Management
Services Agreement, this Agreement shall be deemed to have been terminated by
S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof,
effective as of the date of termination of such Affiliate Management Services
Agreement.
(c) For purposes of this Section 4, a "Change of Control" shall be
deemed to have occurred when a majority of the Board of Directors of Holdings
shall not consist of "Continuing Holdings Directors," which shall mean (i) the
directors of Holdings on the date hereof and (ii) each other director of
Holdings who is either recommended, approved or nominated for election, or is
elected, to the Board of Directors of Holdings by a majority of the other
Continuing Holdings Directors.
-10-
<PAGE>
5. Events of Default.
-----------------
Any one of the following defaults shall constitute an Event of Default
(other than by reason of an Event of Force Majeure in the case of each of
Paragraphs 5(a)-(f)):
(a) (i) The failure or refusal of S&H to comply with or perform its
obligations under this Agreement if such failure or refusal continues unremedied
for more than 60 days after written notice of the existence of such failure or
refusal shall have been given to S&H by Plastics or (ii) the failure or refusal
of Plastics to comply with or perform its obligations under this Agreement if
such failure or refusal continues unremedied for more than 60 days after written
notice of the existence of such failure or refusal shall have been given to
Plastics by S&H;
(b) S&H or Holdings is declared insolvent or bankrupt by any court of
competent jurisdiction, or a voluntary petition in bankruptcy is filed in any
court of competent jurisdiction by either of them;
(c) An involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against S&H or Holdings and within forty-five (45) days
thereafter shall not have been dismissed or stayed (and, in the event of any
such stay, such stay shall not have been set aside and the petition dismissed
within forty-five (45) days after the stay shall have been granted);
-11-
<PAGE>
(d) A trustee or receiver is appointed for S&H or Holdings and remains
undischarged for more than forty-five (45) days after being appointed;
(e) A proceeding seeking a reorganization, arrangement, liquidation or
dissolution of S&H or Holdings is instituted in a court of competent
jurisdiction and remains undismissed for more than forty-five (45) days after
being instituted;
(f) S&H or Holdings voluntarily seeks any such reorganization or
arrangement or makes an assignment for the benefit of creditors; or
(g) Death or permanent disability of both Horrigan and Silver. For
the purposes of this Agreement, "permanent disability" shall mean the inability
of Horrigan or Silver, as the case may be, by reason of illness or injury to
perform substantially all of his duties as Chairman of the Board or as President
of Holdings (or in performing his duties in any other office in Holdings or any
of its respective Affiliates to which he may be duly appointed) during any
continuous period of one hundred eighty (180) days.
6. Cause.
-----
(a) The occurrence of any of the following shall constitute "Cause"
for purposes of clause (i) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described in
Section 5(a)(ii) of this Agreement; or
-12-
<PAGE>
(ii) Criminal conduct or gross negligence by S&H in the performance
of the Services; or
(iii) The termination of any Affiliate Management Services Agreement
by Holdings, Silgan, or Containers, as the case may be, for "Cause" as
defined therein.
(b) The occurrence of either of the following shall constitute
"Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described
in Section 5(a)(i) of this Agreement; or
(ii) The termination of any Affiliate Management Services Agreement
by S&H for "Cause" as defined therein.
7. Remedies. (a) In the event this Agreement is terminated (or deemed
--------
terminated) by Plastics prior to June 30, 1999 for any reason other than for
Cause, Plastics shall be required to pay to S&H as liquidated damages, within
thirty (30) days of such termination, the present value of the sum of (i) the
Monthly Management Fee (or any portion thereof) that would have been payable by
Plastics to S&H for each month (or any portion thereof) from the date of such
termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any
portion thereof) that would have been payable by Plastics to S&H for each
quarter (or portion thereof) from the date of such termination through June 30,
1999, in each case calculated based on a discount rate of eight percent (8%) per
annum.
-13-
<PAGE>
(b) In the event this Agreement is terminated by Plastics after June
30, 1999, for any reason other than for Cause, Plastics shall be required to pay
to S&H as liquidated damages, within thirty (30) days of such termination, the
present value of the sum of (i) the Monthly Management Fee (or any portion
thereof) payable by Plastics to S&H for each month (or any portion thereof) from
the date of such termination through the end of the then current one-year term
and (ii) the Quarterly Management Fee (or any portion thereof) payable by
Plastics to S&H for each quarter (or portion thereof) from the date of such
termination through the end of the then current one-year term, in each case
calculated based on a discount rate of eight percent (8%) per annum.
(c) The amounts described in clauses (i) and (ii) of Sections 7(a)
and 7(b) shall be calculated based upon the projections of Holdings' EBDIT for
the period from the date of such termination through June 30, 1999 or through
the end of the then current one-year term, as the case may be, which projections
are (1) included in Holdings' most recently prepared forecast statements
required under the Credit Agreement or (2) if the Credit Agreement is not in
existence, included in Holdings' most recently prepared forecast statements
presented to its Board of Directors (provided such forecast statements are
prepared on a basis consistent with the requirements under the Credit Agreement
that was in effect last).
