-----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, GzwI+HVNAi271VA7dNLu7mousXk8EPyi3LfBfU2CKsbmmNOb+BLEbdwJ5FtSrMjC NRswn7sXXDgELddPChL1jg== 0000950137-00-001457.txt : 20000331 0000950137-00-001457.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950137-00-001457 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13678 FILM NUMBER: 587002 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 10-K405 1 ANNUAL REPORT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 1-13678 U.S. CAN CORPORATION (Exact Name Of Registrant As Specified In Its Charter)
DELAWARE 06-1094196 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 900 COMMERCE DRIVE, OAK BROOK, ILLINOIS 60523 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 571-2500 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, par value $0.01 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the"Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [X] No [ ] As of February 29, 2000, the aggregate market value of the voting stock held by non-affiliates of U.S. Can Corporation was approximately $145,901,616. As of February 29, 2000, 13,448,471 shares of Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of U.S. Can Corporation's 2000 Proxy Statement are incorporated in Part III hereof by reference. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 U.S. CAN CORPORATION AND SUBSIDIARIES FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 6 Item 3. Legal Proceedings........................................... 8 Item 4. Submission of Matters to a Vote of Security Holders......... 8 PART II Item 5. Market for Common Equity and Related Stockholder Matters.... 8 Item 6. Selected Financial Data..................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 9 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................ 14 Item 8. Financial Statements and Supplementary Data................. 17 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.................................. 47 PART III Item 10. Directors and Executive Officers of the Registrant.......... 47 Item 11. Executive Compensation...................................... 47 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 47 Item 13. Certain Relationships and Related Transactions.............. 47 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................................... 48
2 3 U.S. CAN CORPORATION AND SUBSIDIARIES FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 PART I ITEM 1. BUSINESS GENERAL U.S. Can Corporation (a Delaware corporation), through its wholly owned subsidiary United States Can Company, is a leading manufacturer of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe, as well as food cans in Europe and plastic containers in the U.S.. References in this Report to the "Company" mean U.S. Can Corporation and its subsidiaries, collectively, unless the context otherwise requires; and references to "U.S. Can" mean solely United States Can Company and, unless the context otherwise requires, does not include U.S. Can's foreign subsidiaries (collectively referred to as "USC Europe"). The Company conducts its principal business operations in the general and food packaging sectors of the metal container industry. The Company's 1999 sales were generated by three major segments: (i) Aerosol Products: U.S. and International; (ii) Paint, Plastic & General Line Products; and (iii) Custom & Specialty Products. The references in this Report to market positions or market share are based on information derived from annual reports, trade publications and management estimates which the Company believes to be reliable. For financial information about segments and geographic areas, refer to Note (12) to the Consolidated Financial Statements. AEROSOL The Company is the leader in sales of aerosol cans in the United States, accounting for more than 50% of all steel aerosol containers used in 1999. USC Europe is the second largest manufacturer of steel aerosol cans in Europe. Aerosol containers represent the Company's largest segment, accounting for approximately 67.7% of the Company's total net sales in 1999, and are used to package personal care, household, automotive, paint and various other products. The Company offers a wide range of aerosol containers in order to meet its customers' requirements, including stylized necked-in and beaded cans and barrier-pack cans used for products such as shaving gel. PAINT, PLASTIC & GENERAL LINE Paint, Plastic & General Line, the Company's second largest segment, accounted for approximately 22.6% of the Company's total net sales in 1999. This segment produces round steel cans for paint and coatings, oblong steel cans for products such as turpentine and charcoal lighter, and plastic pails and other containers for industrial and consumer products. Management estimates that U.S. Can is second in market share in the United States, on a unit volume basis, in steel round and general line containers. CUSTOM & SPECIALTY PRODUCTS The Company has a significant presence in the custom and specialty products market. Its product lines include a wide array of functional and decorative containers and tins, fitments and stampings, and collectible items. Custom & Specialty products accounted for approximately 9.6% of the Company's total net sales in 1999. RECENT DEVELOPMENTS On March 22, 2000, a group led by Paul W. Jones, Chairman and Chief Executive Officer of the Company and Berkshire Partners, a private equity firm, made a proposal to the Company's board of directors calling for a recapitalization of the Company in which public shareholders of the Company would receive $21.00 in cash per outstanding share of common stock. The Company's board of directors has formed a special committee to evaluate the proposal. The special committee has retained legal advisors and will be retaining a financial advisor to assist it in its evaluation. Any transaction would be subject to approvals by the special committee and the board of directors, shareholder approval, confirmatory due diligence to be performed by the financial institutions that are expected to provide the financing for the proposed transaction, the negotiation and execution of mutually satisfactory definitive agreements and other customary conditions. There can be no 3 4 assurance that any agreements relating to the proposal will be reached or that any transaction will be consummated. CUSTOMERS As of December 31, 1999, in the United States, the Company had approximately 7,000 customers for its products. No single customer accounted for more than 10% of the Company's total net sales. To the extent possible, the Company enters into one-year or multi-year supply agreements with its major customers. 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 the Company's multi-year supply agreements, a provision permitting the Company to pass through price increases in certain raw material and other costs. Aerosol containers accounted for 67.7% of the Company's total net sales for the year ended December 31, 1999. A significant reduction in the number of aerosol containers used by the Company's customers could have a material adverse effect on the Company. In October 1996, U.S. Can received written confirmation of a major customer's intention to purchase certain annual unit volumes of aerosol cans from U.S. Can, including USC Europe operations. The Company's manufacturing facility in Merthyr Tydfil, in which the Company has invested approximately $30 million, was opened in large part due to the major customer's decision. The loss of this customer or a material reduction in the benefits to the Company expected under this arrangement, would have an adverse impact on the profitability of that facility and the Company's ability to recoup its investment in Merthyr Tydfil. The plant began to service other customers in 1998 and the Company has continued to expand the customer base of this facility. The Company's relationships with its customers are critical to its business. A significant portion of the Company's annual net sales is attributable to repeat customers. The loss of a significant number of such customers could have a material effect on the Company. U.S. Can and USC Europe market their products primarily through a sales force comprised of inside and outside sales representatives dedicated to each segment. RAW MATERIALS The Company's principal raw materials are tin-plated steel ("tinplate") and coatings and inks used to print its customers' designs and logos onto the tinplate. U.S. Can purchases tinplate principally from domestic steel manufacturers, with a smaller portion purchased from foreign suppliers and USC Europe purchases principally from European suppliers. Periodically, U.S. Can's major suppliers announce increases in prices for tinplate, and in October 1999, such suppliers announced an increase of 3% in the price of tinplate effective January 2000. Historically, U.S. Can has been able to negotiate lower price increases than those announced by its major suppliers. However, there can be no assurance that U.S. Can will be successful in negotiating lower price increases with respect to future price increases. Many of U.S. Can's and some of USC Europe's multi-year supply agreements with its customers permit them to pass through tinplate price increases and, in some cases, other raw material costs. However, U.S. Can and USC Europe have not always been able to immediately offset increases in tinplate prices with price increases on their products. The Company believes that adequate quantities of tinplate will continue to be available from steel manufacturers. The individual suppliers of steel accounting for more than 10% of the raw material used by U.S. Can in 1999 were USX's U.S. Steel group, Weirton Steel Corporation and LTV Corporation. The Company has not historically entered into written supply contracts with steel makers and believes that other can manufacturers follow the same practice. The Company's second largest raw material expense is for coatings and inks, which are used to print designs and logos onto the tinplate prior to assembly. Coatings and inks are purchased from regional suppliers. Based on the ready availability of these materials in the past and the number of manufacturers that continue to make these products, management does not anticipate any lack of availability of coatings and inks in the foreseeable future. The Company's plastic products are produced from two main types of resins, which is a petroleum or natural gas product. High-density polyethylene resin is used to make pails, drums and agricultural products. 100% post-industrial and consumer use, recycled polyethylene or polypropolene resin is used in the production 4 5 of the Plastite line of paint cans. The price of resin fluctuates significantly and management believes that it is standard industry practice, as well as the Company's contractual right/obligation in many of its supply agreements, to pass on increases and decreases in resin prices to the customer. SEASONALITY The Company's business as a whole has minor seasonal variations, whereby quarterly sales and earnings tend to be slightly stronger starting in early spring (second quarter) and extending through late summer (third quarter). Aerosol sales do not tend to fluctuate during the year, with only relatively minor spring and summer increases related to household products and insect repellents. Paint container sales tend to be stronger in spring and early summer due to the favorable weather conditions. Portions of the Custom and Specialty products line tend to vary seasonally, because of holiday sales late in the year. LABOR As of February 1, 2000, the Company employed approximately 3,000 salaried and hourly employees in the U.S.. Of the Company's total U.S. workforce, 1,887 employees, or 63%, were members of various labor unions, including the United Steelworkers of America ("USWA"), the International Association of Machinists ("IAM") and the Graphic Communications International Union ("GCIU"). Labor agreements covering 449 employees were successfully negotiated in 1999. In 2000, labor agreements covering 225 employees will need to be negotiated between the Company and the respective unions. USC Europe employed approximately 1,500 people at the end of 1999. In line with common European practices, all plants are unionized. The Company has followed a labor strategy designed to enhance its flexibility and productivity through constructive relations with its employees and collective bargaining units. Management believes the Company and its employees have benefited from dealing directly with local unions in order to tailor their contracts to local employee issues and plans to continue this practice in the future. This practice also has the effect of staggering renewal negotiations with the various bargaining units. Management believes the Company's relations with its employees and their collective bargaining units are generally good. COMPETITION The principal methods of competition in the rigid metal and plastic container industry are price, quality and service. Because shipping costs associated with the delivery of cans from outside major geographical markets would add a significant additional component of cost, the can industry has historically had relatively little competition from manufacturers outside these markets. Management believes that this condition is unlikely to change in the foreseeable future. Price competition exists in the industry and limits the Company's ability to increase prices. Management believes that the following factors benefit the Company from a competitive standpoint: (i) reputation for quality and service; (ii) strategically located manufacturing facilities (iii) a strong sales force; (iv) substantial capital investment in new technology such as barrier package designs, high-speed presses and assembly equipment, and state-of-the-art lithography equipment; (v) quality control systems, including statistical process control and electronic "vision" error detection; (vi) breadth of product line; (vi) in-house decorating and lithography capability; and (viii) a successful labor strategy. In steel aerosol containers, U.S. Can competes primarily with Crown, Cork & Seal ("Crown") and BWAY Corporation. USC Europe competes in the steel aerosol market with Crown, Impress Metal Packaging and a group of other smaller regional producers. Crown is larger and has greater financial resources than the Company. Because aerosol cans are used for personal care, household and other packaged products, and because they are pressurized, aerosol cans are more sensitive to quality, can decoration and other consumer-oriented features than some of the Company's other products. In paint, plastic and general line, the Company competes primarily with BWAY Corporation and one smaller, private firm. The Company's products also face competition from aluminum, glass and plastic containers. Custom and specialty products compete with a large number of container manufacturers; they do not compete across their entire product spectrum with any single company. Competition is based principally on price, quality and service, geographical proximity to customers and production capability, with varying degrees of intensity according to the specific product category. 5 6 The Company believes it has the ability to compete favorably in each aspect of its businesses as market conditions may require. 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, in a transaction accounted for using the purchase method. May, headquartered in Erftstadt, Germany, is a manufacturer of pet food and specialty food packaging, as well as aerosol cans. Historically, the Company has not had a significant presence in the food can market. The Company believes that strategic acquisition opportunities are important to its growth. The Company will continue to evaluate and selectively pursue acquisitions which adhere to U.S. Can's stated strategy of seeking rigid packaging companies that will complement and grow the Company's existing product base, be accretive in the first year with positive cash flow characteristics and create value for shareholders. If acquisitions are made, the Company would expect to finance them through cash and debt financing as appropriate under the conditions in effect at the time of the acquisition. Refer to the caption "Acquisitions" in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note (4) to the Consolidated Financial Statements for further discussion of these matters. RESTRUCTURING PROGRAMS During 1998 and 1997, the Company announced restructuring programs which included the adoption of a new lithography strategy, the divestiture of non-strategic businesses and additional plant closings to further consolidate operations. In connection with this strategy, the Company has sold the metal services and the metal closure businesses and the Orlando Machine Engineering Center, as well as, closed 8 facilities as of March 22, 2000. See Management's Discussion and Analysis of Financial Conditions and Results of Operations and Note (3) to the Consolidated Financial Statements for further details. ITEM 2. PROPERTIES The Company has 18 manufacturing facilities located in 9 states in the U.S., many of which are strategically positioned near principal customers and suppliers. Through USC Europe, it also has production locations in the five largest regional markets in Europe, including the United Kingdom, France, Spain, Italy and Germany. The following table sets forth certain information with respect to the Company's principal plants as of February 29, 2000. 6 7
LOCATION SIZE STATUS SEGMENT -------- ---- ------ ------- UNITED STATES Elgin, IL 481,346 sq. ft. Owned Aerosol Tallapoosa, GA 228,080 sq. ft. Owned Aerosol 21,400 sq. ft. Owned Aerosol Commerce, CA 215,860 sq. ft. Leased Paint, Plastic & General Line Glen Dale, WV 210,000 sq. ft. Owned(1) Custom & Specialty Burns Harbor, IN 190,000 sq. ft. Leased Aerosol Hubbard, OH 174,970 sq. ft. Owned Paint, Plastic & General Line Baltimore, MD 150,000 sq. ft. Leased Paint, Plastic & General Line Horsham, PA 132,000 sq. ft. Owned Aerosol Baltimore, MD 123,000 sq. ft. Owned Custom & Specialty Morrow, GA 110,160 sq. ft. Leased Paint, Plastic & General Line Weirton, WV 108,000 sq. ft. Leased Aerosol Danville, IL 100,000 sq. ft. Owned Aerosol Newnan, GA 95,000 sq. ft. Leased Paint, Plastic & General Line Dallas, TX 87,000 sq. ft. Owned Paint, Plastic & General Line Warren, OH 58,000 sq. ft. Leased(1) Custom & Specialty Alliance, OH 52,000 sq. ft. Leased Paint, Plastic & General Line Baltimore, MD 45,000 sq. ft. Leased Custom & Specialty New Castle, PA 22,750 sq. ft. Owned Custom & Specialty EUROPE Erftstadt, Germany 369,000 sq. ft. Leased Aerosol Merthyr Tydfil, UK 320,000 sq. ft. Leased(2) Aerosol Southall, UK 253,000 sq. ft. Owned Aerosol Laon, France 220,000 sq. ft. Owned(3) Aerosol Reus, Spain 182,250 sq. ft. Owned Aerosol Dageling, Germany 172,224 sq. ft. Owned Aerosol Itzenhoe, Germany 80,730 sq. ft. Owned Aerosol Sundern, Germany 77,500 sq. ft. Leased Aerosol Esbjerg, Denmark 66,209 sq. ft. Owned Aerosol Voghera, Italy 45,200 sq. ft. Leased Aerosol Schwedt, Germany 35,500 sq. ft. Leased Aerosol
- ------------------------- (1) The closure business (including the Glen Dale property and Warren leasehold) was sold on March 10, 2000. (2) The property at Merthyr Tydfil is subject to a 998-year lease with a pre-paid option to buy which becomes exercisable in January 2007. Up to that time, the landowner may require the Company to purchase the property for a payment of one Pound Sterling. Currently, the Company's facility at Merthyr Tydfil is subject to a pledge of the leasehold interests and personal property located thereon to secure amounts outstanding under a credit agreement entered into with General Electric Capital Corporation. (3) Subject to a mortgage in favor of Societe Generale. Management believes the Company's facilities are adequate for its present needs and that its properties are generally in good condition, well-maintained and suitable for their intended use. The Company continuously evaluates the composition of its various manufacturing facilities in light of current and expected market conditions and demand. Further consolidation of plant operations may be implemented in the future. 7 8 ITEM 3. LEGAL PROCEEDINGS 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 indemnified the owner of the property against this matter. 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 the source of the 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 contribution of its predecessors, to these sites was, in most cases, minimal. For further discussion on legal and environmental matters refer to Note (9) to the Consolidated Financial Statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 1999. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET PRICE AND DIVIDEND POLICY U.S. Can Corporation's common stock, par value $0.01 per share (the "Common Stock"), is listed on the New York Stock Exchange, trading under the symbol "USC." The table below sets forth the high and low sales price for the Common Stock for each quarter of 1999 and 1998, as reported in the consolidated transaction reporting system.
