-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GObbEpp4wAqwmpulqdo7rPUss5zvmh5EUsMQrEKU43K6ii27HqxKP5OxDhfoIAq4 HuQj4pmD1yeTs1PAo1IvRw== 0000912057-01-000427.txt : 20010122 0000912057-01-000427.hdr.sgml : 20010122 ACCESSION NUMBER: 0000912057-01-000427 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 21 FILED AS OF DATE: 20010105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US CAN CORP CENTRAL INDEX KEY: 0000895726 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061094196 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53276 FILM NUMBER: 1502746 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 6305712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES CAN COMPANY /DE/ CENTRAL INDEX KEY: 0000880657 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061145011 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53276-01 FILM NUMBER: 1502747 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USC MAY VERPACKUNGEN HOLDING INC CENTRAL INDEX KEY: 0001131341 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364335392 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53276-02 FILM NUMBER: 1502748 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: STE 300 CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 6305712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: STE 300 CITY: OAK BROOK STATE: IL ZIP: 60523 S-4 1 a2034240zs-4.txt S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ U.S. CAN CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 06-1094196 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------------ UNITED STATES CAN COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 06-1145011 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ USC MAY VERPACKUNGEN HOLDING INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 36-4335392 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 900 COMMERCE DRIVE OAK BROOK, ILLINOIS 60523 TELEPHONE: (630) 571-2500 FACSIMILE: (630) 573-0715 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) STEVEN K. SIMS VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY UNITED STATES CAN COMPANY 900 COMMERCE DRIVE OAK BROOK, ILLINOIS 60523 TELEPHONE: (630) 571-2500 FACSIMILE: (630) 573-0715 (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS FOR EACH REGISTRANT) COPY TO: JANE D. GOLDSTEIN, ESQ. ROPES & GRAY ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110 TELEPHONE: (617) 951-7000 FACSIMILE: (617) 951-7050 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. ------------------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: / / 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, other than securities offered only in connection with dividend or interest reinvestment plans, 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, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE 12 3/8% Series B Senior Subordinated Notes due 2010.................................. $175,000,000 100% $175,000,000 $43,750 Guarantees of 12 3/8% Series B Senior Subordinated Notes due 2010............... $175,000,000 (2) (2) None(2)
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933. (2) No further fee is payable pursuant to Rule 457(n) under the Securities Act of 1933. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JANUARY 5, 2001 PROSPECTUS UNITED STATES CAN COMPANY OFFER TO EXCHANGE ALL OUTSTANDING 12 3/8% SENIOR SUBORDINATED NOTES DUE 2010 ($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING) FOR 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 --------------------- We are offering to exchange our 12 3/8% Series B Senior Subordinated Notes due 2010, or exchange notes, for all of our outstanding 12 3/8% Senior Subordinated Notes due 2010, or notes. We are making this exchange offer on the terms and conditions set forth in this prospectus and the accompanying letter of transmittal. We have registered the exchange notes under the Securities Act of 1933, while we have not registered the notes. The form and terms of the exchange notes and the notes are identical in all material respects, except for various transfer restrictions and registration rights relating to the notes. We will accept for exchange all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , unless we extend this exchange offer. You may withdraw the tender of your notes at any time prior to such date and time. Although our offer is subject to certain customary conditions, it is not conditioned upon any minimum principal amount of notes being tendered for exchange. Information about the exchange notes: - The exchange notes will mature on October 1, 2010. - We will pay interest on the exchange notes every six months, on April 1 and October 1, beginning on April 1, 2001. - We may redeem the exchange notes at any time after October 1, 2005. - Before October 1, 2003, we may redeem up to 35% of the aggregate principal amount of the exchange notes with the net proceeds of certain public offerings of common equity by us. - If we sell certain assets or experience specific kinds of changes in control, we must offer to repurchase all or a portion of the exchange notes. - The exchange notes are subordinated to all of our current and future senior indebtedness, except indebtedness that expressly provides otherwise. We will not receive any proceeds from the issuance of the exchange notes. We will pay all the expenses incurred by us in connection with this exchange offer and issuance of the exchange notes. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for notes where such notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business one year after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." YOU SHOULD CAREFULLY REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 16 IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. Neither the Securities and Exchange Commission (the Commission) nor any state securities commission has approved or disapproved of our offer of the exchange notes or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. THE DATE OF THIS PROSPECTUS IS . TABLE OF CONTENTS SUMMARY..................................................... 1 RISK FACTORS................................................ 16 THE TRANSACTIONS............................................ 23 USE OF PROCEEDS............................................. 25 CAPITALIZATION.............................................. 26 UNAUDITED PRO FORMA FINANCIAL DATA.......................... 27 SELECTED FINANCIAL DATA..................................... 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 39 BUSINESS.................................................... 48 MANAGEMENT.................................................. 58 PRINCIPAL STOCKHOLDERS...................................... 64 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 66 OTHER INDEBTEDNESS.......................................... 70 DESCRIPTION OF U.S. CAN'S CAPITAL STOCK..................... 73 DESCRIPTION OF THE COMPANY'S CAPITAL STOCK.................. 75 DESCRIPTION OF EXCHANGE NOTES............................... 76 THE EXCHANGE OFFER.......................................... 116 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 125 PLAN OF DISTRIBUTION........................................ 130 LEGAL MATTERS............................................... 130 INDEPENDENT PUBLIC ACCOUNTANTS.............................. 130 WHERE YOU CAN FIND MORE INFORMATION......................... 131 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES.......................... F-1
i DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we can give no assurance that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth below under the caption "Risk Factors" and elsewhere in this prospectus. We expressly qualify all forward-looking statements attributable to us or persons acting on our behalf in their entirety by those cautionary statements. We will not update these forward-looking statements even though our situation will change in the future. ------------------------ This prospectus contains summaries of the terms of certain documents. Such summaries are qualified in their entirety by reference to the full and complete text of such documents (copies of which will be made available to you upon request to United States Can Company) for complete information with respect thereto. This exchange offer is not being made to, and we will not accept surrenders for exchange from, holders of the outstanding notes in any jurisdiction in which the exchange offer or its acceptance would not comply with the securities or blue sky laws of such jurisdiction. All resales must be made in compliance with state securities or "blue sky" laws. Such compliance may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL BEFORE DECIDING WHETHER TO TENDER YOUR NOTES. ------------------------ MARKET AND INDUSTRY DATA Unless otherwise indicated, the market share and industry data used throughout this prospectus were obtained primarily from internal company surveys and management estimates based on these surveys and our management's knowledge of the industry. Where we have relied on third-party market and industry data, we have so noted. The Chemical Specialties Manufacturers Association, European Aerosol Federation and Can Manufacturers Institute were the primary sources for third party industry data. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. We have not independently verified any of the data from third-party sources. Similarly, internal company surveys and management estimates, while we believe they are reliable, have not been verified by any independent sources. While we are not aware of any misstatements regarding our industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors" in this prospectus. TRADEMARKS U.S. Can-Registered Trademark- and Plastite-Registered Trademark- are our trademarks. All other trademarks and service marks used in this prospectus are the property of their respective owners. ii SUMMARY THIS SUMMARY CONTAINS BASIC INFORMATION ABOUT UNITED STATES CAN COMPANY AND THE EXCHANGE OFFER. IT DOES NOT CONTAIN ALL THE INFORMATION THAT YOU MAY CONSIDER IMPORTANT IN MAKING YOUR INVESTMENT DECISION. THEREFORE, YOU SHOULD READ THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE ACCOMPANYING NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. EXCEPT AS OTHERWISE REQUIRED BY THE CONTEXT, REFERENCES IN THIS PROSPECTUS TO "OUR COMPANY," "WE," "US," OR "OUR" REFER TO THE COMBINED BUSINESS OF U.S. CAN CORPORATION, THE PARENT COMPANY OF UNITED STATES CAN COMPANY, AND ALL OF ITS SUBSIDIARIES. ALL REFERENCES TO "U.S. CAN" REFER TO U.S. CAN CORPORATION, AND REFERENCES TO THE "COMPANY" REFER TO UNITED STATES CAN COMPANY. ALL PRO FORMA FINANCIAL INFORMATION IN THIS PROSPECTUS INCLUDES THE OPERATIONS OF MAY VERPACKUNGEN, OUR GERMAN SUBSIDIARY THAT WE ACQUIRED ON DECEMBER 30, 1999, AND REFLECTS U.S. CAN'S 20 FOR 1 STOCK SPLIT THAT OCCURRED ON OCTOBER 4, 2000. THE COMPANY GENERAL We are a leading manufacturer of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in the United States and food cans in Europe. Our product offerings include a wide variety of steel containers, such as aerosol cans, paint cans, oblong containers and a large number of custom and specialty products, and plastic containers, such as plastic pails for industrial and consumer products. We have long-standing customer relationships with many leading consumer products companies in the United States and Europe, including Gillette, Reckitt Benckiser and Sherwin Williams. In steel aerosol cans, we hold the number one market position in the United States and the number two market position in Europe. We also hold the number two market position in paint cans in the United States. We attribute our market leadership to our ability to consistently provide high-quality products and service at competitive prices, while continually improving our product-related technologies. For the twelve months ended October 1, 2000, we had pro forma net sales of $803.6 million and adjusted EBITDA of $105.5 million. Our aerosol and paint products represented approximately 78% of our total pro forma net sales for the same period. Domestic operations represented approximately 69% of total pro forma net sales, with the remainder generated by our European operations. Our principal executive offices are located at 900 Commerce Drive, Suite 302, Oak Brook, Illinois 60523 (Telephone Number: (630) 571-2500). We compete in three major business segments within the container industry: Aerosol Products; Paint, Plastic and General Line Products; and Custom and Specialty Products. In addition, we recently acquired May Verpackungen, a German manufacturer of metal food packaging and steel aerosol cans. - AEROSOL PRODUCTS. Steel aerosol cans represent our largest segment and accounted for approximately 59% of our total pro forma net sales for the last twelve months ended October 1, 2000. In 1999, we manufactured over 50% of the steel aerosol cans produced in the United States and over 25% of the steel aerosol cans produced in Europe. We also supply steel aerosol cans to customers in Latin America through an Argentinian joint venture. We offer a wide range of steel aerosol cans that enhance our customers' product offerings, including stylized and barrier-pack cans. Most of the aerosol cans that we produce employ a lithography process that prints our customers' designs and logos on the cans. Examples of products using our steel aerosol cans include Right Guard deodorant, Easy-Off oven cleaner and Krylon spray paint. - PAINT, PLASTIC AND GENERAL LINE PRODUCTS. These products are our second largest segment and accounted for approximately 19% of our total pro forma net sales for the last twelve months ended October 1, 2000. Our primary paint, plastic and general line products include paint and 1 coating containers, oblong steel cans, plastic pails and other containers for industrial and consumer products. We produce nearly half of all one-gallon paint cans sold in the United States. Examples of products using our containers include Dutch Boy paint, Thompson's Water Seal and Arch pool chemicals. - CUSTOM AND SPECIALTY PRODUCTS. Our custom and specialty products accounted for approximately 6% of our total pro forma net sales for the last twelve months ended October 1, 2000. We believe that we offer the industry's widest range of decorative and specialty products. Our primary products include a wide array of functional and decorative containers and tins, fitments and stampings, and collectible items, such as decorative metal signs and canister sets. Examples of products packaged with our containers include holiday tins sold by mass merchandisers, Keebler cracker tins and Liz Claiborne fragrance gift boxes. MAY VERPACKUNGEN ACQUISITION On December 30, 1999, we acquired May Verpackungen, a German manufacturer of steel food packaging and aerosol cans. May is a leading European food can producer with more than 20% of the German food can market. For the last twelve months ended October 1, 2000, May generated approximately 16% of our total pro forma net sales. The May acquisition allows us to: - increase our scale and presence in Europe; - improve our ability to reduce manufacturing costs; - take advantage of purchasing synergies; and - enhance our ability to offer global manufacturing services to our customers. May has a reputation for manufacturing excellence and has long-term relationships with several leading consumer products companies. As a result of this increased diversification and our larger European presence, we expect to realize additional cross-selling opportunities between our traditional customers and those of May. Generally, we serve different customers than May, with no overlap among our top ten customers. COMPETITIVE STRENGTHS We believe we have the following competitive strengths: - MARKET LEADERSHIP. Domestically, we hold the number one market position in our steel aerosol can lines and the number two market position in our paint product lines. In Europe, we are the second largest manufacturer of steel aerosol cans. Collectively, our aerosol can and paint product lines represent approximately 78% of our annual sales. We believe our technological innovation and product quality have resulted in an over 50% share of the domestic United States aerosol container market. We also produce nearly half of all one-gallon paint cans sold annually in the United States. Through May, we have strengthened our position in Europe and Germany, as well as expanded our product offerings. - LONG-STANDING CUSTOMER RELATIONSHIPS. We have long-standing relationships with many of our customers and have been able to expand our market share with many key customers. Our market share makes us an important supplier to the leading users of aerosol and paint cans, while our scale allows us to respond quickly to customer demands. We believe our long-standing customer relationships have developed as a result of our reputation for quality and service, providing competitively priced products and providing global supply services to multi-national consumer products companies. 2 - INDUSTRY-LEADING TECHNICAL CAPABILITIES. Over the last two years, we have invested heavily in equipment and systems that improve our manufacturing quality and efficiency. We have made a significant investment in new technology, including the installation of two new high-speed, six-color presses that we expect will improve the quality and lower the cost of printing. We also have been at the forefront of technological improvements in the packaging industry, including the production of barrier-pack cans and the development of advanced interior container coatings. - EFFICIENT MANUFACTURING OPERATIONS. Since 1997, we have rationalized manufacturing facilities and centralized operations to lower our overall costs. As of October 1, 2000, we have sold or closed 18 manufacturing facilities. The closing of these facilities, in conjunction with investments in new technology, has created a lower-cost, more efficient manufacturing base, while improving product quality and customer service. In addition, we recently reduced our workforce by eliminating 73 salaried and 34 hourly positions. This plan is expected to reduce expenses by approximately $5 million per year. We expect that these and future initiatives will continue to improve our manufacturing efficiencies and our customer service capabilities. - STRATEGICALLY POSITIONED MANUFACTURING FACILITIES. We strategically locate our manufacturing facilities near our customers to provide time sensitive product delivery and improve inventory management and product design. We have 16 facilities in the United States and ten facilities in Europe. Our broad U.S. and European presence allows us to reduce costs, improve delivery times and meet our customers' growing needs for global supply solutions. To expand our global presence, we recently entered the growing South American market through an Argentinian joint venture. - EXPERIENCED MANAGEMENT TEAM. Our management team consists of highly qualified senior managers with significant industry experience. Our management team owns 9.00% of U.S. Can's common stock and has time and performance-based options to acquire an additional 5.75% over the next five years. BUSINESS STRATEGY Our business strategy focuses on the following: - FOCUSING ON CUSTOMER SERVICE. By providing improved customer service and support, we believe we can enhance our market share with existing customers and further distinguish ourselves in the container and packaging industry. We are currently implementing new systems and technology, including just-in-time delivery, customer order tracking and demand forecasting that will further enhance our value-added service offerings. In addition, we have invested in new lithography capacity, including two high-speed, six-color presses that allow us to offer sophisticated printing capabilities. - MEETING OUR CUSTOMERS' GLOBAL NEEDS. Our customers are expanding internationally and have an increasing need for global supply sources. To meet their needs, we are integrating our global manufacturing capabilities and selectively expanding into new geographic regions. We believe our recent success in securing global supply relationships validates our global strategy. - IMPROVING OPERATING EFFICIENCIES. We plan to continue to reduce manufacturing costs and enhance operating efficiencies by further reconfiguring our manufacturing base, improving our efficiency in purchasing and investing in new equipment and technology. For example, we are consolidating our purchasing in both the United States and Europe. As a result of these efforts, we have secured steel purchase agreements that will provide us with approximately $2 million in annual cost savings. 3 - MAKING SELECTIVE ACQUISITIONS. We plan to continue to evaluate and selectively pursue acquisitions of rigid packaging businesses that will help fulfill our customer needs, attract new customers, add new products, complement our existing businesses, enhance our earnings or expand our geographic reach. THE TRANSACTIONS On October 4, 2000, we and our parent company, U.S. Can: - consummated the merger of Pac Acquisition Corporation and U.S. Can, with U.S. Can being the surviving corporation; - Berkshire Partners LLC and its co-investors, certain existing stockholders of U.S. Can, referred to as the "rollover stockholders," and several members of U.S. Can's management team made common stock investments and preferred stock investments totaling $160 million; - purchased approximately 13.5 million shares of U.S. Can's common stock for cash at $20.00 per share and outstanding options to purchase approximately 1.6 million shares of U.S. Can's common stock at $20.00 per underlying share, less the applicable option exercise price; - entered into a $400 million senior secured credit facility comprised of term loans totaling $260 million and a revolving line of credit totaling $140 million; - issued $175.0 million aggregate principal amount of notes in the original offering; and - repurchased $235.7 million aggregate principal amount of U.S. Can's outstanding 10 1/8% notes due 2006. OVERVIEW OF BERKSHIRE PARTNERS LLC Berkshire Partners LLC is a Boston-based private investment firm that invests in businesses that offer strong growth prospects and that are supported by high quality management teams interested in becoming owners of the companies they operate. Berkshire Partners' private equity investments have taken many forms, including leveraged buyouts, recapitalizations, privatizations, minority investments and industry consolidations. Since 1984, Berkshire Partners has made investments in over 65 operating companies in a wide variety of industries, including manufacturing, business services, retail and related services, telecommunications and transportation. Berkshire Partners manages $1.8 billion of capital through five private equity partnerships. The most recent of these, Berkshire Fund V, L.P. (inclusive of Berkshire Fund V Coinvestment Fund, L.P.), has capital commitments of approximately $1.0 billion. Berkshire Partners' current and former portfolio companies include Crown Castle International Corporation, Wisconsin Central Transportation Company, Profit Recovery Group, The Holmes Group, Thomas Built Buses and Weigh-Tronix LLC. The investment by Berkshire Fund V and its affiliates of approximately $131.8 million in U.S. Can represents one of the largest investments Berkshire Partners has made in a single entity. 4 THE EXCHANGE OFFER The exchange offer relates to the exchange of up to $175,000,000 aggregate principal amount of our outstanding 12 3/8% Senior Subordinated notes due 2010 for an equal aggregate principal amount of our new 12 3/8% Series B Senior Subordinated notes due 2010. The exchange notes will be obligations of United States Can Company entitled to the benefits of the indenture governing the outstanding notes. Registration Rights Agreement................ You are entitled to exchange your notes for exchange notes with terms that are identical in all material respects to the notes. The exchange offer is intended to satisfy these rights. After the exchange offer is complete, you may no longer be entitled to the benefits of the rights granted under the registration rights agreement that we entered into as part of the offering of the notes. The Exchange Offer........................... We are offering to exchange $1,000 principal amount of exchange notes which have been registered under the Securities Act for each $1,000 principal amount of notes that were issued on October 4, 2000 in a transaction exempt from registration under the Securities Act in accordance with Rule 144A. Each of your notes must be properly tendered and accepted in order to be exchanged. We will exchange all notes that are properly tendered and not validly withdrawn. As of this date, there are $175,000,000 in aggregate principal amount of notes outstanding. We will issue the exchange notes on or promptly after the expiration of the exchange offer. Expiration Date.............................. The exchange offer will expire at 5:00 p.m., New York City time, on , unless we decide to extend the exchange offer. Conditions to the Exchange Offer............. The exchange offer is subject to the condition that it does not violate applicable law or interpretations of the staff of the Commission. If we determine that applicable federal law does not permit the exchange offer, we may terminate the offer. The exchange offer is not conditioned upon any minimum principal amount of notes being tendered. The holders of notes have certain rights under the registration rights agreement should we fail to consummate the exchange offer. Resales of the Exchange Notes................ Based on interpretations of the staff of the Commission, we believe that you may offer for resale, resell or otherwise transfer the exchange notes without complying with the registration and
5 prospectus delivery requirements of the Securities Act if you: - acquire the notes issued in the exchange offer in the ordinary course of your business; - are not participating, do not intend to participate, and have no arrangement or undertaking with anyone to participate, in the distribution of the notes issued to you in the exchange offer; and - are not an "affiliate" of U.S. Can as defined in Rule 405 of the Securities Act. If any of these conditions are not satisfied and you transfer any exchange notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We will not be responsible for or indemnify you against any liability you may incur. Each broker-dealer that receives exchange notes for its own account in exchange for notes, where such notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. See "Plan of Distribution." Accrued Interest on the Exchange Notes and the Notes.................................. Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders who exchange their notes for exchange notes will receive the same interest payment on April 1, 2001 (the first interest payment date with respect to the notes and the exchange notes to be issued pursuant to the exchange offer) that they would have received had they not accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. Procedures for Tendering Notes............... If you wish to tender your notes for exchange pursuant to the exchange offer, you must transmit to Bank One Trust Company, N.A., as exchange agent, on or prior to the expiration date either: - a properly completed and duly executed copy of the letter of transmittal accompanying this prospectus, or a facsimile of such letter of transmittal, together with your outstanding
6 notes and any other documentation required by such letter of transmittal, at the address set forth on the cover page of the letter of transmittal; or - if you are effecting delivery by book-entry transfer, a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of a confirmation of book-entry transfer; In addition, you must deliver to the exchange agent on or prior to the expiration date: - if you are effecting delivery by book-entry transfer, a timely confirmation of book-entry transfer of your outstanding notes into the account of the exchange agent at The Depository Trust Company pursuant to the procedures for book-entry transfers described in this prospectus under the heading "The Exchange Offer--Procedures for Tendering;" or - if necessary, the documents required for compliance with the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." By executing and delivering the accompanying letter of transmittal or effective delivery by book-entry transfer, you are representing to us that, among other things, (i) the person receiving the exchange notes pursuant to the exchange offer, whether or not such person is the holder, is receiving them in the ordinary course of business, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such exchange notes and that such holder is not engaged in, and does not intend to engage in, a distribution of the exchange notes and (iii) neither the holder nor any such other person is an "affiliate" of ours within the meaning of Rule 405 under the Securities Act. Special Procedures for Beneficial Owners..... If you are a beneficial owner of notes and your name does not appear on a security listing of The Depository Trust Company as the holder of such notes or if you are a beneficial owner of notes that are registered in the name of a broker,
7 dealer, commercial bank, trust company or other nominee and you wish to tender such notes in the exchange offer, you should promptly contact the person in whose name your notes are registered and instruct such person to tender on your behalf. If you, as a beneficial holder, wish to tender on your own behalf you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Guaranteed Delivery Procedures............... If you wish to tender your notes and time will not permit the letter of transmittal or any of the documents required by the letter of transmittal to reach the exchange agent by the expiration date, or the procedure for book-entry transfer cannot be completed on time or certificates for your notes cannot be delivered on time, you may tender your notes pursuant to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." Shelf Registration Statement................. If any changes in law or of the applicable interpretation of the staff of the Commission do not permit us to effect the exchange offer, or upon the request of any holder of the notes under certain circumstances, we have agreed to register the notes on a shelf registration statement and use our best efforts to cause such shelf registration statement to be declared effective by the Commission. We have agreed to maintain the effectiveness of the shelf registration statement for, under certain circumstances, at least two years from the date of the original issuance of the notes to cover resales of such notes held by such holders. Withdrawal Rights............................ You may withdraw the tender of your outstanding notes at any time prior to 5:00 p.m., New York City time, on the expiration date. Acceptance of Outstanding Notes and Delivery of Exchange Notes.......................... Subject to certain conditions, we will accept for exchange any and all outstanding notes that are properly tendered and not validly withdrawn. The exchange notes issued pursuant to the exchange offer will be delivered promptly following the expiration date.
8 Certain U.S. Federal Income Tax Consequences............................... The exchange of notes for the exchange notes should not be a taxable exchange for United States federal income tax purposes. See "Certain United States Federal Tax Considerations." Use of Proceeds.............................. We will not receive any proceeds from the issuance of the exchange notes. We will pay all of our expenses relating to the exchange offer. Exchange Agent............................... Bank One Trust Company, N.A. is serving as exchange agent in connection with the exchange offer. The exchange agent can be reached at One North State Street, 9th Floor, Chicago, Illinois 60602. For more information with respect to the exchange offer, please contact the exchange agent at (800) 524-9472 or send your questions by facsimile to the exchange agent at (312) 407-2088.
9 THE EXCHANGE NOTES General...................................... The form and terms of the exchange notes are identical in all material respects to the form and terms of the outstanding notes except that: - the exchange notes will bear a Series B designation; - we will have registered the exchange notes under the Securities Act and, therefore, they generally will not bear legends restricting their transfer; and - the holders of exchange notes will not be entitled to rights under the registration rights agreement. The exchange notes will evidence the same debt as the outstanding notes and will be entitled to the benefits of the indenture under which the notes were issued. Issuer....................................... United States Can Company. Notes Offered................................ $175.0 million aggregate principal amount of 12 3/8% Series B Senior Subordinated Notes due 2010. Maturity..................................... October 1, 2010. Interest Payments............................ April 1 and October 1, commencing April 1, 2001. Optional Redemption.......................... We may redeem the exchange notes in whole or in part, at redemption prices set forth in the section entitled "Description of the Exchange Notes--Redemption," plus accrued and unpaid interest, if any, to the redemption date. Optional Redemption After Some Equity Offerings.................................. At any time and from time to time before October 1, 2003, we may apply the proceeds of a prior equity offering, within 180 days of that offering, to redeem up to 35% of the aggregate principal amount of the exchange notes at a redemption price equal to 112.375% of the principal amount thereof, plus accrued and unpaid interest, if any, through the date of redemption if at least 65% of the aggregate principal amount of the exchange notes originally issued remains outstanding immediately after giving effect to the redemption.
10 Change of Control............................ Upon a change of control, as defined under the section entitled "Description of the Exchange Notes," you will have the right, as a holder of exchange notes, to require us to repurchase all or part of your exchange notes at the repurchase price set forth in the section entitled "Description of the Exchange Notes," plus accrued and unpaid interest, if any, to the date of repurchase. Guarantee.................................... The company's obligations under the exchange notes will be guaranteed on a senior subordinated basis (the "Guarantees") by our parent, U.S. Can, and all of our domestic restricted subsidiaries (collectively, the "Guarantors"). Currently, our only domestic restricted subsidiary and our only subsidiary guarantor is USC May Verpackungen Holding Inc. None of our foreign subsidiaries will guarantee the notes. The Guarantees will be general, unsecured obligations of the Guarantors, subordinate in right of payment to all the Guarantors' senior indebtedness. As of October 1, 2000, after giving pro forma effect to the transactions and the original offering, the Guarantees were subordinated to $319.8 million of senior indebtedness. See "Description of Exchange Notes." Ranking...................................... The exchange notes will be unsecured and will rank in right of payment behind all of our existing and future senior debt and will rank equal in right of payment to all of our existing and future senior subordinated debt. The exchange notes will be effectively subordinated to all liabilities of our subsidiaries that do not guarantee the notes. The exchange notes will rank equally with any notes issued in the original offering that are not exchanged pursuant to the exchange offer. As of October 1, 2000, after giving pro forma effect to the transactions and the original offering: - we had approximately $319.8 million of senior debt outstanding and approximately $104.6 million of unused commitment under our senior secured credit facility; - we had approximately $175.0 million of senior subordinated debt represented by the notes and approximately $0.9 million of senior subordinated debt represented by U.S. Can's outstanding 10 1/8% notes due 2006; and - our subsidiaries that are not guarantors of the exchange notes had $98.1 million of liabilities, excluding liabilities owed to us.
11 See "Summary Historical and Pro Forma Financial Information" and "Capitalization." Restrictive Covenants........................ The company will issue the exchange notes under an indenture between us and Bank One Trust Company, N.A., as trustee. The indenture also governs the notes. The indenture limits the company's ability and the ability of our restricted subsidiaries to: - incur more debt; - pay dividends or make other distributions, repurchase stock, repurchase subordinated debt and make certain investments; - create liens; - create restrictions on the payment of dividends and other amounts to us from our restricted subsidiaries; - sell assets or consolidate or merge with or into other companies; and - engage in transactions with affiliates. These covenants are subject to a number of important exceptions and limitations that are described under the heading "Description of the Exchange Notes." Risk Factors................................. You should consider carefully all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in the exchange notes.
12 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES The following tables present our summary financial data. The summary historical financial data for the years ended December 31, 1995 through 1999 have been derived from our consolidated financial statements. The summary financial data for the nine months ended October 1, 2000 and October 3, 1999 have been derived from our unaudited interim condensed consolidated financial statements, which in our opinion include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for the fair presentation of our financial position and results of operations for these periods. Our October 1, 2000 financial statements include the results of operations of our German subsidiary, May Verpackungen, which we acquired in December 1999, but our historical income statements for all other periods presented below do not reflect the results of May. Operating results for the nine months ended October 1, 2000 are not necessarily indicative of results that may be expected for the entire year or any future period. The summary unaudited pro forma consolidated financial statements have been prepared by applying certain pro forma adjustments resulting from the transactions, the acquisition of May on December 30, 1999 and the sale of our Wheeling metal closures and Warren lithography businesses on March 10, 2000 to our historical audited financial statements. The transactions have been reflected as a recapitalization. The pro forma consolidated balance sheet as of October 1, 2000 has been derived from our historical balance sheet (which includes the impact of the acquisition of May and the sale of our Wheeling and Warren operations), adjusted to give effect to the transactions, as if they occurred on October 1, 2000. The pro forma consolidated statement of operations for the twelve months ended December 31, 1999 and October 1, 2000 and the nine months ended October 1, 2000 gives effect to the acquisition of May, the sale of our Wheeling and Warren operations and the recapitalization as if each occurred on January 1, 1999. The pro forma consolidated statements of operations exclude non-recurring items directly attributable to the transactions. The pro forma consolidated financial statements are presented for informational purposes only and have been derived from, and should be read in conjunction with, our consolidated financial statements, including the notes thereto. The pro forma adjustments, as described in the notes to the unaudited pro forma statements of operations and balance sheet contained in "Unaudited Pro Forma Financial Data," are based on currently available information and certain adjustments that we believe are reasonable. The pro forma financial information is not necessarily indicative of the financial position or results of operations of U.S. Can or the company that would have occurred had the transactions, the May acquisition and the sale of our Wheeling and Warren operations taken place on the date indicated, nor are they necessarily indicative of our future financial position or results of operations. We have not provided separate financial statements or data for the company in this prospectus. U.S. Can's only assets are its investment in and advances to the company. We believe that the financial statements of U.S. Can and the consolidated financial statements of the company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. The following summary historical and pro forma financial data should be read in conjunction with "Capitalization," "Selected Financial Data," "Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes thereto included elsewhere in this prospectus. 13 HISTORICAL AND PRO FORMA FINANCIAL DATA (DOLLARS IN MILLIONS)
HISTORIAL ---------------------------------------------------------------------------- PRO FORMA NINE MONTHS ------------ YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- --------------------- YEAR OCTOBER OCTOBER ENDED 3, 1, DECEMBER 31, 1995 1996 1997 1998 1999 1999 2000 1999 -------- -------- -------- -------- -------- --------- --------- ------------ (UNAUDITED) (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales.......................... $562.7 $660.6 $755.7 $710.2 $714.1 $549.8 $607.0 $843.1 Cost of Sales...................... 491.1 571.7 665.8 618.1 611.6 470.1 517.6 723.5 ------ ------ ------ ------ ------ ------ ------ ------ Gross income....................... 71.6 88.9 89.9 92.1 102.5 79.7 89.4 119.6 Selling, general and administrative expenses......................... 26.5 28.4 33.0 32.6 33.8 25.0 32.4 44.5 Special charges(1)................. 8.0 -- 63.0 35.9 -- -- 3.4 -- ------ ------ ------ ------ ------ ------ ------ ------ Operating income (loss)............ 37.1 60.5 (6.1) 23.6 68.7 54.7 53.6 75.1 Interest expense................... 24.5 28.4 36.9 33.2 28.7 21.8 24.6 50.4 Amortization of deferred financing costs............................ 1.5 1.4 1.7 1.8 1.2 0.9 1.2 3.8 Other expenses..................... 2.0 1.7 2.0 1.8 1.7 1.3 1.9 2.8 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes............................ 9.1 29.0 (46.7) (13.2) 37.1 30.7 25.9 18.1 Provision (benefit) for income taxes............................ 4.2 12.3 (16.8) (5.7) 14.6 12.0 9.8 7.1 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before discontinued operations, extraordinary item and preferred stock dividend..... 4.9 16.7 (29.9) (7.5) 22.5 18.7 16.1 11.0 Net Income (loss) from discontinued operations....................... (1.0) 0.4 1.1 -- -- -- -- -- Net loss on sale of discontinued business(2)...................... -- -- (3.2) (8.5) -- -- -- -- Extraordinary item(3).............. -- (5.3) -- -- (1.3) (1.3) -- (1.3) ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) before preferred stock dividend................... $ 3.9 $ 11.8 $(32.0) $(16.0) $ 21.2 $ 17.4 $ 16.1 $ 9.7 ====== ====== ====== ====== ====== ====== ====== Preferred stock dividend........... 11.1 ------ Net loss available for common stockholders..................... $ (1.4) ====== OTHER FINANCIAL DATA: EBITDA(4).......................... $ 69.8 $ 91.4 $ 93.1 $ 91.3 $ 97.7 $ 77.9 $ 80.7 $107.1 Adjusted EBITDA(5)................. -- -- -- -- -- -- -- 112.1 Depreciation and amortization...... 28.2 34.0 39.9 35.4 31.9 25.4 26.8 38.6 Capital expenditures(6)............ 31.4 48.6 54.0 22.8 31.0 19.7 16.5 31.0 Ratio of earnings to fixed charges(7)....................... 1.3x 1.9x NM 0.7x 2.2x 2.3x 1.9x 1.0x Ratio of adjusted EBITDA to cash interest expense................. 2.2x Ratio of total debt to adjusted EBITDA........................... BALANCE SHEET DATA: Cash and cash equivalents.......... $ 0.1 $ 8.0 $ 6.8 $ 18.1 $ 15.7 $ 32.2 $ 7.4 Working capital.................... 48.9 105.6 80.8 76.1 37.7 69.9 71.0 Total assets....................... 455.4 643.6 633.7 555.6 663.6 558.6 626.0 Total debt......................... 244.6 375.8 376.1 316.7 359.3 281.5 318.9 Preferred Stock.................... -- -- -- -- -- -- -- Stockholders' equity (deficit)..... 81.8 96.8 62.3 50.2 68.6 67.2 68.5 PRO FORMA ------------------------- NINE TWELVE MONTHS MONTHS ENDED ENDED OCTOBER 1, OCTOBER 1, 2000 2000 ----------- ----------- (UNAUDITED) (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales.......................... $603.8 $803.6 Cost of Sales...................... 515.0 687.9 ------ ------ Gross income....................... 88.8 115.7 Selling, general and administrative expenses......................... 32.5 44.4 Special charges(1)................. 3.4 3.4 ------ ------ Operating income (loss)............ 52.9 67.9 Interest expense................... 39.2 51.9 Amortization of deferred financing costs............................ 1.4 1.8 Other expenses..................... 1.9 2.6 ------ ------ Income (loss) before income taxes............................ 10.4 11.6 Provision (benefit) for income taxes............................ 3.9 4.5 ------ ------ Income (loss) from continuing operations before discontinued operations, extraordinary item and preferred stock dividend..... 6.5 7.1 Net Income (loss) from discontinued operations....................... -- -- Net loss on sale of discontinued business(2)...................... -- -- Extraordinary item(3).............. -- -- ------ ------ Net income (loss) before preferred stock dividend................... $ 6.5 $ 7.1 Preferred stock dividend........... 9.1 11.9 ------ ------ Net loss available for common stockholders..................... $ (2.6) $ (4.8) ====== ====== OTHER FINANCIAL DATA: EBITDA(4).......................... $ 79.9 $101.7 Adjusted EBITDA(5)................. 82.4 105.5 Depreciation and amortization...... 26.9 34.8 Capital expenditures(6)............ 16.5 27.8 Ratio of earnings to fixed charges(7)....................... 0.9x 0.9x Ratio of adjusted EBITDA to cash interest expense................. 2.1x 2.0x Ratio of total debt to adjusted EBITDA........................... 4.7x BALANCE SHEET DATA: Cash and cash equivalents.......... $ 5.1 Working capital.................... 94.6 Total assets....................... 634.2 Total debt......................... 495.7 Preferred Stock.................... 106.7 Stockholders' equity (deficit)..... (178.9)
- ---------------------------------- (1) The 1995 special charge relates to an overhead reduction program. See note (3) to the audited consolidated financial statements for a description of the 1997 and 1998 special charges and note (2) to the unaudited consolidated financial statements for a description of the third quarter 2000 special charge. (2) See note (3) to the consolidated financial statements for a description of the sale of the company's metal services segment. 14 (3) Represents premium paid and write-offs of deferred financing costs in conjunction with the early extinguishment of debt. (4) Earnings before interest, taxes, depreciation, amortization and special charges. We consider EBITDA to be an important indicator of the performance of our business, including our ability to provide cash flows to service debt and fund capital expenditures. EBITDA, however, should not be considered an alternative to operating or net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. In addition, our definition of EBITDA may not be comparable to similarly-titled measures reported by other companies. (5) Adjusted EBITDA is EBITDA adjusted for our reduction in force program. Pro forma adjusted EBITDA for the twelve months ended December 31, 1999 and October 1, 2000 and the nine months ended October 1, 2000 of $112.1 million, $105.5 million and $82.4 million, respectively, are derived by adding $5.0 million, $3.8 million and $2.5 million, respectively, consisting of the net reduction in salaries of employees terminated in connection with our reduction in force program, to the pro forma EBITDA for the twelve months ended December 31, 1999 and October 1, 2000 and the nine months ended October 1, 2000 of $107.1 million, $101.7 million and $79.9 million respectively. (6) The pro forma data for the twelve months ended October 1, 2000 excludes capital expenditures for May for the three-month period from October 3, 1999 to December 31, 1999. (7) For purposes of computing the ratio of earnings to fixed charges, earnings represents earnings from continuing operations plus fixed charges. Fixed charges include interest expense on indebtedness, amortization of debt discount and the portion of rent deemed representative of an interest factor. Approximately $46.7 million and $13.2 million of additional pretax earnings for the fiscal years ended December 31, 1997 and 1998, respectively, would be required for our company to have achieved a ratio of earnings to fixed charges of 1.0. As pretax earnings were reduced by non-cash special charges of $41.7 million and $27.7 million for the respective fiscal years, the ratios do not indicate an inability of the company to make cash payments necessary to support its fixed charges. Approximately $7.8 million and $4.2 million of additional pre-tax earnings would be required in order for our company to have achieved a pro forma ratio of earnings to fixed charges of 1.0 for the nine-month and twelve-month periods ended October 1, 2000. As pro forma non-cash depreciation and amortization amounted to $26.9 million and $34.8 million for the nine-month and twelve-month periods ended October 1, 2000, respectively, we do not expect that we will be unable to make the cash payments necessary to support our fixed charges. 15 RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE INVESTING IN THE EXCHANGE NOTES. WE HAVE SUBSTANTIAL DEBT THAT COULD NEGATIVELY IMPACT OUR BUSINESS AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE EXCHANGE NOTES. As a result of the transactions and the original offering, we have significant debt outstanding. As of October 1, 2000, taking into account the transactions and the original offering, we would have had total consolidated debt outstanding of $495.7 million and $104.6 million of unused commitment under our revolving credit facility. Our high level of debt could: - make it difficult for us to satisfy our obligations, including making interest payments under the exchange notes and our other debt obligations; - limit our ability to obtain additional financing to operate our business; - limit our financial flexibility in planning for and reacting to industry changes; - place us at a competitive disadvantage as compared to less leveraged companies; - increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates; and - require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing the availability of our cash flow for other purposes. We may borrow additional funds to fund our capital expenditures and working capital needs. We also may incur additional debt to finance future acquisitions. The incurrence of additional debt could make it more likely that we will experience some or all of the risks described above. IF WE DO NOT GENERATE POSITIVE CASH FLOWS, WE MAY BE UNABLE TO SERVICE OUR DEBT. Our ability to pay principal and interest on the exchange notes and on our senior debt depends on our future operating performance. Future operating performance is subject to market conditions and business factors that often are beyond our control. Consequently, we cannot assure you that we will have sufficient cash flows to pay the principal, premium, if any, and interest on our debt. If our cash flows and capital resources are insufficient to allow us to make scheduled payments on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our debt. We cannot assure you that the terms of our debt will allow these alternative measures or that such measures would satisfy our scheduled debt service obligations. If we cannot make scheduled payments on our debt, we will be in default and, as a result: - our debt holders could declare all outstanding principal and interest to be due and payable; - our senior debt lenders could terminate their commitments and commence foreclosure proceedings against our assets; and - we could be forced into bankruptcy or liquidation. THE TERMS OF OUR DEBT MAY SEVERELY LIMIT OUR ABILITY TO PLAN FOR OR RESPOND TO CHANGES IN OUR BUSINESS. Our senior secured credit facility and the indenture governing the exchange notes restrict, among other things, our ability to take specific actions, even if such actions may be in our best interest. These restrictions limit our ability to: - incur liens or make negative pledges on our assets; 16 - merge, consolidate or sell our assets; - issue additional debt; - pay dividends or redeem capital stock and prepay other debt; - make investments and acquisitions; - enter into transactions with affiliates; - make capital expenditures; - materially change our business; - amend our debt and other material agreements; - issue and sell capital stock; - allow distributions from our subsidiaries; or - prepay specified indebtedness. Our debt requires us to maintain specified financial ratios and meet specific financial tests. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we were unable to make this repayment or otherwise refinance these borrowings, our lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our business could be adversely impacted. In addition, our senior debt will bear interest at a floating rate that will not be capped at a maximum interest rate. If interest rates rise, our senior debt interest payments also will increase, which could adversely affect our business. Although we may enter into agreements to hedge our interest rate risk, we cannot assure you that these agreements will protect us fully against our interest rate risk. YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS SUBORDINATED TO ALL OF OUR EXISTING AND FUTURE SENIOR DEBT AND ALL OF THE GUARANTORS' EXISTING AND FUTURE SENIOR DEBT. The exchange notes are our general, unsecured obligations and are subordinate to all of our existing and future senior debt. The exchange notes will rank senior or equal to all of our existing and future subordinated debt. The Guarantors will guarantee our obligations under the exchange notes on a senior subordinated basis. The Guarantees will be the Guarantors' general, unsecured obligations, subordinate to all of the Guarantors' senior debt. Our foreign restricted subsidiaries are not guarantors of the exchange notes. We may designate other subsidiaries to be non-guarantors in the future, in accordance with the indenture. In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiaries in the future, holders of their debt will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. As of October 1, 2000, our non-guarantor subsidiaries had $98.1 million of liabilities, excluding liabilities owed to us. In addition, all payments on the exchange notes will be blocked in the event of a payment default on our senior debt and may be blocked for up to 179 consecutive days in any given year in the event of a non-payment default on our senior debt. In the event of a default on the exchange notes and any resulting acceleration of the exchange notes, the holders of senior debt will be entitled to payment in full before any payment or distribution may be made with respect to the exchange notes. As of October 1, 2000, on a pro forma basis after giving effect to the transactions and the original offering, we had approximately $319.8 million of debt that ranks senior to the exchange notes and a stockholders' deficit of $178.9 million. If we are declared insolvent, liquidated or reorganized, our assets will be available to pay our obligations on the exchange notes only after all senior debt has been paid in full. Accordingly, there may be insufficient assets remaining after payment of prior senior claims 17 to pay amounts due on the exchange notes. In addition, we generally may not make any payments with respect to the exchange notes if a default exists with respect to our senior debt. WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY OUR INDENTURE. The indenture provides that, upon a change in control of our company or the parent guarantor, we will be required to offer to repurchase all of the outstanding exchange notes at 101% of the principal amount thereof, plus accrued interest. This provision will not necessarily protect exchange note holders in a highly leveraged exchange transaction or certain other transactions. In addition, our financial resources may limit our ability to repurchase the notes or repay our outstanding debt under the senior secured credit facility. For example, our senior secured credit facility prohibits our repurchase of the exchange notes if we have outstanding debt under the facility. Furthermore, any future debt that we incur would also likely limit our ability to repurchase the exchange notes. We currently anticipate that we will need additional financing to pay the principal of the exchange notes or to repurchase the exchange notes upon a change of control as required under the indenture. We may obtain such financing by refinancing our debt, selling our equity securities or selling the equity securities or assets of our subsidiaries. We cannot assure you that upon a change of control we will have sufficient funds, or will be permitted by our outstanding debt, to purchase the exchange notes tendered by holders. See "Description of the Exchange Notes--Change of Control." THE EXCHANGE NOTES AND THE GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF FRAUDULENT CONVEYANCE LAWS. Federal bankruptcy law and comparable provisions of state fraudulent transfer laws allow courts to void the exchange notes or the Guarantees, or to subordinate the exchange notes or the Guarantees to the debt owed to our or a Guarantor's existing or future creditors. A court must find, however, that, at the time we incurred the indebtedness evidenced by the exchange notes, either: - we incurred the debt, or the Guarantors incurred the Guarantees, with the intent of hindering, delaying or defrauding current or future creditors; or - we received less than reasonably equivalent value or fair consideration for the incurrence of the indebtedness or the Guarantors did not receive reasonably equivalent value or fair consideration for their Guarantees, and we or the Guarantors, as the case may be, were found to be insolvent under various definitions. If any of our future subsidiaries guarantee the exchange notes, those guarantees will be subject to the same risks as the Guarantees. If the Guarantees are avoided as a fraudulent conveyance or found to be unenforceable for any other reason, you will not have a claim against the Guarantors and will be a creditor only of the company and any Guarantor whose Guarantee was not set aside or found to be unenforceable. BERKSHIRE PARTNERS OWNS A CONTROLLING INTEREST IN OUR VOTING SECURITIES AND ITS INTERESTS COULD BE INCONSISTENT WITH THE INTERESTS OF THE EXCHANGE NOTE HOLDERS. Berkshire Partners and its affiliates own approximately 77.3% of our total common equity. Subject to certain limitations contained in our stockholders agreement, Berkshire Partners controls us. We cannot assure you that Berkshire Partners' interest will be consistent with the exchange note holders' interests. WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE NOTES. FURTHER, RESALES OF THE EXCHANGE NOTES MUST COMPLY WITH APPLICABLE STATE SECURITIES LAWS. The exchange notes are new securities for which there currently is no market. Although Salmon Smith Barney and Banc of America Securities, LLC, the initial purchasers of the outstanding notes, 18 have informed us that they intend to make a market in the exchange notes, they are not obligated to do so and they may discontinue any such market making at any time without notice. Accordingly, we cannot assure you as to the development or liquidity of any market for the exchange notes. We expect the exchange notes to be eligible for trading by qualified buyers in the PORTAL market. We do not intend to apply for listing of the exchange notes on any securities exchange or for quotation through The Nasdaq National Market. In addition, changes in the overall market for high yield securities and changes in our financial performance or prospects or in the prospects for companies in our industry generally may adversely affect the liquidity of the trading market in the exchange notes and the market price quoted for the exchange notes. See "Description of Exchange Notes" and "The Exchange Offer." All resales must be made in compliance with state securities or "blue sky" laws. Such compliance may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements. YOUR FAILURE TO EXCHANGE YOUR NOTES IN THE EXCHANGE OFFER WILL RESTRICT YOUR ABILITY TO RESELL THEM. Untendered outstanding notes that you do not exchange for the registered exchange notes pursuant to the exchange offer will remain restricted securities, subject to the following restrictions on transfer: - you may resell only if registered pursuant to the Securities Act or if an exemption from registration is available; - the notes will bear a legend restricting transfer in the absence of registration or an exemption; and - a holder of the notes who wants to sell or otherwise dispose of all or any part of its notes under an exemption from registration under the Securities Act, if requested by us, must deliver to us an opinion of independent counsel experienced in Securities Act matters, reasonably satisfactory in form and substance to us, that such exemption is available. Except under limited circumstances, we have no obligation to register any notes not tendered in the exchange offer. RISKS RELATED TO OUR BUSINESS WE FACE COMPETITIVE RISKS FROM MANY SOURCES THAT MAY NEGATIVELY IMPACT OUR BUSINESS. The can and container industry is highly competitive with some of our competitors having greater financial resources than we do. Quality, service and price are the principal methods of competition in our industry. Because our customers have the ability to buy similar products from our competitors, we are limited in our ability to increase prices. Our capital investments have improved our operating efficiencies, and consequently, improved profitability, but we cannot assure you that we will continue to improve profit margins in this manner. In addition, our business could be adversely affected if we are unable to meet our customers' quality and service demands. We also face competitive risks from substitute products, such as aluminum, glass and plastic containers. Our business also is affected by changes in consumer demand for our customers' products. A decrease in the costs of substitute products or a decline in consumer demand for our customers' products, particularly their aerosol-based products, could reduce our customers' orders and adversely affect our business. 19 THE LOSS OF A KEY CUSTOMER COULD HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR BUSINESS. We make a significant percentage of our sales to a limited number of customers. On a pro forma basis, our top ten customers accounted for approximately 32.9% of our sales in 1999, with our largest customer accounting for approximately 7.2%. The loss of a key customer could adversely affect our business because we may be unable to lower our operating costs quickly enough to offset the resulting sales decrease. In addition, several of our manufacturing plants are dependent on high volume orders from customers. The loss of any of these customers or a decrease in demand for their products, which are packaged in our containers, could adversely affect our business and force us to close manufacturing plants. Product quality is a key element in customer retention in the packaging industry. In August 2000, a manufacturing facility owned by our May Verpackungen subsidiary supplied a small number of defective pet food cans to a major customer. We have determined the cause of the production defect and have implemented additional policies and training at our May Verpackungen subsidiary to prevent a recurrence of this problem in the future. While our overall relationship with this customer is positive, the customer stopped orders from the production line that produced the defective cans through the end of 2000 and reduced purchases of other products from the facility. The customer recently requested that we resume shipments of cans from this production line. We do not expect a negative impact from this production defect on 2001 results of operations. However, we estimate that our results of operations for 2000 have been negatively impacted by approximately $3.0 million with respect to EBITDA, and we cannot assure you that we will return to previous levels of shipments to this customer. INCREASES IN TIN-PLATED STEEL PRICES COULD NEGATIVELY IMPACT OUR BUSINESS. Tin-plated steel is the most significant raw material used to make our products. In 1999, our domestic and European operations (including those of May, our recently acquired German subsidiary) purchased approximately 500,000 tons of tin-plated steel. Negotiations with our domestic and European tin-plated steel suppliers generally occur once per year. We cannot assure you that we will be able to negotiate favorable tin-plated steel prices in the future. Some customer contracts allow us to pass tin-plated steel price increases through to our customers. However, these contracts generally limit pass-throughs and also may require us to match other competitive bids. If we cannot pass through all future tin-plated steel price increases to our customers or match other packaging suppliers' bids, our business may be adversely affected. OUR FAILURE TO IMPLEMENT OUR COST SAVINGS STRATEGY COULD NEGATIVELY IMPACT OUR BUSINESS. A significant element of our business strategy is the improvement of our operating efficiencies and a reduction of our operating costs. In order to accomplish these goals, we will consider opportunities to consolidate our manufacturing plants, implement programs to lower our operating costs, implement new manufacturing technology and continue our focus on overhead reductions. Our failure to successfully implement this strategy could negatively impact our business. OUR FAILURE TO INTEGRATE THE BUSINESS WE RECENTLY ACQUIRED OR ANY BUSINESSES WE MAY ACQUIRE IN THE FUTURE COULD NEGATIVELY IMPACT OUR BUSINESS. We recently acquired May, a German manufacturer of pet food and specialty food packaging and aerosol cans. We are currently in the process of integrating May's operations into our existing business. This integration may be disruptive and may divert management time and attention from existing operations and activities. As an international acquisition, the process of integrating May is more complex. As a result, we may fail to realize the expected benefits of the acquisition. Our failure to integrate the May acquisition effectively could adversely affect our business. 20 As part of our strategy, we expect to continue to make acquisitions as opportunities arise. We cannot assure you that we will integrate successfully any businesses we acquire in the future. Difficulties encountered in any integration process for newly acquired companies could adversely affect our business. WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS. We operate facilities and sell products in several countries outside the United States. We have significant foreign operations, including plants and sales offices in Denmark, France, Germany, Italy, Spain and the United Kingdom. In addition, we currently own 36.5% of an aerosol can manufacturer located in Argentina and intend to acquire the remaining 63.5% of this manufacturer. Our international operations subject us to risks associated with selling and operating in foreign countries. These risks include: - fluctuations in currency exchange rates; - political instability; - limitations on conversion of foreign currencies into United States dollars; - restrictions on dividend payments and other payments by our foreign subsidiaries; - withholding and other taxes on dividend payments and other payments by our foreign subsidiaries; - hyperinflation in some foreign countries; and - investment regulation and other restrictions by foreign governments. We may enter into transactions to hedge the risk of exchange rate fluctuations or take other steps to protect against these risks. However, we cannot assure you that we can protect ourselves against these risks or that these risks will not adversely affect our business. OUR BUSINESS IS SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REMEDIATION AND COMPLIANCE COSTS. Our operations are subject to federal, state, local and foreign laws and regulations relating to pollution, the protection of the environment, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. In particular, our lithography operations' air emissions are strictly regulated. We spend significant funds each year to upgrade emissions control equipment to comply with changes in environmental regulations and increase the efficiencies of our manufacturing operations. Changes in applicable environmental regulations could increase the capital expenditures necessary to bring manufacturing facilities into compliance with changing environmental laws. We also could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as a result of violations of, or liabilities under, environmental laws or non-compliance with environmental permits required for our production facilities. Occasionally, contaminants from current or historical operations have been detected at some of our present and former sites. Although we are not currently aware of any material claims or obligations with respect to these sites, the detection of additional contaminants or the imposition of cleanup obligations at existing or unknown sites of contamination could result in significant liability. We cannot predict the amount or timing of costs imposed under environmental laws. Liability under certain environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis (i.e., one liable party could be held liable for all costs at a site). We have been named as a potentially responsible party for costs incurred in the clean up of a regional groundwater plume partially extending underneath property located in San Leandro, California, formerly a site of one of our can assembly plants. We have agreed to indemnify the owner of this property against this matter. We do not believe the past operations of our can assembly plant caused or contributed to this 21 groundwater plume. However, any liability in connection with this or other environmental matters could adversely affect our business. IF WE FAIL TO RETAIN KEY MANAGEMENT AND PERSONNEL, WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS PLAN. We believe that our future success depends, in large part, on our experienced senior management team. Losing the services of one or more members of our senior management team could adversely affect our business. A SIGNIFICANT PORTION OF OUR WORKFORCE IS UNIONIZED AND LABOR DISRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS. As of October 1, 2000, we had approximately 4,200 employees. Nearly 1,750 of our United States employees are subject to collective bargaining agreements that expire on various dates between June 2001 and March 2004. In keeping with common practice, virtually all manufacturing employees at our European plants are unionized. Although we consider our current relations with our employees to be good, if we do not maintain these good relations, or if major work disruptions were to occur, our business could be adversely affected. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT MAY NOT BE ACCURATE INDICATORS OF OUR FUTURE PERFORMANCE. Many statements under the captions "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus are "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements use words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions and give our current expectations or forecasts of future events. Such statements involve known and unknown risks and uncertainties which may cause the company's actual results, performance or achievements to be materially different than future results, performance or achievements expressed or implied in this release. By way of example and not limitation, and in no particular order, known risks and uncertainties include the timing of, and net proceeds realized from, divestitures, the timing and cost of plant closures, the level of cost reduction achieved through restructuring, the success of new technology, the timing of, and synergies achieved through, integration of acquisitions, changes in raw material costs and currency fluctuations. In light of these and other risks and uncertainties, the inclusion of a forward-looking statement in this prospectus should not be regarded as a representation by the Company that any future results, performance or achievements will be attained. 22 THE TRANSACTIONS THE RECAPITALIZATION On June 1, 2000, Pac Packaging Acquisition Corporation and U.S. Can entered into an Agreement and Plan of Merger (as amended, the "recapitalization agreement"), which provided for the merger of Pac Acquisition and U.S. Can in a recapitalization transaction, with U.S. Can being the surviving corporation. On October 4, 2000, the recapitalization was consummated. In connection with the recapitalization, the following transactions occurred: - U.S. Can purchased approximately 13.5 million shares of its common stock for cash at $20.00 per share; - U.S. Can purchased options to purchase approximately 1.6 million shares of its common stock for cash at $20.00 per underlying share, less the applicable option exercise price; - Berkshire Partners, its co-investors and certain of the rollover stockholders purchased preferred stock of U.S. Can for $106.7 million; - Berkshire Partners, its co-investors, certain of the rollover stockholders and management purchased common stock of U.S. Can for $53.3 million; - we borrowed $260.0 million in term loans under the new senior secured credit facility; - we borrowed $20.5 million under a revolving credit facility that is part of our new senior secured credit facility; - we issued $175.0 million aggregate principal amount of the company's 12 3/8% senior subordinated notes due 2010 in the original offering; and - U.S. Can repurchased $235.7 million aggregate principal amount of its outstanding 10 1/8% notes due 2006. SOURCES OF FUNDS The recapitalization was funded with a combination of debt and equity comprised of the following: THE EQUITY FINANCING. As part of the recapitalization, Berkshire Partners and its co-investors, along with the rollover stockholders and members of management, contributed approximately $160.0 million in cash and rollover stock to Pac Acquisition in exchange for securities consisting of approximately $53.3 million in U.S. Can common stock and approximately $106.7 million in U.S. Can preferred stock. See "Certain Relationships and Related Party Transactions." As a result of these transactions, Berkshire Partners and its affiliates own approximately 77.3% of U.S. Can's common stock. THE NEW SENIOR SECURED CREDIT FACILITY. We entered into a $400.0 million senior secured credit facility with a group of lenders. The senior secured credit facility consists of term loan facilities in an aggregate principal amount of $260.0 million and a $140.0 million revolving credit facility available for loans and letters of credit. All of the term debt and approximately $20.5 million under the revolving credit facility were used to finance a portion of the recapitalization. See "Other Indebtedness--Senior Secured Credit Facility." THE NOTES. We issued $175.0 million aggregate principal amount of the company's 12 3/8% senior subordinated notes due 2010. 23 USES OF FUNDS We used the net proceeds from these debt and equity financings to: - fund the payments required to effect the recapitalization; - tender for all of our subordinated debt (including paying accrued interest and the bond tender premium) and refinance a majority of our existing senior debt; and - pay related fees and expenses. As part of the debt refinancing, U.S. Can repurchased $235.7 million of its outstanding 10 1/8% notes due 2006 and paid the accrued interest and a bond tender premium associated with those notes. The original offering, the initial borrowings under the senior secured credit facility, the investment by Berkshire Partners and its co-investors in U.S. Can's preferred and common stock, the repurchase of U.S. Can's outstanding 10 1/8% notes due 2006 and the recapitalization, including the purchase of U.S. Can common stock, investment by the rollover stockholders and investment by management contemplated by the recapitalization agreement, are collectively referred to in this prospectus as the "transactions." The following table sets forth the sources and uses of funds in connection with the transactions as of October 4, 2000:
AMOUNT ----------- (DOLLARS IN MILLIONS) SOURCES OF FUNDS: New Senior Secured Credit Facility: Revolving Credit Facility(1)............................ $ 20.5 Term Loans.............................................. 260.0 12 3/8% Senior Subordinated Notes due October 1, 2010..... 175.0 Preferred Stock(2)........................................ 106.7 Common Stock(3)........................................... 53.3 Available Cash............................................ 2.3 Assumed Debt(4)........................................... 40.2 Total Sources............................................... $658.0 USES OF FUNDS: Purchase Capital Stock(5)................................. $277.5 Refinance Existing Debt(6)................................ 309.0 Payment of Fees and Expenses.............................. 31.3 Assumed Debt.............................................. 40.2 Total Uses.................................................. $658.0
- ------------------------ (1) The total commitment under the revolving credit facility is $140.0 million. (2) Consists of the purchase of $91.3 million of preferred stock by Berkshire Partners and its co-investors and $15.4 million by certain of the rollover stockholders. (3) Consists of the purchase (by cash and/or rollover stock) of $41.5 million of common stock by Berkshire Partners and its co-investors, $7.0 million by certain of the rollover stockholders and $4.8 million by management. 24 (4) Includes mortgages of $23.6 million, outstanding bank borrowings of $4.7 million, industrial revenue bonds of $4.0, capitalized lease obligations of $7.0 million and $0.9 million of untendered 10 1/8% notes due 2006. (5) Includes $24.8 million of rollover stock. (6) Includes amounts outstanding under the credit facility in place prior to the original offering and the principal, accrued interest and a bond tender premium in connection with the repurchase of U.S. Can's 10 1/8% notes due 2006. USE OF PROCEEDS There will be no proceeds from the issuance of the exchange notes. 25 CAPITALIZATION The following table sets forth as of October 1, 2000 our actual capitalization and our pro forma capitalization as adjusted to give effect to the transactions and the original offering as if they had occurred on that date. See "The Transactions" and "Unaudited Pro Forma Financial Data."
AS OF OCTOBER 1, 2000 ----------------------- PRO FORMA ACTUAL AS ADJUSTED --------- ----------- (DOLLARS IN MILLIONS) Cash and cash equivalents................................ $ 7.4 $ 5.1 ====== ======= Debt: Existing credit facility............................... $ 41.8 $ -- New senior secured credit facility: Revolving credit facility(1)......................... -- 20.5 Term loans........................................... -- 260.0 Other senior debt(2)................................... 40.5 39.3 10 1/8% senior subordinated notes due 2006(3) 236.6 0.9 Notes offered in the original offering................. -- 175.0 ------ ------- Total debt......................................... $318.9 $ 495.7 ====== ======= Preferred stock.......................................... $ -- $ 106.7 ====== ======= Stockholders' equity: Common stock and additional paid-in capital............ $114.6 $ 53.3 Treasury stock and unearned restricted stock........... (2.2) -- Currency translation adjustment........................ (25.4) (25.4) Accumulated deficit(4)................................. (18.5) (206.8) ------ ------- Total stockholders' equity (deficit)............... $ 68.5 $(178.9) ------ ------- Total capitalization............................... $387.4 $ 423.5 ====== =======
- ------------------------ (1) Upon completion of the transactions, we had letters of credit of $14.9 million outstanding and $104.6 million of unused commitment under the revolving credit facility. (2) Pro forma as adjusted other senior debt includes mortgages of $23.6 million, outstanding bank borrowings of $4.7 million, industrial revenue bonds of $4.0 million and capitalized lease obligations of $7.0 million. (3) As part of the transactions, U.S. Can repurchased $235.7 million aggregate principal amount of its outstanding 10 1/8% notes due 2006. (4) See notes (h) and (i) to the Pro Forma Consolidated Balance Sheet for a description of the transaction-related adjustments that cause the increase in the pro forma as adjusted accumulated deficit. 26 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma consolidated financial statements have been prepared by applying certain pro forma adjustments resulting from the transactions, the acquisition of our German subsidiary, May, on December 30, 1999 and the sale of our Wheeling and Warren operations on March 10, 2000 to our historical consolidated financial statements. The transactions have been reflected as a recapitalization. The pro forma consolidated balance sheet as of October 1, 2000 has been derived from our historical balance sheet (which includes the impact of the acquisition of May and the sale of the Wheeling and Warren operations), adjusted to give effect to the transactions as if they occurred on October 1, 2000. The pro forma consolidated statements of operations for the year ended December 31, 1999 and for the nine-month and twelve-month periods ended October 1, 2000 give effect to the acquisition of May, the sale of the Wheeling and Warren operations and the recapitalization as if each occurred on January 1, 1999. The pro forma consolidated statements of operations exclude non-recurring items directly attributable to the transactions. The pro forma consolidated financial statements are presented for informational purposes only and have been derived from, and should be read in conjunction with, our historical consolidated financial statements, including the notes thereto. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed consolidated financial statements, are based on currently available information and certain adjustments that we believe are reasonable. They are not necessarily indicative of the financial position or results of operations of U.S. Can or the company that would have occurred had the transactions, the May acquisition and the sale of the Wheeling metal closures and Warren lithography businesses taken place on the dates indicated, nor are they necessarily indicative of future financial position or results of operations. We have not provided separate pro forma financial statements or data for the company in this prospectus. U.S. Can's only assets are its investment in and advances to the company. We believe that the financial statements of U.S. Can and the consolidated financial statements of the company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. The unaudited pro forma financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes thereto, included elsewhere in this prospectus. 27 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN MILLIONS) (UNAUDITED)
AS ADJUSTED FOR PRO FORMA MAY PRO FORMA EFFECT OF U.S. CAN HISTORICAL(A) ADJUSTMENTS RECAPITALIZATION -------- ------------- ----------- ---------------- Sales........................................ $714.1 $146.7 $(17.7)(b) $843.1 Cost of Sales................................ 611.6 130.5 (18.6)(c) 723.5 ------ ------ ------ ------ Gross Income............................... 102.5 16.2 0.9 119.6 Selling, General and Administrative Expenses................................... 33.8 11.3 (0.6)(d) 44.5 ------ ------ ------ ------ Operating Income........................... 68.7 4.9 1.5 75.1 Interest Expense............................. 28.7 0.9 20.8 (e) 50.4 Amortization of Deferred Financing Costs..... 1.2 -- 2.6 (f) 3.8 Other Expenses............................... 1.7 0.3 0.8 (g) 2.8 ------ ------ ------ ------ Income before Income Taxes................... 37.1 3.7 (22.7) 18.1 Income Tax Expense........................... 14.6 0.6 (8.1)(h) 7.1 ------ ------ ------ ------ Income (Loss) from Continuing Operations Before Extraordinary Items................. 22.5 3.1 (14.6) 11.0 Extraordinary Item........................... (1.3) -- -- (1.3) ------ ------ ------ ------ Net Income before Preferred Dividends........ 21.2 3.1 (14.6) 9.7 Preferred Stock Dividends.................... -- -- 11.1 (i) 11.1 ------ ------ ------ ------ Net Income (Loss) Available for Common Stockholders............................... $ 21.2 $ 3.1 $(25.7) $ (1.4) ====== ====== ====== ====== Other Financial Information: - --------------------------------------------- EBITDA(j).................................... $107.1 Adjusted EBITDA(k)........................... 112.1 Depreciation and Amortization Expense........ 38.6 Capital Expenditures(l)...................... 31.0
See Notes to Pro Forma Consolidated Statements of Operations 28 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (DOLLARS IN MILLIONS) (UNAUDITED)
AS ADJUSTED FOR PRO FORMA U.S. CAN PRO FORMA EFFECT OF HISTORICAL ADJUSTMENTS RECAPITALIZATION ---------- ----------- ---------------- Sales..................................................... $607.0 $ (3.2)(b) $603.8 Cost of Sales............................................. 517.6 (2.6)(c) 515.0 ------ ------ ------ Gross Income............................................ 89.4 (0.6) 88.8 Selling, General and Administrative Expenses.............. 32.4 0.1 (d) 32.5 Special Charge............................................ 3.4 -- 3.4 ------ ------ ------ Operating Income........................................ 53.6 (0.7) 52.9 Interest Expense.......................................... 24.6 14.6 (e) 39.2 Amortization of Deferred Financing Costs.................. 1.2 0.2 (f) 1.4 Other Expenses............................................ 1.9 -- 1.9 ------ ------ ------ Income before Income Taxes................................ 25.9 (15.5) 10.4 Income Tax Expense........................................ 9.8 (5.9)(h) 3.9 ------ ------ ------ Net Income before Preferred Dividends..................... 16.1 (9.6) 6.5 Preferred Stock Dividends................................. -- 9.1 (i) 9.1 ------ ------ ------ Net Income (Loss) Available for Common Stockholders....... $ 16.1 $(18.7) $ (2.6) ====== ====== ====== Other Financial Information: - ---------------------------------------------------------- EBITDA(j)................................................. $ 79.9 Adjusted EBITDA(k)........................................ 82.4 Depreciation and Amortization Expense..................... 26.9 Capital Expenditures...................................... 16.5
See Notes to Pro Forma Consolidated Statements of Operations 29 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS LAST TWELVE MONTHS ENDED OCTOBER 1, 2000 (DOLLARS IN MILLIONS) (UNAUDITED)
MAY AS U.S. CAN HISTORICAL PRO FORMA ADJUSTED HISTORICAL 10/99-12/99(A) ADJUSTMENTS 10/99-9/00 ---------- -------------- ----------- ---------- Sales........................................... $771.3 $39.8 $ (7.5)(b) $803.6 Cost of Sales................................... 659.1 35.7 (6.9)(c) 687.9 ------ ----- ------ ------ Gross Income.................................. 112.2 4.1 (0.6) 115.7 Selling, General and Administrative Expenses.... 41.2 3.5 (0.3)(d) 44.4 Special Charge.................................. 3.4 -- -- 3.4 ------ ----- ------ ------ Operating Income.............................. 67.6 0.6 (0.3) 67.9 Interest Expense................................ 31.5 0.4 20.0 (e) 51.9 Amortization of Deferred Financing Costs........ 1.4 -- 0.4 (f) 1.8 Other Expenses.................................. 2.3 0.1 0.2 (g) 2.6 ------ ----- ------ ------ Income before Income Taxes...................... 32.4 0.1 (20.9) 11.6 Income Tax Expense.............................. 12.4 0.1 (8.0)(h) 4.5 ------ ----- ------ ------ Net Income Before Preferred Dividends........... 20.0 -- (12.9) 7.1 Preferred Stock Dividends....................... -- -- 11.9 (i) 11.9 ------ ----- ------ ------ Net Income (Loss) Available for Common Shareholders.................................. $ 20.0 $ -- $(24.8) $ (4.8) ====== ===== ====== ====== Other Financial Information: - ------------------------------------------------ EBITDA(j)....................................... $101.7 Adjusted EBITDA(k).............................. 105.5 Depreciation and Amortization Expense........... 34.8 Capital Expenditures(l)......................... 27.8
See Notes to Pro Forma Consolidated Statements of Operations 30 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (a) Represents the historical results of May Verpackungen, which we acquired on December 30, 1999 in a transaction accounted for as a purchase. (b) Represents the elimination of sales of our former Wheeling metal closures business and the Warren lithography operation. We sold these facilities on March 10, 2000. (c) The pro forma adjustment relating to cost of sales is as follows (in millions):
NINE MONTHS TWELVE MONTHS DECEMBER 31, ENDED ENDED 1999 OCTOBER 1, 2000 OCTOBER 1, 2000 ------------- --------------- --------------- Cost of sales related to Wheeling and Warren......... $(14.2) $(2.6) $(6.0) Pro forma impact of May contractual arrangements entered into as a result of the acquisition........ (2.0) -- (0.5) Depreciation expense benefit from the lengthening of lives, net of increased depreciation expense due to the write up of property and equipment acquired in the May acquisition to fair value.................. (2.4) -- (0.4) ------ ----- ----- $(18.6) $(2.6) $(6.9) ====== ===== =====
The contractual arrangement benefit applicable to the first nine months of 2000 was realized and is included in the historical results. The lengthened depreciable lives are in accordance with our accounting policies relating to depreciable lives. (d) The pro forma adjustment relating to selling, general and administrative expenses is as follows (in millions):
NINE MONTHS TWELVE MONTHS DECEMBER 31, ENDED ENDED DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000 - ----------- ------------- ---------------- ---------------- May historical expenses related to sale of the Company............................................ $(0.5) $ -- $(0.5) Amortization of unearned restricted stock, which became 100% vested as a result of the transaction........................................ (0.1) (0.3) (0.2) New management fee................................... 0.8 0.6 0.8 Selling, general and administrative expenses of Wheeling and Warren................................ (0.8) (0.2) (0.4) ----- ----- ----- Total pro forma adjustment........................... $(0.6) $ 0.1 $(0.3) ===== ===== =====
31 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (UNAUDITED) (e) The pro forma adjustment relating to interest expense is as follows (in millions):
NINE MONTHS TWELVE MONTHS DECEMBER 31, ENDED ENDED DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000 - ----------- ------------- ---------------- ---------------- Interest on new term loans........................... $ 22.4 $ 18.4 $ 24.0 Interest on outstanding senior subordinated notes.... 21.7 16.2 21.7 Interest on new revolving loan agreement............. 2.4 2.0 2.6 Interest on borrowings under the credit agreement in place prior to the original offering and U.S. Can's 10 1/8% notes due 2006............................. (25.7) (22.0) (28.3) ------ ------ ------ Pro forma adjustment................................. $ 20.8 $ 14.6 $ 20.0 ====== ====== ======
The interest rates to be charged under the new term loan agreement and the new revolving loan agreement are based on LIBOR plus a margin, or on the applicable base rate plus a margin. The assumed interest rates applicable to these agreements were 8.66%, 9.70% and 9.44% for 1999, the first nine months of 2000 and the last twelve months ended October 1, 2000, respectively. A 1/8% increase in the LIBOR rate would cause an increase in interest expense of $323,000, $236,000 and $316,000 for 1999, the first nine months of 2000 and the last twelve months ended October 1, 2000, respectively. The assumed interest rate for the outstanding notes was 12 3/8% for both periods. Interest expense for the new revolving loan agreement includes commitment fees of 0.5% per annum of the unused amount. (f) The pro forma adjustment relating to deferred financing expense is as follows (in millions):
NINE MONTHS TWELVE MONTHS DECEMBER 31, ENDED ENDED DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000 - ----------- ------------- --------------- --------------- Amortization of deferred financing costs in connection with new senior and senior subordinated debt facilities.................................... $ 3.4 $ 1.1 $ 1.5 Historical deferred financing expense related to the existing credit agreement and the 10 1/8% notes due 2006............................................... (0.8) (0.9) (1.1) ----- ----- ----- Pro forma adjustment................................. $ 2.6 $ 0.2 $ 0.4 ===== ===== =====
(g) Amortization of goodwill incurred in connection with the acquisition of May. (h) Represents income taxes (at our U.S. effective tax rate of 39.44% for the year ended December 31, 1999 and 38% for the first nine months of 2000 and the last twelve months ended October 1, 2000) related to the pro forma adjustments. The 1999 and last twelve months ended October 1, 2000 adjustments include an increase in income tax expense of $700,000 and $189,000, respectively, which will be incurred by May due to the change in its tax structure as a result of the acquisition. (i) Represents the cumulative dividend payable on the preferred stock issued in connection with the recapitalization. (j) Earnings before interest, taxes, depreciation, amortization and special charges. We consider EBITDA to be an important indicator of the performance of our business including our ability to 32 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (UNAUDITED) provide cash flows to service debt and fund capital expenditures. EBITDA, however, should not be considered an alternative to operating or net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. In addition, our definition of EBITDA may not be comparable to similarly titled measures reported by other companies. (k) Pro forma adjusted EBITDA is EBITDA adjusted for our reduction in force program we adopted in July 2000. The calculation of adjusted EBITDA is shown below (in millions):
NINE MONTHS TWELVE MONTHS DECEMBER 31, ENDED ENDED DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000 - ----------- ------------- --------------- --------------- EBITDA............................................... $107.1 $79.9 $101.7 Salaries of employees terminated in connection with reduction in force program......................... 5.0 2.5 3.8 ------ ----- ------ Adjusted EBITDA...................................... $112.1 $82.4 $105.5 ====== ===== ======
(l) The pro forma capital expenditures for the year ended December 31, 1999 exclude capital expenditures for May. The pro forma capital expenditures for the twelve months ended October 1, 2000 exclude capital expenditures for May for the three-month period from October 3, 1999 to December 31, 1999. (m) See note (i) to the pro forma consolidated balance sheet for a description of transactions that have been excluded from the pro forma statements of operations. Pro forma adjustments were not made relating to these items because these costs are one-time, non-recurring items that are directly attributable to the recapitalization. 33 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OCTOBER 1, 2000 (DOLLARS IN MILLIONS) (UNAUDITED)
PRO FORMA U.S. CAN U.S. CAN ADJUSTMENTS PRO FORMA -------- ----------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 7.4 $ (2.3)(a) $ 5.1 Accounts receivable, less allowances of $10.8............. 107.3 -- 107.3 Inventories............................................... 112.6 -- 112.6 Prepaid Expenses and other current assets................. 21.2 (0.3)(b) 20.9 Prepaid income taxes...................................... 16.2 1.6 (c) 17.8 ------ ------- ------- Total Current Assets.................................... 264.7 (1.0) 263.7 PROPERTY, PLANT AND EQUIPMENT............................... 271.7 -- 271.7 INTANGIBLE ASSETS, less amortization of $13.0............... 65.1 -- 65.1 OTHER ASSETS................................................ 24.5 9.2(d) 33.7 ------ ------- ------- Total Assets............................................ $626.0 $ 8.2 $ 634.2 ====== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 11.0 $ 3.3(e) $ 14.3 Accounts payable.......................................... 108.5 -- 108.5 Accrued payroll, benefits and insurance................... 24.3 -- 24.3 Restructuring reserves.................................... 13.7 -- 13.7 Other current liabilities................................. 36.2 (27.9)(c)(f) 8.3 ------ ------- ------- Total current liabilities............................... 193.7 (24.6) 169.1 SENIOR DEBT................................................. 71.3 234.2 (e) 305.5 SUBORDINATED DEBT........................................... 236.6 (60.7)(e) 175.9 ------ ------- ------- Total long-term debt.................................... 307.9 173.5 481.4 OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 13.3 -- 13.3 Other long-term liabilities............................... 42.6 -- 42.6 ------ ------- ------- Total other long-term liabilities....................... 55.9 -- 55.9 COMMITMENTS AND CONTINGENCIES PREFERRED STOCK............................................. 106.7 (g) 106.7 STOCKHOLDERS' EQUITY Common Stock.............................................. 0.1 0.4 (h) 0.5 Paid-in capital........................................... 114.5 (61.7)(h) 52.8 Unearned restricted stock................................. (0.3) 0.3 (h) -- Treasury common stock, at cost............................ (1.9) 1.9 (h) -- Currency translation adjustment........................... (25.4) -- (25.4) Accumulated deficit....................................... (18.5) (188.3)(h)(i) (206.8) ------ ------- ------- Total stockholders' equity.............................. 68.5 (247.4) (178.9) ------ ------- ------- Total liabilities and stockholders' equity.............. $626.0 $ 8.2 $ 634.2 ====== ======= =======
See Notes to Pro Forma Consolidated Balance Sheet 34 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET OCTOBER 1, 2000 (UNAUDITED) (a) Represents use of existing cash to consummate the recapitalization. (b) Represents deferred financing costs written off related to facilities that will be terminated in connection with the recapitalization. (c) Represents the income tax impact related to the items discussed in note (i). (d) Represents $13.6 million of costs related to the new senior and senior subordinated debt facilities to be deferred over the estimated terms of the related facilities, net of $4.4 million of deferred financing costs written off related to facilities that will be terminated in connection with the recapitalization. (e) Represents the borrowings made under the new senior secured credit facilities and the notes offered by this prospectus, net of the repayment of borrowings under our existing credit agreement (as defined below) and the 10 1/8% notes due 2006, as follows (in millions):
CURRENT MATURITIES OF SENIOR SUBORDINATED DESCRIPTION LONG-TERM DEBT DEBT DEBT - ----------- --------------------- -------- ------------ New term loan......................... $ 5.0 $255.0 $ -- New revolving loan.................... -- 20.5 -- New senior subordinated borrowings.... -- -- 175.0 Existing credit agreement............. (1.7) (41.3) -- Existing 10 1/8% notes due 2006....... -- -- (235.7) ----- ------ ------- Pro forma adjustment.................. $ 3.3 $234.2 $ (60.7) ===== ====== =======
(f) See notes (c) and (i). Also includes payment of accrued interest of $11.4 million required to repay the borrowings outstanding under our existing credit agreement and the 10 1/8% notes due 2006 and $0.1 million related to the accelerated vesting (as a result of the transaction) of units under our Executive Deferred Compensation Plan. (g) Represents 10% cumulative preferred stock issued in connection with the recapitalization. (h) Represents capital transactions required to effect the recapitalization, as follows (in millions):
TREASURY COMMON PAID-IN- RESTRICTED COMMON ACCUMULATED DESCRIPTION STOCK CAPITAL STOCK STOCK DEFICIT - ----------- -------- -------- ---------- -------- ----------- Vest unearned restricted stock...................... $ -- $ -- $0.3 $ -- $ (0.2) Issue common stock........... 0.5 52.8 -- -- -- Cancel treasury stock........ -- (1.9) -- 1.9 -- Purchase common stock of current U.S. Can stockholders............... (0.1) (112.6) -- -- (158.6) ----- ------- ---- ---- ------- Pro forma adjustment......... $ 0.4 $ (61.7) $0.3 $1.9 $(158.8) ===== ======= ==== ==== =======
35 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (i) In addition to the items described in (h), includes the following net of tax impact (in millions):
INCOME PRETAX TAX ACCUMULATED DESCRIPTION EXPENSE BENEFIT DEFICIT - ----------- -------- -------- ----------- Advisory fees.................................... $16.4 $ (6.2) $10.2 Redemption premium on the 10 1/8% notes due 2006........................................... 18.9 (7.2) 11.7 Vest unearned deferred compensation and restricted stock............................... 1.5 (0.6) 0.9 Pay optionholders the difference between the transaction price and the option exercise price.......................................... 6.1 (2.3) 3.8 Write-off of deferred financing costs related to the existing credit agreement and 10 1/8% notes due 2006....................................... 4.7 (1.8) 2.9 ----- ------ ----- Pro forma adjustment............................. $47.4 $(17.9) $29.5 ===== ====== =====
36 SELECTED FINANCIAL DATA INTRODUCTION The following consolidated selected financial data as of and for each of the fiscal years in the five years ended December 31, 1999, were derived from our audited financial statements. The following consolidated selected financial data as of and for each of the nine-month periods ended October 1, 2000 and October 3, 1999 were derived from our unaudited financial statements. We believe that the selected financial data as of and for the nine months ended October 1, 2000 and October 3, 1999, include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the information included therein. You should not regard the results of operations for the nine months ended October 1, 2000 as indicative of the results that may be expected for the full year. We have not provided separate financial statements or data for the company in this prospectus. U.S. Can's only assets are its investment in and advances to the company. We believe that the financial statements of U.S. Can and the consolidated financial statements of the company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. You should read all of this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements for the year ended December 31, 1999 and for the nine months ended October 1, 2000, including the notes thereto, contained elsewhere in this prospectus.