-14-
<PAGE>
8. Force Majeure.
-------------
The term "Event of Force Majeure" as used herein shall mean any
failure of a party to perform any of its obligations hereunder if such failure
is due to circumstances beyond its control, including but not limited to, any
requisition by any government authority, act of war, strike, boycott, lockout,
picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act
of God, fire, flood, accident, explosion, earthquake, storm, failure of public
utilities or common carriers, mechanical failure, embargo, or prohibition
imposed by any governmental body or agency having authority over the party,
which would have constituted an Event of Default but for the fact that such
events constituted an Event of Force Majeure. The party affected by an Event of
Force Majeure shall give prompt notice thereof to the other parties hereto and
each party shall use its best efforts to minimize the duration and consequences
of, and to eliminate, any such Event of Force Majeure. At such time as an Event
of Force Majeure no longer exists, the respective obligations of the parties
hereto shall be reinstated and this Agreement shall continue in full force and
effect.
9. Insurance.
---------
S&H agrees that for the term of this Agreement it shall cause Plastics
to obtain and maintain insurance for such risks and in such amounts similar to
companies of comparable size which are engaged in similar business activities,
provided that S&H shall be deemed to be in compliance with the provisions of
- --------
this paragraph if Plastics maintains a level of insurance which
-15-
<PAGE>
complies with the applicable terms of the Credit Agreement.
10. Indemnification.
---------------
(a) Plastics shall indemnify to the fullest extent permitted by
law (as now or hereafter in effect) S&H and each of its Affiliates, officers,
directors, employees, consultants and subcontractors, and any Person controlling
S&H and each of its Affiliates or any such consultant or subcontractor (each, an
"S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that
any S&H Indemnitee is made, or threatened to be made, a defendant to, or is
involved in any manner in, any action, suit or proceeding (whether civil,
criminal, administrative, investigative or otherwise) by reason of the fact that
such S&H Indemnitee is or was an agent of Plastics.
(b) In furtherance and not in limitation of the powers conferred
by statute:
(i) Plastics may purchase and maintain insurance on
behalf of any S&H Indemnitee as an agent of Plastics against any liability
asserted against any S&H Indemnitee and incurred by any S&H Indemnitee in
such capacity, or arising out of any S&H Indemnitee's status as such,
whether or not Plastics would have the power to indemnify such S&H
Indemnitee against such liability under the provisions of law; and
(ii) Plastics may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or
-16-
<PAGE>
other similar arrangements), as well as enter into contracts providing
indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the
foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
(c) The manner of any indemnification under this Agreement shall
be in accordance with Section 2.8 of the Stockholders Agreement dated as of
December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity
Fund II, L.P., Bankers Trust New York Corporation, First Plaza Group Trust and
Holdings (as amended from time to time, the "Stockholders Agreement").
11. Noncompetition.
--------------
(a) During the term of this Agreement, S&H hereby agrees that it
will not, directly or indirectly, own, render services to, manage, operate,
control, or participate in the ownership, management, operation or control of a
business that is engaged in any "Business". For purposes hereof, the term
"Business" shall mean the manufacture and sale anywhere in the world of consumer
goods packaging products.
(b) In the event that this Agreement is terminated by S&H
pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby
agrees that, for a period of one year beginning on the date of such termination,
it will not, directly or indirectly: (i) own, render services to, manage,
operate, control, or participate in the ownership, management,
-17-
<PAGE>
operation or control of a business that is engaged in any Business; (ii)
interfere with any customer or supplier relationship between Holdings and/or its
subsidiaries and any other person or business entity; or (iii) disclose or use
any confidential or proprietary information relating to Holdings and its
subsidiaries' businesses, except for any information already in the public
domain through no act of S&H and except as may be required by law or
governmental or court order.
(c) Notwithstanding anything herein to the contrary, nothing
herein, however, shall restrict S&H from making any investments in any company
whose stock is listed on a national securities exchange or actively traded in
the over-the-counter markets, so long as such investment does not give S&H the
right to control or influence the policy decisions of any such company engaged
in any Business.
(d) If any particular provision or portion of this Section 11
shall be adjudicated to be invalid or unenforceable, this Section 11 shall be
deemed amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable, and such amendment will apply only with respect to the
operation of such provision or portion in the particular jurisdiction in which
such adjudication was sought.
(e) The parties recognize that the performance of the
obligations under this Section 11 by S&H is special, unique and extraordinary in
character, and that in the event of a breach, or threatened breach, of any of
the terms and conditions of this Section 11, Plastics shall be entitled, if it
so elects,
-18-
<PAGE>
in addition to any other remedies available to Plastics, to enforce the specific
performance thereof or to enjoin any breach thereof.
12. Notices.
-------
All notices and other communications required by or specifically
provided for in this Agreement shall be in writing and shall be deemed to have
been given (a) when delivered in person, (b) when sent by telex or telecopier
with answerback received, or (c) seventy-two (72) hours after having been
deposited in the U.S. mails, certified mail with return receipt requested and
postage prepaid, and in any case addressed to the party for which it is intended
at that party's address as set forth below, or at such other address as the
addressee shall have designated by notice hereunder to the other party.