QUARTER HIGH LOW - ------- ---- --- 1999 - ------------------------------------------------------------ Fourth quarter.............................................. $22.500 $17.125 Third quarter............................................... 25.625 20.375 Second quarter.............................................. 22.813 13.750 First quarter............................................... 17.813 14.000 1998 - ------------------------------------------------------------ Fourth quarter.............................................. $18.000 $13.250 Third quarter............................................... 17.000 12.813 Second quarter.............................................. 18.250 13.875 First quarter............................................... 18.250 14.875
As of February 29, 2000, there were 502 record holders of the Common Stock. No cash dividends were declared on the Common Stock by U.S. Can Corporation during 1999 or 1998, and U.S. Can Corporation has no intention to pay cash dividends in the foreseeable future. There are restrictions on the ability of U.S. Can to transfer funds to U.S. Can Corporation in the form of cash dividends, loans or advances, and on U.S. Can Corporation's ability to declare cash dividends, under the Company's credit agreement and indenture, respectively. See Note (5) to the Consolidated Financial Statements for additional details on these restrictions. SALES OF UNREGISTERED SECURITIES In April 1999, 3,582 shares of restricted Common Stock were awarded to outside directors of the Company, in payment of their annual retainer. Each of these awards was exempt pursuant to Section 4(2) of the Securities Act of 1933, as amended. 8 9 ITEM 6. SELECTED FINANCIAL DATA U.S. CAN CORPORATION AND SUBSIDIARIES (000'S OMITTED, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- OPERATING DATA: Net sales................................... $714,115 $710,246 $755,675 $660,623 $562,728 Special charges (a)......................... -- 35,869 62,980 -- 8,000 Operating income (loss)..................... 68,703 23,570 (6,107) 60,515 37,097 Income (loss) from continuing operations before discontinued operations and extraordinary item........................ 22,452 (7,525) (29,906) 16,555 4,949 Discontinued operations, net of income taxes ( a ) Net income (loss) from discontinued operations................................ -- -- 1,078 446 (1,010) Net loss on sale of business.............. -- (8,528) (3,204) -- -- Extraordinary item - loss from early extinguishment of debt, net of income taxes (b)................................. (1,296) -- -- (5,250) -- Net income (loss)........................... 21,156 (16,053) (32,032) 11,751 3,939 Diluted income (loss) from continuing operations per share...................... $ 1.65 $ (0.57) $ (2.29) $ 1.26 $ 0.39 Diluted net income (loss) per share......... $ 1.56 $ (1.21) $ (2.45) $ 0.90 $ 0.31 Weighted average shares outstanding......... 13,593 13,264 13,048 13,090 12,839 BALANCE SHEET DATA: Total assets................................ $663,570 $555,571 $633,704 $643,616 $455,436 Total debt (including current maturities)... 359,317 316,673 376,141 375,810 244,576
- --------------- (a) See Note 3 of the "Notes to Consolidated Financial Statements." (b) See Note 5 of the "Notes to Consolidated Financial Statements." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion summarizes the significant factors affecting the consolidated operating results and financial condition of the Company and subsidiaries for the three years ended December 31, 1999. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements. On December 30, 1999, the Company acquired all of the partnership interests of May, a German limited liability company, in a transaction accounted for using the purchase method. May, headquartered in Erftstadt, Germany, is a manufacturer of pet food and specialty food packaging, as well as aerosol cans. Historically, the Company has not had a significant presence in the food can market. Refer to the caption "Acquisitions" in this section and Note (4) to the Consolidated Financial Statements for further discussion of these matters. RESULTS OF YEAR ENDED DECEMBER 31, 1999, AS 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 1998. Along business segment lines, Aerosol net sales in 1999 increased 3.8% over 1998, primarily due to increased efficiencies and production at the Company's 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 & 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. 9 10 GROSS INCOME Consolidated gross income of $102.5 million for 1999 was up $10.4 million, an 11.3% increase versus 1998. Gross margin of 14.4% 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 & Specialty gross income decreased 18.6% 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. Operating margins of 9.6% in 1999 compare favorably to the 8.4% reported in 1998, before the special charge. Improvements versus 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 down 13.4%, or $4.5 million, versus 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% subordinated notes. Average borrowings under the Credit Agreement in 1999 (prior to the May acquisition) were $12.3 million in letters of credit and $0.1 million in loans. In 1999, there were 10 months in which no borrowings were made under the Credit Agreement. See caption "Liquidity and Capital Resources" in Management's Discussion and Analysis of Financial Condition and Note (5) to the Consolidated Financial Statements for further discussion on the Credit Agreement. EXTRAORDINARY ITEM In 1999, the Company 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 its 10 1/8% subordinated notes and the write-off of related deferred financing costs. NET INCOME 1999 net income of $21.2 million, or $1.56 diluted earnings per share (including a $0.09 loss per share related to the early redemption bond premium discussed above), compares favorably to the 1998 net loss of $(16.1) million, or $(1.21) diluted earnings per share (including a loss of $(1.62) per diluted share associated with the special charge and a loss of $(0.64) per diluted share for discontinued operations). Excluding special charges and discontinued operations in 1998, income improvements in 1999 are a reflection of higher margins, productivity improvements and lower interest expense. RESULTS OF YEAR ENDED DECEMBER 31, 1998, AS 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 1997. This decrease reflected the sale of the Company's 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 prior year as the Wales facility achieved qualification with its primary customer in 1998. Paint, Plastic & General Line net sales of $164.1 million were down 12.0% from 1997 due to 10 11 the sale of the Metal Pail business in November 1997. Custom & 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% to a level of $92.1 million for the year ended December 31, 1998 as compared to 1997. 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 & General Line and the Custom & 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 & General Line gross income improved 26.1% to $15.6 million. Custom & 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. Excluding special charges recorded in both years, 1998 operating income of $59.4 million improved 4.4% versus a level of $56.9 million in 1997. Operating margins, before special charges, of 8.4% in 1998 compared favorably to the 7.5% reported in 1997. Improvements versus 1997 reflected stronger gross margins coupled with the benefits realized late in 1998 from the restructuring programs initiated in 1997. INTEREST EXPENSE Interest expense for the full-year 1998 of $33.2 million declined 10.0% versus 1997. The Company's focus on cash flow, working capital improvements and controlled capital programs resulted in a year-to-year debt reduction of $59.5 million. NET INCOME (LOSS) Net loss from continuing operations in 1998 was ($7.5) million, or ($0.57) per share, versus a net loss of ($29.9) million, or ($2.29) per share in 1997. Special charges recorded in 1998 had a negative after-tax effect of ($21.4) million, or ($1.62) per share. Special charges recorded in 1997 had an after-tax effect of ($37.8) million, or ($2.90) per share. Net loss for 1998 was ($16.1) million, or ($1.21) per share, (including ($8.5) million, or ($0.64) per share loss on the sale of the discontinued Metal Service business) versus 1997 net loss of ($32.0) million, or ($2.45) per share. 1997 net loss included a ($2.1) million, or ($0.16) per share loss on the discontinued Metal Service business. SPECIAL CHARGES 1998 In the third quarter of 1998, the Company 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. Closing and realigning selected lithography facilities servicing the Company's core business were also included in the provision as part of the Company's 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 11 12 related capital investment in new technology are expected to generate after-tax savings of $10 million annually at maturity. 1997 In the third quarter of 1997, the Company 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, the Company established a disposition provision for the anticipated loss on the closure of its Metal Pail operation in North Brunswick, New Jersey. Also in the fourth quarter of 1997, the Company, at the direction of its 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 the Company had exited or was in the process of exiting. The Company continuously evaluates the composition of its various manufacturing facilities in light of current and expected market conditions and demands. In connection with the May acquisition, the Company is reviewing its European operations for potential consolidation opportunities. See Note (3) to the Consolidated Financial Statements for further information on the 1998 and 1997 special charges. LIQUITY AND CAPITAL RESOURCES The Company's principal liquidity needs are for operations, capital expenditures, acquisitions and debt amortization (see Note (5) to the Consolidated Financial Statements). Excluding the May acquisition, the Company met its liquidity needs in 1999 through internally generated cash flow. 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. The Company's total capital expenditures of $31.0 million in 1999 included the installation of two new state-of-the-art lithography presses. The Company expects to spend approximately $150 to $200 million on capital expenditures during the five years commencing 1999, in roughly equal amounts of $30.0 million to $40.0 million a year, but is only contractually committed to spend an insignificant amount. The Company expects to fund future capital expenditures from operating cash flows. Capital investments by the Company have historically yielded reduced operating costs and improved the Company's profit margins, and management believes that the strategic deployment of capital will enable the Company to improve its overall profitability by leveraging the economies of scale inherent in the manufacturing of containers. In 1999, the Company's excess cash provided by operations over its cash required for capital expenditures and other investing activities (before acquisitions) was $34.6 million. $27.7 million of the excess was used to redeem a portion of the 10 1/8% subordinated notes. As of December 31, 1999, the Company had redeemed a total principal amount of $40 million of the subordinated notes -- the maximum allowed under its Amended and Restated Credit Agreement (the "Credit Agreement"). The Company is a party to the Credit Agreement, which provides for borrowings of up to $120 million for working capital requirements, letters of credit and permitted acquisitions. $70 million of this facility (the "364-day Facility") expires on December 26, 2000 and the remainder expires in 2002. Borrowings under the Credit Agreement bear interest at market rates plus a margin. 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 due to reduced borrowing needs. In December 1999, the Company added a $70 million, 364-day facility in connection with the May acquisition. As of December 31, 1999, the Company had borrowed $56.1 million under this facility, $11.4 million is outstanding under the letter of credit portion of the facility and $52.5 million of unused credit remains available under the facility. The Company is in compliance with all of the financial and other covenants required under the Credit Agreement. The Company expects to refinance any borrowings outstanding under the 364-day facility prior to its expiration. See Note (5) to the Consolidated Financial Statements for a description of the Credit Agreement. Management believes that cash flow from operations, amounts available under the Credit Agreement and proceeds from sales of assets should provide sufficient funds for the Company's short-term and long-term capital expenditures, debt amortization requirements and operating cash needs. 12 13 INTEREST RATES/FOREIGN CURRENCY As the Company has financed the May acquisition with borrowings under the Credit Agreement, future fluctuations in interest rates may impact results from operations. The Company has engaged in transactions that carry some degree of foreign currency risk. As such, the Company has entered into a series of forward hedge contracts to mitigate the foreign currency risks associated with the financing of the Merthyr Tydfil facility, the purchase of lithography equipment and the repayment of short-term debt assumed in connection with the May acquisition. A series of British Pound contracts not exceeding a notional amount of $23.1 million carries a term of not more than five years. The remaining contracts are German Deutsche Mark contracts not exceeding $14.3 million, which expire in February 2000. The Company also bears foreign exchange risk because financing is currently obtained in U. S. Dollars, but it receives a portion of its revenues and incurs a portion of its expenses in the various currencies of USC Europe's operations. INFLATION Tin-plated steel represents the primary component of the Company's raw materials requirement. Historically, the Company has not always been able to immediately offset increases in tinplate prices with price increases on the Company's products. However, in most years, a combination of factors has permitted the Company to maintain its profitability notwithstanding these conditions. The Company's capital spending programs and manufacturing process upgrades have increased operating efficiencies and thereby mitigated the impact of inflation on the Company's cost structure. ACQUISITIONS The Company believes that strategic acquisition opportunities are important to its growth. In December 1999, U.S. Can acquired all of the partnership interests of May for an aggregate amount of $63.9 million. The acquisition was financed using borrowings made by U.S. Can under the Credit Agreement. The Company will continue to evaluate and selectively pursue acquisitions which adhere to U.S. Can's stated strategy of seeking rigid packaging companies that will complement and grow the Company's existing product base, be accretive in the first year with positive cash flow characteristics and create value for shareholders. If acquisitions are made, the Company would expect to finance them through cash and debt financing as appropriate under the conditions in effect at the time of the acquisition. YEAR 2000 The Company believes material implications and risks related to Year 2000 have expired and therefore does not anticipate experiencing any additional effects related to this issue. The products produced and sold by the Company remain unaffected since they contain no microprocessors or similar electronic components. The Company did not experience a significant increase in customer demand for products as a result of Year 2000, nor did it experience any supply problems with its key vendors. As part of its normal course of business, the Company has evaluated and invested in its internal computer systems as a means to streamline processes and better manage its operations. Many system conversions were already in process yielding Year 2000 compliance as a side benefit. As such, it is difficult to separate the cost of Year 2000 compliance from ongoing information system costs already recorded in the financial results of the Company as part of its normal operations. However, the Company estimates that Year 2000 compliance costs have been less than $1 million in total. All such costs were funded through cash generated from operations. 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. 13 14 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risks relating to the Company's operations result primarily from changes in interest rates and foreign currency fluctuations. In an effort to limit foreign exchange risks related to specific transactions, 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 Company also has borrowings outstanding which bear interest at both fixed and variable rates. The Company's Credit Agreement permits the Company to borrow up to $120 million provided certain conditions and restrictive financial covenants are met. 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. The balance of the Company's borrowings, including its Senior Subordinated 10 1/8% Notes (the "10 1/8% Notes") bear interest at fixed rates. Upon a change of control of the Corporation, as defined, the Noteholders could require that the Corporation repurchase all or some of the 10 1/8% Notes at a 101% premium. 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 as of December 31, 1999. 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. The table below presents principal cash flows and related interest rates by year of maturity. Variable interest rates represent the weighted average interest rate at January 4, 2000:
2000 2001 2002 2003 2004 THEREAFTER ------- ------ ------- ------ ------- ---------- Fixed rate................. $19,275 $2,726 $ 2,217 $3,615 $16,170 $248,345 Average interest rate...... 9.54% 9.68% 9.71% 9.72% 9.77% 9.86% Variable rate.............. $17,502 -- $38,598 -- -- -- Average interest rate...... 6.90% -- 6.90% -- -- --
The Company does not utilize derivative financial instruments for trading or other speculative purposes. INCLUSION OF FORWARD-LOOKING INFORMATION Certain statements in this report constitute "forward-looking statements" within the meaning of the federal securities laws. 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 any future results, performance or achievements expressed or implied in this report. By way of example and not limitation and in no particular order, known risks and uncertainties include 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 market conditions or product demand; loss of important customers; 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 report should not be regarded as a representation by the Company that any future results, performance or achievements will be attained. 14 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE ---- Report of Independent Public Accountants.................... 16 U.S. Can Corporation and Subsidiaries Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997....................................... 17 U.S. Can Corporation and Subsidiaries Consolidated Balance Sheets as of December 31, 1999 and 1998................... 18 U.S. Can Corporation and Subsidiaries Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997.......................... 19 U.S. Can Corporation and Subsidiaries Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997....................................... 20 U.S. Can Corporation and Subsidiaries Notes to Consolidated Financial Statements...................................... 21
15 16 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, shareholders' 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 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 matter discussed in Note (13), as to which the date is March 22, 2000 16 17 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (000'S OMITTED, EXCEPT PER SHARE DATA)
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) ======== ======== ======== PER SHARE DATA: Basic: Income (loss) from continuing operations before discontinued operations and extraordinary item.... $ 1.67 $ (0.57) $ (2.29) Discontinued operations.............................. -- (0.64) (0.16) Extraordinary item................................... (0.10) -- -- -------- -------- -------- Net income (loss)................................. $ 1.57 $ (1.21) $ (2.45) ======== ======== ======== Weighted average shares outstanding (000's)....... 13,442 13,264 13,048 Diluted: Income (loss) from continuing operations before discontinued operations and extraordinary item.... $ 1.65 $ (0.57) $ (2.29) Discontinued operations.............................. -- (0.64) (0.16) Extraordinary item................................... (0.09) -- -- -------- -------- -------- Net income (loss)................................. $ 1.56 $ (1.21) $ (2.45) ======== ======== ======== Weighted average shares and equivalent shares outstanding (000's)............................. 13,593 13,264 13,048
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 17 18 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (000'S OMITTED)
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. 18 19 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 STOCK CAPITAL STOCK STOCK ADJUSTMENT ADJUSTMENT DEFICIT ------ -------- ---------- -------- ----------- ---------- ----------- BALANCE AT DECEMBER 31, 1996....................... 1$30.. $105,582 $ (2,581) $ (256) $ 1,622 $ (2) $ (7,710) Net loss..................... -- -- -- -- -- -- (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) -- Cumulative translation adjustment................. -- -- -- -- (3,815) -- -- Comprehensive loss........... -- -- -- -- -- -- -- ---- -------- -------- -------- -------- ------ --------- BALANCE AT DECEMBER 31, 1997....................... 131 108,003 (2,558) (714) (2,193) (614) (39,742) Net loss..................... -- -- -- -- -- -- (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 -- Cumulative translation adjustment................. -- -- -- -- 750 -- -- Comprehensive loss........... -- -- -- -- -- -- -- ---- -------- -------- -------- -------- ------ --------- BALANCE AT DECEMBER 31, 1998....................... 133 109,839 (829) (1,728) (1,443) -- (55,795) Net income................... -- -- -- -- -- -- 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) -- -- Comprehensive income......... -- -- -- -- -- -- -- ---- -------- -------- -------- -------- ------ --------- BALANCE AT DECEMBER 31, 1999....................... $135 $112,840 $ (629) $ (1,380) $ (7,771) $ -- $ (34,639) ==== ======== ======== ======== ======== ====== ========= COMPREHENSIVE INCOME ------------- BALANCE AT DECEMBER 31, 1996....................... $ -- Net loss..................... (32,032) Issuance of stock under employee benefit plans..... -- Purchase of treasury stock... -- Exercise of stock options.... -- Issuance of restricted stock...................... -- Amortization of unearned restricted stock........... -- Equity adjustment to reflect minimum pension liability.................. (612) Cumulative translation adjustment................. (3,815) --------- Comprehensive loss........... $ (36,459) ========= BALANCE AT DECEMBER 31, 1997....................... -- Net loss..................... (16,053) Issuance of stock under employee benefit plans..... -- Purchase of treasury stock... Exercise of stock options.... -- Issuance of restricted stock...................... -- Amortization of unearned restricted stock........... -- Equity adjustment to reflect minimum pension liability.................. 614 Cumulative translation adjustment................. 750 --------- Comprehensive loss........... $ (14,689) ========= BALANCE AT DECEMBER 31, 1998....................... -- Net income................... 21,156 Issuance of stock under employee benefit plans..... -- Purchase of treasury stock... Exercise of stock options.... -- Issuance of restricted stock...................... -- Amortization of unearned restricted stock........... -- Cumulative translation adjustment................. (6,328) --------- Comprehensive income......... $ 14,828 ========= BALANCE AT DECEMBER 31, 1999.......................