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED ---------------------------------------------------- ------------------------- OCTOBER 3, OCTOBER 1, 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS: Net Sales............................ $562.7 $660.6 $755.7 $710.2 $714.1 $549.8 $607.0 Cost of Sales........................ 491.1 571.7 665.8 618.1 611.6 470.1 517.6 ------ ------ ------ ------ ------ ------ ------ Gross income......................... 71.6 88.9 89.9 92.1 102.5 79.7 89.4 Selling, general and administrative expenses........................... 26.5 28.4 33.0 32.6 33.8 25.0 32.4 Special charges(1)................... 8.0 -- 63.0 35.9 -- -- 3.4 ------ ------ ------ ------ ------ ------ ------ Operating income (loss).............. 37.1 60.5 (6.1) 23.6 68.7 54.7 53.6 Interest expense..................... 24.5 28.4 36.9 33.2 28.7 21.8 24.6 Amortization of deferred financing costs.............................. 1.5 1.4 1.7 1.8 1.2 0.9 1.2 Other expenses....................... 2.0 1.7 2.0 1.8 1.7 1.3 1.9 ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes.... 9.1 29.0 (46.7) (13.2) 37.1 30.7 25.9 Provision (benefit) for income taxes.............................. 4.2 12.3 (16.8) (5.7) 14.6 12.0 9.8 ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before discontinued operations and extraordinary item............................... 4.9 16.7 (29.9) (7.5) 22.5 18.7 16.1 Income from discontinued operations......................... (1.0) 0.4 1.1 -- -- -- -- Net loss on sale of discontinued business(2)........................ -- -- (3.2) (8.5) -- -- -- Extraordinary item(3)................ -- (5.3) -- -- (1.3) (1.3) -- ------ ------ ------ ------ ------ ------ ------ Net income (loss).................... $ 3.9 $ 11.8 $(32.0) $(16.0) $ 21.2 $ 17.4 $ 16.1 ====== ====== ====== ====== ====== ====== ======
37
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED ---------------------------------------------------- ------------------------- OCTOBER 3, OCTOBER 1, 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS) OTHER FINANCIAL DATA: EBITDA(4)............................ $ 69.8 $ 91.4 $ 93.1 $ 91.3 $ 97.7 $ 77.9 $ 80.7 Depreciation and amortization........ 28.2 34.0 39.9 35.4 31.9 25.4 26.8 Capital expenditures................. 31.4 48.6 54.0 22.8 31.0 19.7 16.5 Ratio of earnings to fixed charges(5)......................... 1.3x 1.9x NM 0.7x 2.2x 2.3x 1.9x BALANCE SHEET DATA: Cash and cash equivalents............ $ 0.1 $ 8.0 $ 6.8 $ 18.1 $ 15.7 $ 32.2 $ 7.4 Working capital...................... 48.9 105.6 80.8 76.1 37.7 69.9 71.0 Total assets......................... 455.4 643.6 633.7 555.6 663.6 558.6 626.0 Total debt........................... 244.6 375.8 376.1 316.7 359.3 281.5 318.9 Stockholders' equity................. 81.8 96.8 62.3 50.2 68.6 67.2 68.5
- -------------------------- (1) The 1995 special charge relates to an overhead reduction program. See note (3) to the audited consolidated financial statements for a description of the 1997 and 1998 special charges and note (2) to the unaudited consolidated financial statements for a description of the third quarter 2000 special charge. (2) See note (3) to the consolidated financial statements for a description of the sale of the company's metal services segment (3) Represents premium paid and write-offs of deferred financing costs in conjunction with the early extinguishment of debt (4) Earnings before interest, taxes, depreciation, amortization and special charges. We consider EBITDA to be an important indicator of the performance of our business including our ability to provide cash flows to service debt and fund capital expenditures. EBITDA, however, should not be considered an alternative to operating or net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. In addition, our definition of EBITDA may not be comparable to similarly-titled measures reported by other companies. (5) See note (7) to the Summary Historical and Pro Forma Financial Information for a description of this ratio. Approximately $46.7 million and $13.2 million of additional pretax earnings for the fiscal years ended December 31, 1997 and 1998, respectively, would be required for our company to have achieved a ratio of earnings to fixed charges of 1.0. As pretax earnings are reduced by non-cash special charges of $41.7 million and $27.7 million for the respective fiscal years, the ratio does not indicate an inability of our company to make cash payments necessary to support our fixed charges. 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YOU SHOULD READ THE FOLLOWING DISCUSSION ALONG WITH THE "SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. SUMMARY We are a leading manufacturer of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in the United States and food cans in Europe. Our product offerings include a wide variety of steel containers, such as aerosol cans, paint cans, oblong containers and a large number of custom and specialty products, and plastic containers, such as plastic pails for industrial and consumer products. We own or lease 16 plants in the United States and ten plants in Europe. The highlights of our corporate history are as follows: - We were formed in 1983 through the purchase of the container division of Sherwin Williams and expanded our aerosol operations to customers other than Sherwin Williams in 1987 by acquiring the United States general packaging business of Continental Can Company. - In 1993, we completed an initial public offering of common stock and contributed the net proceeds of $48.6 million to our capital. - In 1994, we completed a second public offering of common stock and contributed the net proceeds of $34.2 million to our capital. - In 1996, we issued $275.0 million of our 10 1/8% senior subordinated notes due 2006 and used the proceeds to repay indebtedness. We also acquired a significant part of Crown, Cork & Seal's and CarnaudMetalbox's aerosol businesses in Europe in 1996. In addition, we expanded our plastics business in 1996 through the acquisition of CPI Plastics. - In 1998, we expanded into Latin America by purchasing a minority stake in Formametal, S.A., an Argentinean aerosol can manufacturer. - In 1999, we acquired May, a German manufacturer of metal food packaging and steel aerosol cans. - On June 1, 2000, we announced that we entered into the recapitalization agreement with Pac Acquisition. - On October 4, 2000, we consummated the original offering, the recapitalization and the other transactions. We took special charges in 1997 and 1998 and in 2000. In 1997, we took pre-tax special charges of $63.0 million in connection with plant closings and overhead cost reductions. In 1998, we took a pre-tax special charge of $35.9 million in connection with the closure of certain facilities and write-downs of certain non-core businesses. In 2000 we instituted a reduction in force program, under which we have eliminated 73 salaried and 34 hourly positions. We took a one-time charge of approximately $3.4 million for severance and other termination related costs in connection with the program. We expect to realize projected annual savings of $5.0 million from this program beginning in July 2000. In addition, we expect to take after-tax extraordinary charges in the fourth quarter of 2000 in connection with the transactions totaling approximately $18.9 million, including charges for advisory fees and payments to option holders. We also expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. 39 In August 2000, May supplied a small number of defective pet food cans to a major customer. While we have taken steps to remedy the situation and our overall relationship with this customer remains positive, the customer responded in August by reducing orders significantly. The customer recently requested that we resume shipments. We do not expect a negative impact from this production defect on 2001 results of operations. However, we estimate that our results of operations for 2000 have been negatively impacted by approximately $3.0 million with respect to EBITDA, and we cannot be assured that we will return to previous levels of shipments to this customer. See "Risk Factors--The loss of a key customer could have a significant negative impact on our business." The following discussion summarizes the significant factors affecting the consolidated operating results and financial condition of our company and our subsidiaries for the three years ended December 31, 1999 and the nine months ended October 1, 2000. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements. We have not provided separate financial statements or data for the Company in this prospectus. U.S. Can's only assets are its investment in and advances to the Company. We believe that the financial statements of U.S. Can and the consolidated financial statements of the Company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. RESULTS OF OPERATIONS The following table sets forth our results of operations based on the percentage relationship of certain items to net sales during the period shown.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, ----------------------- ------------------------------ OCTOBER 3, OCTOBER 1, 1997 1998 1999 1999 2000 -------- -------- -------- ---------- ---------- (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales....................................... 88.1 87.0 85.7 85.5 85.3 ----- ----- ----- ----- ----- Gross income........................................ 11.9 13.0 14.3 14.5 14.7 Selling, general and administrative expenses........ 4.4 4.6 4.8 4.5 5.3 Special charges..................................... 8.3 5.1 -- -- 0.6 ----- ----- ----- ----- ----- Operating income (loss)............................. (0.8) 3.3 9.5 10.0 8.8 Interest expense.................................... 4.9 4.6 4.0 4.0 4.0 Amortization of deferred financing costs............ 0.2 0.3 0.2 0.2 0.2 Other expenses...................................... 0.3 0.3 0.2 0.2 0.3 ----- ----- ----- ----- ----- Income (loss) before income taxes................... (6.2) (1.9) 5.1 5.6 4.3 Provision (benefit) for income taxes................ (2.2) (0.8) 2.0 2.2 1.6 ----- ----- ----- ----- ----- Income (loss) from continuing operations before discontinued operations and extraordinary item.... (4.0) (1.1) 3.1 3.4 2.7 Income from discontinued operations................. 0.1 -- -- -- -- Net loss on sale of discontinued Business........... (0.4) (1.2) -- -- -- Extraordinary item.................................. -- -- (0.2) (0.2) -- ----- ----- ----- ----- ----- Net income (loss)................................... (4.3)% (2.3)% 2.9% 3.2% 2.7% ===== ===== ===== ===== =====
40 NINE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO NINE MONTHS ENDED OCTOBER 3, 1999 NET SALES Net sales for the nine-month period ended October 1, 2000 totaled $607.0 million, an increase of 10.4% versus $549.8 million for the corresponding period in 1999. The increase was principally due to the inclusion of the sales of May, which we acquired in December 1999. Along business segment lines, Aerosol net sales in the first three quarters of 2000 were $362.8 million, a decline of 2.7% versus $372.7 million in the same period last year. The decrease is due to a decline in U.S. volumes and a $13.2 million negative impact due to the effect of U.S. dollar translation on sales made in foreign currencies by our European operations. Paint, Plastic and General Line sales decreased 5.3% from $127.2 million to $120.5 million due to the loss of a Plastite customer in 1999. Custom and Specialty net sales of $123.7 million increased $73.9 million from $49.8 million in the first nine months of 1999 due to the inclusion of the sales of May. Net sales for the first nine months for May were $85.4 million. Excluding May's sales, the Custom and Specialty segment had net sales of $38.3 million, an $11.5 million decrease from $49.8 million in the first three-quarters of 1999 due to the sale of the Wheeling metal closure and Warren lithography businesses (see Note (2) to the Consolidated Financial Statements). GROSS INCOME Gross income of $89.4 million for the nine-month period ended October 1, 2000 increased $9.7 million, or 12.2%, versus $79.7 million for the corresponding period of 1999. Gross margin of 14.7% for the nine months of 2000 increased slightly from the 14.5% reported in the first nine months of 1999, due to the continuing focus on productivity improvements and cost savings opportunities. Aerosol gross income declined 6.4% due to a decline in U.S. sales volume and a $1.0 million negative impact due to the effect of U.S. dollar translation on sales made in foreign currencies by our European operations. Paint, Plastic and General Line gross income decreased $3.9 million versus the first nine months of 1999 due to the loss of a Plastite customer in 1999 and a decline in general line volume. Custom and Specialty gross income increased $9.9 million versus the first nine months of 1999 due primarily to the inclusion of the results of operations of May. Excluding May and the divested Wheeling closure and Warren lithography businesses, gross income in the Custom and Specialty segment increased 18.8%. Certain expenses are not allocated to specific business segments. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $32.5 million in the first nine months of 2000, a $7.5 million increase in comparison to $25.0 million in the same period in 1999. The increase is primarily due to the inclusion of the results of operations of May, which accounted for $6.0 million of the increase. The remainder of the increase is due to higher marketing expenses incurred in improving customer service. INTEREST AND OTHER EXPENSES Interest expense for the first nine months of 2000 increased 12.9%, or $2.8 million, versus the first nine months of 1999. The increase was due to interest incurred in connection with borrowings made to acquire May, offset by the interest reduction due to the repurchase and early retirement of the 10 1/8% notes due 2006 in the second and third quarters of 2000. OTHER CHARGES In the third quarter of 2000, we announced a reduction in force program and recorded a one-time charge of $3.4 million for severance and other termination related costs. For further discussion on this program (see Note (2) to the Consolidated Financial Statements). 41 YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 NET SALES Consolidated net sales for the year ended December 31, 1999 were $714.1 million, an increase of 0.5% versus $710.0 million in 1998. Along business segment lines, Aerosol net sales in 1999 increased 3.8% over 1998, primarily due to increased efficiencies and production at our Wales facility, as well as increased U.S. demand. Consistent with expectations, the Paint, Plastic and General Line segment had a 1.4% decrease in net sales due to reduced customer requirements during the year. In the Custom and Specialty segment, sales were down 8.7% due principally to significant liquidation of excess holiday products in early 1998 and softer markets in 1999. Key management changes were made in mid-1999 to address sales and operational issues. GROSS INCOME Consolidated gross income of $102.5 million for 1999 was up $10.4 million, an 11.3% increase versus $92.1 million in 1998. Gross margin of 14.3% compares favorably to the 13.0% reported in 1998 due to benefits derived from restructuring programs, productivity improvements as a result of line speed-ups and cost reduction programs instituted in the plants, as well as the ramp-up of the Wales facility. Aerosol gross income increased from $80.2 million to $85.7 million, a 6.9% increase versus 1998, aided by higher sales volume, the Welsh operation improvements, and the effects of consolidating manufacturing operations. Paint, Plastic and General Line gross income increased to $16.9 million versus $15.6 million in 1998, a 7.9% increase, primarily due to productivity improvements. Custom and Specialty gross income decreased from $11.0 million to $8.9 million in 1999 due to softer markets in 1999 and a loss in productivity during plant consolidation activities. Certain expenses are not allocated to specific business segments including special charges and other corporate and miscellaneous costs. OPERATING INCOME Operating income in 1999 was $68.7 million versus $23.6 million in 1998. Excluding special charges recorded in 1998, operating income improved 15.6% from $59.4 million in 1998 to $68.7 million in 1999. The operating margin of 9.6% in 1999 compares favorably to the 8.4% reported in 1998, before the special charge. 1998 operating margins were negatively impacted by $35.9 million of special charges for plant closings, additional losses on the sale of the Orlando Machine Engineering Center and a reassessment of 1997 special charges. See note (3) to the consolidated financial statements. Other improvements versus the prior year reflect stronger gross margins coupled with benefits realized from the 1997 and 1998 restructuring programs. Selling, general and administrative costs as a percent of sales remained relatively flat at 4.7% in 1999. INTEREST AND OTHER EXPENSES Interest expense in 1999 was $28.7 million, down 13.4%, or $4.5 million, versus $33.2 million in 1998. Prior to the May acquisition in late December, long-term debt had been reduced by $48.0 million as excess cash was used to redeem some of the 10 1/8% notes due 2006. Including the May acquisition, long-term debt increased 3.4% or $10.6 million in 1999 as compared to 1998. Average borrowings under the credit agreement (as defined below) in 1999 were $12.3 million in letters of credit and $0.1 million in loans and $12.3 million in letters of credit and $4.8 million in loans after the May acquisition. In 1999, there were 10 months in which no borrowings were made under the credit agreement. See "Liquidity and Capital Resources." 42 EXTRAORDINARY ITEM In 1999, we recorded a $1.3 million extraordinary charge (net of related income taxes of $0.8 million) due to the early redemption premium on $27.7 million of our 10 1/8% notes and the write-off of related deferred financing costs. NET INCOME 1999 net income of $21.2 million compares favorably to the 1998 net loss of $16.1 million. Income improvements in 1999 are a reflection of higher margins, productivity improvements and lower interest expense and the absence of a special charge in 1999. YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 NET SALES Consolidated net sales for the year ended December 31, 1998 were $710.2 million, a decrease of 6.0% versus $755.7 million in 1997. This decrease reflected the sale of our Metal Pail business and the loss of a major Aerosol customer, both in late 1997. Along business segment lines, Aerosol net sales in 1998 of $466.0 million declined 2.8% versus 1997, reflecting the loss of a major customer in late 1997. European net sales, included within the Aerosol business segment, increased 11.1% from the prior year as the Wales facility achieved qualification with its primary customer in 1998. Paint, Plastic and General Line net sales of $164.1 million were down 12.0% from 1997 due to the sale of the Metal Pail business in November 1997. Custom and Specialty 1998 net sales of $74.9 million were 11.7% lower than 1997. The decline in this business segment was largely a function of product mix and management's decision not to pursue certain unprofitable popcorn tin business it had in 1997. GROSS INCOME Consolidated gross income improved 2.4% from $89.9 million for the year ended December 31, 1997 to $92.1 million for the year ended December 31, 1998. Gross margin of 13.0% for the full-year 1998 compared favorably to the 11.9% reported in 1997. Margin rate increases were primarily in the Paint, Plastic and General Line and the Custom and Specialty business segments and reflected improved productivity as a result of line speed-ups and cost reduction programs instituted in the plants, the sale of the unprofitable Metal Pail business and the shedding of the popcorn tin business. The Wales facility impacted Aerosol operations gross margins favorably. Aerosol gross income increased slightly to $80.2 million versus $79.9 million in 1997. Gross margins in this sector increased 0.5% versus 1997 despite a lower sales volume base. Paint, Plastic and General Line gross income improved 26.1% to $15.6 million. Custom and Specialty gross income improved 60.8% versus 1997 to a level of $11.0 million. Certain expenses are not allocated to specific business segments including special charges and other corporate and miscellaneous costs. OPERATING INCOME Consolidated operating income of $23.6 million for the year ended December 31, 1998 compared favorably to an operating loss of $6.1 million for the same period in 1997. Improvements versus 1997 reflected a $27.1 million decrease in special charges (see note (3) to the consolidated financial statements) and stronger gross margins coupled with the benefits realized late in 1998 from the restructuring programs initiated in 1997. 43 INTEREST EXPENSE Interest expense for the full-year 1998 of $33.2 million declined 10.0% versus $36.9 million in 1997. Our focus on cash flow, working capital improvements and controlled capital programs resulted in a year-to-year debt reduction of $59.5 million. NET LOSS Net loss from continuing operations in 1998 was $7.5 million versus a net loss of $29.9 million in 1997. Special charges recorded in 1998 had a negative after-tax effect of $21.4 million. Special charges recorded in 1997 had an after-tax effect of $37.8 million. Net loss for 1998 was $16.1 million (including $8.5 million loss on the sale of the discontinued Metal Services business) versus 1997 net loss of $32.0 million. Net loss for 1997 included a $2.1 million loss on the discontinued Metal Services business. SPECIAL CHARGES 2000 On July 7, 2000, we announced a reduction in force program, under which 73 salaried and 34 hourly positions have been eliminated. A one-time charge of $3.4 million for severance and other termination related costs was recorded in the third quarter of 2000. We expect to realize annual savings of $5.0 million from this program. 1998 In the third quarter of 1998, we established a pre-tax special charge of $35.9 million. The provision was for the closure of certain facilities and write-downs of non-core businesses. Costs related to closing and realigning selected lithography facilities servicing our core business were also included in the provision as part of our national lithography strategy. Working capital improvements are expected to partially offset new capital costs associated with the 1998 restructuring program and the acquisition of new lithography technology. The restructuring program and related capital investment in new technology are expected to generate after-tax savings of $10.0 million annually at maturity. The 1998 special charge included charges for non-cash items of $27.7 million. 1997 In the third quarter of 1997, we established a pre-tax special charge of $35 million primarily for plant closings and overhead cost reductions. These actions were due to the loss of a major aerosol customer (the customer represented approximately $35 million of annual sales) and to enhance efficiencies at certain other locations. In addition, we established a disposition provision for the anticipated loss on the closure of our Metal Pail operation in North Brunswick, New Jersey. Also in the fourth quarter of 1997, we, at the direction of our Board of Directors, employed the assistance of external business consultants to review operations and explore other avenues for enhancing shareholder value. As a result of this review, a provision was established primarily to include further personnel reductions and the reduction of asset value associated with equipment used in the businesses we had exited or were in the process of exiting. The 1997 special charge included $41.7 million for the non-cash write-off of assets related to the facilities to be closed or sold (comprised of fixed assets of $34.1 million and unamortized goodwill of $7.6 million), $13.2 million for severance and related termination benefits and $8.1 million for other related closure costs. We continuously evaluate the composition of our various manufacturing facilities in light of current and expected market conditions and demands. Our current restructuring activities are substantially on 44 target with the original planned shutdown or closure dates and, therefore, we believe that significant changes to these plans are unlikely. In connection with the May acquisition, we are reviewing our European operations for potential consolidation opportunities. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of 2000, we met our liquidity needs through internally generated cash flow, the sale of the Wheeling metal closures and Warren lithography businesses, borrowings made under our lines of credit and a sale/leaseback transaction of certain manufacturing assets. Cash flow provided by operations was $25.9 million in the first nine months of 2000, compared to cash provided of $59.3 million in the first three quarters of 1999. Principal liquidity needs included working capital (primarily accounts receivable and inventory), debt payments and capital expenditures. The increased use of cash for working capital is attributable to an increase in accounts receivable and inventory within our domestic operations. The increase in accounts receivables is due to increased sales late in the third quarter of 2000 versus the timing of 1999 third quarter sales. We continue to focus on inventory management and have instituted programs to monitor inventory levels throughout our company. We also paid $2.9 million in restructuring costs and anticipate expending an additional $3.2 million of such costs during the remainder of 2000. Cash flow from operations before working capital was $65.4 million in 1999, compared to $56.9 million in 1998 and $68.0 million in 1997. We expect total capital expenditures in 2000 to be approximately $20.0 million, of which $16.5 million was spent in the first nine months. Our total capital expenditures of $31.0 million in 1999 included the installation of two new state-of-the-art lithography presses. We expect to spend approximately $150.0 to $200.0 million on capital expenditures during the five years commencing 1999, in roughly equal amounts of $30.0 million to $40.0 million a year. We also expect to increase our ownership interest in Formametal, S.A., our Argentinian joint venture, in 2001. We expect to use approximately $6.0 million in cash for this acquisition. We expect to fund this acquisition and other future capital expenditures from operations and borrowings under our revolving credit facility. Our capital investments have historically yielded reduced operating costs and improved our profit margins, and we believe that the strategic deployment of capital will enable us to improve our overall profitability by leveraging the economies of scale inherent in the manufacturing of containers. In 1999, our excess cash provided by operations over our cash required for capital expenditures and other investing activities (before acquisitions) was $34.8 million. Of the excess, $27.7 million was used to redeem a portion of the 10 1/8% notes due 2006. As of December 31, 1999, we had redeemed a total principal amount of $40.0 million of the 10 1/8% notes due 2006, the maximum allowed under the credit agreement. Our primary sources of liquidity are cash flow from operations and borrowings under our new revolving credit facility. We expect that ongoing requirements for debt service, working capital and capital expenditures will be funded from these sources. Concurrent with the recapitalization, we issued the notes and entered into the senior secured credit facility. The senior secured credit facility provides for two tranches of term loans in the aggregate principal amount of $260.0 million. In addition, the senior secured credit facility provides for a revolving credit facility that will provide revolving loans in an aggregate amount up to $140.0 million. Upon closing of the recapitalization, we borrowed the full amount available under the term loan facilities and approximately $20.5 million under the revolving credit facility. The borrowings under the revolving credit facility are available to fund our working capital requirements, capital expenditures and other general corporate purposes. The tranche A term loan facility of $80.0 million matures in quarterly installments from December 31, 2000 through September 30, 2006. The tranche B term loan facility of $180.0 million matures in quarterly installments from December 31, 2000 through September 30, 2008. Principal repayments required under the term loan facilities are $6.0 million in 2001 and $9.0 million in 2002. Additionally, the senior secured credit facility requires a prepayment in 45 the event that we have excess cash flow (as defined) and following certain other events, including asset sales and issuances of debt and equity. We also expect to assume between $6.0 million and $7.0 million in debt in connection with the acquisition of Formametal, S.A. Our significant debt service obligations following the recapitalization could, under certain circumstances, have material consequences to our security holders, including holders of the notes. In addition, we issued $106.7 million in preferred stock and $53.3 million in common stock concurrent with the recapitalization. See "Other Indebtedness," "Description of U.S. Can's Capital Stock--Preferred Stock" and "Risk Factors." Based upon the current level of operations and anticipated growth, we believe that cash generated from operations together with amounts available under the revolving credit facility will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs for the next several years. We cannot assure you, however, that we will generate sufficient cash flow from operations or that future borrowings will be available under the senior secured credit facility or otherwise to enable us to service our indebtedness, including the senior secured credit facility and the notes or to make anticipated capital expenditures. Our future operating performance and our ability to service or refinance the notes, to service, extend or refinance the senior secured credit facility and to redeem or refinance our preferred stock will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 (amended by SFAS No. 137 to delay required implementation) and will be adopted by us in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that we recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We are currently evaluating SFAS No. 133, but do not believe this pronouncement will have a material impact on our financial position or results of operations. Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates and market prices. To reduce this risk, we may at times use financial instruments. All hedging transactions are authorized and executed under clearly defined policies and procedures, which prohibit the use of financial instruments for trading purposes. FOREIGN CURRENCY AND INTEREST RATE RISK FOREIGN CURRENCY RISK We have engaged in transactions that carry some degree of foreign currency risk. As such, we have entered into a series of forward hedge contracts to mitigate the foreign currency risks associated with the financing of one of our production facilities in the United Kingdom. We are a party to a series of British Pound forward exchange contracts, not exceeding a notional amount of $23.1 million, that carry a term of not more than five years. We also bear foreign exchange risk because much of our financing is currently obtained in United States dollars, but we receive a portion of our revenues and incur a portion of our expenses in the various currencies of our foreign subsidiaries' operations. Our new revolving credit facility will allow certain of our foreign subsidiaries to borrow up to $75 million in British Pounds Sterling, German Deutsche Marks and Euros. We have not yet determined what amount of borrowings, if any, we expect to make in these currencies. INTEREST RATE RISK We are exposed to interest rate risk primarily as a result of our floating rate borrowings. We have hedged a portion of our interest rate risks by entering into a swap and collar agreements. The swap 46 agreement is a three-year agreement for a notional amount of $83.3 million. Under the swap agreement, we pay a fixed rate of 6.65% and receive the three-month LIBOR. The collar agreement is also a three-year agreement for a notional amount of $41.7 million. Under the collar agreement, we pay the bank if the three-month LIBOR is less than 6.1% (the floor) and receive a payment if the three-month LIBOR is greater than 7.25% (the cap). Since the counterparties to the agreements are also lenders under the senior secured credit facility, our obligations under these agreements are subject to the security interest under the terms of the senior secured credit facility. See "Other Indebtedness." TIN-PLATED STEEL PRICING Tin-plated steel represents the primary component of our raw materials requirement. Historically, we have not always been able to immediately offset increases in tinplate prices with price increases to our customers. However, in most years, a combination of factors has permitted us to maintain our profitability notwithstanding these conditions. 47 BUSINESS OUR BUSINESS GENERAL We are a leading manufacturer of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in the United States and food cans in Europe. Our product offerings include a wide variety of steel containers, such as aerosol cans, paint cans and oblong containers for products such as turpentine and charcoal lighter fluid, as well as a large number of custom and specialty products and plastic containers. We attribute our market leadership to our ability to consistently provide high-quality products and service at competitive prices, while continually improving our product-related technologies. We have long-standing relationships with many well-known consumer products and paint manufacturers in the United States and Europe, including Gillette, Reckitt Benckiser and Sherwin Williams. We produce containers for many of these customers' products, including Right Guard deodorant, Easy-Off oven cleaner and Dutch Boy paint. We also produce seasonal holiday tins sold by mass merchandisers. In steel aerosol cans, we hold the number one market position in the United States and the number two market position in Europe. In addition, we hold the number two market position in paint cans in the United States. Our aerosol and paint products represented approximately 78% of our total pro forma net sales for the last twelve months ended October 1, 2000. We had pro forma sales of $803.6 million and adjusted EBITDA of $105.4 million for the same period. Domestic operations represented approximately 69% of total pro forma net sales, with the remainder generated by our European operations. We compete in three major business segments within the container industry: Aerosol Products; Paint, Plastic and General Line Products; and Custom and Specialty Products. In addition, we recently acquired May, a German manufacturer of metal food packaging and steel aerosol cans. AEROSOL PRODUCTS As the largest producer of steel aerosol cans in the United States and the second largest producer in Europe, we have a leading position in all of the major aerosol consumer product lines, including personal care, household, automotive and spray paint cans. We offer a wide range of aerosol containers to meet our customer requirements including stylized necked-in cans and barrier pack cans used for products that cannot be mixed with a propellant, such as shaving gel. Most of the aerosol cans that we produce employ a lithography process that consists of printing our customers' designs and logos on the cans. Examples of products using our steel aerosol cans include Right Guard deodorant, Easy-Off oven cleaner and Krylon spray paint. Steel aerosol cans represent our largest segment, accounting for approximately 59% of our total pro forma net sales for the last twelve months ended October 1, 2000. In 1999, we manufactured over 50% of the steel aerosol cans produced in the United States and over 25% of the steel aerosol cans produced in Europe. We also supply steel aerosol cans to customers in Latin America through Formametal S.A., our joint venture in Argentina. PAINT, PLASTIC AND GENERAL LINE PRODUCTS Our primary paint, plastic and general line products include paint and coating containers, oblong steel cans for products such as turpentine and charcoal lighter fluid, plastic pails and other containers for industrial products, such as spackle and dry wall compounds, and consumer products, such as 48 swimming pool chemicals and paint. Among our largest customers for these products are Sherwin Williams and Behr. Examples of products using our containers include Dutch Boy paint, Thompson's Water Seal and Arch pool chemicals. Paint, plastic and general line products are our second largest segment, accounting for approximately 19% of our total pro forma net sales for the last twelve months ended October 1, 2000. Within this segment, our steel round paint cans and oblong cans accounted for approximately 71% of our sales during the same period. Our plastic containers accounted for approximately 22% of our sales in this segment, and our general line containers, used for products such as engine additives, colorants and lighter fluid, accounted for 7% of our 1999 sales in this segment during the same period. CUSTOM AND SPECIALTY PRODUCTS We also have a significant presence in the custom and specialty products market. We believe that we offer the industry's widest range of decorative and specialty products. Our primary products include a wide array of functional and decorative containers and tins, fitments and stampings, and collectible items, such as decorative metal signs and canister sets. These products are generally custom designed and decorated and are typically produced in smaller quantities than our other products. Our customers in this segment include Wyeth Nutritionals, Keebler Company and Liz Claiborne Cosmetics. Examples of products packaged with our containers include holiday tins sold by mass merchandisers, Keebler cracker tins and Liz Claiborne Cosmetics fragrance gift boxes. Our custom and specialty products accounted for approximately 6% of our total pro forma net sales for the last twelve months ended October 1, 2000. MAY VERPACKUNGEN ACQUISITION On December 30, 1999, we acquired May, a German manufacturer of steel food packaging and aerosol cans. May is a leading European food can producer with more than 20% of the German food can market. For the last twelve months ended October 1, 2000, May generated approximately 16% of our total pro forma net sales. This acquisition allows us to: - increase our scale and presence in Europe; - improve our ability to reduce manufacturing costs; - take advantage of purchasing synergies; and - enhance our ability to offer global manufacturing services to our customers. May has a reputation for manufacturing excellence and has established long-term relationships with several leading consumer products companies. May also has provided us with diversification across our product lines and customer base. As a result of this increased diversification and our larger European presence, we expect to realize additional cross-selling opportunities between our traditional customers and those of May. Generally, we serve different customers than May, with no overlap among our respective top ten customers. As an example of the benefits that our increased scale and presence in Europe can provide, we recently negotiated an agreement with one of May's existing customers to expand May's supply of pet food cans to this customer in the United Kingdom. May has state-of-the-art manufacturing technology and processes, including a new high-speed production line that increased May's production capacity and new quality testing equipment and procedures. We plan to utilize May's manufacturing expertise at our other facilities. 49 COMPETITIVE STRENGTHS We believe we have the following competitive strengths: MARKET LEADERSHIP Domestically, we hold the number one market position in our steel aerosol can lines and the number two market position in our paint product lines. In Europe, we are the second largest manufacturer of steel aerosol cans. Collectively, our aerosol can and paint product lines represent approximately 78% of our annual sales. We believe our technological innovation and product quality have been instrumental in securing over 50% of the domestic United States aerosol container market. We also produce nearly one half of all one-gallon paint cans sold annually in the United States. Additionally, our acquisition of May strengthened our position both in Europe and in Germany, the number two European aerosol container market, and expanded our product offering. LONG-STANDING CUSTOMER RELATIONSHIPS We have long-standing relationships with many of our customers and have been able to expand our market share with many of our key customers over time by continuing to expand our product capabilities and increasing the quality of our services. Currently, we believe we are the number one or number two supplier to each of our top customers in each business segment. In addition, as we have expanded internationally, we have increased the number of sole source relationships we have with our customers. We believe our long-standing customer relationships have developed as a result of our reputation for providing: - quality and service; - competitively priced products; - global supply services to multi-national consumer products companies; and - technological innovations in product and service offerings. INDUSTRY-LEADING TECHNICAL CAPABILITIES Over the last two years, we have invested heavily in equipment and systems that improve our manufacturing quality and efficiency. We have made a significant investment in new technology, including the installation of two new high-speed, six-color presses that we expect to improve the quality and lower the cost of printing. We also have been at the forefront of technological improvements in the packaging industry, including the production of barrier-pack cans and the development of advanced interior container coatings. EFFICIENT MANUFACTURING OPERATIONS We continue to reduce our overall cost of manufacturing while improving product quality and customer service. We also have invested in new technology, including barrier package design equipment, high-speed production lines and assembly equipment and two high-speed lithography presses. These new lithography presses improve lithography cycle and set-up time, increase throughput, reduce inventory requirements and shorten lead times. Lithography quality is critical to our consumer product customers, as product appearance is a determining factor in the consumer's choice of products. In addition, since 1997, we have rationalized manufacturing facilities and centralized operations to lower our overall costs. As of October 1, 2000, we have sold or closed 18 manufacturing facilities. The closing of these facilities, in conjunction with investments in new technology, has created a lower-cost, more efficient manufacturing base, while improving product quality and customer service. We are continually evaluating the benefits of closing additional plants. In addition, we recently reduced our 50 workforce by eliminating 73 salaried and 34 hourly positions. This plan is expected to reduce expenses by approximately $5 million per year. We expect that these and future initiatives will continue to improve our manufacturing efficiencies and our customer service capabilities. STRATEGICALLY POSITIONED MANUFACTURING FACILITIES We strategically locate our manufacturing facilities near our customers to provide time sensitive product delivery and improve inventory management and product design. The close proximity of our facilities to our customers improves customer service and reduces the substantial costs involved in transporting empty cans over long distances. We have 16 facilities located in the United States and ten facilities located in the largest European markets. Our local presence in regions throughout the United States and Europe allows us to lower costs, improve delivery times and meet our customers' growing need for a global supply solution. The May acquisition also enhanced our manufacturing and customer service capabilities in Europe. To further enhance our global capabilities, we have entered the growing South American market through an Argentinian joint venture. Through this joint venture, we recently secured a multi-year supply agreement with a leading consumer products company to be its sole source of steel aerosol containers in this region. EXPERIENCED MANAGEMENT TEAM Our management team consists of highly qualified senior managers with significant industry experience. Paul W. Jones, our Chairman and Chief Executive Officer, spent nine years as chief executive officer of Greenfield Industries, Inc., which grew from $70 million in sales in 1989 to more than $700 million in 1996 during his tenure, and 19 years with General Electric Corporation, where he served as General Manager of Manufacturing for GE Transportation Systems and General Manager of GE Drives, Motor and Generator Operations. In addition, Mr. Jones has recruited a senior management team with significant packaging industry experience, including prior positions with Tetra Pak, Inc., American National Can and Crown Cork & Seal. Our management team owns 9.00% of our company's common stock after this offering and a substantial portion of their overall targeted compensation is tied to time and performance-based options to acquire an additional 5.75% of our company's common stock over the next five years. BUSINESS STRATEGY FOCUSING ON CUSTOMER SERVICE By providing improved customer service and support, we believe we can enhance our market share with existing customers and further distinguish ourselves in the container and packaging industry. We are currently implementing new systems and technology, including just-in-time delivery, customer order tracking and demand forecasting that will further enhance our value-added service offerings. In addition, we have invested in new lithography capacity, including two high-speed, six-color presses that allow us to offer sophisticated printing capabilities. These systems and technology are aimed at meeting our customers' quality and supply needs, enhancing communication with customers and improving our order fulfillment and manufacturing capabilities. By providing improved customer service and support, we believe that we can enhance our market share with existing customers and further differentiate ourselves in the container and packaging industry. MEETING OUR CUSTOMERS' GLOBAL NEEDS Our customers are expanding internationally, increasing the need for high-quality global supply sources. To meet our customers' needs and secure new global supply contracts, we are integrating our global manufacturing capabilities and selectively expanding into new geographic regions. We entered the South American market in 1998 through our joint venture in Argentina, and we expanded our 51 European presence in 1999 through our acquisition of May. We believe our global strategy has been validated by our recent success in securing global supply relationships with Gillette, Reckitt Benckiser and CCL Custom Manufacturing. IMPROVING OPERATING EFFICIENCIES We plan to continue to reduce manufacturing costs and enhance operating efficiencies through the ongoing reconfiguration of our manufacturing base, improvements to our purchasing efficiency and investments in equipment and technology. For example, we are consolidating our purchasing in both the United States and Europe. As a result of these efforts, we recently secured steel purchase agreements that we expect will provide us with approximately $2 million in annual cost savings. In addition, we expect to realize additional efficiencies in connection with our consolidation of purchasing other non-raw materials. MAKING SELECTIVE ACQUISITIONS We plan to continue to evaluate and selectively pursue acquisitions of rigid packaging businesses that will help fulfill our customer needs, attract new customers, add new products, complement our existing businesses, enhance our earnings or expand our geographic reach. PRODUCTS We believe that we offer the widest range of aerosol, round, general line and specialty metal containers in the U.S. general packaging industry. In 1999, on a pro forma basis, we produced approximately 4.5 billion cans. We emphasize quality and breadth of product line in marketing our steel aerosol cans. We offer full-color, quality lithographed cans in a wide range of styles and sizes. Our necked-in cans (aerosol cans where the plastic cap is flush with the metal exterior of the can) offer a distinctive look and feel to our customers' products. Our barrier packaging cans (cans that separate the product from the can's propellant) provide our customers with an effective solution for delivering a complex product. Our European operations accounted for production of over 25% of the 3 billion steel aerosol cans produced in Europe in 1999. These aerosol cans cover the most popular size diameters in Europe and, when supplemented by various heights, enable our European subsidiaries to offer customers a full range of cost efficient sizes. We offer round paint cans, oblong containers, plastic pails and specialty containers in the industry's widest choice of sizes. Our containers range from one-quarter pint to six and one-half gallons, and feature a variety of interior linings, making them suitable for a wide variety of applications. Our general line product offerings also include a wide range of open-top and AccuPor metal cans used primarily for automotive products. Additionally, we are a leader in the production of plastic paint cans and two sizes of plastic pails. Our plastic product line also includes molded drums, pails and containers and products used in the farming industry. Our custom and specialty products consist of a wide array of functional and decorative containers, tins, metal housewares and collectible items. This line includes the following: - hermetic containers and slipcover tins of both three-piece and seamless construction manufactured in round and off-round configurations; - standard and custom fitments and stampings; and - decorative metal signs, posters, serving trays and canister sets. We also provide containers for the cosmetic and retail accessory markets. These products signal an expansion of the custom and specialty products into areas not traditionally supplied by the metal 52 packaging industry, such as perfume and jewelry, as manufacturers seek to differentiate the appearance of their products. We believe that we offer the industry's widest range of related products within this product grouping. Since our acquisition of May, we also provide tin-plated packaging for the European food market. We produce packaging in various sizes for whipped cream, pet food, snack products, ready-to-serve soups and other meals, meat products and fruits and vegetables. Our food containers are specially coated to maintain the quality of their contents. CUSTOMERS AND SALES FORCE As of October 1, 2000, in the United States, we had approximately 7,500 customers worldwide, with our largest customer accounting for 7.2% of our pro forma total net sales in 1999. To the extent possible, we enter into one-year or multi-year supply agreements with our major customers. Some of these agreements specify the number of containers a customer will purchase (or the mechanism for determining such number), pricing, volume discounts (if any) and, in the case of many of our domestic and some of our international multi-year supply agreements, a provision permitting us to pass through price increases in certain raw material and other costs. We market our products primarily through a sales force comprised of inside and outside sales representatives dedicated to each segment. As of October 1, 2000, we had 85 sales representatives in the United States and 39 sales representatives in Europe. Each sales representative is responsible for growing sales in a specific geographic region and is compensated by a salary and a bonus based on sales volume targets. Over the past several years, we have focused on providing value added services to our customers. In 1999, we established a new marketing organization, implemented a strategic marketing plan and conducted customer interviews to determine our performance against customer service expectations. A key element to our strategic marketing plan is changing the selling process from being product-driven to being solution-driven. The ultimate objective of this program is to position us as an informed business partner with our customers rather than merely a product supplier. COMPETITION Quality, service and price are the principal methods of competition in the rigid metal and plastic container industry. To compete effectively, we must strategically locate supply facilities to reduce the added cost of shipping cans long distances. In addition, competition in our industry limits our ability to raise prices for many of our top products. In the U.S. steel aerosol can market, we compete primarily with Crown Cork & Seal. Our European subsidiaries compete in the steel aerosol can market with Crown Cork & Seal, Impress Metal Packaging and a group of other smaller regional producers. Crown Cork & Seal is larger and may have greater financial resources than we do. Because steel aerosol cans are pressurized and are used for personal care, household and other packaged products, they are more sensitive to quality, can decoration and other consumer-oriented features than some of our other products. In metal paint and general line products, we compete primarily with BWAY Corporation and one smaller, regional manufacturer. Our plastic products line competes with many regional companies. Our custom and specialty products compete with a large number of container manufacturers, but we do not compete across the entire product spectrum with any single company. Competition is based principally on quality, service, price, geographical proximity to customers and production capability, with varying degrees of intensity according to the specific product category. Our products also face competition from aluminum, glass and plastic containers. 53 RAW MATERIALS Our principal raw materials are tin-plated steel, referred to as tin-plate, and coatings and inks used to print our customers' designs and logos onto tin-plate. Tin-plate represents one of our largest raw material costs. Our domestic operations purchase tin-plate principally from domestic steel manufacturers, with a smaller portion purchased from foreign suppliers. Our European operations purchase tin-plate principally from European suppliers. We believe that adequate quantities of tin-plate will continue to be available from steel manufacturers. Our largest domestic steel suppliers are U.S. Steel, Weirton Steel and LTV, while Corus, Usinor and Aceralia supply the largest volume in Europe. We have not historically entered into written supply contracts with steel makers and believe that other container manufacturers follow the same practice. Our domestic and European operations (including May) purchase approximately 500,000 tons of tin-plate annually. Tin-plate prices have increased slightly over the last five years. Historically, we have been able to negotiate lower price increases than those announced by our major suppliers. In Europe, we expect a slight decrease in tin-plate prices due to the increased purchasing power following the May acquisition and other consolidation factors influencing European steel. Many of our domestic and some of our international multi-year supply agreements with our customers permit us to pass through tin-plate price increases and, in some cases, other raw material costs. However, we have not always been able to immediately offset increases in tin-plate prices with price increases on our products. While there is some long-term variability, tin prices are fairly stable and price increases are announced several months before implementation. This stability enhances our ability to communicate and negotiate required selling price increases with our customers and minimizes fluctuations of our gross margins. Coatings and inks, which are used to coat tin-plate and print designs and logos, represent our second largest raw material expense. We purchase coatings and inks from regional suppliers in the United States and Europe. These products historically have been readily available, and we expect to be able to meet our needs for coatings and inks in the foreseeable future. Our plastic products are produced from two main types of resins, which are petroleum- or natural gas-based products. High-density polyethylene resin is used to make pails, drums and agricultural products. We use 100% post-industrial and post-consumer use, recycled polypropylene resin in the production of the Plastite line of paint cans. The price of resin fluctuates significantly, and we believe that it is standard industry practice, as well as a requirement in many contracts, to pass on increases and decreases in resin prices to our customers. LABOR As of October 1, 2000, we employed approximately 2,800 salaried and hourly employees in the United States. Of our total U.S. workforce, approximately 1,750 employees, or 63%, were members of various labor unions, including the United Steelworkers of America, the International Association of Machinists and the Graphic Communications International Union. Labor agreements covering 670 employees were successfully negotiated in 1999 and 2000. As of October 1, 2000, our European subsidiaries employed approximately 1,400 people. In line with common European practices, all plants are unionized. We have followed a labor strategy designed to enhance our flexibility and productivity through constructive relations with our employees and collective bargaining units. Our practice is to deal directly with labor unions on employment contract issues and other employee concerns. We believe that we and our employees have benefited from this approach, and we intend to continue this practice in the future. This practice also has the effect of staggering renewal negotiations with the various 54 bargaining units. We believe that our relations with our employees and their collective bargaining units are generally good. PROPERTIES We have 16 plants located in the United States, many of which are strategically positioned near principal customers and suppliers. Through our European subsidiaries, we also have production locations in the largest regional markets in Europe, including Denmark, France, Germany, Italy, Spain and the United Kingdom. The following table sets forth certain information with respect to our principal plants as of October 1, 2000.
LOCATION SIZE (IN SQ. FT.) STATUS - -------- ----------------- -------- UNITED STATES Commerce, CA.......................................... 215,860 Leased Morrow, GA............................................ 110,160 Leased Newnan, GA............................................ 95,000 Leased Tallapoosa, GA........................................ 249,480 Owned Danville, IL.......................................... 100,000 Owned Elgin, IL............................................. 481,346 Owned Burns Harbor, IN...................................... 190,000 Leased Baltimore, MD......................................... 150,000 Leased Baltimore, MD......................................... 137,000 Owned Baltimore, MD......................................... 55,000 Leased Alliance, OH.......................................... 52,000 Leased Hubbard, OH........................................... 174,970 Owned Horsham, PA........................................... 132,000 Owned New Castle, PA........................................ 22,750 Leased Dallas, TX............................................ 87,000 Owned Weirton, WV........................................... 108,000 Leased EUROPE Esbjerg, Denmark...................................... 66,209 Owned Laon, France.......................................... 220,000 Owned(1) Dageling, Germany..................................... 172,224 Owned Erftstadt, Germany.................................... 369,000 Leased Itzehoe, Germany...................................... 80,730 Owned Schwedt, Germany...................................... 35,500 Leased Voghera, Italy........................................ 45,200 Leased Reus, Spain........................................... 182,250 Owned Merthyr Tydfil, United Kingdom........................ 320,000 Leased(2) Southall, United Kingdom.............................. 253,000 Owned
- ------------------------ (1) Subject to a mortgage in favor of Societe Generale. (2) The property at Merthyr Tydfil is subject to a 999-year lease with a pre-paid option to buy that becomes exercisable in January 2007. Up to that time, the landowner may require us to purchase the property for a payment of one Pound Sterling. Currently, the leasehold interest in, and personal property located at, Merthyr Tydfil is subject to a pledge to secure amounts outstanding under a credit agreement with General Electric Capital Corporation. We believe our facilities are adequate for our present needs and that our properties are generally in good condition, well-maintained and suitable for their intended use. We continuously evaluate the 55 composition of our various manufacturing facilities in light of current and expected market conditions and demand, and may further consolidate our plant operations in the future. ENVIRONMENTAL MATTERS Our operations are subject to environmental laws in the United States and abroad, including those described below. Our capital and operating budgets include costs and expenses associated with complying with these laws, including the acquisition, maintenance and repair of pollution control equipment, and routine measures to prevent, contain and clean up spills of materials that occur in the ordinary course of our business. In addition, our production facilities require environmental permits that are subject to revocation, modification and renewal. We believe that we are in substantial compliance with environmental laws and our environmental permit requirements, and that the costs and expenses associated with such compliance are not material to our business. However, additional operating costs and capital expenditures could be incurred if, among other developments, additional or more stringent requirements relevant to our operations are promulgated. Among other environmental laws, our operations are subject to regulation under the federal Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act, as well as similar state statutes. Capital costs for additional air pollution controls or monitors may be required at certain of our sites if certain Clean Air Act regulations become effective. The proposed regulations are currently under review, and no definitive date has been set for issuance. Under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state statutes, an owner or operator of real property or a person who arranges for disposal of hazardous substances may be liable for the costs of removing or remediating hazardous substance contamination. Liability may be imposed under these statutes regardless of whether the owner or operator owned or operated the real property at the time of the release of the hazardous substances, and regardless of whether the release or disposal was in compliance with law at the time it occurred. We are not aware of any current material claims under CERCLA or similar state statutes against us. We have been, however, designated as a potentially responsible party at various superfund sites in the United States. As a potentially responsible party, we are or may be legally responsible, jointly and severally with other members of the potentially responsible party group, for the cost of environmental remediation of these sites. Based on currently available data, we believe our contribution to these sites was, in most cases, minimal. We have been named as a potentially responsible party for costs incurred in the clean-up of a groundwater plume partially extending underneath a property located in San Leandro, California, formerly a site of one of our can assembly plants. We are a party to an indemnity agreement related to this matter with the owner of the property. Extensive soil and groundwater investigative work has been performed at this site. We, along with other potentially responsible parties at the site, participated in a coordinated sampling event in 1999. The results of the sampling were inconclusive as to the source of the contamination. While the State of California has not yet commented on the sampling results, we believe that the source of contamination is unrelated to our past operations. From time to time, contaminants from current or historical operations have been detected at some of our present and former sites, principally in connection with the removal or closure of underground storage tanks. We are not currently aware that any of our facility locations have material outstanding claims or obligations relating to contamination issues. 56 LITIGATION We are involved in litigation from time to time in the ordinary course of our business. In our opinion, none of this litigation is material to our financial condition or results of operations. In May 1998, the National Labor Relations Board issued a decision ordering us to pay $1.5 million in back pay, plus interest, for a violation of certain sections of the National Labor Relations Act. The violation was a result of our closure of certain facilities in 1991 and our failure to offer inter-plant job opportunities to certain affected employees. We have appealed this decision on the grounds, among others, that we are entitled to a credit against this award for certain supplemental unemployment benefits and pension payments. We presented oral arguments in late September 2000, and we are waiting for the court's decision. We believe this appeal will be successful. On September 20, 2000, a class action lawsuit was filed against U.S. Can, Pac Acquisition, the directors of U.S. Can and Carl Ferenbach. The complaint challenges the recapitalization and alleges inadequate disclosure with respect to U.S. Can's filings with the Securities and Exchange Commission and violations of Delaware law. The complaint seeks to rescind the recapitalization and requests that the defendants pay unspecified monetary damages, costs and attorney's fees. The recapitalization was consummated on October 4, 2000. We currently are engaged in settlement discussions with the plaintiffs. We believe that this lawsuit is without merit and, if settlement discussions are unsuccessful, we intend to contest this matter vigorously. 57 MANAGEMENT BOARD OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age as of October 1, 2000 and position of each of our directors, officers and other key employers. Each of our directors will hold office until the next annual meeting of shareholders or until his successor has been elected and qualified. Our officers are elected by our Board of Directors and serve at the discretion of the Board of Directors.
NAME AGE POSITION - ---- -------- ------------------------------------------------ Paul W. Jones................................ 52 Chairman of the Board, President and Chief Executive Officer John L. Workman.............................. 49 Director, Executive Vice President and Chief Financial Officer J. Michael Kirk.............................. 42 Executive Vice President, Corporate Marketing and Aerosol Sales Gillian V. N. Derbyshire..................... 46 Senior Vice President and General Manager, Paint, Plastic, Custom and General Line Operations Roger B. Farley.............................. 56 Senior Vice President, Human Resources David R. Ford................................ 54 Senior Vice President, International, and President, European Operations Thomas A. Scrimo............................. 52 Senior Vice President and General Manager, Aerosol Operations and Business Support John R. McGowan.............................. 58 Vice President and Controller Larry S. Morrison............................ 46 Vice President, Operational Excellence Emil P. Obradovich........................... 54 Vice President and Chief Technical Officer Steven K. Sims............................... 36 Vice President, General Counsel and Secretary Sandra K. Vollman............................ 42 Vice President, Finance Carl Ferenbach............................... 58 Director Richard K. Lubin............................. 54 Director Ricardo Poma................................. 54 Director Francisco A. Soler........................... 54 Director Louis B. Susman.............................. 62 Director
PAUL W. JONES. Mr. Jones has been our President and Chief Executive Officer since April 1998, and our Chairman of the Board since July 1998. From 1989 to 1998, Mr. Jones was the President of Greenfield Industries, Inc., an international tool manufacturer. Prior to joining Greenfield Industries, Inc., Mr. Jones held various positions with General Electric for 19 years, including serving as General Manager--Manufacturing for General Electric Transportation Systems from 1988 to 1989. Prior to that time, Mr. Jones was the General Manager of General Electric Drives, Motor and Generator Operations. Mr. Jones is a member of the Board of Directors of Federal Signal Corporation and Regal-Beloit Corporation. JOHN L. WORKMAN. Mr. Workman has been our Executive Vice President and Chief Financial Officer since his appointment in August 1998. Prior to his appointment, Mr. Workman served as Executive Vice President and Chief Restructuring Officer at Montgomery Ward Holding Corporation. Montgomery Ward is one of the nation's largest privately-held retailers. Mr. Workman joined 58 Montgomery Ward in 1984 as a general auditor and held a variety of financial positions with Montgomery Ward, including Vice President--Controller, Vice President--Finance and Chief Financial Officer. Mr. Workman was an executive officer of Montgomery Ward in July 1997 when it filed for reorganization under Chapter 11 of the Federal bankruptcy laws. Prior to joining Montgomery Ward, Mr. Workman was a partner in Main Hurdman CPAs which later merged into KPMG. J. MICHAEL KIRK. Mr. Kirk has served as our Executive Vice President, Marketing since August 1999. In February 2000, Aerosol sales were also added to his duties. Prior to joining us, he served as General Manager of Blank Fed Packaging Systems for Tetra Pak, Inc., a manufacturer of beverage packaging products. He joined Tetra Pak in 1986 as a sales manager and held a number of sales and marketing positions. At Tetra Pak, he became General Manager of the nine state Southern Region of Tetra Pak and in 1996 was named General Manager of Tetra Pak's 33-state Central Region. GILLIAN V. N. DERBYSHIRE. Ms. Derbyshire has served as our Senior Vice President, Paint, Plastic and General Line since September 1999. In February 2000, Custom and Specialty operations were added to Ms. Derbyshire's responsibilities. Prior to joining us, she served as Vice President and General Manager of American National Can's Worldwide Plastic Bottle Group, a position held from June 1997 to September 1999. Prior to joining American National Can, Ms. Derbyshire was Vice President and General Manager of Tenneco Packaging's EZ Foil-Registered Trademark- Products Group (from June 1995 to June 1997). Prior to that, Ms. Derbyshire was Vice President and General Manager, Marketing of the Tenneco Packaging Specialty Packaging Group. ROGER B. FARLEY. Mr. Farley has served as our Senior Vice President, Human Resources since August 1998. Prior to joining us, Mr. Farley was Senior Vice President, Human Resources from July 1997 to July 1998 and Vice President, Human Resources from June 1994 to June 1997 of Greenfield Industries, Inc., an international tool manufacturer. Before joining Greenfield Industries, Inc., Mr. Farley spent 28 years with General Electric in various operating and human resources positions. DAVID R. FORD. Mr. Ford has served as our Senior Vice President, International and President, European Operations since November 1997. From 1987 until 1997, Mr. Ford held a number of senior management positions with CMB Packaging Group, a division of CarnaudMetalbox (a Crown Cork & Seal company), including Vice President, Eastern Europe; Vice President, European Food Can business; Regional Vice President, Northern Europe; and Managing Director, CMB Food Can UK. Crown Cork & Seal is a global metal and plastic packaging company. THOMAS A. SCRIMO. Mr. Scrimo has served as our Senior Vice President and General Manager, Aerosol Operations and Business Support since February 2000. From August 1998 to February 2000, Mr. Scrimo served as our Vice President, Business Support Operations. Prior to joining us, he served as Vice President of Operations for Greenfield Industries, Inc., an international tool manufacturer, from January 1997 to August 1998. Prior to that, he served as Vice President of Manufacturing of Commercial Cam Co., Wheeling, Illinois, a division of Emerson Electric Co., a manufacturer of precision material handling equipment. JOHN R. MCGOWAN. Mr. McGowan has served as our Vice President and Controller since August 1989. Mr. McGowan joined us in May 1987 and served as Vice President, Planning from September 1987 to July 1989. Prior to joining us, Mr. McGowan held a number of financial and management positions during his 25-year tenure with Continental Can Company. Mr. McGowan was employed in Continental Can Company's general packaging operations as Division Manager, Finance from February to May 1987 and as Division Controller from February 1982 to January 1987. LARRY S. MORRISON. Mr. Morrison has served as our Vice President, Operational Excellence since February 2000. From 1998 to February 2000, Mr. Morrison served as our Vice President and General 59 Manager, Custom and Specialty Products. From July 1995 to 1998, Mr. Morrison served as our Vice President of Manufacturing of Custom and Specialty Products. From October 1991 to July 1995, Mr. Morrison served as Director of Operations at our Hubbard, Ohio and Baltimore, Maryland plants. Mr. Morrison was with Sherwin Williams' container division for 10 years prior to our acquisition of the division in 1983. EMIL P. OBRADOVICH. Mr. Obradovich has served as our Vice President and Chief Technical Officer since February 2000. From 1996 to February 2000, Mr. Obradovich served as our Managing Director of Technical Service. From 1983 to 1996, Mr. Obradovich served as our Technical Director. He also spent 10 years with Sherwin-Williams prior to our formation. STEVEN K. SIMS. Mr. Sims has served as our Vice President, General Counsel and Secretary since June 1998. From April 1995 to May 1998, Mr. Sims served as our Assistant General Counsel. From September 1989 to March 1995, Mr. Sims was engaged in private practice at the Chicago-based law firm of Ross & Hardies, representing public and private companies in corporate and securities matters and mergers and acquisitions. SANDRA K. VOLLMAN. Ms. Vollman has served as our Vice President--Finance since July 2000. From July 1999 to July 2000, Ms. Vollman served as our Vice President--Business Development. From 1997 to 1999, Ms. Vollman was Vice President and Corporate Controller for Montgomery Ward and Co. Prior to 1997, Ms. Vollman held a variety of financial and information systems positions at Montgomery Ward and was vice president and controller of Signature Financial/Marketing, Inc., Montgomery Ward's direct marketing subsidiary. Before joining Montgomery Ward in 1983, Ms. Vollman was audit manager for Arthur Andersen in Chicago. CARL FERENBACH. Mr. Ferenbach has served as a Director since the recapitalization. Mr. Ferenbach is a Managing Director of Berkshire Partners, which he co-founded in 1986. In addition, he was one of our founding directors in 1983 and served as a member of our Board of Directors until February 2000. He has been a director of many of Berkshire Partners' manufacturing, transportation and telecommunications investments, including, among others, Crown Castle International Corporation, Wisconsin Central Transportation Corporation, Tranz Rail Limited and Trico Marine Services, Inc. RICHARD K. LUBIN. Mr. Lubin has served as a Director since the recapitalization. Mr. Lubin is a Managing Director of Berkshire Partners, which he co-founded in 1986. He has been a director of many of Berkshire Partners' manufacturing, retailing and transportation investments, including, among others, The Holmes Group, Inc., InteSys Technologies, Inc. and Wisconsin Central Transportation Corporation. RICARDO POMA. Mr. Poma has served as a Director since 1983. Since 1979, Mr. Poma has served as the Managing Partner and Chief Executive Officer of Group Poma, a family holding company involved in automobile distribution, hotels, real estate development and manufacturing. Mr. Poma is also Vice Chairman of International Bancorp of Miami, Inc.; a member of the Advisory Board of Bain Capital, an investment fund; and President of the School for Economics and Business, a private university in El Salvador. FRANCISCO A. SOLER. Mr. Soler has served as a Director since 1983. Since 1985, Mr. Soler has served as the Chairman of International Bancorp of Miami, Inc., the holding company for The International Bank of Miami, N.A. Mr. Soler is also President of Harbour Club Milano Spa. and a director of various industrial and commercial companies in the United Kingdom and El Salvador. LOUIS B. SUSMAN. Mr. Susman has served as a Director since 1998. Mr. Susman is a Vice Chairman of the Citigroup Global Corporate Investment Bank, Chairman of the Citigroup North American Customer Committee, and a Vice Chairman of Investment Banking and Managing Director of Salomon Smith Barney Inc. Prior to joining Salomon Brothers Inc (one of the predecessors of 60 Salomon Smith Barney) in June 1989, Mr. Susman was a senior partner at the St. Louis-based law firm of Thompson & Mitchell. Mr. Susman is a Director of Drury Inns and has previously served on the boards of the St. Louis National Baseball Club, Inc., Silver Eagle, Inc., Hasco International, PennCorp Financial, Avery, Inc. and other publicly-held corporations. In addition to the directors listed above, we expect to expand our board to include up to four additional independent directors as a result of the recapitalization. COMPENSATION OF DIRECTORS We pay our non-employee directors customary fees and reimburse their expenses for each board and committee meeting attended. EXECUTIVE COMPENSATION The following tables set forth information for the fiscal year ended December 31, 1999 concerning compensation paid to our Chief Executive Officer and our other four most highly compensated executive officers during fiscal years 2000, 1999 and 1998. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION --------------------------- ANNUAL COMPENSATION AWARDS PAYOUT ---------------------------------------------- ----------- ------------- SECURITIES UNDERLYING OTHER ANNUAL OPTIONS/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION SARS (#)(C) COMPENSATION - --------------------------- -------- -------- -------- ------------- ----------- ------------- Paul W. Jones(b) ............................. 2000 $614,473 none $7,521 212,202 $2,351,037(d) President and Chief Executive Officer 1999 $572,800 $830,200 $7,500 none $ 96,300(e) 1998 $384,900 $618,750 $5,500 450,000 $ 68,100 David R. Ford(f) ............................. 2000 $395,000 none none 141,468 $ 771,266(d) Senior Vice President, International and 1999 $383,000 $251,300 none none $ 239,116(d) President, European Operations 1998 $365,100 $143,100 none 28,000 $ 116,600 John L. Workman(b) ........................... 2000 $398,088 none $7,521 353,669 $1,066,672(d) Executive Vice President and Chief Financial 1999 $378,600 $270,700 $7,500 none $ 54,100(e) Officer 1998 $119,600 $165,000 $2,900 117,500 $ 2,200 Gillian V.N. Derbyshire(b) ................... 2000 $277,069 none $7,521 212,202 $ 344,503(d) Senior Vice President and General Manager, 1999 $ 62,138 $102,500 $2,025 50,000 $ 1,080(e) Paint, Plastic, Custom and General Line Operations J. Michael Kirk(b) ........................... 2000 $243,088 none $7,521 212,202 $ 358,139(d) Senior Vice President, Corporate Marketing 1999 $ 79,892 $77,500 $2,603 50,000 $ 3,691(e) and Aerosol Sales
- ------------------------------ (a) The 1998 amounts for Messrs. Jones and Workman and the 1999 amounts for Ms. Derbyshire and Mr. Kirk consist of a signing or make-whole bonus (based on foregone bonus from their previous employers) and a guaranteed partial year incentive payout. For 1998 and 1999, the amounts shown for all officers include the dollar value of additional deferred stock units provided by us to the named executive officers in connection with their deferral of a portion of their 1998 and 1999 bonuses into deferred stock units under our Executive Deferred Compensation Plan. Under this plan, eligible executives were able to defer up to 25% of their annual incentive compensation into deferred Company stock units, which were settled in cash at the reorganization date. We contributed one additional deferred stock unit for each five deferred stock units elected by the executive. (b) Mr. Jones, Mr. Workman, Ms. Derbyshire and Mr. Kirk joined our company in April 1998, August 1998, September 1999 and August 1999, respectively. (c) Options granted in 1999 and 1998 were granted under various option or equity incentive plans that were terminated as of the October 4, 2000 recapitalization date and reflect shares prior to the recapitalization. Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire and 61 Mr. Kirk, respectively, under the plans in effect prior to the recapitalization. All of the foregone options were cancelled at the time of the recapitalization, and each holder received a cash payment equal to the product of (i) the $20.00 price per share paid to shareholders in connection with the recapitalization less the exercise price of the option and (ii) the number of shares of common stock subject to the option. Options reflected in this table for 2000 were granted on October 4, 2000 under the U.S. Can Corporation 2000 Equity Incentive Plan in connection with the recapitalization. (d) The 2000 amounts include one-time bonuses in connection with the recapitalization of $697,500, $156,600, $309,000, $90,700 and $99,400 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, cash proceeds from the cancellation of employee stock options in the recapitalization of $1,291,312, $252,250, $624,713, $220,000 and $220,288 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, distribution of cash from U.S. Can's executive deferred compensation program to the extent not reported as 1999 or 1998 bonuses, of $124,384, $39,399, $38,852, $6,053 and $6,053 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, contributions or payments for their benefit to U.S. Can's Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") of $10,200 for each named executive officer other than Mr. Ford and $214,538, $80,314, $16,470 and $19,823 for Messrs. Jones and Workman, Ms. Derbyshire and Mr. Kirk, respectively, pursuant to nonqualified retirement plans. The 2000 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of our standard benefit ($5,803, $1,080 and $1,175, respectively). The 2000 amounts shown for Messrs. Jones, Workman and Kirk include payments for personal financial planning of $7,300, $3,593 and $1,200, respectively. The 2000 and 1999 amounts for Mr. Ford include contributions to an executive retirement plan and an overseas employee benefit trust, of which Mr. Ford is the beneficiary, designed to provide contractual retirement benefits ($227,011 and $229,424 for 2000 and 1999, respectively) and the cost of life insurance ($8,958 and $9,692 for 2000 and 1999, respectively). The 2000 amount for Mr. Ford also includes reimbursement for relocation expenses as provided under his Service Agreement of $87,048. (e) The 1999 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of our standard benefit ($5,803, $1,080 and $1,175, respectively). The 1999 amounts shown for Messrs. Jones, Workman and Kirk include contributions or payments for their benefit to U.S. Can's Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") and pursuant to nonqualified retirement plans ($90,500, $54,100 and $2,515, respectively). (f) Mr. Ford is compensated in British Pounds. Certain amounts shown for Mr. Ford have been converted to U.S. dollars at the exchange rate in effect as of the calendar year-end for the year in which payment was made. OPTION GRANTS IN 2000
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE % OF TOTAL OPTIONS APPRECIATION FOR NUMBER OF SECURITIES GRANTED TO OPTION TERM UNDERLYING OPTIONS EMPLOYEES IN EXERCISE OR ------------------- NAME GRANTED (#)(A) FISCAL YEAR BASE PRICE EXPIRATION DATE 5%($) 10%($) - ---- -------------------- ------------------ ----------- --------------- ----- ------ Paul W. Jones.............. 70,734(b) 2.17% $1.00 October 4, 2010 $ 44,484 $112,729 141,468(c) 8.93% $1.00 October 4, 1010 $ 88,969 $225,458 David R. Ford.............. 141,468(b) 4.35% $1.00 October 4, 2010 $ 88,969 $225,458 John L. Workman............ 70,734(b) 2.17% $1.00 October 4, 2010 $ 44,484 $112,729 282,935(c) 17.86% $1.00 October 4, 2010 $177,938 $450,914 Gillian V.N. Derbyshire.... 84,881(b) 2.61% $1.00 October 4, 2010 $ 53,382 $135,275 127,321(c) 8.04% $1.00 October 4, 2010 $ 80,072 $202,911 J. Michael Kirk............ 84,881(b) 2.61% $1.00 October 4, 2010 $ 53,382 $135,275 127,321(c) 8.04% $1.00 October 4, 2010 $ 80,072 $202,911
- ------------------------------ (a) Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, under the plans in effect prior to the recapitalization, which were cancelled at the time of the recapitalization. See note (c) to the Summary Compensation Table. (b) Represents time-vested options to purchase shares of common stock. These options vest in equal installments of 20% on October 4 of each of 2001, 2002, 2003, 2004 and 2005, subject to accelerated vesting upon a change of control of the Company. (c) Represents performance-based options to purchase shares of common stock. These options are exercisable only as to the total number of shares that are both vested and earned. These options vest in equal installments of 20% on October 4 of each of 2001, 2002, 2003, 2004 and 2005. These options are earned at the time of an initial public offering or if Berkshire Fund V Investment Corp. and its affiliates receive a specified return on their investment in the Company under specific, enumerated circumstances. 62 AGGREGATED OPTIONS/SAR EXERCISES IN 2000 AND 2000-END OPTIONS/SAR VALUED No shares were acquired as a result of option exercises by the named executive officers during 2000. See note (d) to the Summary Compensation Table for a description of the cash proceeds from the cancellation of employee stock options in the recapitalization. We have not awarded any stock appreciation rights ("SARs").
EXERCISABLE/UNEXERCISABLE NUMBER OF SECURITIES EXERCISABLE/UNEXERCISABLE UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS NAME AT 2000-YEAR END (#) AT 2000-YEAR END ($)(A) - ---- ------------------------- ------------------------- Paul W. Jones...................................... 0/212,202 $0/$0 David R. Ford...................................... 0/141,468 $0/$0 John L. Workman.................................... 0/353,669 $0/$0 Gillian V.N. Derbyshire............................ 0/212,202 $0/$0 J. Michael Kirk.................................... 0/212,202 $0/$0
- ------------------------ (a) Because there was no established trading market for the Company's common stock as of December 31, 2000, management has determined that the fair market value of the common stock underlying these options did not exceed $1.00 (the exercise price of these options) and, accordingly, none of these options were in-the-money. 63 PRINCIPAL STOCKHOLDERS Following the consummation of the transactions on October 4, 2000, we had one class of issued and outstanding common stock, and U.S. Can owned all of it. The following table sets forth certain information with respect to the ownership of U.S. Can's common stock immediately after consummation of the transactions and reflects U.S. Can's 20 for 1 stock split, which was effected upon the closing of the recapitalization. As of October 4, 2000, immediately following the consummation of the transactions, U.S. Can had 53,333,333 shares of issued and outstanding common stock. U.S. Can's preferred stock, which has no voting rights other than those provided by Delaware law, is owned by Berkshire Partners and its co-investors and the rollover stockholders. See "Description of U.S. Can's Capital Stock--Preferred Stock." Notwithstanding the beneficial ownership of common stock presented below, the stockholders agreement entered into upon consummation of the transactions governs the stockholders' exercise of their voting rights with respect to the election of directors and certain other material events. The parties to the stockholders agreement have agreed to vote their shares to elect the Board of Directors as set forth therein. See "Certain Relationships and Related Party Transactions." The following table describes the beneficial ownership of each class of issued and outstanding common stock of U.S. Can by each of our directors and executive officers, our directors and executive officers as a group and each person who beneficially owns more than 5% of the outstanding shares of common stock of U.S. Can as of October 1, 2000. As used in the table, beneficial ownership has the meaning set forth in Rule 13d-3(d)(1) of the Exchange Act.