If to S&H:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If to Plastics:
Silgan Plastics Corporation
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If a notice is sent to any of the above, a copy shall
be sent to the following:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Attention: Frank W. Hogan, III, Esq.
-19-
<PAGE>
Any notice or request sent by telecopier or similar facsimile telecommunication
shall be confirmed promptly by the sending of a copy of such notice or request
to the addressee thereof by prepaid certified mail, return receipt requested.
13. Definitions.
-----------
Terms not defined herein which are defined in the Stockholders
Agreement shall have the meanings ascribed to them therein.
14. Amendment; Assignment; Binding Effect.
-------------------------------------
This Agreement may be amended or modified only by a written instrument
signed by the parties hereto. No party shall assign or transfer this Agreement,
in whole or in part, or any of such party's rights or obligations hereunder, to
any other person or entity without the prior written consent of the other party
hereto, except that S&H may transfer or assign all of its rights and obligations
hereunder to any entity directly or indirectly succeeding to S&H by merger,
consolidation or reorganization. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted assigns.
15. Waiver; Severability.
--------------------
The failure of a party to insist in any instance upon the strict and
punctual performance of any provision of this Agreement shall not constitute a
continuing waiver of such provision. No party shall be deemed to have waived
any right, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver
-20-
<PAGE>
shall be a waiver only with respect to the specific instance involved and shall
in no way impair the rights of the waiving party or the obligations of any other
party in any other respect or at any other time. If any provision of this
Agreement shall be waived, or be invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain binding and in full force and effect.
16. Relationship of the Parties.
---------------------------
In all matters relating to this Agreement, each party hereto shall be
solely responsible for the acts of its employees, and employees of one party
shall not be considered employees of the other party. Except as otherwise
provided herein, no party shall have any right, or authority to create any
obligation, express or implied, on behalf of any other party.
17. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to its conflict of laws
rules and laws.
18. Entire Agreement; Termination of Original Management Services
-------------------------------------------------------------
Agreement.
- ---------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either oral or written, with respect thereto.
Upon the execution and delivery of this Agreement, the Original Management
Services Agreement shall be terminated and shall be of no effect whatsoever.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
S&H INC.
By:
----------------------------------
Title:
SILGAN PLASTICS CORPORATION
By:
----------------------------------
Title:
-22-
<PAGE>
SCHEDULE I
(000's Omitted)
<TABLE>
<CAPTION>
Scheduled Amount/1/ Maximum Amount/1/
- --------------------- -----------------
<S> <C> <C> <C>
1997 $ 89,500 1997 $100,504
1998 95,500 1998 102,964
1999 101,500 1999 105,488
2000 108,653 2000 108,653
</TABLE>
- ------------------------
/1/ For each calendar year after 2000, the Scheduled Amount for such calendar
year shall be an amount equal to the Maximum Amount for such calendar year. For
each calendar year after 2000, the Maximum Amount for such calendar year shall
be equal to one hundred and three percent (103%) of the Maximum Amount for the
prior calendar year.
<PAGE>
Exhibit 10.45
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
This Amended and Restated Management Services Agreement (the "Agreement")
is made as of this ___ day of February, 1997 by and between S&H INC., a
Connecticut corporation ("S&H"), and SILGAN CONTAINERS CORPORATION, a Delaware
corporation ("Containers").
W I T N E S S E T H:
-------------------
WHEREAS, S&H and Containers have entered into the Amended and Restated
Management Services Agreement dated as of December 21, 1993 (the "Original
Management Services Agreement"), pursuant to which S&H provides general
management, supervision, administrative and other services to Containers in
accordance with the terms of the Original Management Services Agreement;
WHEREAS, S&H also is a party to an Amended and Restated Management Services
Agreement dated as of December 21, 1993 with each of Silgan Holdings Inc.
("Holdings"), Silgan Corporation, a wholly owned subsidiary of Holdings and the
parent holding company of Containers ("Silgan"), and Silgan Plastics
Corporation, a wholly owned subsidiary of Silgan ("Plastics");
WHEREAS, S&H and each of Holdings, Silgan and Plastics are entering into an
amended and restated management services agreement dated as of the date hereof
(collectively, as so
<PAGE>
amended and restated, the "Affiliate Management Services Agreements"); and
WHEREAS, in contemplation of the consummation of an initial public offering
of the common stock of Holdings pursuant to an effective registration statement
under the Securities Act of 1933, as amended, S&H and Containers desire to amend
and restate hereby the Original Management Services Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, S&H and Containers agree as follows:
1. Management Services.
-------------------
(a) S&H and Containers hereby agree that, during the period
beginning on the date hereof and continuing throughout the term hereof, S&H and
its Affiliates shall provide to Containers general management, supervision and
administrative services, including, without limitation, the preparation of the
annual and long-term business plans, and perform such other duties and provide
such other services as Containers shall be permitted to request of S&H pursuant
to the Certificate of Incorporation or By-Laws of Holdings or pursuant to
applicable law, which power and authority Containers hereby grants to S&H
("General Management Services"). (The General Management Services are
hereinafter collectively referred to as the "Services" and individually as a
"Service").