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements 19 20 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 42,434 Special charges....................................... -- 35,869 62,980 Loss on sale of business.............................. -- 8,528 12,413 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 12,059 Inventories........................................... 4,211 15,324 3,785 Accounts payable...................................... 14,805 (667) (5,193) Accrued payroll, benefits, insurance and special charge cash costs................................... (10,641) (8,228) (20,172) Other, net............................................ 3,102 (8,608) 5,576 --------- --------- --------- Net cash provided by operating activities........... 62,452 64,963 64,062 --------- --------- --------- 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) 1,931 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) (22,352) 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) 1,913 --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... (670) 402 (2,370) --------- --------- --------- 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. 20 21 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. 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 ======== =======
(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. 21 22 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. (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. 22 23 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 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). As of December 31, 1999, the actions outlined in the 1998 and 1997 restructuring reserves have been or are scheduled to be completed according to the Company's original plan. 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. 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 23 24 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. (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, except per share data):
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) Diluted Per Share Data: Income Before Discontinued Operations and Extraordinary Item.................................................... $ 1.61 $ (0.69) Net Income................................................ $ 1.52 $ (1.33)
24 25 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 guaranty 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 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 25 26 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. 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 Noteholders 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. 26 27 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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, 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) ======= ======= ========
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. 27 28 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. 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 ======= =======
28 29 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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) ======== ========
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. 29 30 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. 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 ======= =======
30 31 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 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, 31 32 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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. 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. 32 33 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 =======
(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. 33 34 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 ========= ======
EXERCISABLE OPTIONS OPTIONS OUTSTANDING AT DECEMBER 31, AT DECEMBER 31, 1999 1999 ---------------------------------- -------------------- REMAINING WTD. WTD. CONTRACTUAL AVG. 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 ========= ======= ======
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) and diluted earnings (loss) per share would have been $20.1 million and $1.48, respectively, for 1999, ($19.5) million and ($1.47), respectively, for 1998 and ($32.4) million and ($2.49), respectively, for 1997. 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 34 35 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) 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 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
35 36 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (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 March 22, 2000, a group led by Paul W. Jones, Chairman and Chief Executive Officer of the Company and Berkshire Partners, a private equity firm, made a proposal to the Company's board of directors calling for a recapitalization of the Company in which public shareholders of the Company would receive 36 37 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) $21.00 in cash per outstanding share of common stock. The Company's board of directors has formed a special committee to evaluate the proposal. The special committee has retained legal advisors and will be retaining a financial advisor to assist in the evaluation. Any transaction would be subject to approvals by the special committee and the board of directors, shareholder approval, confirmatory due diligence to be performed by the financial institutions that are expected to provide the financing for the proposed transaction, the negotiation and execution of mutually satisfactory definitive agreements and other customary conditions. There can be no assurance that any agreements relating to the proposal will be reached or that any transaction will be consummated. (14) SUBSIDIARY GUARANTOR INFORMATION The 10 1/8% Notes are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and several basis by each of the Corporation's Subsidiary Guarantors. As of and through December 31, 1999, U.S. Can and USC May Verpackungen ("May", acquired on December 30, 1999 and accounted for as a purchase for financial reporting purposes; therefore, 1999 results of operations do not include operations related to the acquired business), both wholly owned by the corporation, were the only Subsidiary Guarantors. The Corporation had no assets or operations separate from its investment in U.S. Can. Separate financial statements of U.S. Can or USC May Verpackungen are not presented because management of the Company has determined that they are not material to investors. The following condensed consolidating financial data illustrates the composition of the Corporation (the "Parent"), consolidated U.S. Can/USC May Verpackungen ("United States Can Company" or the "Subsidiary Guarantors"), and the European Subsidiaries (the "Non-Guarantor Subsidiaries"), as of and for the years ended December 31, 1999, 1998, and 1997. Investments in subsidiaries are accounted for by the Parent and the Subsidiary Guarantors 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. 37 38 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) 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.................. -- 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 SUBSIDIARY...................... 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 (LOSS)................. $21,156 $ 21,156 $ 4,103 $(25,259) $ 21,156 ======= ======== ======== ======== ========
38 39 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) 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) ======== =========== ============== ======= ========
39 40 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) 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 LOSS FROM DISCONTINUED OPERATIONS...................... -- 1,078 -- -- 1,078 NET INCOME FROM DISCONTINUATION OF BUSINESS........................ -- (3,204) -- -- (3,204) -------- -------- -------------- ------- -------- NET INCOME (LOSS)................. $(32,032) $(32,032) $ 1,312 $30,720 $(32,032) ======== ======== ============== ======= ========
40 41 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CONSOLIDATED (PARENT) GUARANTORS) SUBSIDIARIES) ELIMINATIONS CORPORATION ----------- ------------- -------------- ------------ ------------ CURRENT ASSETS: Cash and cash equivalents....... $ -- $ 2,101 $ 13,596 $ -- $ 15,697 Accounts receivable............. -- 66,509 25,355 -- 91,864 Inventories..................... -- 98,040 17,939 -- 115,979 Prepaid expenses and other assets....................... 31,133 4,658 -- 35,791 -------- -------- -------------- --------- -------- Total current assets.... -- 197,783 61,548 -- 259,331 NET PROPERTY, PLANT AND EQUIPMENT....................... -- 266,636 65,868 -- 332,504 INTANGIBLE ASSETS................. -- 50,478 -- -- 50,478 OTHER ASSETS...................... 236,629 14,799 6,458 (236,629) 21,257 INVESTMENT IN SUBSIDIARIES........ 46,827 (3,565) -- (43,262) -- -------- -------- -------------- --------- -------- Total assets............ $283,456 $526,131 $ 133,874 $(279,891) $663,570 ======== ======== ============== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt......................... $ -- $ 36,585 $ 2,239 $ -- $ 38,824 Accounts payable................ -- 83,374 20,815 -- 104,189 Other current liabilities....... -- 68,733 9,851 -- 78,584 -------- -------- -------------- --------- -------- Total current liabilities........... -- 188,692 32,905 -- 221,597 SENIOR DEBT....................... -- 61,088 22,776 -- 83,864 SUBORDINATED DEBT................. 236,629 236,629 -- (236,629) 236,629 OTHER LONG-TERM LIABILITIES....... -- 48,802 4,122 -- 52,924 INTERCOMPANY ADVANCES............. (21,729) (55,907) 77,636 -- -- STOCKHOLDERS' EQUITY.............. 68,556 46,827 (3,565) (43,262) 68,556 -------- -------- -------------- --------- -------- Total liabilities and stockholders' equity................ $283,456 $526,131 $ 133,874 $(279,891) $663,570 ======== ======== ============== ========= ========
41 42 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ 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...................... 270,587 6,847 6,886 (264,325) 19,995 INVESTMENT IN SUBSIDIARIES........ 40,383 53,144 -- (93,527) -- -------- -------- -------- ------------ -------- Total assets............ $310,970 $471,286 $131,167 $ (357,852) $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 -- (264,325) 264,325 OTHER LONG-TERM LIABILITIES....... -- 51,656 4,262 -- 55,918 INTERCOMPANY ADVANCES............. (3,532) (12,958) 16,490 -- -- STOCKHOLDERS' EQUITY.............. 50,177 40,383 53,144 (93,527) 50,177 -------- -------- -------- ------------ -------- Total liabilities and stockholders' equity................ $310,970 $471,286 $131,167 $ (357,852) $555,571 ======== ======== ======== ============ ========
42 43 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES........ $ -- $51,871 $10,581 $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........................ -- (83,808) (7,673) (91,481) -------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances........... 25,378 (32,070) 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................. -- 24,630 2,694 27,324 -------- ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..... -- -- (670) (670) -------- ------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... -- (7,307) 4,932 (2,375) CASH AND CASH EQUIVALENTS, beginning of year...................................... -- 9,408 8,664 18,072 -------- ------- ------- ------- CASH AND CASH EQUIVALENTS, end of period.... $ -- $ 2,101 $13,596 $15,697 ======== ======= ======= =======
43 44 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) 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 (10,747) -- -- Issuance of common stock and exercise of stock options.......................... 1,658 (3,000) 3,000 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 ======== ======= ============== =======
44 45 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
UNITED STATES U.S. CAN CAN COMPANY USC EUROPE U.S. CAN CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION (PARENT) GUARANTORS) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES......... $ -- $65,035 $ (973) $64,062 -------- ------- ------- ------- 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 4,629 (5,656) -- Issuance of common stock and exercise of stock options........................... 152 -- -- 152 Net borrowings under the revolving line of credit and changes in cash overdrafts... -- 1,931 -- 1,931 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............... -- (21,628) (724) (22,352) 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............................ -- (17,728) 19,641 1,913 -------- ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH...... -- -- (2,370) (2,370) -------- ------- ------- ------- 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 ======== ======= ======= =======
45 46 (15) U.S. CAN CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL DATA (UNAUDITED) (000'S OMITTED, EXCEPT SHARE DATA) 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 ======== ======== ======== ======== ======== ======== ======== ======== DILUTED EARNINGS (LOSS) PER SHARE.... $ 0.41 $ 0.23 $ 0.47 $ 0.28 $ 0.40 $ (1.94) $ 0.27 $ 0.22 ======== ======== ======== ======== ======== ======== ======== ======== Weighted average shares and equivalent shares outstanding (000's)............. 13,412 13,257 13,529 13,401 13,739 13,325 13,732 13,443
- ------------------------- (a) See Note 3 of the "Notes to Consolidated Financial Statements." 46 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to "Election of Directors," "Executive Officers and Directors" and "Section 16 (a) Beneficial Ownership Reporting Compliance" in the Corporation's 2000 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to "Executive Officers and Directors -- Compensation of Directors" and "Executive Compensation" in the Corporation's 2000 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to "Principal Stockholders" in the Corporation's 2000 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to "Principal Stockholders -- Recent Developments" in the Corporation's 2000 Proxy Statement. 47 48 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements commence on p.17. (2) Financial Statement Schedules All schedules are omitted as they are inapplicable or not required, or the required information is included in the financial statements or in the notes thereto. (3) Exhibits: A list of Exhibits is included in the Exhibit Index, which appears following the signature pages and incorporated by reference herein. The Company agrees that, upon request, it will furnish a copy of any instrument with respect to long-term debt less than or equal to 10 percent of its total consolidated assets. (b) No reports on Form 8-K were filed by the Corporation during the fourth quarter of 1999. 48 49 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 30, 2000. U.S. CAN CORPORATION By: /s/ PAUL W. JONES ------------------------------------ Paul W. Jones President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on March 30, 1999.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board, President and Chief - --------------------------------------------- Executive Officer Paul W. Jones /s/ JOHN L. WORKMAN Executive Vice President and Chief Financial - --------------------------------------------- Officer John L. Workman /s/ JOHN R. MCGOWAN Vice President and Controller - --------------------------------------------- John R. McGowan /s/ CALVIN W. AURAND, JR. Director - --------------------------------------------- Calvin W. Aurand, Jr. /s/ BENJAMIN F. BAILAR Director - --------------------------------------------- Benjamin F. Bailar Director - --------------------------------------------- Charles W. Gaillard /s/ RICARDO POMA Director - --------------------------------------------- Ricardo Poma /s/ FRANCISCO A. SOLER Director - --------------------------------------------- Francisco A. Soler /s/ LOUIS B. SUSMAN Director - --------------------------------------------- Louis B. Susman
49 50 EXHIBIT INDEX
INCORPORATION BY REFERENCE TO THE EXHIBIT NUMBER LISTED BELOW IN THE FILING EXHIBIT DESCRIPTION REFERENCE BELOW - ------- ----------- ---------------- 3.1 Restated Certificate of Incorporation....................... (a)4.3 3.2 By-Laws..................................................... (b)4.1 4.1 Indenture for 10 1/8 Notes.................................. (c)4.2 4.2 Amended and Restated Credit Agreement....................... (d)4.1 4.3 Amendment No. 1 to Credit Agreement......................... (e)10.3 4.4 Amendment No. 2 to Credit Agreement......................... (f)4.4 4.5 Amendment No. 3 to Credit Agreement......................... (g)10.1 4.6 Amendment No. 4 to Credit Agreement......................... (g)10.5 4.7 Amendment No. 5 to Credit Agreement......................... (s)10.1 4.8 Amendment No. 6 to Credit Agreement......................... 4.9 Shareholder Rights Agreement................................ (h)4.1 10.1 Commerce, CA Sublease Agreement, dated 2/10/89.............. (i)10.10 10.2 Weirton, WV Lease, dated 1/1/76, as amended................. (i)10.11 10.3 Burns Harbor, IN Lease, dated 12/5/87....................... (j)10.12 10.4 Voghera, Italy lease (English translation).................. (k)10.6 10.5 Baltimore, MD (paint can plant) Lease, dated 10/24/91....... (j)10.23 10.6 Stockholders Agreement...................................... (m)10.25 10.7 Frank J. Galvin Separation Agreement, dated 2/1/2000*....... 10.8 Amendment No. 4 to Weirton, WV Lease........................ (n)10.30 10.9 Amendment, dated 9/1/94, to Burns Harbor Lease.............. (n)10.31 10.10 Merthyr Tydfil, Wales Lease................................. (k)10.24 10.11 Nonqualified Supplemental 401(k) Plan*...................... (o)10.33 10.12 Nonqualified Benefit Replacement Plan*...................... (o)10.34 10.13 Amendment No. 1 to Burns Harbor, IN Lease................... (o)10.48 10.14 Amendment No. 3 to Burns Harbor, IN Lease................... (o)10.49 10.15 Amendment No. 1 to Baltimore, MD (paint can plant).......... (o)10.51 10.16 Baltimore, MD (Columbia Specialty plant) Lease Agreement, (o)10.52 dated 5/6/94................................................ 10.17 Amendment No. 3 to Weirton, WV Lease Agreement.............. (o)10.55 10.18 Newnan, GA Lease............................................ (c)10.3 10.19 Alliance, OH Lease.......................................... (c)10.4 10.20 David R. Ford Change-in-Control Agreement*.................. (f)10.51 10.21 Salomon Brothers Inc (a predecessor to Salomon Smith Barney) indemnification agreement, dated 7/9/97..................................... (j)10.1 10.22 Paul W. Jones Employment Agreement,dated 4/1/98*............ (p)10.1 10.23 Executive Deferred Compensation Plan*....................... (t)10.30 10.24 John L. Workman Employment Agreement, dated 1/25/2000*...... 10.25 David R. Ford Service Agreement, dated as of 11/24/97*...... (t)10.34 10.26 1998 Equity Incentive Plan*................................. (t)10.35 10.27 1995 Equity Incentive Plan*................................. (r)Exhibit A 10.28 1997 Equity Incentive Plan*................................. (f)10.50 10.29 1993 Stock Option Plan*..................................... (q)10.28 10.30 1984 Incentive Stock Option Plan*........................... (i)10.20 10.31 John L. Workman Change-In-Control Agreement dated 1/31/2000*.................................................. 10.32 Roger B. Farley Employment Agreement dated 2/3/2000*........ 10.33 Roger B. Farley Change-In-Control Agreement dated 2/3/2000*...................................................