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OWNERSHIP - ---------------- ---------------- ----------------- Berkshire Partners LLC(1)................................... 41,229,278 77.30% Salomon Smith Barney Inc.(2)................................ 2,613,332 4.90 Paul W. Jones............................................... 1,933,334 3.63 John L. Workman............................................. 1,000,000 1.88 J. Michael Kirk............................................. 333,333 * Gillian V. N. Derbyshire.................................... 333,333 * Roger B. Farley............................................. 533,333 1.00 David R. Ford............................................... 453,333 * Thomas A. Scrimo............................................ 213,334 * Carl Ferenbach(3)........................................... 41,229,278 77.30 Richard K. Lubin(4)......................................... 41,229,278 77.30 Ricardo Poma(5)............................................. 2,202,344 3.89 Francisco A. Soler(6)....................................... 951,485 1.68 Louis B. Susman(7).......................................... 2,613,332 4.62 All officers and directors as a group (12 persons).......... 51,769,758 96.41
- ------------------------ * Less than 1% (1) Includes 25,847,737 shares of common stock held by Berkshire Fund V Investment Corp.; 2,584,771 shares of common stock held by Berkshire Investors LLC; and 12,796,770 shares of 64 common stock held by Berkshire Fund V Coinvestment Corp. The address of Berkshire Partners LLC is One Boston Place, Suite 3300, Boston, Massachusetts 02108. (2) The address of Salomon Smith Barney Inc. is 8700 Sears Tower, Chicago, Illinois 60606. (3) Mr. Ferenbach is a Managing Director of Berkshire Partners LLC. (4) Mr. Lubin is a Managing Director of Berkshire Partners LLC. (5) Mr. Poma beneficially owns 2,202,344 shares of U.S. Can common stock as a result of his relationship to (i) Salcorp Ltd., a company of which Mr. Poma is the sole stockholder, director and executive officer, and which is the record holder of 924,804 shares, (ii) Scarsdale Company N.V., Inc., a company of which Mr. Poma is a director and executive officer and which is the record holder of 26,681 shares, and (iii) Barcel Corporation, which is the record holder of 1,250,859 shares and is wholly owned by United Capital Corporation, which is wholly owned by Inversal Trust, a family trust of which Mr. Poma is the trustee. (6) Mr. Soler beneficially owns 951,485 shares of U.S. Can common stock as a result of his relationship to (i) Windsor International Corporation, a company of which Mr. Soler is a director and executive officer and which is the record holder of 424,460 shares, (ii) Atlas World Carriers S.A., a company of which Mr. Soler is a director and executive officer and which is the record holder of 250,172 shares, (iii) The World Financial Corporation S.A., a company of which Mr. Soler is a director and executive officer and which is the record holder of 250,172 shares, and (iv) Scarsdale Company N.V., Inc., a company of which Mr. Soler is an executive officer and which is the record holder of 26,681 shares. (7) Mr. Susman is the Vice Chairman of Investment Banking and Managing Director of Salomon Smith Barney Inc. Salomon Smith Barney owns 2,613,332 shares of common stock. 65 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH BERKSHIRE PARTNERS Berkshire Partners has been actively involved in our company through Carl Ferenbach, a founding partner of Berkshire Partners. Mr. Ferenbach was one of our founding directors in 1983 and served as a member of our Board of Directors until February 2000. Upon the completion of the transactions, Berkshire Partners received a fee of $2.0 million. In addition, Berkshire Partners will receive a management fee of $750,000 per year. RELATIONSHIP WITH SALOMON SMITH BARNEY Salomon Smith Barney currently beneficially owns 4.62% of our common stock and provides us with investment banking and financial advisory services. Between 1997 and 1998, we paid Salomon Brothers Inc, one of Salomon Smith Barney's predecessors, approximately $800,000 in fees in connection with the sale of our commercial metal services business. We paid Salomon Smith Barney $2.0 million in fees for financial advisory services provided in connection with the transactions. In addition, we paid Salomon Smith Barney customary fees for serving as sole book running manager for the original offering, as dealer manager in U.S. Can's tender offer for all of its outstanding 10 1/8% notes due 2006 and as joint arranger under our new senior secured credit facility. STOCKHOLDERS AGREEMENT In connection with the recapitalization, we entered into a stockholders agreement with our stockholders which provides for, among other things, certain restrictions and rights related to the transfer, sale or purchase of our common stock and preferred stock. See "Description of U.S. Can's Capital Stock--Stockholders Agreement." TRANSACTIONS WITH MANAGEMENT EXECUTIVE DEFERRED COMPENSATION PLAN Our executive deferred compensation plan permits eligible executives to reduce the amount of their current taxable income by deferring payment of up to 25% of their annual cash bonus under our management incentive plan. The deferrals are invested in stock units of U.S. Can and the executive is entitled to a 20% company match on the number of stock units credited. The matching stock units generally vest over five years. As a result of the recapitalization, each executive who continued to be a stockholder of our company after the recapitalization received a cash distribution from the executive deferred compensation plan equal to the product of: - the number of stock units held by such executive, including vested and unvested matching stock units; and - $20.00. Participants in our executive deferred compensation plan who did not continue to be stockholders of our company after the recapitalization became vested in their matching stock units in the amount of $20.00 per matching stock unit. The vested amount was transferred to other investments. EXECUTIVE SEVERANCE PLAN Certain of our executive officers are eligible to participate in our executive severance plan. The executive severance plan provides an executive with a severance payment equal to 12 months (18 months in certain circumstances) of the executive's base salary in the event the executive is terminated without cause or leaves for good reason. In the cases of Ms. Derbyshire and Messrs. Farley, Kirk, Morrison, Scrimo, Sims and Workman, the executive severance plan will not provide a severance 66 benefit if these executives are entitled to receive a severance benefit under their change in control agreements (described below). U.S. CAN CORPORATION 2000 EQUITY INCENTIVE PLAN In connection with the recapitalization, the Board of Directors and stockholders of U.S. Can approved the U.S. Can Corporation 2000 Equity Incentive Plan. The Board of Directors administers the plan and may, from time to time, grant option awards to directors of U.S. Can, including directors who are not employees of U.S. Can, all executive officers of U.S. Can and its subsidiaries, and other employees, consultants, and advisers who, in the opinion of the Board, are in a position to make a significant contribution to the success of U.S. Can and its subsidiaries. The Board of Directors may grant options that are time-vested and options that vest based on the attainment of certain performance goals determined by the Board of Directors. CHANGE IN CONTROL AGREEMENTS Certain of our executive officers are a party to a change in control agreement. The recapitalization constituted a change in control under each agreement, which generally requires us to provide severance benefits to the executive officer upon his or her termination of employment during the agreement term. The agreements with Messrs. Morrison and Sims provide that, until the end of the 24th month following October 2000, the executive will be entitled to the following benefits during the term of such executive's agreement while employed by the company: - a salary which is not less than his or her highest annual base salary rate during the one-year period before the change in control; - continued participation in our management incentive plan or any replacement bonus plan providing an opportunity for an incentive payment equal to at least the greatest incentive compensation opportunity provided to him or her during the one-year period prior to the change in control; - life insurance coverage providing an amount in death benefits that is not less than two times the executive's base salary and disability income replacement coverage; and - participation in health, welfare, retirement and other fringe benefit programs on substantially the same terms as those benefits that are provided to other senior management employees. If we terminate the executive without cause at any time prior to the end of the 24th month following October 2000, or if the executive leaves employment as a result of a constructive termination, the executive is entitled to a lump sum severance payment. This payment will equal 18 months of base salary for Mr. Morrison and 12 months of base salary for Mr. Sims. In addition, the executives will be entitled to pro rata payments of bonus awards under the management incentive plan. The agreements with Messrs. Ford, McGowan and Obradovich provide that upon termination by us or constructive termination by the executive within two years of a change in control, the executive will be entitled to: - a severance payment equal to two times the greater of his current annual base salary or the annual base salary immediately before the change in control in the cases of Messrs. Ford and McGowan and equal to one times such amount in the case of Mr. Obradovich; - a pro-rated bonus based on the executive's target bonus; - accelerated vesting of all restricted stock grants awarded to Mr. McGowan; and 67 - continuation of health and welfare benefits for two years following termination in the cases of Messrs. Ford and McGowan and for one year in the case of Mr. Obradovich. EMPLOYMENT AGREEMENT WITH MR. JONES As of the recapitalization, Mr. Jones terminated his then existing change of control agreement and entered into a new employment agreement with us. We entered into a two-year employment agreement with Mr. Jones on October 4, 2000. Under the terms of Mr. Jones' employment agreement, he will be paid an annual base salary of at least $610,000. His base salary and other compensation will be reviewed annually by the Compensation Committee of the Board of Directors. Mr. Jones participates in our management incentive plan with an opportunity to receive a bonus payment equal to 100% of his base salary. We have also agreed to provide Mr. Jones with term life insurance coverage with death benefits at least equal to twice his base salary, an automobile allowance and employee benefits comparable to those provided to our other senior executives. In the event of the termination of Mr. Jones' employment with us due to his death or permanent disability, we will pay him or his estate: (1) an amount equal to one year's base salary reduced by any amounts received from any life or disability insurance provided by us; and (2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. In the event Mr. Jones terminates his employment for good reason or we terminate his employment without cause, we will pay him: (1) his base salary and benefits for the earliest to occur of 18 months, his death or the date that he breaches the provisions of his employee agreement (relating to non-competition, confidentiality and inventions); and (2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. If Mr. Jones' employment is terminated for cause or by voluntary resignation, he will receive no further compensation. EMPLOYMENT AGREEMENTS WITH MS. DERBYSHIRE AND MESSRS. FARLEY, KIRK, SCRIMO AND WORKMAN As of the recapitalization, Ms. Derbyshire and Messrs. Farley, Kirk, Scrimo and Workman, referred to as the executives, terminated their then existing change of control agreements and entered into new employment agreements with us. We entered into two-year employment agreements with each of the executives on October 4, 2000. Under the terms of these employment agreements, Ms. Derbyshire and each of Messrs. Farley, Kirk, Scrimo and Workman will be paid an annual base salary of at least $260,000, $226,000, $235,000, $220,000 and $390,000, respectively. Each executive's base salary and other compensation will be reviewed annually by that executive's supervisor. Each executive also participates in our management incentive plan with an opportunity to receive a bonus payment equal to 50% of his or her base salary. We have also agreed to provide each executive with term life insurance coverage with death benefits at lease equal to twice his or her base salary, an automobile allowance and employee benefits comparable to those provided to our other senior executives. In the event of the termination of an executive's employment with us due to his or her death or permanent disability, we will pay him or her or his or her estate: (1) an amount equal to one year's base salary reduced by any amounts received from any life or disability insurance provided by us; and 68 (2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. In the event an executive terminates his or her employment for good reason or we terminate his or her employment without cause, we will pay him or her: (1) his or her base salary and benefits for the earliest to occur of 18 months, his or her death or the date that he or she breaches the provisions of his or her employee agreement (relating to non-competition, confidentiality and inventions); and (2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. If an executive's employment is terminated for cause or by voluntary resignation, he or she will receive no further compensation. SERVICE AGREEMENT WITH MR. FORD We have entered into a service agreement with Mr. Ford through our wholly owned subsidiary, USC Holding UK Limited. The service agreement will continue in effect until it is terminated by us or Mr. Ford, but not beyond Mr. Ford's attainment of USC Holding UK Limited's retirement age (currently 65). We have agreed to pay Mr. Ford a base salary of L232,000 per year during the term of his agreement and to provide him with an automobile and retirement benefits no less beneficial than those provided by his previous employer. We have agreed to provide a target bonus for Mr. Ford of 50% of his base salary with the actual amount based upon the attainment of pre-established performance goals. Mr. Ford may terminate his employment by providing us with 12 months notice. We may terminate Mr. Ford's employment by giving him 24 months notice, except we may terminate Mr. Ford's employment for cause without prior notice. After termination notice is given and prior to expiration of the notice period, we are required to continue to pay Mr. Ford's salary and provide other contractual benefits. If Mr. Ford's employment is terminated by reason of redundancy, we are required to make an additional payment to Mr. Ford equal to two times his entitlement to statutory redundancy pay (to include the statutory entitlement). Additionally, the service agreement requires Mr. Ford to refrain from disclosing confidential information acquired in connection with his employment with us and also requires Mr. Ford to refrain from working for any other firm during the term of the agreement. 69 OTHER INDEBTEDNESS SENIOR SECURED CREDIT FACILITY GENERAL. On October 4, 2000, in connection with the recapitalization, the Company entered into a senior secured credit facility with Bank of America, N.A., Citicorp North America, Inc. and certain other lenders. The senior secured credit facility provides for aggregate borrowings by us of $400.0 million. As of October 1, 2000, after giving pro forma effect to the transactions, there would have been approximately $295.4 million (including $14.9 million of letters of credit) of outstanding indebtedness under the senior secured credit facility and approximately $104.6 million of unused commitment under the senior secured credit facility for working capital and other corporate purposes. The senior secured credit facility includes: - an $80.0 million tranche A term loan; - a $180.0 million tranche B term loan; and - a $140.0 million revolving credit facility. Up to $75.0 million of the revolving credit facility is available in certain foreign currencies, including British Pounds Sterling, French Francs, German Deutsche Marks and Euros and other foreign currencies approved by the lenders for borrowings by certain of our foreign subsidiaries. INTEREST. Amounts outstanding under the senior secured credit facility bear interest, at our option, at a rate per annum equal to either: (1) the base rate (as defined in the senior secured credit facility) or (2) the LIBOR rate (as defined in the senior secured credit facility), in each case, plus an applicable margin. The applicable margin for the tranche A term loan and the revolving credit facility is initially 2.25% for base rate loans and 3.25% for LIBOR loans. The applicable margin for the tranche A term loan and the revolving credit facility is subject to reduction based on the achievement of certain leverage ratio targets and provided that no event of default has occurred and is continuing. The applicable margin for the tranche B term loan is fixed at 2.75% for base rate loans and 3.50% for LIBOR loans, subject to reduction based on our senior secured credit rating. The applicable margins are not subject to reduction until after March 2001. As of October 1, 2000, our borrowings under the senior secured credit facility would have borne interest at rates ranging from 9.58% to 9.83%. The interest rate otherwise payable under the senior secured credit facility will increase by 2% per annum during the continuance of a payment default or another event of default for which the lenders have taken affirmative action. MATURITY AND MANDATORY PREPAYMENTS. Borrowings under the tranche A term loan are due and payable in quarterly installments, which are initially $1 million and increase over time to $8 million, until the final balance is due on the sixth anniversary of the closing of the recapitalization. Borrowings under the tranche B term loan are due and payable in quarterly installments (the quarterly payments due before December 31, 2006 being in nominal amounts), with the final balance due on the eighth anniversary of the closing of the recapitalization. The revolving credit facility is available until the sixth anniversary of the closing of the recapitalization. In addition, we are required to prepay the facilities under the senior secured credit facility in an amount equal to: - 100% of the net cash proceeds from certain asset sales by us subject to certain baskets and reinvestment provisions; - 75% (if our senior debt/EBITDA ratio is equal to or greater than 3.0:1.0) or 50% (if our senior debt/EBITDA ratio is less than 3.0:1.0) of excess cash flow (as defined); - 100% of the net cash proceeds from the issuance of any debt (excluding the proceeds from the notes) by us; and 70 - 50% of the net cash proceeds from our issuance of equity, excluding, among other things, (a) proceeds from any issuance of equity within one year of the closing of the recapitalization which are applied to permanently reduce the outstanding bridge notes, and (b) when no bridge notes are outstanding, (i) any equity invested by Berkshire Partners and the rollover stockholders and (ii) equity invested in connection with a permitted acquisition. SECURITY AND GUARANTEES. The senior secured credit facility is secured by a first priority security interest in all existing and after-acquired assets of us and all of our direct and indirect domestic subsidiaries' existing and after-acquired assets, including, without limitation, real property and all of the capital stock owned by us and our direct and indirect domestic subsidiaries (including certain capital stock of their direct foreign subsidiaries only to the extent permitted by applicable law). In addition, the loans made to our foreign subsidiaries under the senior secured credit facility will be secured by the existing and after-acquired assets of certain of our foreign subsidiaries. All of our obligations under the senior secured credit facility are fully and unconditionally guaranteed by U.S. Can and all of the Company's present and future domestic subsidiaries. In addition, U.S. Can, the Company, each guarantor and, to the extent permitted by law, each subsidiary and parent of any foreign subsidiary authorized to borrow amounts under the senior secured credit facility will guarantee any borrowings by any designated foreign subsidiaries permitted to borrow amounts under the senior secured credit facility. COVENANTS. The senior secured credit facility requires us to meet certain financial tests, including, without limitation: - minimum interest coverage; - minimum EBITDA; - minimum fixed charge coverage; and - maximum leverage. The senior secured credit facility contains certain covenants which, among other things, limit: - the incurrence of additional debt; - investments; - dividends; - transactions with affiliates; - capital expenditures; - asset sales; - acquisitions, mergers and consolidations; - prepayments of other debt (including the notes); - amendments to the terms of any debt (including the notes) that would be adverse to the lenders; and - liens, encumbrances and negative pledges. EVENTS OF DEFAULT. The senior secured credit facility contains customary events of default, including, among other things: - payment defaults; - breaches of representations and warranties; 71 - covenant defaults; - cross-defaults to certain other debt (including the notes); - certain events of bankruptcy and insolvency; - failure of the subordination provisions in the notes to be effective with respect to each holder of the notes; - judgment defaults; - failure of any guarantee or security document supporting the senior secured credit facility to be in full force and effect; and - a change of control of the Company or U.S. Can. WAIVER AND MODIFICATION. The terms of the senior secured credit facility may be waived or modified upon approval by the Company and the required percentage of the senior lenders and without the consent of the exchange note holders. 72 DESCRIPTION OF U.S. CAN'S CAPITAL STOCK GENERAL U.S. Can has two authorized classes of capital stock: preferred stock and common stock, each with par value $.01 per share. The number of authorized shares of preferred stock is 200,000,000 and the number of authorized shares of common stock is 100,000,000. Immediately following the recapitalization, there were 106,666,667 shares of U.S. Can preferred stock and 53,333,333 shares of U.S. Can common stock outstanding. In addition, U.S. Can has reserved 3,253,761 shares of common stock for issuance upon exercise of employee stock options. PREFERRED STOCK As part of the transactions, U.S. Can issued and sold in a private placement shares of preferred stock having an aggregate value of $106.7 million to Berkshire Partners and its affiliates and the rollover stockholders. The principal terms of the preferred stock are summarized below. This summary, however, is not complete and is qualified in its entirety by reference to the provisions of U.S. Can's Certificate of Incorporation, as in effect at the time of the closing of the transactions. DIVIDENDS. Dividends accrue on the preferred stock at an annual rate of 10%, are cumulative from the date of issuance and compounded quarterly, on March 31, June 30, September 30 and December 31 of each year and are payable in cash when and as declared by our Board of Directors, so long as sufficient cash is available to make the dividend payment and such cash has been obtained in a manner permitted under the terms of our new senior secured credit facility and the indenture. VOTING RIGHTS. Holders of the preferred stock have no voting rights, except as otherwise required by law. RANKING. The preferred stock has a liquidation preference equal to the purchase price per share, plus all accrued and unpaid dividends. The preferred stock ranks senior to all classes of U.S. Can common stock and is not convertible into common stock. REDEMPTION. U.S. Can is required to redeem the preferred stock, at the option of the holders, at a price equal to its liquidation preference, plus accrued and unpaid dividends, upon the occurrence of any of the following events and so long as sufficient cash is available at U.S. Can or available from dividend payments permitted under the terms of the indenture: - the bankruptcy of either U.S. Can or the Company; - the acceleration of debt under any major loan agreement to which U.S. Can or any of its subsidiaries is a party; or - public offerings of shares of capital stock of U.S. Can. No holder of preferred stock, however, may require U.S. Can to redeem the preferred stock if doing so would cause the bankruptcy of U.S. Can or the Company or a breach of the indenture. In addition, if proceeds from public offerings of U.S. Can's stock are insufficient to redeem all of the shares of the preferred stock that the holders wish to be redeemed, U.S. Can is required to redeem the remaining shares at a price equal to its liquidation preference, 366 days after the tenth anniversary of the closing of the transactions or the payment in full of the notes and the debt outstanding under the new senior secured credit facility, whichever is earlier. U.S. Can's certificate of incorporation expressly states that any redemption rights of holders of preferred stock shall be subordinate or otherwise subject to prior rights of the lenders under our new senior secured credit facility and the holders of the exchange notes. 73 Upon a change of control of U.S. Can (as defined in the indenture), the shares of preferred stock may be redeemed at the option of either the holders or U.S. Can, subject to the terms of our new senior secured credit facility and after the holders of the notes have been made and completed the requisite offer to repurchase following a change of control under the indenture. The new senior secured credit facility prohibits our ability to redeem the preferred stock, and the indenture restricts U.S. Can's ability to obtain funds that may be necessary to redeem the preferred stock. COMMON STOCK Each share of common stock entitles the holder of the share to one vote in the election of directors and all other matters submitted to a vote of U.S. Can's stockholders. Holders of U.S. Can common stock do not have cumulative voting rights. Subject to any preferential rights of any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive, pro rata based on the number of shares held, cash dividends when and if declared by the Board of Directors from funds legally available for such purpose. However, U.S. Can does not expect to pay cash dividends in the foreseeable future. As a holding company, U.S. Can's ability to pay dividends depends on the receipt of dividends or other payments from the Company. The senior secured credit facility and the indenture limit the Company's ability to pay dividends or otherwise transfer cash to U.S. Can. See "Other Indebtedness" and "Description of Exchange Notes." In the event of a liquidation of U.S. Can, holders of shares of common stock are entitled to receive, pro rata based on the number of shares held, all of the assets remaining available for distribution to holders of common stock after payment of all prior claims, including any preferential liquidation rights of any preferred stock then outstanding. Holders of shares of common stock have no preemptive rights to subscribe to additional shares of any such class or other securities of U.S Can. All outstanding shares of common stock are fully paid and nonassessable. STOCKHOLDERS AGREEMENT In connection with the recapitalization, we entered into a stockholders agreement with our stockholders. The stockholders agreement has the following provisions: - Prior to the third anniversary of the closing of the recapitalization, no stockholder may transfer shares of U.S. Can capital stock (other than certain limited exceptions including permitted transfers to an affiliate or in connection with estate planning). - After the third anniversary of the closing of the recapitalization, a stockholder may only transfer shares of U.S. Can capital stock (other than certain limited exceptions including permitted transfers to an affiliate or in connection with estate planning) after the transferring stockholder first gives U.S. Can, and then the other stockholders on a pro rata basis, a right of first refusal to purchase all or a portion of the shares at the same price. - U.S. Can has the right to purchase U.S. Can equity securities held by a management stockholder (as defined) in the event the management stockholder's employment with U.S. Can is terminated for any reason. - If a management stockholder's employment with U.S. Can is terminated by virtue of death, disability or retirement in accordance with U.S. Can policy, the management stockholder will have the right to require U.S. Can to purchase his or her equity securities of U.S. Can. 74 - If, at any time, certain stockholders holding 75% of the outstanding common stock equivalents (as defined) (i.e., Berkshire Partners, its affiliates and another stockholder) elect to consummate the sale of 50% or more of the common stock of U.S. Can to an unaffiliated third party, the remaining stockholders will be obligated to consent to and take all actions necessary to complete the proposed sale of the same proportion of their stock on the same terms. - After the third anniversary of the closing of the recapitalization, a stockholder (or a group of stockholders together) owning more than 4% of the outstanding shares of U.S. Can capital stock may only (other than in connection with estate planning transfers) transfer the shares to an unaffiliated third party, so long as other stockholders are given the option to participate in the proposed transfer on the same terms and conditions on a pro rata basis (except in connection with certain permitted transfers). - The stockholders have agreed to elect directors of U.S. Can such that the Board of Directors will consist of two designees of Berkshire and its affiliates so long as the Berkshire stockholders maintain ownership of at least 25% of the U.S. Can common stock, two designees of management stockholders, Louis Susman, Ricardo Poma, Francisco Soler (or other designees of the Scarsdale Group if Francisco Soler and Ricardo Poma both no longer serve on the Board of Directors so long as the Scarsdale Group owns at least 5% of the U.S. Can common stock) and two other independent directors acceptable to the other directors. - Following an initial public offering of U.S. Can common stock, certain stockholders will have either one or two demand registration rights. The stockholders will be entitled to "piggy-back" registration rights on all registrations of U.S. Can common stock by U.S. Can or any other stockholder, subject to customary underwriter cutback. - So long as U.S. Can is not paying default interest under any of its financing arrangements, an 80% vote of the common stockholders will be required to approve and adopt mergers, acquisitions, charter or bylaw amendments, extraordinary borrowings, dividends, stock issuances and certain other matters. An 80% vote will be required at all times for a financial restructuring that treats the management stockholders differently and adversely from the rest of the common stockholders. - Stockholders have pre-emptive rights to subscribe for newly issued shares on a pro rata basis, subject to certain exclusions. - Most of the restrictions contained in the stockholders agreements terminate upon consummation of a qualified initial public offering of common stock by U.S. Can or certain changes in control of U.S. Can. DESCRIPTION OF THE COMPANY'S CAPITAL STOCK All of the Company's issued and outstanding capital stock is owned beneficially by U.S. Can. The Company has no outstanding capital stock other than common stock, and there are no outstanding options, warrants or other rights to purchase the Company's capital stock. 75 DESCRIPTION OF EXCHANGE NOTES CAPITALIZED TERMS USED IN THIS SECTION OF THE PROSPECTUS ARE DEFINED LATER UNDER THE HEADING "DEFINITIONS." The Company will issue the exchange notes under the indenture dated October 4, 2000 (the "Indenture") among the Company, the Parent Guarantor, the Subsidiary Guarantors and Bank One Trust Company, N.A., as trustee (the "Trustee"). The terms of the exchange notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939. The exchange notes are subject to all those terms, and reference is made to the Indenture and the Trust Indenture Act for a statement of those terms. Copies of the Indenture and the form of exchange notes have been filed as exhibits to the registration statement of which this prospectus is a part. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes issued in the original offering, except that: - the exchange notes will bear a Series B designation; - the exchange notes have been registered under the Securities Act and, therefore, will generally not bear legends restricting their transfer; and - the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement dated as of October 4, 2000 by and among, the Company, Salomon Smith Barney and Banc of America Securities LLC, including the provision providing for liquidated damages in certain circumstances relating to the timing of the exchange notes. The exchange notes will evidence the same debt as the notes issued in the original offering and will be entitled to the benefits of the Indenture. The exchange notes will rank equally with the notes issued in the original offering if all of these notes are not exchanged pursuant to the exchange offer and will vote together with the notes on all matters voted upon under the Indenture. The following summary of specific provisions of the Indenture is not intended to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Indenture and the exchange notes, including the definitions of certain terms therein and those terms made a part thereof by the Trust Indenture Act. Capitalized terms used in this section and not otherwise defined below under the heading "Definitions" have the respective meanings assigned to them in the Indenture. GENERAL The exchange notes are the Company's general unsecured senior subordinated obligations and will initially be limited to $175.0 million aggregate principal amount. The exchange notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. Except in limited circumstances, the exchange notes will be issued as a global note. See "The Exchange Offer--Procedures for Tendering." No service charge will be made for any registration of transfer of notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. The payment of principal, premium, if any, and interest on the exchange notes is unconditionally guaranteed on a senior subordinated and unsecured basis by the Parent Guarantor (the "Parent Guarantee") and the Subsidiary Guarantors (the "Subsidiary Guarantees" and, together with the Parent Guarantee, referred to as the "Guarantees"). The Parent Guarantor and the Subsidiary Guarantors are collectively referred to as the "Guarantors" and are individually referred to as a "Guarantor." See "--Parent and Subsidiary Guarantees." 76 ADDITIONAL NOTES The Company may, without the consent of the Holders of exchange notes, create and issue up to $100.0 million aggregate principal amount of additional notes ranking equally with the exchange notes in all respects. Such additional notes will be consolidated with the exchange notes and form a single series with the exchange notes and will have the same terms as to status, redemption or otherwise as the exchange notes. Additional notes may be issued from time to time subject to the limitations set forth under "--Certain Covenants--Limitation on Indebtedness." PAYMENT TERMS The exchange notes will mature on October 1, 2010 and will bear interest at a rate of 12 3/8% per annum until maturity. The Company will pay interest semiannually on April 1 and October 1 of each year, beginning April 1, 2001, to the persons who are registered Holders of the exchange notes at the close of business on the March 15 or September 15 immediately preceding such interest payment date. The Company will pay interest on overdue principal at 1% per annum in excess of the set rate, and it will pay interest on overdue installments of interest at the same higher rate to the extent lawful. Interest on the exchange notes will accrue from the last date on which interest was paid on the notes being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. The Indenture provides that interest on the exchange notes will be computed on the basis of a 360-day year of twelve 30-day months. Initially, the Trustee will act as Paying Agent and Registrar. Principal and interest will be payable initially at the Trustee's offices within the City and State of New York but, at the Company's option, interest may be paid by check mailed to the Holders at their addresses as they appear in the exchange notes register; PROVIDED that the Company will be required to make, by wire transfer of immediately available funds to the accounts specified by a Holder of at least $5 million aggregate principal amount of exchange notes, all payments of principal of, premium, if any, and interest with respect to such Holder's exchange notes if such Holder has given wire transfer instructions to the Company. The notes may be presented for registration of transfer and exchange at the Registrar's offices, which initially will be the Trustee's offices. PARENT AND SUBSIDIARY GUARANTEES The Parent Guarantor and each Subsidiary Guarantor unconditionally guarantee, jointly and severally, on a senior subordinated basis to each Holder and the Trustee, the full and prompt performance of the Company's obligations under the Indenture and the exchange notes, including the payment of principal of, and interest on, the exchange notes. As of the Issue Date, USC May Verpackungen Holding, Inc., as the Company's only Domestic Restricted Subsidiary, is the only Subsidiary Guarantor. In the future, each Domestic Restricted Subsidiary created or acquired by the Company that has at any time a Fair Market Value of more than $500,000 is required to become an additional Subsidiary Guarantor; PROVIDED that the aggregate Fair Market Value of Domestic Restricted Subsidiaries that are not Subsidiary Guarantors will not at any time exceed $1.5 million. See "--Certain Covenants--Future Subsidiary Guarantors." The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Parent Guarantee or Subsidiary Guarantee, as the case may be, or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Guarantor under its Parent Guarantee or Subsidiary Guarantee, as the case may be, not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. 77 Each Guarantor that makes a payment or distribution under a Parent Guarantee or Subsidiary Guarantee, as the case may be, will be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP. Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company without limitation, or with other Persons upon the terms and conditions set forth in the Indenture. See "--Merger, Consolidation and Sale of Assets." In the event the Company sells all of the capital stock of a Subsidiary Guarantor and the sale complies with the provisions set forth in "--Certain Covenants--Limitation on Asset Dispositions," the Subsidiary Guarantor's Subsidiary Guarantee will be released. SUBORDINATION OF EXCHANGE NOTES The exchange notes are subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of the Company. The exchange notes will in all respects rank equally with all other Senior Subordinated Indebtedness of the Company, and only Indebtedness of the Company that is Senior Indebtedness will rank senior to the exchange notes. Except with respect to limitations on consolidated Indebtedness that the Company and the Subsidiary Guarantors may incur, the Indenture does not limit the ability of the Company or the Guarantors to incur Senior Indebtedness or restrict the ability of the Company or the Parent Guarantor to transfer assets to and among the Restricted Subsidiaries. As described below, in the event of bankruptcy, liquidation or reorganization of the Company, the Company's assets will be available to make payments on the exchange notes only after all Senior Indebtedness has been paid in full, and there may not be sufficient assets remaining to pay amounts due on the exchange notes. In the event of any payment or distribution of the Company's assets in any foreclosure, dissolution, winding up, liquidation or reorganization, holders of any secured Indebtedness will have a secured prior claim to the assets of the Company and its Subsidiaries. Under certain circumstances, as described below, holders of Senior Indebtedness may block payments on the exchange notes. Any claims by Holders against the assets of the Company's subsidiaries (except the Subsidiary Guarantors) would be subordinate to all existing and future obligations thereof (including trade payables and preferred stock, if any, of such subsidiaries). As of October 1, 2000, after giving effect to the original offering and application of the net proceeds thereof (including the repayment through a successful tender offer of the 10 1/8% notes), the aggregate Senior Indebtedness of the Company and the Guarantors would have been $319.8 million (all of which is secured Indebtedness), and the Company and the Guarantors had no outstanding Senior Subordinated Indebtedness (other than the Notes and related Guarantees) after giving effect to the repayment of the 10 1/8% notes. Indebtedness and other liabilities of subsidiaries of the Company that are not Subsidiary Guarantors, on an adjusted basis, aggregated approximately $98.1 million as of October 1, 2000. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness will be entitled to receive payment in full of the Senior Indebtedness before Holders will be entitled to receive any payment of principal of or interest on the exchange notes; and (2) until the Senior Indebtedness is paid in full, any distribution to which Holders would be entitled but for this provision will be made to holders of Senior Indebtedness as their interests may appear, except that Holders may receive shares of stock and any debt securities that are subordinated to Senior Indebtedness to at least the same extent as the exchange notes. 78 The Company may not pay the principal of or interest on the exchange notes or make any deposit for the purpose of the discharge of its liabilities under the Indenture and may not repurchase, redeem or otherwise retire any notes (collectively, "pay the exchange notes") if (1) a default in the payment of principal or interest on any Senior Indebtedness occurs and is continuing beyond any applicable grace period, or (2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, (A) the default has been cured or waived and any such acceleration has been rescinded, or (B) such Senior Indebtedness has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the exchange notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the Representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Blockage Notice") and ending 179 days thereafter, or earlier if such Payment Blockage Period is terminated - by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, - by repayment in full of such Designated Senior Indebtedness, or - because the default giving rise to such Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the next preceding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders will have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the exchange notes after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. In the event of the Company's insolvency, liquidation, reorganization, dissolution or other proceedings, funds which would otherwise be payable to Holders will be paid to the holders of Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full. Moreover, the Company's creditors who are holders of Senior Indebtedness may recover more, ratably, than the Holders, and the Company's creditors who are not holders of Senior Indebtedness or of the exchange notes may recover less, ratably, than holders of the Senior Indebtedness and may recover more, ratably, than the Holders. The Company currently has no Indebtedness that is subordinated to the exchange notes. SUBORDINATION OF GUARANTEES The Parent Guarantee is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of the Parent Guarantor. The Subsidiary Guarantees are subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of Subsidiary Guarantors. As of October 1, 2000, after giving effect to the exchange offer, there would have been no Senior Indebtedness of the Parent Guarantor to which the Parent Guarantee 79 would be subordinated and no Senior Indebtedness of Subsidiary Guarantors to which the Subsidiary Guarantees would be subordinated. The Guarantees will in all respects rank equally with all other Senior Subordinated Indebtedness of the Guarantors, and only Indebtedness of the Guarantors which is Senior Indebtedness of the Guarantors will rank senior to the Guarantees. Except with respect to limitations on consolidated Indebtedness that the Company and the Restricted Subsidiaries (including the Subsidiary Guarantors) may incur, the Indenture does not limit the ability of the Guarantors to incur additional Senior Indebtedness or restrict the ability of the Guarantors to transfer assets to and among the Restricted Subsidiaries. As described below, in the event of bankruptcy, liquidation or reorganization of a Guarantor, the assets of such Guarantor will be available to make payments under the Parent Guarantee or Subsidiary Guarantee, as the case may be, only after all Senior Indebtedness of the Guarantors has been paid in full, and there may not be sufficient assets remaining to pay amounts due on the Guarantees. As of the date of this Prospectus, substantially all of the Senior Indebtedness of the Guarantors is secured by substantially all their respective assets. In the event of any payment or distribution of the assets of the Guarantors in any foreclosure, dissolution, winding up, liquidation or reorganization, holders of the secured Indebtedness will have a secured prior claim to the assets of the Guarantors and their Subsidiaries. Under certain circumstances, as described below, holders of Senior Indebtedness may block payments on the Guarantees. Any claims by Holders against the assets of Subsidiaries of the Subsidiary Guarantors (that are themselves not Subsidiary Guarantors) would be subordinate to all existing and future obligations (including trade payables and preferred stock, if any) of such Subsidiaries. Upon any payment or distribution of the assets of the Guarantors to creditors upon a total or partial liquidation or a total or partial dissolution of the Guarantors or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to any Guarantor or its property: (1) holders of Senior Indebtedness of the Guarantors will be entitled to receive payment in full of such Senior Indebtedness before Holders will be entitled to receive any payment under the Guarantees; and (2) until the Senior Indebtedness of the Guarantors is paid in full, any distribution to which Holders would be entitled but for this provision will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders may receive shares of stock and any debt securities that are subordinated to Senior Indebtedness of the Guarantors to at least the same extent as the Guarantees. The Guarantors may not pay the principal of or interest on the exchange notes pursuant to the Guarantees or make any deposit for the purpose of the discharge of their liabilities under the Indenture and may not repurchase, redeem or otherwise retire any notes pursuant to the Guarantees (collectively, "pay the exchange notes") if (1) any Senior Indebtedness of the Guarantors is not paid when due or (2) any other default on Senior Indebtedness of the Guarantors occurs and the maturity of such Designated Senior Indebtedness of the Guarantors is accelerated in accordance with its terms, unless, in either case, (A) the default has been cured or waived and any such acceleration has been rescinded or (B) such Senior Indebtedness of the Guarantors has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness of the Guarantors pursuant to which the maturity thereof may be accelerated immediately without further notice (except such 80 notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Guarantors may not pay the exchange notes for a period (a "Guarantor Payment Blockage Period") commencing upon the receipt by the Guarantors and the Trustee of written notice of such default from the Representative of any Designated Senior Indebtedness of the Guarantors specifying an election to effect a Guarantor Payment Blockage Period (a "Guarantor Blockage Notice") and ending 179 days thereafter, or earlier if such Guarantor Payment Blockage Period is terminated - by written notice to the Trustee and the Guarantors from the Person or Persons who gave such Guarantor Blockage Notice, - by repayment in full of such Designated Senior Indebtedness of Guarantors, or - because the default giving rise to such Guarantor Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the next preceding paragraph), unless the holders of such Senior Indebtedness of Guarantors or the Representative of such holders will have accelerated the maturity of such Designated Senior Indebtedness of the Guarantors, the Guarantors may resume payments under the Guarantees after such Guarantor Payment Blockage Period. Not more than one Guarantor Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of Guarantors during such period. In the event of a Guarantor's insolvency, liquidation, reorganization, dissolution or other proceedings, funds which would otherwise be payable to Holders will be paid to the holders of Senior Indebtedness of Guarantors to the extent necessary to pay the Senior Indebtedness of Guarantors in full. Moreover, the Guarantors' creditors who are holders of Senior Indebtedness of Guarantors may recover more, ratably, than the Holders, and the Guarantors' creditors who are not holders of Senior Indebtedness of Guarantors or of the exchange notes may recover less, ratably, than holders of the Senior Indebtedness of Guarantors and may recover more, ratably, than the Holders. The Guarantors currently have no Indebtedness that is subordinated to the Guarantees. REDEMPTION OPTIONAL REDEMPTION Except as set forth below, the Company may not redeem the exchange notes before October 1, 2005. On or after that date, the Company may redeem the exchange notes, in whole at any time or in part from time to time, on at least 30 but not more than 60 days prior notice, mailed by first-class mail to the Holders at their registered addresses, at the redemption prices (expressed in percentages of principal amount) specified below plus accrued and unpaid interest, if any, through the redemption date (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date), if redeemed during the twelve-month period beginning October 1, of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2005........................................................ 106.188% 2006........................................................ 104.125% 2007........................................................ 102.063% 2008 and thereafter......................................... 100.000%
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS At any time, or from time to time, on or before October 1, 2003, the Company may, at its option, use all or any portion of the net cash proceeds of one or more Public Equity Offerings (as defined 81 below) to redeem up to 35% of the aggregate principal amount of the exchange notes issued at a redemption price equal to 112.375% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; PROVIDED that at least 65% of the aggregate principal amount of exchange notes initially issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company will make such redemption not more than 180 days after the consummation of any such Public Equity Offering. As used in the preceding paragraph, "Public Equity Offering" means an underwritten public offering of Capital Stock of the Company (other than Disqualified Stock) pursuant to a registration statement filed with the Commission in accordance with the Securities Act or a firm commitment private placement of Capital Stock (other than Disqualified Stock) pursuant to an agreement that requires the registration of the resale of such Capital Stock (or Capital Stock issued upon conversion thereof) contemporaneously with the issuance thereof or as soon as practical thereafter. In the case of any partial redemption, selection of the exchange notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion will deem to be fair and appropriate (and which complies with applicable legal and securities exchange requirements), although no exchange note of $1,000 in original principal amount or less will be redeemed in part. If a partial redemption is made with the proceeds of a Public Equity Offering, selection of the exchange notes or portions thereof for redemption will be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC (as defined below) procedures), unless such method is otherwise prohibited. If any exchange note is to be redeemed in part only, the notice of redemption relating to such exchange note will state the portion of the principal amount thereof to be redeemed. A new exchange note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original exchange note. MANDATORY SINKING FUND There are no mandatory sinking fund payments for the exchange notes. CHANGE OF CONTROL Upon a Change of Control, each Holder will have the right to require that the Company repurchase all or any part of such Holder's exchange notes at a repurchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, through the date of repurchase. See "Risk Factors--We May Be Unable to Raise the Funds Necessary to Finance the Change of Control Offer Required by our Indenture." If at the time of such Change of Control the terms of the Bank Indebtedness or other Senior Indebtedness restrict or prohibit the repurchase of exchange notes pursuant to this provision, then before mailing the notice to Holders provided for in the next paragraph below, but in any event within 30 days following any Change of Control, the Company covenants to - repay in full all Bank Indebtedness or such other Senior Indebtedness to the extent required to permit the repurchase of exchange notes pursuant to this provision or - obtain the requisite consent under the agreements governing the Bank Indebtedness or such other Senior Indebtedness to permit the repurchase of the exchange notes as provided for in the next paragraph. 82 Within 30 days following any Change of Control, the Company will send, by first-class mail to each Holder, a notice to each Holder with a copy to the Trustee stating: - that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's exchange notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase; - the purchase date (which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and - the instructions determined by the Company, consistent with this provision, that a Holder must follow in order to have its exchange notes purchased, together with the information contained in the next paragraph (and including any related materials). Holders electing to have a exchange note purchased will be required to surrender the exchange note, with an appropriate form duly completed, to the Company at the address specified in the notice at least five Business Days before the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than three business days prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the exchange note that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such exchange note purchased. On the purchase date, all exchange notes purchased by the Company under this provision will be delivered by the Trustee for cancellation, and the Company will pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. The occurrence of certain of the events that would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events that would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the exchange notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. The Company can give no assurance that sufficient funds will be available when necessary to make any repurchases required in connection with a Change of Control. The Company's failure to purchase the exchange notes in connection with a Change in Control would result in a default under the Indenture that would, in turn, constitute a default under the Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payment to the Holders of the exchange notes. See "Risk Factors--We May Be Unable to Raise the Funds Necessary to Finance the Change of Control Offer Required by our Indenture." The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of exchange notes pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such covenant by virtue thereof. The Company's obligations to repurchase the exchange notes upon a Change of Control will be guaranteed on a senior subordinated basis by the Guarantors pursuant to the Guarantees. The Guarantees will be subordinated to Senior Indebtedness of the Guarantors to the same extent described above under "--Subordination of Guarantees." 83 COVENANTS The Indenture contains covenants including, among others, the following: LIMITATION ON INDEBTEDNESS The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness, unless such Indebtedness is Permitted Indebtedness. LIMITATION ON RESTRICTED PAYMENTS The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (each of which is hereafter referred to as a "Restricted Payment"): - declare or pay any dividend on, or make any distribution in respect of, any Capital Stock of the Company or the Parent Guarantor, as the case may be, except for dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or the Parent Guarantor, as the case may be; - purchase, redeem, retire or acquire for value any Capital Stock of the Company, the Parent Guarantor or any Subsidiary of the Company or the Parent Guarantor (other than a Restricted Subsidiary); - purchase, repurchase, redeem, defease or acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligation; or - make any Investment (other than Permitted Investments) in any Person, if at the time of and after giving effect to the proposed Restricted Payment: - any Default or Event of Default has occurred and is continuing; - the Company could not incur at least $1.00 of additional Indebtedness pursuant to clause (1) of the definition of Permitted Indebtedness; or - the aggregate amount expended or declared for all Restricted Payments after the Issue Date exceeds (without duplication) the sum of (1) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the first day of the fiscal quarter in which the exchange notes are issued to the end of the most recent fiscal quarter ending at least 30 days prior to the date of such Restricted Payment (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit), (2) 100% of the aggregate Net Cash Proceeds plus the Fair Market Value of property other than cash received by the Company from the issuance or sale of its respective Capital Stock (excluding the issuance or sale of Disqualified Stock) subsequent to the Issue Date (other than an issuance or a sale to a Subsidiary of the Company or an employee stock ownership plan or trust), (3) the amount by which Indebtedness of the Company or the Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date, of any Indebtedness of the Company or the Restricted Subsidiaries that is convertible or exchangeable, or is exchanged, for Capital Stock (other than Disqualified Stock) of the Company, (4) an amount equal to the net reduction in Investments resulting from dividends, distributions, repayments of loans or advances or other transfers of assets (to the extent not included in Consolidated Net Income), in each case, to the Company or any Restricted Subsidiary, 84 not to exceed the amount of Investments previously made that were included as Restricted Payments, and (5) 50% of the gain realized by the Company or any Restricted Subsidiary from the cash sale (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company or any Restricted Subsidiary after the issue date of the exchange notes to the extent not included in Consolidated Net Income. The foregoing limitations will not prevent the Company or a Restricted Subsidiary from: (A) paying a dividend on its Capital Stock within 60 days after the declaration thereof, if, on the declaration date, the Company could have paid such dividend in compliance with the Indenture; (B) redeeming, repurchasing, defeasing, acquiring or retiring for value, Subordinated Obligations in exchange for or from proceeds of Refinancing Indebtedness permitted by clause (8) of the definition of Permitted Indebtedness; (C) acquiring, redeeming or retiring Capital Stock or Subordinated Obligations of the Company in exchange for, or in connection with a substantially concurrent issuance of, Capital Stock (other than Disqualified Stock) of the Company; (D) repurchasing or redeeming (or paying a dividend to the Parent Guarantor to enable the Parent Guarantor to purchase or redeem) shares of, or options to purchase shares of, Capital Stock of the Company or the Parent Guarantor or stock appreciation rights from officers, directors and employees (or the heirs of such persons) of the Company, the Parent Guarantor or any Restricted Subsidiary whose employment has terminated or who have died or retired or become disabled or upon the vesting of stock appreciation rights, so long as the aggregate amount of such payments in any fiscal year does not exceed the sum of (1) $2.5 million plus (2) the proceeds of any "key man" life insurance policies purchased by the Company for the specific purpose of making such repurchases or redemptions, it being understood that the cancellation of Indebtedness owed by management to the Company in connection with such repurchase or redemption will not be deemed to be a Restricted Payment; (E) any purchase of Subordinated Obligations from Excess Proceeds remaining after an Offer made pursuant to the "Limitations on Asset Dispositions" covenant below to the extent permitted to be used for general corporate purposes; (F) cash dividends to the Parent Guarantor in amounts equal to (1) the amounts required for the Parent Guarantor to pay any Federal, state or local income taxes to the extent that such income taxes are attributable to the income of the Company and its Subsidiaries, (2) the amounts required for the Parent Guarantor to pay franchise taxes and other fees required to maintain its legal existence, (3) an amount not to exceed $200,000 in any fiscal year to permit the Parent Guarantor to pay corporate overhead expenses incurred in the ordinary course of business, (4) on or about the Issue Date the amount required to enable the Parent Guarantor to repay the 10 1/8% exchange notes and to enable the Parent Guarantor to make the payments due under the Recapitalization Agreement; and (5) reasonable and customary costs and expenses incident to a public offering of the common stock of the Parent Guarantor to the extent that the proceeds therefrom are intended to be contributed to the Company; 85 (G) repurchases of Capital Stock deemed to occur upon the exercise of employee stock options if such Capital Stock is surrendered in lieu of the exercise price thereof; (H) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its equity interests on a pro rata basis; and (I) so long as no Event of Default will have occurred and be continuing, other Restricted Payments not otherwise permitted pursuant to this covenant up to $10.0 million in the aggregate. Proceeds of Capital Stock used to make Restricted Payments described in clause (C) of the immediately preceding paragraph will not increase the amount available for Restricted Payments. The Restricted Payments made pursuant to clauses (B), (C), (D)(2), (E), (F), (G), (H) and (I) of the immediately preceding paragraph will not be included in the calculation of subsequent Restricted Payments. Restricted Payments made pursuant to clauses (A) and (D)(1) of the immediately preceding paragraph will be included in the calculation of subsequent Restricted Payments. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, cause to exist or become effective or enter into any encumbrance or restriction (other than pursuant to law or regulation) on the ability of any Restricted Subsidiary (A) to pay dividends or make any other distributions in respect of its Capital Stock or pay any debt or other obligation owed to the Company or any other Restricted Subsidiary; (B) to make loans or advances to the Company or any other Restricted Subsidiary; or (C) to transfer any of its property or assets to the Company or any other Restricted Subsidiary. Such limitation will not apply (1) with respect to clauses (A), (B) and (C), to encumbrances and restrictions (a) in existence under or by reason of any agreements (not otherwise described in clause (c)) in effect on the Issue Date, (b) relating to Indebtedness of a Restricted Subsidiary and existing at such Restricted Subsidiary at the time it became a Restricted Subsidiary if such encumbrance or restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, (c) pursuant to the Credit Agreement, PROVIDED that such restrictions or encumbrances are not more restrictive with respect to dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the Issue Date, (d) pursuant to the Indenture and the exchange notes, (e) which result from the renewal, refinancing, extension or amendment of an agreement referred to in clauses (1)(a), (b) and (f) and in clauses (2)(a) and (b) PROVIDED, such encumbrances or restrictions, when taken as a whole, are no more restrictive to such Restricted Subsidiary and are not materially less favorable to the Holders than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced, or (f) relating to Refinancing Indebtedness incurred pursuant to the definition of Permitted Indebtedness, and 86 (2) with respect to clause (C) only, to (a) any encumbrance or restriction relating to Indebtedness that is permitted to be Incurred and secured pursuant to the provisions under "--Limitation on Indebtedness" and "--Limitation on Liens" that limits the right of the debtor to dispose of the assets or property securing such Indebtedness, (b) any encumbrance or restriction in connection with an acquisition of property, so long as such encumbrance or restriction relates solely to the property so acquired and was not created in connection with or in anticipation of such acquisition, (c) customary non-assignment and non-transfer provisions in leases, contracts or licenses entered into in the ordinary course of business, (d) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale, (e) Liens permitted pursuant to the provisions of "Limitations on Liens" below and restrictions in the agreements creating such Liens, (f) any agreement or instrument governing Indebtedness of a Foreign Subsidiary now or hereafter outstanding if it constitutes Permitted Indebtedness, and (g) any amendments to any of the foregoing that, when taken as a whole, are not more restrictive than those contained in the agreement being amended. LIMITATION ON ASSET DISPOSITIONS The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless (A) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to such Asset Disposition; (B) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents; PROVIDED, HOWEVER, that any securities or exchange notes received by the Company or such Restricted Subsidiary in connection with such Asset Disposition that are converted by the Company or such Restricted Subsidiary into cash or cash equivalents within 10 business days of the date of such Asset Disposition will be deemed to be cash equivalents; (C) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Disposition complies with clauses (A) and (B); and (D) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary) (1) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness or Senior Indebtedness of the Subsidiary Guarantors (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) or, if the Asset Disposition is made by a Foreign Restricted Subsidiary, Senior Indebtedness of a Foreign Restricted Subsidiary, within 270 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; PROVIDED, HOWEVER that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to this clause (1), the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased; 87 (2) second, to the extent of the balance of Net Available Cash after application in accordance with clause (1), to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by the Company or a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 270 days from the later of such Asset Disposition or the receipt of such Net Available Cash; and (3) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (1) and (2) (which balance should constitute "Excess Proceeds"), to make an Offer (as defined) to purchase exchange notes pursuant to and subject to the conditions of the following paragraph. Pending application of Net Available Cash pursuant to this provision, such Net Available Cash will be invested in Temporary Cash Investments or used to reduce revolving credit borrowings of Senior Indebtedness. The Indenture provides that, when the aggregate amount of Excess Proceeds exceeds $15 million, the Company will apply the Excess Proceeds to the repayment of the exchange notes pursuant to an offer to purchase (an "Offer") from all Holders in accordance with the procedures set forth in the Indenture in the principal amount (expressed as a multiple of $1,000) of exchange notes that may be purchased out of an amount (the "Exchange Note Amount") equal to such Excess Proceeds. The offer price for the exchange notes will be payable in cash in an amount equal to 100% of the principal amount of the exchange notes plus accrued and unpaid interest, if any, to the date (the "Offer Date") such Offer is consummated (the "Offered Price"), in accordance with the procedures set forth in the Indenture. To the extent that the aggregate Offered Price of the exchange notes tendered pursuant to the Offer is less than the Exchange Note Amount relating thereto, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of exchange notes surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee will select the exchange notes to be purchased on a pro rata basis. Upon the completion of the purchase of all the exchange notes tendered pursuant to an Offer, the amount of Excess Proceeds, if any, will be reset at zero. Within 10 days after the Company becomes obligated to make an Offer, the Company will deliver to the Trustee and mail to each Holder a written notice of its Offer to purchase exchange notes in whole or in part (subject to proration as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice will specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and all instructions and materials necessary to tender such exchange notes pursuant to the Offer, together with the information contained in the next following paragraph. Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company will deliver to the Trustee an Officers' Certificate as to - the Offered Price, - the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and - the compliance of such allocation with the provisions of the Indenture. On such date, the Company will also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments an amount equal to the Offered Price to be held for payment in accordance with the provisions of the Indenture. 88 If the terms of any outstanding PARI PASSU Indebtedness require the Company to make a similar offer to purchase to all holders of such PARI PASSU Indebtedness with the proceeds from any Asset Disposition, the Excess Proceeds available to fund an Offer to the Holders of exchange notes will be reduced on a pro rata basis to reflect the Company's offer to purchase obligations under such PARI PASSU Indebtedness. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of exchange notes pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such covenant by virtue thereof. LIMITATION ON TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction or series of related transactions with or for the benefit of any Affiliate, unless (A) the terms of such transaction or series of related transactions are - set forth in writing, and - no less favorable to the Company or such Restricted Subsidiary than those that could reasonably be obtained at such time in a comparable arm's-length transaction with an unrelated third party; (B) with respect to a transaction or series of related transactions involving aggregate payments or value in excess of $3 million, the Board of Directors of the Company (including a majority of the Disinterested Directors thereof) approves such transaction or related series of transactions and, in its good faith judgment, believes that such transaction or series of related transactions complies with clause (A) of this paragraph, as evidenced by a Certified Resolution delivered to the Trustee; and (C) with respect to a transaction or series of related transactions involving aggregate payments or value in excess of $15 million, the Company will, prior to the consummation thereof, obtain a written opinion of a nationally recognized accounting, appraisal or investment banking firm stating that the transaction is fair to the Company or such Restricted Subsidiary from a financial point of view and file the same with the Trustee. The provisions described above will not prohibit - any Restricted Payment permitted to be paid pursuant to "--Limitation on Restricted Payments" above, - any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company (including a majority of the Disinterested Directors thereof), - any transaction pursuant to any agreement in existence on the Issue Date or any amendment or replacement thereof that, taken in its entirety, is no less favorable to the Company than the agreement as in effect on the Issue Date, - loans or advances to employees in the ordinary course of business of the Company, not to exceed $1 million per employee and $3 million in the aggregate, - the payment of indemnities provided for by the Company's charter, by-laws and written agreements and reasonable fees to directors of the Company, the Parent Guarantor and the 89 Restricted Subsidiaries who are not employees of the Company, the Parent Guarantor or the Restricted Subsidiaries, - any transaction between or among the Company and a Restricted Subsidiary or between Restricted Subsidiaries, - the making of payments to Salomon Smith Barney Inc. or its Affiliates for investment banking or other financial services, - fees, compensation, and indemnities under employment arrangements entered into by the Company or its Restricted Subsidiaries in the ordinary course of business, and - issuance of Capital Stock (other than Disqualified Stock) of the Company and the granting of registration rights with respect thereto. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary if - the Subsidiary to be so designated does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary, - the Subsidiary to be so designated is not obligated under any Indebtedness or other obligation that, if in default, would result (with the passage of time or the giving of notice or otherwise) in a default on any Indebtedness of the Company or any Restricted Subsidiary and - either (1) the Subsidiary to be so designated has total assets of $1,000 or less or (2) if such Subsidiary has assets greater than $1,000, such designation would be permitted under "--Certain Covenants--Limitation on Restricted Payments" as a "Restricted Payment." Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or of any Restricted Subsidiary will be classified as a Restricted Subsidiary. Notwithstanding the foregoing sentence, the Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to such designation, - the Company could incur $1.00 of additional Indebtedness pursuant to clause (1) of the definition of "Permitted Indebtedness" and - no Default will have occurred and be continuing. Any such designation by the Board of Directors will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Certified Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing provisions. LIMITATION ON LAYERED INDEBTEDNESS Each of the Company and the Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness that is subordinate in right of payment to any other Indebtedness of the Company, the Parent Guarantor or such Restricted Subsidiary, as the case may be, unless such Indebtedness is subordinate in right of payment to, or ranks PARI PASSU with, the exchange notes in the case of the Company or the Guarantees in the case of the Guarantors. The Guarantors will not, directly or indirectly, Guarantee any Indebtedness of the Company that is subordinated in right of payment to any other Indebtedness of the Company unless such Guarantee is subordinate in right of payment to, or ranks PARI PASSU with, the Guarantees. 90 LIMITATION ON LIENS Each of the Company and the Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Lien of any kind, other than Permitted Liens, on or with respect to any property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom to secure Indebtedness that is subordinate in right of payment to, or ranks PARI PASSU with, in the case of the Company, the exchange notes, or, in the case of the Guarantors, the Guarantees, unless the exchange notes are secured prior to (in the case of any Indebtedness that is subordinated in right of payment), or equally and ratably with (in the case of any Indebtedness that ranks PARI PASSU), the Indebtedness so secured. FUTURE SUBSIDIARY GUARANTORS The Company will cause each Domestic Restricted Subsidiary created or acquired after the Issue Date that has at any time a Fair Market Value of more than $500,000 to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the exchange notes on the same terms and conditions as those set forth in the Indenture; PROVIDED that the aggregate Fair Market Value of Domestic Restricted Subsidiaries that are not Subsidiary Guarantors will not at any time exceed $1.5 million. Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor without rendering such Subsidiary Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Notwithstanding the foregoing, if any Foreign Restricted Subsidiary shall Guarantee any Indebtedness of the Company, the Parent Guarantor or any Domestic Subsidiary while the exchange notes are outstanding, then the Company will cause such Foreign Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which such Foreign Restricted Subsidiary will guarantee payment of the exchange notes on the same terms and conditions as those set forth in the Indenture. COMMISSION REPORTS The Company will file with the Trustee and provide the Holders at the Company's expense, within 15 days after filing them with the Commission, copies of their annual, quarterly and other reports, documents and information that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with the annual, quarterly and other reports, documents and information specified in Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the other provisions of Section 314(a) of the TIA. MERGER, CONSOLIDATION AND SALE OF ASSETS The Company will not, and will not permit any Restricted Subsidiary to, merge or consolidate with or into any other entity or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Restricted Subsidiaries) unless (1) the entity formed by or surviving any such consolidation or merger (if other than the Company or such Restricted Subsidiary) or to which such sale, transfer or conveyance is made (the "Surviving Entity") will be a corporation organized and existing under the laws of the United States of America or any state thereof and such corporation expressly assumes, by supplemental indenture satisfactory to the Trustee, all obligations of the Company or such Restricted Subsidiary, as the case may be, pursuant to the Indenture; 91 (2) immediately before and after giving effect to such transaction or series of transactions on a pro forma basis, no Default or Event of Default (and no event that, after notice or lapse of time, or both, would become an Event of Default) will have occurred and be continuing; (3) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness Incurred or anticipated to be Incurred in connection with such transaction or series of transactions), the Company or the Surviving Entity, as the case may be, would be able to Incur at least $1.00 of additional debt pursuant to clause (1) of the definition of Permitted Indebtedness and (4) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing, no Subsidiary Guarantor will merge or consolidate with or into any other entity or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of its assets (other than to the Company or another Subsidiary Guarantor) unless the Company and its remaining Restricted Subsidiaries are in compliance with the provisions of subclauses (2), (3) and (4) above. The Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company or such Restricted Subsidiary, as the case may be, under the Indenture, but in the case of a lease, the Company or such Restricted Subsidiary, as the case may be, will not be released from the obligation to pay the principal of and interest on the exchange notes. Notwithstanding the foregoing clauses (2), (3) and (4), any Domestic Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any other Domestic Restricted Subsidiary, and any Foreign Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties or assets to (A) any other Foreign Restricted Subsidiary or (B) the Company or any Domestic Restricted Subsidiary, PROVIDED that the surviving company or the transferee entity, as applicable, in such consolidation, merger or transfer is the Company or such Domestic Restricted Subsidiary. EVENTS OF DEFAULT An "Event of Default" occurs if: (1) the Company and the Guarantors default in any payment of interest on any exchange note when the same becomes due and payable, and such default continues for a period of 30 days; (2) the Company and the Guarantors (A) default in the payment of the principal of any exchange note when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise, or (B) fail to redeem or purchase exchange notes when required pursuant to the Indenture or the exchange notes; (3) the Company or any Restricted Subsidiary fails to comply with the provisions of "--Merger, Consolidation and Sale of Assets" above; (4) the Company, the Parent Guarantor or any Restricted Subsidiary, as the case may be, fails to comply with "--Change of Control" above, or the covenants described under "--Limitation on Indebtedness," "--Limitation on Restricted Payments," "--Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries," "--Limitation on Asset Dispositions," "--Limitation on Transactions with Affiliates," "--Limitation on Layered Indebtedness," "--Limitation on Liens" or "--Future Subsidiary Guarantors" in "--Certain Covenants" (other 92 than a failure to purchase exchange notes when required under "--Change of Control" or "--Certain Covenants--Limitation on Asset Dispositions") above and such failure continues for 30 days after the notice specified under "--Acceleration" below; (5) the Company, the Parent Guarantor or any Restricted Subsidiary fails to comply with any of its agreements in the exchange notes, or the Indenture (other than those referred to in (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified under "--Acceleration" below; (6) the principal, any premium or accrued and unpaid interest of Indebtedness of the Company, the Parent Guarantor or any Restricted Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default, the total amount of such Indebtedness unpaid or accelerated exceeds $10 million at the time and such default continues for 10 days; (7) the Company, any Guarantor or any Foreign Significant Subsidiary pursuant to or within the meaning of any bankruptcy law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, any Guarantor or any Foreign Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company, any Guarantor or any Foreign Significant Subsidiary or for any substantial part of the Company's, any Guarantor's or any Foreign Significant Subsidiary's property; or (C) orders the winding up or liquidation of the Company or any Guarantor or any Foreign Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10 million at the time is entered against the Company, the Parent Guarantor or any Restricted Subsidiary and is not discharged and either (A) an enforcement proceeding has been commenced by any creditor upon such judgment or decree or (B) there is a period of 60 days following the entry of such judgment or decree during which such judgment or decree is not discharged, waived or the execution thereof stayed and, in the case of (A) or (B), such default continues for 10 days; or (10) the Parent Guarantee or any Subsidiary Guarantee is held to be unenforceable or invalid or ceases to be in full force and effect. 93 ACCELERATION If an Event of Default (other than an Event of Default specified in clauses (7) or (8) in "Events of Default" above with respect to the Company or any Guarantor) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the exchange notes by notice to the Company and the Trustee, may declare the principal of and accrued interest on all the exchange notes to be due and payable. Upon such a declaration, such principal and interest will be due and payable immediately. If an Event of Default specified in clauses (7) or (8) above with respect to the Company or any Guarantor occurs, the principal of and interest on all the exchange notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate principal amount of the exchange notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission will affect any subsequent Default or impair any right consequent thereto. Except as provided below under "--Rights of Holders to Receive Payment," a Holder may not pursue any remedy with respect to the Indenture or the exchange notes unless: - such Holder gives to the Trustee written notice stating that an Event of Default is continuing; - the Holders of at least 25% in aggregate principal amount of the exchange notes make a written request to the Trustee to pursue the remedy; - such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; - the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and - the Holders of a majority in aggregate principal amount of the exchange notes do not give the Trustee a direction inconsistent with the request during such 60-day period. A Holder may not use the Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. RIGHTS OF HOLDERS TO RECEIVE PAYMENT Notwithstanding any other provision of the Indenture, the right of any Holder to receive payment of principal of and interest on the exchange notes held by such Holder, on or after the respective due dates expressed in the exchange notes, or to bring suit for the enforcement of any such payment on or after such respective dates, will not be impaired or affected without the consent of such Holder. DISCHARGE OF INDENTURE AND DEFEASANCE When (1) the Company delivers to the Trustee all outstanding exchange notes (other than exchange notes replaced because of mutilation, loss, destruction or wrongful taking) for cancellation or (2) all outstanding exchange notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption as described above, and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding exchange notes, including interest thereon, and 94 if in either case the Company pays all other sums payable hereunder by the Company, then the Indenture will, subject to certain surviving provisions, cease to be of further effect. The Trustee will acknowledge satisfaction and discharge of the Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. Subject to conditions to defeasance described below and the survival of certain provisions, the Company at any time may terminate (1) all its obligations under the exchange notes and the Indenture ("legal defeasance option") or (2) its obligations under certain restrictive covenants and the related Events of Default ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the exchange notes may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the exchange notes may not be accelerated because of an Event of Default specified in clause (2) of the immediately preceding paragraph. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (A) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the exchange notes to maturity or redemption, as the case may be; (B) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent certified public accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the exchange notes to maturity or redemption, as the case may be; (C) 91 days pass after the deposit is made and during the 91-day period no Default described in clauses (7) or (8) under "--Events of Default" occurs with respect to the Company which is continuing at the end of the period; (D) no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto; (E) such deposit does not constitute a default under any other agreement or instrument binding on the Company; (F) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (G) in the case of the legal defeasance option, the Company delivers to the Trustee an Opinion of Counsel stating that - the Company has received from the Internal Revenue Service a ruling, or - since the date of the Indenture there has been a change in the applicable Federal income tax law, to the effect, in either case, that, and based thereon such Opinion of Counsel will confirm that, the Holders of the exchange notes will not recognize income, gain or loss for Federal income tax 95 purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same time as would have been the case if such legal defeasance had not occurred; (H) in the case of the covenant defeasance option, the Company delivers to the Trustee an Opinion of Counsel to the effect that the Holders of the exchange notes will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (I) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the exchange notes have been complied with as required by the Indenture. TRANSFER AND EXCHANGE Holders may transfer or exchange notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any exchange note selected for redemption, or any exchange note for a period of 15 days before a selection of exchange notes to be redeemed, or any exchange note for a period of 15 days before an interest payment date. The registered holder of a exchange note may be treated as the owner of it for all purposes. AMENDMENT AND SUPPLEMENT Subject to certain exceptions, the Indenture, the exchange notes, or the Guarantees may be amended or supplemented by the Company or the Guarantors and the Trustee with the consent of the Holders of at least a majority in aggregate principal amount of such then outstanding exchange notes. Without notice to or the consent of any Holder, the Company, the Guarantors and the Trustee may amend the Indenture or the exchange notes, among other things, - to cure any ambiguity, defect or inconsistency; - to provide for the assumption of the Company's or a Guarantor's obligations to Holders by a Surviving Entity; - to provide for uncertificated exchange notes in addition to or in place of certificated exchange notes; or - to make any change that does not adversely affect the rights of any Holder. Without the consent of each Holder affected, the Company may not - reduce the principal amount of exchange notes the Holders of which must consent to an amendment of the Indenture; - reduce the rate or extend the time for payment of interest on any exchange note; - reduce the principal of or extend the fixed maturity of any exchange note; - reduce the premium payable upon the redemption of any exchange note or change the time at which any exchange note may or will be redeemed; - reduce the premium payable upon the repurchase of any exchange note upon a Change of Control; - make any exchange note payable in money other than that stated in the exchange note; 96 - make any change in the provisions concerning waiver of Defaults or Events of Default by Holders of the exchange notes or rights of Holders to receive payment of principal or interest; - make any change in the subordination provisions in the Indenture that affects the rights of any Holder; - release the Company or the Guarantors from their respective obligations under the exchange notes, or the Guarantees (except pursuant to the provisions described above in "--Merger, Consolidation and Sale of Assets"); or - make any change in the exchange notes not otherwise permitted by the Indenture that would adversely affect the rights of any Holder. NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS No director, officer, employee or stockholder, as such, of the Company, the Guarantors or the Trustee (as the case may be) will have any personal liability in respect of the obligations of the Company, the Guarantors or the Trustee (as the case may be) under the exchange notes or the Indenture by reason of his or its status as such. THE TRUSTEE Bank One Trust Company, N.A. is the Trustee under the Indenture. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such of the rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise under the circumstances in the conduct of such Person's own affairs. DEFINITIONS In addition to terms defined elsewhere in this prospectus, set forth below is a summary of specific defined terms used in the Indenture. Reference is made to the Indenture and the Trust Indenture Act for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "10 1/8% EXCHANGE NOTES" means the 10 1/8% senior subordinated exchange notes due 2006 of the Parent Guarantor. "ADDITIONAL ASSETS" means (1) any property or assets (other than Indebtedness and Capital Stock) that are used or intended to be used in a Related Business; (2) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (2) and (3), such Restricted Subsidiary is primarily engaged in a Related Business. "AFFILIATE" of any specified Person means (1) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or 97 (2) any other Person who is a director or officer of such specified Person, of any Subsidiary of such specified Person or of any Person described in clause (1) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the section "Certain Covenants--Limitation on Transactions with Affiliates" only, "Affiliate" also means any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence of the preceding paragraph. "ASSET DISPOSITION" means any direct or indirect sale including a Sale/Leaseback Transaction, lease, transfer, conveyance or other disposition (or series of related sales, Sale/Leaseback Transactions, leases, transfers, conveyances or dispositions) of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company, the Parent Guarantor or any of the Restricted Subsidiaries other than - a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, - a disposition of property or assets at Fair Market Value in the ordinary course of business of the Company or any of the Restricted Subsidiaries, as applicable, - a disposition with a Fair Market Value and a sale price of less than $5 million, - operating leases entered in the ordinary course of business, - for purposes of the provisions of "--Certain Covenants--Limitation on Asset Dispositions" only, a disposition subject to the limitations set forth under "--Certain Covenants--Limitation on Restricted Payments" and - when used with respect to the Company or any Guarantor, any Asset Disposition pursuant to "--Merger, Consolidation and Sale of Assets" which constitutes a disposition of all or substantially all of the Company's or such Guarantor's property. "ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be Incurred in respect of a Sale/ Leaseback Transaction and will be, at the date of determination, the present value (discounted at the actual rate of interest implicit in such transaction, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing - the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock and the amount of such payment by - the sum of all such payments. "BANK INDEBTEDNESS" means any and all amounts payable under or in respect of the Credit Agreement from time to time, whether outstanding on the Issue Date or thereafter incurred, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Guarantor whether or not a claim for 98 post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "BOARD OF DIRECTORS" means, as applicable, the Board of Directors of the Company or the Parent Guarantor, or any committee thereof duly authorized to act on behalf of such Board. "CAPITAL EXPENDITURE INDEBTEDNESS" means Indebtedness issued to finance the purchase or construction of any assets acquired or constructed after the Issue Date - to the extent the purchase or construction prices for such assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP, - if the acquisition or construction of such assets is not part of any acquisition of a person or business unit, and - if such Indebtedness is Incurred within 360 days of the acquisition or completion of construction of such assets. "CAPITALIZED LEASE OBLIGATIONS" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP; and the amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "CAPITAL STOCK" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible or exchangeable into such equity. "CERTIFIED RESOLUTION" means a duly adopted resolution of the Board of Directors in full force and effect at the time of determination and certified as such by the Secretary or an Assistant Secretary of the Company or the Parent Guarantor, as applicable. "CHANGE OF CONTROL" means the occurrence of any of the following events: (A) before the first Public Equity Offering that results in a Public Market, (1) the Permitted Holders cease to be the "beneficial owners" (as defined in Rule 13-3 under the Exchange Act, except that a Person will be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of at least 40% of the total voting power of the Voting Stock of the Company or the Parent Guarantor, whether as a result of the issuance of securities of the Company or the Parent Guarantor, any merger, consolidation, liquidation or dissolution of the Company or the Parent Guarantor, any direct or indirect transfer of securities by the Permitted Holders or otherwise, or (2) any "person" or "group" (as such terms are used in Section 13(d) or Section 14(d) of the Exchange Act or any successor provisions to either of the foregoing, including any group acting for the purpose of acquiring, voting or disposing of securities within the meaning of Rule 13-5(b)(1) under the Exchange Act) becomes the "beneficial owner" (as defined above), directly or indirectly, of more Voting Stock of the Company or the Parent Guarantor than is "beneficially owned" by the Permitted Holders (for purposes of this clause (A) the Permitted Holders will be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation so long as the Permitted Holders beneficially own, directly or indirectly, in the aggregate a majority of the total voting power of the Voting Stock of such parent corporation); 99 (B) on or after the first Public Equity Offering that results in a Public Market, if any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13-5(b)(1) under the Exchange Act, other than one or more Permitted Holders or an underwriter engaged in a firm commitment underwriting in connection with a public offering of the Voting Stock of the Company or the Parent Guarantor, is or becomes the "beneficial owner" (as such term is used in Rules 13-3 and 13-5 under the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company or the Parent Guarantor; (C) the Company or the Parent Guarantor consolidates or merges with or into any other Person, other than a consolidation or merger (1) with a Wholly Owned Subsidiary or a Permitted Holder or (2) pursuant to a transaction in which the outstanding Voting Stock of the Company or the Parent Guarantor is changed into or exchanged for cash, securities or other property with the effect that the outstanding Voting Stock of the Company or the Parent Guarantor is changed into or exchanged for other Voting Stock of the Company, the Parent Guarantor or the surviving corporation, or the beneficial owners of the outstanding Voting Stock of the Company or the Parent Guarantor immediately prior to such transaction, beneficially own, directly or indirectly, more than 50% of the total voting power of the Voting Stock of the surviving corporation immediately following such transaction, (D) the Company, the Parent Guarantor or any of the Restricted Subsidiaries, directly or indirectly, sells, assigns, conveys, transfers, leases, or otherwise disposes of, in one transaction or a series of related transactions, all or substantially all of the property or assets of the Company, the Parent Guarantor and the Restricted Subsidiaries to any Person or group of related Persons (as such term is used in Section 13( ) of the Exchange Act), other than the Company, a Wholly Owned Subsidiary or a Permitted Holder or (E) the stockholders of the Company or the Parent Guarantor will have approved any plan of liquidation or dissolution of the Company or the Parent Guarantor, as the case may be. For purposes of the definition of Change of Control, the collective parties to the Stockholder Agreement, as such may be amended from time to time, shall not constitute a group solely as a result of being parties to the Stockholder Agreement. "COMMISSION" means the Securities and Exchange Commission. "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of - the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 30 days prior to the date of such determination to - Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness (other than revolving credit borrowings made in the ordinary course of business for working capital purposes) since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such 100 period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Restricted Subsidiary will have made any Asset Disposition or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Asset Disposition, the EBITDA for such period will be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period as if such Asset Disposition had occurred on the first day of such period and Consolidated Interest Expense for such period will be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period as if such Asset Disposition had occurred on the first day of such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period as if such Asset Disposition had occurred on the first day of such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) will have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period will be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and (4) if since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period will have made any Asset Disposition or any Investment that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period will be calculated after giving pro forma effect thereto as if such Asset Disposition or Investment occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the pro forma calculations the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, will be determined in good faith by a responsible financial or accounting officer of the Company and as further contemplated by the definition of pro forma. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest expense of the Company and its Restricted Subsidiaries determined in accordance with GAAP, plus, to the extent not included in such interest expense, (1) interest expense attributable to Capital Lease Obligations, 101 (2) amortization of debt discount and debt issuance cost, (3) capitalized interest, (4) non-cash interest expense, (5) accrued interest, (6) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (7) to the extent any Indebtedness of any Person is Guaranteed by the Company or any Restricted Subsidiary, the aggregate amount of interest related to such Guarantee actually paid or required by GAAP to be accrued in the Company's financial statements, (8) net costs associated with Interest Rate Agreements and Currency Exchange Agreements (including, in each case, amortization of fees), (9) the interest portion of any deferred obligation, (10) Preferred Stock Dividends in respect of all Preferred Stock of the Company and its Restricted Subsidiaries and Redeemable Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary, (11) fees payable in connection with financings to the extent not being amortized as contemplated by (2) above, including commitment, availability and similar fees, and (12) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "CONSOLIDATED NET INCOME" means, for any period, the net income (loss) of the Company and its Subsidiaries determined in accordance with GAAP; PROVIDED, HOWEVER, that there will not be included in such Consolidated Net Income (1) any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that subject to the limitations contained in (4) below, the Company's equity in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (3) below), and the Company's equity in a net loss of any such Person (including an Unrestricted Subsidiary) for such period will be included in determining such Consolidated Net Income to the extent funded in cash by the Company, (2) except as required by the pro forma requirements of the definition of "Consolidated Coverage Ratio", any net income (loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition, (3) any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company (other than pursuant to the Credit Agreement) except that subject to the limitations contained in (4) below, the Company's equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation 102 contained in this clause) and the Company's equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income, (4) any gain or loss realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Subsidiaries (including pursuant to any Sale/ Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (5) any extraordinary gain or loss, (6) the cumulative effect of a change in accounting principles, (7) non-cash compensation charges incurred as a result of the issuance of employee stock options or restricted stock for less than fair market value and (8) the non-recurring fees, expenses and other costs incurred in connection with the Transactions that are reflected in the financial statements of the Company in the period the Transactions are consummated. "CREDIT AGREEMENT" means that certain Credit Agreement, dated as of the closing of the recapitalization, as amended, among the Company and the Guarantors and the syndicate of lenders named therein, together with any Guarantees, collateral documents or other instruments or agreements executed in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time and any renewal, extensions, revisions, restructuring, refinancings or replacements thereof (whether with the original agent or agents or lenders or other agents or lenders and whether pursuant to the original credit agreement or another credit or other agreement or indenture). "CURRENCY EXCHANGE AGREEMENT" means, in respect of any Person, any foreign currency swap agreement or other agreement pursuant to which the Company, the Parent Guarantor or any of the Company's Subsidiaries hedge their exposure to foreign currency exchange rates in connection with their business operations. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DESIGNATED SENIOR INDEBTEDNESS" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture and has been designated as "Designated Senior Indebtedness" for purposes of the Indenture in an Officers' Certificate received by the Trustee. "DESIGNATED SENIOR INDEBTEDNESS OF GUARANTORS" means (1) with respect to the Guarantors, the Bank Indebtedness and (2) any other Senior Indebtedness of the Guarantors which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated by the Guarantors in the instrument evidencing or governing such Senior Indebtedness of the Guarantors as "Designated Senior Indebtedness of Guarantors" for purposes of the Indenture and has been designated as "Designated Senior Indebtedness of Guarantors" for purposes of the Indenture in an Officers' Certificate received by the Trustee. "DISINTERESTED DIRECTOR" means a director of the Company other than a director (1) who is an employee of the Company or a Subsidiary of the Company, or (2) who is a party, or who is a director, officer, employee or Affiliate (or is related by blood or marriage to any such Person) of a party, to the transaction in question, and who is, in fact, independent in respect of such transaction. 103 "DISQUALIFIED STOCK" of a Person means Redeemable Stock of such Person as to which the maturity, mandatory redemption, conversion or exchange or redemption at the option of the holder thereof occurs, or may occur, on or prior to the first anniversary of the Stated Maturity of the exchange notes. "DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the Company other than a Foreign Restricted Subsidiary. "DOMESTIC SUBSIDIARY" means any subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" means, for any period, the sum for such period, of Consolidated Net Income plus, to the extent reflected in the income statement of such Person for such period from which Consolidated Net Income is determined, without duplication, - Consolidated Interest Expense, - net provision for plant closing costs, - income tax expense, - depreciation expense, - amortization expense, - any charge related to any premium or penalty paid in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity, and - any other non-cash charges to the extent deducted from or reflected in Consolidated Net Income except for any non-cash charges that represent accruals of, or reserves for, cash disbursements to be made in any future accounting period (less any non-cash items increasing Consolidated Net Income for such period that were not accrued in the ordinary course of business). "FAIR MARKET VALUE" means, with respect to any asset or property, the price which could be negotiated in an arms' length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined, except as otherwise provided, - if such property or asset has a Fair Market Value of less than $3 million, by any Officer of the Company, or - if such property or asset has a Fair Market Value in excess of $3 million, by a majority of the Board of Directors of the Company and evidenced by a Certified Resolution dated within 30 days of the relevant transaction. "FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any state thereof or the District of Columbia. "FOREIGN SIGNIFICANT SUBSIDIARY" means any Foreign Restricted Subsidiary of the Company meeting the standards specified in Rule 1-02(w) of Regulation S-X promulgated by the Commission as in effect on the Issue Date. "FOREIGN SUBSIDIARY" means any Subsidiary of the Company that is not organized under the laws of the United States of America or any state thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in - the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, 104 - statements and pronouncements of the Financial Accounting Standards Board, and - such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture will be computed in conformity with GAAP consistently applied. "GUARANTORS" means the Parent Guarantor and the Subsidiary Guarantors, collectively. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person - to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or - entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" will not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "HOLDER" means the Person in whose name a exchange note is registered on the Registrar's books. "INCUR" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) will be deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary. The terms "Incurred", "Incurrence" and "Incurring" will each have a correlative meaning. "INDEBTEDNESS" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, exchange notes or other similar instruments; (3) all Capitalized Lease Obligations and Attributable Indebtedness of such Person; (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (5) all obligations of such Person in respect of letters of credit, banker's acceptances or other similar instruments or credit transactions (including reimbursement obligations with respect thereto), other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (4) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by such Person of a demand for reimbursement following payment on the letter of credit; 105 (6) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; PROVIDED, HOWEVER, that the amount of such Indebtedness will be the lesser of (a) the fair market value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Persons; (8) all Indebtedness of other Persons to the extent guaranteed by such Person; and (9) to the extent not otherwise included in this definition, net obligations in respect of Interest Rate Agreements and Currency Exchange Agreements. The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "INTEREST RATE AGREEMENT" means, in respect of a Person, any interest rate swap agreement, interest rate option agreement, interest rate cap agreement, interest rate collar agreement, interest rate floor agreement or other similar agreement or arrangement. "INVESTMENT" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable or trade receivables on the balance sheet of such Person) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the covenant described under "--Covenants--Designation of Restricted and Unrestricted Subsidiaries" and the limitations set forth in "--Covenants--Limitation on Restricted Payments," - "Investment" will include the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to the Company's "Investment" in such Subsidiary at the time of such redesignation less the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time that such Subsidiary is so redesignated a Restricted Subsidiary; and - any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of such transfer. In determining the amount of any Investment in respect of any property or assets other than cash, such property or asset will be valued at its Fair Market Value at the time of such Investment (unless otherwise specified in this definition), as determined in good faith by the Board of Directors, whose determination will be evidenced by a Certified Resolution. "ISSUE DATE" means the date on which the notes were issued in the original offering. "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof) or any Sale/Leaseback Transaction. 106 "NET AVAILABLE CASH" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a exchange note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) therefrom, in each case net of - all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, - all payments made on any Indebtedness that is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition, - all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition, and - the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "NET CASH PROCEEDS," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "OFFICER" means the Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer, Senior Vice President, Chief Financial Officer, Treasurer or Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers at least one of whom will be the principal executive officer, principal accounting officer or principal financial officer of the Company. "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be outside counsel to the Company or an employee of or outside counsel to the Trustee. "PARENT GUARANTOR" means U.S. Can Corporation, the Company's sole stockholder and parent corporation. "PARI PASSU," as applied to the ranking of any Indebtedness of a Person in relation to other Indebtedness of such Person, means that each such Indebtedness either (1) is not subordinate in right of payment to any Indebtedness or (2) is subordinate in right of payment to the same Indebtedness as is the other, and is so subordinate to the same extent, and is not subordinate in right of payment to each other or to any Indebtedness as to which the other is not so subordinate. "PERMITTED HOLDER" means Berkshire Partners LLC (and its Affiliates) or any Person of which the foregoing "beneficially owns" (as defined in Rules 13-3 and 13-5 under the Exchange Act) voting securities representing at least 75% of the total voting power of all classes of Capital Stock of such Person (exclusive of any matters as to which class voting rights exist). "PERMITTED INDEBTEDNESS" is defined to include: (1) Indebtedness Incurred if, after giving pro forma effect to the Incurrence and application of the proceeds thereof, the Consolidated Coverage Ratio exceeds 2.0 to 1.0; 107 (2) Indebtedness Incurred pursuant to the Credit Agreement in an amount outstanding at any time not to exceed $400 million (reduced by any required permanent repayments of the principal amount of Indebtedness under the Credit Agreement with the proceeds of Asset Dispositions that are accompanied by a corresponding permanent commitment reduction thereunder); (3) Capital Expenditure Indebtedness incurred in an aggregate principal amount not to exceed $15 million in any fiscal year of the Company; (4) Indebtedness under Interest Rate Agreements and Currency Exchange Agreements, entered into for the purpose of limiting interest rate or foreign exchange risk, as the case may be, provided that the obligations under Interest Rate Agreements are related to payment obligations on Permitted Indebtedness and provided further that obligations under Currency Exchange Agreements are entered into in connection with foreign business transactions in the ordinary course of business; (5) Indebtedness of the Company to any Restricted Subsidiary or of any Restricted Subsidiary to the Company or any other Restricted Subsidiary for so long as such Indebtedness is held by the Company or such Restricted Subsidiary, in each case subject to no Lien held by a Person other than the Company or a Restricted Subsidiary; PROVIDED that if as of any date any Person other than the Company or a Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date will be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness (under any clause other than clause (1) of the definition thereof) by the issuer of such Indebtedness; (6) Indebtedness evidenced by the Initial Notes and the Guarantees not to exceed the $175 million initially outstanding on the Issue Date; (7) Indebtedness outstanding immediately after the issuance of the Initial Notes and the application of the proceeds thereof reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (8) Refinancing Indebtedness incurred with respect to Indebtedness referred to in clauses (1), (3), (6), (7) and (13) of this paragraph; (9) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims and letters of credit and bankers acceptances for the purchase of inventory and other goods; (10) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, or other similar obligations (exclusive of any Guarantee of Indebtedness of the purchaser in such transaction), in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, provided that the maximum assumable liability in respect of all such Indebtedness will at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (11) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (12) Indebtedness of Foreign Subsidiaries not borrowed under the Credit Agreement in an amount outstanding at any time not to exceed $75 million, including any guarantees thereof by the 108 Company, PROVIDED, HOWEVER, that the amount of Indebtedness of Foreign Subsidiaries outstanding at any particular time under this clause (12) shall reduce on a dollar-for-dollar basis both the amount that may be borrowed at that time under the Credit Agreement referred to in clause (2) of this paragraph and under the sub-facility available to Foreign Subsidiaries under said Credit Agreement; (13) Indebtedness in an amount not to exceed $7 million that is incurred or assumed by the Company or a Subsidiary in connection with its acquisition of the majority interest in the Company's Formametal S.A. joint venture in Argentina; and (14) Indebtedness not otherwise permitted to be incurred pursuant to the covenant described under "--Limitation on Indebtedness" in an aggregate principal amount not to exceed at any one time outstanding $15 million. "PERMITTED INVESTMENT" means an Investment by the Company or any Restricted Subsidiary in - a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a Related Business; - another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is a Related Business; - Temporary Cash Investments; - receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; - payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; - loans or advances to employees made in the ordinary course of business of the Company or such Restricted Subsidiary, as the case may be, not to exceed $1 million per employee and $3 million in the aggregate; - stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; - Investments in foreign joint ventures in an aggregate amount not to exceed $5 million; and - any securities received or other Investments made as a result of the receipt of non-cash consideration received in connection with an Asset Disposition that was made pursuant to and in compliance with the provisions of the covenant described under the caption "--Limitation on Asset Disposition" or in connection with any other disposition of assets not constituting an Asset Disposition. "PERMITTED LIENS" means, with respect to any Person, (1) pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or 109 deposits and other Liens as security for taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (2) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings, or other Liens arising out of judgments or awards against such Person with respect to which such Person will then be prosecuting an appeal or other proceedings for review; (3) Liens for property taxes not yet delinquent or which are being contested in good faith by appropriate proceedings; (4) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (5) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (6) Liens existing on the Issue Date; (7) Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; PROVIDED, HOWEVER, that any such Lien may not extend to any other property owned by the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED FURTHER that such Liens are not Incurred in anticipation of or in connection with the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary; (8) Liens on property at the time the Company, the Parent Guarantor or a Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED, HOWEVER, that any such Lien may not extend to any other property owned by the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED FURTHER that such Liens are not Incurred in anticipation of or in connection with the acquisition of such property; (9) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7) and (8); PROVIDED, HOWEVER, that - such new Lien will be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and - the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of - the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7) and (8) at the time the original Lien became a Permitted Lien under the Indenture, and - an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; (10) Liens securing Senior Indebtedness that the Company or its Restricted Subsidiaries are permitted to incur under the Indenture, including Capital Expenditure Indebtedness; 110 (11) Liens in favor of the Company or the Guarantors; (12) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances and letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods incurred in the ordinary course of business; (13) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off incurred in the ordinary course of business; (14) Leases or subleases granted to others and entered into in the ordinary course of business; and (15) Liens to secure the performance of statutory obligations and Liens imposed by law, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "PREFERRED STOCK DIVIDENDS" means all dividends with respect to Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Subsidiary. The amount of any such dividend will be equal to the quotient of such dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Preferred Stock. "PRINCIPAL" of a exchange note means the principal of the exchange note plus the premium, if any, payable on the exchange note which is due or overdue or is to become due at the relevant time. "PRO FORMA" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation in accordance with Article 11 of Regulation S-X promulgated under the Securities Act (to the extent applicable). "PUBLIC EQUITY OFFERING" has the meaning set forth under "--Optional Redemption upon Public Equity Offerings." "PUBLIC MARKET" means any time after (1) a Public Equity Offering has been consummated and (2) at least 10.0% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "REDEEMABLE STOCK" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event - matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, - is convertible or exchangeable for Indebtedness or Disqualified Stock or - is redeemable at the option of the holder thereof, in whole or in part. 111 "REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" will have a correlative meaning) any Indebtedness existing on the date of the Indenture or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that - the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced, - the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, - such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, and - if the Indebtedness of the Company or a Restricted Subsidiary being refinanced is subordinated to other Indebtedness of the Company or a Restricted Subsidiary in any respect, such Refinancing Indebtedness is subordinated at least to the same extent; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness will not include - Indebtedness of a Subsidiary that refinances Indebtedness of the Company, or - Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "RELATED BUSINESS" means any business related, or complementary (as determined in good faith by the Board of Directors), to the business of the Company and the Restricted Subsidiaries on the Issue Date. "REPRESENTATIVE" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "RESTRICTED INVESTMENT" means any Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" means - U.S.C. Europe N.V., - U.S.C. Europe Netherlands B.V., - U.S.C. Holding U.K. Ltd., - U.K. Can Ltd., - U.S.C. Europe U.K. Ltd., - U.S.C. Europe Italia, S.r.l., - U.S.C. France Holding, S.A.S., - USC Aerosols France, S.A.S., - USC May Verpackungen Holding Inc., - U.S.C. Aerosoldosen Deutschland GmbH, 112 - U.S.C. Can Espana Holding SCpA, - U.S.C. Europe Espana SA, - May Verpackungen GmbH & Co. KG, - Wilhelm Wessel Nachfl. GmbH & Co. KG, - May Verpackungen Verwaltung GmbH, - May Can Company GmbH, - Wessel Emballagen GmbH, - any other direct or indirect Subsidiary of the Company that is not designated by the Board of Directors to be an Unrestricted Subsidiary, and - an Unrestricted Subsidiary that is redesignated as a Restricted Subsidiary as permitted pursuant to the definition of "Unrestricted Subsidiary." "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now owned or hereafter acquired whereby the Company, the Parent Guarantor or a Restricted Subsidiary transfers such property to a Person and the Company, the Parent Guarantor or a Restricted Subsidiary leases it from such Person. "SENIOR INDEBTEDNESS" means - all monetary obligations under the Credit Agreement, including without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities under the Credit Agreement, and - all Indebtedness of the Company including interest thereon, whether outstanding on the date of the Indenture or thereafter issued, created or incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the exchange notes; PROVIDED, HOWEVER, that Senior Indebtedness will not include - any obligation of the Company to any Subsidiary, - any liability for federal, state, local, foreign or other taxes owed or owing by the Company, - any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), - any Indebtedness, Guarantee or obligation of the Company which is subordinate or junior in any respect to any other Indebtedness, Guarantee or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, - any obligations with respect to any Capital Stock, or - any Indebtedness Incurred in violation of the Indenture. "SENIOR INDEBTEDNESS OF THE GUARANTORS" means all Indebtedness of the Guarantors including interest thereon, whether outstanding on the date of the Indenture or thereafter issued, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Guarantees, PROVIDED, HOWEVER, that Senior Indebtedness of the Guarantors will not include - any obligation of the Guarantors to any Subsidiary, - any liability for federal, state, local, foreign or other taxes owed or owing by the Guarantors, 113 - any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), - any Indebtedness, Guarantee or obligation of the Guarantors that is subordinate or junior in any respect to any other Indebtedness, Guarantee or obligation of the Guarantors, including Senior Subordinated Indebtedness of Guarantors and any Subordinated Obligations, - any obligations with respect to any Capital Stock, or - any Indebtedness Incurred in violation of the Indenture. "SENIOR SUBORDINATED INDEBTEDNESS" means the exchange notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank PARI PASSU with the exchange notes and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "SENIOR SUBORDINATED INDEBTEDNESS OF THE GUARANTORS" means (1) the Guarantees and (2) any other Indebtedness of the Guarantors that specifically provides that such Indebtedness is to rank PARI PASSU with the Guarantees and is not subordinated by its terms to any Indebtedness or other obligation of the Guarantors which is not Senior Indebtedness of the Guarantors. "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "STOCKHOLDER AGREEMENT" means that certain Stockholder Agreement by and among the common equity stockholders of the Parent Guarantor, including the Permitted Holders, certain management investors and the other Persons listed therein, as in effect on the date of the Indenture. "SUBORDINATED OBLIGATION" means - any Indebtedness of the Company (whether outstanding on the date of the Indenture or thereafter Incurred) which is subordinate or junior in right of payment to the exchange notes, - any Indebtedness of the Guarantors (whether outstanding on the date of the Indenture or thereafter Incurred) which is subordinate or junior in right of payment to the Guarantees or - any Disqualified Stock of the Company or the Guarantors. "SUBSIDIARY" OR "SUBSIDIARY" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, - in the case of a corporation, of which at least 50% of the total voting power of the Voting Stock is held by such first-named Person or any of its Subsidiaries and such first-named Person or any of its Subsidiaries has the power to direct the management, policies and affairs thereof; or - in the case of a partnership, joint venture, association, or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "SUBSIDIARY GUARANTORS" means (1) USC May Verpackungen Holding Inc. and (2) each Domestic Restricted Subsidiary that in the future executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor, PROVIDED that any Person 114 constituting a Subsidiary Guarantor as described above will cease to constitute a Subsidiary Guarantor when its respective Subsidiary Guarantee is released in accordance with the terms of the Indenture. "TEMPORARY CASH INVESTMENTS" means any of the following: (1) investments in U.S. Government Obligations maturing within one year of the date of acquisition thereof, (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition thereof, issued by a bank or trust company which is organized under the laws of the United States of America or any state thereof having capital, surplus and undivided profits aggregating in excess of $500 million and whose long-term debt (or that of its parent) is rated "A-3" or A- or higher according to Moody's Investors Service, Inc. or Standard and Poor's (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), (3) repurchase obligations with a term of not more than 7 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above, (4) investments in commercial paper, maturing not more than six months after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's, and (5) mutual funds whose assets consist primarily of Investments of the type described in clauses (1) through (4) above. "TRADE PAYABLES" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person arising in the ordinary course of business of such Person in connection with the acquisition of goods or services. "TRANSACTIONS" means the recapitalization of the Company and the Parent Guarantor pursuant to which Pac Packaging Acquisition Corporation was merged with and into the Parent Guarantor and the financing transactions of the Company and the Parent Guarantor related thereto. "TRUSTEE" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and, thereafter, means such successor. "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time. "UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary of the Company that at the time of determination will be designated an Unrestricted Subsidiary by the Board of Directors as permitted or required pursuant to the covenant described under "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries" and not thereafter redesignated as a Restricted Subsidiary as permitted pursuant thereto and (2) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "VOTING STOCK" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors. "WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary of the Company, all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 115 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We originally sold the notes on October 4, 2000 to Salomon Smith Barney and Banc of America Securities LLC (the "Initial Purchasers") pursuant to a purchase agreement dated September 26, 2000. The Initial Purchasers subsequently resold the notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to a limited number of persons outside the United States under Regulation S. As a condition to the purchase agreement, we entered into a registration rights agreement with the Initial Purchasers in which we agreed to: (1) file a registration statement registering the exchange notes with the Commission within 120 days after the original issuance of the notes, and (2) use our best efforts to have the registration statement relating to the exchange notes declared effective by the Commission within 150 days after the original issuance of the notes. We have agreed to keep the exchange offer open for not less than 30 business days (or longer if required by applicable law) after the date on which notice of the exchange offer is mailed to note holders. This prospectus covers the offer and sale of the exchange notes pursuant to the exchange offer and the resale of exchange notes received in the exchange offer by any broker-dealer who held notes, other than notes purchased directly from us or one of our affiliates. For each note surrendered to us pursuant to the exchange offer, the holder of the surrendered note will receive an exchange note having a principal amount equal to that of the surrendered note. Interest on each exchange note will accrue from the last date on which interest was paid on the surrendered note or, if no interest has been paid, from the date of original issuance of the surrendered note. Under existing Commission interpretations, the exchange notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the exchange notes represents that it is acquiring the exchange notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the exchange notes and that it is not one of our affiliates, as such terms are interpreted by the Commission. If our belief is inaccurate, holders who transfer exchange notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration may incur liability under the Securities Act. We do not assume or indemnify holders against such liability. Broker-dealers ("Participating Broker-Dealers") receiving exchange notes in the exchange offer will have a prospectus delivery requirement with respect to resales of such exchange notes. While the Commission has not taken a position with respect to this particular transaction, under existing Commission interpretations relating to transactions structured substantially like the exchange offer, Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to exchange notes (other than a resale of an unsold allotment from the original sale of the notes) with the prospectus contained in the registration statement relating to the exchange offer. Under the registration agreement, we are required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the registration statement relating to the exchange offer in connection with the resale of such exchange notes. A holder of notes (other than certain specified holders) tendering notes in the exchange offer is required to represent that: - any exchange notes to be received by it will be acquired in the ordinary course of business; 116 - the holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes; and - it is not one of our "affiliates" as defined in Rule 405 of the Securities Act or, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent practicable. If a holder is a broker-dealer that will receive exchange notes for its own account in exchange for notes that were acquired as a result of market-making or other trading activities, the holder will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. In the event that - applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer, - for any other reason, we do not consummate the exchange offer within 180 days after issuance of the original notes, - the Initial Purchasers so request with respect to notes not eligible to be exchanged for exchange notes in the exchange offer, - any holder of notes is not eligible to participate in the exchange offer, or - an Initial Purchaser does not receive freely tradable exchange notes in exchange for notes constituting any portion of an unsold allotment (unless current interpretations by the Commission's staff permit the filing in lieu of a shelf registration statement of a post-effective amendment to the registration statement relating to the exchange offer), we will, at our cost, - as promptly as practicable, file a shelf registration statement covering resales of the notes or the exchange notes, as the case may be, - use our best efforts to cause the shelf registration statement to be declared effective under the Securities Act and - keep the shelf registration statement effective until two years after its effective date (or until one year after the effective date if the registration statement is filed at the request of an Initial Purchaser). An Initial Purchaser or holder of a note is ineligible to participate in the exchange offer if such Initial Purchaser or holder cannot execute the letter of transmittal because it is unable to make the required representations therein. We will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom the shelf registration statement was filed copies of the prospectus that is a part of the shelf registration statement, notify each holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the notes or the exchange notes, as the case may be. A holder selling notes or exchange notes pursuant to the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration agreement that are applicable to such holder (including certain indemnification obligations). In the event that - within 120 days after the issuance of the original notes, neither the registration statement relating to the exchange offer nor the shelf registration statement has been filed with the Commission, 117 - within 150 days after the issuance of the original notes, the registration statement relating to the exchange offer has not been declared effective. - within 180 days after the issuance of the original notes, neither the exchange offer has been consummated nor the shelf registration statement has been declared effective, or - after either the registration statement relating to the exchange offer or the shelf registration statement has been declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with resales of notes or exchange notes in accordance with and during the periods specified in the registration agreement (each such event a "Registration Default"), additional interest will accrue on the notes and the exchange notes (in addition to the stated interest on the notes and the exchange notes) from and including the date on which any such Registration Default has occurred to but excluding the date on which all Registration Defaults have been cured. The additional interest will accrue at a rate of 0.50% per annum during the 90-day period immediately following the occurrence of any Registration Default and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no effect will such rate exceed 1.00% per annum in the aggregate, regardless of the number of Registration Defaults. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, we will accept all notes validly tendered prior to 5:00 p.m., New York City time, on the expiration date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their notes pursuant to the exchange offer in integral multiples of $1,000. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes except for the following: (1) the exchange notes bear a Series B designation and different CUSIP number from the notes; (2) the exchange notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer; and (3) the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions providing for liquidated damages in certain circumstances relating to the timing of the exchange offer, all of which rights will terminate when the exchange offer is terminated. The exchange notes will evidence the same debt as the notes and will be entitled to the benefits of the indenture. As of the date of this prospectus, $175.0 million aggregate principal amount of the notes is outstanding. Solely for reasons of administration and no other reason, we have fixed the close of business on as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. Only a registered holder of notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the indenture may participate in the exchange offer. There will be no fixed record date, however, for determining registered holders of the notes entitled to participate in the exchange offer. The holders of notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the indenture. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission. We shall be deemed to have accepted validly tendered notes when, as and if the holder of such note has given oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. 118 If any tendered notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth in this prospectus or otherwise, the certificates for any such unaccepted notes will be returned, without expense, to the tendering holder as promptly as practicable after the expiration date. Those holders who tender notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of notes. We will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "--Fees and Expenses." EXPIRATION DATES; EXTENSIONS; AMENDMENTS The "expiration date" will be 5:00 p.m., New York City time, on , unless we, in our sole discretion, extend the exchange offer, in which case the expiration date will be the latest date to which the exchange offer is extended. Notwithstanding the foregoing, we will not extend the expiration date beyond . We have no current plans to extend the exchange offer. In order to extend the expiration date, we will notify the exchange agent of any extension by oral or written notice and will make a public announcement of such extension, in each case prior to 9:00 a.m., New York City time, no later than the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion, to (1) delay accepting any notes; (2) extend the exchange offer; or (3) terminate the exchange offer if any of the conditions set forth below under "--Conditions of the Exchange Offer" shall not have been satisfied, in each case by giving oral or written notice of such delay, extension or termination to the exchange agent, and to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement of such event. If we amend the exchange offer in a manner determined by us to constitute a material change, we will promptly disclose the amendment by means of a prospectus supplement that will be distributed to the registered holders of the notes, and the exchange offer will be extended for a period of five to ten business days, as required by law, depending upon the significance of the amendment and the manner of disclosure to the registered holders, assuming the exchange offer would otherwise expire during such five to ten business day period. Without limiting the manner in which we may choose to make public announcement of any delay, extension, termination or amendment of the exchange offer, we will not have an obligation to publish, advertise, or otherwise communicate any such public announcement other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from their date of issuance. Interest is payable semiannually on April 1 and October 1 of each year, commencing on April 1, 2001, at the rate of 12 3/8% per annum. Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders who exchange their notes for exchange notes will receive the same interest payment on April 1, 2001 that they would have received had they not accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. 119 PROCEDURES FOR TENDERING Only a registered holder of notes may tender such notes in the exchange offer. To effectively tender in the exchange offer, a holder must complete, sign and date a copy or facsimile of the letter of transmittal, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile, together with the notes and any other required documents, to the exchange agent at the address set forth below under "Exchange Agent" for receipt on or prior to the expiration date. Delivery of the notes also may be made by book-entry transfer in accordance with the procedures described below. If you are effecting delivery by book-entry transfer, (1) confirmation of such book-entry transfer must be received by the exchange agent prior to the expiration date; and (2) you must transmit to the exchange agent on or prior to the expiration date a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company ("DTC") in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of the confirmation of book-entry transfer. By executing the letter of transmittal or effecting delivery by book-entry transfer, each holder is making to us those representations set forth under the heading "--Resale of the Exchange Notes." The tender by a holder of notes will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. The method of delivery of the notes and the letter of transmittal and all other required documents to the exchange agent is at the election and sole risk of the holder. As an alternative to delivery by mail, holders may wish to consider overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the exchange agent on or prior to the expiration date. You should not send any letters of transmittal or notes to us. Holders may request that their respective brokers, dealers, commercial banks, trust companies or nominees effect the above transactions for such holders. The term "holder" with respect to the exchange offer means any person in whose name notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose notes are held of record by DTC who desires to deliver such notes by book-entry transfer at DTC. If your notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender, you should promptly contact the person in whose name the notes are registered and instruct such registered holder to tender on your behalf. If a beneficial owner wishes to tender on his or her own behalf, the holder must, prior to completing and executing the letter of transmittal and delivering the notes, either make appropriate arrangements to register ownership of the notes in his or her name or to obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (defined below) unless the notes are tendered: (1) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or (2) for the account of an Eligible Institution. If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed, such guarantee must be by a participant in a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). 120 If the letter of transmittal is signed by a person other than the registered holder of any notes listed therein, such notes must be endorsed or accompanied by properly completed bond powers, signed by such registered holder as such registered holder's name appears on such notes with the signature thereon guaranteed by an Eligible Institution. If the letter of transmittal or any notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and submit with the letter of transmittal evidence satisfactory to so act. We understand that the exchange agent will make a request, promptly after the date of this prospectus, to establish accounts with respect to the notes at the book-entry transfer facility of DTC for the purpose of facilitating this exchange offer, and subject to the establishment of these accounts, any financial institution that is a participant in the book-entry transfer facility system may make book-entry delivery of notes by causing the transfer of such notes into the exchange agent's account with respect to the notes in accordance with DTC's procedures for such transfer. Although delivery of the notes may be effected through book-entry transfer into the exchange agent's account at the book-entry transfer facility, unless the holder complies with the procedures described in the following paragraph or the guaranteed delivery procedures described below, an appropriate letter of transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the exchange agent at its address set forth below before the expiration date. The delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent. The exchange agent and DTC have confirmed that the exchange offer is eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer notes to the exchange agent in accordance with the procedures for transfer established under ATOP. DTC will then send an Agent's Message to the exchange agent. The term "Agent's Message" means a message transmitted by DTC that, when received by the exchange agent, forms part of the confirmation of a book-entry transfer and that states that DTC has received an express acknowledgment from the DTC participant that such participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce such agreement against such participant. In the case of an Agent's Message relating to guaranteed delivery, the term means a message transmitted by DTC and received by the exchange agent that states that DTC has received an express acknowledgment from the DTC participant that such participant has received and agrees to be bound by the Notice of Guaranteed Delivery. We will determine all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered notes in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all notes not validly tendered or any notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects, irregularities or conditions of tender as to particular notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to the tender of notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give such notification. Tenders of notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any notes received by the exchange agent that are not validly tendered and as to which the defects or irregularities have not been cured or waived, or if notes are submitted in a principal amount greater than the principal amount of notes being tendered by such tendering holder, such unaccepted or non-exchanged notes will be returned by the exchange agent to the tendering holders (or, in the case of notes tendered by book-entry transfer into the exchange agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such unaccepted or non-exchanged notes will be credited to an account maintained with such book-entry 121 transfer facility), unless otherwise provided in the letter of transmittal designated for such notes, as soon as practicable following the expiration date. GUARANTEED DELIVERY PROCEDURES Those holders who wish to tender their notes and (1) whose notes are not immediately available; or (2) who cannot deliver their notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date; or (3) who cannot complete the procedures for book-entry transfer before the expiration date; may effect a tender if: (1) the tender is made through an Eligible Institution; (2) before the expiration date, the exchange agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number or numbers of such notes and the principal amount of notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the expiration date, either (a) that a copy or facsimile of the letter of transmittal, together with the certificate(s) representing the notes and any other documents required by the letter of transmittal, will be deposited by the Eligible Institution with the exchange agent or (b) that a confirmation of book-entry transfer of such notes into the exchange agent's account at DTC, will be delivered to the exchange agent; and (3) either (a) a copy or facsimile of such properly completed and executed letter of transmittal, together with the certificate(s) representing all tendered notes in proper form for transfer and all other documents required by the letter of transmittal, or (b) if applicable, confirmation of a book-entry transfer into the exchange agent's account at DTC, are actually received by the exchange agent within five business days after the expiration date. Upon request, the exchange agent will send a Notice of Guaranteed Delivery to holders who wish to tender their notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of notes may be withdrawn at any time on or prior to the expiration date. To validly withdraw a tender of notes in the exchange offer, the exchange agent must receive a telegram, telex, letter or facsimile transmission notice of withdrawal at its address set forth herein on or prior to the expiration date. Any such notice of withdrawal must: (1) specify the name of the person having deposited the notes to be withdrawn (the "Depositor"); (2) identify the notes to be withdrawn, including the certificate number or numbers and the aggregate principal amount of such notes or, in the case of notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which such notes were tendered, including any required signature guarantees, or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the notes to register the transfer of such notes into the name of the person withdrawing the tender; and 122 (4) specify the name in which any such notes are to be registered, if different from the name of the Depositor. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices in our sole discretion, and our determination will be final and binding. Any notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no exchange notes will be issued in exchange for withdrawn notes unless those notes are validly retendered. Any notes that have been tendered but that are not accepted for exchange because of the rejection of the tender due to uncured defects or the prior termination of the exchange offer, or which have been validly withdrawn, will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the expiration date. CONDITIONS OF THE EXCHANGE OFFER The offer is subject to the condition that the exchange offer, or the making of any exchange by a holder, does not violate applicable law or any applicable interpretation of the staff of the Commission. If there has been a change in policy of the Commission such that, in the reasonable opinion of our counsel, there is a substantial question whether the exchange offer is permitted by applicable federal law, we have agreed to seek a no-action letter or other favorable decision from the Commission allowing us to consummate the exchange offer. If we determine that the exchange offer is not permitted by applicable federal law, we may terminate the exchange offer. In connection with any termination we may: (1) refuse to accept any notes and return any notes that have been tendered by the holders thereof; (2) extend the exchange offer and retain all notes tendered prior to the expiration date, subject to the rights of the holders of tendered notes to withdraw their tendered notes; or (3) waive the termination event with respect to the exchange offer and accept all properly tendered notes that have not been properly withdrawn. If the waiver of a termination event constitutes a material change in the exchange offer, we will disclose the change by means of a supplement to this prospectus that will be distributed to each registered holder of notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver, if the exchange offer would otherwise expire during such period. EXCHANGE AGENT Bank One Trust Company, N.A., the Trustee under the indenture, has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the Notice of Guaranteed Delivery should be directed to the exchange agent addressed as follows: By Hand Delivery, Overnight Courier, or Registered or Certified Mail: Bank One Trust Company, N.A. One North State Street, 9th Floor Chicago, Illinois 60602 Attention: Exchanges Facsimile: (312) 407-2088 Any requests or deliveries to an address or facsimile number other than as set forth above will not constitute a valid delivery. 123 FEES AND EXPENSES We will bear the expenses of soliciting tenders. We are making the principal solicitation by mail, but our officers, employees and affiliates may make additional solicitations in person, by telegraph or telephone. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will pay the exchange agent, however, reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with the exchange offer. We will pay the cash expenses incurred in connection with the exchange offer. Such expenses include fees and expenses of the exchange agent and the Trustee, accounting and legal fees and printing costs, among others. We will pay all transfer taxes, if any, applicable to the exchange of the notes in the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the notes in the exchange offer, then the amount of any such transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of or exemption from such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the notes, which is face value, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The costs of the exchange offer will be amortized over the term of the exchange notes. CONSEQUENCES OF FAILURE TO EXCHANGE The notes that are not exchanged for exchange notes in the exchange offer will remain restricted securities. Accordingly, those notes may be resold only as follows: (1) to us, upon redemption or otherwise; (2) (a) so long as the notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (b) in accordance with Rule 144 under the Securities Act, or (c) pursuant to another exemption from the registration requirements of the Securities Act and based upon an opinion of counsel reasonably acceptable to us; (3) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act; or (4) pursuant to an effective registration statement under the Securities Act. Persons who acquire the exchange notes are responsible for compliance with the state securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. 124 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of certain United States federal income tax consequences relevant to the acquisition, ownership and disposition of the exchange notes by the beneficial owners thereof who exchange the outstanding notes therefor ("Holders"). This discussion is limited to the tax consequences to the initial Holders of exchange notes and does not address the tax consequences to subsequent purchasers of exchange notes. This summary does not purport to be a complete analysis of all of the potential United States federal income tax consequences relating to the acquisition, ownership and disposition of the exchange notes, nor does this summary describe any federal estate tax consequences (except with respect to Foreign Holders (as defined below)). There can be no assurance that the Internal Revenue Service ("IRS") will take a similar view of the tax consequences described herein. Furthermore, this discussion does not address all aspects of taxation that might be relevant to particular Holders in light of their individual circumstances or to Holders who are subject to special treatment under United States federal tax law or to certain types of Holders (including dealers in securities, insurance companies, financial institutions, tax-exempt entities and, except to the extent discussed below, Foreign Holders (as defined below)). This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect as of the date hereof and all of which are subject to change (possibly on a retroactive basis). The discussion below assumes that the exchange notes are held as capital assets (generally, property held for investment) within the meaning of Code Section 1221. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT SUCH INVESTOR'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF A PURCHASE OF EXCHANGE NOTES IN LIGHT OF SUCH INVESTOR'S PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF THE CODE, AS WELL AS STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. TAX CONSEQUENCES TO UNITED STATES HOLDERS The following summary is a general description of certain United States federal income tax consequences applicable to a "United States Holder." For the purpose of this discussion, a "United States Holder" means a Holder that is for United States federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust, and (b) one or more United States persons have the authority to control all substantial decisions of the trust. TAXATION OF INTEREST Interest paid on an exchange note will generally be taxable to you as ordinary interest income at the time the interest accrues or is received in accordance with your method of accounting for United States federal income tax purposes. ADDITIONAL PAYMENTS We intend to take the position for United States federal income tax purposes that any additional payments as a result of a redemption pursuant to a change of control should be taxable to you as additional interest income when received or accrued, in accordance with your method of tax accounting. This position is based in part on the assumption that as of the date of issuance of the exchange notes, the possibility that additional payments will have to be paid is a "remote" or 125 "incidental" contingency within the meaning of applicable Treasury regulations. Our determination that such possibility is a remote or incidental contingency is binding on you, unless you explicitly disclose to the IRS, on your return for the year during which the exchange note is acquired, that you are taking a different position. Regardless of our position, however, the IRS may take the contrary position that the payment of additional payments is not a remote or incidental contingency. Such a contrary position could affect the timing and character of both your income from the exchange notes and our deduction with respect to payments of additional payments. SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF THE EXCHANGE NOTES: GENERAL In general, upon the sale, exchange, redemption or retirement of an exchange note, you will recognize capital gain or loss equal to the difference between the amount realized on such sale, exchange, redemption or retirement (not including any amount attributable to accrued but unpaid interest that you have not already included in gross income) and your adjusted tax basis in the exchange note. To the extent attributable to accrued but unpaid interest that you have not already included in gross income, the amount recognized by you will be treated as a payment of interest. See "Tax Consequences to United States Holders--Taxation of Interest" above. Your adjusted tax basis in an exchange note generally will equal the issue price of the exchange note, reduced by any principal payments you received. The excess of net long-term capital gains over net short-term capital losses is subject to tax at a lower rate for non-corporate taxpayers. Non-corporate taxpayers are generally subject to a maximum tax rate of 20% on capital gain realized on the disposition of a capital asset (including an exchange note) held for more than one year. The distinction between capital gain or loss and ordinary income or loss is relevant for purposes of, among other things, limitations on the deductibility of capital losses. SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF NOTES: EXCHANGE OFFER The exchange of an outstanding note for an exchange note pursuant to the exchange offer is not anticipated to be taxable to the Holder. As a result, a Holder: - would not be expected to recognize any gain or loss on the exchange; - would be expected to have a holding period for the exchange note that includes the holding period for the note exchanged therefor; - would be expected to have an adjusted tax basis in the exchange note equal to its adjusted tax basis in the note exchanged therefor; and - would be expected to recognize taxable gain or loss on a subsequent sale, exchange, redemption or retirement of an exchange note under the same circumstances and conditions as a holder of the outstanding note would have with respect to a sale, exchange, redemption or retirement of an outstanding note. See "Tax Consequences to United States Holders--Sale, Exchange, Redemption or Retirement of the Exchange Notes: General" above. The exchange offer is not expected to result in any United States federal income tax consequences to a nonexchanging holder of outstanding notes. TAX CONSEQUENCES TO FOREIGN HOLDERS The following summary is a general description of certain United States federal income tax consequences to a "Foreign Holder" (which, for the purpose of this discussion, means a Holder that is not a United States Holder). The following summary is subject to the discussion below concerning 126 backup withholding and assumes that a Holder is not subject to provisions of the Code applicable to expatriates such as Code Section 877. (a) In general, payments of interest on an exchange note by the Company or any paying agent to a Foreign Holder will not be subject to United States federal income tax or withholding tax, provided that: - the interest received is not effectively connected with a United States trade or business; - such Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote; - such Holder is not, for United States federal income tax purposes, a controlled foreign corporation related, directly or indirectly, to the Company through stock ownership; - such Holder is not a bank receiving interest described in Code Section 881(c)(3)(A); and - the certification requirements under Code Section 871(h) or 881(c) and Treasury Regulations thereunder (summarized below) are met. Subject to any treaty exemption or rate reduction payments of interest on an exchange note that do not satisfy all of the foregoing requirements are generally subject to United States federal income tax and withholding tax at a flat rate of 30%. Federal withholding tax is not an additional tax. Rather, any amounts withheld from a payment to a Holder are generally allowed as a credit against the affected Foreign Holder's United States federal income tax liability. Payments of interest which are effectively connected with a United States trade or business conducted by the Holder will be subject to tax at graduated rates applicable to United States Holders. In the event any additional payments we are required to pay as a result of a redemption pursuant to a change of control are treated as interest, the tax treatment of such payments should be the same as other interest payments received by a Foreign Holder. However, the IRS may treat such payments as other than interest, in which case (i) if such payments are not effectively connected with a United States trade or business conducted by the Holder they would be subject to United States federal withholding tax at a rate of 30%, unless the Holder qualifies for a reduced rate of tax or an exemption under a tax treaty, or (ii) if such payments are effectively connected with a United States trade or business conducted by the Holder, they would be subject to tax at graduated rates applicable to United States Holders. (b) In general, a Foreign Holder of an exchange note will not be subject to United States federal withholding tax on the receipt of payments of principal on the exchange note and will not be subject to United States federal income tax on any gain recognized on the sale, exchange, redemption, retirement or other disposition of any exchange note, unless (i) such Foreign Holder is a non-resident alien individual who is present in the United States for 183 or more days in the taxable year of disposition and certain other conditions are met, or (ii) such Foreign Holder is engaged in a United States trade or business and such gain is effectively connected with such trade or business. Under Code Sections 871(h) and 881(c) and the underlying Treasury Regulations, in order to obtain the exemption from withholding tax described in paragraph (a) above, either (1) the Holder of an exchange note must provide its name and address, and certify, under penalties of perjury, to the Company or paying agent, as the case may be, that such Holder is a Foreign Holder or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and holds the exchange note on behalf of the Holder thereof must certify, under penalties of perjury, to the Company or paying agent, as the case may be, that such certificate has been received from the Holder by it or by a Financial Institution between it and the Holder and must furnish the payor with a copy thereof. A certificate described in 127 this paragraph is effective only with respect to payments of interest made to the certifying Foreign Holder after issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. Under Treasury Regulations, the foregoing certification may be provided by the Holder of an exchange note on IRS Form W-8BEN, W-8ECI, W-8IMY or W-8EXP, as applicable. Notwithstanding the provision of a Form W-8ECI, a Holder who is engaged in a United States trade or business will be subject to tax as described above with respect to amounts which are effectively connected with such trade or business. If any of the payments with respect to the exchange notes are effectively connected with a United States trade or business conducted by a Holder and such Holder is a foreign corporation, such Holder may also be subject to a United States "branch profits" tax on such effectively connected income at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty, subject to certain adjustments). An exchange note held by an individual who is not a citizen or resident of the United States at the time of death will not be includible in the decedent's gross estate for United States estate tax purposes, provided that such Holder or beneficial owner did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of stock of the Company entitled to vote, and provided that, at the time of death, payments with respect to such exchange note would not have been effectively connected with the conduct by such Holder of a trade or business within the United States. BACKUP WITHHOLDING AND INFORMATION REPORTING Under current United States federal income tax law, a 31% backup withholding tax and information reporting requirements apply to certain payments of principal and interest made to, and to the proceeds of sale before maturity by, certain Holders. In the case of a non-corporate United States Holder, information reporting requirements will apply to payments of principal or interest made by the Company or any paying agent thereof on an exchange note. The payor will be required to withhold backup withholding tax if: a Holder fails to furnish its Taxpayer Identification Number ("TIN") (which, for an individual, is his Social Security number) to the payor in the manner required; a Holder furnishes an incorrect TIN and the payor is so notified by the IRS; the payor is notified by the IRS that such Holder has failed to properly report payments of interest or dividends; or under certain circumstances, a Holder fails to certify, under penalties of perjury, that it has furnished a correct TIN and has not been notified by the IRS that it is subject to backup withholding for failure to report interest or dividend payments. Backup withholding and information reporting does not apply with respect to payments made to certain exempt recipients, including a corporation (within the meaning of Code Section 7701(a)). United States Holders should consult their tax advisors regarding their qualification for exemption from backup withholding and information reporting, and the procedure for obtaining such an exemption if applicable. The amount of any backup withholding imposed upon a payment to a United States Holder will be allowed as a credit against such Holder's United States federal income tax liability and may entitle such Holder to a refund, provided that certain required information is furnished to the IRS. In the case of a Foreign Holder, under currently applicable Treasury Regulations, backup withholding and information reporting will not apply to payments of principal or interest made by the Issuer or any paying agent thereof on an exchange note (absent actual knowledge that the Holder is actually a United States Holder) if such Holder has provided the required certification under penalties of perjury that it is not a United States Holder or has otherwise established an exemption. If such Holder provides the required certification, such Holder may nevertheless be subject to withholding of United States federal income tax as described above under "Tax Consequences to Foreign Holders." Foreign Holders of exchange notes should consult their tax advisors regarding the application of 128 information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a Foreign Holder under the backup withholding rules will be allowed as a credit against such Holder's United States federal income tax liability and may entitle such Holder to a refund, provided that certain required information is furnished to the IRS. New Treasury Regulations relating to withholding tax on income paid to Foreign Holders will generally be effective for payments made after December 31, 2000, subject to certain transition rules. In general, these new regulations do not significantly alter the substantive withholding and information reporting requirements, but rather unify current certification procedures and forms, and clarify reliance standards. The new regulations also alter the procedures for claiming benefits of an income tax treaty and permit the shifting of primary responsibility for withholding to certain financial intermediaries acting on behalf of beneficial owners under some circumstances. On January 24, 2000, the IRS issued Rev. Proc. 2000-12 providing guidance for entering into a "qualified intermediary" withholding agreement with the IRS to allow certain institutions to certify on behalf of their non-United States customers or account holders who invest in United States securities. We strongly urge prospective Foreign Holders to consult their own tax advisors for information on the impact, if any, of these new withholding regulations. 129 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for notes that such broker-dealer acquired as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Any such broker-dealer may use this prospectus, as we may amend or supplement it from time to time, in connection with resales of exchange notes received in exchange for notes. For a period of one year after we complete the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. All resales must be made in compliance with state securities or blue sky laws. We assume no responsibility for compliance with these requirements. We will not receive any proceeds from any sales of the exchange notes by broker-dealers. Broker-dealers may sell exchange notes received for their own account pursuant to the exchange offer from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to the purchaser or to or through brokers-dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells the exchange notes that it received for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holder of the notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. The initial purchasers have advised us that, following completion of this exchange offer, they intend to make a market in the exchange notes. However, the initial purchasers are under no obligation to do so, and they may discontinue any market activities with respect to the exchange notes at any time. LEGAL MATTERS Certain legal matters with respect to the issuance of the notes offered hereby will be passed upon for the Company by Ropes & Gray, Boston, Massachusetts. INDEPENDENT PUBLIC ACCOUNTANTS The consolidated financial statements of U.S. Can Corporation and its subsidiaries as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 included in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing herein. 130 WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement on Form S-4 under the Securities Act with the Securities and Exchange Commission with respect to the exchange notes. This prospectus, which forms a part of the registration statement, does not contain all of the information included in the registration statement. Certain parts of this registration statement are omitted in accordance with the rules and regulations of the Commission. For further information about us and the exchange notes, we refer you to the registration statement. You should be aware that statements made in this prospectus as to the contents of any agreement or other document filed as an exhibit to the registration statement are not necessarily complete. We refer you to the copy of such documents filed as exhibits to the registration statement. Each such statement is qualified in all respects by such reference. We are not currently subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended. We have agreed that, whether or not we are required to do so by the rules and regulations of the Commission, for so long as any of the exchange notes remain outstanding, we will furnish to the holders of the exchange notes and, if permitted, will file with the Commission, within the time periods specified in the rules and regulations of the Commission: (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if we were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations," and, with respect to the annual information only, a report thereon by our certified independent accountants; and (ii) all reports that would be required to be filed with the Commission on Form 8-K if we were required to file such reports in each case. Any reports or documents we file with the Commission, including the registration statement, may be inspected and copied at the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such reports or other documents may be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a web site that contains reports and other information that is filed through the Commission's Electronic Data Gathering Analysis and Retrieval System. The web site can be accessed at http://www.sec.gov. This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. We will provide without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request of any such person, a copy of any and all of such information. Requests for such copies should be directed to the Treasurer, United States Can Company, 900 Commerce Drive, Suite 302, Oak Brook, Illinois 60523 (Telephone Number (630) 571-2500). You should request any such information at least five days in advance of the date on which you expect to make your decision with respect to the exchange offer. In any event, you must request such information prior to . 131 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES
PAGE -------- AUDITED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants.................... F-2 Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997...................................................... F-3 Consolidated Balance Sheets as of December 31, 1999 and 1998...................................................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997.............. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997...................................................... F-6 Notes to Consolidated Financial Statements.................. F-7 UNAUDITED QUARTERLY FINANCIAL DATA.......................... F-34 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Operations for the Quarterly Periods Ended October 1, 2000 and October 3, 1999 and for the Nine Months Ended October 1, 2000 and October 3, 1999...................................................... F-35 Consolidated Balance Sheets as of October 1, 2000 and December 31, 1999......................................... F-36 Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2000 and October 3, 1999................. F-37 Notes to Consolidated Financial Statements.................. F-38
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO U.S. CAN CORPORATION: We have audited the accompanying consolidated balance sheets of U.S. CAN CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of U.S. Can Corporation and Subsidiaries as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Chicago, Illinois February 2, 2000, except with respect to the matters discussed in Notes (13) and (14), as to which the date is October 4, 2000 F-2 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 1997 --------- --------- --------- NET SALES................................................... $714,115 $710,246 $755,675 COST OF SALES............................................... 611,629 618,156 665,755 -------- -------- -------- Gross income.............................................. 102,486 92,090 89,920 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 33,783 32,651 33,047 SPECIAL CHARGES............................................. -- 35,869 62,980 -------- -------- -------- Operating income (loss)................................... 68,703 23,570 (6,107) INTEREST EXPENSE ON BORROWINGS.............................. 28,726 33,182 36,867 AMORTIZATION OF DEFERRED FINANCING COSTS.................... 1,175 1,753 1,738 OTHER EXPENSES.............................................. 1,728 1,822 1,986 -------- -------- -------- Income (loss) before income taxes........................... 37,074 (13,187) (46,698) PROVISION (BENEFIT) FOR INCOME TAXES........................ 14,622 (5,662) (16,792) -------- -------- -------- Income (loss) from continuing operations before discontinued operations and extraordinary item......................... 22,452 (7,525) (29,906) DISCONTINUED OPERATIONS, net of income taxes Net income from discontinued operations................... -- -- 1,078 Net loss on sale of discontinued business................. -- (8,528) (3,204) -------- -------- -------- EXTRAORDINARY ITEM, net of income taxes Net loss from early extinguishment of debt................ (1,296) -- -- -------- -------- -------- NET INCOME (LOSS)........................................... $ 21,156 $(16,053) $(32,032) ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-3 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (000'S OMITTED, EXCEPT PER SHARE DATA)
DECEMBER 31, DECEMBER 31, 1999 1998 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 15,697 $ 18,072 Accounts receivables, less allowances of $13,367 and $17,063 as of December 31, 1999 and December 31, 1998, respectively............................................ 91,864 63,742 Inventories............................................... 115,979 94,887 Prepaid expenses and other current assets................. 19,677 16,011 Deferred income taxes..................................... 16,114 22,934 --------- --------- Total current assets.................................... 259,331 215,646 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land...................................................... 14,541 5,862 Buildings................................................. 83,106 63,026 Machinery, equipment and construction in process.......... 463,400 416,940 --------- --------- 561,047 485,828 Less--Accumulated depreciation............................ (228,543) (217,826) --------- --------- Total property, plant and equipment..................... 332,504 268,002 --------- --------- INTANGIBLE ASSETS, less accumulated amortization of $12,211 and $11,853 as of December 31, 1999 and December 31, 1998, respectively.............................................. 50,478 51,928 OTHER ASSETS................................................ 21,257 19,995 --------- --------- Total assets............................................ $ 663,570 $ 555,571 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 38,824 $ 6,731 Accounts payable.......................................... 104,189 52,317 Accrued payroll, benefits and insurance................... 29,500 31,282 Restructuring reserves.................................... 25,016 25,674 Other current liabilities................................. 24,068 23,530 --------- --------- Total current liabilities............................... 221,597 139,534 --------- --------- SENIOR DEBT................................................. 83,864 45,617 SUBORDINATED DEBT........................................... 236,629 264,325 --------- --------- Total long-term debt.................................... 320,493 309,942 --------- --------- OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 10,670 5,595 Other long-term liabilities............................... 42,254 50,323 --------- --------- Total other long-term liabilities....................... 52,924 55,918 --------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued or outstanding.................. -- -- Common stock, $0.01 par value; 50,000,000 shares authorized, 13,446,933 and 13,278,223 shares issued as of December 31, 1999 and December 31, 1998, respectively............................................ 135 133 Paid-in-capital........................................... 112,840 109,839 Unearned restricted stock................................. (629) (829) Treasury common stock, at cost; 83,024 and 90,011 shares at December 31, 1999 and December 31, 1998, respectively............................................ (1,380) (1,728) Cumulative translation adjustment......................... (7,771) (1,443) Accumulated deficit....................................... (34,639) (55,795) --------- --------- Total stockholders' equity.............................. 68,556 50,177 --------- --------- Total liabilities and stockholders' equity.............. $ 663,570 $ 555,571 ========= =========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-4 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (000'S OMITTED)
ACCUMULATED OTHER COMPREHENSIVE INCOME -------------------------------------- UNEARNED TREASURY CUMULATIVE PENSION COMMON PAID-IN- RESTRICTED COMMON TRANSLATION LIABILITY ACCUMULATED COMPREHENSIVE STOCK CAPITAL STOCK STOCK ADJUSTMENT ADJUSTMENT DEFICIT INCOME -------- -------- ---------- -------- ----------- ---------- ----------- ------------- BALANCE AT DECEMBER 31, 1996..................... $130 $105,582 $(2,581) $ (256) $ 1,622 $ (2) $ (7,710) $ -- Net loss................... -- -- -- -- -- -- (32,032) (32,032) Issuance of stock under employee benefit plans... -- 778 -- 721 -- -- -- -- Purchase of treasury stock.................... -- -- -- (1,179) -- -- -- -- Exercise of stock options.................. -- 152 -- -- -- -- -- -- Issuance of restricted stock.................... 1 1,491 (1,492) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 1,515 -- -- -- -- -- Equity adjustment to reflect minimum pension liability................ -- -- -- -- -- (612) -- (612) Cumulative translation adjustment............... -- -- -- -- (3,815) -- -- (3,815) -------- Comprehensive loss......... -- -- -- -- -- -- -- $(36,459) ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1997..................... 131 108,003 (2,558) (714) (2,193) (614) (39,742) -- Net loss................... -- -- -- -- -- -- (16,053) (16,053) Issuance of stock under employee benefit plans... -- -- -- 716 -- -- -- -- Purchase of treasury stock.................... -- -- -- (1,730) -- Exercise of stock options.................. 2 1,656 -- -- -- -- -- -- Issuance of restricted stock.................... -- 180 (180) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 1,909 -- -- -- -- -- Equity adjustment to reflect minimum pension liability................ -- -- -- -- -- 614 -- 614 Cumulative translation adjustment............... -- -- -- -- 750 -- -- 750 -------- Comprehensive loss......... -- -- -- -- -- -- -- $(14,689) ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1998..................... 133 109,839 (829) (1,728) (1,443) -- (55,795) -- Net income................. -- -- -- -- -- -- 21,156 21,156 Issuance of stock under employee benefit plans... -- -- -- 850 -- -- -- -- Purchase of treasury stock.................... -- -- -- (502) -- Exercise of stock options.................. 2 2,818 -- -- -- -- -- -- Issuance of restricted stock.................... -- 183 (183) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 383 -- -- -- -- -- Cumulative translation adjustment............... -- -- -- -- (6,328) -- -- (6,328) -------- Comprehensive income....... -- -- -- -- -- -- -- $ 14,828 ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1999..................... $135 $112,840 $ (629) $(1,380) $(7,771) $ -- $(34,639) ==== ======== ======= ======= ======= ===== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-5 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (000'S OMITTED)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 1997 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss)......................................... $ 21,156 $(16,053) $(32,032) Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization........................... 31,863 35,439 39,866 Special charges......................................... -- 35,869 62,980 Loss on sale of business................................ -- 8,528 3,204 Extraordinary loss on extinguishment of debt............ 1,296 -- -- Deferred income taxes................................... 11,124 (6,916) (17,788) Change in operating assets and liabilities, net of effect of acquired and disposed of businesses: Accounts receivable..................................... (14,464) 10,275 12,074 Inventories............................................. 4,211 15,324 3,204 Accounts payable........................................ 14,805 (667) (5,204) Accrued payroll, benefits, insurance and special charge cash costs............................................ (10,641) (8,228) (7,100) Other, net.............................................. 3,102 (8,608) 4,905 -------- -------- -------- Net cash provided by operating activities............. 62,452 64,963 64,109 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (30,982) (22,828) (54,030) Acquisition of businesses, net of cash acquired........... (63,847) -- (12,398) Proceeds on sale of business.............................. 4,500 28,296 1,000 Proceeds from sale of property............................ 448 6,601 630 Investment in Formametal S.A.............................. (1,600) (3,000) -- -------- -------- -------- Net cash provided by (used in) investing activities... (91,481) 9,069 (64,798) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock and exercise of stock options.... 2,820 1,658 152 Net borrowings (payments) under the revolving line of credit and changes in cash overdrafts................... 23,553 (36,770) 5,962 Repurchase of 10 1/8% notes............................... (27,696) (10,675) -- Borrowings of other long-term debt, including capital lease obligations....................................... 38,598 -- 24,935 Payments of other long-term debt, including capital lease obligations............................................. (9,449) (15,618) (26,386) Payments of debt refinancing costs........................ -- -- (1,574) Purchase of treasury stock................................ (502) (1,730) (1,179) -------- -------- -------- Net cash provided by (used in) financing activities... 27,324 (63,135) 1,910 -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (670) 402 (2,414) -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (2,375) 11,299 (1,193) CASH AND CASH EQUIVALENTS, beginning of year................ 18,072 6,773 7,966 -------- -------- -------- CASH AND CASH EQUIVALENTS, end of year...................... $ 15,697 $ 18,072 $ 6,773 ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-6 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (1) BASIS OF PRESENTATION AND OPERATIONS The consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation"), its wholly owned subsidiary, United States Can Company ("U.S. Can"), and U.S. Can's subsidiaries (the "Subsidiaries"). All significant intercompany balances and transactions have been eliminated. The consolidated group is referred to herein as the Company. These financial statements are prepared in accordance with generally accepted accounting principles. Certain reclassifications have been made to conform prior years' data to current presentation. These reclassifications had no effect on previously reported earnings. The Company is a packaging supplier of steel and plastic containers for personal care, household, food, automotive, paint and industrial supplies, and other specialty products. The Company owns or leases 21 plants in the United States and 11 plants located in Europe. Certain operations and plants are being discontinued or closed as further described in Note 3. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) CASH AND CASH EQUIVALENTS--The Company considers all liquid interest-bearing instruments purchased with an original maturity of three months or less to be cash equivalents. (b) ACCOUNTS RECEIVABLE ALLOWANCES--Activity in the accounts receivable allowances accounts was as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Balance at beginning of year................................ $17,063 $15,134 $10,895 Provision for doubtful accounts........................... 997 881 1,065 Change in discounts, allowances and rebates, net of recoveries.............................................. (3,914) 2,525 3,734 Net write-offs of doubtful accounts....................... (779) (1,477) (560) ------- ------- ------- Balance at end of year...................................... $13,367 $17,063 $15,134 ======= ======= =======
(c) INVENTORIES--Inventories are stated at the lower of cost or market and include material, labor and factory overhead. Costs for United States inventory have been determined using the last-in, first-out ("LIFO") method. Costs for Subsidiaries and machine shop inventories of approximately $49.6 million at December 31, 1999 and $19.9 million as of December 31, 1998 have been determined by the first-in, first-out ("FIFO") method. Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
1999 1998 -------- -------- Raw materials............................................ $ 30,821 $21,171 Work in progress......................................... 49,884 42,146 Finished goods........................................... 35,274 26,848 Machine shop inventory................................... -- 4,722 -------- ------- $115,979 $94,887 ======== =======
F-7 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is recorded at cost. Major renewals and betterments which extend the useful life of an asset are capitalized; routine maintenance and repairs are expensed as incurred. Maintenance and repairs charged against earnings were approximately $29.4 million, $29.9 million and $30.9 million in 1999, 1998 and 1997, respectively. Upon sale or retirement of these assets, the asset cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in income. Depreciation for financial reporting purposes is principally provided using the straight-line method over the estimated useful lives of the assets, as follows: buildings-25 to 40 years; machinery and equipment-5 to 20 years. Property, plant and equipment under capital leases are amortized over the economic useful life of the asset. (e) INTANGIBLES--Intangible assets consist principally of the excess purchase price over the fair value of the net assets of businesses acquired ("goodwill"), amortized on a straight-line basis over the periods of expected benefit, ranging from 20 to 40 years. The related amortization expense was $1.7 million, $1.8 million and $2.0 million for the years ended December 31, 1999, 1998 and 1997, respectively. The Company continually reviews whether subsequent events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or its recoverable value requires adjustment. In assessing and measuring recoverability, the Company uses projections to determine whether future operating income (net of tax) exceeds the goodwill amortization. (f) REVENUE--Revenue is recognized when goods are shipped to the customer. Estimated sales returns and allowances are recognized as an offset against revenue in the period in which the related revenue is recognized. (g) FOREIGN CURRENCY TRANSLATION--The functional currency for substantially all the Company's Subsidiaries is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate prevailing during the period. The gains or losses resulting from such translation are included in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in other income and were not material in 1999, 1998 or 1997. (h) NEW ACCOUNTING PRONOUNCEMENTS--SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 (amended by SFAS No. 137 to delay required implementation) and will be adopted by the Company in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating SFAS No. 133, but does not believe this pronouncement will have a material impact on the Company's financial position or results of operations. (i) USE OF ESTIMATES--The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-8 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (3) SPECIAL CHARGES AND DISCONTINUED OPERATIONS 1998 SPECIAL CHARGES In 1998, the Company established a pre-tax restructuring provision of $35.9 million for additional plant closings, implementation of a national lithography strategy, an incremental provision for the anticipated loss on the sale of the Orlando Machine Engineering Center ("OMEC") and a reassessment of 1997 special charges. The key elements of the 1998 restructuring provision include the closure of the Green Bay, Wisconsin aerosol assembly plant, the Alsip, Illinois general line plant, and the Columbiana, Ohio specialty plant (which occurred in the first half of 1999); a write-down to estimated proceeds for the sale of the metal closure business located in Glen Dale, West Virginia; and selected closures and realignment of facilities servicing the lithography needs of the Company's core businesses. The restructuring provision included $5.2 million for severance and related termination benefits for approximately 45 salaried and 250 production employees; $24.4 million for the non-cash write off of assets related to the facilities being closed or consolidated (includes fixed assets of $9.3 million and unamortized goodwill of $15.1 million); $3.3 million for the estimated net loss (book value in excess of proceeds) on the sale of the closure business and OMEC; $4.2 million for other related closure costs and ($1.2) million adjustment for 1997 items. 1997 SPECIAL CHARGES In 1997, the Company established a pre-tax special charge of $63.0 million as follows: $35.0 million, primarily for plant closings and overhead cost reductions associated with the loss of a major aerosol customer; $13.3 million for the loss on the closure of its Metal Pail operation in North Brunswick, New Jersey; and $14.7 million, related to personnel reductions and the reduction of asset values associated with equipment used in the businesses the Company had exited or was in the process of exiting. The key elements of the restructuring included closure in 1998 of the Racine, Wisconsin aerosol assembly plant, the Midwest litho center in Alsip, Illinois, the Sparrows Point litho center in Baltimore, Maryland, and the California Specialty plant in Vernalis, California; a write-down to estimated proceeds for the sale of the OMEC; and organizational changes designed to reduce general overhead. On January 29, 1999, the Company completed the sale of OMEC for $4.5 million in cash. The special charge included $41.7 million for the non-cash write-off of assets related to the facilities to be closed or sold, (comprised of fixed assets of $34.1 million and unamortized goodwill of $7.6 million), $13.2 million for severance and related termination benefits for approximately 115 salaried and 370 hourly employees, and $8.1 million for other related closure costs. DISCONTINUED OPERATIONS On November 9, 1998, the Company sold its commercial metal services business ("Metal Services") for net cash proceeds of approximately $28 million. Metal Services included one plant in each of Chicago, Illinois; Trenton, New Jersey; and Brookfield, Ohio, and the closed Midwest Litho plant in Alsip, Illinois. The Company's historical financial statements have been restated to reflect Metal F-9 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (3) SPECIAL CHARGES AND DISCONTINUED OPERATIONS (CONTINUED) Services as a discontinued operation. Based on the proceeds received, the Company recorded an incremental $8.5 million after-tax charge for the loss on the sale of Metal Services in 1998. Revenues to third parties from these operations were $94.3 million and $115.7 million in the periods ended November 8, 1998 and December 31, 1997, respectively (excluding intra-company sales continued by the buyer and ongoing third-party sales from the closed Midwest Litho facility, which were transferred to other Metal Services facilities). Reserves as of December 31, 1999 include $8.0 million for severance and related termination benefits for approximately 42 salaried and 166 hourly employees; $6.0 million for non-cash write-off of assets related to facilities being closed or consolidated; $10.1 million for the estimated loss on the sale of the closure business; and $4.4 million primarily for on-going carrying costs for facilities already closed located in Green Bay, Wisconsin and Vernalis, California. The actions identified under the 1997 restructuring plan have essentially been completed, however, there are some ongoing costs resulting from the actions taken and these will be charged against the reserve as they are paid. Under the union contract at the Racine, Wisconsin facility, the Company is obligated to fund increased pension amounts to certain terminated hourly employees as a direct result of closing the Racine facility. These amounts are payable over five years and began on the date of the plant closure in April 1998. Additionally, the company has long-term lease obligations (plus related utilities and security costs) for its Vernalis, California (part of the 1997 special charge; closed in June 1998) and Green Bay, Wisconsin (part of the 1998 special charge; closed in June 1999) facilities which will continue for several years into the future. The actions management committed to as part of the 1998 restructure plan are also substantially complete. Remaining actions to be completed include the closure of certain lithography facilities. When the Company recorded the charge related to these facilities, it was expected that the actions related to these operations would extend into 2000. The current status of the exit plan activities is substantially the same as the original exit plan, supporting the Company's assertion that significant changes to the plan are not likely. Cash costs for restructuring activities in 1999 were $6.9 million and the Company anticipates spending another $11.0 million of such costs in 2000 and $3.5 million in the year 2001 and beyond. The remainder of the restructuring provision primarily consists of non-cash items associated with the write-off of assets. The details of the changes in accrued restructuring costs are as follows (000's omitted):
1999 1998 -------- -------- Balance at beginning of the year........................ $43,387 $ 35,081 Special charge........................................ -- 35,869 Discontinued operations charge........................ -- 14,261 Payments against reserve.............................. (6,856) (8,251) Non-cash charges against reserve...................... (8,017) (33,573) ------- -------- Balance at end of the year............................ $28,514 (a) $ 43,387 (a) ======= ========
- ------------------------ (a) Includes $3.5 million and $17.7 million of long-term liabilities as of December 31, 1999 and 1998, respectively. F-10 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (4) ACQUISITIONS On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH & Co., KG ("May"), a German limited liability company. The acquisition was financed using borrowings made by U.S. Can under the Credit Agreement (refer to Note (5)) for an aggregate amount of $63.9 million. The following is a summary of the preliminary allocation of the aggregate purchase price for May (000's omitted): Current Assets.............................................. $ 53,744 Property, Plant and Equipment............................... 74,640 Goodwill.................................................... 277 Other Assets................................................ 3,708 Current Portion of Long-Term Debt........................... (17,023) Current Liabilities......................................... (39,432) Long-Term Debt.............................................. (6,552) Other Liabilities........................................... (5,484) -------- Total Purchase Price...................................... $ 63,878 ========
The acquisition was accounted for as a purchase for financial reporting purposes; therefore, 1999 results do not include operations related to the acquired business. Certain assets and liabilities of May were revalued to estimated fair values as of the acquisition date. The final amounts recorded may differ based on results of further evaluations of the fair value of the acquired assets and liabilities. The following represents the Company's unaudited pro forma results of operations as if the May acquisition had occurred on January 1 of the applicable year (000's omitted):
1999 1998 -------- -------- Net Sales................................................... $859,478 $857,322 Income Before Discontinued Operations and Extraordinary Item...................................................... 21,928 (9,130) Net Income.................................................. 20,632 (17,658)
May's pre-acquisition results have been adjusted to reflect amortization of goodwill, the depreciation expense impact of the increased fair market value of property plant and equipment, interest expense on the acquisition borrowings and the effect of income taxes on the pro forma adjustments. The pro forma information given above does not purport to be indicative of the results that would have been obtained if the operations were combined during the periods presented and is not intended to be a projection of future results or trends. In March 1998, a European Subsidiary acquired a 36.5% equity interest in Formametal S.A. ("Formametal"), an aerosol can manufacturer located in Argentina, for $4.6 million, payable over a 15-month period. In connection with this investment, the Company has provided a guarantee in an amount not to exceed $3.8 million, to secure the repayments of certain indebtedness of Formametal. In 1999, the Company loaned Formametal $1.0 million for capital expenditures with all principal and interest payable in January 2004. In addition, the Company received a three-year option to convert this F-11 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (4) ACQUISITIONS (CONTINUED) loan into additional shares of Formametal, which, if exercised, would take the Company's interest in Formametal up to 39.8%. This investment is being accounted for using the equity method. (5) DEBT OBLIGATIONS Long-term debt obligations of the Company at December 31, 1999 and 1998, consisted of the following (000's omitted):
1999 1998 -------- -------- Senior debt-- Revolving line of credit.............................. $ 56,100 $ -- Capital lease obligations............................. 10,869 15,511 Secured term loan..................................... 21,156 25,128 Industrial revenue bonds.............................. 7,500 7,500 Mortgages and other................................... 27,063 4,209 -------- -------- 122,688 52,348 Less--Current maturities................................ (38,824) (6,731) -------- -------- Total long-term senior debt......................... 83,864 45,617 Senior Subordinated 10 1/8% notes....................... 236,629 264,325 -------- -------- Total long-term debt................................ $320,493 $309,942 ======== ========