(b) Any Service hereunder shall be provided to Containers only by S&H
or its Affiliates or such consultants, subcontractors or agents as may be
selected from time to time by
-2-
<PAGE>
S&H to assist S&H in its provision of the Services. It is understood and agreed
that S&H may retain the services of Morgan Stanley & Co. Incorporated or another
suitable investment bank as financial advisor to Containers or as an underwriter
or placement agent for offerings of securities by Containers.
2. Fees; Payment.
-------------
(a) In consideration for General Management Services provided by S&H
to Containers hereunder, Containers shall pay to S&H aggregate fees or
compensation therefor (not including any related out-of-pocket expenses), (i) on
a monthly basis, an amount equal to Containers' Proportionate Percentage (as
defined below) of five thousand dollars ($5,000) plus 2.475% of EBDIT (as
defined in Paragraph 2(i) hereof) for such calendar month until EBDIT for the
calendar year to date has reached the Scheduled Amount (as defined in Paragraph
2(d) hereof) for such calendar year, and 1.65% of EBDIT for such calendar month
to the extent that EBDIT for the calendar year to date exceeds the Scheduled
Amount but is not greater than the Maximum Amount (as defined in Paragraph 2(d)
hereof) (the "Monthly Management Fee"); and (ii) on a quarterly basis, an amount
equal to Containers' Proportionate Percentage of 2.475% of EBDIT for such
calendar quarter until EBDIT for the calendar year to date has reached the
Scheduled Amount, and 1.65% of EBDIT for such calendar quarter to the extent
that EBDIT for the calendar year to date exceeds the Scheduled Amount but is not
greater than the Maximum Amount (the "Quarterly Management Fee"). For purposes
of this Section 2, "Proportionate Percentage" means such percentage of EBDIT
for a
-3-
<PAGE>
given period that is attributable to the results of Containers for such period.
(b) Such Quarterly Management Fee shall continue to accrue, but shall
not be paid, to S&H by Containers in the event that, and from the date on which,
Containers or Silgan shall have received written notice ("Notice") from the
Agent (as defined below) that an Event of Default (as such term is defined in
the Credit Agreement, dated as of August 1, 1995, among Silgan, Containers,
Plastics, the lenders from time to time party thereto, Bankers Trust Company, as
Administrative Agent and as a Co-Arranger (the "Agent"), and Bank of America
Illinois, as Documentation Agent and as a Co-Arranger, as in effect from time to
time, and any refinancings, renewals, amendments or extensions thereof (the
"Credit Agreement")) exists under any of Sections 9.01, 9.03 (but only to the
extent resulting from the violation of one or more of Sections 8.08, 8.09, 8.10,
and 8.11 of the Credit Agreement), 9.04(i)(x), 9.04(ii) or 9.05 of the Credit
Agreement (each of the foregoing Events of Default, a "Financial Covenant Event
of Default") until, and shall be paid by Containers to S&H on, the earliest to
occur of (x) the first date after receipt of such Notice upon which no Financial
Covenant Event of Default to which the Notice related or otherwise known to S&H
or Containers shall be in existence (and so long as no such Financial Covenant
Event of Default would be in existence after giving effect to the payment of
such unpaid portion of the Quarterly Management Fee), (y) the first date
occurring 180 days or more after receipt by Silgan of a written notice from the
-4-
<PAGE>
Agent stating that no Event of Default exists under Section 9.01 of the Credit
Agreement, or (z) the date that Silgan, Containers, Plastics, California-
Washington Can Corporation, a wholly owned subsidiary of Containers, and SCCW
Can Corporation, a wholly owned subsidiary of Containers, shall have paid all
outstanding Obligations (as such term is defined under the Credit Agreement).
In the event that a Notice is delivered by the Agent, Containers shall pay to
S&H that portion of any unpaid Quarterly Management Fee that has accrued with
respect to that portion of such calendar quarter prior to the occurrence of any
Financial Covenant Event of Default to which such Notice relates.
(c) Nothing contained in Paragraph 2(b) shall prevent the Agent from
giving successive Notices of the type described in Paragraph 2(b) (in which case
the rules set forth in Paragraph 2(b) shall apply to, and the time periods set
forth therein shall begin to run on, the date of such subsequent Notice);
provided that only one Notice relating to a single Financial Covenant Event of
- --------
Default and all other Financial Covenant Events of Default in existence at the
date of the giving of any such Notice may be given. Notwithstanding anything to
the contrary stated herein, if at any time after the giving of Notice by the
Agent to Silgan, S&H shall certify in writing to Silgan that all Financial
Covenant Events of Default to which such Notice relates have been cured or
waived, and that S&H knows of no other Financial Covenant Event of Default then
in existence, then Containers shall, unless it knows of the existence of a
Financial Covenant Event of Default which has not yet been cured
-5-
<PAGE>
or waived, pay to S&H any accrued and unpaid Quarterly Management Fee or portion
thereof in the manner set forth in Paragraph 2(g) hereof unless a Financial
Covenant Event of Default would result from such payment. S&H shall not be
required to deliver any such certification to Silgan upon the occurrence of the
dates or events set forth in clauses (y) or (z) of Paragraph 2(b), and promptly
after the occurrence of such date or event, Containers will pay to S&H any
accrued and unpaid Quarterly Management Fee or portion thereof.