50 51
INCORPORATION BY REFERENCE TO THE EXHIBIT NUMBER LISTED BELOW IN THE FILING EXHIBIT DESCRIPTION REFERENCE BELOW - ------- ----------- ---------------- 10.34 Executive Severance Plan*................................... 10.35 Employee (restrictive covenant) Agreement with John L. Workman dated 1/25/2000*.................................................. 10.36 Employee (restrictive covenant) Agreement with Roger B. Farley dated 3/2/2000....................................... 10.37 1999 Equity Incentive Plan.................................. (u)Exhibit A 10.38 Director Equity Plan........................................ 21.1 Subsidiaries of the Company................................. 23.1 Consent of Arthur Andersen LLP.............................. 27.1 Financial Data Schedule (EDGAR version only)................ 99.1 Letter dated 3/22/2000 from Pac Packaging Acquisition Corporation to the Board of Directors of U.S. Can Corporation Proposing Leveraged Recapitalization............ - --------------- * Management contract or compensatory plan or arrangement. a. Form S-3 Registration Statement of the Company dated June 1, 1994 (No. 33-79556). b. Form S-8 Registration Statement of the Company dated March 23, 1994 (No. 33-76742). c. Form 10-Q for the quarter ended September 29, 1996. d. Form 10-Q for the quarter ended March 31, 1996. e. Form 10-Q for the quarter ended July 2, 1995. f. Form 10-K for the year ended December 31, 1997. g. Form 10-Q for the quarter ended October 4, 1998. h. Form 10-Q for the quarter ended October 1, 1995. i. Form 10-Q for the quarter ended April 6, 1997. j. Form 10-Q for the quarter ended October 5, 1997. k. Form 10-K for the year ended December 31, 1996. l. Form S-1 Registration Statement of the Company dated January 6, 1993 (No. 33-56804). m. Form 10-K for the year ended December 31, 1992. n. Form 10-K for the year ended December 31, 1994. o. Form 10-K for the year ended December 31, 1995. p. Form 10-Q for the quarter ended April 5, 1998. q. Form 8-K dated August 9, 1996. r. 1995 Proxy Statement. s. Form 10-Q for the quarter ended July 4, 1999. t. Form 10-K for the year ended December 31, 1998. u. 1999 Proxy Statement.
51 EX-4.8 2 AMENDMENT #6 TO CREDIT AGREEMENT 1 EXHIBIT 4.8 EXECUTION COPY AMENDMENT NO. 6 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED CREDIT AGREEMENT ("Amendment") is dated as of December 28, 1999, by and among United States Can Company, a Delaware corporation (the "Borrower"), the financial institutions from time to time party to the Amended and Restated Credit Agreement referred to below (collectively, the "Lenders", and each individually, a "Lender"), and Bank of America, N.A. (as successor to Bank of America National Trust and Savings Association), as the "Agent" for the Lenders (the "Agent"). Undefined capitalized terms which are used herein shall have the meanings ascribed to such terms in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Agent are parties to that certain Amended and Restated Credit Agreement dated as of April 25, 1997 (as heretofore amended and modified by that certain Amendment No. 1 and Waiver No. 1 thereto dated as of November 12, 1997, that certain Amendment No. 2 and Waiver No. 2 dated as of February 19, 1998, that certain Amendment No. 3 dated as of September 11, 1998, that certain Amendment No. 4 and Waiver No. 3 dated as of October 15, 1998, and that certain Amendment No. 5 and Security Interest Release dated as of April 30, 1999, in each case among such parties, the "Credit Agreement"), pursuant to which the Lenders have agreed to provide, subject to the terms and conditions contained therein, certain loans and other financial accommodations to the Borrower; WHEREAS, the Borrower has requested that the Credit Agreement be amended to provide for additional commitments from certain Lenders to be made available to the Borrower, on a short-term basis maturing no later than 364 days from the date hereof, to finance the Acquisition (as defined below) and to provide working capital; WHEREAS, the Lenders have indicated their willingness to consent to such amendment solely on the condition that the Loan Parties grant Liens on certain property to secure the Obligations and upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions stated herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Borrower, the Lenders, and the Agent, such parties hereby agree as follows: 2 Section 1. Amendment No. 6 to Credit Agreement. Effective as of the Amendment No. 6 Effective Date (as defined in Section 2 of this Amendment), the Credit Agreement is hereby amended as follows (unless otherwise specified, section and schedule references herein refer to those of the Credit Agreement): (a) Section 1.5 is amended by deleting it in its entirety and replacing it with the following: "SECTION 1.5 Collateral Documents. References in this Agreement or any other Loan Document to the Borrower Pledge Agreement or any other Collateral Document, in a case where such Collateral Document is or would be governed by the laws of any jurisdiction other than Illinois, shall mean and be a reference to a document having a purpose and effect under the laws of such other jurisdiction similar to the purpose and effect of the corresponding form of Collateral Document referred to herein." (b) Section 2.1 is amended by adding before each of the words "Lender," "Commitment," "Loans," in each case, the word "Multicurrency," and by adding at the end thereof the additional sentence: "On the terms and subject to the conditions of this Agreement (including Article IV), each 364- Day Lender severally and for itself alone agrees to make 364- Day Loans to the Borrower pursuant to the 364-Day Commitment as described in this Article II. " (c) Section 2.1.1 is amended by deleting such section in its entirety and replacing it with the following: "SECTION 2.1.1. General Terms. (a) From time to time on any Business Day occurring prior to the Commitment Termination Date, each Multicurrency Lender, severally and for itself alone, agrees to make revolving loans in Dollars or in Alternative Currencies (relative to such Lender, its "Multicurrency Loans") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Multicurrency Loans requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1(a) is herein referred to as its "Multicurrency Commitment"; provided that (a) the aggregate principal amount of all such Loans which any Multicurrency Lender shall be committed to have outstanding hereunder (determined on a Dollar equivalent basis) shall not at any time exceed the product of such Lender's Percentage and the Availability and (b) the aggregate principal amount of all such Loans which the Multicurrency Lenders shall be committed to have outstanding hereunder (determined on a Dollar equivalent basis) shall not at any time exceed the 2 3 Availability. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Multicurrency Loans. (b) From time to time on any Business Day occurring prior to the 364-Day Commitment Termination Date, each 364-Day Lender, severally and for itself alone, agrees to make revolving loans in Dollars (relative to such Lender, its "364-Day Loans") to the Borrower equal to such 364-Day Lender's Percentage of the aggregate amount of the Borrowing of 364-Day Loans requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1(b) is herein referred to as its "364-Day Commitment"; provided that (a) the aggregate principal amount of all such 364-Day Loans which any 364-Day Lender shall be committed to have outstanding hereunder shall not at any time exceed the product of such Lender's Percentage and the 364-Day Commitment Amount at such time, (b) the aggregate principal amount of all 364-Day Loans which the 364-Day Lenders shall be committed to have outstanding hereunder shall not at any time exceed the 364-Day Commitment Amount at such time, (c) 364-Day Loans shall be made in Dollars only and shall not be redenominated in any other currency, including any Alternative Currency and (d) 364-Day Loans made on the Amendment No. 6 Effective Date shall be Base Rate Loans. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow 364-Day Loans." (d) Section 2.2 is amended by adding to the heading thereof the words "and the 364-Day Commitment Amount", and by adding before the period at the end of the sentence therein the words "and the 364-Day Commitment Amount is subject to reduction from time to time pursuant to this Section 2.2". (e) Section 2.2.1 is amended by adding before each of the words "Lenders" and "Loans" the word "Multicurrency", and by adding at the end thereof the additional sentence: "The Borrower may, from time to time on any Business Day, voluntarily reduce the amount of the 364-Day Commitment Amount by delivering to the Agent notice of such reduction; provided that all such reductions shall require at least one (1) Business Day's prior written notice to the Agent and be permanent and that any partial reduction of the 364-Day Commitment Amount shall be in a minimum amount of $2,500,000 and in an integral multiple of $1,000,000 in excess thereof." (f) Section 2.2.2 is amended by deleting it in its entirety and replacing it with the following provision: 3 4 "SECTION 2.2.2. Mandatory. The 364-Day Commitment Amount shall be automatically and permanently reduced to zero pursuant to this subsection if the Acquisition is rescinded pursuant to Section 13 of the Acquisition Agreement, and the outstanding principal balance of the 364-Day Loans at such time shall be due and payable, together with interest thereon, and all fees and other amounts then due and payable, on the fifth Business Day following the date of such rescission." (g) Section 2.4(b) is amended by changing each reference therein to "Lender" to "Multicurrency Lender". (h) Sections 2.4(e), 2.6 and 2.8.1(a)(ii)(A) are amended by deleting each reference therein to "$1,000,000" and replacing each such reference with "$2,500,000" and by deleting each reference therein to "$100,000" and replacing each such reference with "$1,000,000". (i) Section 2.7 is amended by deleting it in its entirety and replacing it with the following: "SECTION 2.7 Pro Rata Treatment. All Borrowings, continuations, conversions, redenominations, prepayments, repayments and mandatory and voluntary Commitment Amount and 364-Day Commitment Amount reductions shall be effected so that after giving effect thereto (a) each Multicurrency Lender will have a ratable share (according to its Percentage of the Multicurrency Facility) of all types and Groups of Multicurrency Loans, Letters of Credit and the Commitment Amount and (b) each 364-Day Lender will have a ratable share (according to its Percentage of the 364-Day Facility) of all types and Groups of 364-Day Loans and the 364-Day Commitment Amount. In the event that any payment is received from or in behalf of the Borrower at a time when any past due Obligations are owing to the Agent (in its capacity as such) or any Loans or Letter of Credit Obligations (or interest thereon) are past due, such payment shall first be applied to all such amounts owing to the Agent and then ratably to such past due Loans and Letter of Credit Obligations (and interest) until all such past due amounts are paid in full before application of any portion of such payment to any other Obligations. (j) Section 2.8.1 is amended (i) by deleting the first sentence therein and replacing it with the following sentence: "The Borrower will make payment in full of all unpaid principal of all Multicurrency Loans on the Commitment Termination Date and will make payment in full of all unpaid principal of all 364-Day Loans on the 364-Day Commitment Termination Date."; (ii) by changing each reference in clause (b) to "Loans" to "Multicurrency Loans," 4 5 (iii) by deleting in its entirety clause (c) and replacing it with the following: "(c) shall from time to time, make mandatory prepayments of the Loans in such amounts and at such times as may be necessary to prevent (i) the aggregate outstanding principal amount of all Multicurrency Loans (determined on a Dollar equivalent basis) from exceeding Availability, (ii) the aggregate outstanding Letter of Credit Obligations from exceeding Letter of Credit Availability (determined on a Dollar equivalent basis) and (ii) the aggregate outstanding principal amount of 364-Day Loans from exceeding the 364-Day Commitment Amount;" (iv) by deleting in its entirety clause (e) and replacing it with the following: "(e) shall, on each date when any reduction in the 364-Day Commitment Amount shall become effective, make a mandatory prepayment of all 364-Day Loans equal to the excess, if any, of the aggregate outstanding principal amount of all 364-Day Loans over the 364-Commitment Amount then in effect, as so reduced"; and (iv) by adding before the period at the end of the last sentence therein the words "or the 364-Day Commitment Amount, provided, however, that the 364-Day Commitment shall be reduced to zero upon the mandatory prepayment of the 364-Day Loans pursuant to Section 2.2.2". (k) Section 2.9.3 is amended by deleting clause (a) in its entirety and replacing it with the following: "(a) as to all Multicurrency Loans, on the Commitment Termination Date, and as to all 364-Day Loans, on the 364-Day Commitment Termination Date;". (l) Section 2.14 is amended by (i) deleting clause (a) in its entirety and replacing it with the following: "(a) Commitment Fees. The Borrower agrees to pay to the Agent, for the account of each Multicurrency Lender, a commitment fee (the "Commitment Fee") in an amount equal to the product of (i) the Applicable Commitment Fee Percentage multiplied by (ii) the daily average amount by which the Commitment Amount exceeds the sum of the outstanding principal balance of the Multicurrency Loans plus, the then Letter of Credit Obligations for each fiscal quarterly period ending after the Closing Date and for the period commencing on the last day of the fiscal quarter most recently ending immediately prior to the Commitment Termination Date and ending on the Commitment Termination Date. The Commitment Fee shall be payable quarterly in arrears on the last day of each fiscal quarter for the fiscal period then ended and on the Commitment Termination Date. Solely for purposes of calculating the Commitment Fee for the Multicurrency Lenders under this Section 2.14(a), the equivalent in Dollars of each Eurodollar Loan made in an Alternative Currency as determined on the date of the making of such Loan shall be the amount of the Commitment Amount used 5 6 in connection with such Loan, and no further adjustments shall be made with respect to fluctuations thereafter in the value of the Alternative Currency of such Loan. The Borrower agrees to pay to the Agent, for the account of each 364-Day Lender, a commitment fee (the "364- Day Commitment Fee") in an amount equal to the product of (i) the Applicable Commitment Fee Percentage multiplied by (ii) the daily average amount by which the 364-Day Commitment Amount exceeds the sum of the outstanding principal balance of the 364-Day Loans for each fiscal quarterly period ending after the Amendment No. 6 Effective Date and for the period commencing on the last day of the fiscal quarter most recently ending immediately prior to the 364-Day Commitment Termination Date and ending on the 364-Day Commitment Termination Date. The 364-Day Commitment Fee shall be payable quarterly in arrears on the last day of each fiscal quarter for the fiscal period then ended and on the 364-Day Commitment Termination Date."; and (ii) by adding at the end of clause (b) the words "and the fees specified in an amount and at the times set forth in the Amendment Fee Letter". (m) Section 2.20 is amended by deleting it in its entirety and replacing it with the following: "SECTION 2.20 All Obligations Secured. The Loans and all other Obligations of the Borrower and each other Loan Party to the Agent, any Lender or any other Secured Party, shall be secured by the Lien, for the benefit of the Secured Parties, on all of the Collateral and by all other Liens heretofore, now, or at any time or times hereafter granted by the Borrower or any other Loan Party to the Agent, any Lender or any other Secured Party to secure any Obligations, subject to release pursuant to Section 8.10. The Borrower agrees that all of the rights of the Secured Parties set forth in this Agreement shall apply to any modification, amendment or restatement of, or supplement to, this Agreement, any supplements or exhibits hereto, and the other Loan Documents, unless otherwise agreed in writing." (n) Section 2.21 is amended by (i) deleting the first sentence in its entirety and replacing it with the following: "The Borrower shall apply the proceeds of each Borrowing (a) under the Multicurrency Facility, and shall utilize each Letter of Credit, for general corporate purposes (including to provide ongoing working capital and funds for acquisitions permitted hereunder (including, without limitation, the Acquisition)) 6 7 and (b) under the 364-Day Facility, (i) to finance the Acquisition and to refinance certain indebtedness of May and its Subsidiaries, (ii) to pay transaction fees and expenses incurred in connection with the Acquisition and the financing hereunder and (iii) for general corporate purposes (including to provide ongoing working capital and funds for acquisitions permitted hereunder, including, without limitation, the Acquisition)."; and (ii) deleting the words "pursuant to a guaranty substantively similar to the guaranties previously executed by former Subsidiaries of the Borrower in connection with the Existing Agreement (in each case, in form, scope and substance reasonably acceptable to the Agent, collectively, the "Subsidiary Guaranties")" in clause (a) of the second sentence therein, and replacing such words with the following: "in substantially the form of the Subsidiary Guarantee attached hereto as Exhibit H (each, a "Subsidiary Guarantee")." (o) Article III is amended by changing each reference therein to "Lender", "Lenders" and "Majority Lenders" to "Multicurrency Lender", "Multicurrency Lenders" and "Majority Multicurrency Lenders", respectively. (p) Section 5.1(b) is amended by deleting it in its entirety and replacing it with the following: "(b) Authorizations; Enforceability. The Borrower and each of its Subsidiaries has the requisite corporate authority to execute, deliver and perform each of the Loan Documents and Acquisition Documents executed by it and to consummate the Acquisition. This Agreement has been, and each of the Loan Documents and Acquisition Documents to which the Borrower or any of its Subsidiaries is a party when delivered hereunder will have been, duly executed and delivered by the Borrower or such Subsidiary, as the case may be, and is, or when delivered hereunder will be, the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforceability of creditors' rights generally and by general equitable principles." (q) Section 5.1(c) is amended by adding (i) after the words "each Loan Document" the words "and each Acquisition Document," (ii) after the words "to which it is a party" the words "and the consummation of the Acquisition and the other transactions contemplated hereby" and (iii) before the period at the end thereof the words "(other than Liens granted pursuant to the Collateral Documents)". 