In 1997, U.S. Can entered into an Amended and Restated Credit Agreement with a group of banks (the "Credit Agreement"), providing a revolving credit facility for working capital requirements, letters of credit and permitted acquisitions. The Credit Agreement was amended twice in 1999. In April 1999, the Company reduced the available amount under the Credit Agreement to $50 million from the previous $80 million level. Obligations under the Credit Agreement were secured by U.S. Can's domestic accounts receivable and inventories; however, this collateral was released in May, 1999 because of the improved credit profile of the Company. In connection with the May acquisition, the Company added a $70 million, 364-day facility in December 1999, which expires on December 26, 2000. The remainder of the facilities under the Credit Agreement expire in 2002. As of December 31, 1999, the Company had borrowed $56.1 million under the Credit Agreement, $11.4 million outstanding under the letter of credit portion of the facility and $52.5 million of unused credit remaining available under the Credit Agreement. The Company expects to refinance any borrowings outstanding under the 364-day facility prior to its expiration. The loans under the Credit Agreement, at the election of U.S. Can, bear interest at a floating rate equal to one of the following: (i) the Base Rate (as defined in the Credit Agreement) per annum, or (ii) based on the current pricing ratio, a reserve-adjusted Eurodollar rate plus the then applicable margin, for specified interest periods of one, two, three, or six months. Prime rate loans outstanding as of December 31, 1999 were converted on January 4, 2000 to libor-based borrowings bearing a weighted average rate of 6.9%. U.S. Can is required to pay letter of credit fees based on the outstanding face amount on each letter of credit and a commitment fee based on the average daily unused portion of each lender's commitment under the Credit Agreement. F-12 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (5) DEBT OBLIGATIONS (CONTINUED) Capital lease obligations mature in varying amounts from 2000 to 2005 and bear interest at various rates between 4.6% and 15.8%. Other debt, consisting of various governmental loans, real estate mortgages and secured equipment notes bearing interest at rates between 3.4% and 8.4%, matures at various times through 2015, and was used to finance the expansion of several manufacturing facilities. In an effort to limit foreign exchange risks, the Company has entered into several forward hedge contracts. The Merthyr Tydfil facility was financed by a series of British Pound/Dollar forward hedge contracts, which will not exceed $23.1 million in notional amount or a term of not more than five years. In connection with the acquisition of May, the Company purchased a series of German Deutsche Mark/ Dollar forward hedge contracts. As of December 31, 1999, the remaining contracts did not exceed $14.3 million, with the final contract payment due in February 2000. The Senior Subordinated 10 1/8% notes (the "10 1/8% notes") are unsecured and are subordinated to all other senior debt of the Corporation and its subsidiaries. The 10 1/8% notes are fully and unconditionally guaranteed on an unsecured senior subordinated basis by U.S. Can and USC May Verpackungen Holding, Inc. On or after October 15, 2001, the Corporation may, at its option, redeem all or some of the 10 1/8% notes at declining redemption premiums which begin at approximately 105.1% in 2001. Upon a change of control of the Corporation, as defined, the Note holders could require that the Corporation repurchase all or some of the 10 1/8% notes at a 101% premium. As part of the Company's focus on debt reduction, it repurchased through the open market and subsequently retired $27.7 and $10.7 million in 1999 and 1998, respectively, of the outstanding 10 1/8% notes. The associated redemption premiums and the write-off of the related deferred financing costs resulted in an extraordinary charge in 1999 of $1.3 million, net of taxes of $0.8 million. The Credit Agreement restricts the Company's ability to repurchase the 10 1/8% notes. As of December 31, 1999, the Company had purchased the maximum amount allowed under the Credit Agreement. Based upon borrowing rates currently available to the Company for borrowings with similar terms and maturities, the fair value of the Company's total debt was approximately $366 million and $324 million as of December 31, 1999 and 1998, respectively. No quoted market value is available (except on the 10 1/8% notes). These amounts, because they do not include certain costs such as prepayment penalties, do not represent the amount the Company would have to pay to reacquire and retire all of its outstanding debt in a current transaction. Financing costs related to the issuance of new debt are deferred and amortized over the terms of the related debt agreements. Net deferred financing costs are recorded as other assets in the accompanying balance sheets. The Company paid interest on borrowings of $26.5 million, $33.2 million and $35.2 million in 1999, 1998 and 1997, respectively. The Credit Agreement and certain of the Company's other debt agreements contain various financial and other restrictive covenants, as well as cross-default provisions. The financial covenants include, but are not limited to, limitations on annual capital expenditures and certain ratios of borrowings to earnings before interest, taxes, depreciation and amortization ("EBITDA"), senior debt to EBITDA and interest coverage. The covenants also restrict the Company's and U.S. Can's ability to distribute dividends, to incur additional indebtedness, to dispose of assets and to make investments, F-13 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (5) DEBT OBLIGATIONS (CONTINUED) acquisitions, mergers and transactions with affiliates. The Company was in compliance with all of the required financial ratios and other covenants under the Credit Agreement at year-end. Under existing agreements, contractual maturities of long-term debt as of December 31, 1999 (including capital lease obligations), are as follows (000's omitted): 2000........................................................ $ 38,824 2001........................................................ 6,185 2002........................................................ 45,012 2003........................................................ 4,065 2004........................................................ 16,637 Thereafter.................................................. 248,594 -------- $359,317 ========
For further discussion on lease obligations refer to Note (9) which includes operating and capital lease information. (6) INCOME TAXES The provision (benefit) for income taxes before discontinued operations and extraordinary item consisted of the following (000's omitted):
1999 1998 1997 -------- -------- -------- Current......................................... $ 1,304 $ -- $ -- Deferred........................................ 11,124 (6,916) (17,788) Foreign......................................... 2,194 1,254 996 ------- ------- -------- Total....................................... $14,622 $(5,662) $(16,792) ======= ======= ========
Income taxes, net of refunds, of $1.1 million and $0.5 million were paid in 1999 and 1997, respectively. No income taxes were paid in 1998. A reconciliation of the difference between taxes on pre-tax income from continuing operations before discontinued operations and extraordinary item computed at the Federal statutory rate and the actual provision (benefit) for such income taxes for the years presented were as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Tax provision (benefit) computed at the statutory rates..... $12,605 $(4,483) $(16,344) Nondeductible amortization of intangible assets............. 253 238 396 State taxes, net of Federal tax effect...................... 1,483 (659) (801) Other, net.................................................. 281 (758) (43) ------- ------- -------- Provision (benefit) for income taxes...................... $14,622 $(5,662) $(16,792) ======= ======= ========
F-14 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (6) INCOME TAXES (CONTINUED) Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. Significant temporary differences representing deferred income tax benefits and obligations consisted of the following (000's omitted):
DECEMBER 31, 1999 DECEMBER 31, 1998 ---------------------- ---------------------- BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS -------- ----------- -------- ----------- Restructuring reserves............................... $13,527 $ -- $19,544 $ -- Postretirement benefits.............................. 12,068 -- 12,694 -- Accrued liabilities.................................. 6,143 -- 6,183 -- Alternative minimum tax credit carry-forwards........ 5,273 -- 4,310 -- Capitalized leases................................... 1,904 -- 1,687 -- Property and equipment............................... 2,316 -- 2,481 -- Pension accrual...................................... 1,848 -- 3,221 -- Accelerated Depreciation............................. -- (32,545) -- (32,914) Inventory valuation reserves......................... -- (6,246) -- (6,888) Net operating loss................................... 949 -- 6,168 -- Other................................................ 5,190 (4,983) 4,598 (3,745) ------- -------- ------- -------- Total deferred income tax benefits (obligations).................................. $49,218 $(43,774) $60,886 $(43,547) ======= ======== ======= ========
The Company does not provide for U. S. income taxes which would be payable if undistributed earnings of the European Subsidiaries were remitted to the U.S. because the Company either considers these earnings to be invested for an indefinite period or anticipates that if such earnings were distributed, the U.S. income taxes payable would be substantially offset by foreign tax credits. Such unremitted earnings were $8.3 million and $4.0 million as of December 31, 1999 and 1998, respectively. (7) EMPLOYEE BENEFIT PLANS The Company maintains separate noncontributory pension and defined contribution plans covering most domestic hourly employees and all domestic salaried personnel, respectively. It is the Company's policy to fund accrued pension and defined contribution plan costs in compliance with ERISA requirements. The total cost of these plans charged against earnings was approximately $3.9 million, $5.2 million and $6.5 million for 1999, 1998 and 1997, respectively. F-15 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (7) EMPLOYEE BENEFIT PLANS (CONTINUED) The following presents the changes in the projected benefit obligations for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Projected benefit obligation at the beginning of the year... $31,164 $30,637 Net increase (decrease) during the year attributed to: Service cost.............................................. 854 912 Interest cost............................................. 2,180 2,028 Actuarial gain............................................ (3,479) (1,104) Benefits paid............................................. (2,037) (1,685) Plan amendments........................................... -- 376 ------- ------- Net (decrease) increase during the year..................... (2,482) 527 ------- ------- Projected benefit obligation at the end of the year......... $28,682 $31,164 ======= =======
The following table presents the changes in the fair value of net assets available for plan benefits for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Fair value of plan assets at the beginning of the year.... $30,448 $24,965 Increase (decrease) during the year: Return on plan assets................................... 5,366 4,388 Sponsor contributions................................... 1,496 2,780 Benefits paid........................................... (2,037) (1,685) ------- ------- Net increase during the year.............................. 4,825 5,483 ------- ------- Fair value of plan assets at the end of the year.......... $35,273 $30,448 ======= =======
The following table sets forth the funded status of the Company's domestic defined benefit pension plans, at December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Actuarial present value of benefit obligation-- Vested benefits........................................... $(26,680) $(28,563) Nonvested benefits........................................ (2,002) (2,601) -------- -------- Accumulated benefit obligation.............................. (28,682) (31,164) Fair value of plan assets................................... 35,273 30,448 Accumulated benefit obligation in excess of plan assets..... 6,591 (716) Unrecognized transition obligation.......................... 3 4 Unrecognized net loss....................................... (8,538) (2,243) Unrecognized prior-service costs............................ 1,589 1,903 -------- -------- Net amount recognized....................................... $ (355) $ 1,052 ======== ======== Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability................................. $ (355) $ (1,132) Intangible asset.......................................... -- 80 -------- -------- Net amount recognized....................................... $ (355) $ (1,052) ======== ========
F-16 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (7) EMPLOYEE BENEFIT PLANS (CONTINUED) The projected benefit obligation as of December 31, 1999, 1998 and 1997 was determined using an assumed discount rate of 7.8%, 7.0% and 7.0%, respectively. The expected long-term rate of return on plan assets used in determining net periodic pension cost was 8.5% in 1999, 1998, and 1997. The plan has a flat benefit formula; accordingly, the effect of projected future compensation levels is zero. The plan's assets consist primarily of shares of the Corporation's common stock, equity and bond funds, corporate bonds and investment contracts with insurance companies. The United States net periodic pension cost was as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Service costs..................................... $ 854 $ 912 $ 871 Interest costs.................................... 2,180 2,028 1,825 Return on assets.................................. (3,215) (2,501) (4,535) Amortization of unrecognized transition obligation...................................... 2 2 (11) Prior service cost recognized..................... 977 666 468 Curtailment loss on severed employees............. -- -- 2,595 ------- ------- ------- Net periodic pension cost......................... $ 798 $ 1,107 $ 1,213 ======= ======= =======
In addition, hourly employees at eight plants are covered by union-sponsored collectively bargained, multi-employer pension plans. The Company contributed to these plans and charged to expense approximately $1.4 million, $1.3 million and $1.4 million in 1999, 1998 and 1997, respectively. The contributions are generally determined in accordance with the provisions of the negotiated labor contracts and are generally based on a per employee, per week amount. In March 1999, 1998 and 1997, the Corporation contributed shares of Common Stock, valued at $0.9 million, $0.7 million and $0.9 million, respectively, to U.S. Can's Salaried Employees Savings and Retirement Accumulation Plan. The Company maintains three defined benefit plans for certain of its employees in the United Kingdom, Germany and France. The plan benefits are based primarily on years of service, employee compensation or a combination thereof. As of December 31, 1999, 1998 and 1997, the preliminary actuarially-determined accumulated benefit obligations were $35.3 million, $30.8 million and $30.9 million, respectively, of which $29.0 million, $28.8 million and $29.1 million, respectively, were funded. The aggregate net pension expense in 1999, 1998 and 1997, for these plans was approximately $1.1 million, $1.3 million and $0.8 million, respectively. (8) POSTRETIREMENT BENEFIT PLANS The Company provides health and life insurance benefits for certain domestic retired employees in connection with certain collective bargaining agreements. F-17 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (8) POSTRETIREMENT BENEFIT PLANS (CONTINUED) The following presents the changes in the accumulated postretirement benefit obligations for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Accumulated postretirement benefit obligations at the beginning of the year................................... $29,128 $29,533 Net decrease during the year attributable to: Service cost............................................ 373 424 Interest cost........................................... 1,929 1,907 Actuarial gains......................................... (3,306) (1,731) Benefits paid........................................... (1,316) (1,005) ------- ------- Net decrease for the year................................. (2,320) (405) ------- ------- Accumulated postretirement benefit obligations at the end of the year............................................. $26,808 $29,128 ======= =======
The Company's postretirement benefit plans currently are not funded. The status of the plans at December 31, 1999 and 1998, is as follows (000's omitted):
1999 1998 -------- -------- Accumulated postretirement benefit obligations: Active employees........................................ $ 7,586 $11,477 Retirees................................................ 19,222 17,651 ------- ------- Total accumulated postretirement benefit obligations...... 26,808 29,128 Unrecognized net gain (loss).............................. 721 (2,586) ------- ------- Net amount recognized..................................... $27,529 $26,542 ======= =======
Net periodic postretirement benefit costs for the Company's domestic postretirement benefit plans for the years ended December 31, 1999, 1998 and 1997, included the following components (000's omitted):
1999 1998 1997 -------- -------- -------- Service cost........................................ $ 373 $ 424 $ 406 Interest cost....................................... 1,929 1,907 1,994 Amortization of net loss............................ -- -- 10 ------ ------ ------ Net periodic postretirement benefit cost............ $2,302 $2,331 $2,410 ====== ====== ======
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 7% in 1999 and remaining at 7% thereafter, 8% in 1998 and 9% in 1997. A one percentage point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 1999 and 1998, by approximately $2.8 million and $3.1 million, respectively, and the total of the service and interest cost components of net postretirement benefit cost for each year then ended by approximately $0.3 million. A one F-18 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (8) POSTRETIREMENT BENEFIT PLANS (CONTINUED) percentage point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 1999 and 1998, by approximately $2.6 million and $2.8 million, respectively, and the total of the service and interest cost components of net postretirement benefit cost for each year then ended by approximately $0.3 million. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.8%, 7.0% and 7.0%, in 1999, 1998 and 1997, respectively. As of December 31, 1999, 1998 and 1997, the Company had recorded a liability of $3.3 million, $3.4 million and $3.3 million, respectively, for benefit obligations for which a former executive was fully eligible to receive on a periodic payment basis beginning August 1, 1998. The principal source of funding for this obligation is an insurance policy on the executive's life. (9) COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL The processes involved in lithography and certain aspects of the manufacturing of steel containers have historically involved the use and handling of materials now classified as hazardous substances under various laws. The Company has a policy to comply with applicable legal requirements. The Company may be subject to liabilities for previously owned or operated sites or sites where the Company or its predecessors shipped waste. The Company accrues for the estimated cost of environmental matters, on a non-discounted basis. Such provisions and accruals exclude claims for recoveries from insurance carriers or other third parties. The Company has been named as a potentially responsible party ("PRP") for costs incurred in the clean-up of a regional groundwater plume partially extending underneath a property located in San Leandro, California, formerly a site of one of the Company's can assembly plants. The Company has entered into an indemnity agreement related to this matter with the owner of the property. Extensive soil and groundwater investigative work has been performed at this site. The Company, along with other PRPs, participated in a coordinated sampling event in 1999. The results of the sampling were inconclusive as to the source of the contamination. While the State has not yet commented on the sampling results, the Company believes that the source of contamination is unrelated to its past operations. As a PRP at various superfund sites in the U.S., the Company is or may be legally responsible, jointly and severally with other members of the PRP group, for the cost of remediation of these sites. Based on currently available data, the Company believes its contribution, and/or the contribution of its predecessors, to these sites was, in most cases, DE MINIMIS. The Company has established reserves of $0.6 million for future ascertainable costs of environmental remediation. Management does not believe that such costs, if any, in excess of the reserve will have a material adverse effect on the Company's results of operations or financial condition. In making this assessment, the Company considered all information available to it including its and other companies' reported prior experience in dealing with such matters, data released by the EPA and reports by independent environmental consultants regarding certain matters. The Company has made, and expects to continue to make, significant capital expenditures to upgrade its facilities in accordance with current and pending environmental regulations and administrative proceedings. F-19 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (9) COMMITMENTS AND CONTINGENCIES (CONTINUED) LEGAL The National Labor Relations Board ("NLRB") issued a decision ordering the Company to pay $1.5 million in back pay, plus interest, for a violation of certain sections of the National Labor Relations Act as a result of the Company's closure of certain facilities in 1991 and the failure to offer inter- plant job opportunities to affected certain employees. The Company appealed this decision on the grounds, among others, that the Company is entitled to a credit against this award for certain pension payments. The Company believes its appeal will be successful and the claim will not exceed the liability recorded. The Company, including the Subsidiaries, is involved in various legal actions and administrative proceedings. Management is of the opinion that their outcome will not have a material effect on the Company's financial position or results of operations. PURCHASE COMMITMENTS As part of its national lithography strategy, the Company is investing in certain lithography process equipment with a foreign vendor. In an effort to limit foreign exchange risk related to this purchase commitment, the Company entered into a series of German Deutsche Mark/Dollar forward hedge contracts with a sole remaining payment of $0.5 million due in February 2000. LEASES The Company has entered into agreements to lease certain property under terms which qualify as capital leases. Capital leases consist primarily of data processing equipment and various production machinery and equipment. Most capital leases contain renewal options and some contain purchase options. The December 31, 1999 and 1998 capital lease asset balances were $23.5 million and $31.7 million, net of accumulated amortization of $16.6 million and $20.4 million, respectively. The Company also maintains operating leases on various plant and office facilities, vehicles and office equipment. Rent expense under operating leases for the years ended December 31, 1999, 1998 and 1997, was $7.1 million, $6.8 million and $6.8 million, respectively. At December 31, 1999, minimum payments due under these leases were as follows (000's omitted):
CAPITAL OPERATING LEASES LEASES -------- --------- 2000..................................................... $ 2,666 $ 7,329 2001..................................................... 3,931 4,652 2002..................................................... 4,439 4,738 2003..................................................... 503 2,963 2004..................................................... 497 1,951 Thereafter............................................... 257 7,846 ------- ------- Total minimum lease payments....................... 12,293 $29,479 ======= Amount representing interest............................. (1,424) ------- Present value of net minimum capital lease payments...... $10,869 =======
F-20 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (10) EQUITY INCENTIVE PLANS The Company has one active plan, the 1999 Equity Incentive Plan, which provides options for management so as to align management's interest with those of the Company's shareholders. Under this program, 1,250,000 shares are available for issuance under options priced at market price on the grant date. All options issued to date under the 1999 Plan have a vesting schedule as follows: 30% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 110% of the market price on the grant date, 30% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 125% of the market price on the grant date, and the remaining 40% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 150% of the market price on the grant date. All previous plans have been frozen and no future grants will be made under those plans. Restricted shares are charged to stockholders' equity at their fair value and amortized as expense on a straight-line basis over the restriction period. Shares awarded were: 10,582 shares or $0.2 million in 1999; 17,140 shares or $0.3 million in 1998; 95,630 shares or $1.4 million in 1997. Amortization charges were $0.2 million, $1.7 million and $2.4 million during 1999, 1998 and 1997, respectively. A summary of the status of the Company's stock option plans at December 31, 1999, 1998 and 1997, and changes during the years then ended, are presented in the tables below:
OPTIONS OUTSTANDING EXERCISABLE OPTIONS --------------------- -------------------- WTD. AVG. WTD. AVG. EXERCISE EXERCISE SHARES PRICE SHARES PRICE --------- --------- -------- --------- January 1, 1997....................... 917,772 $13.63 744,499 $13.15 Granted............................. 100,000 19.03 Exercised........................... (12,000) 12.00 Canceled............................ (129,272) 3.63 --------- ------ December 31, 1997..................... 876,500 $14.63 867,250 $14.59 Granted............................. 916,750 16.91 Exercised........................... (112,222) 12.01 Canceled............................ (79,726) 17.38 --------- ------ December 31, 1998..................... 1,601,302 $15.93 820,280 $15.03 Granted............................. 154,300 21.95 Exercised........................... (225,280) 13.41 Canceled............................ (92,172) 16.88 --------- ------ December 31, 1999..................... 1,438,150 $16.82 801,212 $15.90 ========= ======
OPTIONS OUTSTANDING AT DECEMBER 31, 1999 EXERCISABLE OPTIONS ----------------------------------- AT DECEMBER 31, 1999 REMAINING --------------------- CONTRACTUAL WTD. AVG. WTD. AVG. LIFE EXERCISE EXERCISE SHARES (YEARS) PRICE SHARES PRICE --------- ----------- --------- --------- --------- $8.00 to $15.75............ 204,500 3.0 $11.42 194,501 $11.28 $16.00 to $27.00........... 1,233,650 8.0 17.72 606,711 17.38 --------- ------- 1,438,150 7.3 $16.82 801,212 $15.90 ========= =======
F-21 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (10) EQUITY INCENTIVE PLANS (CONTINUED) The Company accounts for the plan under APB Opinion No. 25; therefore, no compensation costs have been recognized for options granted. Had compensation costs been determined on the fair value-based accounting method for options granted in 1999, 1998 and 1997, pro forma net income (loss) would have been $20.1 million, ($19.5) million and ($32.4) million for 1999, 1998 and 1997, respectively. The weighted-average estimated fair value of options granted during 1999, 1998 and 1997 was $12.92, $8.80 and $6.80, respectively. The fair value of each option grant is determined on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for options granted in 1999, 1998 and 1997, respectively: risk-free interest rate of 5.8%, 5.2% and 6.2%; expected lives of 10.0 years, 8.9 years and 7.0 years; expected volatility of 35.2%, 33.1% and 28.3%; and no dividends for any year. (11) SHAREHOLDER RIGHTS PLAN/CHANGE OF CONTROL On October 19, 1995, the Corporation's Board of Directors adopted a Shareholder Rights Plan. The Board declared a distribution of one right (a "Right") for each share of Common Stock outstanding on October 19, 1995 (the "Record Date"). Each share of Common Stock issued after the Record Date will be issued with an attached Right. Rights will become exercisable and detachable only following the acquisition by a person or a group of 15 percent or more of the outstanding Common Stock of U.S. Can Corporation or following the announcement of a tender or exchange offer for 15 percent or more of the outstanding Common Stock. The Rights will, if they become exercisable, permit the holders of the Rights to purchase a certain amount of preferred stock of the Corporation at a 50 percent discount, or to exchange the Rights for Common Stock, if the Board permits. Where an acquiring company effects a merger or other control transaction with the Corporation, the Rights may also entitle the holder to acquire stock of the acquiring company at a 50 percent discount. If a person or group acquires 15 percent or more of the Common Stock (or announces a tender or exchange offer for 15 percent or more of the Common Stock), the acquiring person's or group's Rights become void. In certain circumstances, the Rights may be redeemed by the Company at an initial redemption price of $.01 per Right. If not redeemed, the Rights will expire ten years after the Record Date. In addition, the Company has adopted certain change of control protections that, under certain circumstances, would increase compensation and benefits of certain executive officers and other key managers. (12) BUSINESS SEGMENTS The Company has established three segments by which management monitors and evaluates business performance, customer base and market share. These segments (Aerosol; Paint, Plastic & General Line and Custom & Specialty) have separate management teams and distinct product lines. The aerosol segment has two units: United States and International. The segment primarily produces steel aerosol containers for personal care, household, automotive, paint and industrial products. The Paint, Plastic & General Line segment produces round cans for paint and coatings, oblong cans for such items as lighter fluid and turpentine as well as plastic containers for paint and F-22 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (12) BUSINESS SEGMENTS (CONTINUED) industrial and consumer products. The Custom & Specialty segment produces a wide array of functional and decorative tins, containers and other products. The accounting policies of the segments are the same as those described in Note (2) to the Consolidated Financial Statements. No single customer accounted for more than 10% of the Company's total net sales during 1999, 1998 or 1997. Financial information relating to the Company's operations by geographic area was as follows (000's omitted):
UNITED STATES EUROPE CONSOLIDATED -------- -------- ------------ 1999 Net sales................................... $587,780 $126,335 $714,115 Identifiable assets......................... 397,327 266,243 663,570 1998 Net sales................................... $593,606 $116,640 $710,246 Identifiable assets......................... 424,404 131,167 555,571 1997 Net sales................................... 650,643 $105,032 $755,675 Identifiable assets......................... 517,283 116,421 633,704
F-23 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (12) BUSINESS SEGMENTS (CONTINUED) The following is a summary of revenues from external customers, income (loss) from operations, capital spending, depreciation and amortization and identifiable assets for each segment for the years ended December 31, 1999, 1998 and 1997 (000's omitted):
1999 1998 1997 -------- -------- --------- Revenues from external customers: Aerosol..................................................... $483,459 $465,960 $ 479,521 Paint, Plastic, & General Line.............................. 161,698 164,050 186,509 Custom & Specialty.......................................... 68,367 74,873 84,829 Other....................................................... 591 5,363 4,816 -------- -------- --------- Total revenues........................................ $714,115 $710,246 $ 755,675 ======== ======== ========= Income (loss) from operations: Aerosol..................................................... $ 85,727 $ 80,168 $ 79,894 Paint, Plastic, & General Line.............................. 16,871 15,640 12,394 Custom & Specialty.......................................... 8,928 10,972 6,823 Corporate and eliminations (a) (b).......................... (42,823) (83,210) (105,218) -------- -------- --------- Total income (loss) from operations................... $ 68,703 $ 23,570 $ (6,107) ======== ======== ========= Capital spending: Aerosol..................................................... $ 21,877 $ 16,704 $ 33,847 Paint, Plastic, & General Line.............................. 5,866 1,360 8,560 Custom & Specialty.......................................... 956 547 7,270 Corporate................................................... 2,283 4,217 4,353 -------- -------- --------- Total capital spending................................ $ 30,982 $ 22,828 $ 54,030 ======== ======== ========= Depreciation and amortization: Aerosol..................................................... $ 18,554 $ 20,761 $ 22,481 Paint, Plastic, & General Line.............................. 5,680 5,649 6,051 Custom & Specialty.......................................... 2,476 2,457 2,577 Corporate................................................... 5,153 6,572 11,325 -------- -------- --------- Total depreciation and amortization................... $ 31,863 $ 35,439 $ 42,434 ======== ======== ========= Identifiable assets: Aerosol..................................................... $441,126 $308,944 $ 307,590 Paint, Plastic, & General Line.............................. 92,471 92,629 100,600 Custom & Specialty.......................................... 71,625 73,019 93,972 Corporate................................................... 58,348 80,979 131,542 -------- -------- --------- Total identifiable assets............................. $663,570 $555,571 $ 633,704 ======== ======== =========
- ------------------------ (a) Special charges are included in Corporate costs. Management does not evaluate segment performance including such charges. (b) Selling, general and administrative costs are not allocated to individual segments. (13) RECENT DEVELOPMENTS On October 4, 2000, U.S. Can Corporation and Berkshire Partners LLC completed a recapitalization of the Company through a merger. As a result of the recapitalization, all of U.S. Can's common stock, other than certain shares held by designated continuing shareholders (the rollover shareholders), was converted into the right to receive $20.00 in cash per share and options to purchase F-24 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (13) RECENT DEVELOPMENTS (CONTINUED) approximately 1.6 million shares of U.S. Can's common stock were retired in exchange for a cash payment of $20.00 per underlying share, less the applicable option price. Certain shares held by the rollover shareholders were converted into the right to receive $20.00 in cash per share and certain shares held by the rollover shareholders were converted into the right to receive shares of capital stock of the surviving corporation in the merger. The recapitalization was financed by: - a $106.7 million preferred stock investment by Berkshire Partners, its co-investors and certain of the rollover stockholders; - a $53.3 million common stock investment by Berkshire Partners, its co-investors, certain of the rollover stockholders and management; - $260.0 million in term loans under a new senior bank credit facility; - $20.5 million in borrowings under a new revolving credit facility; and - $175.0 million from the sale of 12 3/8% Senior Subordinated Notes due 2010. Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the Company's former the credit agreement, to repay the principal, accrued interest and tender premium applicable to U.S. Can's 10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to U.S. Can's existing stockholders and optionholders as previously described. The recapitalization will have a significant impact on the balance sheet and results of operations of the Company. The Company expects to record a charge of approximately $18.9 million related to the recapitalization in the fourth quarter of 2000. We also expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. (14) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent Guarantor"), United States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"), and the Parent Guarantor's European subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor Subsidiaries"), as of and for the years ended December 31, 1999, 1998 and 1997. The Subsidiary Guarantor was formed by the Issuer in December 1999. Investments in subsidiaries are accounted for by the Parent Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, therefore, reflected in their parent's investment accounts and earnings. This consolidating information reflects the guarantors and non-guarantors of the new 12 3/8% senior subordinated notes due 2010. Previously provided condensed consolidating financial data included in the Parent Guarantor's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 reflected the guarantors and non-guarantors of the old 10 1/8% senior subordinated notes due 2006. The 12 3/8% senior subordinated notes due 2010 are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted subsidiary of the Issuer. USC May Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only Subsidiary Guarantor. The Parent Guarantor has no assets or operations separate from its investment in the Issuer. F-25 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES...................... $ -- $587,780 $126,335 $ -- $714,115 COST OF SALES.................. -- 501,201 110,428 -- 611,629 ------- -------- -------- -------- -------- Gross income................. -- 86,579 15,907 -- 102,486 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... -- 26,627 7,156 -- 33,783 ------- -------- -------- -------- -------- Operating income............. -- 59,952 8,751 -- 68,703 INTEREST EXPENSE ON BORROWINGS................... -- 26,272 2,454 -- 28,726 AMORTIZATION OF DEFERRED FINANCING COSTS.............. -- 1,175 -- -- 1,175 OTHER EXPENSES................. -- 1,728 -- -- 1,728 EQUITY IN EARNINGS OF SUBSIDIARIES................. 21,156 4,103 -- (25,259) -- ------- -------- -------- -------- -------- Income (loss) before income taxes...................... 21,156 34,880 6,297 (25,259) 37,074 PROVISION FOR INCOME TAXES..... -- 12,428 2,194 -- 14,622 EXTRAORDINARY ITEM--LOSS ON THE EARLY EXTINGUISHMENT OF DEBT, net of income tax............ -- (1,296) -- -- (1,296) ------- -------- -------- -------- -------- NET INCOME..................... $21,156 $ 21,156 $ 4,103 $(25,259) $ 21,156 ======= ======== ======== ======== ========
F-26 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (000'S OMITTED)
USC USC MAY EUROPE/ MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- U.S. CAN (PARENT COMPANY (SUBSIDIARY GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- ------------- ------------ ------------ CURRENT ASSETS: Cash and cash equivalents.... $ -- $ 2,095 $ -- $ 13,602 $ -- $ 15,697 Accounts receivable.......... -- 45,205 -- 46,659 -- 91,864 Inventories.................. -- 66,360 -- 49,619 -- 115,979 Prepaid expenses and other assets..................... -- 30,377 5,414 -- 35,791 -------- -------- ------- -------- --------- -------- Total current assets....... -- 144,037 -- 115,294 -- 259,331 NET PROPERTY, PLANT AND EQUIPMENT.................... -- 191,997 -- 140,507 -- 332,504 INTANGIBLE ASSETS.............. -- 50,200 -- 278 -- 50,478 OTHER ASSETS................... 4,891 6,202 -- 10,164 -- 21,257 INTERCOMPANY ADVANCES.......... 242,654 -- -- -- (242,654) -- INVESTMENT IN SUBSIDIARIES..... 57,640 50,919 63,847 -- (172,406) -- -------- -------- ------- -------- --------- -------- Total assets............... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt............. $ -- $ 19,562 $ -- $ 19,262 $ -- $ 38,824 Accounts payable............. -- 50,083 -- 54,106 -- 104,189 Other current liabilities.... -- 62,594 -- 15,990 -- 78,584 -------- -------- ------- -------- --------- -------- Total current liabilities.............. -- 132,239 -- 89,358 -- 221,597 SENIOR DEBT.................... -- 54,536 -- 29,328 -- 83,864 SUBORDINATED DEBT.............. 236,629 -- -- -- -- 236,629 OTHER LONG-TERM LIABILITIES.... -- 43,317 -- 9,607 -- 52,924 INTERCOMPANY ADVANCES.......... -- 155,623 63,847 23,184 (242,654) -- STOCKHOLDERS' EQUITY........... 68,556 57,640 -- 114,766 (172,406) 68,556 -------- -------- ------- -------- --------- -------- Total liabilities and stockholders' equity..... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ========
F-27 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
USC MAY USC EUROPE/ MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- (PARENT COMPANY (SUBSIDIARY GUARANTOR U.S. CAN GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) CORPORATION ----------- ------------- ----------- --------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES.......................... $ -- $ 51,865 $ -- $10,587 $ 62,452 -------- -------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures................ -- (24,909) -- (6,073) (30,982) Acquisition of businesses, net of cash acquired..................... -- -- (63,847) -- (63,847) Proceeds on the sale of business.... -- 4,500 -- -- 4,500 Proceeds on the sale of property.... 448 -- -- 448 Investment in Formametal S.A........ -- -- -- (1,600) (1,600) -------- -------- -------- ------- -------- Net cash used in investing activities...................... -- (19,961) (63,847) (7,673) (91,481) -------- -------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances..... 25,378 (95,917) 63,847 6,692 -- Issuance of common stock and exercise of stock options......... 2,820 -- -- 2,820 Net borrowings under the revolving line of credit and changes in cash overdrafts........................ -- 23,159 -- 394 23,553 Repurchase of 10 1/8% notes......... (27,696) -- -- -- (27,696) Borrowings of other long-term debt, including capital lease obligations....................... -- 38,598 -- -- 38,598 Payments of other long-term debt, including capital lease obligations....................... -- (5,057) -- (4,392) (9,449) Purchase of treasury stock.......... (502) -- -- -- (502) -------- -------- -------- ------- -------- Net cash (used in) provided by financing activities............ -- (39,217) 63,847 2,694 27,324 -------- -------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ -- -- -- (670) (670) -------- -------- -------- ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... -- (7,313) -- 4,938 (2,375) CASH AND CASH EQUIVALENTS, beginning of year............................. -- 9,408 -- 8,664 18,072 -------- -------- -------- ------- -------- CASH AND CASH EQUIVALENTS, end of period.............................. $ -- $ 2,095 $ -- $13,602 $ 15,697 ======== ======== ======== ======= ========
F-28 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES............................. $ -- $593,606 $116,640 $ -- $710,246 COST OF SALES......................... -- 513,886 104,270 -- 618,156 -------- -------- -------- ------- -------- Gross income........................ -- 79,720 12,370 -- 92,090 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................ -- 26,183 6,468 -- 32,651 SPECIAL CHARGES....................... -- 35,869 -- -- 35,869 -------- -------- -------- ------- -------- Operating income.................... -- 17,668 5,902 -- 23,570 INTEREST EXPENSE ON BORROWINGS........ -- 30,582 2,600 -- 33,182 AMORTIZATION OF DEFERRED FINANCING COSTS............................... -- 1,753 -- 1,753 OTHER EXPENSES........................ -- 1,822 -- -- 1,822 EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY.......................... (16,053) 2,048 -- 14,005 -- -------- -------- -------- ------- -------- Income (loss) before income taxes... (16,053) (14,441) 3,302 14,005 (13,187) PROVISION (BENEFIT) FOR INCOME TAXES............................... -- (6,916) 1,254 -- (5,662) NET LOSS FROM DISCONTINUED OPERATIONS.......................... -- (8,528) -- -- (8,528) -------- -------- -------- ------- -------- NET INCOME (LOSS)..................... $(16,053) $(16,053) $ 2,048 $14,005 $(16,053) ======== ======== ======== ======= ========
F-29 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE (PARENT COMPANY (NON-GUARANTOR U.S. CAN GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CORPORATION ----------- ------------- -------------- ------------ ----------- CURRENT ASSETS: Cash and cash equivalents........... $ -- $ 9,408 $ 8,664 $ -- $ 18,072 Accounts receivable................. -- 41,461 22,281 -- 63,742 Inventories......................... -- 74,965 19,922 -- 94,887 Prepaid expenses and other assets... -- 35,856 3,089 -- 38,945 -------- -------- -------- --------- -------- Total current assets.............. -- 161,690 53,956 -- 215,646 NET PROPERTY, PLANT AND EQUIPMENT..... -- 197,677 70,325 -- 268,002 INTANGIBLE ASSETS..................... -- 51,928 -- -- 51,928 OTHER ASSETS.......................... 6,262 6,847 6,886 -- 19,995 INTERCOMPANY ADVANCES................. 265,428 15,387 -- (280,815) -- INVESTMENT IN SUBSIDIARIES............ 42,812 53,144 -- (95,956) -- -------- -------- -------- --------- -------- Total assets...................... $314,502 $486,673 $131,167 $(376,771) $555,571 ======== ======== ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt.............................. $ -- $ 3,922 $ 2,809 $ -- $ 6,731 Accounts payable.................... -- 37,089 15,228 -- 52,317 Other current liabilities........... -- 67,735 12,751 -- 80,486 -------- -------- -------- --------- -------- Total current liabilities......... -- 108,746 30,788 -- 139,534 SENIOR DEBT........................... -- 19,134 26,483 -- 45,617 SUBORDINATED DEBT..................... 264,325 -- -- -- 264,325 OTHER LONG-TERM LIABILITIES........... -- 51,656 4,262 -- 55,918 INTERCOMPANY PAYABLES................. -- 264,325 16,490 (280,815) -- STOCKHOLDERS' EQUITY.................. 50,177 42,812 53,144 (95,956) 50,177 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity............ $314,502 $486,673 $131,167 $(376,771) $555,571 ======== ======== ======== ========= ========
F-30 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES.............. $ -- $54,913 $10,050 $64,963 ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................ -- (17,266) (5,562) (22,828) Proceeds on the sale of business................ -- 28,296 -- 28,296 Proceeds on the sale of property................ 6,578 23 6,601 Investment in Formametal S.A.................... -- -- (3,000) (3,000) ------- ------- ------- ------- Net cash used in investing activities......... -- 17,608 (8,539) 9,069 ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances................. 10,747 (13,747) 3,000 -- Issuance of common stock and exercise of stock options....................................... 1,658 -- -- 1,658 Net borrowings under the revolving line of credit and changes in cash overdrafts......... -- (36,770) -- (36,770) Repurchase of 10 1/8% notes..................... (10,675) -- -- (10,675) Payments of other long-term debt, including capital lease obligations..................... -- (13,011) (2,607) (15,618) Purchase of treasury stock...................... (1,730) -- -- (1,730) ------- ------- ------- ------- Net cash (used in) provided by financing activities.................................. -- (63,528) 393 (63,135) ------- ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH........... -- -- 402 402 ------- ------- ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS............. -- 8,993 2,306 11,299 CASH AND CASH EQUIVALENTS, beginning of year...... -- 415 6,358 6,773 ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, end of period.......... $ -- $ 9,408 $ 8,664 $18,072 ======= ======= ======= =======
F-31 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES............................. $ -- $650,643 $105,032 $ -- $755,675 COST OF SALES......................... -- 569,292 96,463 -- 665,755 -------- -------- -------- ------- -------- Gross income........................ -- 81,351 8,569 -- 89,920 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................ -- 28,784 4,263 -- 33,047 SPECIAL CHARGES....................... -- 62,980 -- -- 62,980 -------- -------- -------- ------- -------- Operating income (loss)............. -- (10,413) 4,306 (6,107) INTEREST EXPENSE ON BORROWINGS........ -- 34,869 1,998 -- 36,867 AMORTIZATION OF DEFERRED FINANCING COSTS............................... -- 1,738 -- 1,738 OTHER EXPENSES........................ -- 1,986 -- -- 1,986 EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY.......................... (32,032) 1,312 -- 30,720 -- -------- -------- -------- ------- -------- Income (loss) before income taxes... (32,032) (47,694) 2,308 30,720 (46,698) PROVISION (BENEFIT) FOR INCOME TAXES............................... -- (17,788) 996 -- (16,792) NET INCOME FROM DISCONTINUED OPERATIONS.......................... -- 1,078 -- -- 1,078 NET LOSS FROM DISCONTINUATION OF BUSINESS............................ -- (3,204) -- -- (3,204) -------- -------- -------- ------- -------- NET INCOME (LOSS)..................... $(32,032) $(32,032) $ 1,312 $30,720 $(32,032) ======== ======== ======== ======= ========
F-32 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH PROVIDED BY OPERATING ACTIVITIES........... $ -- $ 73,220 $ (9,111) $ 64,109 ------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.......................... -- (36,122) (17,908) (54,030) Acquisition of businesses, net of cash acquired.................................... -- (12,398) -- (12,398) Proceeds on the sale of business.............. -- 1,000 -- 1,000 Proceeds on the sale of property.............. -- 630 630 ------- -------- -------- -------- Net cash used in investing activities....... -- (47,520) (17,278) (64,798) ------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances............... 1,027 (3,553) 2,526 -- Issuance of common stock and exercise of stock options..................................... 152 -- -- 152 Net borrowings under the revolving line of credit and changes in cash overdrafts....... 5,962 -- 5,962 Borrowings of other long-term debt, including capital lease obligations................... -- (1,086) 26,021 24,935 Payments of other long-term debt, including capital lease obligations..................... -- (25,662) (724) (26,386) Payments of debt refinancing costs............ -- (1,574) -- (1,574) Purchase of treasury stock.................... (1,179) -- -- (1,179) ------- -------- -------- -------- Net cash (used in) provided by financing activities................................ -- (25,913) 27,823 1,910 ------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH......... -- -- (2,414) (2,414) ------- -------- -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS........... -- (213) (980) (1,193) CASH AND CASH EQUIVALENTS, beginning of year.... -- 628 7,338 7,966 ------- -------- -------- -------- CASH AND CASH EQUIVALENTS, end of period........ $ -- $ 415 $ 6,358 $ 6,773 ======= ======== ======== ========
F-33 U.S. CAN CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL DATA (UNAUDITED) (000'S OMITTED) The following is a summary of the unaudited interim results of operations for each of the quarters in 1999 and 1998.
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR ------------------- ------------------- ------------------- ------------------- 1999 1998 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- -------- -------- NET SALES................................. $184,916 $192,363 $186,773 $183,473 $178,123 $177,920 $164,303 $156,490 SPECIAL CHARGES(a)........................ -- -- -- -- -- 35,869 -- OPERATING INCOME (LOSS)................... 17,620 14,955 19,827 15,190 17,248 (20,099) 14,008 13,524 INCOME (LOSS) FROM CONTINUING OPERATIONS.............................. 5,551 3,082 7,138 3,805 6,006 (17,358) 3,757 2,946 NET INCOME (LOSS).................................. $ 5,551 $ 3,082 $ 6,330 $ 3,805 $ 5,518 $(25,886) $ 3,757 $ 2,946 ======== ======== ======== ======== ======== ======== ======== ========
- ------------------------------ (a) See Note 3 of the "Notes to Consolidated Financial Statements." F-34 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (000'S OMITTED)
FOR THE QUARTERLY FOR THE NINE MONTHS PERIOD ENDED ENDED ------------------------- ------------------------ OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3 2000 1999 2000 1999 ----------- ----------- ----------- ---------- NET SALES........................................... $194,655 $178,123 $607,000 $549,812 COST OF SALES....................................... 164,933 152,742 517,562 470,116 -------- -------- -------- -------- Gross income...................................... 29,722 25,381 89,438 79,696 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 10,079 8,133 32,457 25,001 SPECIAL CHARGES..................................... 3,413 -- 3,413 -- -------- -------- -------- -------- Operating income.................................... 16,230 17,248 53,568 54,695 INTEREST EXPENSE ON BORROWINGS...................... 8,184 6,841 24,556 21,758 AMORTIZATION OF DEFERRED FINANCING COSTS............ 381 278 1,161 898 OTHER EXPENSES...................................... 624 432 1,910 1,296 -------- -------- -------- -------- Income before income taxes.......................... 7,041 9,697 25,941 30,743 PROVISION FOR INCOME TAXES.......................... 2,665 3,691 9,807 12,048 -------- -------- -------- -------- Income from operations before extraordinary item.... 4,376 6,006 16,134 18,695 EXTRAORDINARY ITEM, net of income taxes Net loss from early extinguishment of debt.......... -- (488) -- (1,296) -------- -------- -------- -------- NET INCOME.......................................... $ 4,376 $ 5,518 $ 16,134 $ 17,399 ======== ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-35 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE DATA)
OCTOBER 1, DECEMBER 31, 2000 1999 ---------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 7,414 $ 15,697 Accounts receivables, less allowances of $10,871 and $13,367 as of October 1, 2000 and December 31, 1999, respectively............................................ 107,377 91,864 Inventories............................................... 112,580 115,979 Prepaid expenses and other current assets................. 21,261 19,677 Prepaid income taxes...................................... 16,116 16,114 --------- --------- Total current assets.................................... 264,748 259,331 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land...................................................... 6,598 14,541 Buildings................................................. 65,109 83,106 Machinery, equipment and construction in process.......... 432,756 463,400 --------- --------- 504,463 561,047 Less--Accumulated depreciation and amortization........... (232,759) (228,543) --------- --------- Total property, plant and equipment..................... 271,704 332,504 --------- --------- INTANGIBLE ASSETS, less amortization of $13,042 and $12,211 as of October 1, 2000 and December 31, 1999, respectively.............................................. 65,144 50,478 OTHER ASSETS................................................ 24,429 21,257 --------- --------- Total assets............................................ $ 626,025 $ 663,570 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 10,955 $ 38,824 Accounts payable.......................................... 108,478 104,189 Accrued payroll, benefits and insurance................... 24,309 29,500 Restructuring reserves.................................... 13,652 25,016 Other current liabilities................................. 36,273 24,068 --------- --------- Total current liabilities............................... 193,667 221,597 --------- --------- SENIOR DEBT................................................. 71,239 83,864 SUBORDINATED DEBT........................................... 236,629 236,629 --------- --------- Total long-term debt.................................... 307,868 320,493 --------- --------- OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 13,259 10,670 Other long-term liabilities............................... 42,700 42,254 --------- --------- Total other long-term liabilities....................... 55,959 52,924 --------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued or outstanding.................. -- -- Common stock, $0.01 par value; 50,000,000 shares authorized, 13,659,278 and 13,446,933 shares issued as of October 1, 2000 and December 31, 1999, respectively............................................ 137 135 Paid-in-capital........................................... 114,541 112,840 Unearned restricted stock................................. (305) (629) Treasury common stock, at cost; 85,873 and 83,024 shares at October 1, 2000 and December 31, 1999, respectively............................................ (1,868) (1,380) Currency translation adjustment........................... (25,469) (7,771) Accumulated deficit....................................... (18,505) (34,639) --------- --------- Total stockholders' equity.............................. 68,531 68,556 --------- --------- Total liabilities and stockholders' equity.............. $ 626,025 $ 663,570 ========= =========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-36 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (000'S OMITTED)
NINE MONTH PERIOD ENDED ----------------------- OCTOBER 1, OCTOBER 3, 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 16,134 $ 17,399 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization........................... 26,788 25,419 Special Charge.......................................... 3,413 -- Extraordinary loss on extinguishment of debt............ -- 1,296 Deferred income taxes................................... 3,004 2,240 Change in operating assets and liabilities, net of effect of acquired and disposed of businesses: Accounts receivable..................................... (27,386) (16,835) Inventories............................................. (7,450) 5,847 Accounts payable........................................ 12,873 12,383 Accrued payroll, benefits and insurance................. 1,768 9,712 Other, net.............................................. (3,196) 1,877 -------- -------- Net cash provided by operating activities............. 25,948 59,338 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (16,519) (19,713) Proceeds from sale of business............................ 12,088 4,500 Proceeds from sale of property............................ 7,855 556 Investment in Formametal S.A.............................. (4,914) (1,644) -------- -------- Net cash used in investing activities................... (1,490) (16,301) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock and exercise of stock options.... 1,700 1,959 Repurchase of 10 1/8% notes............................... -- (27,696) Payments of long-term debt, including capital lease obligations............................................. (33,993) (2,478) Purchase of treasury stock................................ (488) (210) -------- -------- Net cash used in financing activities................... (32,781) (28,425) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 40 1 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (8,283) 14,613 CASH AND CASH EQUIVALENTS, beginning of year................ 15,697 18,072 -------- -------- CASH AND CASH EQUIVALENTS, end of year...................... $ 7,414 $ 32,685 ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-37 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 1, 2000 (UNAUDITED) (1) PRINCIPLES OF REPORTING The condensed consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation"), its wholly owned subsidiary, United States Can Company ("U.S. Can"), and U.S. Can's subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated. These financial statements, in the opinion of management, include normal recurring adjustments necessary for a fair presentation. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year. Generally, quarterly accounting periods are based upon two four-week periods and one five-week period. These financial statements are to be read in conjunction with the previously filed financial statements and footnotes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999. (2) SPECIAL CHARGES On July 7, 2000, the Company announced a reduction in force program, under which 73 salaried and 34 hourly positions have been eliminated. A one-time charge of $3.4 million for severance and other termination related costs was recorded in the third quarter of 2000. The Company expects to realize annual savings of $5.0 million from this program. On March 10, 2000, the Company sold its Wheeling metal closures and the Warren lithography businesses for $12.1 million in cash. The Company established a disposition provision for the anticipated loss on the sale of the metal closures business in connection with the special charge taken in 1998. Cash costs for restructuring activities in the first nine months of 2000 were $2.9 million. The Company anticipates spending another $3.2 million of such costs in 2000 and $9.3 million in cash costs in 2001 and beyond. The Company continuously evaluates the composition of its various manufacturing facilities in light of current and expected market conditions and demand. (3) ACQUISITIONS On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH & Co., KG ("May"), a German limited liability company. The acquisition was financed using the borrowings made by U.S. Can under the Credit Agreement (see Note 6) for an aggregate amount of $64.6 million. F-38 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (3) ACQUISITIONS (CONTINUED) The following is a summary of the preliminary allocation of the aggregate purchase price for May (000's omitted): Current Assets.............................................. $ 53,744 Property, Plant and Equipment............................... 53,037 Goodwill.................................................... 21,880 Other Assets................................................ 3,708 Current Portion of Long Term Debt........................... (17,023) Current Liabilities......................................... (38,722) Long-Term Debt.............................................. (6,552) Other Liabilities........................................... (5,484) -------- Total Purchase Price........................................ $ 64,588 ========
The acquisition was accounted for as a purchase for financial reporting purposes; therefore 1999 results do not include operations related to the acquired business. Certain assets and liabilities of May were revalued to estimated fair values as of the acquisition date. The final amounts recorded may differ based on results of further evaluations of the fair value of the acquired assets and liabilities. The following represents the Company's unaudited pro forma results of operations for the third quarter and first nine months of 1999 as if the May acquisition had occurred on January 1, 1999 (000's omitted, except per share data):
FIRST NINE- THIRD QUARTER 1999 MONTHS 1999 ------------------ ----------- Net Sales....................................... $216,782 $656,754 Net Income...................................... 6,201 18,268
May's pre-acquisition results have been adjusted to reflect amortization of goodwill, the depreciation expense impact of the increased fair market value of property, plant and equipment, interest expense on acquisition borrowings, changes in contractual agreements and the effect of income taxes on the pro forma adjustments. The pro forma information given above does not purport to be indicative of the results that would have been obtained if the operations were combined during the periods presented and is not intended to be a projection of future results or trends. (4) INVENTORIES All domestic inventories, except machine parts, are stated at cost determined by the last-in, first-out ("LIFO") cost method, not in excess of market. Inventories of approximately $47.2 million at October 1, 2000 and $49.6 million at December 31, 1999, at the European subsidiaries and machine shop inventory are stated at cost determined by the first-in, first-out ("FIFO") cost method, not in excess of market. FIFO cost of LIFO inventories approximated their LIFO value at October 1, 2000 and at December 31, 1999. F-39 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (4) INVENTORIES (CONTINUED) Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
OCTOBER 1, DECEMBER 31, 2000 1999 ---------- ------------ Raw materials......................................... $ 25,920 $ 30,821 Work in process....................................... 50,324 49,884 Finished goods........................................ 36,336 35,274 -------- -------- $112,580 $115,979 ======== ========
(5) RECENT DEVELOPMENTS On October 4, 2000, U.S. Can Corporation and Berkshire Partners LLC completed a recapitalization of the Company through a merger. As a result of the recapitalization, all of U.S. Can's common stock, other than certain shares held by designated continuing shareholders (the rollover shareholders), was converted into the right to receive $20.00 in cash per share and options to purchase approximately 1.6 million shares of U.S. Can's common stock were retired in exchange for a cash payment of $20.00 per underlying share, less the applicable option price. Certain shares held by the rollover shareholders were converted into the right to receive $20.00 in cash per share and certain shares held by the rollover shareholders were converted into the right to receive shares of capital stock of the surviving corporation in the merger. The recapitalization was financed by: - a $106.7 million preferred stock investment by Berkshire Partners, its co-investors and certain of the rollover stockholders; - a $53.3 million common stock investment by Berkshire Partners, its co-investors, certain of the rollover stockholders and management; - $260.0 million in term loans under a new senior bank credit facility; - $20.5 million in borrowings under a new revolving credit facility; and - $175.0 million from the sale of 12 3/8% Senior Subordinated Notes due 2010. Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the Company's former the credit agreement, to repay the principal, accrued interest and tender premium applicable to U.S. Can's 10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to U.S. Can's existing stockholders and optionholders as previously described. The recapitalization will have a significant impact on the balance sheet and results of operations of the Company. The Company expects to record a charge of approximately $18.9 million related to the recapitalization in the fourth quarter of 2000. We also expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. F-40 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (6) DEBT OBLIGATIONS In connection with the recapitalization discussed above, the Company entered into a Credit Agreement among United States Can Company, as Borrower, U.S. Can Corporation and Domestic Subsidiaries of U.S. Can Corporation as Domestic Guarantors, and certain lenders including Bank of America, N.A., Citicorp North America, Inc., and Bank One NA as of October 4, 2000 (the "Senior Secured Credit Facility"). The Senior Secured Credit Facility provides for aggregate borrowings of $400.0 million consisting of: (i)$80.0 million tranche A loan; (ii) $180.0 million tranche B loan; and (iii) $140.0 million in availability under a revolving credit facility. All of the term debt and approximately $20.5 million under the revolving credit facility were used to finance the recapitalization. Amounts outstanding under the Senior Secured Credit Facility bear interest at a rate per annum equal to either: (1) the base rate (as defined in the Senior Secured Credit Facility) or (2) the LIBOR rate (as defined in the Senior Secured Credit Facility), in each case, plus an applicable margin. The applicable margins are subject to future reductions based on the achievement of certain leverage ratio targets and on senior secured credit rating. The applicable margins are not subject to reduction until after March 2001. Borrowings under the tranche A term loan are due and payable in quarterly installments, which are initially $1.0 million and increase over time to $8.0 million, until the final balance is due on October 4, 2006. Borrowings under the tranche B term loan are due and payable in quarterly installments (the quarterly payments due before December 31, 2006 being in nominal amounts), with the final balance due on October 4, 2008. The revolving credit facility is available until October 4, 2006. In addition, the Company is required to prepay a portion of the facilities under the Senior Secured Credit Facility upon the occurrence of certain specified events. The Senior Secured Credit Facility is secured by a first priority security interest in all existing and after-acquired assets of the Company and its direct and indirect domestic subsidiaries' existing and after-acquired assets, including, without limitation, real property and all of the capital stock owned of our direct and indirect domestic subsidiaries (including certain capital stock of their direct foreign subsidiaries only to the extent permitted by applicable law). In addition, if loans are made to foreign subsidiaries, they will be secured by the existing and after-acquired assets of certain of our foreign subsidiaries. The Company also issued $175.0 million aggregate principal amount of 12 3/8% Senior Subordinated Notes due October 1, 2010 ("Notes"). The Notes are unsecured obligations of U.S. Can and are subordinated in right of payment to all of U.S. Can's senior indebtedness. The Notes are guaranteed by the Corporation and all of U.S. Can's domestic restricted subsidiaries. Both the Senior Secured Credit Facility and the Notes contain a number of financial and restrictive covenants. In general, the financial covenants require the achievement of specified earnings and debt levels. The restrictive covenants limit the Company's ability to incur debt, pay dividends or make distributions, sell assets or consolidate or merge with other companies. As part of the debt-refinancing portion of the recapitalization, the Corporation completed a tender offer and consent solicitation for all of its outstanding 10 1/8% notes due 2006, plus accrued interest and a bond tender premium. $235.7 million of the $236.6 million principal amount of bonds outstanding F-41 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (6) DEBT OBLIGATIONS (CONTINUED) were purchased by the Corporation in the tender offer. An extraordinary charge related to the tender premium and the write-off of remaining deferred financing charges will be taken in the fourth quarter of 2000. As of October 1, 2000, after giving pro forma effect to the recapitalization, there would have been approximately $502.1 million of outstanding indebtedness. For further discussion of the recapitalization see Note (5). (7) SUPPLEMENTAL CASH FLOW INFORMATION The Company paid interest of approximately $13.9 million and $14.3 million for the nine-month periods ended October 1, 2000 and October 3, 1999, respectively. The Company paid approximately $0.4 million and $0.8 million of income taxes for the nine-month periods ended October 1, 2000 and October 3, 1999, respectively. During the nine-month period ended October 3, 1999, the Company issued stock valued at approximately $0.9 million to certain of its employee benefit plans. No stock was contributed in 2000. (8) NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998 (amended by SFAS No. 137 to delay implementation) and will be adopted by the Company in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is evaluating SFAS No. 133, but does not believe this pronouncement will have a material impact on the Company's financial position or results of operations. (9) BUSINESS SEGMENTS The Company has established three segments by which management monitors and evaluates business performance, customer base and market share. These segments (Aerosol; Paint, Plastic & General Line and Custom & Specialty) have separate management teams and distinct product lines. The aerosol segment produces steel aerosol containers for personal care, household, automotive, paint and industrial products and has two units: United States and International. The Paint, Plastic & General Line segment produces round metal cans for paint and coatings, oblong cans for items such as lighter fluid and turpentine, and plastic containers for industrial and consumer products. Custom & Specialty produces a wide array of functional and decorative tins and other containers, and beginning in the first quarter of 2000, the pet food and specialty food containers of May. The May acquisition was accounted for as a purchase for financial reporting purposes; therefore, previously reported 1999 results did not include May's operations. For the year ended December 31, 1999, identifiable assets of May were reported as part of the Aerosol segment. F-42 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (9) BUSINESS SEGMENTS (CONTINUED) The following is a summary of revenues from external customers and income (loss) from operations for the three and nine-month periods ended October 1, 2000 and October 3, 1999, respectively (000's omitted):
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------- ----------------------- OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- REVENUES FROM EXTERNAL CUSTOMERS: Aerosol............................................. $114,731 $119,787 $362,786 $372,742 Paint, Plastic, & General Line...................... 39,722 41,135 120,468 127,209 Custom & Specialty.................................. 40,202 17,201 123,746 49,861 -------- -------- -------- -------- Total revenues...................................... $194,655 $178,123 $607,000 $549,812 ======== ======== ======== ======== INCOME (LOSS) FROM OPERATIONS: Aerosol............................................. $ 19,986 $ 20,97 $ 62,411 $ 66,735 Paint, Plastic, & General Line...................... 4,070 4,190 10,475 14,380 Custom & Specialty.................................. 5,666 3,016 16,552 7,070 Corporate and eliminations.......................... (13,492) (10,934) (35,870) (33,490) -------- -------- -------- -------- Total income from operations........................ $ 16,230 $ 17,248 $ 53,568 $ 54,695 ======== ======== ======== ========
(10) COMPREHENSIVE NET INCOME The components of comprehensive income for the three months and nine months ended October 1, 2000 and October 3, 1999 are as follows (000's omitted):
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------- ----------------------- OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Income........................................... $ 4,376 $5,518 $ 16,134 $17,399 Foreign Currency Translation Adjustment.............. (7,669) 3,111 (17,698) (3,422) ------- ------ -------- ------- Comprehensive Income................................. $(3,293) $8,629 $ (1,564) $13,977 ======= ====== ======== =======
(11) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent Guarantor"), United States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"), and the Parent Guarantor's European subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor Subsidiaries"), as of October 1, 2000 and December 31, 1999 and for the nine months ended October 1, 2000 and October 3, 1999. The Subsidiary Guarantor was formed by the Issuer in December 1999. Investments in subsidiaries are accounted for by the Parent Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, F-43 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (11) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION (CONTINUED) therefore, reflected in their parent's investment accounts and earnings. This consolidating information reflects the guarantors and non-guarantors of the new 12 3/8% senior subordinated notes due 2010. Previously provided condensed consolidating financial data included in the Parent Guarantor's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 reflected the guarantors and non-guarantors of the old 10 1/8% senior subordinated notes due 2006. The 12 3/8% senior subordinated notes due 2010 are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted subsidiary of the Issuer. USC May Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only Subsidiary Guarantor. The Parent Guarantor has no assets or operations separate from its investment in the Issuer. F-44 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (UNAUDITED) (000'S OMITTED)
USC MAY USC EUROPE/ U.S. CAN VERPACKUGEN MAY CORPORATION UNITED STATES HOLDING VERPACKUGEN U.S. CAN (PARENT CAN COMPANY (SUBSIDIARY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- -------------- ------------ ------------ NET SALES.............................. $ -- $430,022 $ -- $176,978 $ -- $607,000 COST OF SALES.......................... -- 365,075 -- 152,487 -- 517,562 ------- -------- ------- -------- -------- -------- Gross income......................... -- 64,947 -- 24,491 89,438 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................. -- 21,258 -- 11,199 -- 32,457 SPECIAL CHARGES........................ 3,413 -- -- -- 3,413 ------- -------- ------- -------- -------- -------- Operating income..................... -- 40,276 -- 13,292 -- 53,568 INTEREST EXPENSE ON BORROWINGS......... 18,482 4,072 2,002 24,556 AMORTIZATION OF DEFERRED FINANCING COSTS................................ -- 781 380 -- -- 1,161 OTHER EXPENSES......................... -- 1,074 -- 836 -- 1,910 EQUITY IN EARNINGS OF SUBSIDIARIES..... 16,134 3,900 2,317 -- (22,351) -- PROVISION (BENEFIT) FOR INCOME TAXES... -- 7,705 (1,692) 3,794 -- 9,807 ------- -------- ------- -------- -------- -------- NET INCOME (LOSS)...................... $16,134 $ 16,134 $ (443) $ 6,660 $(22,351) $ 16,134 ======= ======== ======= ======== ======== ========
F-45 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF OCTOBER 1, 2000 (000'S OMITTED)
USC EUROPE/MAY USC MAY VERPACKUGEN U.S. CAN UNITED STATES VERPACKUGEN GMBH CORPORATION CAN HOLDING (NON- U.S. CAN (PARENT COMPANY (SUBSIDIARY GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- ------------- ------------ ------------ Current Assets: Cash and cash equivalents............. $ -- $ 3,015 $ -- $ 4,399 $ -- $ 7,414 Accounts receivable................... -- 59,209 -- 48,168 -- 107,377 Inventories........................... -- 65,327 -- 47,253 -- 112,580 Prepaid expenses and other assets..... -- 29,479 -- 7,898 -- 37,377 -------- -------- -------- -------- --------- -------- Total current assets................ -- 157,030 -- 107,718 -- 264,748 Net property, plant and equipment....... -- 169,036 -- 102,668 -- 271,704 Intangible assets....................... -- 42,315 -- 22,829 -- 65,144 Other assets............................ 10,513 -- 13,916 24,429 Intercompany advances................... 251,513 -- -- -- (251,513) -- Investment in subsidiaries.............. 53,647 37,525 57,061 -- (148,233) -- -------- -------- -------- -------- --------- -------- Total assets........................ $305,160 $416,419 $ 57,061 $247,131 $(399,746) $626,025 ======== ======== ======== ======== ========= ======== Current Liabilities Current maturities of long-term debt................................ $ -- $ 3,750 $ -- $ 7,205 $ -- $ 10,955 Accounts payable...................... -- 63,829 -- 44,649 -- 108,478 Other current liabilities............. -- 58,077 -- 16,157 -- 74,234 -------- -------- -------- -------- --------- -------- Total current liabilities........... -- 125,656 -- 68,011 -- 193,667 Senior debt............................. -- 50,182 -- 21,057 -- 71,239 Subordinated debt....................... 236,629 -- -- -- 236,629 Other long-term liabilities............. -- 46,904 -- 9,055 -- 55,959 INTERCOMPANY ADVANCES................... -- 140,030 67,348 44,135 (251,513) -- STOCKHOLDERS' EQUITY.................... 68,531 53,647 (10,287) 104,873 (148,233) 68,531 -------- -------- -------- -------- --------- -------- Total liabilities and stockholders' equity............................ $305,160 $416,419 $ 57,061 $247,131 $(399,746) $626,025 ======== ======== ======== ======== ========= ========
F-46 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (UNAUDITED) (000'S OMITTED)
USC EUROPE/ USC MAY MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- (PARENT COMPANY (SUBSIDIARY GUARANTOR U.S. CAN GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) CORPORATION ----------- ------------- ---------------- -------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES.............. $ -- $ 35,165 $(2,760) $ (6,457) $25,948 ------- -------- ------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................ -- (11,376) -- (5,143) (16,519) Proceeds on sale of business.................... -- 12,088 -- -- 12,088 Proceeds on the sale of property................ 7,855 -- -- 7,855 Investment in Formametal S.A.................... -- -- (4,914) (4,914) ------- -------- ------- -------- ------- Net cash used in investing activities......... -- 8,567 -- (10,057) (1,490) ------- -------- ------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances................. (1,212) (24,034) 2,760 22,486 -- Issuance of common stock and exercise of stock options....................................... 1,700 -- -- -- 1,700 Borrowings of other long-term debt, including capital lease obligations..................... -- (18,784) (15,209) (33,993) Purchase of treasury stock...................... (488) -- -- -- (488) ------- -------- ------- -------- ------- Net cash (used in) provided by financing activities.................................. -- (42,818) 2,760 7,277 (32,781) ------- -------- ------- -------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH........... -- -- -- 40 40 ------- -------- ------- -------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... -- 914 -- (9,197) (8,283) CASH AND CASH EQUIVALENTS, beginning of year...... -- 2,101 -- 13,596 15,697 ------- -------- ------- -------- ------- CASH AND CASH EQUIVALENTS, end of period.......... $ -- $ 3,015 $ -- $ 4,399 $ 7,414 ======= ======== ======= ======== =======
F-47 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTH PERIOD ENDED OCTOBER 3, 1999 (UNAUDITED) (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED -------------- ------------- -------------- ------------ ------------ NET SALES......................................... $ -- $424,465 $125,347 $ -- $549,812 COST OF SALES..................................... -- 361,358 108,758 -- 470,116 ------- -------- -------- -------- -------- Gross income.................................... -- 63,107 16,589 -- 79,696 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... -- 18,148 6,853 -- 25,001 ------- -------- -------- -------- -------- Operating Income................................ -- 44,959 9,736 -- 54,695 INTEREST EXPENSE ON BORROWINGS.................... -- 19,250 2,508 -- 21,758 AMORTIZATION OF DEFERRED FINANCING COSTS.......... -- 898 -- -- 898 OTHER EXPENSES.................................... -- 1,296 -- -- 1,296 EQUITY EARNINGS (LOSS) FROM SUBSIDIARY............ 17,399 4,772 -- (22,171) -- PROVISION FOR INCOME TAXES........................ -- 9,592 2,456 -- 12,048 EXTRAORDINARY ITEM--LOSS ON THE EARLY EXTINGUISHMENT OF DEBT, net of income tax....... -- (1,296) -- -- (1,296) ------- -------- -------- -------- -------- NET INCOME (LOSS)................................. $17,399 $ 17,399 $ 4,772 $(22,171) $ 17,399 ======= ======== ======== ======== ========
F-48 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE-MONTH PERIOD ENDED OCTOBER 3, 1999 (UNAUDITED) (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES........................ $ -- $ 52,165 $ 6,641 $ 58,806 ------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... -- (16,691) (3,022) (19,713) Proceeds on the sale of business............................ -- 4,500 -- 4,500 Proceeds on the sale of property............................ -- 556 -- 556 Investment in Formametal S.A................................ -- -- (1,644) (1,644) ------- -------- ------- -------- Net cash used in investing activities....................... -- (11,635) (4,666) (16,301) ------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances........................... (1,749) (3,993) 5,742 -- Issuance of common stock and exercise of stock options.... 1,959 -- -- 1,959 Net borrowings under the revolving line of credit and changes in cash overdrafts.............................. -- 6,014 203 6,217 Repurchase of 10 1/8% notes............................... -- (27,696) -- (27,696) Payments of other long-term debt, including capital lease obligations............................................. -- (4,539) (4,156) (8,695) Purchase of treasury stock, net........................... (210) -- -- (210) ------- -------- ------- -------- Net cash (used in) provided by financing activities..... -- (30,214) 1,789 (28,425) ------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... -- -- 1 1 ------- -------- ------- -------- DECREASE IN CASH AND CASH EQUIVALENTS....................... -- 10,316 3,765 14,081 ------- -------- ------- -------- CASH AND CASH EQUIVALENTS, beginning of year................ -- 9,408 8,664 18,072 ------- -------- ------- -------- CASH AND CASH EQUIVALENTS, end of period.................... -- 19,724 12,429 32,153 ======= ======== ======= ========
F-49 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (000'S OMITTED)
USC MAY USC EUROPE/ U.S. CAN UNITED STATES VERPACKUGEN MAY CORPORATION CAN HOLDING VERPACKUGEN U.S. CAN (PARENT COMPANY (SUBSIDIARY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- -------------- ------------ ------------ CURRENT ASSETS: Cash and cash equivalents............ $ -- $ 2,095 $ -- $ 13,602 $ -- $ 15,697 Accounts receivable.................. -- 45,205 -- 46,659 -- 91,864 Inventories.......................... -- 66,360 -- 49,619 -- 115,979 Prepaid expenses and other assets.... -- 30,377 5,414 -- 35,791 -------- -------- ------- -------- --------- -------- Total current assets............... -- 144,037 -- 115,294 -- 259,331 NET PROPERTY, PLANT AND EQUIPMENT...... -- 191,997 -- 140,507 -- 332,504 INTANGIBLE ASSETS...................... -- 50,200 -- 278 -- 50,478 OTHER ASSETS........................... 4,891 6,202 -- 10,164 -- 21,257 INTERCOMPANY ADVANCES.................. 242,654 -- -- -- (242,654) -- INVESTMENT IN SUBSIDIARIES............. 57,640 50,919 63,847 -- (172,406) -- -------- -------- ------- -------- --------- -------- Total assets....................... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt............................... $ -- $ 19,562 $ -- $ 19,262 $ -- $ 38,824 Accounts payable..................... -- 50,083 -- 54,106 -- 104,189 Other current liabilities............ -- 62,594 -- 15,990 -- 78,584 -------- -------- ------- -------- --------- -------- Total current liabilities.......... -- 132,239 -- 89,358 -- 221,597 SENIOR DEBT............................ -- 54,536 -- 29,328 -- 83,864 SUBORDINATED DEBT...................... 236,629 -- -- -- -- 236,629 OTHER LONG-TERM LIABILITIES............ -- 43,317 -- 9,607 -- 52,924 INTERCOMPANY ADVANCES.................. -- 155,623 63,847 23,184 (242,654) -- STOCKHOLDERS' EQUITY................... 68,556 57,640 -- 114,766 (172,406) 68,556 -------- -------- ------- -------- --------- -------- Total liabilities and stockholders' equity........................... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ========
F-50 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You should rely only upon the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. UNITED STATES CAN COMPANY EXCHANGE OFFER $175,000,000 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 ------------------------ [LOGO] ------------------------ , 2001 Until , all dealers effecting transactions in the notes or the exchange notes, whether or not participating in the exchange offer, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes a corporation to indemnify and advance reasonable expenses to any person who was a party, is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, Section 145 of the DGCL states that no indemnification may be made in respect of any claim, issue or matter as to which such person is adjudged to be liable to us unless and only to the extent that the Court of Chancery or the court in which the action was brought determines that, despite the adjudication of liability but in view of all of the circumstances of the case, he or she was fairly and reasonably entitled to indemnity for the expenses which the court deems proper. Our Certificate of Incorporation includes indemnification provisions that mirror Section 145 of the DGCL Consequently, any of our directors or officers or any person serving at our request in those capacities will be fully indemnified against such judgments, penalties, fines, settlements and reasonable expenses actually incurred, except if (1) he or she did not conduct himself or herself in good faith and did not reasonably believe his or her conduct was in the corporation's best interests; or (2) in the case of any criminal action or proceeding, he or she had reasonable cause to believe his or her conduct was unlawful. Our Certificate of Incorporation also contains a provision eliminating liability to us or our shareholders for monetary damages from breach of fiduciary duty as a director, except under certain specified circumstances. The inclusion of these indemnification provisions in our Certificate of Incorporation and is intended to enable us to attract qualified persons to serve as directors and officers who might otherwise be reluctant to serve. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following exhibits are either filed herewith or incorporated by reference:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 2.1 Agreement and Plan of Merger (the "Merger Agreement") dated as of June 1, 2000 between U.S. Can Corporation and Pac Packaging Acquisition Corporation (Exhibit 2 to the current report on Form 8-K, filed on June 15, 2000).(2) 2.2 First Amendment to Merger Agreement dated as of June 28, 2000 (Exhibit 2.2 to the current report on Form 8-K, filed on June 30, 2000).(2) 2.3 Second Amendment to Merger Agreement dated as of August 22, 2000 (Exhibit 2.3 to the current report on Form 8-K, filed on August 31, 2000).(2) 3.1 Restated Certificate of Incorporation of U.S. Can Corporation.(1) 3.2 Amended and Restated By-laws of U.S. Can Corporation.(1) 3.3 Restated Certificate of Incorporation of United States Can Company.(1)
II-1
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 3.4 Amended and Restated By-laws of United States Can Company.(1) 3.5 Certificate of Incorporation of USC May Verpackungen Holding Inc.(1) 3.6 By-Laws of USC May Verpackungen Holding Inc.(1) 4.1 Indenture dated as of October 4, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 4.2 Registration Rights Agreement dated as of October 4, 2000 among United States Can Company, Salomon Smith Barney and Banc of America Securities LLC.(1) 4.3 Form of Letter of Transmittal.** 4.4 Form of Notice of Guaranteed Delivery.** 4.5 Form of Exchange Agent Agreement.** 4.6 Form of Exchange Note.** 5 Opinion of Ropes & Gray.** 10.1 Credit Agreement dated as of October 4, 2000, among United States Can Company, the guarantors and Bank of America, N.A. and the other financial institutions listed therein, as Lenders (Exhibit 10.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.(1) 10.3 Security Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.(1) 10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce, CA property (Exhibit 10.10 to the quarterly report on Form 10-Q for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.5 Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.11 to the quarterly report on Form 10-Q, for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000 (Exhibit 10.7 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2) 10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property.(1) 10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to the annual report on Form 10-K for the fiscal year ended December 31, 1996, filed on March 26, 1997).(2) 10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the quarterly report on Form 10-Q for the quarter ended July 2, 2000, filed on August 15, 2000).(2)
II-2
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.55 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.13 Employment Agreement dated October 4, 2000 by and among Paul W. Jones, United States Can Company and U.S. Can Corporation.(1) 10.14 Employment Agreement dated October 4, 2000 by and among John L. Workman, United States Can Company and U.S. Can Corporation.(1) 10.15 Employment Agreement dated October 4, 2000 by and among Gillian V. Derbyshire, United States Can Company and U.S. Can Corporation.(1) 10.16 Employment Agreement dated October 4, 2000 by and among Roger B. Farley, United States Can Company and U.S. Can Corporation.(1) 10.17 Employment Agreement dated October 4, 2000 by and among J. Michael Kirk, United States Can Company and U.S. Can Corporation.(1) 10.18 Employment Agreement dated October 4, 2000 by and among Thomas A. Scrimo, United States Can Company and U.S. Can Corporation.(1) 10.19 Service Agreement with David R. Ford dated November 24, 1997 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.20 Employee Agreement dated October 4, 2000 by and among David R. Ford, United States Can Company and U.S. Can Corporation.** 10.21 Change-in-Control Agreement dated February 4, 1998 by and among David R. Ford, U.S. Can Corporation and United States Can Company (Exhibit 10.51 to the annual report on Form 10-K for the fiscal year ended December 31, 1997, filed on March 26, 1998).(2) 10.22 U.S. Can Corporation Executive Deferred Compensation Plan (Exhibit 10.30 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.23 Amendment No. 1 to the U.S. Can Corporation Executive Deferred Compensation Plan, dated as of October 4, 2000.** 10.24 U.S. Can Corporation 2000 Equity Incentive Plan.(1) 10.25 United States Can Company Executive Severance Plan, dated as of October 13, 1999 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2) 21 Subsidiaries of the Registrants.(1) 23.1 Consent of Arthur Andersen LLP.(1) 23.2 Consent of Ropes & Gray.** 25 Statement of Eligibility of Trustee.(1)
- ------------------------ ** To be filed by amendment. (1) Filed herewith. (2) Incorporated by reference. (b) Other financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or the notes thereto. II-3 ITEM 22. UNDERTAKINGS (1) The Company undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (x) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (y) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (z) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (2) The undersigned registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and where applicable, each filing of employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) 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 Securities Act of 1933 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 that 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 Securities Act of 1933 and will be governed by the final adjudication of such issue. (4) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this registration statement, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request. (5) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on January 5, 2001. U.S. CAN CORPORATION By /s/ JOHN L. WORKMAN ------------------------------------------ John L. Workman EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on January 5, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board, President and Chief - -------------------------------------------- Executive Officer Paul W. Jones /s/ JOHN L. WORKMAN Director, Executive Vice President and Chief - -------------------------------------------- Financial Officer John L. Workman /s/ CARL FERENBACH Director - -------------------------------------------- Carl Ferenbach /s/ RICHARD K. LUBIN Director - -------------------------------------------- Richard K. Lubin /s/ RICARDO POMA Director - -------------------------------------------- Ricardo Poma /s/ FRANCISCO A. SOLER Director - -------------------------------------------- Francisco A. Soler /s/ LOUIS B. SUSMAN Director - -------------------------------------------- Louis B. Susman
II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on January 5, 2001. UNITED STATES CAN COMPANY By /s/ JOHN L. WORKMAN ------------------------------------------ John L. Workman EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on January 5, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board, President and Chief - -------------------------------------------- Executive Officer Paul W. Jones /s/ JOHN L. WORKMAN Director, Executive Vice President and Chief - -------------------------------------------- Financial Officer John L. Workman /s/ CARL FERENBACH Director - -------------------------------------------- Carl Ferenbach /s/ RICHARD K. LUBIN Director - -------------------------------------------- Richard K. Lubin /s/ RICARDO POMA Director - -------------------------------------------- Ricardo Poma /s/ FRANCISCO A. SOLER Director - -------------------------------------------- Francisco A. Soler /s/ LOUIS B. SUSMAN Director - -------------------------------------------- Louis B. Susman
II-6 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on January 5, 2001. USC MAY VERPACKUNGEN HOLDING INC. By /s/ JOHN L. WORKMAN ------------------------------------------ John L. Workman VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on January 5, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board and President - -------------------------------------------- Paul W. Jones /s/ JOHN L. WORKMAN Director, Vice President and Chief Financial - -------------------------------------------- Officer John L. Workman /s/ STEVEN K. SIMS Director, Vice President and Secretary - -------------------------------------------- Steven K. Sims Director, Vice President - -------------------------------------------- David R. Ford
II-7 EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 2.1 Agreement and Plan of Merger (the "Merger Agreement") dated as of June 1, 2000 between U.S. Can Corporation and Pac Packaging Acquisition Corporation (Exhibit 2 to the current report on Form 8-K, filed on June 15, 2000).(2) 2.2 First Amendment to Merger Agreement dated as of June 28, 2000 (Exhibit 2.2 to the current report on Form 8-K, filed on June 30, 2000).(2) 2.3 Second Amendment to Merger Agreement dated as of August 22, 2000 (Exhibit 2.3 to the current report on Form 8-K, filed on August 31, 2000).(2) 3.1 Restated Certificate of Incorporation of U.S. Can Corporation.(1) 3.2 Amended and Restated By-laws of U.S. Can Corporation.(1) 3.3 Restated Certificate of Incorporation of United States Can Company.(1) 3.4 Amended and Restated By-laws of United States Can Company.(1) 3.5 Certificate of Incorporation of USC May Verpackungen Holding Inc.(1) 3.6 By-Laws of USC May Verpackungen Holding Inc.(1) 4.1 Indenture dated as of October 4, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 4.2 Registration Rights Agreement dated as of October 4, 2000 among United States Can Company, Salomon Smith Barney and Banc of America Securities LLC.(1) 4.3 Form of Letter of Transmittal.** 4.4 Form of Notice of Guaranteed Delivery.** 4.5 Form of Exchange Agent Agreement.** 4.6 Form of Exchange Note.** 5 Opinion of Ropes & Gray.** 10.1 Credit Agreement dated as of October 4, 2000, among United States Can Company, the guarantors and Bank of America, N.A. and the other financial institutions listed therein, as Lenders (Exhibit 10.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.(1) 10.3 Security Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.(1) 10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce, CA property (Exhibit 10.10 to the quarterly report on Form 10-Q for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.5 Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.11 to the quarterly report on Form 10-Q, for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000 (Exhibit 10.7 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2)
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property.(1) 10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to the annual report on Form 10-K for the fiscal year ended December 31, 1996, filed on March 26, 1997).(2) 10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the quarterly report on Form 10-Q for the quarter ended July 2, 2000, filed on August 15, 2000).(2) 10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.55 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.13 Employment Agreement dated October 4, 2000 by and among Paul W. Jones, United States Can Company and U.S. Can Corporation.(1) 10.14 Employment Agreement dated October 4, 2000 by and among John L. Workman, United States Can Company and U.S. Can Corporation.(1) 10.15 Employment Agreement dated October 4, 2000 by and among Gillian V. Derbyshire, United States Can Company and U.S. Can Corporation.(1) 10.16 Employment Agreement dated October 4, 2000 by and among Roger B. Farley, United States Can Company and U.S. Can Corporation.(1) 10.17 Employment Agreement dated October 4, 2000 by and among J. Michael Kirk, United States Can Company and U.S. Can Corporation.(1) 10.18 Employment Agreement dated October 4, 2000 by and among Thomas A. Scrimo, United States Can Company and U.S. Can Corporation.(1) 10.19 Service Agreement with David R. Ford dated November 24, 1997 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.20 Employee Agreement dated October 4, 2000 by and among David R. Ford, United States Can Company and U.S. Can Corporation.** 10.21 Change-in-Control Agreement dated February 4, 1998 by and among David R. Ford, U.S. Can Corporation and United States Can Company (Exhibit 10.51 to the annual report on Form 10-K for the fiscal year ended December 31, 1997, filed on March 26, 1998).(2) 10.22 U.S. Can Corporation Executive Deferred Compensation Plan (Exhibit 10.30 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.23 Amendment No. 1 to the U.S. Can Corporation Executive Deferred Compensation Plan, dated as of October 4, 2000.** 10.24 U.S. Can Corporation 2000 Equity Incentive Plan.(1) 10.25 United States Can Company Executive Severance Plan, dated as of October 13, 1999 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2)
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 21 Subsidiaries of the Registrants.(1) 23.1 Consent of Arthur Andersen LLP.(1) 23.2 Consent of Ropes & Gray.** 25 Statement of Eligibility of Trustee.(1)