(d) For any given calendar year during the term of this Agreement,
the Scheduled Amount and the Maximum Amount for such calendar year will be the
amounts set forth in Schedule I hereto.
(e) In addition to the Monthly Management Fee and the Quarterly
Management Fee, Containers shall also reimburse S&H in an amount equal to all
out-of-pocket expenses paid by S&H in providing the Services hereunder,
including fees and expenses paid to consultants, subcontractors and other third
parties, in connection with such Services. Such expenses shall be payable by
Containers to S&H monthly in arrears.
(f) (i) Not later than fifteen (15) days after the end of each
calendar month during the term hereof with respect to the Monthly Management Fee
and (ii) not later than thirty (30) days after the end of each full calendar
quarter during the term hereof with respect to the Quarterly Management Fee, S&H
shall furnish Containers with a bill for an amount equal to the Monthly
Management Fee and the Quarterly Management Fee,
-6-
<PAGE>
respectively, then owing with respect to periods ended on or before the end of
such calendar month or such calendar quarter.
(g) Each bill furnished to Containers hereunder shall be paid in full
within thirty (30) days of the receipt of such bill, except that any accrued and
unpaid Quarterly Management Fee or portion thereof shall be paid on the earliest
date on which such payment is permitted to be made pursuant to Paragraphs 2(a),
2(b) and 2(c) hereof. All payments of such bills shall be sent to:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
or to such other address as S&H may specify from time to time by written notice
to Containers.
(h) All fees and expenses paid to S&H by Holdings and Silgan pursuant
to their respective Affiliate Management Services Agreements with S&H, shall be
credited to the Monthly Management Fee, the Quarterly Management Fee and the
expenses referred to in Paragraphs 2(a) and 2(e) hereof.
(i) For purposes of this Section 2, EBDIT shall mean, for any period,
the consolidated net income of Holdings and its subsidiaries, before interest
expense and provision for income taxes and without giving effect to any
extraordinary non-cash gains or extraordinary non-cash losses and any
adjustments resulting from changes in the value of employee stock options and/or
stock appreciation rights, and adjusted by adding thereto (i) the amount of any
fees and expenses paid pursuant to this
-7-
<PAGE>
Agreement or the Affiliate Management Services Agreements, (ii) the amount of
all charges and expenses incurred in connection with any refinancing,
restructuring, recapitalization or reorganization involving Holdings and its
subsidiaries (which charges and expenses have been charged against the
consolidated net income of Holdings or its subsidiaries), and (iii) the amount
of all amortization of intangibles, covenants not to compete, goodwill and debt
financing costs and all depreciation (which amortization and depreciation have
been charged against the consolidated net income of Holdings and its
subsidiaries, before interest expense), computed in accordance with generally
accepted accounting principles.
3. Direct Expenses.
---------------
It is understood that the consideration to be paid by Containers to
S&H for Services hereunder shall not be in lieu of, and that Containers shall be
directly liable for, direct expenses incurred by Containers, or by S&H on
Containers' behalf (other than the out-of-pocket expenses billed to Containers
by S&H pursuant to Paragraph 2(e) hereof), for services rendered to Containers
by third parties, including, but not limited to, legal and accounting fees and
insurance premiums. Containers shall pay any compensation (including employee
benefit costs and any related out-of-pocket expenses) to officers and other
employees of Containers who provide substantially full-time services to
Containers, other than Messrs. R. Philip Silver ("Silver"), D. Greg Horrigan
("Horrigan"), Harley Rankin, Jr. ("Rankin") and Harold J. Rodriguez, Jr.
("Rodriguez") who shall receive no
-8-
<PAGE>
salaries (it being understood, however, that Containers shall reimburse S&H in
respect of compensation paid by S&H to Messrs. Rankin and Rodriguez consistent
with the reimbursement therefor by Containers to S&H in 1996), notwithstanding
that said officers and other employees may simultaneously be officers or
employees of S&H or one of its subsidiaries or Affiliates.
4. Term.
----
(a) The term of this Agreement shall commence on the date hereof and
shall continue until June 30, 1999. Thereafter, the term of this Agreement
shall be automatically renewed for successive one-year terms unless prior to the
date that is 180 days prior to the expiration of the initial term or the then
current one-year term, as the case may be, either party shall have given the
other party written notice of its election not to renew the term of this
Agreement (it being understood that the determination by Containers whether to
give such written notice of its election not to renew the term of this Agreement
will be made by the independent members of the Board of Directors of Holdings).
For purposes hereof, the independent members of the Board of Directors of
Holdings shall not include any employee or affiliate of S&H, any officer of
Holdings or any member of the Board of Directors that is affiliated with any
entity that is receiving or is entitled to receive any payment from Holdings
under this Agreement or any payment from S&H in connection with this Agreement.
The term of this Agreement may be terminated prior to the expiration of the
initial term or the then current one-year term, as the case may be, by written
notice to the other
-9-
<PAGE>
party as follows: (i) by Containers for Cause, (ii) by S&H for Cause, (iii) by
Containers for any reason other than Cause, upon at least 180 days prior written
notice, (iv) by S&H for any reason other than (A) Cause or (B) because of a
Change of Control, upon at least 180 days prior written notice, or (v) by S&H at
any time after a Change of Control.