7 8 (r) Section 5.1(d) is amended by adding before the period at the end of the sentence thereof the following: "or Acquisition Documents to which it is party, the consummation of the Acquisition or the granting of a Lien on any of the Collateral in the manner and for the purpose contemplated by the Collateral Documents, except filings and recordings to perfect such Liens. All applicable waiting periods in connection with the Acquisition and the other transactions contemplated hereby have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the Acquisition or the rights of any Loan Party or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them." (s) Section 5.1(f) is amended by adding the following provision at the end thereof: "A balance sheet and statement of income and loss of each Group Company for fiscal year ended March 31, 1999, reviewed by independent public accountants and the unaudited consolidated and consolidating balance sheet and statement of income and loss of May for fiscal year ended March 31, 1999 in each case, together with English translations by Arthur Andersen thereof and prepared in conformity with German GAAP, consistently applied, copies of each of which have been furnished to each Lender, to the best of the Borrower's knowledge, fairly present the consolidated financial condition of May and its Subsidiaries as at such date. Since September 30, 1999, there has been no change in any circumstances, facts or conditions nor shall an event have taken place which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect." (t) Section 5.1(q) is amended by adding before the period at the end of the sentence thereof the words ", except only to the extent of any inaccuracy arising as a result of the granting of, and any filing, recording or other act to perfect, Liens pursuant to the Collateral Documents". (u) Section 5.1(r) is amended by adding before the period at the end of the third sentence thereof the words "(other than Liens granted pursuant to the Collateral Documents)". (v) Section 5.1(v) is amended by deleting it in its entirety and replacing it with the following: "(v) Collateral Documents. The provisions of the Collateral Documents executed by any Loan Party in favor of the Agent evidence legal, valid, enforceable and continuing Liens, in favor of the Agent for the benefit of the Secured Parties, in all right, title and interest of such Loan Party in any and all of the Collateral described therein, securing the Obligations from time to time outstanding, and upon all filings and recordings being duly made in the locations 8 9 referred to in the applicable Collateral Documents or the taking of possession of the Collateral by the Agent in accordance with the provisions of such Collateral Documents, each of such Collateral Documents creates a fully perfected first priority Lien in all right, title and interest of such Loan Party in such Collateral superior in right to any Liens, existing or future, which such Loan Party or any creditors thereof or purchasers therefrom, or any other Person, may have against such Collateral or interests therein, except to the extent, if any, otherwise provided in Section 6.2(h)." (w) Section 5.1 is further amended by adding the following provisions at the end thereof: "(x) Year 2000 Compliance. The Borrower (i) has reviewed its operations and those of its Subsidiaries with a view to assessing whether each of its or the Subsidiaries' respective businesses will, in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data, be vulnerable to a Year 2000 Problem arising from computer hardware or software used in the Borrower's or any Subsidiary's business or operations, and (ii) has taken into account the costs to be incurred by the Borrower and such Subsidiaries to address any Year 2000 Problem arising from computer hardware or software used in the Borrower's or any Subsidiary's business or operations in the preparation of all projections provided to the Lenders with respect to the Borrower and any such Subsidiary. No Material Adverse Effect has occurred, or would reasonably be expected to occur, as a result of any Year 2000 Problem arising from computer hardware or software used in the Borrower's or any Subsidiary's business or operations or in the business or operations of vendors or customers of the Borrower or any Subsidiary. (y) Acquisition Documents. (i) The Borrower has delivered to the Lenders and the Agent true, complete and correct copies of each of the material Acquisition Documents and all material amendments thereto, waivers relating thereto and other material side letters or agreements affecting the terms thereof. After the date of such delivery, none of such documents and agreements has been amended or supplemented in any material respect, nor have any of the provisions thereof been waived and no consent or waiver has been granted by any Loan Party thereunder in any material respect, except pursuant to a written agreement or instrument which has heretofore been consented to by the Agent. Each of the Acquisition Documents has been duly executed and delivered by each Loan Party thereto and, to the best of the Borrower's knowledge, each other party thereto and is a legal, valid and binding obligation of such Loan Party and, to the best of the Borrower's knowledge, each other party thereto enforceable, in all material 9 10 respects, in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the rights of creditors generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (ii) The representations and warranties of the Borrower, USC Holding and to the best of the Borrower's knowledge, each other party to the Acquisition Documents are true and correct in all material respects on the Amendment No. 6 Effective Date as if made on and as of such date (other than any such representations or warranties that, by their terms, are made as of an earlier date other than such date in which case, such representations and warranties of the Borrower or the USC Holding were true and correct in all material respects as of such earlier date and such representations and warranties of any other party to the Acquisition Documents were, to the best of the Borrower's knowledge, true and correct in all material respects as of such earlier date). (iii) The Borrower and, to the best of the Borrower's knowledge, each other party to the Acquisition Documents has complied in all material respects with all terms and provisions contained therein. All conditions precedent to the consummation of the Acquisition have been satisfied other than USC Holding's payment of the purchase price consideration therefor as provided in the Acquisition Agreement and, upon such payment, the Acquisition will be duly consummated in accordance with the terms of the Acquisition Documents (subject to rescission pursuant to the terms of Section 13 of the Acquisition Agreement). (z) Solvency. On the Amendment No. 6 Effective Date, after giving effect to the Acquisition, and on each date on which Borrowings are made hereunder, the Borrower and its Subsidiaries, taken as a whole, are Solvent. Neither the Borrower nor any other Loan Party has incurred any obligations or liabilities (contingent or otherwise) under this Agreement, any other Loan Document or any Acquisition Document, nor has the Borrower or any other Loan Party made any conveyance pursuant to or in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of the Borrower or any of its Subsidiaries." (x) Section 6.1(m) is amended by adding after the words "record and account" in the first sentence thereof the words "(including records relating to the Collateral)". (y) Section 6.1 is further amended by deleting clause (n) therein in its entirety and adding at the end thereof the following additional subsections: 10 11 "(n) Delivery of German Pledge Agreement. No later than 30 days after the Amendment No. 6 Effective Date, and at the sole expense of the Borrower, the Borrower shall cause USC Holding to (i) duly execute and deliver to the Agent, for the benefit of the Secured Parties, a pledge agreement (as amended, supplemented or otherwise modified from time to time, the "German Pledge Agreement") in form and substance reasonably satisfactory to the Agent, securing payment of the obligations of USC Holding under the Loan Documents and the Obligations of the Borrower, pursuant to which USC Holding unconditionally grants to the Agent, for the benefit of the Secured Parties, a first perfected Lien on 65% of the partnership interests issued by May, free and clear of all other Liens and other encumbrances (including, without limitation, any encumbrance resulting from any rescission rights or claims under Section 13 of the Acquisition Agreement), and accompanied by any other items required to be delivered under the terms of the German Pledge Agreement, and (ii) deliver to the Lenders favorable opinions, addressed to the Agent and the Lenders, of United States and German counsel to the Loan Parties reasonably acceptable to the Agent, as to the creation and perfection of the Liens granted pursuant to the German Pledge Agreement, the German Pledge Agreement being the legal, valid and binding obligation of USC Holding enforceable in accordance with its terms and as to such other matters as the Agent may reasonably request; provided that the requirements set forth in this Section 6.1(n) shall terminate and be of no further force and effect if the Borrower has made the mandatory prepayment under and in accordance with Section 2.2.2. (o) Further Assurances. The Borrower agrees that, until all Obligations in respect of the 364-Day Facility have been indefeasibly paid and fully satisfied and the 364-Day Commitments have been terminated, the security interests in and Liens on and against the Collateral, and all proceeds thereof, granted or purported to be granted by the Collateral Documents shall continue in full force and effect. The Borrower shall perform, from time to time, any and all steps reasonably requested by the Agent to perfect, maintain and protect the security interests in and Liens on and against the Collateral granted or purported to be granted by the Collateral Documents, as well as the priority of such security interests and Liens, or to enable the exercise of rights and remedies hereunder with respect to any Collateral, including (i) executing and filing financing or continuation statements, or amendments thereof, and terminations of financing statements and other releases, in form and substance reasonably satisfactory to the Agent, (ii) delivering to the Agent all certificates, notes and other instruments representing or evidencing the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, including stock powers, all in form and substance reasonably satisfactory to the Agent, and (iii) executing and delivering all further instruments and documents, and taking all further action in furtherance of the foregoing, as the Agent may reasonably request." 11 12 (z) Section 6.2(a)(ii) is amended by deleting it in its entirety and replacing it with the following provision: "(ii) the Borrower or any of its Subsidiaries may merge with or into any other corporation, or acquire substantially all of the assets, or any material asset or assets, from another Person, or acquire not less than 90% of the outstanding capital stock of another Person if: (A) the Borrower, or such Subsidiary, is the continuing or surviving entity, or the purchaser of such assets or capital stock, as the case may be; (B) such other Person is engaged in the container manufacturing or distribution industries and businesses related thereto; (C) immediately prior to such merger or acquisition and after giving effect thereto, the Borrower shall be in compliance with the covenants set forth in Section 6.3; (D) the cash consideration paid or payable by the Borrower or such Subsidiary does not exceed (i) $50,000,000 for any such merger or acquisition or (ii) $75,000,000 in the aggregate for all such mergers and acquisitions consummated during any fiscal year unless, in either case, the Majority Lenders shall have provided their prior written consent to such merger or acquisition; (E) no Default or Event of Default exists immediately prior to such merger or acquisition, or would result therefrom; (F) in the case of the acquisition by, or of, a Domestic Subsidiary, the Borrower and its Subsidiary shall have complied with the requirements of clauses (a) and (b) of Section 2.21, if applicable, regardless of whether any proceeds of any Borrowing are used, directly or indirectly, to facilitate such merger or acquisition; (G) the board of directors (or similar governing body) of the Person which is the proposed counterparty to such merger or target of such acquisition has approved such merger or acquisition; and (H) the Administrative Agent shall have received evidence satisfactory to it demonstrating that the Person which is the proposed counterparty to such merger or target of such acquisition shall have positive EBITDA (adjusted for excess owners' compensation and other special charges approved by the Agent in its reasonable discretion) for the twelve-month period ending as of the date of such merger or acquisition; and". (aa) Section 6.2(a)(iii) is amended by adding after the words "all of the other Loan Documents" in clause (a) thereof the following: "and takes all steps reasonably requested by the Agent to preserve the priority of the perfected security interests and liens granted under the Collateral Documents,". 12 13 (bb) Section 6.2(b) is amended by deleting the period at the end of clause (vii) thereof and replacing it with a semicolon, and by adding the following clauses to the end of such section: "(viii) the Acquisition; (ix) additional Investments in the Argentinean joint venture referred to in clause (vi) of this section as a result of the purchase by Borrower or any Subsidiary of additional equity interests in such joint venture, provided that the aggregate of all Investments in such venture under clause (vi) and under this clause do not exceed $25,000,000 (or the Dollar equivalent thereof); and (x) Investments after the Amendment No. 6 Effective Date in May's existing Spanish venture, Envases Metallicos del Sureste, in an aggregate amount of up to $10,000,000 (or the Dollar equivalent thereof), provided that no additional Investments shall be permitted following a rescission under Section 13 of the Acquisition Agreement." (cc) Section 6.2(f) is amended by adding after the words "with respect to any Guaranty" in the third line thereof the words "(excluding any Subsidiary Guarantee)". (dd) Section 6.2(h) is amended by deleting clause (i) in its entirety and replacing it with the following: "(i) Liens granted pursuant to the Loan Documents;". (ee) Section 6.2(i)(vii) is amended by deleting such clause (vii) in its entirety and replacing it with the following: "(vii) one or more Foreign Subsidiaries may incur, permit to exist and prepay any Debt in an aggregate amount not to exceed $45,000,000 (or the Dollar equivalent thereof)". (ff) Section 6.2(p) is amended by deleting it in its entirety and replacing it with the following provision: "(p) Change of Location or Name. The Borrower shall not, nor shall it permit any of its Domestic Subsidiaries to, change: (i) the location of its principal place of business, chief executive office, major executive office, chief place of business or its records concerning its business and financial affairs; or 13 14 (ii) its name or the name under or by which it conducts its business, in each case without first giving the Agent thirty (30) days' prior written notice thereof and taking any and all actions which may be necessary or desirable, or which the Agent may request, to maintain and preserve all Liens granted pursuant to the Collateral Documents; provided that notwithstanding the foregoing, the Borrower will not, and will not permit any of its Domestic Subsidiaries to, change the location of its principal place of business, chief executive office, chief place of business or its records concerning its business and financial affairs from the contiguous continental United States of America to any place outside the contiguous continental United States of America." (gg) Section 6.3(e) is amended by deleting, in its entirety, the schedule of periods and ratios set forth therein and replacing such schedule with the following: "Period Ratio ------ ----- Closing Date through and including June 30, 2000 2.75 to 1.00 July 1, 2000 and thereafter 3.00 to 1.00" (hh) Section 6.4(h) is deleted in its entirety and replaced with the following provision: "(h) Other Information. With reasonable promptness, the Borrower shall deliver to the Agent (i) notice of any material amendment, supplement or other modification with respect to, or any material consent or waiver granted in respect of, any Acquisition Document, and copies of any notices delivered pursuant to Section 13 of the Acquisition Agreement and (ii) such other data and information as the Agent or a Lender through the Agent shall reasonably request." (ii) Section 7.1 is amended as follows: (i) clause (a) of Section 7.1 is amended by deleting after the words "or any other amount due and payable by" the words "the Borrower" and inserting in lieu thereof the words "any Loan Party"; (ii) clause (b)(i) of Section 7.1 is amended by adding after the reference to "6.1(f)" the reference to ", 6.1(n)" and by adding at the end thereof the following words: 14 15 "or USC Holding shall fail duly and punctually to perform or observe any covenant or agreement binding on it under Section 5(c) of the Subsidiary Guarantee"; (iii) clause (b)(iii) of Section 7.1 is amended by adding after the words "The Borrower" at the beginning of such clause the words "or any Loan Party", and by adding after the words "the Borrower" therein the words "or such other Loan Party"; (iv) clause (c) of Section 7.1 is amended by adding after the words "the Borrower" when used therein the words "or any other Loan Party"; and (v) clause (j) of Section 7.1 is amended by deleting it in its entirety and replacing it with the following provision: "(j) Termination of Documents; Failure of Security. Any of the Loan Documents shall cease for any reason to be in full force and effect (other than in accordance with the terms hereof or thereof), or the Borrower, any of its Subsidiaries or any guarantor of the Obligations shall disavow its obligations under, or shall contest the validity or enforceability of, any of the Loan Documents or the Obligations, or any material Lien intended to be created thereby ceases to be or is not valid and perfected in any material respect, or the Parent Indenture or the subordination provisions of any of the documents and instruments evidencing any Subordinated Debt shall at any time cease to be in full force and effect; or any such Lien shall be subordinated or shall not have the priority contemplated by this Agreement, any of the other Loan Documents, or such subordination provisions, for any reason, or the Borrower, the Parent or any of their Subsidiaries shall institute any action seeking a determination of any of the foregoing." (jj) Section 8.1 is amended by adding at the end thereof the following sentence: "The Arranger, as such, shall have no duties or obligations whatsoever with respect to this Agreement, any other Loan Document or any other document or any matter related thereto." (kk) Section 8.10 is amended by deleting in its entirety and replacing it with the following provision: "SECTION 8.10 Collateral Matters. (a) The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Collateral Documents 15 16 which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Collateral Documents. (b) The Lenders irrevocably authorize and direct the Agent, and the Agent hereby agrees, to release any Lien granted to or held by the Agent on any Collateral, upon the request of the Borrower, (i) upon termination of the 364-Day Commitments and payment in full of all 364-Day Loans and all other Obligations payable under this Agreement and under any other Loan Document in respect of the 364-Day Facility; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; (iii) constituting property in which the Borrower or any Subsidiary of the Borrower owned no interest at the time the Lien was granted or at any time thereafter; (iv) constituting property leased to the Borrower or any Subsidiary of the Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or such Subsidiary to be, renewed or extended; (v) consisting of an instrument evidencing Debt or other debt instrument, if the indebtedness evidenced thereby has been paid in full; or (vi) if approved, authorized or ratified in writing by the Majority Lenders (or by all of the Lenders if required by the terms of Section 9.1). Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to this Section 8.10(b)." (ll) Section 9.1 is amended by deleting it in its entirety and replacing it with the following provision: "SECTION 9.1 Amendments, etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed or consented to by the Majority Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that (a) no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) waive any of the conditions specified in Article IV, (ii) change the percentage of any of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of the Lenders, which shall be required for the Lenders or any of them to take any action hereunder, (iii) release all or substantially all the Collateral (other than as required by the terms of this Agreement or any other Loan Document), (iv) reduce or limit the obligations of USC Holding or any other Loan Party under any Subsidiary Guarantee or (v) amend this Section 9.1, and (b) no amendment, waiver or consent shall, unless in writing and signed by each Lender that has a Commitment under, or Loans owing to it in respect of, the Facility affected by such amendment, waiver or consent, do any of the following: (i) increase any of the Commitments of such Lenders or subject such Lenders to any additional obligations under such Facility, (ii) reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder to such Lender under such Facility or (iii) postpone any date fixed for 16 17 any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder to such Lender under such Facility; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement. (mm) Section 9.7(a) is amended by adding after the words "of such Lender hereunder" the words "and in respect of one or both Facilities." (nn) Section 9.11(a) is amended by adding after the words "any other Loan Documents," the words "the Acquisition and any Acquisition Document". (oo) Schedule I is amended by adding the following definitions to such Schedule 1 in alphabetical order: ""Acquisition" means the acquisition by USC Holding of all the Capital Stock of May pursuant to the Acquisition Agreement. "Acquisition Agreement" means the Sale and Purchase Agreement dated as of December 22, 1999 among Lucretia GmbH, as seller, May Holding GmbH & Co. KG, as seller guarantor, the Borrower and USC Holding. "Acquisition Documents" means the collective reference to the Acquisition Agreement and each of the agreements, real property leases, notes, guarantees, consents, instruments, certificates and opinions delivered by the Borrower, USC Holding or any other Person in connection with the Acquisition. "Amendment Fee Letter" means the Letter dated as of the Amendment No. 6 Effective Date between the Borrower and the Agent. "Amendment No. 6" means the Amendment No. 6 to this Agreement dated as of December 28, 1999 among the Borrower, the Lenders and the Agent. "Amendment No. 6 Effective Date" means the date on which all the conditions to the effectiveness of Amendment No. 6 were satisfied. "Arranger" means Banc of America Securities LLC, in its capacity as lead arranger and book manager. 