- ------------------------ ** To be filed by amendment. (1) Filed herewith. (2) Incorporated by reference. EX-3.1 2 a2034240zex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF U.S. CAN CORPORATION ARTICLE I NAME The name of the Corporation is U.S. Can Corporation (the "CORPORATION"). ARTICLE II REGISTERED OFFICE AND AGENT The address of the Corporation's registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III PURPOSE The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV CAPITAL 1. DESIGNATION. 1.1. CLASSES OF STOCK. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 300,000,000 shares, of which (a) 200,000,000 shares, $.01 par value per share, are to be of a class designated "Preferred Stock" (the "PREFERRED STOCK") and (b) 100,000,000 shares, $.01 par value per share, are to be of a class designated "Common Stock" (the "COMMON STOCK"). 1.2. SERIES OF PREFERRED STOCK. Subject to the limitations prescribed by law and the provisions of this Certificate of Incorporation, the Corporation's Board of Directors (the "BOARD OF DIRECTORS") is authorized to issue the Preferred Stock from time to time in one or more series, each of such series to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be determined by the Board of Directors in a resolution or resolutions providing for the issue of such Preferred Stock. Initially, 106,666,667 shares of Preferred Stock shall be designated "Series A Senior Preferred Stock" (the "SERIES A PREFERRED"). 1.3. RIGHTS, PREFERENCES AND RESTRICTIONS OF STOCK. The rights, preferences, privileges and restrictions granted to and imposed upon the Series A Preferred and the Common Stock are set forth below in this Article IV. 1.4. SENIOR CREDIT FACILITY. Notwithstanding anything to the contrary in this Certificate of Incorporation, no payments relating to the Series A Preferred (including without limitation dividends and redemptions) shall be made unless (a) such payments are permitted under the Credit Agreement dated as of October 4, 2000 by and among the Corporation, United States Can Company, USC May Verpackungen Holding, Inc., certain foreign subsidiaries of the Corporation, Bank of America, N.A., as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank One, NA (Main Office Chicago), as Documentation Agent, as amended, modified, renewed, restated or refinanced from time to time (the "SENIOR CREDIT FACILITY") or (b) the debt outstanding under the Senior Credit Facility has been paid in full. 2. DIVIDENDS. 2.1. DIVIDENDS ON SERIES A PREFERRED. Each holder of Series A Preferred shall be entitled to receive annual cumulative preferential dividends with respect to each share of Series A Preferred held by such holder in an amount equal to $0.10 (which amount shall be subject to equitable adjustment whenever a stock split, combination, reclassification or other similar event involving the Series A Preferred shall occur), which dividends (a) shall be payable in preference and priority to any payment of any dividend with respect to the Common Stock, (b) shall (i) accrue daily and (ii) compound quarterly on the unpaid amount of the dividend on the last day of each of March, June, September and December, beginning December 31, 2000, and (c) shall be payable in cash when, as and if declared by the Board of Directors. Dividends on the Series A Preferred shall accrue and compound whether or not the Corporation has earnings or profits, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. 2.2. DIVIDENDS ON COMMON STOCK. Each holder of Common Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefor; PROVIDED, HOWEVER, that no dividend shall be declared or paid on the Common Stock unless all accrued and unpaid dividends on all outstanding shares of Series A Preferred shall have been paid or declared and set aside for payment. -2- 3. LIQUIDATION, DISSOLUTION OR WINDING UP. 3.1. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, distributions to the stockholders of the Corporation shall be made in the following manner: (a) Each holder of Series A Preferred shall receive, prior to and in preference to any distribution of any of the assets of the Corporation to the holders of Common Stock by reason of their ownership of Common Stock, an amount in cash equal to the sum of (i) $1.00 per share of Series A Preferred (which amount shall be subject to equitable adjustment whenever a stock split, combination, reclassification or other similar event involving the Series A Preferred shall occur) held by such holder PLUS (ii) all accrued and unpaid dividends on each such share of Series A Preferred, if any, to and including the date on which full payment of such preferential amount shall be tendered with respect to such share of Series A Preferred to the holder of such share of Series A Preferred (collectively, the "LIQUIDATION PREFERENCE"). If the assets of the Corporation legally available for distribution shall be insufficient to permit the payment in full of the Liquidation Preference to all holders of Series A Preferred, then the entire assets of the Corporation legally available for distribution shall be distributed ratably among the holders of Series A Preferred in accordance with the aggregate Liquidation Preference for the shares of Series A Preferred held by each of them. (b) If payment has been made to each holder of Series A Preferred of such holder's Liquidation Preference, or if no shares of Series A Preferred are then outstanding, the holders of Common Stock shall then be entitled to share ratably in the Corporation's remaining assets, based on the number of shares of Common Stock held by each of them. 3.2. TREATMENT OF SALES OF ASSETS. A sale of 50% or more of the assets of the Corporation shall be regarded as a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of Section 3.1 of this Article IV, unless the holders of a majority of the shares of Series A Preferred then outstanding, voting as a single class, elect not to treat any such event as a liquidation, dissolution or winding up by giving written notice thereof to the Corporation. 4. VOTING POWER. 4.1. PREFERRED STOCK. Except as otherwise required by law or Section 7 of this Article IV, no holder of Series A Preferred shall be entitled to vote on any matter by virtue of such holder's ownership of Series A Preferred, but such holder shall be entitled to notice of each stockholder meeting in accordance with the By-laws of the Corporation, as amended and in effect from time to time (the "BY-LAWS") as if such holder were a holder of Common Stock. -3- In the event that holders of Series A Preferred shall be entitled to vote on a matter, each holder of Series A Preferred shall be entitled to one vote for each share of Series A Preferred held in such holder's name on the books of the Corporation. 4.2. COMMON STOCK. Except as otherwise required by law, each holder of Common Stock shall be entitled to vote on all matters and shall be entitled to one vote for each share of Common Stock held in such holder's name on the books of the Corporation. 4.3. RECORD DATE; SINGLE CLASS. The number of shares of Series A Preferred or Common Stock, as the case may be, entitled to vote on any matter shall be determined in each case as of the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. Except as otherwise expressly provided for herein or as required by law, (a) the holders of Series A Preferred shall vote together as a single class and (b) the holders of Common Stock shall vote together as a single class. 5. REDEMPTION. 5.1. REDEMPTION AT THE OPTION OF THE HOLDERS. (a) Upon a Change of Control, each holder of Series A Preferred will have the right to require the Corporation to redeem all or any part of such holder's Series A Preferred at a price per share equal to the Liquidation Preference. The Corporation will use any and all cash that it has available (the "CORPORATION CASH") to effect a redemption pursuant to this Section 5.1 of Article IV; PROVIDED, HOWEVER, that subject to Section 5.1(d) of this Article IV, the failure of the Corporation to have sufficient Corporation Cash to effect such redemption shall not relieve the Corporation of its obligation to make such redemption. In the event that Corporation Cash is not available or is not sufficient to effect a redemption pursuant to this Section 5.1 of Article IV, the Corporation will cause United States Can Company, USC May Verpackungen Holding, Inc. or any other subsidiary of the Corporation designated by the Board of Directors of the Corporation (the "DISTRIBUTING SUBSIDIARIES") to make a distribution to the Corporation for the purposes of effecting a redemption pursuant to this Section 5.1 of Article IV but only (i) after United States Can Company has made the requisite repurchase offer to the holders of the subordinated notes (the "SUBORDINATED NOTES") issued pursuant to the Indenture dated as of October 4, 2000 between United States Can Company and Bank One Trust Company, N.A., as Trustee, as amended, modified, renewed, restated or refinanced from time to time (the "INDENTURE") in accordance with the terms of the Indenture, and any Subordinated Notes required to be repurchased pursuant thereto are so repurchased, each as required as a result of such Change of Control so long as the Subordinated Notes are outstanding and (ii) if the making of such distribution would not be prohibited by the terms of the Indenture. Prior to, or within 30 days following, any Change of Control, the Corporation shall mail a written notice -4- (the "REDEMPTION NOTICE") to holders of the Series A Preferred, which Redemption Notice shall meet the requirements of Section 5.4 of this Article IV. For purposes of this Section 5 of Article IV, "CHANGE OF CONTROL" shall have the meaning ascribed to it in the Indenture; PROVIDED, that in the event that the Indenture has been terminated, Change of Control shall mean (i) any transaction or series of related transactions in which any person who is not an affiliate of the Corporation, or any two or more such persons acting as a group, and all affiliates of such person or persons, who prior to such time owned no securities of the Corporation or securities representing less than 50% of the voting power at elections for the Corporation's Board of Directors, shall (A) acquire, whether by purchase, exchange, tender offer, merger, consolidation, recapitalization or otherwise, or (B) otherwise be the owner of securities of the Corporation (as a result of a redemption of securities or otherwise), or shares in a successor corporation by merger, consolidation or otherwise, such that following such transaction or transactions, such person or group and their respective affiliates beneficially own 50% or more of the voting power at elections for the Board of Directors of the Corporation or any successor corporation, or (ii) the sale or transfer of all or substantially all of the Corporation's or United States Can Company's assets and following such sale or transfer, there is a liquidation of the Corporation. (b) If (i) an Event of Bankruptcy occurs or (ii) the maturity of any debt is accelerated under any Material Loan or Credit Agreement to which the Corporation or any of its subsidiaries is a party, each holder of Series A Preferred will have the right to require the Corporation to redeem all or any part of such holder's Series A Preferred at a price per share equal to the Liquidation Preference; PROVIDED that claims by holders of Series A Preferred pursuant to clause (i) above shall be subordinated to the claims of the lenders under the Senior Credit Facility and to the claims of the holders of the Subordinated Notes, and shall not be paid until such time as such claims are satisfied; PROVIDED, HOWEVER, that subject to Section 5.1(d) of this Article IV, the failure of the Corporation to have sufficient Corporation Cash to effect such redemption shall not relieve the Corporation of its obligation to make such redemption. Within 30 days following any of the events set forth in clause (i) or (ii) above, the Corporation shall mail a Redemption Notice to the holders of the Series A Preferred, which Redemption Notice shall meet the requirements of Section 5.4 of this Article IV. For purposes of this Section 5 of Article IV, "EVENT OF BANKRUPTCY" shall mean (i) the filing by the Corporation or United States Can Company in any forum or jurisdiction of any voluntary petition for relief in bankruptcy for either adjudication of bankruptcy or for a reorganization or rearrangement under federal or state bankruptcy laws, or an action for receivership of any nature or an assignment by the Corporation or United States Can Company for the benefit of its creditors, or (ii) the filing (which filing remains undismissed after a period of 60 days from the date of such filing) against the Corporation or United States Can Company in any forum or jurisdiction of -5- any involuntary petition for relief in bankruptcy for either adjudication of bankruptcy or for a reorganization or rearrangement under federal or state bankruptcy laws, or an action for receivership of any nature or an assignment by the Corporation or United States Can Company for the benefit of its creditors. For purposes of this subsection (b), "MATERIAL LOAN OR CREDIT AGREEMENT" shall mean each loan or credit agreement to which the Corporation or any of its subsidiaries is a party and under which an amount of $50,000,000 or more is outstanding or may be borrowed by the Corporation or any of its subsidiaries. (c) In the event of any Public Offering of Common Stock of the Corporation, each holder of Series A Preferred will have the right to require the Corporation to redeem all or any part of such holder's Series A Preferred at a price per share equal to the Liquidation Preference from the net proceeds of each such Public Offering to the extent that proceeds from such Public Offering are not required by the Senior Credit Facility to be applied to the payment of debt of the Corporation or its subsidiaries. In the event that the Corporation does not have sufficient proceeds available from its initial Public Offering to make the required redemption or the Series A Preferred is not otherwise redeemed, the required redemption will be made from the available proceeds of each subsequent Public Offering until the full amount of the Series A Preferred desired by the holders to be redeemed has been redeemed. If any shares that the holders desire to be redeemed remain outstanding, such shares shall be subject to mandatory redemption at a price per share equal to the Liquidation Preference on the 366th day following the earlier of (i) the tenth anniversary of the initial issue date of such Series A Preferred or (ii) the payment in full of the debt outstanding under each of the Senior Credit Facility and the Subordinated Notes. Prior to, or within 30 days following, each Public Offering, the Corporation shall mail a Redemption Notice to holders of the Series A Preferred, which Redemption Notice shall meet the requirements of Section 5.4 of this Article IV. For purposes of this subsection (c), "PUBLIC OFFERING" shall mean the sale by the Corporation of its equity securities pursuant to a registration statement which has become effective under the Securities Act of 1933, as amended (excluding registration statements on Form S-4, S-8 or similar limited purpose forms), in which the Common Stock of the Corporation shall be listed and traded on a national securities exchange, on the NASDAQ National Market System or on the NASDAQ Stock Market. (d) Notwithstanding anything to the contrary contained in this Section 5.1 of Article IV, until the 366th day following the earlier of (i) the tenth anniversary of the initial issue date of the Series A Preferred or (ii) the payment in full of the debt outstanding under each of the Senior Credit Facility and the Subordinated Notes, the holders of the Series A Preferred shall not be entitled to institute any proceedings against the Corporation or United States Can Company under federal or state -6- bankruptcy laws as a result of the failure by the Corporation to make any redemption required by this Section 5.1 of Article IV; PROVIDED, that this Section 5.1(d) of Article IV shall not be construed to prevent the holders of the Series A Preferred from asserting any rights in the event of a bankruptcy proceeding against the Corporation or United States Can Company that shall not have been initiated by the holders of the Series A Preferred as a result of the Corporation's failure to redeem any Series A Preferred pursuant to this Section 5.1 of Article IV. 5.2. REDEMPTION AT THE OPTION OF THE CORPORATION. Upon a Change of Control, the Corporation will have the right to redeem all or any part, on a PRO RATA basis, of a holder's Series A Preferred at a price per share equal to the Liquidation Preference. In the event that Corporation Cash is not available or is not sufficient to effect a redemption pursuant to this Section 5.2 of Article IV, the Corporation may cause a Distributing Subsidiary to make a distribution to the Corporation for the purposes of enabling the Corporation to effect a redemption pursuant to this Section 5.2 of Article IV but only (i) after United States Can Company has made the requisite repurchase offer to the holders of the Subordinated Notes issued pursuant to the Indenture in accordance with the terms of the Indenture, and any Subordinated Notes required to be repurchased pursuant thereto are so repurchased, each as required as a result of such Change of Control so long as the Subordinated Notes are outstanding and (ii) if the making of such distribution would not be prohibited by the terms of the Indenture. In the event that the Corporation elects to exercise its rights under this Section 5.2 of Article IV, it may do so not later than 180 days after such Change of Control occurs, and the Corporation shall mail a Redemption Notice to holders of the Series A Preferred, which Redemption Notice shall meet the requirements of Section 5.4 of this Article IV. 5.3. PAYMENT OF LIQUIDATION PREFERENCE. (a) On the date of redemption of the shares of Series A Preferred (the "REDEMPTION DATE"), the Corporation will pay to each holder of Series A Preferred an amount equal to the Liquidation Preference with respect to each share of Series A Preferred held by such holder and redeemed on such date. If on the Redemption Date the funds of the Corporation legally available and permitted to be used for redemption under the terms of this Certificate of Incorporation for redemption of shares of Series A Preferred are insufficient to redeem the number of shares of Series A Preferred to be redeemed on such date, those funds that are legally available and permitted to be used for redemption under the terms of this Certificate of Incorporation will be used to redeem, at the Liquidation Preference, the maximum possible number of such shares of Series A Preferred. If, at any time thereafter, additional funds of the Corporation become legally available and permitted to be used for redemption under the terms of this Certificate of Incorporation for the redemption of Series A Preferred, such funds will immediately be used to redeem the balance of such shares of Series A Preferred to be redeemed (or such portion thereof for which funds are then legally available and -7- permitted to be used for redemption under the terms of this Certificate of Incorporation) that the Corporation has not so redeemed. (b) If less than all of the shares of Series A Preferred are to be redeemed or purchased in an offer to purchase at any time, the Corporation shall select the shares of Series A Preferred to be redeemed or purchased among the holders of the shares of Series A Preferred in compliance with the requirements of the principal national securities exchange, if any, on which the shares of Series A Preferred are listed or, if the shares of Series A Preferred are not so listed, on a PRO RATA basis. 5.4. REDEMPTION NOTICE; SURRENDER OF CERTIFICATES. The Redemption Notice to each holder of Series A Preferred shall contain the following information: (a) the number of shares, if any, of Series A Preferred held by such holder which shall or may, as the case may be, be redeemed on the Redemption Date pursuant to the provisions of this Article IV; (b) the Redemption Date; (c) the address at which the holder may surrender to the Corporation its certificate or certificates representing shares of Series A Preferred to be redeemed; and (d) a description of the transaction or transactions that gave rise to the issue of such Redemption Notice. The Redemption Notice shall be mailed, postage prepaid by first class mail or recognized overnight delivery service, to each holder of record of Series A Preferred, at such holder's address as shown on the records of the Corporation. In the event the Redemption Notice is being sent to holders of Series A Preferred pursuant to Section 5.1 of this Article IV, the Redemption Notice shall, in addition to meeting the requirements of subsections (a) through (d) of this Section 5.4 of Article IV, notify such holders of the option to redeem such shares of Series A Preferred pursuant to the terms of Section 5.1 of this Article IV. Within 30 days following the mailing of a Redemption Notice pursuant to Section 5.1 of this Article IV, a holder of Series A Preferred who wishes to exercise its option to redeem shares pursuant to Section 5.1 of this Article IV (a "SECTION 5.1 OPTION") must deliver, or cause to be delivered, a written notice (the "HOLDER'S NOTICE") to the Corporation at the address specified in the Redemption Notice, which Holder's Notice shall instruct the Corporation that the holder elects to exercise its Section 5.1 Option. In the event that the Corporation has not received a Holder's Notice for any holder within such 30-day period following the Corporation's mailing of the Redemption Notice, such holder will be conclusively deemed not to have exercised its Section 5.1 Option; PROVIDED, HOWEVER, that once a holder has delivered a Holder's Notice with respect to any shares of Series A Preferred, such -8- holder shall not be required to deliver any subsequent Holder's Notice with respect to such shares of Series A Preferred if such shares of Series A Preferred had not otherwise been previously redeemed. In the event the Redemption Notice is being sent to holders of Series A Preferred pursuant to Section 5.2 of this Article IV, shares of Series A Preferred called for redemption shall become irrevocably due, upon the delivery of such Redemption Notice, and payable on the Redemption Date set forth in such Redemption Notice at the Liquidation Preference. Each holder of shares of Series A Preferred to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation at the place specified in the Redemption Notice on or prior to the Redemption Date designated in the Redemption Notice, and thereupon an amount equal to the Liquidation Preference shall be paid to the order of the person whose name appears on such certificate or certificates. Each surrendered certificate shall be canceled and retired. The Corporation's failure to give any required Redemption Notice shall in no way affect its obligation to redeem the Series A Preferred as provided in this Article IV. 5.5. DIVIDENDS AFTER REDEMPTION. From and after the date on which the Corporation shall have paid in full the Liquidation Preference with respect to any share of Series A Preferred, such share of Series A Preferred thereby redeemed shall not be entitled to any further dividends pursuant to Section 2 of this Article IV. 6. NO REISSUANCE OF SERIES A PREFERRED. No share of Series A Preferred acquired by the Corporation by reason of redemption, purchase or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares that the Corporation shall be authorized to issue. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized number of shares of Series A Preferred accordingly. 7. VOTING RIGHTS OF SERIES A PREFERRED. In addition to any rights provided by law, without the written consent of the holders of a majority of shares of Series A Preferred then outstanding, the Corporation shall not: (a) effect any amendment to, or modification of, this Certificate of Incorporation that would adversely affect the rights or preferences pertaining to Series A Preferred; (b) reclassify any shares of Series A Preferred; (c) authorize, issue or sell, or obligate itself to authorize, issue or sell, any equity securities that are senior to or pari passu with the Series A Preferred with respect to dividends, liquidation preferences or redemption rights; and -9- (d) incur any indebtedness in excess of indebtedness permitted under the terms and conditions of the Senior Credit Facility. 8. NO CONVERSION OF SERIES A PREFERRED. Shares of Series A Preferred shall not be convertible into any securities of the Corporation or any of its affiliates. 9. NOTICES OF RECORD DATE. In the event of: (a) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right (other than the right to vote in and of itself); or (b) any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split up or combination of shares), any merger or consolidation of the Corporation (other than a merger or consolidation with a wholly-owned subsidiary in which the Corporation is the surviving corporation), or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person (other than a wholly-owned subsidiary); or (c) any voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then and in each such event the Corporation shall mail or cause to be mailed to each holder of Series A Preferred a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding up. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which such action is to be taken. 10. COMMON STOCK. Except as otherwise set forth herein, each share of Common Stock issued and outstanding shall be identical in all respects one with the other. Except for, and subject to, those rights expressly granted to the holders of the Series A Preferred, or except as may be provided by the laws of the State of Delaware, the holders of Common Stock shall have exclusively all other rights of stockholders, including, but not by way of limitation, -10- (a) the right to receive dividends, when, as and if declared by the Board of Directors out of assets lawfully available therefor, and (b) in the event of any distribution of assets upon liquidation, dissolution or winding up of the Corporation or otherwise, the right to receive ratably and equally all the assets and funds of the Corporation remaining after the payment to the holders of the Series A Preferred of the specific amounts which they are entitled to receive upon such liquidation, dissolution or winding up of the Corporation as herein provided. ARTICLE V DURATION The Corporation shall have perpetual existence. ARTICLE VI BOARD OF DIRECTORS The Board of Directors is expressly authorized to exercise all powers granted to the Board of Directors by law, except insofar as such powers are limited or denied herein or in the By-laws. ARTICLE VII ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS To the fullest extent permitted from time to time under the General Corporation Law of the State of Delaware, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of such director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the General Corporation Law of the State of Delaware or (d) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article VII shall not adversely affect any right or protection of a director of the Corporation with respect to any act or omission occurring prior to such repeal or modification. ARTICLE VIII INDEMNIFICATION To the fullest extent permitted from time to time under the General Corporation Law of the State of Delaware, and subject to the provisions of the following paragraph, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation (including any predecessor corporation), or is or was a director or officer of the Corporation -11- who is or was serving at the request of the Corporation (including any predecessor corporation) as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful. Any indemnification under the preceding paragraph (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper under the circumstances because such person has met the applicable standard of conduct set forth in the preceding paragraph. Such determination shall be made in accordance with Section 145(d) of the General Corporation Law of the State of Delaware. If a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in the first paragraph of this Article VIII, or with respect to any claim, issue or matter therein (to the extent that a portion of such person's expenses can be reasonably allocated thereto), such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Expenses incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding, or threat thereof, may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors, whether a disinterested quorum exists or not, upon receipt of a written undertaking by or on behalf of the director or officer to repay such amount if it shall be finally adjudicated that such director or officer was not entitled to indemnification pursuant to this Article VIII. The indemnification provided by this Article VIII shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. The right to indemnification under this Article VIII shall be a contract right. -12- The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or on behalf of a current or former director or officer of the Corporation who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VIII or of Section 145 of the General Corporation Law of the State of Delaware. ARTICLE IX SEVERABILITY If any provision contained in this Certificate of Incorporation shall for any reason be held invalid, illegal or unenforceable in any respect, (a) such invalidity, illegality or unenforceability shall not invalidate this entire Certificate of Incorporation or any other provision hereof and (b) such provision shall be deemed to be modified to the extent necessary to render it valid and enforceable; PROVIDED, HOWEVER, that if no such modification shall render such provision valid and enforceable, then this Certificate of Incorporation shall be construed as if not containing such provision. ARTICLE X RENUNCIATION OF CORPORATE OPPORTUNITIES To the fullest extent permitted from time to time under the General Corporation Law of the State of Delaware, the Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, business opportunities that are presented to its officers, directors or stockholders other than those officers, directors or stockholders who are employees of the Corporation. No amendment or repeal of this Article X shall apply to or have any effect on the liability or alleged liability of any officer, director or stockholder of the corporation for or with respect to any acts or omissions of such officer, director or stockholder occurring prior to such amendment or repeal. ARTICLE XI MISCELLANEOUS The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws. Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The election of directors of the Corporation need not be by written ballot. Any director of the Corporation or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares of capital stock of the Corporation then entitled to vote at an election of directors of the Corporation, except as otherwise provided in any agreement to which the Corporation is a party or by law. In furtherance and not in -13- limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the By-laws. Cumulative voting by the holders of any class and of any series of any class of the capital stock of the Corporation at any election of directors of the Corporation is hereby prohibited. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to such reservation. The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. References in this Certificate of Incorporation to specific Sections of the General Corporation Law of the State of Delaware shall include any successor provisions to such Sections that shall be in effect from time to time. -14- EX-3.2 3 a2034240zex-3_2.txt EXHIBIT 3.2 Exhibit 3.2 AMENDED AND RESTATED BY-LAWS OF U.S. CAN CORPORATION Section 1. LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS 1.1. These by-laws are subject to the certificate of incorporation of the corporation. In these by-laws, references to law, the certificate of incorporation and by-laws mean the law, the provisions of the certificate of incorporation and the by-laws as from time to time in effect. Section 2. STOCKHOLDERS 2.1. ANNUAL MEETING. Annual meetings of stockholders for the election of directors, and for such other business as may be stated in the notice of the meeting, shall be held at such place and at such time and date as the board of directors, by resolution, shall determine and as set forth in the notice of the meeting. At each such annual meeting, the stockholders shall elect a board of directors and transact such other business as may be required by law or these by-laws or as may properly come before the meeting. 2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be called at any time by the chairman of the board, if any, the president or the board of directors. A special meeting of the stockholders shall be called by the secretary, or in the case of the death, absence, incapacity or refusal of the secretary, by an assistant secretary or some other officer, upon application of a majority of the directors. Any such application shall state the purpose or purposes of the proposed meeting. Any such call shall state the place, date, hour, and purposes of the meeting. 2.3. PLACE OF MEETING. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such place within or without the State of Delaware as may be determined from time to time by the chairman of the board, if any, the president or the board of directors. Any adjourned session of any meeting of the stockholders shall be held at the place designated in the vote of adjournment. 2.4. NOTICE OF MEETINGS. Except as otherwise provided by law, a written notice of each meeting of stockholders stating the place, day and hour thereof and, in the case of a special meeting, the purposes for which the meeting is called, shall be given not less then ten nor more than sixty days before the meeting, to each stockholder entitled to vote thereat, and to each stockholder who, by law, by the certificate of incorporation or by these by-laws, is entitled to notice, by leaving such notice with him or at his residence or usual place of business, or by depositing it in the United States mail, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. Such notice shall be given by the secretary, or by an officer or person designated by the board of directors, or in the case of a special meeting by the officer calling the meeting. As to any adjourned session of any meeting of stockholders, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment was taken except that if the adjournment is for more than thirty days or if after the adjournment a new record date is set for the adjourned session, notice of any such adjourned session of the meeting shall be given in the manner heretofore described. No notice of any meeting of stockholders or any adjourned session thereof need be given to a stockholder if a written waiver of notice, executed before or after the meeting or such adjourned session by such stockholder, is filed with the records of the meeting or if the stockholder attends such meeting without objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders or any adjourned session thereof need be specified in any written waiver of notice. 2.5. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders a quorum as to any matter shall consist of a majority of the votes entitled to be cast on the matter, except where a larger quorum is required by law, by the certificate of incorporation or by these by-laws. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present. If a quorum is present at an original meeting, a quorum need not be present at an adjourned session of that meeting. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. 2.6. ACTION BY VOTE. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide the question, except when a larger vote is required by law, by the certificate of incorporation or by these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. 2.7. ACTION WITHOUT MEETINGS. Unless otherwise provided in the certificate of incorporation, any action required or permitted to be taken by stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares -2- entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in Delaware by hand or certified or registered mail, return receipt requested, to its principal place of business or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Each such written consent shall bear the date of signature of each stockholder who signs the consent. No written consent shall be effective to take the corporate action referred to therein unless written consents signed by a number of stockholders sufficient to take such action are delivered to the corporation in the manner specified in this paragraph within sixty days of the earliest dated consent so delivered. If action is taken by consent of stockholders and in accordance with the foregoing, there shall be filed with the records of the meetings of stockholders the writing or writings comprising such consent. If action is taken by less than unanimous consent of stockholders, prompt notice of the taking of such action without a meeting shall be given to those who have not consented in writing and a certificate signed and attested to by the secretary that such notice was given shall be filed with the records of the meetings of stockholders. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the General Corporation Law of the State of Delaware, if such action had been voted upon by the stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning a vote of stockholders, that written consent has been given under Section 228 of said General Corporation Law and that written notice has been given as provided in such Section 228. 2.8. PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. The authorization of a proxy may but need not be limited to specified action, provided, however, that if a proxy limits its authorization to a meeting or meetings of stockholders, unless otherwise specifically provided such proxy shall entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof. -3- 2.9. INSPECTORS. The directors or the person presiding at the meeting may, and shall if required by applicable law, appoint one or more inspectors of election and any substitute inspectors to act at the meeting or any adjournment thereof. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. 2.10. LIST OF STOCKHOLDERS. The secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. The stock ledger shall be the only evidence as to who are stockholders entitled to examine such list or to vote in person or by proxy at such meeting. Section 3. BOARD OF DIRECTORS 3.1. NUMBER. The corporation shall have one or more directors, the number of directors to be determined from time to time by vote of a majority of the directors then in office. Except in connection with the election of directors at the annual meeting of stockholders, the number of directors may be decreased only to eliminate vacancies by reason of death, resignation or removal of one or more directors. No director need be a stockholder. 3.2. TENURE. Except as otherwise provided by law, by the certificate of incorporation or by these by-laws, each director shall hold office until the next annual meeting and until his successor is elected and qualified, or until he sooner dies, resigns, is removed or becomes disqualified. 3.3. POWERS. The business and affairs of the corporation shall be managed by or under the direction of the board of directors who shall have and may exercise all the powers of the corporation and do all such lawful acts and things as are not by law, the certificate of incorporation or these by-laws directed or required to be exercised or done by the stockholders. 3.4. VACANCIES. Vacancies and any newly created directorships resulting from any increase in the number of directors may be filled by vote of the holders of the particular class or series of stock entitled to elect such director at a meeting called for the purpose, or by a -4- majority of the directors then in office, although less than a quorum, or by a sole remaining director, in each case elected by the particular class or series of stock entitled to elect such directors. When one or more directors shall resign from the board, effective at a future date, a majority of the directors then in office, including those who have resigned, who were elected by the particular class or series of stock entitled to elect such resigning director or directors shall have power to fill such vacancy or vacancies, the vote or action by writing thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies in their number, subject to any requirements of law or of the certificate of incorporation or of these by-laws as to the number of directors required for a quorum or for any vote or other actions. 3.5. COMMITTEES. The board of directors may, by vote of a majority of the whole board, (a) designate, change the membership of or terminate the existence of any committee or committees, each committee to consist of one or more of the directors; (b) designate one or more directors as alternate members of any such committee who may replace any absent or disqualified member at any meeting of the committee; and (c) determine the extent to which each such committee shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, including the power to authorize the seal of the corporation to be affixed to all papers which require it and the power and authority to declare dividends or to authorize the issuance of stock; excepting, however, such powers which by law, by the certificate of incorporation or by these by-laws they are prohibited from so delegating. In the absence or disqualification of any member of such committee and his alternate, if any, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Except as the board of directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the board or such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these by-laws for the conduct of business by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors upon request. 3.6. REGULAR MEETINGS. Regular meetings of the board of directors may be held without call or notice at such places within or without the State of Delaware and at such times as the board may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent directors. A regular meeting of the directors may be held without call or notice immediately after and at the same place as the annual meeting of stockholders. 3.7. SPECIAL MEETINGS. Special meetings of the board of directors may be held at any time and at any place within or without the State of Delaware designated in the notice of the meeting, when called by the chairman of the board, if any, the president, or by one-third or more in number of the directors, reasonable notice thereof being given to each director by the -5- secretary or by the chairman of the board, if any, the president or any one of the directors calling the meeting. 3.8. NOTICE. It shall be reasonable and sufficient notice to a director to send notice by mail at least forty-eight hours or by telegram at least twenty-four hours before the meeting addressed to him at his usual or last known business or residence address or to give notice to him in person or by telephone at least twenty-four hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting. 3.9. QUORUM. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, at any meeting of the directors a majority of the directors then in office shall constitute a quorum; a quorum shall not in any case be less than one-third of the total number of directors constituting the whole board. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. 3.10. ACTION BY VOTE. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, when a quorum is present at any meeting the vote of a majority of the directors present shall be the act of the board of directors. 3.11. ACTION WITHOUT A MEETING. Any action required or permitted to be taken at any meeting of the board of directors or a committee thereof may be taken without a meeting if all the members of the board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the records of the meetings of the board or of such committee. Such consent shall be treated for all purposes as the act of the board or of such committee, as the case may be. 3.12. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the board of directors, or any committee designated by such board, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other or by any other means permitted by law. Such participation shall constitute presence in person at such meeting. 3.13. COMPENSATION. In the discretion of the board of directors, each director may be paid such fees for his services as director and be reimbursed for his reasonable expenses incurred in the performance of his duties as director as the board of directors from time to time may determine. Nothing contained in this section shall be construed to preclude any director from serving the corporation in any other capacity and receiving reasonable compensation therefor. -6- 3.14. INTERESTED DIRECTORS AND OFFICERS. (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the corporation's directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. Section 4. OFFICERS AND AGENTS 4.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall be a president, a treasurer, a secretary and such other officers, if any, as the board of directors from time to time may in its discretion elect or appoint including without limitation a chairman of the board, one or more vice presidents and a controller. The corporation may also have such agents, if any, as the board of directors from time to time may in its discretion choose. Any officer may be but none need be a director or stockholder. Any two or more offices may be held by the same person. Any officer may be required by the board of directors to secure the faithful performance of his duties to the corporation by giving bond in such amount and with sureties or otherwise as the board of directors may determine. 4.2. POWERS. Subject to law, to the certificate of incorporation and to the other provisions of these by-laws, each officer shall have, in addition to the duties and powers herein -7- set forth, such duties and powers as are commonly incident to his office and such additional duties and powers as the board of directors may from time to time designate. 4.3. ELECTION. The officers may be elected by the board of directors at their first meeting following the annual meeting of the stockholders or at any other time. At any time or from time to time the directors may delegate to any officer their power to elect or appoint any other officer or any agents. 4.4. TENURE. Each officer shall hold office until the first meeting of the board of directors following the next annual meeting of the stockholders and until his respective successor is chosen and qualified unless a shorter period shall have been specified by the terms of his election or appointment, or in each case until he sooner dies, resigns, is removed or becomes disqualified. Each agent shall retain his authority at the pleasure of the directors, or the officer by whom he was appointed or by the officer who then holds agent appointive power. 4.5. CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND VICE PRESIDENT. The chairman of the board, if any, shall have such duties and powers as shall be designated from time to time by the board of directors. Unless the board of directors otherwise specifies, the chairman of the board, or if there is none the chief executive officer, shall preside, or designate the person who shall preside, at all meetings of the stockholders and of the board of directors. Unless the board of directors otherwise specifies, the president shall be the chief executive officer and shall have direct charge of all business operations of the corporation and, subject to the control of the directors, shall have general charge and supervision of the business of the corporation. Any vice presidents shall have such duties and powers as shall be set forth in these by-laws or as shall be designated from time to time by the board of directors or by the president. 4.6. TREASURER AND ASSISTANT TREASURERS. Unless the board of directors otherwise specifies, the treasurer shall be the chief financial officer of the corporation and shall be in charge of its funds and valuable papers, and shall have such other duties and powers as may be designated from time to time by the board of directors or by the president. If no controller is elected, the treasurer shall, unless the board of directors otherwise specifies, also have the duties and powers of the controller. Any assistant treasurers shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the treasurer. 4.7. CONTROLLER AND ASSISTANT CONTROLLERS. If a controller is elected, he shall, unless the board of directors otherwise specifies, be the chief accounting officer of the corporation -8- and be in charge of its books of account and accounting records, and of its accounting procedures. He shall have such other duties and powers as may be designated from time to time by the board of directors, the president or the treasurer. Any assistant controller shall have such duties and powers as shall be designated from time to time by the board of directors, the president, the treasurer or the controller. 4.8. SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all proceedings of the stockholders, of the board of directors and of committees of the board of directors in a book or series of books to be kept therefor and shall file therein all actions by written consent of stockholders or directors. In the absence of the secretary from any meeting, an assistant secretary, or if there be none or he is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed the secretary shall keep or cause to be kept the stock and transfer records of the corporation, which shall contain the names and record addresses of all stockholders and the number of shares registered in the name of each stockholder. He shall have such other duties and powers as may from time to time be designated by the board of directors or the president. Any assistant secretaries shall have such duties and powers as shall be designated from time to time by the board of directors, the president or the secretary. Section 5. RESIGNATIONS AND REMOVALS 5.1. Any director or officer may resign at any time by delivering his resignation in writing to the chairman of the board, if any, the president, or the secretary or to a meeting of the board of directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time, and without in either case the necessity of its being accepted unless the resignation shall so state. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, a director (including persons elected by stockholders or directors to fill vacancies in the board) may be removed from office with or without cause by the vote of the holders of a majority of the issued and outstanding shares of the particular class or series entitled to vote in the election of such directors. The board of directors may at any time remove any officer either with or without cause. The board of directors may at any time terminate or modify the authority of any agent. Section 6. VACANCIES 6.1. If the office of the president or the treasurer or the secretary becomes vacant, the directors may elect a successor by vote of a majority of the directors then in office. If the office of any other officer becomes vacant, any person or body empowered to elect or appoint that officer may choose a successor. Each such successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the secretary until his successor is chosen and qualified or in each case until he sooner dies, resigns, is removed or becomes -9- disqualified. Any vacancy of a directorship shall be filled as specified in Section 3.4 of these by-laws. Section 7. CAPITAL STOCK 7.1. STOCK CERTIFICATES. Each stockholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by him, in such form as shall, in conformity to law, the certificate of incorporation and the by-laws, be prescribed from time to time by the board of directors. Such certificate shall be signed by the chairman or vice chairman of the board, if any, or the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary. Any of or all the signatures on the certificate may be a facsimile. In case an officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the time of its issue. 7.2. LOSS OF CERTIFICATES. In the case of the alleged theft, loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms, including receipt of a bond sufficient to indemnify the corporation against any claim on account thereof, as the board of directors may prescribe. Section 8. TRANSFER OF SHARES OF STOCK 8.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or noted on the stock certificate, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the board of directors or the transfer agent of the corporation may reasonably require. Except as may be otherwise required by law, by the certificate of incorporation or by these by-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote or to give any consent with respect thereto and to be held liable for such calls and assessments, if any, as may lawfully be made thereon, regardless of any transfer, pledge or other disposition of such stock until the shares have been properly transferred on the books of the corporation. It shall be the duty of each stockholder to notify the corporation of his post office address. 8.2. RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the -10- board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no such record date is fixed by the board of directors, the record date for determining the stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no such record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by the General Corporation Law of the State of Delaware, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in Delaware by hand or certified or registered mail, return receipt requested, to its principal place of business or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. If no record date has been fixed by the board of directors and prior action by the board of directors is required by the General Corporation Law of the State of Delaware, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such payment, exercise or other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. -11- Section 9. CORPORATE SEAL 9.1. Subject to alteration by the directors, the seal of the corporation shall consist of a flat-faced circular die with the word "Delaware" and the name of the corporation cut or engraved thereon, together with such other words, dates or images as may be approved from time to time by the directors. Section 10. EXECUTION OF PAPERS 10.1. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts or other obligations made, accepted or endorsed by the corporation shall be signed by the chairman of the board, if any, the president, a vice president or the treasurer. Section 11. FISCAL YEAR 11.1. The fiscal year of the corporation shall end on the 31st day of December. Section 12. AMENDMENTS 12.1. These by-laws may be adopted, amended or repealed by vote of a majority of the directors then in office or by vote of a majority of the voting power of the stock outstanding and entitled to vote. Any by-law, whether adopted, amended or repealed by the stockholders or directors, may be amended or reinstated by the stockholders or the directors. -12- EX-3.3 4 a2034240zex-3_3.txt EXHIBIT 3.3 Exhibit 3.3 RESTATED CERTIFICATE OF INCORPORATION OF UNITED STATES CAN COMPANY Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware United States Can Company, a Delaware corporation (the "Corporation"), does hereby certify that: 1. The present name of the Corporation is United States Can Company. The name under which the Corporation was originally incorporated is CCC Series 200, Inc. 2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on April 24, 1985. 3. This Restated Certificate of Incorporation amends and restates in its entirety the Restated Certificate of Incorporation of the Corporation filed with the Secretary of State of the State of Delaware on May 29, 1992, as heretofore supplemented by the Certificates of Ownership and Merger filed with the Secretary of State of the State of Delaware on November 25, 1992, February 28, 1994, June 29, 1994, August 2, 1994, April 5, 1995, April 28, 1995, June 23, 1995 and September 13, 1996 (as so supplemented the "Existing Certificate of Incorporation"). 4. The Existing Certificate of Incorporation is hereby amended and restated in its entirety to read as set forth on Exhibit A attached hereto. 5. The foregoing amendment and restatement of the Existing Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware by the sole stockholder of the Corporation. IN WITNESS WHEREOF, United States Can Company has caused this certificate to be executed this ____ day of July, 1999. UNITED STATES CAN COMPANY By: ------------------------------ Name: ------------------------ Title: ------------------------ EXHIBIT A RESTATED CERTIFICATE OF INCORPORATION OF UNITED STATES CAN COMPANY Article 1. NAME. The name of the corporation (hereinafter called the "Corporation") is United States Can Company. Article 2. ADDRESS. The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. Article 3. PURPOSES. The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Article 4. CAPITAL STOCK. Section 4.01. NUMBER OF SHARES. The total number of shares of stock which the Corporation shall have authority to issue is 1,500 shares of common stock, par value $1 per share ("Common Stock"). Section 4.02. VOTING RIGHTS. All shares of Common Stock shall have the right to vote on all matters presented for stockholder action and shall have one vote for each share of Common Stock. Section 4.03. LIQUIDATION. All shares of Common Stock shall share equally in the event of any liquidation, dissolution or winding up of the affairs of the Corporation. Article 5. PERPETUAL EXISTENCE. The Corporation is to have perpetual existence. Article 6. BOARD OF DIRECTORS. Section 6.01. NUMBER OF DIRECTORS. The number of directors of the Corporation shall be fixed, and may be increased or decreased from time to time, in such a manner as may be prescribed by the By-laws. Section 6.02. REMOVAL; VACANCIES. Any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of all of the then outstanding shares of Common Stock. Vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled by a majority of the remaining directors, though less then a quorum of the Board of Directors, and directors so chosen shall, subject to the preceding sentence, hold office for a term expiring at the next annual meeting of stockholders and until their successors have been duly elected and qualified. No decrease in the number of authorized directors shall shorten the term of any incumbent director. Article 7. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. Any amendment or repeal of this Article 7 shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal. Article 8. INDEMNIFICATION. Section 8.01. RIGHT TO INDEMNIFICATION. To the full extent permitted by Delaware law from time to time in effect, and subject to the provisions of Section 8.02 of this Article 8, the Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, and (ii) may, in the sole discretion of the Board of Directors, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that such person is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that such person did 2 not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful. Section 8.02. DETERMINATION OF STANDARD OF CONDUCT. Any indemnification under Section 8.01 of this Article 8 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances because such person has met the applicable standard of conduct set forth in said Section 8.01. Such determination shall be made (1) by the Board of Directors by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel (compensated by the Corporation) in a written opinion, or (4) by the stockholders. Section 8.03. EXPENSES. To the extent that a director or officer of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 8.01 of this Article 8, or with respect to any claim, issue or matter therein (to the extent that a portion of such person's expenses can be reasonably allocated thereto), such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Section 8.04. ADVANCEMENT OF EXPENSES. Expenses (including attorney's fees) incurred by a director or officer of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in Section 8.01 of this Article 8, or threat thereof, shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article 8. Such expenses (including attorney's fees) incurred by an employee or agent of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) may be so paid upon the receipt of such an undertaking and such other terms and conditions as the Board of Directors deems appropriate. Section 8.05. NON-EXCLUSIVITY OF RIGHTS. The indemnification and advancement of expenses provided by this Article 8 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be 3 entitled under any statute, certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 8.06. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article 8 or of Section 145 of the General Corporation Law of the State of Delaware. Section 8.07. EMPLOYEE BENEFIT PLANS. For purposes of this Article 8, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article 8. Article 9. LOCATION OF STOCKHOLDERS MEETINGS. Meetings of stockholders may be held within or without the State of Delaware, as the By-laws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation. Article 10. CHANGES TO CERTIFICATE. The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in effect may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law. Article 11. CHANGES TO BY-LAWS. The Board of Directors, in furtherance and not in limitation of the powers conferred by the laws of the State of Delaware and by this Restated Certificate of Incorporation, is expressly authorized to make, amend or repeal the By-laws of the Corporation. 4 EX-3.4 5 a2034240zex-3_4.txt EXHIBIT 3.4 Exhibit 3.4 AMENDED AND RESTATED BY-LAWS OF UNITED STATES CAN COMPANY (Amended and Restated on July 22, 1999) ARTICLE I OFFICES AND RECORDS SECTION (1) REGISTERED OFFICE. The registered office of the Corporation shall be established and maintained at the office of The Corporation Trust Company at 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware, and The Corporation Trust Company shall be the registered agent of the Corporation at such address. SECTION (2) OTHER OFFICES. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require. SECTION (3) BOOKS AND RECORDS. The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors. ARTICLE II STOCKHOLDERS SECTION (1) ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and other proper corporate business shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and may transact any other proper corporate business. The business to be transacted at any annual meeting need not be specified in the notice of such meeting. SECTION (2) TIME, PLACE AND PURPOSE OF SPECIAL MEETINGS. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by the Certificate of Incorporation or by law, may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. The purpose or purposes of any special meeting need not be specified in the notice of such meeting. SECTION (3) CALLING OF SPECIAL MEETINGS. Special meetings of the stockholders may be called only by the Chairman of the Board, by a vote of a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board") or by the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"). SECTION (4) NOTICE OF MEETINGS. Written or printed notice, stating the place, day and hour of the meeting, shall be delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required by law. SECTION (5) QUORUM AND ADJOURNMENT. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the Voting Stock, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The Chairman of the meeting or a majority of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION (6) VOTING. Each stockholder shall be entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-laws, in person or by proxy, but no proxy shall be voted after three years from its date, unless such proxy provides for a longer period. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION (7) [RESERVED]. SECTION (8) PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE. At all meetings of the stockholders at which directors are to be elected, a plurality of the votes cast thereat shall elect 2 directors. Except as otherwise provided by law, the Certificate of Incorporation, or these By-laws, in all matters other than the election of directors, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders. SECTION (9) [RESERVED]. SECTION (10) CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Such written consent shall be filed with the records of the Corporation. ARTICLE III BOARD OF DIRECTORS SECTION (1) GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. In addition to the powers and authorities by these By-laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws required to be exercised or done by the stockholders. SECTION (2) NUMBER, TENURE AND QUALIFICATIONS. The number of directors shall be fixed from time to time pursuant to a resolution adopted by a majority of the Whole Board or by action of the stockholders, but shall consist of not more than twelve (12) nor less than six (6) directors. The directors shall be elected at each annual meeting of stockholders, except as provided in the Certificate of Incorporation or Section 9 of this Article, and each director shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and qualified or until his death, resignation, disqualification or removal from office. Directors need not be stockholders of the Corporation. SECTION (3) REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-law immediately after, and at the same place as, the annual meeting of stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION (4) SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the President or any two of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings. 3 SECTION (5) NOTICE. Notice of any special meeting of directors shall be given to each director at his business or residence in writing by hand delivery, first-class or overnight mail or courier service, telegram or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least twenty-four (24) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or by hand delivery, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Article VI, Section 4 of these By-laws. SECTION (6) ACTION BY CONSENT OF BOARD OF DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION (7) CONFERENCE TELEPHONE MEETINGS. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION (8) QUORUM. Subject to Article III, Section 9 of these By-laws, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. SECTION (9) VACANCIES. Subject to applicable law and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in 4 the authorized number of directors, may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall, subject to Article III, Section 11 of these By-laws, hold office for a term expiring at the next annual meeting of stockholders and until such director's successor shall have been duly elected and qualified. SECTION (10) EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the Whole Board, designate an Executive Committee to exercise, subject to applicable provisions of law, all the powers of the Board in the management of the business and affairs of the Corporation when the Board is not in session, including, without limitation, the power to declare dividends, to authorize the issuance of the Corporation's capital stock and to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware, and may, by resolution similarly adopted, designate one or more other committees. The Executive Committee and each such other committee shall consist of two or more directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, other than the Executive Committee (the powers of which are expressly provided for herein), may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board when required. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Article III, Section 5 of these By-laws. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; PROVIDED, HOWEVER, that no such committee shall have or may exercise any authority of the Board. SECTION (11) REMOVAL. Any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of Voting Stock, voting together as a single class. SECTION (12) RECORDS. The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation. 5 SECTION (13) COMPENSATION. Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the Board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, employee, agent or otherwise, and receiving compensation therefor. ARTICLE IV OFFICERS SECTION (1) ELECTED OFFICERS. The elected officers of the Corporation shall be a Chairman of the Board of Directors, a President, a Secretary, a Treasurer, and such other officers (including, without limitation, a Chief Financial Officer) as the Board of Directors from time to time may deem proper. The Chairman of the Board shall be chosen from among the directors. All officers elected by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof. The Board or any committee thereof may from time to time elect, or the Chairman of the Board or President may appoint, such other officers (including one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers) and such agents, as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these By-laws or as may be prescribed by the Board or such committee or by the Chairman of the Board or President, as the case may be. SECTION (2) ELECTION AND TERM OF OFFICE. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign, but any officer may be removed from office at any time, with or without cause, by the affirmative vote of a majority of the Whole Board or, except in the case of an officer or agent elected by the Board, by the Chairman of the Board or President. Such removal shall be without prejudice to the contractual rights, if any, of the person so removed. SECTION (3) CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall be the Chief Executive Officer of the Company. The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to his office which may be required by law and all such other duties as are properly required of him by the Board of Directors. He shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chairman of the Board may also serve as President, if so elected by the Board. 6 SECTION (4) PRESIDENT. The President shall act in a general executive capacity and shall assist the Chairman of the Board in the administration and operation of the Corporation's business and general supervision of its policies and affairs. The President shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of stockholders and of the Board of Directors. SECTION (5) VICE-PRESIDENTS. Each Vice President shall have such powers and shall perform such duties as shall be assigned to him by the Board of Directors, the Chairman of the Board or the President, as the case may be. SECTION (6) CHIEF FINANCIAL OFFICER. The Chief Financial Officer (if any) shall be a Vice President and act in an executive financial capacity. He shall assist the Chairman of the Board and the President in the general supervision of the Corporation's financial policies and affairs. SECTION (7) TREASURER. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board of Directors, or in such banks as may be designated as depositaries in the manner provided by resolution of the Board of Directors. He shall have such further powers and duties and shall be subject to such directions as may be granted or imposed upon him from time to time by the Board of Directors, the Chairman of the Board or the President. SECTION (8) SECRETARY. The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders; he shall see that all notices are duly given in accordance with the provisions of these By-laws and as required by law; he shall be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; and he shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, he shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board or the President. SECTION (9) [RESERVED]. SECTION (10) VACANCIES. A newly created elected office and a vacancy in any elected office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors. Any vacancy in an office appointed by the Chairman of the Board or the President because of death, resignation or removal may be filled by the Chairman of the Board or the President. 7 ARTICLE V STOCK CERTIFICATES, TRANSFERS AND RECORD DATE SECTION (1) STOCK CERTIFICATES AND TRANSFERS. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by, or in the name of the Corporation by, the Chairman of the Board, the President or any Vice President, and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe. All or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION (2) LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any officer may in its or his discretion require. SECTION (3) TRANSFER OF SHARES. The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the Board of Directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION (4) STOCKHOLDERS RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. 8 ARTICLE VI MISCELLANEOUS PROVISIONS SECTION (1) FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year. SECTION (2) DIVIDENDS. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation. SECTION (3) SEAL. The corporate seal shall have inscribed thereon the words "Corporate Seal - Delaware" and around the margin thereof the words "United States Can Company". SECTION (4) WAIVER OF NOTICE. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or any committee thereof need be specified in any waiver of notice of such meeting. SECTION (5) [RESERVED]. SECTION (6) RESIGNATIONS. Any director or any officer, whether elected or appointed, may resign at any time by giving written notice of such resignation to the Chairman of the Board, the President or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the President or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective. ARTICLE VII CONTRACTS, PROXIES, ETC. SECTION (1) CONTRACTS. Except as otherwise required by law, the Certificate of Incorporation or these By-laws, any contracts or other instruments may be executed and delivered in the name and on behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of 9 Directors or the Chairman of the Board, the Chairman of the Board, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power. SECTION (2) VOTING OF SHARES IN OTHER CORPORATIONS OR ENTITIES. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation or entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE VIII AMENDMENTS SECTION (1) AMENDMENTS. These By-laws may be altered or repealed, and any By- laws may be made, at any annual meeting of the stockholders or at any special meeting thereof by the affirmative vote of the holders of a majority of the then outstanding Voting Stock, or by the affirmative vote of a majority of the Whole Board at any regular or special meeting of the Board of Directors. 10 EX-3.5 6 a2034240zex-3_5.txt EXHIBIT 3.5 Exhibit 3.5 CERTIFICATE OF INCORPORATION OF USC MAY VERPACKUNGEN HOLDING INC. Article 1. NAME. The name of the corporation (hereinafter called the "Corporation") is USC May Verpackungen Holding Inc. Article 2. ADDRESS. The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. Article 3. PURPOSES. The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Article 4. CAPITAL STOCK. Section 4.01. NUMBER OF SHARES. The total number of shares of stock which the Corporation shall have authority to issue is 1,000 shares of common stock, par value $.01 per share ("Common Stock"). Section 4.02. VOTING RIGHTS. All shares of Common Stock shall have the right to vote on all matters presented for stockholder action and shall have one vote for each share of Common Stock. Section 4.03. LIQUIDATION. All shares of Common Stock shall share equally in the event of any liquidation, dissolution or winding up of the affairs of the Corporation. Article 5. PERPETUAL EXISTENCE. The Corporation is to have perpetual existence. Article 6. BOARD OF DIRECTORS. Section 6.01. NUMBER OF DIRECTORS. The number of directors of the Corporation shall be fixed, and may be increased or decreased from time to time, in such a manner as may be prescribed by the By-laws. Section 6.02. REMOVAL; VACANCIES. Any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of all of the then outstanding shares of Common Stock. Vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled by a majority of the remaining directors, though less then a quorum of the Board of Directors, and directors so chosen shall, subject to the preceding sentence, hold office for a term expiring at the next annual meeting of stockholders and until their successors have been duly elected and qualified. No decrease in the number of authorized directors shall shorten the term of any incumbent director. Article 7. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived any improper personal benefit. Any amendment or repeal of this Article 7 shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal. Article 8. INDEMNIFICATION. Section 8.01. RIGHT TO INDEMNIFICATION. To the full extent permitted by Delaware law from time to time in effect, and subject to the provisions of Section 8.02 of this Article 8, the Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, and (ii) may, in the sole discretion of the Board of Directors, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that such person is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that such person 2 did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful. Section 8.02. DETERMINATION OF STANDARD OF CONDUCT. Any indemnification under Section 8.01 of this Article 8 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances because such person has met the applicable standard of conduct set forth in said Section 8.01. Such determination shall be made (1) by the Board of Directors by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel (compensated by the Corporation) in a written opinion, or (4) by the stockholders. Section 8.03. EXPENSES. To the extent that a director or officer of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 8.01 of this Article 8, or with respect to any claim, issue or matter therein (to the extent that a portion of such person's expenses can be reasonably allocated thereto), such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Section 8.04. ADVANCEMENT OF EXPENSES. Expenses (including attorney's fees) incurred by a director or officer of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in Section 8.01 of this Article 8, or threat thereof, shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article 8. Such expenses (including attorney's fees) incurred by an employee or agent of the Corporation (or of another corporation, partnership, joint venture, trust or other enterprise, in which capacity such person is serving at the request of the Corporation) may be so paid upon the receipt of such an undertaking and such other terms and conditions as the Board of Directors deems appropriate. Section 8.05. NON-EXCLUSIVITY OF RIGHTS. The indemnification and advancement of expenses provided by this Article 8 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be 3 entitled under any statute, certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 8.06. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article 8 or of Section 145 of the General Corporation Law of the State of Delaware. Section 8.07. EMPLOYEE BENEFIT PLANS. For purposes of this Article 8, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article 8. Article 9. LOCATION OF STOCKHOLDERS MEETINGS. Meetings of stockholders may be held within or without the State of Delaware, as the By-laws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation. Article 10. CHANGES TO CERTIFICATE. The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in effect may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law. Article 11. CHANGES TO BY-LAWS. The Board of Directors, in furtherance and not in limitation of the powers conferred by the laws of the State of Delaware and by this Certificate of Incorporation, is expressly authorized to make, amend or repeal the By-laws of the Corporation. 4 Article 12. INCORPORATOR. The name and address of the incorporator of the Corporation are, Karen S. Smith, c/o Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate of Incorporation, hereby declaring and certifying that this is my act and deed and the facts stated herein are true, and accordingly, have hereunto set my hand this __ day of December, 1999. ---------------------------------- Karen S. Smith, Incorporator 5 EX-3.6 7 a2034240zex-3_6.txt EXHIBIT 3.6 Exhibit 3.6 BY-LAWS OF USC MAY VERPACKUNGEN HOLDING INC. ARTICLE I OFFICES AND RECORDS SECTION (1) REGISTERED OFFICE. The registered office of the Corporation shall be established and maintained at the office of The Corporation Trust Company at 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware, and The Corporation Trust Company shall be the registered agent of the Corporation at such address. SECTION (2) OTHER OFFICES. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require. SECTION (3) BOOKS AND RECORDS. The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors. ARTICLE II STOCKHOLDERS SECTION (1) ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and other proper corporate business shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and may transact any other proper corporate business. The business to be transacted at any annual meeting need not be specified in the notice of such meeting. SECTION (2) TIME, PLACE AND PURPOSE OF SPECIAL MEETINGS. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by the Certificate of Incorporation or by law, may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. The purpose or purposes of any special meeting need not be specified in the notice of such meeting. SECTION (3) CALLING OF SPECIAL MEETINGS. Special meetings of the stockholders may be called only by the Chairman of the Board, the President, by a vote of a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board") or by the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"). SECTION (4) NOTICE OF MEETINGS. Written or printed notice, stating the place, day and hour of the meeting, shall be delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required by law. SECTION (5) QUORUM AND ADJOURNMENT. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the Voting Stock, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The Chairman of the meeting or a majority of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION (6) VOTING. Each stockholder shall be entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-laws, in person or by proxy, but no proxy shall be voted after three years from its date, unless such proxy provides for a longer period. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION (7) [RESERVED]. SECTION (8) PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE. At all meetings of the stockholders at which directors are to be elected, a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate of Incorporation, or these By-laws, in all matters other than the election of directors, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders. 2 SECTION (9) [RESERVED]. SECTION (10) CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Such written consent shall be filed with the records of the Corporation. ARTICLE III BOARD OF DIRECTORS SECTION (1) GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. In addition to the powers and authorities by these By-laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-laws required to be exercised or done by the stockholders. SECTION (2) NUMBER, TENURE AND QUALIFICATIONS. The number of directors shall be fixed from time to time pursuant to a resolution adopted by a majority of the Whole Board or by action of the stockholders, but shall consist of not more than [twelve (12)] nor less than [three (3)] directors. The directors shall be elected at each annual meeting of stockholders, except as provided in the Certificate of Incorporation or Section 9 of this Article, and each director shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and qualified or until his death, resignation, disqualification or removal from office. Directors need not be stockholders of the Corporation. SECTION (3) REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-law immediately after, and at the same place as, the annual meeting of stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION (4) SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the President or any [two] of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings. 3 SECTION (5) NOTICE. Notice of any special meeting of directors shall be given to each director at his business or residence in writing by hand delivery, first-class or overnight mail or courier service, telegram or facsimile transmission, or orally by telephone. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least twenty-four (24) hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least twelve (12) hours before such meeting. If by telephone or by hand delivery, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Article VI, Section 4 of these By-laws. SECTION (6) ACTION BY CONSENT OF BOARD OF DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION (7) CONFERENCE TELEPHONE MEETINGS. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION (8) QUORUM. Subject to Article III, Section 9 of these By-laws, a whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. SECTION (9) VACANCIES. Subject to applicable law and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen 4 shall, subject to Article III, Section 11 of these By-laws, hold office for a term expiring at the next annual meeting of stockholders and until such director's successor shall have been duly elected and qualified. SECTION (10) EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the Whole Board, designate an Executive Committee to exercise, subject to applicable provisions of law, all the powers of the Board in the management of the business and affairs of the Corporation when the Board is not in session, including, without limitation, the power to declare dividends, to authorize the issuance of the Corporation's capital stock and to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware, and may, by resolution similarly adopted, designate one or more other committees. The Executive Committee and each such other committee shall consist of two or more directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, other than the Executive Committee (the powers of which are expressly provided for herein), may to the extent permitted by law exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board when required. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Article III, Section 5 of these By-laws. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; PROVIDED, HOWEVER, that no such committee shall have or may exercise any authority of the Board. SECTION (11) REMOVAL. Any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of Voting Stock, voting together as a single class. SECTION (12) RECORDS. The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation. 5 SECTION (13) COMPENSATION. Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the Board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, employee, agent or otherwise, and receiving compensation therefor. ARTICLE IV OFFICERS SECTION (1) ELECTED OFFICERS. The elected officers of the Corporation shall be a President, a Secretary, a Treasurer, and such other officers (including, without limitation, a Chairman of the Board of Directors and a Chief Financial Officer) as the Board of Directors from time to time may deem proper. The Chairman of the Board, if any, shall be chosen from among the directors. All officers elected by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof. The Board or any committee thereof may from time to time elect, or the Chairman of the Board or President may appoint, such other officers (including one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers) and such agents, as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these By-laws or as may be prescribed by the Board or such committee or by the Chairman of the Board or President, as the case may be. SECTION (2) ELECTION AND TERM OF OFFICE. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign, but any officer may be removed from office at any time, with or without cause, by the affirmative vote of a majority of the Whole Board or, except in the case of an officer or agent elected by the Board, by the Chairman of the Board or President. Such removal shall be without prejudice to the contractual rights, if any, of the person so removed. SECTION (3) CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall be the Chief Executive Officer of the Company. The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to his office which may be required by law and all such other duties as are properly required of him by the Board of Directors. He shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chairman of the Board may also serve as President, if so elected by the Board. 6 SECTION (4) PRESIDENT. The President shall act in a general executive capacity and shall assist the Chairman of the Board in the administration and operation of the Corporation's business and general supervision of its policies and affairs. The President shall, in the absence of or failure to elect or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of stockholders and of the Board of Directors. SECTION (5) VICE-PRESIDENTS. Each Vice President shall have such powers and shall perform such duties as shall be assigned to him by the Board of Directors, the Chairman of the Board or the President, as the case may be. SECTION (6) CHIEF FINANCIAL OFFICER. The Chief Financial Officer (if any) shall be a Vice President and act in an executive financial capacity. He shall assist the Chairman of the Board and the President in the general supervision of the Corporation's financial policies and affairs. SECTION (7) TREASURER. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board of Directors, or in such banks as may be designated as depositaries in the manner provided by resolution of the Board of Directors. He shall have such further powers and duties and shall be subject to such directions as may be granted or imposed upon him from time to time by the Board of Directors, the Chairman of the Board or the President. SECTION (8) SECRETARY. The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders; he shall see that all notices are duly given in accordance with the provisions of these By-laws and as required by law; he shall be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; and he shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, he shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board or the President. SECTION (9) [RESERVED]. SECTION (10) VACANCIES. A newly created elected office and a vacancy in any elected office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors. Any vacancy in an office appointed by the Chairman of the Board or the President because of death, resignation or removal may be filled by the Chairman of the Board or the President. 7 ARTICLE V STOCK CERTIFICATES, TRANSFERS AND RECORD DATE SECTION (1) STOCK CERTIFICATES AND TRANSFERS. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by, or in the name of the Corporation by, the Chairman of the Board, the President or any Vice President, and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe. All or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION (2) LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors or any officer may in its or his discretion require. SECTION (3) TRANSFER OF SHARES. The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the Board of Directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION (4) STOCKHOLDERS RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. 8 ARTICLE VI MISCELLANEOUS PROVISIONS SECTION (1) FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year. SECTION (2) DIVIDENDS. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation. SECTION (3) SEAL. The corporate seal shall have inscribed thereon the words "Corporate Seal - Delaware" and around the margin thereof the words "USC May Verpackungen Holding Inc." SECTION (4) WAIVER OF NOTICE. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or any committee thereof need be specified in any waiver of notice of such meeting. SECTION (5) [RESERVED]. SECTION (6) RESIGNATIONS. Any director or any officer, whether elected or appointed, may resign at any time by giving written notice of such resignation to the Chairman of the Board, the President or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the President or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective. ARTICLE VII CONTRACTS, PROXIES, ETC. SECTION (1) CONTRACTS. Except as otherwise required by law, the Certificate of Incorporation or these By-laws, any contracts or other instruments may be executed and delivered in the name and on behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of 9 Directors or the Chairman of the Board, the Chairman of the Board, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power. SECTION (2) VOTING OF SHARES IN OTHER CORPORATIONS OR ENTITIES. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation or entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE VIII AMENDMENTS SECTION (1) AMENDMENTS. These By-laws may be altered or repealed, and any By- laws may be made, at any annual meeting of the stockholders or at any special meeting thereof by the affirmative vote of the holders of a majority of the then outstanding Voting Stock, or by the affirmative vote of a majority of the Whole Board at any regular or special meeting of the Board of Directors. 10 EX-4.2 8 a2034240zex-4_2.txt EXHIBIT 4.2 Exhibit 4.2 UNITED STATES CAN COMPANY 12 3/8% Senior Subordinated Notes due October 1, 2010 REGISTRATION RIGHTS AGREEMENT New York, New York October 4, 2000 Salomon Smith Barney Inc. Banc of America Securities LLC As Representatives of the Initial Purchasers c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Dear Sirs: United States Can Company, a corporation organized under the laws of the state of Delaware (the "Company"), proposes to issue and sell (the "Initial Placement") to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement, dated as of September 26, 2000 (the "Purchase Agreement"), $175,000,000 aggregate principal amount of the Company's 12 3/8% Senior Subordinated Notes due October 1, 2010 (the "Notes"), which will be guaranteed by each of the Guarantors (as defined herein) (the "Guarantees" and, together with the Notes, the "Securities"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Company and the Guarantors (collectively, the "Issuers") agree with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows: 1. DEFINITIONS. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified Person shall mean (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person who is a director or officer (a) of such specified Person, (b) of any subsidiary of such specified Person or (c) of any Person described in clause (i) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Registration Period" shall mean the one-year period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company) for New Securities. "Final Memorandum" shall have the meaning set forth in the Purchase Agreement. "Guarantors" shall mean, collectively, the Parent Guarantor and the Subsidiary Guarantor. "Holder" shall have the meaning set forth in the preamble hereto. "Indenture" shall mean the Indenture relating to the Securities, dated as of October 4, 2000, among the Issuers and Bank One Trust Company, N.A., as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Purchaser" shall have the meaning set forth in the preamble hereto. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Issuers" shall mean, collectively, the Company, the Parent Guarantor and the Subsidiary Guarantor. "Losses" shall have the meaning set forth in Section 6(d) hereof. 2 "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" shall mean debt securities of the Company identical in all material respects to the Securities (except that the cash interest and interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate) and to be issued under the Indenture. "Parent Guarantor" shall mean U.S. Can Corporation, a Delaware corporation and the Company's sole stockholder. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer of the Issuers to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the 3 Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Subsidiary Guarantor" shall mean May Verpackungen Holding Inc., a Delaware corporation and wholly-owned subsidiary of the Company. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. REGISTERED EXCHANGE OFFER. (a) The Issuers shall prepare and, not later than 120 days following the date of the original issuance of the Securities (or if such 120th day is not a Business Day, the next succeeding Business Day), shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Issuers shall use their best efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 150 days of the date of the original issuance of the Securities (or if such 150th day is not a Business Day, the next succeeding Business Day). (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder is not an Affiliate of the Issuers, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any Person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Issuers shall, or shall cause the Trustee to: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 20 days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law); (iii) keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; 4 (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee or an Affiliate of the Trustee; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, provide a supplemental letter to the Commission (A) stating that the Issuers are conducting the Registered Exchange Offer in reliance on the position of the Commission in EXXON CAPITAL HOLDINGS CORPORATION (pub. avail. May 13, 1988) and MORGAN STANLEY AND CO., INC. (pub. avail. June 5, 1991); and (B) including a representation that the Issuers have not entered into any arrangement or understanding with any Person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Issuers' information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Securities; and (vii) comply in all material respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Issuers shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation in accordance with Section 4(s) all Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in MORGAN STANLEY AND CO., INC. (pub. avail. June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction unless such transaction is exempt from such requirements. Absent such exemption, any secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Issuers or one of their Affiliates. Accordingly, each Holder participating in the 5 Registered Exchange Offer shall be required to represent to the Issuers that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Securities or the New Securities within the meaning of the Act; and (iii) such Holder is not an Affiliate of the Issuers. (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Initial Purchaser, the Issuers shall issue and deliver to such Initial Purchaser or the Person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Issuers shall use their best efforts to cause the CUSIP Service Bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. SHELF REGISTRATION. (a) If (i) due to any change in law or applicable interpretations thereof by the Commission's staff, the Issuers determine upon advice of their outside counsel that they are not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; or (ii) for any other reason the Registered Exchange Offer is not consummated within 180 days of the date hereof; (iii) any Initial Purchaser so requests with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than an Initial Purchaser) is not eligible to participate in the Registered Exchange Offer; or (v) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Issuers shall effect a Shelf Registration Statement in accordance with subsection (b) below. (b)(i) The Issuers shall as promptly as practicable (but in no event more than 120 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time 6 in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; PROVIDED, HOWEVER, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and PROVIDED FURTHER, that with respect to New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Issuers may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Issuers shall use their best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the Commission (or for a period of one year from such effective date if such Shelf Registration Statement is filed at the request of an Initial Purchaser) or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Issuers shall be deemed not to have used their best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (A) such action is required by applicable law; or (B) such action is taken by the Issuers in good faith and for valid business reasons (not including avoidance of the Issuers' obligations hereunder), including the acquisition or divestiture of assets, so long as the Issuers promptly thereafter comply with the requirements of Section 4(k) hereof, if applicable. (iii) The Issuers shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement or such amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission; and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 4. ADDITIONAL REGISTRATION PROCEDURES. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. 7 (a) The Issuers shall: (i) furnish to you, not less than five Business Days prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use their best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose; (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus contained in the Exchange Offer Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Issuers covenant that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto shall comply in all material respects with the Act and the rules and regulations thereunder; and (ii) any Registration Statement and any amendment thereto shall not, when it becomes effective, 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. (c) The Issuers shall advise you, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Issuers a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Issuers shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; 8 (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Issuers of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. (d) The Issuers shall use their reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time. (e) The Issuers shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto. (f) The Issuers shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Issuers consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement in accordance with applicable law. (g) The Issuers shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Issuers shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other Person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such Person may reasonably request. The Issuers consent to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other Person that may be required to deliver a Prospectus following the Registered Exchange 9 Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement in accordance with applicable law. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Issuers shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; PROVIDED that in no event shall the Issuers be obligated to qualify to do business in any jurisdiction where they are not then so qualified or to take any action that would subject them to service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction where it is not then so subject. (j) The Issuers shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. (k) Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Issuers shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to Initial Purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 and the Shelf Registration Statement provided for in Section 3(b) shall each be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section. (l) Not later than the effective date of any Registration Statement, the Issuers shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Issuers. (m) The Issuers shall comply with all applicable rules and regulations of the Commission and shall make generally available to their security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Issuers shall cause the Indenture to be qualified under the Trust Indenture Act in a timely manner. 10 (o) The Issuers may require each Holder of securities to be sold pursuant to any Shelf Registration Statement to furnish to the Issuers such information regarding the Holder and the distribution of such securities as the Issuers may from time to time reasonably require for inclusion in such Registration Statement. The Issuers may exclude from such Shelf Registration Statement the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, the Issuers shall enter into such and take all other appropriate actions (including if requested an underwriting agreement in customary form) in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any, with respect to all parties to be indemnified pursuant to Section 6). (q) In the case of any Shelf Registration Statement, the Issuers shall: (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Issuers and their subsidiaries; (ii) cause the Issuers' officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations during normal business hours; PROVIDED, HOWEVER, that any information that is designated in writing by the Issuers, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally through no fault of the Holder or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; 11 (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Issuers. The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (r) In the case of any Exchange Offer Registration Statement, the Issuers shall: (i) make reasonably available for inspection by such Initial Purchaser, and any attorney, accountant or other agent retained by such Initial Purchaser, all relevant financial and other records, pertinent corporate documents and properties of the Issuers and their subsidiaries; (ii) cause the Issuers' officers, directors and employees to supply all relevant information reasonably requested by such Initial Purchaser or any such attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations during normal business hours; PROVIDED, HOWEVER, that any information that is designated in writing by the Issuers, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Initial Purchaser or any such attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally through no fault of the Holder or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to such Initial Purchaser, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to such Initial Purchaser and its counsel, addressed to such Initial Purchaser, covering such matters as are customarily covered in opinions requested in underwritten offerings and 12 such other matters as may be reasonably requested by such Initial Purchaser or its counsel; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to such Initial Purchaser, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings, or if requested by such Initial Purchaser or its counsel in lieu of a "cold comfort" letter, an agreed-upon procedures letter under Statement on Auditing Standards No. 35, covering matters requested by such Initial Purchaser or its counsel; and (vi) deliver such documents and certificates as may be reasonably requested by such Initial Purchaser or its counsel, including those to evidence compliance with Section 4(k) and with conditions customarily contained in underwriting agreements. The foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this Section shall be performed at the close of the Registered Exchange Offer and the effective date of any post-effective amendment to the Exchange Offer Registration Statement. (s) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the New Securities, the Issuers shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (t) The Issuers will use their best efforts (i) if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement; or (ii) if the Securities were not previously rated, to cause the Securities covered by a Registration Statement to be rated with at least one nationally recognized statistical rating agency, if so requested by Majority Holders with respect to the related Registration Statement or by any Managing Underwriters. (u) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such Broker-Dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by: (i) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect 13 thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Rules. (v) The Issuers shall use their best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 5. REGISTRATION EXPENSES. The Issuers shall bear all expenses incurred in connection with the performance of their obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith. 6. INDEMNIFICATION AND CONTRIBUTION. (a) Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each Person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof 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 agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the Issuers will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Issuers by or on behalf of any such Holder specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Issuers may otherwise have. Each of the Issuers, jointly and severally, also agrees to indemnify or contribute as provided in Section 6(d) to Losses of each any underwriter of Securities or New Securities, as 14 the case may be, registered under a Shelf Registration Statement, their directors, officers, employees or agents and each Person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. (b) Each Holder of securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees to indemnify and hold harmless each of the Issuers, each of their directors, each of their officers who signs such Registration Statement and each Person who controls the Issuers within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from each of the Issuers to each such Holder, but only with reference to written information relating to such Holder furnished to the Issuers by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 or notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such 15 claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; PROVIDED, HOWEVER, that in no case shall any Initial Purchaser or any subsequent Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Issuers shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum and (y) the total amount of additional interest which the Issuers were not required to pay as a result of registering the securities covered by the Registration Statement which resulted in such Losses. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), 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. For purposes of this Section, each Person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each Person who 16 controls the Company, the Parent Guarantor or the Subsidiary Guarantor within the meaning of either the Act or the Exchange Act, each officer of the Company, the Parent Guarantor or the Subsidiary Guarantor who shall have signed the Registration Statement and each director of the Company, the Parent Guarantor or the Subsidiary Guarantor shall have the same rights to contribution as the Company, the Parent Guarantor or the Subsidiary Guarantor, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or any of the Issuers or any of the officers, directors or controlling Persons referred to in this Section hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. UNDERWRITTEN REGISTRATIONS. (a) If any of the Securities or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders. (b) No Person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such Person (i) agrees to sell such Person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. NO INCONSISTENT AGREEMENTS. The Issuers have not, as of the date hereof, entered into, nor shall any of them, on or after the date hereof, enter into, any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuers have obtained the written consent of the Majority Holders (or, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of New Securities); PROVIDED that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Issuers shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: 17 (a) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Brothers Inc; (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Issuers, initially at the Company's address set forth in the Purchase Agreement, with a copy to Ropes & Gray, One International Place, Boston, Massachusetts 02110. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers or the Issuers by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Issuers thereto, subsequent Holders of Securities and the New Securities. The Issuers hereby agree to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. 12. COUNTERPARTS. This agreement may be in signed counterparts, each of which shall an original and all of which together shall constitute one and the same agreement. 13. HEADINGS. The headings used herein are for convenience only and shall not affect the construction hereof. 14. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. SEVERABILITY. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 16. SECURITIES HELD BY THE ISSUERS, ETC. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Issuers or their Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) 18 shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [signature page follows] 19 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Issuers and the several Initial Purchasers. Very truly yours, UNITED STATES CAN COMPANY By: /s/ John Workman -------------------------------------- U.S. CAN CORPORATION By: /s/ John Workman -------------------------------------- MAY VERPACKUNGEN HOLDING INC. By: /s/ John Workman -------------------------------------- The foregoing Agreement is hereby confirmed and accepted as of the date first above written. SALOMON SMITH BARNEY INC. BANC OF AMERICA SECURITIES LLC By: SALOMON SMITH BARNEY INC. By: /s/ Michael S. Canmann -------------------------------------- Name: Title: 20 ANNEX A Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business one year after the Expiration Date, it will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution". 21 ANNEX B Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution". 22 ANNEX C PLAN OF DISTRIBUTION Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 2000, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Securities by brokers-dealers. New Securities received by Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such New Securities. Any Broker-Dealer that resales New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Securities and any commissions or concessions received by any such Persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Securities Act. 23 ANNEX D RIDER A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------- Address: --------------------------------------------------- --------------------------------------------------- RIDER B If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has not arrangements or understandings with any Person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchange for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 24 EX-10.2 9 a2034240zex-10_2.txt EXHIBIT 10.2 Exhibit 10.2 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is entered into as of October 4, 2000 among UNITED STATES CAN COMPANY, a Delaware corporation (the "BORROWER"), U.S. CAN CORPORATION, a Delaware corporation and each of the Domestic Subsidiaries of the Borrower (individually a "DOMESTIC GUARANTOR" and collectively the "DOMESTIC GUARANTORS"; together with the Borrower, individually a "PLEDGOR" and collectively the "PLEDGORS") and BANK OF AMERICA, N.A., in its capacity as collateral agent (in such capacity, the "COLLATERAL AGENT") for the lenders from time to time party to the Credit Agreement described below (the "LENDERS"). RECITALS WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof (as amended, modified, extended, renewed, restated or replaced from time to time, the "CREDIT AGREEMENT") among the Borrower, the Foreign Subsidiary Borrowers party thereto, the Domestic Guarantors, the Lenders, the Collateral Agent in its capacity as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank One, NA (Main Office Chicago), as Documentation Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the obligations of the Lenders to make their respective Loans and issue their respective Letters of Credit under the Credit Agreement that the Pledgors shall have executed and delivered this Pledge Agreement to the Collateral Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code (the "UCC") in effect in the State of New York are used herein as so defined: Control, Entitlement Order, Investment Company Security, Proceeds, Products, Securities Account, Security Entitlement, Securities Intermediary and Security. For purposes of this Pledge Agreement, (a) the term "Lender" shall include any Affiliate of any Lender which has entered into a Hedging Agreement with any Credit Party and (b) the term "First-Tier Foreign Subsidiary" shall mean any direct Foreign Subsidiary of a Pledgor. Except as otherwise expressly provided, all definitions shall be equally applicable to the singular and plural forms of the terms defined. 2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the prompt payment and performance in full when due, whether by lapse of time or otherwise, of the Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby pledges and assigns to the Collateral Agent, for the benefit of the Lenders, and grants to the Collateral Agent, for the benefit of the Lenders, a continuing security interest in any and all right, title and interest of such Pledgor in and to the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the "PLEDGED COLLATERAL"): (a) PLEDGED CAPITAL STOCK. 100% (or, if less, the full amount owned by such Pledgor) of the issued and outstanding Capital Stock of each Domestic Subsidiary and, subject to Section 3 hereof, each First-Tier Foreign Subsidiary set forth on SCHEDULE 2(a) attached hereto, together with the certificates (or other agreements or instruments), if any, representing such Capital Stock and all options and other rights, contractual or otherwise, with respect thereto (collectively, together with the Capital Stock described in Sections 2(b) and 2(c) below, the "PLEDGED CAPITAL STOCK"), including, but not limited to, the following: (A) all shares, securities, membership interests or other equity interests representing a dividend on any of the Pledged Capital Stock, or representing a distribution or return of capital upon or in respect of the Pledged Capital Stock, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder of, or otherwise in respect of, the Pledged Capital Stock; and (B) without affecting the obligations of the Pledgors under any provision prohibiting such action hereunder or under the Credit Agreement, in the event of any consolidation or merger involving the issuer of any Pledged Capital Stock and in which such issuer is not the surviving entity, the Capital Stock of the successor entity formed by or resulting from such consolidation or merger. (b) ADDITIONAL SHARES. 100% (or, if less, the full amount owned by such Pledgor) of the issued and outstanding Capital Stock of any Person which hereafter becomes a Domestic Subsidiary or a First-Tier Foreign Subsidiary, together with the certificates (or other agreements or instruments), if any, representing such Capital Stock. (c) PROCEEDS. All Proceeds and Products of the foregoing, however and whenever acquired and in whatever form. Without limiting the generality of the foregoing, it is hereby specifically understood and agreed that a Pledgor may from time to time hereafter deliver additional Capital Stock to the Collateral Agent as collateral security for the Pledgor Obligations. Upon delivery to the Collateral Agent, such additional Capital Stock shall be deemed to be part of the Pledged Collateral of such Pledgor and shall be subject to the terms of this Pledge Agreement whether or not SCHEDULE 2(a) is amended to refer to such additional Capital Stock. 3. SECURITY FOR PLEDGOR OBLIGATIONS. The security interest created hereby in the Pledged Collateral of each Pledgor constitutes continuing collateral security for all of the Credit Party Obligations owing from the Borrower or any other Credit Party to any Lender or the Collateral Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including, without limitation, all obligations and liabilities incurred in connection with collecting and enforcing the foregoing (collectively, the "PLEDGOR OBLIGATIONS"); PROVIDED, HOWEVER, (a) in no event shall more than 2 65% of the Capital Stock of any First Tier Foreign Subsidiary of any Pledgor collaterally secure the Domestic Credit Party Obligations and (b) the obligations under any Hedging Agreement owed to any Lender or any Affiliate of a Lender shall constitute Pledgor Obligations only so long as the other Credit Party Obligations remain outstanding and/or the Commitments are in effect. 4. DELIVERY OF THE PLEDGED COLLATERAL; PERFECTION OF SECURITY INTEREST. Each Pledgor hereby agrees that: (a) DELIVERY OF CERTIFICATES. Each Pledgor shall deliver to the Collateral Agent (i) simultaneously with or prior to the execution and delivery of this Pledge Agreement, all certificates representing the Pledged Capital Stock of such Pledgor and (ii) promptly upon the receipt thereof by or on behalf of a Pledgor, all other certificates and instruments constituting Pledged Collateral of a Pledgor. Prior to delivery to the Collateral Agent, all such certificates and instruments constituting Pledged Collateral of a Pledgor shall be held in trust by such Pledgor for the benefit of the Collateral Agent pursuant hereto. All such certificates shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, substantially in the form provided in EXHIBIT 4(a) attached hereto. (b) ADDITIONAL SECURITIES. If such Pledgor shall receive by virtue of its being, becoming or having been the owner of any Pledged Collateral, any (i) certificate, including without limitation, any certificate representing a dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares or membership or equity interests, stock splits, spin-off or split-off, promissory notes or other instrument; (ii) option or right, whether as an addition to, substitution for, or an exchange for, any Pledged Collateral or otherwise; (iii) dividends payable in securities; or (iv) distributions of securities or other equity interests in connection with a partial or total liquidation, dissolution or reduction of capital, capital surplus or paid-in surplus, then, subject to the percentage limitations set forth in Section 2(a) above, such Pledgor shall receive such certificate, instrument, option, right or distribution in trust for the benefit of the Collateral Agent, shall segregate it from such Pledgor's other property and shall deliver it forthwith to the Collateral Agent in the exact form received together with any necessary endorsement and/or appropriate stock power duly executed in blank, substantially in the form provided in EXHIBIT 4(a), to be held by the Collateral Agent as Pledged Collateral and as further collateral security for the Pledgor Obligations. (c) FINANCING STATEMENTS. Each Pledgor shall execute and deliver to the Collateral Agent such UCC or other applicable financing statements as may be reasonably requested by the Collateral Agent in order to perfect the security interest created hereby in the Pledged Collateral of such Pledgor. (d) PROVISIONS RELATING TO SECURITIES ENTITLEMENTS AND SECURITIES ACCOUNTS. With respect to any Pledged Collateral consisting of a Securities Entitlement or held in a Securities Account, (a) the applicable Pledgor and the applicable Securities Intermediary shall enter into an agreement with the Collateral Agent granting Control to the Collateral 3 Agent over such Pledged Collateral, such agreement to be in form and substance satisfactory to the Collateral Agent and (b) the Collateral Agent shall be entitled, upon the occurrence and during the continuance of a Default or an Event of Default, to notify the applicable Securities Intermediary that it should follow the Entitlement Orders of the Collateral Agent and no longer follow the Entitlement Orders of the applicable Pledgor. Upon receipt by a Pledgor of notice from a Securities Intermediary of its intent to terminate the Securities Account of such Pledgor held by such Securities Intermediary, prior to the termination of such Securities Account the Pledged Collateral in such Securities Account shall be (i) transferred to a new Securities Account which is subject to a control agreement as provided above or (ii) transferred to an account held by the Collateral Agent (in which it will be held until a new Securities Account is established). 5. REPRESENTATIONS AND WARRANTIES. Each Pledgor hereby represents and warrants to the Collateral Agent, for the benefit of the Lenders, that so long as any of the Pledgor Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments shall have been terminated: (a) AUTHORIZATION OF PLEDGED CAPITAL STOCK. The Pledged Capital Stock is duly authorized and validly issued, is fully paid and, with respect any Pledged Capital Stock consisting of stock of a corporation, nonassessable and is not subject to the preemptive rights of any Person. All other shares of Capital Stock constituting Pledged Collateral will be duly authorized and validly issued, fully paid and, with respect any Pledged Capital Stock consisting of stock of a corporation, nonassessable and not subject to the preemptive rights of any Person. (b) TITLE. Each Pledgor has good and indefeasible title to the Pledged Collateral of such Pledgor and will at all times be the legal and beneficial owner of such Pledged Collateral free and clear of any Lien or "adverse claim" (within the meaning of Section 8-102 of the UCC), other than Permitted Liens. (c) EXERCISING OF RIGHTS. Neither the grant by the Obligors to the Collateral Agent of the rights and remedies hereunder nor the exercise by the Collateral Agent of its rights and remedies hereunder in a lawful manner will violate any law or governmental regulation or any material contractual restriction binding on or affecting a Pledgor or any of its property; provided, however, that no representation or warranty is made as to any authorization, approval or action by, or notice of filing with, any Governmental Authority applicable to the Collateral Agent or any Lender. (d) PLEDGOR'S AUTHORITY. No authorization, approval or action by, and no notice or filing with any Governmental Authority, the issuer of any Pledged Capital Stock or any third party is required either (i) for the pledge made by a Pledgor or for the granting of the security interest by a Pledgor pursuant to this Pledge Agreement or (ii) for the exercise by the Collateral Agent or the Lenders of their rights and remedies hereunder (except as may be required by laws affecting the offering and sale of securities). 4 (e) SECURITY INTEREST/PRIORITY. This Pledge Agreement creates a valid security interest in favor of the Collateral Agent, for the benefit of the Lenders, in the Pledged Collateral. The taking of possession by the Collateral Agent of the certificates, if any, representing the Pledged Capital Stock and all other certificates and instruments constituting Pledged Collateral will perfect and establish the first priority of the Collateral Agent's security interest in the Pledged Capital Stock and such certificates and instruments and, upon the filing of UCC financing statements in the appropriate filing office in the location of each Pledgor's chief executive office, the Collateral Agent shall have a first priority perfected security interest in all uncertificated Pledged Capital Stock consisting of partnership or limited liability company interests that do not constitute a Security pursuant to Section 8-103(c) of the UCC. With respect to any Pledged Collateral consisting of a Securities Entitlement or held in a Securities Account, upon execution and delivery by the applicable Pledgor, the applicable Securities Intermediary and the Collateral Agent of an agreement granting Control to the Collateral Agent over such Pledged Collateral, the Collateral Agent shall have a first priority perfected security interest in such Pledged Collateral. Except as set forth in this Section, no action is necessary to perfect or otherwise protect such security interest. (f) NO OTHER CAPITAL STOCK. No Pledgor owns any Capital Stock of any Domestic Subsidiary or First-Tier Foreign Subsidiary other than as set forth on SCHEDULE 2(a) attached hereto. (g) PARTNERSHIP AND LIMITED LIABILITY COMPANY INTERESTS. Except as previously disclosed to the Collateral Agent pursuant to Section 6(f), none of the Pledged Capital Stock consisting of partnership or limited liability company interests (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a "Security" or a "Financial Asset" as such terms are defined in Article 8 of the UCC. 6. COVENANTS. Each Pledgor hereby covenants, that so long as any of the Pledgor Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments shall have been terminated, such Pledgor shall: (a) BOOKS AND RECORDS. Mark its books and records (and shall cause the issuer of the Pledged Capital Stock of such Pledgor to mark its books and records) to reflect the security interest granted to the Collateral Agent, for the benefit of the Lenders, pursuant to this Pledge Agreement. (b) DEFENSE OF TITLE. Warrant and defend title to and ownership of the Pledged Collateral of such Pledgor at its own expense against the claims and demands of all other parties claiming an interest therein, keep the Pledged Collateral free from all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign, lease or 5 otherwise dispose of Pledged Collateral of such Pledgor or any interest therein, except as permitted under the Credit Agreement and the other Credit Documents. (c) FURTHER ASSURANCES. Promptly execute and deliver at its expense all further instruments and documents and take all further action that may be necessary and desirable or that the Collateral Agent may reasonably request in order to (i) perfect and protect the security interest created hereby in the Pledged Collateral of such Pledgor (including, without limitation, the execution and filing of UCC financing statements and any and all action necessary to satisfy the Collateral Agent that the Collateral Agent has obtained a first priority perfected security interest in all Pledged Capital Stock); and (ii) enable the Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral of such Pledgor, including, without limitation and if requested by the Collateral Agent after the occurrence and during the continuance of an Event of Default, delivering to the Collateral Agent irrevocable proxies in respect of the Pledged Collateral of such Pledgor. (d) AMENDMENTS. Not make or consent to any amendment or other modification or waiver with respect to any of the Pledged Collateral of such Pledgor or enter into any agreement or allow to exist any restriction with respect to any of the Pledged Collateral of such Pledgor other than pursuant hereto or as may be permitted under the Credit Agreement. (e) COMPLIANCE WITH SECURITIES LAWS. File all reports and other information now or hereafter required to be filed by such Pledgor with the United States Securities and Exchange Commission and any other state, federal or foreign agency in connection with the ownership of the Pledged Collateral of such Pledgor. (f) ISSUANCE OR ACQUISITION OF CAPITAL STOCK. Not, without providing 30 days prior written notice to the Collateral Agent and without executing and delivering, or causing to be executed and delivered, to the Collateral Agent such agreements, documents and instruments as the Collateral Agent may require, issue or acquire any Capital Stock consisting of an interest in a partnership or a limited liability company that (i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its terms expressly provides that it is a Security governed by Article 8 of the UCC, (iii) is an Investment Company Security, (iv) is held in a Securities Account or (v) constitutes a "Security" or a "Financial Asset" as such terms are defined in Article 8 of the UCC. 7. PERFORMANCE OF OBLIGATIONS AND ADVANCES BY COLLATERAL AGENT. On failure of any Pledgor to perform any of the covenants and agreements contained herein, the Collateral Agent may, at its sole option and in its reasonable discretion, perform or cause to be performed the same and in so doing may expend such sums as the Collateral Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Collateral Agent may make for the protection of the security hereof or which may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Pledgors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Pledgor Obligations and shall 6 bear interest from the date said amounts are expended at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans. No such performance of any covenant or agreement by the Collateral Agent on behalf of any Pledgor, and no such advance or expenditure therefor, shall relieve the Pledgors of any default under the terms of this Pledge Agreement, the other Credit Documents or any Hedging Agreement between any Credit Party. The Collateral Agent may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by a Pledgor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP. 8. EVENTS OF DEFAULT. The occurrence of an event which under the Credit Agreement would constitute an Event of Default shall be an event of default hereunder (an "EVENT OF DEFAULT"). 9. REMEDIES. (a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and during the continuation thereof, the Collateral Agent and the Lenders shall have, in respect of the Pledged Collateral of any Pledgor, in addition to the rights and remedies provided herein, in the Credit Documents, in any Hedging Agreement between any Credit Party and any Lender or by law, the rights and remedies of a secured party under the UCC or any other applicable law. (b) SALE OF PLEDGED COLLATERAL. Upon the occurrence of an Event of Default and during the continuation thereof, without limiting the generality of this Section and without notice, the Collateral Agent may, in its sole discretion, sell or otherwise dispose of or realize upon the Pledged Collateral, or any part thereof, in one or more parcels, at public or private sale, at any exchange or broker's board or elsewhere, at such price or prices and on such other terms as the Collateral Agent may deem commercially reasonable, for cash, credit or for future delivery or otherwise in accordance with applicable law. To the extent permitted by law, any Lender may in such event bid for the purchase of such securities. Each Pledgor agrees that, to the extent notice of sale shall be required by law and has not been waived by such Pledgor, any requirement of reasonable notice shall be met if notice, specifying the place of any public sale or the time after which any private sale is to be made, is personally served on or mailed postage prepaid to such Pledgor in accordance with the notice provisions of Section 11.1 of the Credit Agreement at least 10 days before the time of such sale. The Collateral Agent shall not be obligated to make any sale of Pledged Collateral of such Pledgor regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (c) PRIVATE SALE. Upon the occurrence of an Event of Default and during the continuation thereof, the Pledgors recognize that the Collateral Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Collateral and that 7 the Collateral Agent may, therefore, determine to make one or more private sales of any such Pledged Collateral to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by reason of such prices or terms and that the Collateral Agent shall have no obligation to delay sale of any such Pledged Collateral for the period of time necessary to permit the issuer of such Pledged Collateral to register such Pledged Collateral for public sale under the Securities Act of 1933. Each Pledgor further acknowledges and agrees that any offer to sell such Pledged Collateral which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a "public sale" under the UCC, notwithstanding that such sale may not constitute a "public offering" under the Securities Act of 1933, and the Collateral Agent may, in such event, bid for the purchase of such Pledged Collateral. (d) RETENTION OF PLEDGED COLLATERAL. In addition to the rights and remedies hereunder, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may, after providing the notices required by Section 9-505(2) of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, retain all or any portion of the Pledged Collateral in satisfaction of the Pledgor Obligations. Unless and until the Collateral Agent shall have provided such notices, however, the Collateral Agent shall not be deemed to have retained any Pledged Collateral in satisfaction of any Pledgor Obligations for any reason. (e) DEFICIENCY. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent or the Lenders are legally entitled, the Pledgors shall be jointly and severally liable for the deficiency, together with interest thereon at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans and together with the costs of collection and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Pledgor Obligations shall be returned to the Pledgors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 8 10. RIGHTS OF THE COLLATERAL AGENT. (a) POWER OF ATTORNEY. In addition to other powers of attorney contained herein, each Pledgor hereby designates and appoints the Collateral Agent, on behalf of the Lenders, and each of its designees or agents as attorney-in-fact of such Pledgor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default: (i) to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Pledged Collateral of such Pledgor, all as the Collateral Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any of the Pledged Collateral of such Pledgor and enforcing any other right in respect thereof; (iii) to defend, settle, adjust or compromise any action, suit or proceeding brought and, in connection therewith, give such discharge or release as the Collateral Agent may deem reasonably appropriate; (iv) to pay or discharge taxes, liens, security interests, or other encumbrances levied or placed on or threatened against the Pledged Collateral of such Pledgor; (v) to direct any parties liable for any payment under any of the Pledged Collateral to make payment of any and all monies due and to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (vi) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at any time in respect of or arising out of any Pledged Collateral of such Pledgor; (vii) to sign and endorse any drafts, assignments, proxies, stock powers, verifications, notices and other documents relating to the Pledged Collateral of such Pledgor; (viii) to execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, pledge agreements, affidavits, notices and other agreements, instruments and documents that the Collateral Agent may determine necessary in order to perfect and maintain the security interests and liens granted in this Pledge Agreement and in order to fully consummate all of the transactions contemplated herein; (ix) to exchange any of the Pledged Collateral of such Pledgor or other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Pledged Collateral of such Pledgor with any committee, depository, transfer 9 agent, registrar or other designated agency upon such terms as the Collateral Agent may determine; (x) to vote for a shareholder, partner or member resolution, or to sign an instrument in writing, sanctioning the transfer of any or all of the Pledged Capital Stock of such Pledgor into the name of the Collateral Agent or one or more of the Lenders or into the name of any transferee to whom the Pledged Capital Stock of such Pledgor or any part thereof may be sold pursuant to Section 9 hereof; and (xi) to do and perform all such other acts and things as the Collateral Agent may reasonably deem to be necessary, proper or convenient in connection with the Pledged Collateral of such Pledgor. This power of attorney is a power coupled with an interest and shall be irrevocable (i) for so long as any of the Pledgor Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or any Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect and (ii) until all of the Commitments shall have been terminated. The Collateral Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Collateral Agent in this Pledge Agreement and shall not be liable for any failure to do so or any delay in doing so. The Collateral Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct. This power of attorney is conferred on the Collateral Agent solely to protect, preserve and realize upon its security interest in the Pledged Collateral. (b) ASSIGNMENT BY THE COLLATERAL AGENT. Subject to the terms of the Credit Agreement, the Collateral Agent may from time to time assign the Pledgor Obligations or any portion thereof and/or the Pledged Collateral or any portion thereof, and the assignee shall be entitled to all of the rights and remedies of the Collateral Agent under this Pledge Agreement in relation thereto. (c) THE COLLATERAL AGENT'S DUTY OF CARE. Other than the exercise of reasonable care to ensure the safe custody of the Pledged Collateral while being held by the Collateral Agent hereunder, the Collateral Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that each of the Pledgors shall be responsible for preservation of all rights in the Pledged Collateral of such Pledgor, and the Collateral Agent shall be relieved of all responsibility for such Pledged Collateral upon surrendering it or tendering the surrender of it to such Pledgor. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent 10 agent in the industry, it being understood that the Collateral Agent shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters; or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. (d) VOTING RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL. (i) So long as no Event of Default shall have occurred and be continuing, to the extent permitted by law, each Pledgor may exercise any and all voting and other consensual rights pertaining to the Pledged Collateral of such Pledgor or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Credit Agreement; and (ii) Upon the occurrence and during the continuance of an Event of Default, all rights of a Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to subsection (i) of this Section shall cease and all such rights shall thereupon become vested in the Collateral Agent which shall then have the sole right to exercise such voting and other consensual rights. (e) DIVIDEND AND DISTRIBUTION RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL. (i) So long as no Event of Default shall have occurred and be continuing and subject to Section 4(b) hereof, each Pledgor may receive and retain any and all dividends (other than stock dividends and other dividends constituting Pledged Collateral which are addressed hereinabove), distributions or interest paid in respect of the Pledged Collateral to the extent they are allowed under the Credit Agreement. (ii) Upon the occurrence and during the continuance of an Event of Default: (A) all rights of a Pledgor to receive the dividends, distributions and interest payments which it would otherwise be authorized to receive and retain pursuant to subsection (i) of this Section shall cease and all such rights shall thereupon be vested in the Collateral Agent which shall then have the sole right to receive and hold as Pledged Collateral such dividends, distributions and interest payments; and (B) all dividends, distributions and interest payments which are received by a Pledgor contrary to the provisions of subsection (A) of this Section shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor, and shall be forthwith paid over to the Collateral Agent as Pledged Collateral in the 11 exact form received, to be held by the Collateral Agent as Pledged Collateral and as further collateral security for the Pledgor Obligations. (f) RELEASE OF PLEDGED COLLATERAL. The Collateral Agent may release any of the Pledged Collateral from this Pledge Agreement or may substitute any of the Pledged Collateral for other Pledged Collateral in connection with a transaction permitted by the Credit Agreement without altering, varying or diminishing in any way the force, effect, lien, pledge or security interest of this Pledge Agreement as to any Pledged Collateral not expressly released or substituted, and this Pledge Agreement shall continue as a first priority lien on all Pledged Collateral not expressly released or substituted. 11. APPLICATION OF PROCEEDS. Upon the occurrence and during the continuance of an Event of Default, any payments in respect of the Pledgor Obligations and any proceeds of any Pledged Collateral, when received by the Collateral Agent or any of the Lenders in cash or its equivalent, will be applied in reduction of the Pledgor Obligations in the order set forth in Section 9.3 of the Credit Agreement, and each Pledgor irrevocably waives the right to direct the application of such payments and proceeds. 12. COSTS OF COUNSEL. At all times hereafter, whether or not an Event of Default exists, the Pledgors agree to promptly pay upon demand any and all reasonable costs and expenses of the Collateral Agent or the Lenders, (a) as required under Section 11.5 of the Credit Agreement and (b) as necessary to protect the Collateral or to exercise any rights or remedies under this Pledge Agreement or with respect to any Collateral. All of the foregoing costs and expenses shall constitute Pledgor Obligations hereunder. 13. CONTINUING AGREEMENT. (a) This Pledge Agreement shall be a continuing agreement in every respect and shall remain in full force and effect so long as any of the Pledgor Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or any Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments thereunder shall have terminated. Upon such payment and termination, the Collateral Agent and the Lenders shall, upon the request and at the expense of the Pledgors, forthwith release all of their Liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Pledgors evidencing such termination. Notwithstanding the foregoing, all releases and indemnities provided hereunder shall survive termination of this Pledge Agreement. (b) This Pledge Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Pledgor Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Pledgor Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without 12 limitation any reasonable legal fees and disbursements) incurred by the Collateral Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Pledgor Obligations. 14. AMENDMENTS; WAIVERS; MODIFICATIONS. This Pledge Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 11.6 of the Credit Agreement. 15. SUCCESSORS IN INTEREST. This Pledge Agreement shall create a continuing security interest in the Collateral and shall be binding upon each Pledgor, its successors and assigns and shall inure, together with the rights and remedies of the Collateral Agent and the Lenders hereunder, to the benefit of the Collateral Agent and the Lenders and their successors and permitted assigns; PROVIDED, HOWEVER, that none of the Pledgors may assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Credit Agreement. To the fullest extent permitted by law, each Pledgor hereby releases the Collateral Agent and each Lender, and its successors and assigns, from any liability for any act or omission relating to this Pledge Agreement or the Collateral, except for any liability arising from the gross negligence or willful misconduct of the Collateral Agent, or such Lender, or its officers, employees or agents. 16. NOTICES. All notices required or permitted to be given under this Pledge Agreement shall be in conformance with Section 11.1 of the Credit Agreement. 17. COUNTERPARTS; TELECOPY. This Pledge Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart. Delivery of an executed counterpart by facsimile shall be as effective as an original executed counterpart and shall be deemed a representation that an original executed counterpart will be delivered. 18. HEADINGS. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning, construction or interpretation of any provision of this Pledge Agreement. 19. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Pledge Agreement may be brought in the courts of the State of New York, or of the United States for the Southern District of New York, and, by execution and delivery of this Pledge Agreement, each Pledgor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each Pledgor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it 13 at the address for notices pursuant to Section 11.1 of the Credit Agreement, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Collateral Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Pledgor in any other jurisdiction. (b) Each Pledgor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Pledge Agreement brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 20. WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES. EACH OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each Pledgor agrees not to assert any claim against the Agents, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the transactions contemplated herein. 21. SEVERABILITY. If any provision of this Pledge Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 22. ENTIRETY. This Pledge Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 23. SURVIVAL. All representations and warranties of the Pledgors hereunder shall survive the execution and delivery of this Pledge Agreement, the other Credit Documents and the Hedging Agreements between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations), the delivery of the Notes, the making of the Loans and the issuance of the Letters of Credit. 24. OTHER SECURITY. To the extent that any of the Pledgor Obligations are now or hereafter secured by property other than the Pledged Collateral (including, without limitation, real and other personal property owned by a Pledgor), or by a guarantee, endorsement or property of any other Person, then the Collateral Agent and the Lenders shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence of any Event of Default, and the Collateral Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Collateral Agent and the 14 Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Collateral Agent's and the Lenders' rights or the Pledgor Obligations under this Pledge Agreement, under any other of the Credit Documents or under any Hedging Agreement between any Credit Party and any Lender. 25. RIGHTS OF REQUIRED LENDERS. To the fullest extent permitted by law, all rights of the Collateral Agent hereunder, if not exercised by the Collateral Agent, may be exercised by the Required Lenders. 15 Each of the parties hereto has caused a counterpart of this Pledge Agreement to be duly executed and delivered as of the date first above written. PLEDGORS: UNITED STATES CAN COMPANY, a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ U.S. CAN CORPORATION, a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ USC MAY VERPACKUNGEN HOLDING, INC., a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ Accepted and agreed to as of the date first above written. BANK OF AMERICA, N.A., as Collateral Agent By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ SCHEDULE 2(a) to Pledge Agreement dated as of October 4, 2000 in favor of Bank of America, N.A., as Collateral Agent PLEDGED CAPITAL STOCK --------------------- PLEDGOR: U.S. CAN CORPORATION
Name of Number of Certificate Percentage Percentage Domestic Subsidiary Shares Number Ownership Pledged ------------------- ------ ------ --------- ------- United States Can Company 1000 7 100% 100%
PLEDGOR: UNITED STATES CAN COMPANY
Name of Number of Certificate Percentage Percentage Domestic Subsidiary Shares Number Ownership Pledged ------------------- ------ ------ --------- ------- USC May Verpackungen Holding Inc. 100 1 100% 100% Name of Number of Certificate Percentage Percentage Foreign Subsidiary Shares Number Ownership Pledged ------------------- ------ ------ --------- ------- U.S.C. Europe N.V. 3900 2 100% 100% (subject to 2100 3 limitations in 1 4 Section 3) 1 5 PLEDGOR: USC MAY VERPACKUNGEN HOLDING INC. Name of Number of Certificate Percentage Percentage Domestic Subsidiary Shares Number Ownership Pledged ------------------- ------ ------ --------- ------- May Verpackungen GmbH & Co., KG N/A N/A 100% 100% (subject to limitations in Section 3)
EXHIBIT 4(a) to Pledge Agreement dated as of October 4, 2000 in favor of Bank of America, N.A., as Collateral Agent Irrevocable Stock Power ----------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to the following shares of capital stock of _____________________, a ____________ corporation: No. of Shares Certificate No. ------------- --------------- and irrevocably appoints __________________________________ its agent and attorney-in-fact to transfer all or any part of such capital stock and to take all necessary and appropriate action to effect any such transfer. The agent and attorney-in-fact may substitute and appoint one or more persons to act for him. _______________, a ______________ corporation By: ______________________________________ Name: ____________________________________ Title: ___________________________________ EX-10.3 10 a2034240zex-10_3.txt EXHIBIT 10.3 Exhibit 10.3 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is entered into as of October 4, 2000 among UNITED STATES CAN COMPANY, a Delaware corporation (the "BORROWER"), U.S. CAN CORPORATION, a Delaware corporation and each of the Domestic Subsidiaries of the Borrower (individually a "DOMESTIC GUARANTOR" and collectively the "DOMESTIC GUARANTORS"; together with the Borrower, individually an "OBLIGOR" and collectively the "OBLIGORS") and BANK OF AMERICA, N.A., in its capacity as collateral agent (in such capacity, the "COLLATERAL AGENT") for the lenders from time to time party to the Credit Agreement described below (the "LENDERS"). RECITALS WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof (as amended, modified, extended, renewed, restated or replaced from time to time, the "CREDIT AGREEMENT") among the Borrower, the Foreign Subsidiary Borrowers party thereto, the Domestic Guarantors, the Lenders, the Collateral Agent in its capacity as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank One, NA (Main Office Chicago), as Documentation Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the obligations of the Lenders to make their respective Loans and issue their respective Letters of Credit under the Credit Agreement that the Obligors shall have executed and delivered this Security Agreement to the Collateral Agent for the ratable benefit of the Lenders. NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. (a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement, and the following terms which are defined in the Uniform Commercial Code (the "UCC") in effect in the State of New York are used herein as so defined: Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Proceeds and Securities Intermediary. For purposes of this Security Agreement, the term "Lender" shall include any Affiliate of any Lender which has entered into a Hedging Agreement with any Credit Party. Except as otherwise expressly provided, all definitions shall be equally applicable to the singular and plural forms of the terms defined. (b) In addition, the following terms shall have the following meanings: "COPYRIGHT LICENSES": any agreement, whether written or oral, providing for the grant by or to an Obligor of any right under any Copyright, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "COPYRIGHTS": (a) all copyrights in all Works, now existing or hereafter created or acquired, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement, and (b) all renewals thereof, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "INTELLECTUAL PROPERTY": all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, and Trademark Licenses. "PATENT LICENSE": all agreements, whether written or oral, providing for the grant by or to an Obligor of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "PATENTS": (a) all letters patent of the United States or any other country and all improvement patents, reissues, reexaminations, patents of additions, renewals and extensions thereof, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement, and (b) all applications for letters patent of the United States or any other country, and all divisions, continuations and continuations-in-part thereof, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "SECURED OBLIGATIONS": the collective reference to all of the Credit Party Obligations owing from the Borrower or any other Credit Party to any Lender or the Collateral Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including, without limitation, all obligations and liabilities incurred in connection with collecting and enforcing the foregoing; PROVIDED, HOWEVER the obligations under any Hedging Agreement owed to any Lender or any Affiliate of a Lender shall constitute Secured Obligations only so long as the other Credit Party Obligations remain outstanding and/or the Commitments are in effect. "TRADEMARK LICENSE": means any agreement, whether written or oral, providing for the grant by or to an Obligor of any right to use any Trademark, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "TRADEMARKS": (a) all trademarks, service marks, trade names, corporate names, fictitious business names, all elements of package or trade dress of goods or services, logos and other source or business identifiers, and the goodwill associated therewith, now existing 2 or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement, and (b) all renewals thereof, including, without limitation, any thereof referred to in SCHEDULE 6.19 to the Credit Agreement. "WORK": any work which is subject to copyright protection pursuant to Title 17 of the United States Code or the applicable copyright laws of any other state or country. 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration or otherwise, of the Secured Obligations, each Obligor hereby grants to the Collateral Agent, for the benefit of the Lenders, a continuing security interest in, and a right to set off against, any and all right, title and interest of such Obligor in and to the following, whether now owned or existing or owned, acquired, or arising hereafter (collectively, the "COLLATERAL"): (a) all Accounts; (b) all cash and Cash Equivalents; (c) all Chattel Paper; (d) all Copyrights; (e) all Copyright Licenses; (f) all Deposit Accounts; (g) all Documents; (h) all Equipment; (i) all Fixtures; (j) all General Intangibles; (k) all Goods; (l) all Instruments; (m) all Inventory; (n) all Investment Property; (o) all Patents; 3 (p) all Patent Licenses; (q) all Trademarks; (r) all Trademark Licenses; (s) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks, and related data processing software (owned by such Obligor or in which it has an interest) that at any time evidence or contain information relating to any Collateral or are otherwise necessary in the collection thereof or realization thereupon; (t) all other personal property of any kind or type whatsoever owned by such Obligor; and (u) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing. Notwithstanding the foregoing, the Obligors do not grant a security interest in, or a right of setoff against, any of the following: (a) any contract, license, permit or franchise that validly prohibits the creation by the Obligor of a security interest in such contract, license, permit or franchise (or in any rights or property obtained by the Obligor under such contract, license, permit or franchise) so long as such contract, license, permit or franchise was not entered into or obtained by the Obligors with the intent of avoiding the requirement that a security interest be granted therein; PROVIDED, HOWEVER, that the provisions of this paragraph shall not prohibit the security interests created by this Security Agreement from extending to the proceeds of such contract, license, permit or franchise (or such rights or property) or to the monetary value of the good will and other general intangibles of the Obligor relating thereto unless the contract, license, permit or franchise in question so prohibits; or (b) any rights or property to the extent that any valid and enforceable law or regulation applicable to such rights or property prohibits the creation of a security interest therein; PROVIDED, HOWEVER, that the provisions of this paragraph shall not prohibit the security interests created by this Security Agreement from extending to the proceeds of such rights or property or to the monetary value of the good will and other general intangibles of the Obligor relating thereto unless the law or regulation in question prohibits such extension. The Obligors and the Collateral Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest created hereby in the Collateral (i) constitutes continuing collateral security for all of the Secured Obligations, whether now existing or hereafter arising and (ii) is not to be construed as an assignment of any Intellectual Property. 4 3. PROVISIONS RELATING TO ACCOUNTS, CONTRACTS AND AGREEMENTS. (a) Anything herein to the contrary notwithstanding, each of the Obligors shall remain liable under each of its Accounts, contracts and agreements to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account or the terms of such contract or agreement. Neither the Collateral Agent nor any Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto), contract or agreement by reason of or arising out of this Security Agreement or the receipt by the Collateral Agent or any Lender of any payment relating to such Account, contract or agreement pursuant hereto, nor shall the Collateral Agent or any Lender be obligated in any manner to perform any of the obligations of an Obligor under or pursuant to any Account (or any agreement giving rise thereto), contract or agreement, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. (b) At any time and from time to time in accordance with the terms of Section 7.10 of the Credit Agreement, the Collateral Agent shall have the right, but not the obligation, to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and the Obligors shall furnish all such assistance and information as the Collateral Agent may reasonably require in connection with such test verifications. Upon the Collateral Agent's request and at the expense of the Obligors (when required by the Credit Agreement), the Obligors shall cause independent public accountants or others satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts. The Collateral Agent in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Collateral Agent's satisfaction the existence, amount and terms of any Accounts. 4. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby represents and warrants to the Collateral Agent, for the benefit of the Lenders, that so long as any of the Secured Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments shall have been terminated: (a) CHIEF EXECUTIVE OFFICE; BOOKS & RECORDS. Such Obligor's chief executive office and chief place of business is (and for the prior four months has been) located at the locations set forth on SCHEDULE 6.27(c) to the Credit Agreement (as updated from time to time), and such Obligor keeps its books and records at such locations. 5 (b) LOCATION OF COLLATERAL. The location of all tangible Collateral (other than Inventory temporarily in transit in the ordinary course of business) owned by such Obligor is as shown on SCHEDULE 6.27(b) to the Credit Agreement (as updated from time to time). (c) OWNERSHIP. Such Obligor is the legal and beneficial owner of the Collateral which it purports to own and has a valid right to use all of its other Collateral. Such Obligor has the right to pledge, sell, assign or transfer the same. Such Obligor's legal name is as shown in this Security Agreement and such Obligor has not in the past four months changed its name, been party to a merger, consolidation or other change in structure or used any tradename except as set forth in SCHEDULE 4(c) attached hereto. SCHEDULE 4(c) may be updated from time to time by the Obligors by giving written notice thereof to the Collateral Agent. (d) SECURITY INTEREST/PRIORITY. This Security Agreement creates a valid security interest in favor of the Collateral Agent, for the benefit of the Lenders, in the Collateral of such Obligor and, when properly perfected by filing or otherwise, shall constitute a valid first priority, perfected security interest in such Collateral, to the extent such security interest can be perfected by filing or otherwise under the UCC, federal law or other applicable personal property security legislation, free and clear of all Liens except for Permitted Liens. (e) CONSENTS. Except for the filing or recording of UCC financing statements to perfect the Liens created by this Security Agreement that may be perfected through the filing of a UCC financing statement, no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder, member or creditor of such Obligor), is required (i) for the grant by such Obligor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Security Agreement by such Obligor or (ii) for the perfection of such security interest or the exercise by the Collateral Agent of the rights and remedies provided for in this Security Agreement. (f) FARM PRODUCTS. None of the Collateral constitutes, or is the Proceeds of, Farm Products. (g) ACCOUNTS. With respect to the Accounts of the Obligors: (i) the goods sold and/or services furnished giving rise to each Account are not subject to any security interest or Lien except the first priority, perfected security interest granted to the Collateral Agent herein and except for Permitted Liens; and (ii) each Account and the papers and documents of the applicable Obligor relating thereto are genuine and in all material respects what they purport to be; (iii) no Account of an Obligor is evidenced by any Instrument unless such Instrument has been theretofore endorsed over and delivered to the Collateral Agent; (iv) the amount of each Account as shown on the applicable Obligor's books and records, and on all invoices and statements which may be delivered to the Collateral Agent with respect thereto, is due and payable to the applicable Obligor; (v) to each of the Obligors' knowledge, the account debtor with respect to each Account has the capacity to contract; and (vi) no surety bond was required or given in connection with any Account of an Obligor or the contracts or purchase orders out of which they arose. 6 (h) INVENTORY. No Inventory of an Obligor is held by a third party (other than an Obligor) pursuant to consignment, sale or return, sale on approval or similar arrangement, unless such Obligor has complied with the terms of Section 9-114 of the UCC. (i) COPYRIGHTS, PATENTS AND TRADEMARKS. (i) SCHEDULE 6.19 to the Credit Agreement includes all registered Intellectual Property and all other material Intellectual Property, in each case owned or used by the Obligors, as such SCHEDULE 6.19 may be updated from time to time. (ii) All Intellectual Property of such Obligor is valid, subsisting, unexpired, enforceable and has not been abandoned, and each Obligor is legally entitled to use each of its tradenames. (iii) Except as set forth on SCHEDULE 6.19 to the Credit Agreement, no holding, decision or judgment has been rendered against any Obligor by any Governmental Authority which would limit, cancel or question the validity of any material Intellectual Property of the Obligors. (iv) Except as set forth on SCHEDULE 6.19 to the Credit Agreement, no action or proceeding is pending seeking to limit, cancel or question the validity of any material Intellectual Property of the Obligors. (v) All applications pertaining to the material Intellectual Property of each Obligor have been duly and properly filed, all registrations or letters pertaining to such Intellectual Property have been duly and properly filed and issued, and all of such Intellectual Property is valid and enforceable. (vi) No Obligor has made any assignment or agreement in conflict with the security interest in the Intellectual Property of any Obligor hereunder. (j) DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER. All Documents, Instruments and Chattel Paper describing, evidencing or constituting Collateral are, to the Obligor's knowledge, complete, valid and genuine. (k) RESTRICTIONS ON SECURITY INTEREST. Except as permitted by Section 8.13 of the Credit Agreement, none of the Obligors is party to any material contract, license, permit or franchise that contains legally enforceable restrictions on the granting of a security interest therein. (l) EQUIPMENT. With respect to each Obligor's Equipment: (i) such Obligor has good and marketable title thereto; and (ii) all such Equipment is in normal operating condition and repair, ordinary wear and tear alone excepted (subject to casualty events). 7 (m) INVESTMENT PROPERTY. As of the Closing Date, none of the Obligors own any Investment Property except as listed on SCHEDULE 6.15 to the Credit Agreement. 5. COVENANTS. Each Obligor covenants that, so long as any of the Secured Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments shall have been terminated, such Obligor shall: (a) OTHER LIENS. Defend the Collateral against the claims and demands of all other parties claiming an interest therein, keep the Collateral free from all Liens, except for Permitted Liens, and not sell, exchange, transfer, assign, lease or otherwise dispose of the Collateral or any interest therein, except as permitted under the Credit Agreement. (b) PRESERVATION OF COLLATERAL. Keep the Collateral in good order, condition and repair in all material respects, ordinary wear and tear excepted, except for property disposed of in accordance with the Credit Agreement; not use the Collateral in violation of the provisions of this Security Agreement or any other Credit Document or any policy insuring the Collateral or any applicable statute, law, bylaw, rule, regulation or ordinance; not permit Collateral with a fair market value exceeding $3,000,000 in the aggregate in any year to be or become a fixture to real property or an accession to other personal property unless the Collateral Agent has a valid, perfected and first priority security interest for the benefit of the Lenders in such fixture or such personal property to which such Collateral has become an accession; and not, without the prior written consent of the Collateral Agent, alter or remove any identifying symbol or number on its Equipment. (c) INSTRUMENTS. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or if any Collateral shall be stored or shipped subject to a Document, immediately deliver such Instrument or Document to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Security Agreement. (d) CHANGE IN LOCATION. Not, without providing 30 days prior written notice to the Collateral Agent and without filing (or confirming that the Collateral Agent has filed) such amendments to any previously filed financing statements as the Collateral Agent may require, (a) change the location of its chief executive office and chief place of business (as well as its books and records) from the locations set forth on SCHEDULE 6.27(c) to the Credit Agreement, (b) change the location of its Collateral from the locations set forth for such Obligor on SCHEDULE 6.27(b) to the Credit Agreement, or (c) change its name, be party to a merger, consolidation or other change in structure or use any tradename other than as set forth on SCHEDULE 4(c) attached hereto. (e) INSPECTION. Allow the Collateral Agent or its representatives to visit and inspect the Collateral as set forth in Section 7.10 of the Credit Agreement. 8 (f) PERFECTION OF SECURITY INTEREST. Execute and deliver to the Collateral Agent such agreements, assignments or instruments (including affidavits, notices, reaffirmations and amendments of existing documents, as the Collateral Agent may reasonably request) and do all such other things as the Collateral Agent may reasonably deem necessary or appropriate (i) to assure to the Collateral Agent its security interests hereunder, including (A) such financing statements (including renewal statements) or amendments thereof or supplements thereto or other instruments as the Collateral Agent may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with the UCC and any other personal property security legislation in the appropriate state(s) or province(s), (B) with regard to Investment Property, execute and cause the Securities Intermediary with respect to such Investment Property to execute a securities control agreement in form and substance satisfactory to the Collateral Agent, (C) with regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in the form of EXHIBIT 5(f)(ii)(A) attached hereto, (D) with regard to Patents, a Notice of Grant of Security Interest in Patents for filing with the United States Patent and Trademark Office in the form of EXHIBIT 5(f)(ii)(B) attached hereto and (E) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for filing with the United States Patent and Trademark Office in the form of EXHIBIT 5(f)(ii)(C) attached hereto, (ii) to consummate the transactions contemplated hereby and (iii) to otherwise protect and assure the Collateral Agent of its rights and interests hereunder. To that end, each Obligor agrees that the Collateral Agent may file one or more financing statements disclosing the Collateral Agent's security interest in any or all of the Collateral of such Obligor without, to the extent permitted by law, such Obligor's signature thereon, and further each Obligor also hereby irrevocably makes, constitutes and appoints the Collateral Agent, its nominee or any other Person whom the Collateral Agent may designate, as such Obligor's attorney-in-fact with full power and for the limited purpose to sign in the name of such Obligor any such financing statements, or amendments and supplements to financing statements, renewal financing statements, notices or any similar documents which in the Collateral Agent's reasonable discretion would be necessary, appropriate or convenient in order to perfect and maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable so long as any of the Secured Obligations remain outstanding or any Credit Document or Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments shall have been terminated. Each Obligor hereby agrees that a carbon, photographic or other reproduction of this Security Agreement or any such financing statement is sufficient for filing as a financing statement by the Collateral Agent without notice thereof to such Obligor wherever the Collateral Agent may in its sole discretion desire to file the same. In the event for any reason the law of any jurisdiction other than New York becomes or is applicable to the Collateral of any Obligor or any part thereof, or to any of the Secured Obligations, such Obligor agrees to execute and deliver all such instruments and to do all such other things as the Collateral Agent reasonably deems necessary or appropriate to preserve, protect and enforce the security interests of the Collateral Agent under the law of such other jurisdiction (and, if an Obligor shall fail to do so promptly upon the request of the Collateral Agent, then the Collateral Agent may execute any and all such requested documents on behalf of such Obligor pursuant to the power of attorney granted 9 hereinabove). Each Obligor agrees to mark its books and records to reflect the security interest of the Collateral Agent in the Collateral. (g) COLLATERAL HELD BY WAREHOUSEMAN, BAILEE, ETC. If any Collateral that is a single asset with a fair market value in excess of $100,000 or a group of assets with a fair market value in excess of $500,000 is at any time in the possession or control of a warehouseman, bailee or any agent or processor of such Obligor, notify the Collateral Agent of such possession, notify such Person of the Collateral Agent's security interest for the benefit of the Lenders in such Collateral, and instruct such Person to hold all such Collateral for the Collateral Agent's account subject to the Collateral Agent's instructions. (h) TREATMENT OF ACCOUNTS. (i) Not grant or extend the time for payment of any Account, or compromise or settle any Account for less than the full amount thereof, or release any Person or property, in whole or in part, from payment thereof, or allow any credit or discount thereon, other than in the prudent conduct of an Obligor's business and (ii) maintain at its principal place of business a record of Accounts consistent with customary business practices. (i) COVENANTS RELATING TO COPYRIGHTS. (i) Employ the Copyright for each material Work with such notice of copyright as may be required by law to secure copyright protection. (ii) (A) Not do any act or knowingly omit to do any act whereby any material Copyright may become invalidated; (B) not do any act, or knowingly omit to do any act, whereby any material Copyright may become injected into the public domain; (C) notify the Collateral Agent immediately if it knows, or has reason to know, that any material Copyright may become injected into the public domain or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in any court or tribunal in the United States or any other country) regarding an Obligor's ownership of any such material Copyright or its validity; (D) take all necessary steps as it shall deem appropriate under the circumstances to maintain and pursue each application, to obtain the relevant registration and to maintain each registration of each material Copyright owned by an Obligor including, without limitation, filing of applications for renewal where necessary; and (E) promptly notify the Collateral Agent of any material infringement of any material Copyright of an Obligor of which it becomes aware and take such actions as it shall reasonably deem appropriate under the circumstances to protect such Copyright, including, where appropriate, the bringing of suit for infringement, seeking injunctive relief and seeking to recover any and all damages for such infringement. (iii) Except in connection with sales or other dispositions permitted under the Credit Agreement, not make any assignment or agreement in conflict with the security interest in the Copyrights of each Obligor hereunder other than in the ordinary course of business. 10 (j) COVENANTS RELATING TO PATENTS AND TRADEMARKS. (i) (A) Continue to use each material Trademark in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under such Trademark, (C) employ such Trademark with the appropriate notice of registration, or notice of trademark or service mark, as applicable, sufficient to protect such Trademark, (D) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Collateral Agent, for the ratable benefit of the Lenders, shall obtain a perfected security interest in such mark pursuant to this Security Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material Trademark may become invalidated. (ii) Not do any act, or omit to do any act, whereby any material Patent may become abandoned or dedicated. (iii) Promptly notify the Collateral Agent if it knows, or has reason to know, that any application or registration relating to any material Patent or material Trademark may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court or tribunal in any country) regarding an Obligor's ownership of any such Patent or Trademark or its right to register the same or to keep, maintain and use the same. (iv) Whenever an Obligor, either by itself or through an agent, employee, licensee or designee, shall file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office of any similar office or agency in any other country or any political subdivision thereof, such Obligor shall promptly report such filing to the Collateral Agent. Upon request of the Collateral Agent, an Obligor shall execute and deliver any and all agreements, instruments, documents and papers as the Collateral Agent, may reasonably request to evidence the Collateral Agent's and the Lenders' security interest in any Patent or Trademark and the goodwill and General Intangibles of such Obligor relating thereto or represented thereby. (v) Take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application, to obtain the relevant registration and to maintain each registration of the material Patents and Trademarks, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. 11 (vi) Promptly notify the Collateral Agent and the Lenders after it learns that any material Patent or material Trademark included in the Collateral is infringed, misappropriated or diluted by a third party and promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as it shall reasonably deem appropriate under the circumstances to protect such Patent or Trademark. (vii) Except for licenses to third parties in the ordinary course of business or except in connection with sales or other dispositions permitted under the Credit Agreement, not make any assignment or agreement in conflict with the security interest in the Patents or Trademarks of any Obligor hereunder. (k) NEW PATENTS, COPYRIGHTS AND TRADEMARKS. Promptly provide the Collateral Agent with (i) a listing of all applications, if any, for new Copyrights, Patents or Trademarks (together with a listing of the issuance of registrations or letters on present applications), which new applications and issued registrations or letters shall be subject to the terms and conditions hereunder, and (ii) (A) with respect to new Copyrights, a duly executed Notice of Grant of Security Interest in Copyrights in the form of EXHIBIT 5(f)(ii)(A) attached hereto, (B) with respect to new Patents, a duly executed Notice of Grant of Security Interest in Patents in the form of EXHIBIT 5.1(f)(ii)(B) attached hereto, (C) with respect to new Trademarks, a duly executed Notice of Grant of Security Interest in Trademarks in the form of EXHIBIT 5.1(f)(ii)(C) attached hereto or (D) such other duly executed documents as the Collateral Agent may reasonably request in a form acceptable to counsel for the Collateral Agent and suitable for recording to evidence the security interest of the Collateral Agent for the benefit of the Lenders in the Copyright, Patent or Trademark which is the subject of such new application. (l) INSURANCE. Insure, repair and replace the Collateral of such Obligor as set forth in the Credit Agreement. All insurance proceeds shall be subject to the security interest of the Collateral Agent hereunder. (m) INVESTMENT PROPERTY. Not acquire any Investment Property without executing and delivering, or causing to be executed and delivered, to the Collateral Agent such agreements, documents and instruments as the Collateral Agent may require. (n) CONTRACTS. Except as permitted by SECTION 8.13 of the Credit Agreement, no Obligor shall (i) enter into any contract, license, permit or franchise that prohibits the granting of a security interest in favor of the Collateral Agent or the Lenders or (ii) amend or modify any existing contracts, licenses, permits or franchises to prohibit the granting of a security interest in favor of the Collateral Agent or the Lenders. 6. PERFORMANCE OF OBLIGATIONS AND ADVANCES BY COLLATERAL AGENT. On failure of any Obligor to perform any of the covenants and agreements contained herein, the Collateral Agent may, at its sole option and in its reasonable discretion, perform or cause to be performed the same and in so doing may expend such sums as the Collateral Agent may reasonably deem advisable in 12 the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any adverse claim and all other expenditures which the Collateral Agent may make for the protection of the security interest hereof or may be compelled to make by operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the default rate specified in SECTION 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans. No such performance of any covenant or agreement by the Collateral Agent on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors of any default under the terms of this Security Agreement, the other Credit Documents or any Hedging Agreement between any Credit Party and any Lender. The Collateral Agent may make any payment hereby authorized in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is being contested in good faith by an Obligor in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP. 7. EVENTS OF DEFAULT. The occurrence of an event which under the Credit Agreement would constitute an Event of Default shall be an event of default hereunder (an "EVENT OF DEFAULT"). 8. REMEDIES. (a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and during the continuance thereof, the Lenders shall have, in addition to the rights and remedies provided herein, in the Credit Documents, in any Hedging Agreement between any Credit Party and any Lender or by law (including, but not limited to, the rights and remedies set forth in the Uniform Commercial Code of the jurisdiction applicable to the affected Collateral), the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further, the Collateral Agent may, with or without judicial process or the aid and assistance of others, to the fullest extent permitted by law, (i) enter on any premises on which any of the Collateral may be located and, without resistance or interference by the Obligors, take possession of the Collateral, (ii) dispose of any Collateral on any such premises, (iii) require the Obligors to assemble and make available to the Collateral Agent at the expense of the Obligors any Collateral at any place and time designated by the Collateral Agent which is reasonably convenient to both parties, (iv) remove any Collateral from any such premises for the purpose of effecting sale or other disposition thereof, and/or (v) without demand and without advertisement, notice, hearing or process of law, all of which each of the Obligors hereby waives to the fullest extent permitted by law (including Article 9 of the UCC), at any place and time or times, sell and deliver any or all Collateral held by or for it at public or private sale, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at 13 such prices and upon such terms as the Collateral Agent deems advisable, in its sole discretion (subject to any and all mandatory legal requirements). In addition to all other sums due the Collateral Agent and the Lenders with respect to the Secured Obligations, the Obligors shall pay the Collateral Agent and each of the Lenders all reasonable documented costs and expenses incurred by the Collateral Agent or any such Lender, including, but not limited to, reasonable attorneys' fees and court costs, in obtaining or liquidating the Collateral, in enforcing payment of the Secured Obligations, or in the prosecution or defense of any action or proceeding by or against the Collateral Agent or the Lenders or the Obligors concerning any matter arising out of or connected with this Security Agreement, any Collateral or the Secured Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the Bankruptcy Code. To the extent the rights of notice cannot be legally waived hereunder, each Obligor agrees that any requirement of reasonable notice shall be met if such notice is personally served on or mailed postage prepaid to the Borrower in accordance with the notice provisions of Section 11.1 of the Credit Agreement at least 10 days before the time of sale or other event giving rise to the requirement of such notice. The Collateral Agent and the Lenders shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. To the extent permitted by law, any Lender may be a purchaser at any such sale. To the extent permitted by applicable law, each of the Obligors hereby waives all of its rights of redemption with respect to any such sale. Subject to the provisions of applicable law, the Collateral Agent and the Lenders may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or the Collateral Agent and the Lenders may further postpone such sale by announcement made at such time and place. (b) REMEDIES RELATING TO ACCOUNTS. Upon the occurrence of an Event of Default and during the continuance thereof, whether or not the Collateral Agent has exercised any or all of its rights and remedies hereunder, each Obligor will promptly upon request of the Collateral Agent instruct all account debtors to remit all payments in respect of Accounts to a mailing location selected by the Collateral Agent. In addition, upon the occurrence and during the continuance of an Event of Default, the Collateral Agent or its designee may notify any Obligor's customers and account debtors that the Accounts of such Obligor have been assigned to the Collateral Agent or of the Collateral Agent's security interest therein, and may (either in its own name or in the name of an Obligor or both) demand, collect (including without limitation by way of a lockbox arrangement), receive, take receipt for, sell, sue for, compound, settle, compromise and give acquittance for any and all amounts due or to become due on any Account, and, in the Collateral Agent's discretion, file any claim or take any other action or proceeding to protect and realize upon the security interest of the Lenders in the Accounts. The Collateral Agent and the Lenders shall have no liability or responsibility to any Obligor for acceptance of a check, draft or other order for payment of money bearing the legend "payment in full" or words of similar import or any other restrictive legend or endorsement or be responsible for determining the correctness of any remittance. Each Obligor hereby agrees to indemnify the Collateral Agent and the Lenders from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, 14 charges and reasonable attorneys' fees suffered or incurred by the Collateral Agent or the Lenders (each, an "INDEMNIFIED PARTY") because of the maintenance of the foregoing arrangements except as relating to or arising out of the gross negligence or willful misconduct of an Indemnified Party or its officers, employees or agents. In the case of any investigation, litigation or other proceeding, the foregoing indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by an Obligor, its directors, shareholders or creditors or an Indemnified Party or any other Person or any other Indemnified Party is otherwise a party thereto. (c) ACCESS. In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default and during the continuance thereof, the Collateral Agent shall have the right as between the Collateral Agent and the Obligors to enter and remain upon the various premises of the Obligors without cost or charge to the Collateral Agent, and use the same, together with materials, supplies, books and records of the Obligors for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Collateral Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral. (d) NONEXCLUSIVE NATURE OF REMEDIES. Failure by the Collateral Agent or the Lenders to exercise any right, remedy or option under this Security Agreement, any other Credit Document, any Hedging Agreement between any Credit Party and any Lender or as provided by law, or any delay by the Collateral Agent or the Lenders in exercising the same, shall not operate as a waiver of any such right, remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated, which in the case of the Collateral Agent or the Lenders shall only be granted as provided herein. To the extent permitted by law, neither the Collateral Agent, the Lenders, nor any party acting as attorney for the Collateral Agent or the Lenders, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct hereunder. The rights and remedies of the Collateral Agent and the Lenders under this Security Agreement shall be cumulative and not exclusive of any other right or remedy which the Collateral Agent or the Lenders may have. (e) RETENTION OF COLLATERAL. The Collateral Agent may, after providing the notices required by Section 9-505(2) of the UCC or otherwise complying with the requirements of applicable law of the relevant jurisdiction, to the extent the Collateral Agent is in possession of any of the Collateral, retain the Collateral in satisfaction of the Secured Obligations. Unless and until the Collateral Agent shall have provided such notices, however, the Collateral Agent shall not be deemed to have retained any Collateral in satisfaction of any Secured Obligations for any reason. (f) DEFICIENCY. In the event that the proceeds of any sale, collection or realization are insufficient to pay all amounts to which the Collateral Agent or the Lenders are legally entitled, the Obligors shall be jointly and severally liable for the deficiency, 15 together with interest thereon at the default rate specified in Section 3.1 of the Credit Agreement for Revolving Loans that are Base Rate Loans, together with the costs of collection and the reasonable fees of any attorneys employed by the Collateral Agent to collect such deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Obligors or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 9. RIGHTS OF THE COLLATERAL AGENT. (a) POWER OF ATTORNEY. In addition to other powers of attorney contained herein, each Obligor hereby designates and appoints the Collateral Agent, on behalf of the Lenders, and each of its designees or agents, as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with authority to take any or all of the following actions upon the occurrence and during the continuance of an Event of Default: (i) to demand, collect, settle, compromise, adjust and give discharges and releases concerning the Collateral of such Obligor, all as the Collateral Agent may reasonably determine; (ii) to commence and prosecute any actions at any court for the purposes of collecting any Collateral and enforcing any other right in respect thereof; (iii) to defend, settle, adjust or compromise any action, suit or proceeding brought and, in connection therewith, give such discharge or release as the Collateral Agent may deem reasonably appropriate; (iv) to receive, open and dispose of mail addressed to an Obligor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to the Collateral of such Obligor, or securing or relating to such Collateral, on behalf of and in the name of such Obligor; (v) to sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any Collateral or the goods or services which have given rise thereto, as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes; (vi) to adjust and settle claims under any insurance policy relating thereto; (vii) to execute and deliver all assignments, conveyances, statements, financing statements, renewal financing statements, security agreements, affidavits, notices and other agreements, instruments and 16 documents that the Collateral Agent may determine necessary in order to perfect and maintain the security interests and liens granted in this Security Agreement and in order to fully consummate all of the transactions contemplated herein; (viii) to institute any foreclosure proceedings that the Collateral Agent may deem appropriate; and (ix) to do and perform all such other acts and things as the Collateral Agent may reasonably deem to be necessary, proper or convenient in connection with the Collateral. This power of attorney is a power coupled with an interest and shall be irrevocable (i) for so long as any of the Secured Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or any Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect and (ii) until all of the Commitments shall have been terminated. The Collateral Agent shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Collateral Agent in this Security Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Collateral Agent shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct. This power of attorney is conferred on the Collateral Agent solely to protect, preserve and realize upon its security interest in the Collateral. (b) ASSIGNMENT BY THE COLLATERAL AGENT. Subject to the terms of the Credit Agreement, the Collateral Agent may from time to time assign the Secured Obligations and any portion thereof and/or the Collateral and any portion thereof, and the assignee shall be entitled to all of the rights and remedies of the Collateral Agent under this Security Agreement in relation thereto. (c) THE COLLATERAL AGENT'S DUTY OF CARE. Other than the exercise of reasonable care to ensure the safe custody of the Collateral while being held by the Collateral Agent hereunder, the Collateral Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Obligors shall be responsible for preservation of all rights in the Collateral, and the Collateral Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Obligors. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Collateral Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. 17 10. APPLICATION OF PROCEEDS. Upon the occurrence and during the continuance of an Event of Default, any payments in respect of the Secured Obligations and any proceeds of the Collateral, when received by the Collateral Agent or any of the Lenders in cash or its equivalent, will be applied in reduction of the Secured Obligations in the order set forth in Section 9.3 of the Credit Agreement, and each Obligor irrevocably waives the right to direct the application of such payments and proceeds. 11. COSTS OF COUNSEL. At all times hereafter, whether or not an Event of Default exists, the Obligors agree to promptly pay upon demand any and all reasonable costs and expenses of the Collateral Agent or the Lenders, (a) as required under Section 11.5 of the Credit Agreement and (b) as necessary to protect the Collateral or to exercise any rights or remedies under this Security Agreement or with respect to any Collateral. All of the foregoing costs and expenses shall constitute Secured Obligations hereunder. 12. CONTINUING AGREEMENT. (a) This Security Agreement shall be a continuing agreement in every respect and shall remain in full force and effect so long as any of the Secured Obligations remain outstanding (other than any such obligations which by the terms thereof are stated to survive termination of the Credit Documents) or any Credit Document or any Hedging Agreement between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations) is in effect, and until all of the Commitments thereunder shall have terminated. Upon such payment and termination, this Security Agreement shall be automatically terminated and the Collateral Agent and the Lenders shall, upon the request and at the expense of the Obligors, forthwith release all of their Liens and security interests hereunder and shall execute and deliver all UCC termination statements and/or other documents reasonably requested by the Obligors evidencing such termination. Notwithstanding the foregoing, all releases and indemnities provided hereunder shall survive termination of this Security Agreement. (b) This Security Agreement shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Collateral Agent or any Lender as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, all as though such payment had not been made; provided that in the event payment of all or any part of the Secured Obligations is rescinded or must be restored or returned, all reasonable costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by the Collateral Agent or any Lender in defending and enforcing such reinstatement shall be deemed to be included as a part of the Secured Obligations. 13. AMENDMENTS; WAIVERS; MODIFICATIONS. This Security Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 11.6 of the Credit Agreement. 18 14. SUCCESSORS IN INTEREST. This Security Agreement shall create a continuing security interest in the Collateral and shall be binding upon each Obligor, its successors and assigns and shall inure, together with the rights and remedies of the Collateral Agent and the Lenders hereunder, to the benefit of the Collateral Agent and the Lenders and their successors and permitted assigns; PROVIDED, HOWEVER, that none of the Obligors may assign its rights or delegate its duties hereunder without the prior written consent of each Lender or the Required Lenders, as required by the Credit Agreement. To the fullest extent permitted by law, each Obligor hereby releases the Collateral Agent and each Lender, and its successors and assigns, from any liability for any act or omission relating to this Security Agreement or the Collateral, except for any liability arising from the gross negligence or willful misconduct of the Collateral Agent, or such Lender, or its officers, employees or agents. 15. NOTICES. All notices required or permitted to be given under this Security Agreement shall be in conformance with Section 11.1 of the Credit Agreement. 16. COUNTERPARTS; TELECOPY. This Security Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Security Agreement to produce or account for more than one such counterpart. Delivery of an executed counterpart by facsimile shall be as effective as an original executed counterpart and shall be deemed a representation that an original executed counterpart will be delivered. 17. HEADINGS. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning, construction or interpretation of any provision of this Security Agreement. 18. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Security Agreement may be brought in the courts of the State of New York, or of the United States for the Southern District of New York, and, by execution and delivery of this Security Agreement, each Obligor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each Obligor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address for notices pursuant to Section 11.1 of the Credit Agreement, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Collateral Agent to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Obligor in any other jurisdiction. 19 (b) Each Obligor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Security Agreement brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 19. WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES. EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each Obligor agrees not to assert any claim against the Agents, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the transactions contemplated herein. 20. SEVERABILITY. If any provision of this Security Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 21. ENTIRETY. This Security Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 22. SURVIVAL. All representations and warranties of the Obligors hereunder shall survive the execution and delivery of this Security Agreement, the other Credit Documents and the Hedging Agreements between any Credit Party and any Lender (to the extent the obligations of such Credit Party thereunder constitute Credit Party Obligations), the delivery of the Notes, the making of the Loans and the issuance of the Letters of Credit. 23. OTHER SECURITY. To the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral (including, without limitation, real property and securities owned by an Obligor), or by a guarantee, endorsement or property of any other Person, then the Collateral Agent and the Lenders shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence of any Event of Default, and the Collateral Agent and the Lenders have the right, in their sole discretion, to determine which rights, security, liens, security interests or remedies the Collateral Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify or take with respect thereto, without in any way modifying or affecting any of them or any of the Collateral Agent's and the Lenders' rights or the Secured Obligations under this Security Agreement, under any other of the Credit Documents or under any Hedging Agreement between any Credit Party and any Lender. 20 24. RIGHTS OF REQUIRED LENDERS. To the fullest extent permitted by law, all rights of the Collateral Agent hereunder, if not exercised by the Collateral Agent, may be exercised by the Required Lenders. 21 Each of the parties hereto has caused a counterpart of this Security Agreement to be duly executed and delivered as of the date first above written. BORROWER: UNITED STATES CAN COMPANY, a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ DOMESTIC GUARANTORS: U.S. CAN CORPORATION, a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ USC MAY VERPACKUNGEN HOLDING, INC., a Delaware corporation By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ Accepted and agreed to as of the date first above written. BANK OF AMERICA, N.A., as Collateral Agent By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ SCHEDULE 4(c) MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES None, except use of "U.S. Can" and "May Verpackungen" as abbreviated forms of company names. EXHIBIT 5(f)(ii)(A) NOTICE OF GRANT OF SECURITY INTEREST IN COPYRIGHTS United States Copyright Office Please be advised that pursuant to the Security Agreement dated as of October 4, 2000 (as the same may be amended, modified, extended or restated from time to time, the "SECURITY AGREEMENT") by and among the Obligors party thereto (each a "OBLIGOR" and collectively, the "OBLIGORS") and Bank of America, N.A., as Collateral Agent (the "COLLATERAL AGENT") for the Lenders referenced therein (the "LENDERS"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the copyrights and copyright applications shown below to the Collateral Agent for the ratable benefit of the Lenders: COPYRIGHTS
Date of Copyright No. Description of Copyright Copyright ------------- ------------------------ ---------
COPYRIGHT APPLICATIONS
Copyright Description of Copyright Date of Copyright Applications No. Applied for Applications ---------------- ------------------------ -----------------
The Obligors and the Collateral Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing copyrights and copyright applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any copyright or copyright application. Very truly yours, _____________________________________________________ [Obligor] By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ Acknowledged and Accepted: BANK OF AMERICA, N.A., as Collateral Agent By: _____________________________ Name: ___________________________ Title: __________________________ EXHIBIT 5(f)(ii)(B) NOTICE OF GRANT OF SECURITY INTEREST IN PATENTS United States Patent and Trademark Office Please be advised that pursuant to the Security Agreement dated as of October 4, 2000 (the "SECURITY AGREEMENT") by and among the Obligors party thereto (each a "OBLIGOR" and collectively, the "OBLIGORS") and Bank of America, N.A., as Collateral Agent (the "COLLATERAL AGENT") for the Lenders referenced therein (the "Lenders"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the patents and patent applications shown below to the Collateral Agent for the ratable benefit of the Lenders: PATENTS
Description of Patent Date of Patent No. Item Patent ---------- --------------------- -------
PATENT APPLICATIONS
Patent Date of Patent Applications No. Applications ---------------- --------------
The Obligors and the Collateral Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing patents and patent applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any patent or patent application. Very truly yours, _____________________________________________________ [Obligor] By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ Acknowledged and Accepted: BANK OF AMERICA, N.A., as Collateral Agent By: _____________________________ Name: ___________________________ Title: __________________________ EXHIBIT 5(f)(ii)(C) NOTICE OF GRANT OF SECURITY INTEREST IN TRADEMARKS United States Patent and Trademark Office Please be advised that pursuant to the Security Agreement dated as of October 4, 2000 (the "SECURITY AGREEMENT") by and among the Obligors party thereto (each a "OBLIGOR" and collectively, the "OBLIGORS") and Bank of America, N.A., as Collateral Agent (the "COLLATERAL AGENT") for the Lenders referenced therein (the "Lenders"), the undersigned Obligor has granted a continuing security interest in and continuing lien upon, the trademarks and trademark applications shown below to the Collateral Agent for the ratable benefit of the Lenders: TRADEMARKS
Description of Trademark Date of Trademark Registration No. Item Trademark -------------------------- ------------------------ ---------
TRADEMARK APPLICATIONS
Trademark Description of Trademark Date of Trademark Applications No. Applied for Applications ---------------- ------------------------ -----------------