(b) Upon termination of any Affiliate Management Services Agreement
by the party thereto other than S&H for any reason other than "Cause" as defined
in such Affiliate Management Services Agreement, this Agreement shall be deemed
to have been terminated by Containers pursuant to clause (iii) of the last
sentence of Section 4(a) hereof, effective as of the date of termination of such
Affiliate Management Services Agreement. Upon termination by S&H of any
Affiliate Management Services Agreement for any reason other than "Cause" or
because of a "Change of Control," each as defined in such Affiliate Management
Services Agreement, this Agreement shall be deemed to have been terminated by
S&H pursuant to clause (iv) of the last sentence of Section 4(a) hereof,
effective as of the date of termination of such Affiliate Management Services
Agreement.
(c) For purposes of this Section 4, a "Change of Control" shall be
deemed to have occurred when a majority of the Board of Directors of Holdings
shall not consist of "Continuing Holdings Directors," which shall mean (i) the
directors of Holdings on the date hereof and (ii) each other director of
Holdings who is either recommended, approved or nominated for
-10-
<PAGE>
election, or is elected, to the Board of Directors of Holdings by a majority of
the other Continuing Holdings Directors.
5. Events of Default.
-----------------
Any one of the following defaults shall constitute an Event of Default
(other than by reason of an Event of Force Majeure in the case of each of
Paragraphs 5(a)-(f)):
(a) (i) The failure or refusal of S&H to comply with or perform its
obligations under this Agreement if such failure or refusal continues unremedied
for more than 60 days after written notice of the existence of such failure or
refusal shall have been given to S&H by Containers or (ii) the failure or
refusal of Containers to comply with or perform its obligations under this
Agreement if such failure or refusal continues unremedied for more than 60 days
after written notice of the existence of such failure or refusal shall have been
given to Containers by S&H;
(b) S&H or Holdings is declared insolvent or bankrupt by any court of
competent jurisdiction, or a voluntary petition in bankruptcy is filed in any
court of competent jurisdiction by either of them;
(c) An involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against S&H or Holdings and within forty-five (45) days
thereafter shall not have been dismissed or stayed (and, in the event of any
such stay, such stay shall not have been set aside and the petition dismissed
within forty-five (45) days after the stay shall have been granted);
-11-
<PAGE>
(d) A trustee or receiver is appointed for S&H or Holdings and
remains undischarged for more than forty-five (45) days after being appointed;
(e) A proceeding seeking a reorganization, arrangement, liquidation
or dissolution of S&H or Holdings is instituted in a court of competent
jurisdiction and remains undismissed for more than forty-five (45) days after
being instituted;
(f) S&H or Holdings voluntarily seeks any such reorganization or
arrangement or makes an assignment for the benefit of creditors; or
(g) Death or permanent disability of both Horrigan and Silver. For
the purposes of this Agreement, "permanent disability" shall mean the inability
of Horrigan or Silver, as the case may be, by reason of illness or injury to
perform substantially all of his duties as Chairman of the Board or as President
of Holdings (or in performing his duties in any other office in Holdings or any
of its respective Affiliates to which he may be duly appointed) during any
continuous period of one hundred eighty (180) days.
6. Cause.
-----
(a) The occurrence of any of the following shall constitute "Cause"
for purposes of clause (i) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described in
Section 5(a)(ii) of this Agreement; or
-12-
<PAGE>
(ii) Criminal conduct or gross negligence by S&H in the performance
of the Services; or
(iii) The termination of any Affiliate Management Services Agreement
by Holdings, Silgan or Plastics, as the case may be, for "Cause" as defined
therein.
(b) The occurrence of either of the following shall constitute
"Cause" for purposes of clause (ii) of the last sentence of Section 4(a) of this
Agreement:
(i) An Event of Default, except for the Event of Default described
in Section 5(a)(i) of this Agreement; or
(ii) The termination of any Affiliate Management Services Agreement
by S&H for "Cause" as defined therein.
7. Remedies. (a) In the event this Agreement is terminated (or deemed
--------
terminated) by Containers prior to June 30, 1999 for any reason other than for
Cause, Containers shall be required to pay to S&H as liquidated damages, within
thirty (30) days of such termination, the present value of the sum of (i) the
Monthly Management Fee (or any portion thereof) that would have been payable by
Containers to S&H for each month (or any portion thereof) from the date of such
termination through June 30, 1999 and (ii) the Quarterly Management Fee (or any
portion thereof) that would have been payable by Containers to S&H for each
quarter (or portion thereof) from the date of such termination through June 30,
1999, in each case calculated based on a discount rate of eight percent (8%) per
annum.
-13-
<PAGE>
(b) In the event this Agreement is terminated by Containers after
June 30, 1999 for any reason other than for Cause, Containers shall be required
to pay to S&H as liquidated damages, within thirty (30) days of such
termination, the present value of the sum of (i) the Monthly Management Fee (or
any portion thereof) payable by Containers to S&H for each month (or any portion
thereof) from the date of such termination through the end of the then current
one-year term and (ii) the Quarterly Management Fee (or any portion thereof)
payable by Containers to S&H for each quarter (or portion thereof) from the date
of such termination through the end of the then current one-year term, in each
case calculated based on a discount rate of eight percent (8%) per annum.