17 18 "Assignment Agreement" means a collateral assignment or security agreement, in form and substance reasonably satisfactory to the Agent, executed and delivered by the Borrower, USC Holding and the Agent, for the benefit of the Secured Parties, pursuant to which USC Holding and the Borrower grant to the Agent a collateral assignment securing the Obligations of all of USC Holding's and the Borrower's rights, claims and interests in and to that certain "Joint Account" referred to and defined in the Acquisition Agreement, and all proceeds thereof payable or paid to USC Holding or the Borrower with respect to such account. "Borrower Pledge Agreement" means the Pledge Agreement between the Borrower and the Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I, as the same may be amended, supplemented or otherwise modified from time to time. "Collateral" means all Property and interests in Property now owned or hereafter acquired by the Borrower or any of its Affiliates in or upon which a Lien is granted under the Collateral Documents. "Collateral Documents" means the Borrower Pledge Agreement, the Assignment Agreement, the German Pledge Agreement and consents, financing statements and all other similar agreements, assignments, instruments and documents delivered to the Agent at any time to create, evidence or perfect Liens securing the Obligations, and all amendments, supplements, modifications, renewals, replacements, restatements, consolidations, substitutions, and extensions of any of the foregoing. "Facility" means the Multicurrency Facility and the 364-Day Facility. "German GAAP" means generally accepted accounting principles in Germany consistent with those utilized in preparing the audited financial statements of May delivered in connection with Amendment No. 6. "German Pledge Agreement" has the meaning specified in Section 6.1(n). "Group Companies" means May and each Subsidiary of May specified on Schedule 8.1 to the Acquisition Agreement. "Majority Multicurrency Lenders" means, at any time, the Multicurrency Lenders having, in the aggregate, a Percentage of the Commitment Amount of 66-2/3% or more of the total Percentages of all Multicurrency Lenders at such time. "May" means May Verpackungen GmbH & Co. KG, a limited partnership formed under the laws of the Federal Republic of Germany. 18 19 "Multicurrency Commitment" has the meaning specified in Section 2.1.1. "Multicurrency Facility" means the facility provided hereunder by the Multicurrency Lenders to make Multicurrency Loans in an amount not to exceed the Commitment Amount. "Multicurrency Lender" means the institutions listed on the signature pages to the Credit Agreement and each institution that shall become a party hereto as a Multicurrency Lender pursuant to Section 9.7. "Multicurrency Loans" has the meaning specified in Section 2.1.1. "Solvent" shall mean, with respect to the Borrower and its Subsidiaries, taken as a whole (a) the property of the Borrower and its Subsidiary, at fair valuation (on a going concern basis), will exceed the debts of the Borrower and its Subsidiaries, (b) the Borrower and its Subsidiaries will be able to pay their debts as such debts become absolute and matured, and (c) the Borrower and its Subsidiaries will have, as of such date, sufficient capital with which to conduct their business. For purposes of this definition, "debt" means "liability on a claim" and "claim" means (i) any right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. "Subsidiary Guarantee" means the Guarantee of USC Holding in favor of the Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit H, as the same may be amended, supplemented or otherwise modified from time to time, and any other guarantee by a Subsidiary delivered pursuant to Section 2.21. "364-Day Commitment" shall have the meaning specified in Section 2.1.1. "364-Day Commitment Amount" means $70,000,000, subject to reduction pursuant to Section 2.2. "364-Day Commitment Fee" has the meaning specified in Section 2.14(a). "364-Day Commitment Termination Date" means December 26, 2000 or the earlier date of termination in whole of all of the 364-Day Commitments pursuant to Section 2.2 or 7.2. 19 20 "364-Day Facility" means the facility provided hereunder by the 364-Day Lenders to make 364-Day Loans in an amount not to exceed the 364-Day Commitment Amount. "364-Day Lenders" means the institutions listed as such on the signature pages to Amendment No. 6 and each institution that shall become a party hereto as a 364-Day Lender pursuant to Section 9.7. "364-Day Loans" has the meaning specified in Section 2.1.1. "USC Holding" means USC May Verpackungen Holding Inc., a Delaware corporation and wholly-owned Subsidiary of the Borrower. "Year 2000 Problem" means, with respect to any Person, any significant risk that computer hardware or software used in such Person's business or operations will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000." (pp) Schedule I is further amended by deleting the definitions of "Borrowing", "Commitment", "Lenders", "Loan", "Majority Lenders" and "Percentage" and replacing such definitions with the following new definitions: "Borrowing" means a borrowing of Loans under the Facility applicable to such Loans and, in the case of Multicurrency Loans, denominated in the same currency, and made by all the Lenders in such Facility in accordance with their respective applicable Percentages for such Facility, on the same Business Day, in accordance with Section 2.4. "Commitment" means the Multicurrency Commitment and the 364-Day Commitment, as applicable. "Lenders" means the Multicurrency Lenders and the 364-Day Lenders. "Loan" means the Multicurrency Loans and the 364-Day Loans, as applicable. "Majority Lenders" means at any time (a) the Multicurrency Majority Lenders and (b) the 364-Day Lenders having, in the aggregate, a Percentage of the 364-Day Commitment Amount of 66-2/3% or more of the total Percentages of all 364-Day Lenders at such time. 20 21 "Percentage" means, (a) relative to any Multicurrency Lender, its Percentage of the Commitment Amount as set forth opposite such Lender's name on Schedule II (Part A), or if such Lender has entered into an Assignment and Acceptance, the percentage set forth for such Lender in the register maintained by the Agent pursuant to Section 9.7(d) and (b) relative to any 364-Day Lender, its Percentage of the 364-Day Commitment Amount as set forth opposite such Lender's name on Schedule II (Part B), or if such Lender has entered into an Assignment and Acceptance, the percentage set forth for such Lender in the register maintained by the Agent pursuant to Section 9.7(d)." (qq) Schedule I is further amended as follows: (i) the definition of "Alternative Currency" is amended by adding before the words "Lenders" therein the word "Multicurrency"; (ii) the definitions of "Applicable Eurodollar Margin," and "Applicable Commitment Fee Percentage" are amended by adding the words "(A) for each Multicurrency Loan and Multicurrency Commitment", before the words "respectively mean during any Pricing Period" and by adding at the end thereof the following: "; and, (B) for each 364-Day Loan and 364-Day Commitment, respectively mean, during any Pricing Period, the amount set forth below for such Applicable Eurodollar Margin or Applicable Commitment Fee Percentage, as the case may be, depending upon the Pricing Ratio as of the last day of the fiscal quarter most recently ended prior to the first day of such Pricing Period: Applicable Applicable Commitment Fee Pricing Ratio Eurodollar Margin Percentage ------------- ----------------- -------------- Less than 0.75 to 1.00 1.25% 0.30% Greater than or equal to 0.75 to 1.00 and less than or equal to 1.25 to 1.00 1.50% 0.35% Greater than 1.25 to 1.00 1.875% 0.375% 21 22 provided, however, that, if and for so long as the Borrower shall have failed to timely deliver a Compliance Certificate under Section 6.4(b) or Section 6.4(c) with respect to such fiscal quarter most recently ended, the Applicable Eurodollar Margin for such Pricing Period shall be 1.875% and the Applicable Commitment Fee Percentage for such Pricing Period shall be 0.375% respectively; and provided, further, that, notwithstanding the foregoing, for the period beginning on the Amendment No. 6 Effective Date and ending on the first day of the first Pricing Period commencing after the Amendment No. 6 Effective Date, the Applicable Eurodollar Margin shall be 1.875% and the Applicable Commitment Fee Percentage shall be 0.375%." (iii) the definition of "EBITDA" is amended by adding at the end thereof the following: "and (vii) for purposes of computing the Borrower's and its consolidated Subsidiaries' EBITDA for any period of determination which occurs on and after the Amendment No. 6 Effective Date but incorporates any fiscal quarter during the twelve-month period prior to such date, such computation shall include the EBITDA of May and its Subsidiaries for such fiscal quarter (with such adjustments thereto for the excess owners' compensation and other special charges as the Agent may approve in its reasonable discretion) to the extent that the Lenders may reasonably verify such EBITDA upon review of the financial statements of May and its Subsidiaries delivered pursuant to the terms of Amendment No. 6."; (iii) the definition of "Eurodollar Loan" is amended by adding after the words "or an Alternative Currency" the words "(in the case of a Multicurrency Loan only)"; (iv) the definition of "Interest Period" is amended by adding before the period at the end of clause (d) the words "(in respect of any Multicurrency Loan), or the 364-Day Commitment Termination Date (in respect of any 364-Day Loan)"; (v) the definition of "Letter of Credit Availability" is amended by adding before the word "Loans" the word "Multicurrency"; and (vi) the definitions of "Existing Agreement," "Existing L/C's," "Existing Lenders" and "Existing Loans" are amended by deleting each reference to "Section 3.11" therein and substituting therefor a reference to "Section 2.23"; and (vii) the definition of "Material Adverse Effect" is amended by deleting clause (a) therein in its entirety and replacing it with the following: 22 23 "(a) a material adverse effect upon (i) the Agent's Lien on or rights with respect to any material (whether as to type, or as to amount or value in relation to the total amount of Collateral of such type) Collateral, (ii) the business, financial condition, operations, properties or prospects of the Borrower and its Subsidiaries, taken as a whole or the Parent and its Subsidiaries, taken as a whole, or (iii) the ability of the Borrower and its Subsidiaries, taken as a whole, to perform the Loan Documents to which they are a party". (rr) Each of Exhibits A, B, C, H and I attached to this Amendment, and Schedule II attached to this Amendment is hereby deemed to be on and after the Amendment No. 6 Effective Date Exhibits A, B and C and Schedule II, respectively, of the Credit Agreement. Section 2. Effectiveness of this Agreement; Conditions Precedent. This Amendment shall become effective as of the date (such date, the "Amendment No. 6 Effective Date") the following conditions precedent are satisfied: (a) This Agreement. The Agent shall have received counterparts of this Amendment executed by the Borrower, each Multicurrency Lender and each 364-Day Lender, or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Agreement. (b) Secretary's Certificates. The Secretary or Assistant Secretary of each of the Borrower and USC Holding shall have executed and delivered to the Administrative Agent a certificate, certifying (i) that attached thereto is a true and correct copy of the resolutions adopted by the Board of Directors of such Loan Party authorizing the execution and delivery of this Amendment, the other Loan Documents and Acquisition Documents to be executed and delivered by such Loan Party, (ii) as to the names and true signatures of the officers of such Loan Party authorized to execute the documents referred to in the immediately preceding clause (i), (iii) as to a true and correct copy of such Loan Party's By-Laws attached thereto, and (iv) that such Loan Party's Certificate of Incorporation has not been amended since the date of the certified copy of such document delivered pursuant to clause (c) below. (c) Corporate Documents. Each of the Borrower and USC Holding shall have delivered to the Agent a true and correct copy of its Certificate of Incorporation and a good standing certificate, each certified by the Secretary of State of Delaware, as of a date no earlier than the fifteenth (15th) day immediately preceding the Amendment No. 6 Effective Date. (d) Officer's Certificate. The Executive Vice President and Chief Financial Officer of the Borrower shall have executed and delivered to the Administrative Agent a certificate certifying that as of the Amendment No. 6 Effective Date, no Default or Event of Default has occurred and is continuing, all representations and warranties contained in the Credit Agreement (after giving effect to this Amendment) and the other Loan Documents are true and correct and all conditions set forth in this Section 2 have been satisfied in all material respects. 23 24 (e) Opinions of Counsel. The Agent shall have received an opinion letter from Mayer, Brown & Platt, counsel to the Loan Parties, addressed to the Agent and the Lenders, opining as to the matters set forth in Annex I. (f) Borrower Pledge Agreement. The Agent shall have received a pledge agreement in substantially the form of Exhibit I to the Credit Agreement (after giving effect to this Amendment), duly executed by the Borrower, together with certificates representing the Pledged Shares referred to therein, accompanied by undated stock powers executed in blank, and evidence that all other action that the Agent may deem necessary or desirable in order to perfect and protect the liens and security interests and priority thereof created under the Borrower Pledge Agreement has been taken. (g) Subsidiary Guarantee. The Agent shall have received a guaranty in substantially the form of Exhibit H to the Credit Agreement (after giving effect to this Amendment), duly executed by USC Holding. (h) Acquisition Documents. The Agent shall have received certified copies of each of the Acquisition Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lenders, together with all material agreements, instruments and other documents delivered in connection therewith. (i) Consummation of Acquisition. All conditions precedent to the consummation of the Acquisition have been satisfied other than USC Holding's payment of the purchase price consideration therefor as provided in the Acquisition Agreement and, upon such payment, the Acquisition will have been duly consummated in accordance with the terms of the Acquisition Documents (subject to rescission pursuant to the terms of Section 13 of the Acquisition Agreement), without any waiver or amendment not consented to by the Administrative Agent of any term, provision or condition set forth therein, and in compliance with all Applicable Laws. (j) Corporate Structure. The Lenders shall be satisfied with the corporate and legal structure and capitalization of each Loan Party, including the terms and conditions of the charter, bylaws and each class of capital stock of each Loan Party and of each agreement or instrument relating to such structure or capitalization. (k) No Material Adverse Change. Before giving effect to the Acquisition and the other transactions contemplated by this Amendment, there shall have occurred no material adverse change in the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of (i) the Borrower, since December 31, 1998, (ii) May, since September 30, 1999 and (iii) USC Holding, since the date of its incorporation. (l) No Material Litigation. There shall exist no (i) order, decree, judgment, ruling or injunction which restrains the consummation of the Acquisition in the manner contemplated by the Acquisition Documents and (ii) action, suit, investigation, litigation or proceeding 24 25 affecting any of the Borrower, USC Holding, May or any of their Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) could materially and adversely affect any Loan Party, May or any of their Subsidiaries or the Acquisition or (ii) purports to affect the legality, validity or enforceability of the Acquisition, this Amendment, the Credit Agreement, any Note, any other Loan Document, any Acquisition Document or the consummation of the transactions contemplated hereby or the ability of the Lenders to exercise their rights under any Loan Document. (m) Due Diligence. The Lenders shall have completed a due diligence investigation of May and its Subsidiaries in scope, and with results, satisfactory to the Lenders; without limiting the generality of the foregoing, the Lenders shall have been given such access to the management, records, books of account, contracts and properties of May and its Subsidiaries as they shall have requested. (n) Financial Statements; Compliance Certificate. The Agent shall have received and reviewed (i) the consolidated financial statements of May and its Subsidiaries for the fiscal years ending March 31, 1999 and 1998, including balance sheets, income and cash flow statements reviewed by independent public accountants (together with English translations thereof) and prepared in conformity with German GAAP, (ii) five year financial projections for the combined company prepared by the Borrower, (iii) a Compliance Certificate (as of October 31, 1999 in the case of financial information relating to the Borrower and its Subsidiaries, and as of June 30, 1999 in the case of financial information relating to May and its Subsidiaries) demonstrating compliance on a pro forma basis (after giving effect to the Acquisition and the Loans to be made hereunder) and (iv) such other information relating to the Acquisition as the Agent may reasonably request, including interim financial statements of May and its Subsidiaries dated as of September 30, 1999, pro forma financial statements as to the Borrower and forecasts, in form and substance satisfactory to the Lenders, of balance sheets, income statements and cash flow statements on a monthly basis for the first year following the Amendment No. 6 Effective Date. (o) Year 2000 Problem. The Agent and the Lenders shall have received information, in scope, form and substance reasonably satisfactory to them, confirming that (i) each of the Borrower, May and their respective Subsidiaries have taken necessary and appropriate steps to ascertain the extent of, and to quantify and address, material business and financial risks facing the Borrower, May and their respective Subsidiaries as a result of the Year 2000 Problem, and (ii) each of the Borrower's, May's and their respective Subsidiaries' material computer applications are reasonably expected to, on a timely basis, adequately address the Year 2000 Problem in all material respects. (p) Evidence and Perfection of Liens. The Agent shall have received (i) such documents as the Agent may reasonably request to evidence and perfect all Liens granted by the Collateral Documents required to be delivered under this Section 2 (other than the German Pledge Agreement) and (ii) such other evidence that all other actions necessary or, in the opinion 25 26 of the Agent, desirable to perfect and protect the priority of the security interests and liens created by such Collateral Documents, and to enhance the Agent's ability to preserve and protect its interests in and access to such Collateral, have been taken. (q) Characterization Under the Parent Indenture. The Agent shall have received evidence satisfactory to it that (i) the Credit Agreement, as amended by this Amendment, constitutes the "Credit Agreement" under and as defined in Section 1.01 of the Parent Indenture and (ii) all of the Obligations constitute and will continue to constitute "Bank Indebtedness", "Permitted Indebtedness", "Senior Indebtedness of Subsidiary Guarantors", and "Designated Senior Indebtedness of Subsidiary Guarantors", as each such term is defined in the Parent Indenture. (r) Other Documents. The Agent shall have received such other approvals, opinions or documents as the Agent or any Lender may reasonably request. (s) Closing Fees, Expenses, etc. The Agent shall have received for its own account, or for the account of each applicable Lender, as the case may be, all fees then due and payable pursuant to Section 2.14 and pursuant to the Amendment Fee Letter (as defined in Section 1), and all costs and expenses which have been invoiced and are payable pursuant to Section 8.4 of the Credit Agreement. (t) Disbursement Letter. The Agent shall have received a letter of disbursement of proceeds from the Treasurer of the Borrower setting forth the applicable account information and amount of the proceeds of the Loans made on the Amendment No. 6 Effective Date in connection with the Acquisition and the financing thereof. (u) Other Conditions. The conditions precedent to each Borrowing as provided in Section 4.2 of the Credit Agreement shall be satisfied on the Amendment No. 6 Effective Date. Section 3. Representations, Warranties and Covenants. (a) The Borrower hereby represents and warrants that this Amendment and the Credit Agreement, as amended hereby, constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforceability of creditors' rights generally and by general equitable principles. (b) The Borrower hereby represents and warrants that its execution and delivery of this Amendment, and its performance hereafter of the Credit Agreement as amended by this Agreement, have been duly authorized by all necessary corporate action, do not violate any provision of its certificate of incorporation, bylaws or other charter documents, will not violate any law, regulation, court order or writ applicable to it, will not require the approval or consent of any governmental agency, and do not require the approval or consent of any third party under 26 27 the terms of any contract or agreement to which the Borrower, Parent or any Subsidiary of the Borrower or Parent is bound (including, without limitation, the Parent Indenture). (c) The Borrower hereby represents and warrants that, after giving effect to all of the provisions of this Amendment, (i) no Default or Event of Default has occurred and is continuing or will have occurred and be continuing and (ii) all of the representations and warranties of the Borrower contained in the Credit Agreement, as amended hereby (other than representations and warranties which, in accordance with their express terms, are made only as of a specified date) are, and will be, true and correct as of the Amendment No. 6 Effective Date in all material respects as though made on and as of such date. Section 4. Reference to and Effect on Credit Agreement. The Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed. Neither the execution, delivery nor effectiveness of this Amendment shall operate as a waiver of any right, power or remedy of