The Obligors and the Collateral Agent, on behalf of the Lenders, hereby acknowledge and agree that the security interest in the foregoing trademarks and trademark applications (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any trademark or trademark application. Very truly yours, _____________________________________________________ [Obligor] By: _________________________________________________ Name: _______________________________________________ Title: ______________________________________________ Acknowledged and Accepted: BANK OF AMERICA, N.A., as Collateral Agent By: _____________________________ Name: ___________________________ Title: __________________________ EX-10.7 11 a2034240zex-10_7.txt EXHIBIT 10.7 Exhibit 10.7 AMENDMENT NO. 4 TO LEASE AGREEMENT AMENDMENT No. 4 dated this 29th day of December, 1994, effective January 1, 1995, to Lease Agreement dated as of July 22, 1976, effective as of January 1, 1976, as previously amended by Amendments dated January 1, 1979, July 2, 1985, and October 29, 1993 (hereinafter the "Lease Agreement") by and between WEIRTON STEEL CORPORATION, as successor in interest to National Steel Corporation (hereinafter "LESSOR") and UNITED STATES CAN COMPANY, successor by merger to CCC Series 200, Inc. the Assignee of Continental Can Company, USA, Inc., a member of The Continental Group, Inc., (formerly called Continental Can Company, Inc.) (hereinafter "LESSEE") covering the premises located at the Half Moon Industrial Park, Weirton, WV and more particularly described and outlined in the Lease Agreement. 1. Section 4 of the Lease Agreement (TERM, CANCELLATION AND RENT) is hereby amended and, as amended, shall provide as follows: 4. TERM, CANCELLATION AND RENT The current term of this Lease Agreement is hereby extended until December 31, 2000. LESSEE shall have two (2) successive options to renew this Lease Agreement for two (2) successive renewal periods of five (5) years each after the end of the current term on December 31, 2000. LESSEE may exercise its first said option to renew by giving LESSOR written notice of the exercise hereof at least six (6) months prior to the end of the then current term of this Lease Agreement, and LESSEE may exercise its second said option to renew by giving LESSOR written notice of the exercise thereof at least six (6) months prior to the end of the first renewal term. Each renewal term shall be under and subject to all of the provisions of this Lease Agreement. Commencing January 1, 1995, LESSEE shall pay to LESSOR as rental for the leased areas for both (i) the remainder of the current term and (ii) the first five (5) year renewal term the sum of sixteen cents ($.16) per square foot of the leased areas in the building per month, payable on or before the 20th day of the month following the month for which said rental is paid. The rental for the premises during the second renewal period shall be a fair market value rental to be negotiated, in good faith, by the parties hereto; PROVIDED, HOWEVER, in no event shall the rental for the second renewal period be less than the sum of sixteen cents ($.16) per square foot of the leased areas in the building per month. In the event the parties can't agree on the fair market value, the parties will submit the matter to arbitration with professional real estate appraisers serving as arbitrators. LESSEE shall also pay as additional rent hereunder all real estate taxes allocable to the leased areas, and shall reimburse LESSOR for the portion of LESSOR's premiums for fire insurance with extended coverage, utility charges and other charges payable by LESSEE under the terms hereof allocable to the leased areas or to LESSEE's occupancy thereof. Such items of additional rent shall be payable when due rather than on a monthly basis. 2. A new Section 27 (TERMINATION OF SUPPLY AGREEMENT) of the Lease Agreement is hereby added, and shall provide as follows: Section 27 (TERMINATION OF SUPPLY AGREEMENT) In the event that the Supply Agreement entered into between the LESSOR and LESSEE contemporaneous with the execution of this Amendment No. 4 is terminated for reasons other than the cessation of production by LESSOR of tinmill products, this Lease Agreement shall, unless otherwise agreed in writing by the parties hereto, also terminate automatically effective six months from the effective date of termination of the Supply Agreement. 3. Except as specifically amended herein, all of the remaining provisions of the Lease Agreement, shall be and remain in full force and effect. IN WITNESS WHEREOF, LESSOR and LESSEE have executed this Amendment No. 4 to Lease Agreement as of the date first above written. ATTEST: WEIRTON STEEL CORPORATION ___________________________ By:__________________________________ Assistant Secretary Title: Executive Vice President Commercial ATTEST: UNITED STATES CAN COMPANY ___________________________ By:__________________________________ Assistant Secretary Title: Vice President Materials Management & Logistics EX-10.13 12 a2034240zex-10_13.txt EXHIBIT 10.13 Exhibit 10.13 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among Paul W. Jones (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive U.S. Can have entered into an employment agreement dated April 1, 1998 (the "Prior Employment Agreement") and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement shall terminate and be of no further effect; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the Board of Directors of U.S. Can. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as the Chief Executive Officer of the Company and U.S. Can. (c) The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without his consent, be assigned duties that would be inconsistent with those of a Chief Executive Officer of the Company and U.S. Can. The Executive shall have such authority, power, responsibilities and duties as are inherent in his position(s) (and the undertakings applicable to his position(s)) and necessary to carry out his responsibilities and the duties required of him hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of his Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in -2- any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of his Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non-renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $610,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Compensation Committee of the Board of Directors. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance period under the Company's MIP in which any portion of the Agreement Term occurs, the Executive shall be provided with an opportunity for an incentive payment of at least 100% of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage -3- shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of his employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits to the same extent and on substantially the same terms as those benefits are provided by the Company from time to time to the Company's other senior management employees. However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. -4- 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon his death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which he is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded his responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. (e) TERMINATION BY EXECUTIVE. The Executive may terminate his employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. -5- (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: (i) The Executive shall receive his Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. -6- (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or his estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: -7- (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement (as described in paragraph 9). (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment during the Agreement Term, the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. -8- (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing his duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. 9. EMPLOYEE AGREEMENT. As a condition of entering into this Agreement, the Executive is required to enter into the Company's standard form of Employee Agreement as of the Effective Date, as set forth in Supplement B to this Agreement, which relates to non-competition, confidentiality, inventions and certain other matters. -9- 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Board of Directors of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. -10- However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel -11- to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. (c) The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have -12- been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement), and the Prior Employment Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ Paul W. Jones ----------------------------------------------- Paul W. Jones U.S. Can Corporation By /s/ John Workman -------------------------------------------- Its Executive Vice President, Chief Financial Officer and Treasurer --------------------------------------- United States Can Company By /s/ John Workman -------------------------------------------- Its Executive Vice President, Chief Financial Officer and Treasurer --------------------------------------- -14- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and Paul W. Jones (the "Executive"). The Executive, on behalf of himself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including his service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and his heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that he has carefully read and understands the terms this Release of Claims and each of his rights as set forth therein. /s/ Paul W. Jones ------------------------------------ Paul W. Jones Date: October 4, 2000 ------------------------------ State of -------------------- County of ------------------- Subscribed Before Me This ____ Day of _________, _______. - ------------------------------- Notary Public -16- EMPLOYEE AGREEMENT THIS EMPLOYEE AGREEMENT (this "Agreement") made and entered into this 4th day of October, 2000, by and between Paul W. Jones (the "Employee") and United States Can Company, a Delaware corporation (the "Employer") having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523. WITNESSETH THAT WHEREAS, the Employee is entrusted with knowledge of the Employer's and Affiliates' particular business methods and is trained and instructed in the Employer's and Affiliates' particular operations methods; WHEREAS, the Employee is entrusted with one or more of the following: manufacturing technology; operating procedures; purchasing information; cost data; price data; and customer-specific information and data; and WHEREAS, entering into this Agreement is a condition of an Employment Agreement among the Executive, the Employer and U.S. Can Corporation. NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. RESTRICTIVE COVENANTS. During the term of employment and for a period of 24 months, or for a period of time equal to the length of the Employee's tenure with the Employer (if such tenure is less than 24 months), after the employment relationship has been terminated for any reason, the Employee will not: (a) directly or indirectly on behalf of any other individual or entity, solicit or provide any services also provided by the Employer or any Affiliate to any individual or entity who is then or was at any time a client of the Employer and for whose account the Employee was responsible, in whole or in part, at any time during the Employee's tenure with the Employer and the Affiliates or (b) directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business of the type and character in which the Employee was engaged on behalf of the Employer or any Affiliate which operates in the United States or Canada. At all times during and after employment with the Employer, the Employee will not use or disclose any trade secret of the Employer or any Affiliate or any proprietary or confidential information or data of the Employer or any Affiliate, including, without limitation, the Employer's or Affiliate's manufacturing technology, cost data, price data, customer lists, customer information and the other matters specified in paragraph 2 for the Employee's personal benefit, directly or indirectly, or in any way which could be detrimental to the Employer or any -17- Affiliate. For purposes of this Agreement, the term "Affiliate" shall mean the Employer and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934 as amended. 2. EMPLOYER'S INFORMATION. The Employer and the Affiliates are in the business of container manufacturing and related businesses including, without limitation, aerosol containers; paint, plastic and general line containers; and custom and specialty products. The Employee acknowledges that: (i) the Employer's and Affiliates' manufacturing technology is highly evolved; (ii) the Employer's and the Affiliates' purchasing practices and cost data are not generally known in the packaging industry; (iii) the Employer and the Affiliates have a proprietary interest in the identity of their customers and their customer lists and in their efforts to identify potential customers; and (iv) documents and information regarding the Employer's and the Affiliates' manufacturing methods, sales, pricing, costs and the requirements of the Employer's and the Affiliates' customers are confidential and constitute trade secrets. 3. RESTRICTION ACKNOWLEDGMENT. The Employee further acknowledges that; (1) in the event the Employee's employment with the Employer terminates for any reason, the Employee will be able to earn a livelihood without violating the restrictive covenants contained in this Agreement; and (2) the Employee's ability to earn a livelihood without violating such covenants is a material condition of the Employee's Employment Agreement. 4. OTHER AGREEMENTS. It is expressly understood and agreed that no change, at any time in compensation which may be given to the Employee and no change, at any time, in the nature of services to be performed by the Employee, shall amend, impair or otherwise affect any of this Agreement's terms or provisions. This Agreement may be amended only by a written document signed by the parties. 5. WAIVER. Any failure of the Employer to demand rigid adherence to one or more of this Agreement's terms on one or more occasions, shall not be construed as a waiver nor deprive the Employer of the right to insist upon strict compliance. 6. SEVERABILITY. If any one or more of the provisions of this Agreement should be ruled wholly or partially invalid or unenforceable by an arbitrator in accordance with the procedures set forth in paragraph 15 or a court of competent jurisdiction, then (i) the validity and enforceability of all provisions of this Agreement not ruled to be invalid or unenforceable shall be unaffected, and (ii) the provision(s) held wholly or partially invalid or unenforceable shall be deemed amended and such court is authorized to reform the provision(s), to the minimum extent necessary to render them valid and enforceable in conformity with the parties' intent as manifested herein. 7. REMEDIES. If the Employee shall violate or attempt to violate any of the restrictive covenants contained in this Agreement, then the Employer or the affected Affiliate shall be entitled, as of right, to an injunction and/or other equitable relief against the Employee, restraining the Employee from violating or attempting to violate any of said covenants. -18- 8. SURVIVAL. Notwithstanding any employment termination, this Agreement shall remain a valid and enforceable contract between the parties, including (without limitation) this Agreement's restrictive covenants. 9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Employer and its Affiliates and the Employee and their respective successors and assigns. 10. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to its conflicts of law principles. 11. WARRANTY/AGREEMENT. Unless previously disclosed to the Employer in writing, the Employee represents and warrants to the Employer that the Employee is not a party to any agreement (other than an agreement with an Employer or an Affiliate) which contains a covenant-not-to-compete or other restriction with respect to: (i) the nature of any services or business which the Employee is entitled to perform or conduct for Employer or its Affiliate; or (ii) the disclosure or use of any information which directly or indirectly relates to the nature of the business of the Employer and Affiliates or the services to be rendered by the Employee for Employer or its Affiliate. THE EMPLOYEE AGREES NOT TO USE OR DISCLOSE ANY CONFIDENTIAL OR PROPRIETARY INFORMATION OR DATA OF ANY FORMER EMPLOYER OR OTHER THIRD PARTY IN CONNECTION WITH THE EMPLOYEE'S EMPLOYMENT BY THE EMPLOYER. 12. WORK-FOR-HIRE PROVISION. "Inventions" mean all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by the Employee in the course of employment with the Employer and/or comprised, in whole or part, of the Employer's and the Affiliates' confidential information. Notwithstanding the foregoing, Inventions shall not include (a) any inventions independently developed by the Employee and not derived, in whole or part, from any Employer or Affiliate's confidential information, or (b) any invention made by the Employee prior to the Employee's exposure to any confidential information. The parties acknowledge and agree that all work performed by the Employee hereunder shall be deemed "work for hire." The Employer shall at all times own and have exclusive right, title and interest in and to all Employer and the Affiliates' confidential information and Inventions, and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same. Any and all enhancements of the Employer's and the Affiliates' manufacturing technology developed by the Employee shall be the exclusive property of the Employer. The employee hereby assigns to the Employer the Employee's sole and exclusive right, title and interest in and to all Inventions, without additional consideration of any kind whatsoever from the Employer or the Affiliates. The Employee agrees to execute and deliver any instruments or documents and to do all other things (including, without limitation, the giving of testimony) requested by the Employer (both during and after the Employee's employment by the Employer) in order to vest more fully in the Employer or the Affiliates all ownership rights in the Inventions (including, without limitation, obtaining patent, copyright to trademark protection therefor in the U.S. and/or foreign countries). -19- 13. RETURN OF INFORMATION. Following the Employee's termination of employment with the Employer and the Affiliates, the Employee agrees to return to the Employer and the Affiliates any keys, credit cards, passes, confidential documents or material, or other property belonging to the Employer or the Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets relating to the Employer and the Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 14. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by certified mail, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), (iii) sent by facsimile (provided that transmission by facsimile shall be effective only if accompanied by depositing a hard copy for delivery to the address specified below, postage prepaid (in the case of mailing in the U.S., by U.S. mail, and in the case of mailing outside the U.S. by mailing via overnight or two-day delivery)), or (iv) sent by prepaid overnight courier to the parties at the addressed set forth below (or such other addresses as shall be specified by the parties like notice). Such notices, demands, claims and other communications shall be deemed given: a. in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated by delivery; b. in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or c. in the case of facsimile, the date upon which the transmitting party received confirmation of transmission and deposited a hard copy of such notice in the mail. provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: to the Employer by mail: United States Can Company 900 Commerce Drive Oakbrook, Illinois 60523 Attention: General Counsel -20- to the Employer by facsimile: 630/572-0822 To Employee: at the address of the Employee as set forth in the payroll records at the Employer. 15. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. This paragraph 15 shall not be construed to limit the employer's or an Affiliate's right to obtain relief under paragraph 7 with respect to any matter or controversy subject to paragraph 7, and the Employer shall be entitled to obtain any such relief by direct application to state, federal, or other applicable court, without being required to first arbitrate such matter or controversy. -21- 16. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first above written. UNITED STATES CAN COMPANY By /s/ John Workman ---------------------------------- Its: Executive Vice President, Chief Financial Officer and Treasurer ------------------------------- EMPLOYEE /s/ Paul W. Jones ------------------------------------ Paul W. Jones -22- FOR ILLINOIS EMPLOYEES EXHIBIT A NOTICE We are required under the Employee Patent Act, Ill. Rev. Stat. Ch. 140, para. 302 (1987), to provide each employee who enters into an employment agreement containing a "work-for- hire" provision with a written notification of the following: The agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Please acknowledge that you have received a copy of this Notice as of October 4, 2000 by signing below. EMPLOYEE /s/ Paul W. Jones ------------------------------------ Paul W. Jones -23- EX-10.14 13 a2034240zex-10_14.txt EXHIBIT 10.14 Exhibit 10.14 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among John L. Workman (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive, the Company, and U.S. Can have entered into an employment agreement dated January 25, 2000 (the "Prior Employment Agreement"), and the Executive, the Company, and U.S. Can have entered into a change in control agreement dated January 31, 2000 (the "Prior Change in Control Agreement"), and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement and the Prior Change in Control Agreement shall both terminate and be of no further effect; WHEREAS, the Executive and the Company have entered into an agreement dated January 25, 2000, relating to certain protections as to competition, confidentiality, inventions, and certain other matters (the "Employee Agreement"), which the parties have agreed to continue in effect, subject to certain modifications set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the person to whom the Executive reports. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Senior Vice President and Chief Financial Officer, or in such other position to which the Executive may be appointed by the Executive's Supervisor from time to time; provided that in no event shall the Executive be appointed to a position having a rank of less than Senior Vice President and Chief Financial Officer. To the extent the Company determines to be necessary or appropriate, the Company may change the Executive's Supervisor, and the Executive's reporting relationships. (c) The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without his consent, be assigned duties that would be inconsistent with those of a Senior Vice President and -2- Chief Financial Officer. The Executive shall have such authority, power, responsibilities and duties as are inherent in his position(s) (and the undertakings applicable to his position(s)) and necessary to carry out his responsibilities and the duties required of him hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of his Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of his Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non-renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $390,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Supervisor. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance -3- period under the Company's MIP in which any portion of the Agreement Term occurs, the Executive shall be provided with an opportunity for an incentive payment of at least 50% of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of his employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits -4- to the same extent and on substantially the same terms as those benefits are provided by the Company from time to time to the Company's other senior management employees. However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon his death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which he is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded his responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the -5- Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. (e) TERMINATION BY EXECUTIVE. The Executive may terminate his employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: -6- (i) The Executive shall receive his Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or his estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: -7- (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment during the Agreement Term, the Executive shall not be eligible to receive any benefits -8- that may be otherwise payable to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing his duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. -9- 9. CHANGE IN CONTROL. The Company and the Executive have agreed that, effective as of the Effective Date of this Agreement, the Employee Agreement shall be amended as set forth in Exhibit B to this Agreement, which is attached to and forms a part of this Agreement. As a result, the Executive shall continue to be subject to the restrictions in paragraphs 1(a) and 1(b) of the Employee Agreement (relating to solicitation and competition) without regard to the occurrence of any change in control. 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of-pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Chief Executive Officer of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by -10- such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: -11- to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. -12- (c) The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement and the Prior Change in Control Agreement), and the Prior Employment Agreement and the Prior Change in Control Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. (d) The Employee Agreement shall continue in effect, subject to the terms of paragraph 9 of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ John L. Workman -------------------------------------- John L. Workman U.S. Can Corporation By /s/ Paul W. Jones ------------------------------------ Its Chairman, President and Chief Executive Officer -------------------------------- United States Can Company By /s/ Paul W. Jones ------------------------------------ Its Chairman, President and Chief Executive Officer -------------------------------- -14- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and John L. Workman (the "Executive"). The Executive, on behalf of himself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including his service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and his heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that he has carefully read and understands the terms this Release of Claims and each of his rights as set forth therein. /s/ John L. Workman ---------------------------------- John L.Workman Date: October 4, 2000 ----------------------------- State of ______________________ County of _____________________ Subscribed Before Me This ____ Day of __________, _______. _______________________________ Notary Public -16- Supplement B AMENDMENT OF EMPLOYEE AGREEMENT This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") made and entered into ____________, 2000 (the "Effective Date"), by and among John L. Workman, United States Can Company, and U.S. Can Corporation. The Employee Agreement (as defined in the Agreement) is hereby amended effective as of the Effective Date by substituting the following for all of paragraph 2 thereof: "2. Reserved." -17- EX-10.15 14 a2034240zex-10_15.txt EXHIBIT 10.15 Exhibit 10.15 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among Gillian V. Derbyshire (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive, the Company, and U.S. Can have entered into an employment agreement dated February 15, 2000 (the "Prior Employment Agreement"), and the Executive, the Company, and U.S. Can have entered into a change in control agreement dated February 15, 2000 (the "Prior Change in Control Agreement"), and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement and the Prior Change in Control Agreement shall both terminate and be of no further effect; WHEREAS, the Executive and the Company have entered into an agreement dated February 15, 2000, relating to certain protections as to competition, confidentiality, inventions, and certain other matters (the "Employee Agreement"), which the parties have agreed to continue in effect, subject to certain modifications set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which she has a physical or mental disability which renders her incapable, after reasonable accommodation, of performing her duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) she has a physical or mental disability which renders her incapable, after reasonable accommodation, of performing her duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the person to whom the Executive reports. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote her full time, energies and talents to serving as its Senior Vice President and General Manager, Paint, Plastics and General Line and Custom Specialty, or in such other position to which the Executive may be appointed by the Executive's Supervisor from time to time; provided that in no event shall the Executive be appointed to a position having a rank of less than Senior Vice President and General Manager. To the extent the Company determines to be necessary or appropriate, the Company may change the Executive's Supervisor, and the Executive's reporting relationships. (c) The Executive agrees that she shall perform her duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without her consent, be assigned duties that would be inconsistent with those of a Senior Vice President and -2- General Manager. The Executive shall have such authority, power, responsibilities and duties as are inherent in her position(s) (and the undertakings applicable to her position(s)) and necessary to carry out her responsibilities and the duties required of her hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of her personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of her Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of her Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that she is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non- renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate her for her services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $260,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Supervisor. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance -3- period under the Company's MIP in which any portion of the Agreement Term occurs, the Executive shall be provided with an opportunity for an incentive payment of at least 50% of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of her employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits -4- to the same extent and on substantially the same terms as those benefits are provided by the Company from time to time to the Company's other senior management employees. However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon her death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which she is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded her responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the -5- Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. (e) TERMINATION BY EXECUTIVE. The Executive may terminate her employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after her Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: -6- (i) The Executive shall receive her Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or her estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or her estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: -7- (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment during the Agreement Term, the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of -8- any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform her duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing her duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and her rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of her employment with the Company, or any amounts which might have been earned by the Executive in other employment had she sought such other employment. -9- 9. CHANGE IN CONTROL. The Company and the Executive have agreed that, effective as of the Effective Date of this Agreement, the Employee Agreement shall be amended as set forth in Exhibit B to this Agreement, which is attached to and forms a part of this Agreement. As a result, the Executive shall continue to be subject to the restrictions in paragraphs 1(a) and 1(b) of the Employee Agreement (relating to solicitation and competition) without regard to the occurrence of any change in control. 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if she becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of- pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Chief Executive Officer of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by -10- such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: -11- to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by her in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. -12- (c) The Executive shall be entitled to select her legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement and the Prior Change in Control Agreement), and the Prior Employment Agreement and the Prior Change in Control Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. (d) The Employee Agreement shall continue in effect, subject to the terms of paragraph 9 of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set her hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ Gillian V. Derbyshire -------------------------------- Gillian V. Derbyshire U.S. Can Corporation By /s/ Paul W. Jones ---------------------------------------- Its Chairman, President and Chief Executive Officer ------------------------------------ United States Can Company By /s/ Paul W. Jones ---------------------------------------- Its Chairman, President and Chief Executive Officer ------------------------------------ -14- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and Gillian V. Derbyshire (the "Executive"). The Executive, on behalf of herself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including her service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and her heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that she has received separate consideration beyond that to which she is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of her choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that she has carefully read and understands the terms this Release of Claims and each of her rights as set forth therein. /s/ Gillian V. Derbyshire ------------------------------------- Gillian V. Derbyshire Date: October 2, 2000 ------------------------------- State of ----------------------------------- County of ---------------------------------- Subscribed Before Me This ____ Day of _________, _______. ____________________________________________ Notary Public -16- Supplement B AMENDMENT OF EMPLOYEE AGREEMENT This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") made and entered into ____________, 2000 (the "Effective Date"), by and among Gillian V. Derbyshire, United States Can Company, and U.S. Can Corporation. The Employee Agreement (as defined in the Agreement) is hereby amended effective as of the Effective Date by substituting the following for all of paragraph 2 thereof: "2. Reserved." -17- EX-10.16 15 a2034240zex-10_16.txt EXHIBIT 10.16 Exhibit 10.16 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among Roger B. Farley (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive, the Company, and U.S. Can have entered into an employment agreement dated February 3, 2000 (the "Prior Employment Agreement"), and the Executive, the Company, and U.S. Can have entered into a change in control agreement dated February 3, 2000 (the "Prior Change in Control Agreement"), and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement and the Prior Change in Control Agreement shall both terminate and be of no further effect; WHEREAS, the Executive and the Company have entered into an agreement dated February 3, 2000, relating to certain protections as to competition, confidentiality, inventions, and certain other matters (the "Employee Agreement"), which the parties have agreed to continue in effect, subject to certain modifications set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the person to whom the Executive reports. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Senior Vice President, Human Resources, or in such other position to which the Executive may be appointed by the Executive's Supervisor from time to time; provided that in no event shall the Executive be appointed to a position having a rank of less than Senior Vice President. To the extent the Company determines to be necessary or appropriate, the Company may change the Executive's Supervisor, and the Executive's reporting relationships. (c) The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without his consent, be assigned duties that would be inconsistent with those of a Senior Vice President. The -2- Executive shall have such authority, power, responsibilities and duties as are inherent in his position(s) (and the undertakings applicable to his position(s)) and necessary to carry out his responsibilities and the duties required of him hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of his Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of his Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non-renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $226,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Supervisor. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance period under the Company's MIP in which any portion of the Agreement Term occurs, the Executive shall be provided with an opportunity for an incentive payment of at least 50% -3- of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of his employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits to the same extent and on substantially the same terms as those benefits are provided by the Company from time to time to the Company's other senior management employees. -4- However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon his death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which he is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded his responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. -5- (e) TERMINATION BY EXECUTIVE. The Executive may terminate his employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: -6- (i) The Executive shall receive his Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or his estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: -7- (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment during the Agreement Term, the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of -8- any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing his duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. -9- 9. CHANGE IN CONTROL. The Company and the Executive have agreed that, effective as of the Effective Date of this Agreement, the Employee Agreement shall be amended as set forth in Exhibit B to this Agreement, which is attached to and forms a part of this Agreement. As a result, the Executive shall continue to be subject to the restrictions in paragraphs 1(a) and 1(b) of the Employee Agreement (relating to solicitation and competition) without regard to the occurrence of any change in control. 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of- pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Chief Executive Officer of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by -10- such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: -11- to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. -12- (c) The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement and the Prior Change in Control Agreement), and the Prior Employment Agreement and the Prior Change in Control Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. (d) The Employee Agreement shall continue in effect, subject to the terms of paragraph 9 of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ Roger B. Farley ------------------------------------------ Roger B. Farley U.S. Can Corporation By /s/ Paul W. Jones ---------------------------------------- Its Chairman, President and Chief Executive Officer ----------------------------------- United States Can Company By /s/ Paul W. Jones ---------------------------------------- Its Chairman, President and Chief Executive Officer ----------------------------------- -14- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and Roger B. Farley (the "Executive"). The Executive, on behalf of himself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including his service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and his heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that he has carefully read and understands the terms this Release of Claims and each of his rights as set forth therein. /s/ Roger B. Farley ------------------------------------- Roger B. Farley Date: October 4, 2000 ------------------------------ State of ------------------------ County of ----------------------- Subscribed Before Me This ____ Day of _________, _______. - -------------------------------- Notary Public -16- Supplement B AMENDMENT OF EMPLOYEE AGREEMENT This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") made and entered into ____________, 2000 (the "Effective Date"), by and among Roger B. Farley, United States Can Company, and U.S. Can Corporation. The Employee Agreement (as defined in the Agreement) is hereby amended effective as of the Effective Date by substituting the following for all of paragraph 2 thereof: "2. Reserved." -17- EX-10.17 16 a2034240zex-10_17.txt EXHIBIT 10.17 Exhibit 10.17 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among J. Michael Kirk (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive, the Company, and U.S. Can have entered into an employment agreement dated January 25, 2000 (the "Prior Employment Agreement"), and the Executive, the Company, and U.S. Can have entered into a change in control agreement dated January 25, 2000 (the "Prior Change in Control Agreement"), and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement and the Prior Change in Control Agreement shall both terminate and be of no further effect; WHEREAS, the Executive and the Company have entered into an agreement dated January 25, 2000, relating to certain protections as to competition, confidentiality, inventions, and certain other matters (the "Employee Agreement"), which the parties have agreed to continue in effect, subject to certain modifications set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the person to whom the Executive reports. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Executive Vice President, Marketing and Sales, or in such other position to which the Executive may be appointed by the Executive's Supervisor from time to time; provided that in no event shall the Executive be appointed to a position having a rank of less than Executive Vice President. To the extent the Company determines to be necessary or appropriate, the Company may change the Executive's Supervisor, and the Executive's reporting relationships. (c) The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without his consent, be assigned duties that would be inconsistent with those of a Executive Vice President. The -2- Executive shall have such authority, power, responsibilities and duties as are inherent in his position(s) (and the undertakings applicable to his position(s)) and necessary to carry out his responsibilities and the duties required of him hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of his Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of his Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non-renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $235,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Supervisor. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance period under the Company's MIP in which any portion of the Agreement Term occurs, the -3- Executive shall be provided with an opportunity for an incentive payment of at least 50% of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of his employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits to the same extent and on substantially the same terms as those benefits are provided by -4- the Company from time to time to the Company's other senior management employees. However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon his death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which he is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded his responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the -5- Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. (e) TERMINATION BY EXECUTIVE. The Executive may terminate his employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: -6- (i) The Executive shall receive his Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or his estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: -7- (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment during the Agreement Term, the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of -8- any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing his duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. -9- 9. CHANGE IN CONTROL. The Company and the Executive have agreed that, effective as of the Effective Date of this Agreement, the Employee Agreement shall be amended as set forth in Exhibit B to this Agreement, which is attached to and forms a part of this Agreement. As a result, the Executive shall continue to be subject to the restrictions in paragraphs 1(a) and 1(b) of the Employee Agreement (relating to solicitation and competition) without regard to the occurrence of any change in control. 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of- pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Chief Executive Officer of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance ith the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by -10- such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: -11- to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. -12- (c) The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement and the Prior Change in Control Agreement), and the Prior Employment Agreement and the Prior Change in Control Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. (d) The Employee Agreement shall continue in effect, subject to the terms of paragraph 9 of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ J. Michael Kirk ---------------------------------------------- J. Michael Kirk U.S. Can Corporation By /s/ Paul W. Jones ------------------------------------------- Its Chairman, President and Chief Executive Officer -------------------------------------- United States Can Company By /s/ Paul W. Jones ------------------------------------------- Its Chairman, President and Chief Executive Officer -------------------------------------- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and J. Michael Kirk (the "Executive"). The Executive, on behalf of himself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including his service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and his heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that he has carefully read and understands the terms this Release of Claims and each of his rights as set forth therein. /s/ J. Michael Kirk ------------------------------------------ J. Michael Kirk Date: 9/29/00 ------------------------------------ State of ------------------------ County of ------------------------ Subscribed Before Me This Day of , . - ------ ---------- ----------- - ------------------------------- Notary Public -16- Supplement B AMENDMENT OF EMPLOYEE AGREEMENT This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") made and entered into ____________, 2000 (the "Effective Date"), by and among J. Michael Kirk, United States Can Company, and U.S. Can Corporation. The Employee Agreement (as defined in the Agreement) is hereby amended effective as of the Effective Date by substituting the following for all of paragraph 2 thereof: "2. Reserved." -17- EX-10.18 17 a2034240zex-10_18.txt EXHIBIT 10.18 Exhibit 10.18 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 4th day of October, 2000 (the "Effective Date"), by and among Thomas A. Scrimo (the "Executive"), United States Can Company, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 (the "Company"), and U.S. Can Corporation, a Delaware corporation, having its principal offices at 900 Commerce Drive, Oak Brook, Illinois 60523 ("U.S. Can"); WITNESSETH THAT: WHEREAS, the parties desire to enter into this Agreement concerning the terms of continued employment of the Executive by the Company; WHEREAS, the Executive, the Company, and U.S. Can have entered into an employment agreement dated January 24, 2000 (the "Prior Employment Agreement"), and the Executive, the Company, and U.S. Can have entered into a change in control agreement dated January 24, 2000 (the "Prior Change in Control Agreement"), and the parties have agreed that, effective as of the Effective Date, this Agreement shall govern the terms of the Executive's employment with the Company, and the Prior Employment Agreement and the Prior Change in Control Agreement shall both terminate and be of no further effect; WHEREAS, the Executive and the Company have entered into an agreement dated January 24, 2000, relating to certain protections as to competition, confidentiality, inventions, and certain other matters (the "Employee Agreement"), which the parties have agreed to continue in effect, subject to certain modifications set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, IT IS HEREBY COVENANTED AND AGREED by the Executive, the Company, and U.S. Can as follows: 1. DEFINITIONS. Terms used in this Agreement shall be defined as set forth below: (a) For purposes of this Agreement, the term "Affiliate" shall mean the Company and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934, as amended. (b) The term "Agreement Term" shall have the meaning ascribed to it in paragraph 2(f). (c) The Executive shall be considered "Disabled" during any period in which he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement. The Executive shall be considered "Permanently Disabled" during any period in which (i) he has a physical or mental disability which renders him incapable, after reasonable accommodation, of performing his duties under this Agreement; (ii) such disability is determined by the Executive's Supervisor to be of a long-term nature; and (iii) the Executive is eligible for income replacement benefits under the Company's long-term disability plan during such period of disability. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (e) "Date of Termination" means the Executive's last day worked for the Company, excluding any salary continuation period, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (f) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (g) The Executive's "Supervisor" shall be the person to whom the Executive reports. (h) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. PERFORMANCE OF SERVICES. The Executive's employment with the Company shall be subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Agreement Term, and the Executive hereby agrees to remain in the employ of the Company during the Agreement Term. (b) During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Senior Vice President and General Manager, Aerosol, or in such other position to which the Executive may be appointed by the Executive's Supervisor from time to time; provided that in no event shall the Executive be appointed to a position having a rank of less than Senior Vice President and General Manager. To the extent the Company determines to be necessary or appropriate, the Company may change the Executive's Supervisor, and the Executive's reporting relationships. (c) The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Executive's Supervisor. The Executive's duties may include providing services for both the Company and the Affiliates, as determined by the Executive's Supervisor; provided that the Executive shall not, without his consent, be assigned duties that would be inconsistent with those of a Senior Vice President and -2- General Manager. The Executive shall have such authority, power, responsibilities and duties as are inherent in his position(s) (and the undertakings applicable to his position(s)) and necessary to carry out his responsibilities and the duties required of him hereunder. (d) Notwithstanding the foregoing provisions of this paragraph 2, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, and similar types of activities, to the extent that such other activities do not, in the judgment of his Supervisor, inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Company or any Affiliate. The Executive shall not serve on the board of any business, or hold any other significant position with any business, without the consent of his Supervisor. (e) Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive's responsibilities. (f) The "Agreement Term" shall begin with the commencement of the Initial Term and shall end at the conclusion of all Renewal Periods. The "Initial Term" shall be the period beginning on the Effective Date and ending on the second anniversary of the Effective Date. Thereafter, the Agreement Term will be automatically extended for 12-month periods (a "Renewal Period"), unless one party to this Agreement provides notice of non- renewal to the other at least 90 days before the last day of the Initial Term or any subsequent Renewal Period. 3. COMPENSATION. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: (a) SALARY. The Executive shall receive, for each twelve (12) consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $220,000 (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Supervisor. In no event shall the Salary rate of the Executive be reduced to an amount that is less than the amount specified in this paragraph (a). (b) INCENTIVE COMPENSATION. The Executive shall participate in the Company's Management Incentive Plan ("MIP") on terms that are comparable to the terms applicable to the Company's other senior executives from time to time; provided that, for each performance period under the Company's MIP in which any portion of the Agreement Term occurs, the -3- Executive shall be provided with an opportunity for an incentive payment of at least 50% of the Executive's annual Salary rate (with such Salary rate determined as provided in the MIP). For the performance period in which the Executive's termination of employment occurs, the Executive's eligibility for an incentive compensation award shall be subject to the provisions of paragraph 5 of this Agreement. (c) LIFE INSURANCE. The Company shall obtain life insurance coverage on the Executive's life that is no less favorable than the coverage provided immediately prior to the Effective Date provided, however, that such life insurance shall at least provide term coverage with death benefits equal to two times the Executive's base salary. The life insurance coverage shall be subject to the Executive's satisfactory completion of a physical examination and other aspects of the application process. Death benefits under such coverage shall be payable to the beneficiary named by the Executive. During the period of the Executive's employment with the Company, the Company shall pay the premiums with respect to such policy. (d) DISABILITY INCOME. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income according to the Company's plans and arrangements in effect at the time of the disability during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive's Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and other amounts under this Agreement (including payment in lieu of Salary or other amounts pursuant to paragraph 5(b) or 5(c)), any such Salary and other amounts (or such payments in lieu of Salary and other amounts) to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage. (e) EXPENSES. Subject to the Company's rules and procedures as in effect from time to time, the Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in the course of his employment. The Company will reimburse the Executive for all reasonable expenses so incurred in accordance with the Company's policies. (f) VACATION AND HOLIDAYS. During each year of the Agreement Term, the Executive shall be entitled to four weeks of paid vacation plus the paid holidays observed by the Company. (g) CAR ALLOWANCE. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (h) BENEFITS. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the health, welfare, retirement and other fringe benefits to the same extent and on substantially the same terms as those benefits are provided by -4- the Company from time to time to the Company's other senior management employees. However, the Company shall not be required to provide a benefit under this paragraph (h) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 3, to the extent reasonably determined to be necessary or appropriate by the Company. 4. TERMINATION. The Executive's employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 4(a) through 4(f): (a) DEATH. The Executive's employment hereunder will terminate upon his death. (b) PERMANENT DISABILITY. The Company may terminate the Executive's employment during any period in which he is Permanently Disabled. In the event of a dispute as to whether the Executive is Permanently Disabled, the Company may refer the same to a licensed practicing physician of the Company's choice, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. (c) CAUSE. The Company may terminate the Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall that any one or more of the following has occurred: (i) the Executive shall have committed a felony; (ii) the Executive shall have breached in any material respect any non-competition provisions of any written agreement between the Executive and the Company or any of its Affiliates; (iii) the Executive shall have openly disregarded his responsibilities to the Company and/or its Affiliates (other than due to being Disabled which, in the reasonable judgment of the Board of Directors, causes the Executive to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Executive by the Board of Directors of such action. (d) GOOD REASON. The Executive may terminate employment with the Company for Good Reason. For purposes of this Agreement, the term "Good Reason" shall mean a material adverse change in the nature or scope of the Executive's authorities, status, working conditions, duties or responsibilities, or a material reduction in salary, in benefits, or in bonus program inconsistent with reductions for similarly situated employees of the -5- Company or inconsistent with the Company's past practices. A change in the Executive's reporting relationships shall not constitute Good Reason. (e) TERMINATION BY EXECUTIVE. The Executive may terminate his employment hereunder at any time for any reason by giving the Company thirty (30) days prior written Notice of Termination, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. (f) TERMINATION BY COMPANY. The Company may terminate the Executive's employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 4(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 4(f) only if it is not for reasons described in paragraph 4(b), 4(c), 4(d), or 4(e). Notwithstanding the foregoing provisions of this paragraph (f), if the Executive's employment is terminated by the Company in accordance with this paragraph (f), and within a reasonable time period thereafter, it is determined by the Executive's Supervisor in good faith that circumstances existed which would have constituted a basis for termination of the Executive's employment for Cause (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 4(c)(iii)), the Executive's employment will be deemed to have been terminated for Cause in accordance with paragraph 4(c). (g) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or the Executive must be communicated by a written Notice of Termination to the other party hereto. A "Notice of Termination" shall be dated, indicate the Date of Termination (not earlier than the date on which the notice is provided), indicate the specific termination provision in this Agreement relied on, and set forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive's employment. (h) EFFECT OF TERMINATION. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Affiliates, or holds any other position with the Company or any of the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 5. RIGHTS UPON TERMINATION. The Executive's rights to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 5: (a) If the Executive's Date of Termination occurs during the Agreement Term for any reason, then: -6- (i) The Executive shall receive his Salary from the Company for the period ending on the Date of Termination. (ii) The Executive shall receive any required payment for accrued but unused vacation days from the Company. (iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the incentive compensation award (as described in paragraph 3(b)) for the period, the Executive shall be paid any incentive compensation award at the regularly scheduled time. (iv) Any other required payments or benefits to be provided to the Executive by the Company. Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the date of the Executive's Date of Termination. (b) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(a) (relating to the Executive's death) or paragraph 4(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 5(a): (i) The Executive (or his estate) shall receive from the Company periodic payments of an amount equal to not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination); provided, however, that such payments shall be offset by the amount of any life for disability insurance benefits provided by the Company or any of its Affiliates as a result of the Executive's death or Permanent Disability. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees and on a non-discriminatory basis. (c) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraph 4(d) (relating to termination by the Executive for -7- Good Reason) or paragraph 4(f) (relating to termination by the Company without Cause), then: (i) The Executive shall receive from the Company, for the Severance Period, continuing Salary payments at the Salary rate in effect on the Date of Termination, in monthly or more frequent installments. The "Severance Period" shall be the period beginning on the Date of Termination and continuing through the earliest to occur of: (A) the eighteen (18) month anniversary of the Date of Termination; (B) the date of the Executive's death; or (C) the date, if any, of the breach by the Executive of the provisions of the Employee Agreement. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement, the Executive shall receive from the Company payment of the award under the MIP for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; provided, however, that such award shall be subject to a pro-rata reduction to reflect the portion of the performance period following the Date of Termination. Payment, if any, under this paragraph (ii) of any amount shall be made at the regularly scheduled time for payment of such amounts to active employees, and on a non-discriminatory basis. Notwithstanding the foregoing provisions of this paragraph 5, no payment will be made or benefit provided under this paragraph 5(c) unless (I) the Executive first executes a release in the form attached as Supplement A to this Agreement, and (II) to the extent any portion of such release is subject to the seven-day revocation period prescribed by the Age Discrimination in Employment Act, as amended, or to any similar revocation period in effect on the date of termination of the Executive's employment, such revocation period has expired. (d) If the Executive's Date of Termination occurs during the Agreement Term under circumstances described in paragraphs 4(c) (relating to Cause) or 4(e) (relating to voluntary resignation), the Company shall have no obligation to make payments of Salary or any incentive compensation award or provide benefits under the Agreement for periods after the Executive's Date of Termination. 6. OTHER BENEFITS. (a) Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 12, in the event of a termination of employment -8- during the Agreement Term, the Executive shall not be eligible to receive any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company (or any Affiliate), including without limitation, the United States Can Company Executive Severance Plan (the "Executive Severance Plan"), or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. (b) After the Agreement Term has expired, the Executive shall be designated as an eligible participant in the Executive Severance Plan. The Company agrees that the Executive Severance Plan will not be amended or terminated on or after the Effective Date as to the Executive in a manner that would adversely affect the Executive. 7. DUTIES ON TERMINATION. (a) Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are reasonably necessary for a transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 7, the Company may suspend the Executive from performing his duties under this Agreement following the delivery of a Notice of Termination providing for the Executive's resignation, or delivery by the Company of a Notice of Termination providing for the Executive's termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension. (b) Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company or its Affiliates, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any trade secrets of the Company or its Affiliates. For purposes of the preceding sentence, the term "trade secrets" shall have the meaning ascribed to it under the Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets Act. 8. MITIGATION AND SET-OFF. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. Except as otherwise specifically provided in this Agreement, the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. -9- 9. CHANGE IN CONTROL. The Company and the Executive have agreed that, effective as of the Effective Date of this Agreement, the Employee Agreement shall be amended as set forth in Exhibit B to this Agreement, which is attached to and forms a part of this Agreement. As a result, the Executive shall continue to be subject to the restrictions in paragraphs 1(a) and 1(b) of the Employee Agreement (relating to solicitation and competition) without regard to the occurrence of any change in control. 10. ASSISTANCE WITH CLAIMS. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period after the Executive's Date of Termination, the Executive will assist the Company and the Affiliates in defense or prosecution of any claims that may be made by or against the Company and the Affiliates, to the extent that such claims may relate to services performed by the Executive for the Company or the Affiliates. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Affiliate. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive's reasonable out-of- pocket expenses associated with such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Affiliates (or their actions) that may relate to services performed by the Executive for the Company or the Affiliates, regardless of whether a lawsuit has then been filed against the Company or the Affiliates with respect to such investigation. 11. NONALIENATION. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive's beneficiary. 12. AMENDMENT. This Agreement may be amended or canceled only by mutual agreement of the parties in writing, provided that any such agreement by the Company that includes a substantive amendment must be authorized in writing by the Chief Executive Officer of U.S. Can. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 13. APPLICABLE LAW. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. WAIVER OF BREACH. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party (i) will be effective unless in writing signed by -10- such party; and (ii) will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. SUCCESSORS, ASSUMPTION OF CONTRACT. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive's death, the Executive's heirs and estate shall succeed to such rights and benefits pursuant to the Executive's will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary(ies) with respect to such benefits. This Agreement shall be binding upon and inure to the benefit of the Company and U.S. Can, as applicable, and any successor of the Company or U.S. Can, as applicable, subject to the following: (a) The Company and U.S. Can, as applicable, will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or U.S. Can, as applicable, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company or U.S. Can, as applicable, would be required to perform it if no such succession had taken place. (b) If the Executive is transferred to employment with an Affiliate (including a successor to the Company), such transfer shall not constitute a termination of employment for purposes of this Agreement, provided that the Affiliate agrees to assume this Agreement and be substituted for the Company under this Agreement. (c) After a successor assumes this Agreement in accordance with this paragraph 16, only such successor shall be liable for amounts payable after such assumption, and no other companies shall have liability for amounts payable after such assumption. 17. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, effective immediately, (ii) sent by certified mail, postage prepaid effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy for delivery by regular mail, or (iv) sent by prepaid overnight or international courier service, effective two days after deposit, to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice); provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: -11- to the Company by mail: U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Attention: General Counsel to the Company by facsimile: 630/572-0822 To Executive: at the address of the Executive as set forth in the payroll records at the Company. 18. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. 19. LEGAL AND ENFORCEMENT COSTS. The provisions of this paragraph 19 shall apply if it becomes reasonably necessary for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any right(s) under this Agreement or defending against any allegations of breach of this Agreement by the Company or U.S. Can: (a) The Executive shall be entitled to recover from the Company reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense. (b) Payments required under this paragraph 19 shall be made by the Company to the Executive (or directly to the Executive's attorney) promptly following submission to the Company of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses. -12- (c) The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this paragraph 19 be reasonable. (d) The Executive's rights to payments under this paragraph 19 shall not be affected by the final outcome of any dispute with the Company or U.S. Can; provided, however, that to the extent that the arbitrators shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust, the Executive shall not be entitled to such recovery; and to the extent that such amount have been recovered by the Executive previously, the Executive shall promptly repay such amounts to the Company. 20. SURVIVAL OF AGREEMENT. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 21. ENTIRE AGREEMENT. Except as otherwise provided herein: (a) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. (b) This Agreement supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement and the Prior Change in Control Agreement), and the Prior Employment Agreement and the Prior Change in Control Agreement shall be without effect on and after the Effective Date of this Agreement. (c) Notwithstanding the foregoing, but subject to paragraph (d) below, nothing in this Agreement shall be construed to limit any Company policy or agreement that is otherwise applicable relating to compliance with laws or the Employee Agreement. (d) The Employee Agreement shall continue in effect, subject to the terms of paragraph 9 of this Agreement. 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. -13- IN WITNESS WHEREOF, the Executive has hereunto set his hand, and the Company and U.S. Can have caused these presents to be executed in their names and on their behalf, all as of the Effective Date. /s/ Thomas A. Scrimo -------------------------------------- Thomas A. Scrimo U.S. Can Corporation By /s/ Paul W. Jones ------------------------------------ Its Chairman, President and Chief Executive Officer ------------------------------- United States Can Company By /s/ Paul W. Jones ------------------------------------ Its Chairman, President and Chief Executive Officer ------------------------------- -14- Supplement A RELEASE OF CLAIMS 1. This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") by and between United States Can Company (the "Company") and Thomas A. Scrimo (the "Executive"). The Executive, on behalf of himself and the other Executive Releasors, releases and forever discharges the Company and the other Company Releasees from any and all Claims which the Executive now has or claims, or might hereafter have or claim (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, occurring or arising on or before the date of this Release of Claims, to the extent that the Claim arises out of or relates to the Executive's employment by the Company and its Affiliates (including his service as a director of the Company and its Affiliates) and/or the Executive's termination or resignation therefrom, and shall include, without limitation, Claims arising out of or related to the Agreement, and Claims arising under any local, state, or federal law dealing with employment discrimination, including the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act. For purposes of this Release of Claims, the terms set forth below shall have the following meanings: (a) The term "Agreement" shall include the Agreement and this Supplement, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement. (b) The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity. (c) The term "Company Releasees" shall include the Company and its Affiliates (as defined in the Agreement), and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, and insurers, and their predecessors and successors. (d) The term "Executive Releasors" shall include the Executive, and his heirs, representatives, agents, insurers, and any other person claiming through the Executive. 2. The following provisions are applicable to and made a part of this Release of Claims: (a) By this Release of Claims, the Executive Releasors do not release or waive any right or claim which they may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, which arises after the date of execution of this Release of Claims. -15- (b) In exchange for this Release of Claims, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company's policy or applicable law. (c) The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release of Claims. (d) The Executive has twenty-one (21) days from the date of presentment to consider whether or not to execute this Release of Claims. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release of Claims will not become effective until expiration of such revocation period. (e) This Release of Claims and the commitments and obligations of all parties thereunder: (i) shall become final and binding immediately following the expiration of the Executive's right to revoke the execution of this release in accordance with paragraph 2(d) of this Release of Claims; (ii) shall not become final and binding until the expiration of such right to revoke; and (iii) shall not become final and binding if the Executive revokes such execution. 3. The Executive hereby acknowledges that he has carefully read and understands the terms this Release of Claims and each of his rights as set forth therein. /s/ Thomas A. Scrimo ----------------------------- Thomas A. Scrimo Date: 10/2/00 ----------------------------- State of ----------------------- County of ---------------------- Subscribed Before Me This ____ Day of _________, _______. - --------------------------------- Notary Public -16- Supplement B AMENDMENT OF EMPLOYEE AGREEMENT This document is attached to, is incorporated into, and forms a part of, an agreement (the "Agreement") made and entered into ____________, 2000 (the "Effective Date"), by and among Thomas A. Scrimo, United States Can Company, and U.S. Can Corporation. The Employee Agreement (as defined in the Agreement) is hereby amended effective as of the Effective Date by substituting the following for all of paragraph 2 thereof: "2. Reserved." -17- EX-10.24 18 a2034240zex-10_24.txt EXHIBIT 10.24 Exhibit 10.24 U.S. CAN CORPORATION 2000 EQUITY INCENTIVE PLAN 1. PURPOSE. The purpose of this Equity Incentive Plan (the "Plan") is to advance the interests of U.S. Can Corporation, a Delaware corporation (the "Company"), by enhancing the ability of the Company and its subsidiaries to attract and retain able employees, consultants or advisers; to reward such individuals for their contributions; and to encourage such individuals to take into account the long-term interests of the Company and its subsidiaries through interests in shares of the Company's Common Stock, $.01 par value per share (the "Stock"). Any employee, consultant, or adviser selected to receive an award under the Plan is referred to as a "participant." Options granted pursuant to the Plan may be incentive stock options as defined in section 422 of the Internal Revenue Code of 1986 (as from time to time amended, the "Code") (any option that is intended so to qualify as an incentive stock option being referred to herein as an "incentive option"), or options that are not incentive options, or both. Except as otherwise expressly provided with respect to an option grant, no option granted pursuant to the Plan shall be an incentive option. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors (the "Board") of the Company. The Board shall have discretionary authority, not inconsistent with the express provisions of the Plan, (a) to grant option awards to such eligible persons as the Board may select; (b) to determine the time or times when awards shall be granted and the number of shares of Stock subject to each award; (c) to determine which options are, and which options are not, intended to be incentive options; (d) to determine the terms and conditions of each award; (e) to prescribe the form or forms of any instruments evidencing awards and any other instruments required under the Plan and to change such forms from time to time; (f) to adopt, amend, and rescind rules and regulations for the administration of the Plan; and (g) to interpret the Plan and to decide any questions and settle all controversies and disputes that may arise in connection with the Plan. Such determinations of the Board shall be conclusive and shall bind all parties. Subject to Section 9, the Board shall also have the authority, both generally and in particular instances, to waive compliance by a participant with any obligation to be performed by him or her under an award, to waive any condition or provision of an award, and to amend or cancel any award (and if an award is canceled, to grant a new award on such terms as the Board shall specify), except that the Board may not take any action with respect to an outstanding award that would adversely affect the rights of the participant under such award without such participant's consent. Nothing in the preceding sentence shall be construed as limiting the power of the Board to make adjustments required by Section 4(c) and Section 6(g). The Board may, in its discretion, delegate some or all of its powers with respect to the Plan to a committee (the "Committee"), in which event all references (as appropriate) to the Board hereunder shall be deemed to refer to the Committee. The Committee, if one is appointed, shall consist of at least two directors. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by all of the Committee members. 3. EFFECTIVE DATE AND TERM OF THE PLAN. The Plan shall become effective on the date on which it is approved by the stockholders of the Company. Grants of awards under the Plan may be made prior to that date (but after Board adoption of the Plan), subject to approval of the Plan by the stockholders. No awards shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but awards previously granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN. (a) NUMBER OF SHARES. Subject to adjustment as provided in Section 4(c), the aggregate number of shares of Stock that may be the subject of awards granted under the Plan (after giving effect to the 20 for 1 stock split effective on October 4, 2000) shall be 3,253,761, of which 2,461,542 shares shall be allocated to options which shall be time-vested and 792,219 shares shall be allocated to options which shall vest based on the attainment of performance goals determined by the Board, in each case as specified in the certificate evidencing the grant of such options. If any award granted under the Plan terminates without having been exercised in full, the number of shares of Stock as to which such award was not exercised shall be available for future grants. (b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall be authorized but unissued Stock, or if the Board so decides in its sole discretion, previously issued Stock acquired by the Company and held in its treasury. No fractional shares of Stock shall be delivered under the Plan. (c) CHANGES IN STOCK. In the event of a stock dividend, stock split or combination of shares, recapitalization, or other change in the Company's capital stock, the number and kind of shares of Stock or securities of the Company subject to awards then outstanding or subsequently granted under the Plan, the exercise price of such awards, the maximum number of shares of Stock or securities that may be delivered under the Plan, and other relevant provisions shall be appropriately adjusted by the Board, whose determination shall be binding on all persons. -2- The Board may also adjust the number of shares subject to outstanding awards, the exercise price of outstanding awards, and the terms of outstanding awards, to take into consideration material changes in accounting practices or principles, extraordinary dividends, consolidations or mergers (except those described in Section 6(g)), acquisitions or dispositions of stock or property, or any other event if it is determined by the Board that such adjustment is appropriate to avoid distortion in the operation of the Plan; PROVIDED, that no such adjustment shall be made in the case of an incentive option, without the consent of the participant, if it would constitute a modification, extension, or renewal of the option within the meaning of section 424(h) of the Code. 5. AWARDS; ETC. Persons eligible to receive awards under the Plan shall be all directors, including directors who are not employees, of the Company, all executive officers of the Company and its subsidiaries and other employees, consultants and advisers who, in the opinion of the Board, are in a position to make a significant contribution to the success of the Company and its subsidiaries. A subsidiary for purposes of the Plan shall be a corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock. Incentive options shall be granted only to "employees" as defined in the provisions of the Code or regulations thereunder applicable to incentive stock options. 6. TERMS AND CONDITIONS OF OPTIONS. (a) EXERCISE PRICE OF OPTIONS. The exercise price of each option shall be determined by the Board, but in the case of an incentive option shall not be less than 100% (110%, in the case of an incentive option granted to a ten-percent stockholder) of the fair market value of the Stock at the time the option is granted; nor shall the exercise price be less, in the case of an original issue of authorized stock, than par value. For this purpose, "fair market value" in the case of incentive options shall have the same meaning as it does in the provisions of the Code and the regulations thereunder applicable to incentive options; and "ten-percent stockholder" shall mean any participant who at the time of grant owns directly, or by reason of the attribution rules set forth in section 424(d) of the Code is deemed to own, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its parent or subsidiary corporations. (b) DURATION OF OPTIONS. An option shall be exercisable during such period or periods as the Board may specify. The latest date on which an option may be exercised (the "Expiration Date") shall be the date which is ten years (five years, in the case of an incentive option granted to a ten-percent stockholder as defined in clause (a) above), from the date the option was granted or such earlier date as may be specified by the Board at the time the option is granted, or in the case of any performance options issued by the Company under the Plan, 45 days following the date it is determined whether such performance options have been earned solely if such date -3- occurs after such ten-year period. (c) Exercise of Options. (i) An option shall become exercisable at such time or times and upon such conditions as the Board shall specify. In the case of an option not immediately exercisable in full, the Board may at any time accelerate the time at which all or any part of the option may be exercised. (ii) Any exercise of an option shall be in writing, signed by the proper person and furnished to the Company, accompanied by (A) such documents as the Board may require and (B) payment in full as specified below in Section 6(d) for the number of shares of Stock for which the option is exercised. (iii) The Board shall have the right to require that the participant exercising the option remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements (or make other arrangements satisfactory to the Company with regard to such taxes) prior to the delivery of any Stock pursuant to the exercise of the option. If permitted by the Board, either at the time of the grant of the option or in connection with its exercise, the participant may elect, at such time and in such manner as the Board may prescribe, to satisfy such withholding obligation by (A) delivering to the Company Stock (which in the case of Stock acquired from the Company shall have been owned by the participant for at least six months prior to the delivery date) having a fair market value equal to such withholding obligation, or (B) requesting that the Company withhold from the shares of Stock to be delivered upon the exercise a number of shares of Stock having a fair market value equal to such withholding obligation. In the case of an incentive option, the Board may require as a condition of exercise that the participant exercising the option agree to inform the Company promptly of any disposition (within the meaning of section 424(c) of the Code and the regulations thereunder) of Stock received upon exercise. In addition, if at the time the option is exercised the Board determines that under applicable law and regulations the Company could be liable for the withholding of any federal or state tax with respect to a disposition of the Stock received upon exercise, the Board may require as a condition of exercise that the participant exercising the option agree to give such security as the Board deems adequate to meet the potential liability of the Company for the withholding of tax, and to augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such security. (iv) If an option is exercised by the executor or administrator of a deceased participant, or by the person or persons to whom the option has been transferred by the participant's will or the applicable laws of descent and distribution, the Company shall be under no obligation to deliver Stock pursuant to such exercise until the Company is -4- satisfied as to the authority of the person or persons exercising the option. (d) PAYMENT FOR AND DELIVERY OF STOCK. Stock purchased upon exercise of an option under the Plan shall be paid for as follows: (i) in cash, check acceptable to the Company (determined in accordance with such guidelines as the Board may prescribe) or money order payable to the order of the Company, or (ii) if so permitted by the Board (which, in the case of an incentive option, shall specify such method of payment at the time of grant), (A) through the delivery of shares of Stock (which in the case of Stock acquired from the Company shall have been held for at least six months) having a fair market value on the last business day preceding the date of exercise equal to the purchase price, (B) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, (C) by delivery of a promissory note of the participant to the Company, such note to be payable on such terms as are specified by the Board, or (D) by any combination of the permissible forms of payment; PROVIDED, that if the Stock delivered upon exercise of the option is an original issue of authorized Stock, at least so much of the exercise price as represents the par value of such Stock shall be paid other than with a personal check or promissory note of the person exercising the option. (e) DELIVERY OF STOCK. A participant shall not have the rights of a stockholder with regard to awards under the Plan except as to Stock actually received by him or her under the Plan. The Company shall not be obligated to deliver any shares of Stock (i) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (ii) if the outstanding Stock is at the time listed on any stock exchange, until the shares to be delivered have been listed or authorized to be listed on such exchange upon official notice of issuance and (iii) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. Without limiting the generality of the foregoing, if the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Stock bear an appropriate legend restricting transfer. (f) NONTRANSFERABILITY OF AWARDS. No award may be transferred other than by will or by the laws of descent and distribution, and during a participant's lifetime an award may be exercised only by him or her. (g) MERGERS, ETC. Except as otherwise provided at the time of and in the grant, in the event that (I) (x) any person or entity who is not an affiliate (as such term is defined in the Securities Exchange Act of 1934, as amended, PROVIDED, that for purposes of this Section 6(g), it is understood and agreed that as of the date of the adoption of this Plan, the only stockholders of the Company which constitute affiliates of the Company are Berkshire Fund V Investment Corp., Berkshire Fund V Coinvestment Corp. and Berkshire Investors LLC) of the Company, or any -5- two or more such persons or entities acting as a group, and all affiliates of such person or entity or persons or entities, who prior to such time owned no Stock or Stock representing less than fifty percent (50%) of the voting power at elections for the Board, shall (A) acquire, whether by purchase, exchange, tender offer, merger, consolidation, recapitalization or otherwise, or (B) otherwise be the owner of (as a result of a redemption of Stock or otherwise), Stock (or shares in a successor corporation by merger, consolidation or otherwise) such that following such transaction or transactions, such person or group and their respective affiliates beneficially own fifty percent (50%) or more of the voting power at elections for the board of directors of the Company or any successor, or (y) there is a sale or transfer of all or substantially all the Company's or United States Can Company's assets and following such sale or transfer, there is a liquidation of the Company, and (II) there has been, or upon consummation of the transactions contemplated by (x) or (y) of clause (I) there will be, a determination of whether any performance options issued under the Plan have been earned (collectively, a "covered transaction"), the following rules shall apply: (i) Each participant will be given notice by the Company of the covered transaction including notice that all outstanding awards exercisable either prior to or upon consummation of the covered transaction will cease to be exercisable after the covered transaction (provided the Board shall provide for a reasonable period of time during which such participant may exercise any exercisable awards), and all other awards to the extent not exercisable prior to or upon consummation of the covered transaction will be forfeited, as of the effective time of the covered transaction, provided that the Board of Directors (A) may in its sole discretion on or prior to the effective date of the covered transaction take any or all of the following actions: (1) make any outstanding option exercisable in full and (2) remove any performance or other conditions or restrictions on any award, and (B) shall, subject to the provisions of clause (ii) below, make or provide for a cash payment to the participant equal to the difference between (a) the fair market value of the Stock times the number of shares of Stock subject to outstanding awards (to the extent exercisable prior to or upon such effective date at prices not in excess of the fair market value) and (b) the aggregate exercise price of all such outstanding awards in exchange for the termination of such awards. (ii) With respect to an outstanding award held by a participant who, following the covered transaction, will be employed by or otherwise providing services to an entity which is a surviving or acquiring entity in the covered transaction or an affiliate of such an entity, the Board of Directors may at or prior to the effective time of the covered transaction, in its sole discretion and in lieu of the action described in paragraph (i)(B) above and after each participant is given notice of the covered transaction (and the Board provides for a reasonable period of time during which such participant may exercise any exercisable awards), (A) arrange to have such surviving or acquiring entity or affiliate continue or assume any award held by such participant outstanding hereunder or (B) grant a replacement award which, in the judgment of the Board of Directors, is substantially equivalent to any outstanding award being replaced. -6- (h) TAKE ALONG. In the event that any holder of Stock is required to sell or vote any Stock pursuant to Section 2.4 of the Stockholders Agreement dated as of October 4, 2000 (as amended from time to time the "Stockholders Agreement"), by and among the Company and the Stockholders party thereto (a "take along") then (i) with respect to all outstanding options that are exercisable prior to the take along and all outstanding options that become exercisable upon consummation of the take along, in either case that are not taken along pursuant to Section 2.4 of the Stockholders Agreement, the Board of Directors, in its sole discretion, may make or provide for a cash payment to the participant upon consummation of the take along equal to the difference between (A) the fair market value of the Stock times the number of shares of Stock subject to outstanding awards (to the extent exercisable prior to or upon such consummation at prices not in excess of the fair market value) and (B) the aggregate exercise price of all such outstanding awards, in exchange for the termination of such awards, and (ii) all outstanding options that are not exercisable shall terminate upon the consummation of the take along. 7. TERMINATION OF EMPLOYMENT. In the case of any award, the Board may, through agreement with the participant (including without limitation, any Stockholders Agreement of the Company to which the participant is a party), resolution, or otherwise, provide for post-termination exercise provisions different from those expressly set forth in this Section 7, including without limitation the vesting immediately prior to termination of all or any portion of an option not otherwise vested prior to termination, and terms allowing a later exercise by a former employee, consultant or advisor (or, in the case of a former employee, consultant or advisor who is deceased, the person or persons to whom the award is transferred by will or the laws of descent and distribution) as to all or any portion of the award not exercisable immediately prior to termination of employment or other service, but in no case may an award be exercised after the Expiration Date. If the Board does not otherwise provide for such provisions and if a participant's employment or other service relationship with the Company and its subsidiaries terminates prior to the Expiration Date (including by reason of death) the following shall apply: (a) Options that are not vested immediately prior to or upon the termination shall automatically terminate upon termination. The Board may in its sole discretion provide that, with respect to each share of Stock to which an exercisable option relates, the participant or beneficiary receive in cash, the excess of (i) such share's fair market value on the date of the participant's termination, over (ii) the option exercise price. (b) To the extent vested immediately prior to or upon termination of employment or other service, the option shall continue to be vested and shall be exercisable thereafter during the period prior to the Expiration Date for the following periods of time: (i) in the case of exercisable time-vested or performance-vested options, within 105 days following such termination, and (ii) in the case of performance-vested options for which it has not been determined at the time of termination of employment or other service whether or not such options will be earned in accordance with the terms of the option certificate evidencing the grant of such options, within -7- 45 days following the date it is determined whether the options are earned or not in accordance with the terms of the option certificate evidencing the grant of such options; PROVIDED, HOWEVER, that if the participant's employment or other service is terminated "for cause" as defined in subsection (c) below, all awards shall terminate immediately. Except as otherwise provided in an award, after completion of such exercise period, such awards shall terminate to the extent not previously exercised, expired or terminated. (c) For purposes of the foregoing, termination for "cause" shall mean that any one or more of the following has occurred: (i) the participant shall have committed a felony; (ii) the participant shall have breached in any material respect any non-competition provisions of any written agreement between the participant and the Company or any of its affiliates; (iii) the participant shall have openly disregarded his responsibilities to the Company and/or its affiliates and shall have refused to devote substantial time and energy to the business and affairs of the Company and/or its affiliates (other than due to permanent disability (within the meaning of Section 22(e)(3) of the Code) or temporary disability which, in the reasonable judgment of the Board, causes the participant to be incapable of devoting such time and energy), and has failed to remedy any such action within thirty (30) days of notice to such participant by the Board of such action. No option shall be exercised or surrendered in exchange for a cash payment after the Expiration Date. 8. EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor the grant of awards shall confer upon any participant any right to continue as an employee of, or consultant or adviser to, the Company or any subsidiary or affect in any way the right of the Company or a subsidiary to terminate the participant's relationship at any time. Except as specifically provided by the Board in any particular case, the loss of future profit in awards granted under this Plan shall not constitute an element of damages in the event of termination of the relationship of a participant, even if the termination of the relationship is in violation of an obligation of the Company to the participant by contract or otherwise. 9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION. Neither adoption of the Plan nor the grant of awards to a participant shall affect the Company's right to make awards to such participant that are not subject to the Plan, to issue to -8- such participant Stock as a bonus or otherwise or to adopt other plans or arrangements under which Stock may be issued. The Board may at any time discontinue granting awards under the Plan. With the consent of the participant, the Board may at any time cancel an existing award in whole or in part and grant another award for such number of shares as the Board specifies. The Board may at any time or times amend the Plan or any outstanding award for the purpose of satisfying the requirements of section 422 of the Code or any changes in applicable laws or regulations or for any other purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of awards; PROVIDED, that except to the extent expressly required by the Plan, no such amendment shall adversely affect the rights of any participant (without his or her consent) under any award previously granted, nor shall such amendment, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify for the award of incentive stock options under Section 422 of the Code. -9- EX-21 19 a2034240zex-21.txt EXHIBIT 21 Exhibit 21 SUBSIDIARIES OF U.S. CAN CORPORATION
NAME OF COMPANY JURISDICTION OF INCORPORATION TRADE NAME - --------------- ----------------------------- ---------- United States Can Company (1) State of Delaware, U.S.A. U.S. Can USC May Verpackungen Holding Inc. (2) State of Delaware, U.S.A. n/a U.S.C. Europe N.V. (3) Netherland Antilles n/a U.S.C. Europe Netherlands B.V. (4) Netherlands n/a May Verpackungen GmbH & Co. KG (5) Germany n/a
- ------------- (1) U.S. Can Corporation owns 100% of the shares of United States Can Company (2) United States Can Company owns 100% of the shares of USC May Verpackungen Holding Inc. (3) United States Can Company owns 100% of the shares of U.S.C. Europe B.V. (4) U.S.C. Europe N.V. owns 100% of the shares of U.S.C. Europe Netherlands B.V. U.S.C. Europe Netherlands B.V. has nine foreign subsidiaries engaged in metal can manufacturing in Europe, and also owns 36.5% of Formametal S.A., an Argentine metal can manufacturer. (5) USC May Verpackungen Holding Inc. owns 100% of the shares of May Verpackungen GmbH & Co. KG. May Verpackungen GmbH & Co. KG has four foreign subsidiaries engaged in metal can manufacturing in Europe. SUBSIDIARIES OF UNITED STATES CAN COMPANY
NAME OF COMPANY JURISDICTION OF INCORPORATION TRADE NAME - --------------- ----------------------------- ---------- USC May Verpackungen Holding Inc. State of Delaware, U.S.A. n/a U.S.C. Europe N.V. Netherland Antilles n/a U.S.C. Europe Netherlands B.V. (a) Netherlands n/a May Verpackungen GmbH & Co. KG (b) Germany n/a
- ------------- (a) See footnote (4) above. (b) See footnote (5) above. SUBSIDIARIES OF USC MAY VERPACKUNGEN HOLDING INC.
NAME OF COMPANY JURISDICTION OF INCORPORATION TRADE NAME - --------------- ----------------------------- ---------- May Verpackungen GmbH & Co. KG (i) Germany n/a
- -------------- (i) See footnote (5) above. EX-23.1 20 a2034240zex-23_1.txt EXHIBIT 23.1 Exhibit 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the use of our report dated February 2, 2000, except with respect to the matters discussed in Notes 13 and 14, as to which the date is October 4, 2000, included in this registration statement and to all references to our Firm included in this registration statement. Arthur Andersen LLP Chicago, Illinois January 4, 2001 EX-25 21 a2034240zex-25.txt EXHIBIT 25 Exhibit 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __ ------------------------ BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER) A NATIONAL BANKING ASSOCIATION 31-0838515 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 100 EAST BROAD STREET, COLUMBUS, OHIO 43271-0181 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION 1 BANK ONE PLAZA, SUITE IL1-0126 CHICAGO, ILLINOIS 60670-0126 ATTN: SANDRA L. CARUBA, VICE PRESIDENT, (312) 336-9436 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ------------------------ UNITED STATES CAN COMPANY (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1145011 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) U.S. CAN CORPORATION (EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER) DELAWARE 06-1094196 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) USC MAY VERPACKUNGEN HOLDING INC. (EXACT NAME OF GUARANTOR AS SPECIFIED IN ITS CHARTER) DELAWARE 36-4335392 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 900 COMMERCE DRIVE OAK BROOK, ILLINOIS 60523 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) DEBT SECURITIES (TITLE OF INDENTURE SECURITIES) ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of Currency, Washington, D.C.; Federal Deposit Insurance Corporation, Washington, D.C.; The Board of Governors of the Federal Reserve System, Washington D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. No such affiliation exists with the trustee. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificate of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bank One Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 28th day of December, 2000. BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, TRUSTEE BY /s/SANDRA L. CARUBA __ SANDRA L. CARUBA VICE PRESIDENT *EXHIBITS 1, 2, 3, AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, FILED AS EXHIBIT 25 TO THE REGISTRATION STATEMENT ON FORM S-4 OF U S WEST COMMUNICATIONS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 2000 (REGISTRATION NO. 333-32124). EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT December 28, 2000 Securities and Exchange Commission Washington, D.C. 20549 Ladies and Gentlemen: In connection with the qualification of an indenture between United States Can Company and Bank One Trust Company, National Association, as Trustee, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION BY: __ /s/SANDRA L. CARUBA SANDRA L. CARUBA VICE PRESIDENT EXHIBIT 7 Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 09/30/00 State #: 391581 FFIEC 032 Address: 100 Broad Street Vendor ID: D Cert #: 21377 Page RC-1 City, State Zip: Columbus, OH 43271 Transit #: 04400003
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 2000 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
DOLLAR AMOUNTS IN THOUSANDS C300 RCON BIL MIL THOU ------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): RCON ---- a. Noninterest-bearing balances and currency and coin(1)................. 0081 107,674 1.a b. Interest-bearing balances(2).......................................... 0071 19,256 1.b 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A)............. 1754 0 2.a b. Available-for-sale securities (from Schedule RC-B, column D).......... 1773 4,003 2.b 3. Federal funds sold and securities purchased under agreements to resell... 1350 637,978 3. 4. Loans and lease financing receivables: RCON ---- a. Loans and leases, net of unearned income (from Schedule RC-C)......... 2122 220,388 4.a b. LESS: Allowance for loan and lease losses............................. 3123 1,201 4.b c. LESS: Allocated transfer risk reserve................................. 3128 0 4.c RCON d. Loans and leases, net of unearned income, allowance, and ---- reserve (item 4.a minus 4.b and 4.c).................................. 2125 219,187 4.d 5. Trading assets (from Schedule RD-D)...................................... 3545 0 5. 6. Premises and fixed assets (including capitalized leases)................. 2145 25,122 6. 7. Other real estate owned (from Schedule RC-M)............................. 2150 0 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)........................................... 2130 0 8. 9. Customers' liability to this bank on acceptances outstanding............. 2155 0 9. 10. Intangible assets (from Schedule RC-M)................................... 2143 14,726 10. 11. Other assets (from Schedule RC-F)........................................ 2160 335,321 11. 12. Total assets (sum of items 1 through 11)................................. 2170 1,363,267 12.
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 09/30/00 State #: 391581 FFIEC 032 Address: 100 Broad Street Vendor ID: D Cert #: 21377 Page RC-2 City, State Zip: Columbus, OH 43271 Transit #: 04400003
SCHEDULE RC--CONTINUED
DOLLAR AMOUNTS IN THOUSANDS RCON ---- LIABILITIES 13. Deposits: RCON a. In domestic offices (sum of totals of columns A and C ---- from Schedule RC-E, part 1).......................................... 2200 1,134,992 13.a (1) Noninterest-bearing(1)........................................... 6631 663,468 13.a1 (2) Interest-bearing................................................. 6636 471,524 13.a2 b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II)................................... (1) Noninterest bearing.............................................. (2) Interest-bearing................................................. 14. Federal funds purchased and securities sold under agreements to repurchase: RCFD 2800 0 14 15. a. Demand notes issued to the U.S. Treasury RCON 2840 0 15.a b. Trading Liabilities(from Sechedule RC-D)............................. RCFD 3548 0 15.b RCON 16. Other borrowed money: ---- a. With original maturity of one year or less........................... 2332 0 16.a b. With original maturity of more than one year......................... A547 0 16.b c. With original maturity of more than three years...................... A548 0 16.c 17. Not applicable 18. Bank's liability on acceptance executed and outstanding................. 2920 0 18. 19. Subordinated notes and debentures....................................... 3200 0 19. 20. Other liabilities (from Schedule RC-G).................................. 2930 88,146 20. 21. Total liabilities (sum of items 13 through 20).......................... 2948 1,223,138 21. 22. Not applicable EQUITY CAPITAL 23. Perpetual preferred stock and related surplus........................... 3838 0 23. 24. Common stock............................................................ 3230 800 24. 25. Surplus (exclude all surplus related to preferred stock)................ 3839 45,157 25. 26. a. Undivided profits and capital reserves............................... 3632 94,155 26.a b. Net unrealized holding gains (losses) on available-for-sale securities........................................................... 8434 17 26.b c. Accumulated net gains (losses) on cash flow hedges................... 4336 0 26.c 27. Cumulative foreign currency translation adjustments..................... 28. Total equity capital (sum of items 23 through 27)....................... 3210 140,129 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28)................................... 3300 1,363,267 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external Number auditors as of any date ------- Number during 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . RCFD 6724 . . N/A M.1. ------- 1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other with generally accepted auditing standards by a certified external auditors (may be required by public accounting firm which submits a report on the bank state chartering authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external conducted in accordance with generally accepted auditing auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by submits a report on the consolidated holding company external auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
- ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. -----END PRIVACY-ENHANCED MESSAGE-----