(c) The amounts described in clauses (i) and (ii) of Sections 7(a)
and 7(b) shall be calculated based upon the projections of Holdings' EBDIT for
the period from the date of such termination through June 30, 1999 or through
the end of the then current one-year term, as the case may be, which projections
are (1) included in Holdings' most recently prepared forecast statements
required under the Credit Agreement or (2) if the Credit Agreement is not in
existence, included in Holdings' most recently prepared forecast statements
presented to its Board of Directors (provided such forecast statements are
prepared on a basis consistent with the requirements under the Credit Agreement
that was in effect last).
-14-
<PAGE>
8. Force Majeure.
-------------
The term "Event of Force Majeure" as used herein shall mean any
failure of a party to perform any of its obligations hereunder if such failure
is due to circumstances beyond its control, including but not limited to, any
requisition by any government authority, act of war, strike, boycott, lockout,
picketing, riot, sabotage, civil commotion, insurrection, epidemic, disease, act
of God, fire, flood, accident, explosion, earthquake, storm, failure of public
utilities or common carriers, mechanical failure, embargo, or prohibition
imposed by any governmental body or agency having authority over the party,
which would have constituted an Event of Default but for the fact that such
events constituted an Event of Force Majeure. The party affected by an Event of
Force Majeure shall give prompt notice thereof to the other parties hereto and
each party shall use its best efforts to minimize the duration and consequences
of, and to eliminate, any such Event of Force Majeure. At such time as an Event
of Force Majeure no longer exists, the respective obligations of the parties
hereto shall be reinstated and this Agreement shall continue in full force and
effect.
9. Insurance.
---------
S&H agrees that for the term of this Agreement it shall cause
Containers to obtain and maintain insurance for such risks and in such amounts
similar to companies of comparable size which are engaged in similar business
activities, provided that S&H shall be deemed to be in compliance with the
--------
provisions of this paragraph if Containers maintains a level of insurance which
-15-
<PAGE>
complies with the applicable terms of the Credit Agreement.
10. Indemnification.
---------------
(a) Containers shall indemnify to the fullest extent permitted
by law (as now or hereafter in effect) S&H and each of its Affiliates, officers,
directors, employees, consultants and subcontractors, and any Person controlling
S&H and each of its Affiliates or any such consultant or subcontractor (each, an
"S&H Indemnitee," and collectively, the "S&H Indemnitees") to the extent that
any S&H Indemnitee is made, or threatened to be made, a defendant to, or is
involved in any manner in, any action, suit or proceeding (whether civil,
criminal, administrative, investigative or otherwise) by reason of the fact that
such S&H Indemnitee is or was an agent of Containers.
(b) In furtherance and not in limitation of the powers
conferred by statute:
(i) Containers may purchase and maintain insurance on
behalf of any S&H Indemnitee as an agent of Containers against any
liability asserted against any S&H Indemnitee and incurred by any S&H
Indemnitee in such capacity, or arising out of any S&H Indemnitee's status
as such, whether or not Containers would have the power to indemnify such
S&H Indemnitee against such liability under the provisions of law; and
(ii) Containers may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or
-16-
<PAGE>
other similar arrangements), as well as enter into contracts providing
indemnification to the full extent authorized or permitted by law and
including as part thereof provisions with respect to any or all of the
foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
(c) The manner of any indemnification under this Agreement
shall be in accordance with Section 2.8 of the Stockholders Agreement dated as
of December 21, 1993 among Silver, Horrigan, The Morgan Stanley Leveraged Equity
Fund II, L.P., Bankers Trust New York Corporation, First Plaza Group Trust and
Holdings (as amended from time to time, the "Stockholders Agreement").
11. Noncompetition.
--------------
(a) During the term of this Agreement, S&H hereby agrees that
it will not, directly or indirectly, own, render services to, manage, operate,
control, or participate in the ownership, management, operation or control of a
business that is engaged in any "Business". For purposes hereof, the term
"Business" shall mean the manufacture and sale anywhere in the world of consumer
goods packaging products.
(b) In the event that this Agreement is terminated by S&H
pursuant to clause (iv) of the last sentence of Section 4(a) hereof, S&H hereby
agrees that, for a period of one year beginning on the date of such termination,
it will not, directly or indirectly: (i) own, render services to, manage,
operate, control, or participate in the ownership, management,
-17-
<PAGE>
operation or control of a business that is engaged in any Business; (ii)
interfere with any customer or supplier relationship between Holdings and/or its
subsidiaries and any other person or business entity; or (iii) disclose or use
any confidential or proprietary information relating to Holdings and its
subsidiaries' businesses, except for any information already in the public
domain through no act of S&H and except as may be required by law or
governmental or court order.
(c) Notwithstanding anything herein to the contrary, nothing
herein, however, shall restrict S&H from making any investments in any company
whose stock is listed on a national securities exchange or actively traded in
the over-the-counter markets, so long as such investment does not give S&H the
right to control or influence the policy decisions of any such company engaged
in any Business.
(d) If any particular provision or portion of this Section 11
shall be adjudicated to be invalid or unenforceable, this Section 11 shall be
deemed amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable, and such amendment will apply only with respect to the
operation of such provision or portion in the particular jurisdiction in which
such adjudication was sought.
(e) The parties recognize that the performance of the
obligations under this Section 11 by S&H is special, unique and extraordinary in
character, and that in the event of a breach, or threatened breach, of any of
the terms and conditions of this Section 11, Containers shall be entitled, if it
so
-18-
<PAGE>
elects, in addition to any other remedies available to Containers, to enforce
the specific performance thereof or to enjoin any breach thereof.
12. Notices.
-------
All notices and other communications required by or specifically
provided for in this Agreement shall be in writing and shall be deemed to have
been given (a) when delivered in person, (b) when sent by telex or telecopier
with answerback received, or (c) seventy-two (72) hours after having been
deposited in the U.S. mails, certified mail with return receipt requested and
postage prepaid, and in any case addressed to the party for which it is intended
at that party's address as set forth below, or at such other address as the
addressee shall have designated by notice hereunder to the other party.
If to S&H:
S&H Inc.
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If to Containers:
Silgan Containers Corporation
4 Landmark Square
Suite 400
Stamford, CT 06901
Attention: R. Philip Silver
If a notice is sent to any of the above, a copy shall be sent to the
following:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Attention: Frank W. Hogan, III, Esq.
-19-
<PAGE>
Any notice or request sent by telecopier or similar facsimile telecommunication
shall be confirmed promptly by the sending of a copy of such notice or request
to the addressee thereof by prepaid certified mail, return receipt requested.
13. Definitions.
-----------
Terms not defined herein which are defined in the Stockholders
Agreement shall have the meanings ascribed to them therein.
14. Amendment; Assignment; Binding Effect.
-------------------------------------
This Agreement may be amended or modified only by a written instrument
signed by the parties hereto. No party shall assign or transfer this Agreement,
in whole or in part, or any of such party's rights or obligations hereunder, to
any other person or entity without the prior written consent of the other party
hereto, except that S&H may transfer or assign all of its rights and obligations
hereunder to any entity directly or indirectly succeeding to S&H by merger,
consolidation or reorganization. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted assigns.
15. Waiver; Severability.
--------------------
The failure of a party to insist in any instance upon the strict and
punctual performance of any provision of this Agreement shall not constitute a
continuing waiver of such provision. No party shall be deemed to have waived
any right, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver
-20-
<PAGE>
shall be a waiver only with respect to the specific instance involved and shall
in no way impair the rights of the waiving party or the obligations of any other
party in any other respect or at any other time. If any provision of this
Agreement shall be waived, or be invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain binding and in full force and effect.
16. Relationship of the Parties.
---------------------------
In all matters relating to this Agreement, each party hereto shall be
solely responsible for the acts of its employees, and employees of one party
shall not be considered employees of the other party. Except as otherwise
provided herein, no party shall have any right, or authority to create any
obligation, express or implied, on behalf of any other party.
17. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to its conflict of laws
rules and laws.
18. Entire Agreement; Termination of Original Management Services
-------------------------------------------------------------
Agreement.
- ---------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either oral or written, with respect thereto.
Upon the execution and delivery of this Agreement, the Original Management
Services Agreement shall be terminated and shall be of no effect whatsoever.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
S&H INC.
By:
------------------------------------
Title:
SILGAN CONTAINERS CORPORATION
By:
------------------------------------
Title:
-22-
<PAGE>
SCHEDULE I
(000's Omitted)
<TABLE>
<CAPTION>
Scheduled Amount/1/ Maximum Amount/1/
---------------- - -------------- -
<S> <C> <C> <C>
1997 $ 89,500 1997 $100,504
1998 95,500 1998 102,964
1999 101,500 1999 105,488
2000 108,653 2000 108,653
</TABLE>
- ---------------
1. For each calendar year after 2000, the Scheduled Amount for such calendar
year shall be an amount equal to the Maximum Amount for such calendar year. For
each calendar year after 2000, the Maximum Amount for such calendar year shall
be equal to one hundred and three percent (103%) of the Maximum Amount for the
prior calendar year.
<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 Data" and "Experts" and to the use of our report dated
January 31, 1997 with respect to the consolidated financial statements of Silgan
Holdings Inc. included in Amendment No. 5 to the Registration Statement (Form
S-2, No. 333-11989) and related Prospectus of Silgan Holdings Inc. for the
registration of 4,500,000 shares of its common stock.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
February 12, 1997
<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. 5 to the Registration Statement on Form
S-2 of Silgan Holdings Inc. of our report dated September 14, 1995 relating
to the financial statements of the Food Metal & Specialty Division of American
National Can Company, as of December 31, 1994 and 1993 and for each of the three
years in the period ended December 31, 1994, which appears in the Current Report
on Form 8-K/A of Silgan Holdings Inc. dated October 16, 1995. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 10, 1997