the Agent or any Lender of any Default or Event of Default under the Credit Agreement, all of which the Agent and the Lenders hereby expressly reserve. Nothing contained herein shall require the Agent or the Lender to hereafter waive any Default or Event of Default, or to further amend any provisions of any Loan Document, whether or not similar to the waivers or amendments effected by this Agreement. The Borrower, the Lenders and the Agent agree and acknowledge that this Amendment constitutes a "Loan Document" under and as defined in the Credit Agreement. Section 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws and decisions of the State of Illinois. Section 6. Counterparts. This Amendment may be executed in counterparts, each of which shall be an original and all of which together shall constitute one and the same agreement among the parties. * * * * 27 28 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. UNITED STATES CAN COMPANY By: /s/ Peter J. Andres ------------------------------------- Name: Peter J. Andres Title: Vice President and Treasurer 28 29 BANK OF AMERICA, N.A., as Agent By: /s/ Valerie C. Mills ------------------------------------ Name: Valerie C. Mills Title: Managing Director BANK OF AMERICA, N.A., as the Primary Issuing Lender, a Multicurrency Lender, a 364-Day Lender, and individually By: /s/ Valerie C. Mills ------------------------------------ Name: Valerie C. Mills Title: Managing Director 29 30 HARRIS TRUST AND SAVINGS BANK, as an Issuing Lender, and a Multicurrency Lender and a 364-Day Lender By: /s/ Richard H. Robb ------------------------------------ Name: Richard H. Robb Title: Managing Director 30 31 THE NORTHERN TRUST COMPANY, as a Multicurrency Lender and a 364-Day Lender By: /s/ Daniel A. Toll ------------------------------------ Name: Daniel A. Toll Title: Vice President 31 32 SOCIETE GENERALE, as a Multicurrency Lender and a 364-Day Lender By: /s/ Jerry Parisi ------------------------------------ Name: Jerry Parisi Title: Director 32 33 BANK ONE, NA (Main Office Chicago), as a 364-Day Lender By: /s/ Kevin L. Gillen ------------------------------------ Name: Kevin L. Gillen Title: Vice President 33 34 BANKERS TRUST COMPANY, as a 364-Day Lender By: /s/ Robert R. Telesca ------------------------------------ Name: Robert R. Telesca Title: Assistant Vice President 34 35 LASALLE BANK NATIONAL ASSOCIATION, as a 364-Day Lender By: /s/ Marc D. Horner ------------------------------------ Name: Marc D. Horner Title: Assistant Vice President 35 EX-10.7 3 FRANK J. GALVIN SEPARATION AGREEMENT 1 EXHIBIT 10.7 January 28, 2000 Mr. Frank J. Galvin 1171 Standish Court Naperville, IL 60540 Dear Frank: This Letter Agreement confirms our earlier discussions regarding your voluntary retirement from the position of Executive Vice-President and General Manager Aerosol with the United States Can Company ("U.S. Can"), effective February 4, 2000. This Letter Agreement supplements the Separation and "Non-Compete" Understanding between Frank J. Galvin and U.S. Can, dated January 4, 2000, which is incorporated hereto as Attachment A. A. Base Salary Continuance & Lump Sum Payments As a result of your retirement, you shall not be entitled to any further compensation, payments or remuneration, except as provided herein. After February 4, 2000, you will receive base salary continuance, payable in bi-weekly increments through February 4, 2002. In addition, on February 4, 2002 and February 4, 2003, respectively, you will receive lump sum payments in the gross amount of $170,000. The base salary continuance and lump sum payments shall be subject to customary withholding and other employment taxes and any other voluntary, authorized or required deductions. B. Limited Special Projects During 2000 and 2001, based on your availability, limited special projects may be assigned to you from time to time by Paul W. Jones, President and CEO of U.S. Can. Any reasonable and necessary business expenses incurred in connection with the limited special projects shall be reimbursed in accordance with U.S. Can's expense reimbursement policies in effect when such expenses are incurred. A separate consulting agreement will be agreed to by both parties. C. Medical and Health Benefits Upon payment of the applicable annual premiums (currently $1,430), you are eligible to receive U.S. Can's medical and dental insurance coverages pursuant to the terms of those plans until February 4, 2002. From February 4, 2002 through July 16, 2006, you, your spouse and dependents will be eligible for the supplemental retirement medical benefits as described in Amendment No. 1 to Employment Agreement, dated November 17, 1997. which, except as has been specifically amended by this Letter Agreement, is incorporated hereto as Attachment B. 2 D. Accrued or Unused Vacation You will be separately compensated (in a lump sum) only for accrued or unused vacation through February 4, 2000. E. 1999 Bonus Your bonus for 1999 will be paid on or about February 11, 2000, based on 1999 audited results for the Company. F. Restricted Stock and Stock Options Subject to and contingent upon the approval of the U.S. Can Board of Directors, the vesting of the certain restricted stock and/or non-qualified stock options will be accelerated to February 4, 2000, as follows: Original Plan Shares Vest Date Exercise Price ---- ------ --------- -------------- 1995 Equity Incentive Plan 30,000 6/23/00 -- 1995 Equity Incentive Plan 4,666 10/29/00 $16.125 1995 Equity Incentive Plan 4,667 10/29/01 $16.125 Vesting of restricted stock is a taxable event and the value of the restricted stock would be taxable as ordinary income at your marginal tax rate. U.S. Can is obligated to withhold taxes upon vesting, generally at your marginal tax rate. G. Miscellaneous Benefits (1) You will be eligible for any benefits which have heretofore vested to you in accordance with applicable documents pertaining to the Salaried Employees Retirement and Accumulation Plan ("SRAP") and the non-qualified 401(k) plan and benefit replacement plans ("non-qualified plans"). (2) Unless otherwise addressed in this Letter Agreement or its Attachments, benefits that will cease on February 4, 2000 include car allowance and deductions, travel insurance, short and long term disability, SRAP and non-qualified plan participation, Employee Stock Purchase Plan, the Benefit Replacement Plan and any other equity, deferred compensation, benefit or bonus plan. (3) U.S. Can will retain the services of a mutually-agreeable executive outplacement firm on a month-to-month basis for a period of up to 12 months. (Three firms have been suggested to you as options.) 3 H. Non-Competition/Non-Solicitation Agreement After your retirement from U.S. Can, you understand that you shall be free to work for any other employer or to engage in consulting or in any other business EXCEPT that you hereby covenant and agree that from the effective date of this Letter Agreement and for the four (4) years following your retirement during which you will receive the payments described above, you will not, without the express written approval of the President and CEO of U.S. Can: (1) engage, directly or indirectly, as owner, officer, director, employee, stockholder, principal, consultant, advisor, sales representative, agent, lender, guarantor, cosigner, investor or trustee of any corporation, partnership, proprietorship, joint venture, association or any other business or entity of any nature in the manufacture, development, sale, marketing, licensing and/or distribution of any product or service which is directly competitive with any product or service supplied by U.S. Can or any of its affiliates in the metal or rigid plastic container segment of the packaging industry, including but not limited to the following direct competitors of U.S. Can--Crown Cork & Seal, Impress, B-Way, Central, Plastican, Lettica, Southcorp, KW Plastics, Independent Can and J.L. Clark; (2) assist any person or entity in the development, maintenance, manufacture, sale, licensing, distribution or marketing of any product or service in a business or line of business in competition with U.S. Can or its affiliates in the metal or rigid plastic container segment of the packaging industry; (3) on behalf of yourself, or any other person or entity, solicit or otherwise interfere, with any customers or clients or prospective customers or clients of U.S. Can with whom you or anyone reporting to you had contact during your tenure with U.S. Can or during the consulting period; or (4) on behalf of yourself, or for any other person or entity, employ, offer to employ, solicit for employment, engage as a consultant, advisor, independent contractor or form an association with any person who is then, or who during the preceding two years was, an employee of U.S. Can or any of its affiliates. The foregoing restrictions shall not preclude you from retaining and/or making passive investment interests of less than two percent (2%) in corporations whose stock is registered under the Securities Exchange Act of 1934, as amended. If, at the time of enforcement of this provision, the period or scope of any provision is found to be unreasonable, the maximum reasonable period or scope shall be substituted for the period or scope stated in such provision. THIS NON-COMPETITION/NON-SOLICITATION PROVISION SUPERSEDES AND SUPPLANTS ANY NON-COMPETITION AND/OR NON-SOLICITATION AGREEMENT, CLAUSE OR PROVISION PREVIOUSLY AGREED TO BETWEEN YOU AND U.S. CAN, INCLUDING BUT NOT LIMITED TO PARAGRAPH 1.C. OF ATTACHMENT B. 4 I. Confidentiality (A) U.S. Can Proprietary Information Except in connection with your remaining employment or your limited special projects, you agree that you shall not disclose to any person or entity, or use, any proprietary or confidential information acquired by you while employed or engaged by U.S. Can. Proprietary and confidential information includes, but is not limited to, trade secrets, technical information, designs, drawings, processes, systems, procedures, formulae, test data, know-how, improvements, price lists, financial or other data, business plans, sales data, which is or was used by U.S. Can in the conduct of its business. You acknowledge that all such information, in any form, and copies and extracts thereof, are and shall remain the sole and exclusive property of U.S. Can. Upon your last day, you agree to return all such information, in whatever form maintained, to U.S. Can. If you acquire proprietary or confidential information during the course of any limited special projects, you agree to return all such information, in whatever form maintained, to U.S. Can at the conclusion of the project. For purposes of this Letter Agreement, Confidential Information is subject to the protection of the Illinois Trade Secrets Act. (B) This Letter Agreement From this date forward, you agree not to disclose, divulge, publicize or publish the existence or terms of this Letter Agreement, and its attachments, except to your counsel, spouse or financial advisor, or as required by law or as required to enforce the terms of this Letter Agreement. THIS CONFIDENTIALITY PROVISION SUPERSEDES AND SUPPLANTS ANY CONFIDENTIALITY AGREEMENT, CLAUSE OR PROVISION PREVIOUSLY AGREED TO BETWEEN YOU AND U.S. CAN. J. Nondisparagement You agree that you will refrain from making any negative, adverse or disparaging comments regarding U.S. Can or any of the Released Parties referred to in this Letter Agreement. K. Effect of Breach In the event you breach of the confidentiality, disparagement, or non-competition/non-solicitation provisions of this letter agreement, all payments hereunder will cease immediately. L. Release In consideration for the promises herein, you, for yourself, your agents, legal or personal representatives, assigns, heirs, distributees, administrators and executors (the "Releasing Parties"), hereby release and forever discharge U.S. Can, its present or past parents, subsidiaries, divisions, affiliates, or related companies, and their respective successors or assigns, present or past officers, trustees, directors, employees and agents of each of them (the "Released Parties"), from any and all 5 claims, demands, actions, liabilities and other claims for relief and remuneration whatsoever, whether known or unknown, arising or which could have arisen, up to and including the date of your execution of this letter agreement, including, without limitation, those arising out of or relating to your employment or change in employment status and termination of prior agreements, including any claims arising under Title VII of the Civil Rights Act of 1964 (as amended by the Civil Rights Act of 1991), the Americans With Disabilities Act, the Age Discrimination in Employment Act of 1967, the Illinois Human Rights Act, the Illinois Wage Payment and Collection Act, the Employee Retirement Income Security Act ("ERISA"), or any other federal, state, county, or local statute, law, ordinance, regulation, code or executive order, any tort or contract claims, whether express or implied, and any of the claims, matters and issues which could have been asserted by the Releasing Parties against the Released Parties in any legal, administrative, or other proceeding. U.S. Can, on behalf of itself and its past, present and future principals, officers and directors, predecessors, affiliates, successors and assigns, hereby release you, your heirs, and representatives from any and all claims, demands, actions and liabilities whatsoever arising from or out of your employment except wanton and willful misfeasance, fraud or criminal conduct in the discharge of your employment duties. M. Non-admission of Liability Nothing in this Letter Agreement, nor any actions taken by any parties in connection herewith, shall constitute, be construed as, or be deemed to be, an admission of fault, liability or wrongdoing of any kind whatsoever on the part of U.S. Can or the Released Parties or Frank J. Galvin. N. Effect of Death In the event of your death, the benefits and payments described above will be made to the Estate of Frank J. Galvin, except that the medical and health benefits described in paragraph C, above, will continue for your spouse and/or eligible dependents in accordance with the applicable plans. O. Arbitration Any dispute or claim under this Letter Agreement shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association ("AAA"). The arbitration shall be conducted in accordance with the AAA rules governing employment disputes. 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 arbitrator may be entered in any court having jurisdiction thereof. P. Knowing and Voluntary Agreement; Statutory Consideration Period YOU REPRESENT AND WARRANT THAT YOU HAVE BEEN ADVISED, IN WRITING, TO CONSULT WITH COUNSEL OR AN ATTORNEY IN CONNECTION WITH THIS LETTER AGREEMENT. THE PARTIES REPRESENT AND WARRANT THAT, PRIOR TO EXECUTING THIS LETTER AGREEMENT, THEY HAVE READ IT IN ITS ENTIRETY AND 6 FULLY UNDERSTAND ITS MEANING AND EFFECT AND THAT THEY HAVE ENTERED INTO IT KNOWINGLY AND VOLUNTARILY. YOU REPRESENT AND WARRANT THAT YOU HAVE BEEN GIVEN TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS LETTER AGREEMENT AND THAT YOU HAVE BEEN GIVEN SEVEN (7) DAYS AFTER EXECUTING OR SIGNING IT IN WHICH TO REVOKE IT. THIS LETTER AGREEMENT SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED. This Letter Agreement, consisting of six (6) pages and Attachments A and B, contains the entire agreement between you and U.S. Can or its affiliates. This Letter Agreement supersedes, terminates and discharges all prior oral and written agreements, commitments or understandings between you and U.S. Can or its affiliates. This Letter Agreement shall be binding on and inure to the benefit of U.S. Can, its affiliates and successors and assigns. Sincerely, UNITED STATES CAN COMPANY By: ------------------------------------ Roger B. Farley Sr. Vice President - Human Resources AGREED TO BY: APPROVED: UNITED STATES CAN COMPANY By: - -------------------------------------- ------------------------------------ Frank J. Galvin Paul W. Jones Executive Vice President & Gen'l Mgr., President and CEO Aerosol Attachments EX-10.24 4 JOHN L. WORKMAN EMPLOYMENT AGREEMENT 1 EXHIBIT 10.24 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 25th day of January, 2000 (the "Effective Date"), by and among John L. Workman (the "Executive") and 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 Executive's employment by the Company; WHEREAS, by letter dated July 7, 1998, the Company made certain commitments to the Executive concerning certain terms of Executive's employment with the Company and this Agreement will serve to formally memorialize such commitments and reflect certain other terms of employment; WHEREAS, this Agreement provides that, under certain circumstances, the Executive is to be granted awards based on the common stock of U.S. Can ("U.S. Can Stock") under one or more plans maintained by U.S. Can; 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. (c) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (d) "Date of Termination" means the last day the Executive is employed by the Company, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (e) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (f) The Executive's "Supervisor" shall be Paul W. Jones, Chairman & CEO or his successor. 2 (g) "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 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 the rank he holds as of the date hereof. 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 and 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 be the period beginning on the Effective Date and ending on the day two years after the Effective Date. This Agreement shall be inapplicable to periods of employment after the end of the Agreement Term. Thereafter, and subject to the provisions of paragraph 2(g), and subject to the Executive then becoming eligible to participate in the Executive Severance Plan (as in effect from time to time), the Executive's continuing employment with the Company shall be at-will. (g) As of the Effective Date of this Agreement, the Executive and the Company are entering into an agreement relating to certain terms of employment in the event of a change in control of U.S. Can Corporation (the "Change in Control Agreement"). If a Change in Control (as that term is defined in the Change in Control Agreement) occurs during the Agreement Term, the Agreement Term will end on the date of such Change in Control. Immediately following such expiration, the terms of the Executive's employment shall be governed by the Change in Control Agreement. 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: -2- 3 (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 Three Hundred Seventy Five Thousand U.S. Dollars ($375,000) (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Compensation Committee of the Board of Directors, if the Executive's Supervisor is the Chief Executive Officer ("CEO") or, if the Executive's Supervisor is not the CEO, by the Executive's 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 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). The amount of the payment shall be reduced on a pro rata basis to reflect the portion of the performance period prior to the first date of employment. 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) Options. (i) If and to the extent the Executive is eligible for matching stock options, the terms and conditions of those options shall be governed by such Executive's offer letter and option award letter or agreement. (ii) For fiscal years after 1999, the Executive may, in the discretion of the Board of Directors of U.S. Can (or a committee thereof) (the "Compensation Committee") be granted options to purchase U.S. Can Stock at such times as options are granted to the Company's other senior executives. Subject to the foregoing provisions of this paragraph (c), options to purchase U.S. Can Stock shall be subject to such terms, and shall cover a number of shares, as are determined by the Compensation Committee. (d) Life Insurance. The Company shall obtain term life insurance coverage on the Executive's life providing not less than two times the Executive's base salary in death benefits, 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. (e) 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. (f) 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. (g) Vacation and Holidays. During each year of the Agreement Term, the Executive shall be entitled to four (4) weeks of paid vacation plus the paid holidays observed by the Company. -3- 4 (h) Car Allowance. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (i) 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 (i) 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 selected by the Company and reasonably acceptable to the Executive, and the Executive agrees to submit to such tests and examination 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 mean: (i) the willful and continued failure by the Executive to substantially perform his duties with the Company after notice and failure to cure; or (ii) willful gross misconduct that is materially and demonstrably injurious to the Company or the Affiliates. (d) Constructive Discharge. If: (i) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time after the Executive has knowledge of the circumstances constituting Good Reason, which notice shall identify in reasonable detail the circumstances which the Executive believes constitute Good Reason; (ii) the Company fails to notify the Executive of the Company's intended method of correction within 14 days after the Company receives the notice, or the Company fails to reasonably correct the circumstances within 14 days after such notice; and (iii) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances; or within a reasonable time after the Company fails to reasonably correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent (and except in consequence of a prior termination of the Executive's employment), the occurrence of any of the following circumstances: -4- 5 (I) Assignment of duties inconsistent in any material respect with the Executive's position, authority or duties specified in the Agreement (provided that a change in the Executive's reporting relationship shall not constitute "Good Reason"). (II) A reduction in the Executive's Salary rate to an amount that is less than what is required by the Agreement. (III) The proposed or actual relocation of the Executive's base office on terms that would impose an unreasonable financial or personal hardship on the Executive. (IV) The failure of a successor to assume this Agreement in accordance with paragraph 16. (V) Any attempt by the Company or a successor to terminate the Executive's employment that is not materially in accordance with this Agreement. (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. However, to the extent that the procedures specified in paragraph 4(d) are required, the procedures of this paragraph 4(e) may not be used in lieu of the procedures required under paragraph 4(d). (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)(i)), 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 payments 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. -5- 6 (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 pursuant to any employee benefit plans or arrangements adopted 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 or 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 Company's Management Incentive Plan 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 Constructive Discharge) 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 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 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 described in paragraph 9, the Executive shall receive from the Company payment of the award under the Company's Management Incentive Plan 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 -6- 7 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. (iii) If the Executive holds any options to purchase U.S. Can Stock on the Date of Termination that are not then exercisable, then during the Severance Period the options shall become exercisable as though the Executive continued to be employed for the duration of the Severance Period, provided that any such options that remain outstanding immediately after the last day of the Severance Period (regardless of whether they are then exercisable) shall expire at that time. 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. 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 Executive Severance Plan, or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. However, this paragraph shall not affect the Executive's right to receive any benefits with respect to termination of employment outside of the Agreement Term. 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 -7- 8 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. Covenants. As a condition of entering into this Agreement, the Executive is required to enter into the Company' standard form of Employee Agreement, as of the date hereof, which relates to non-competition, confidentiality, inventions, and certain other matters. 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 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 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 -8- 9 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 U.S. mail, postage prepaid, effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy 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 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 -9- 10 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 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, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof; provided, however, that 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 described in paragraph 9. 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. -10- 11 IN WITNESS THEREOF, 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 Executive U.S. Can Corporation By: /s/ Paul W. Jones Its: Chairman and CEO United States Can Company By: /s/ Paul W. Jones Its: Chairman and CEO -11- 12 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. (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; -12- 13 (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. --------------------------------- EXECUTIVE Date: State of County of Subscribed Before Me This Day of , . - ---- --------- ------- - ------------------------------ Notary Public -13- EX-10.31 5 JOHN L. WORKMAN CHANGE-IN-CONTROL AGREEMENT 1 EXHIBIT 10.31 CHANGE IN CONTROL AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 31st day of January, 2000 (the "Effective Date"), by and among John L. Workman (the "Executive") and U.S. Can Company, a Delaware Corporation, 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 Company wishes to assure itself of the continuity of the Executive's services prior to, and in the event of a Change in Control (as described below); and WHEREAS, the Company, U.S. Can, and the Executive accordingly desire to enter into this Agreement providing for certain rights and benefits if a "Change in Control" occurs during the "Agreement Term," including certain employment rights during the "Employment Period" that follows a Change in Control, and certain separation benefits in the event of the Executive's termination of employment under specified circumstances during the Employment Period, subject to the terms and conditions set forth below; and WHEREAS, this Agreement provides that, under certain circumstances, the Executive is to be granted awards based on the common stock of U.S. Can ("U.S. Can Stock") under one or more plans maintained by U.S. Can; 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 "Agreement Term" shall begin on the Effective Date and shall continue through December 31, 2001, subject to the following: (i) As of December 31, 2001, and on each December 31 thereafter, the Agreement Term shall automatically be extended for one additional year unless, not later than the preceding October 31, either party shall have given notice that such party does not wish to extend the Agreement Term. (ii) If a Change in Control (as defined in paragraph 12) occurs during the Agreement Term (as it may be extended from time to time), the Agreement Term shall continue for a period of twenty-four calendar months beyond the calendar month 2 in which such Change in Control occurs and, following an extension in accordance with this paragraph (ii), no further extensions shall occur under paragraph 1(b)(i). (iii) If a Change in Control described in the first clause in the definition of Change in Control in paragraph 12 (relating to the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can occurs during the Agreement Term (as it may be extended from time to time), but the Board of Directors of U.S. Can thereafter determines that the such acquisition will not substantially affect the control of U.S. Can, then such Board may reduce the 24-month extension period set forth in paragraph (ii) next above; provided that the Agreement Term may not end earlier than six (6) months after such notice of reduction is provided by the Board or, if earlier, the date such Agreement Term would end in the absence of action under this paragraph (iii). (c) The term "Change in Control" shall have the meaning ascribed to it in paragraph 12. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 5(c). (e) "Date of Termination" means the last day the Executive is employed by the Company, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 5. (f) 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. (g) The "Employment Period" is the period commencing on the date of the Change in Control and ending on the last day of the Agreement Term. (h) The term "Good Reason" shall have the meaning ascribed to it in paragraph 5(d). (i) The Executive's "Supervisor" shall be Paul W. Jones, Chairman & CEO. -2- 3 (j) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. 2. Employment After a Change in Control. If a Change in Control occurs during the Agreement Term, and the Executive is in the employ of the Company on the date of the Change in Control, the Company hereby agrees to continue the Executive in its employ for the Employment Period, subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Employment Period, and the Executive hereby agrees to remain in the employ of the Company during the Employment Period. (b) During the Employment Period, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving in the position with the Company as in effect immediately prior to the Change in Control, 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 the rank he held immediately prior to the Change in Control. 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 his position determined in accordance with paragraph 2(b). 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. If the Executive's duties change between the Effective Date and the date immediately prior to a Change in Control, the Executive's duties immediately prior to the Change in Control shall govern the application of this paragraph 2. However, if (i) the Executive's duties are changed, (ii) the change is materially related to a Change in Control, and (iii) the Executive does not consent to the change in duties in writing, the determination of the Executive's duties prior to the time they are so changed shall be used in applying the provisions of the preceding sentence. (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, membership on the boards of directors of other organizations, 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 ; provided, however, that the -3- 4 Executive shall not serve on the board of any business, or hold any other 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. 3. Compensation During the Employment Period. Subject to the terms of this Agreement, during the Employment Period, 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 at a rate which is not less than his highest annual base Salary rate during the one-year period prior to the date of the Change in Control (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Executive's 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 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 Management Incentive Plan in which any portion of the Employment Period occurs, the Executive shall be provided with an opportunity for an incentive payment equal to not less than the greatest incentive compensation opportunity provided to the Executive during the one-year period prior to the Change in Control. (c) Options. (i) The Executive shall be granted options to purchase U.S. Can Stock at such times as options are granted to the Company's other senior executives, and shall be subject to such terms as are comparable to other senior executives of the Company; provided that the Executive shall receive annual option grants having a value (using a Black-Scholes or similar methodology) that is comparable to the average annual value of grants received by the Executive during the two-year period prior to the Change in Control. (ii) If the Executive is in the employ of the Company on the date of a Change in Control, then any options to purchase U.S. Can Stock then held by the Executive that are not then exercisable shall become immediately exercisable, and shall remain exercisable until the expiration of the option in accordance with its terms. (d) Life Insurance. The Company shall obtain term life insurance coverage on the Executive's life providing not less than two times the Executive's base salary in death benefits. Death benefits under such coverage shall be payable to the beneficiary named -4- 5 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. (e) 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 Employment Period 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 6(b) or 6(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. (f) 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. (g) Vacation and Holidays. During each year of the Employment Period, the Executive shall be entitled to not less than the amount of paid vacation he was entitled to receive prior to the Change in Control, plus the paid holidays observed by the Company. (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. Compensation and benefit amounts due from the Company under this paragraph 3 may be provided to the Executive by an Affiliate; provided, however, that the Company shall be relieved of the obligation to provide such compensation or benefit amounts only to the extent that they are in fact provided by the Affiliate. 4. Tax Limitations. If, during the Agreement Term, any payment or benefit to which the Executive is entitled from the Company, any affiliate, or trusts established by the Company or by any affiliate (the "Payments," which shall include, without limitation, the vesting of an option or other non-cash benefit or property) are more likely than not to result in a loss of a -5- 6 deduction to the Company by reason of section 280G of the Internal Revenue Code of 1986 or any successor provision to that section, the Payments shall be reduced to the extent required to avoid such loss of deduction. The Executive shall be entitled to select the order in which payments are to be reduced in accordance with the preceding sentence. If requested by the Executive, the Company shall provide complete compensation and tax data on a timely basis to the Executive and to an accounting or law firm designated by the Executive in order to enable the Executive to determine the extent to which payments from the Company and its affiliates may result in a loss of a deduction, and the Company shall reimburse the Executive for any reasonable expenses incurred by the Executive for such purpose. If the Executive and the Company shall disagree as to whether a payment under this Agreement is more likely than not to result in the loss of a deduction, the matter shall be resolved by an opinion of tax counsel chosen by the Company's independent auditors. The Company shall pay the fees and expenses of such counsel, and shall make available such information as may be reasonably requested by such counsel to prepare the opinion. If, by reason of the limitations of this paragraph 4, the maximum amount payable to the Executive under this Agreement cannot be determined prior to the due date for such payment, the Company shall pay on the due date the undisputed amount which it in good faith determines to be payable and shall pay the remaining amount, with interest at a rate, compounded semi-annually, equal to 120% of the applicable Federal rate determined under section 1274(d) of the Internal Revenue Code of 1986, as soon as such remaining amount is determined in accordance with this paragraph 4. 5. Termination. The Executive's employment with the Company during the Employment Period may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 5(a) through 5(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 selected by the Company and reasonably acceptable to the Executive, and the Executive agrees to submit to such tests and examination 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 mean: (i) the willful and continued failure by the Executive to substantially perform his duties with the Company after notice and failure to cure; or (ii) willful gross misconduct that is materially and demonstrably injurious to the Company or the Affiliates. (d) Constructive Discharge. If: -6- 7 (i) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time after the Executive has knowledge of the circumstances constituting Good Reason, which notice shall identify in reasonable detail the circumstances which the Executive believes constitute Good Reason; (ii) the Company fails to notify the Executive of the Company's intended method of correction within 14 days after the Company receives the notice, or the Company fails to reasonably correct the circumstances within 14 days after such notice (except that no such opportunity to reasonably correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph (III) below, relating to relocation); and (iii) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances; or within a reasonable time after the Company fails to reasonably correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent (and except in consequence of a prior termination of the Executive's employment), the occurrence of any of the following circumstances: (I) Assignment of duties, responsibilities, or status inconsistent with those specified in the Agreement (provided that a change in the Executive's reporting relationship shall not constitute "Good Reason"). (II) A reduction in the Executive's Salary rate to an amount that is less than what is required by the Agreement. (III) The relocation of the Executive's base office to an office that is more than 50 miles from the Executive's base office immediately prior to the Change in Control. (IV) The failure of a successor to assume this Agreement in accordance with paragraph 18. (V) Any attempt by the Company or a successor to terminate the Executive's employment that is not materially in accordance with this Agreement. (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. However, to the extent that the procedures specified in paragraph 5(d) are required, the procedures of this paragraph 5(e) may not be used in lieu of the procedures required under paragraph 5(d). -7- 8 (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 5(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 5(f) only if it is not for reasons described in paragraph 5(b), 5(c), 5(d), or 5(e). (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 and the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 6. Rights Upon Termination. The Executive's right 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 6: (a) If the Executive's Date of Termination occurs during the Employment Period 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 payment for unused vacation days from the Company, as determined in accordance with Company policy as in effect from time to time. (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 such incentive compensation award at the regularly scheduled time. (iv) Any other payments or benefits to be provided to the Executive by the Company pursuant to any employee benefit plans or arrangements adopted by the Company, to the extent such amounts are due from the Company. -8- 9 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 Employment Period under circumstances described in paragraph 5(a) (relating to the Executive's death) or paragraph 5(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 6(a): (i) The Executive (or his estate) shall receive from the Company a lump sum payment of not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination; provided, however, that if the Date of Termination occurs because of the Executive's death, then the amount otherwise payable under this paragraph (i) shall be reduced (but not below zero) by the amount of any life insurance benefits payable with respect to the Executive to the estate or beneficiaries of the Executive under any program maintained by the Company or the Affiliates. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the Company's Management Incentive Plan 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 Employment Period under circumstances described in paragraph 5(d) (relating to Constructive Discharge) or paragraph 5(f) (relating to termination by the Company without Cause), then: (i) As soon as practicable (but in no event later than ten business days) after the Date of Termination, the Executive shall receive from the Company a lump sum payment equal to the sum of all of the Salary payments the Executive would have received (based on the Salary rate in effect on the Date of Termination) if he remained in the employ of the Company until the eighteen (18) month anniversary of the Date of Termination. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement described in paragraph 10, the Executive shall receive from the Company payment of the award under the Company's Management Incentive Plan for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; -9- 10 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 6, no payment will be made or benefit provided under this paragraph 6(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 Employment Period under circumstances described in paragraphs 5(c) (relating to Cause) or 5(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. 7. Other Benefits. Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 14, in the event of a termination of employment during the Employment Period, 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 Executive Severance Plan, or any other arrangement of the Company (or any Affiliate) providing benefits upon involuntary termination of employment. However, this paragraph shall not affect the Executive's right to receive any benefits with respect to termination of employment outside of the Employment Period. 8. 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 smooth transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 8, 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. -10- 11 (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, 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 Company. 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 (on which the Illinois Trade Secrets Act is based). 9. 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 owed to the Company by the Executive, 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. 10. Covenants. As a condition of entering into this Agreement, the Executive is required to enter into the Employee Agreement, which is set forth as Supplement B to this Agreement, and which relates to certain protections as to competition, confidentiality, inventions, and certain other matters. 11. 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 of any claims that may be made against the Company and the Affiliates, and will assist the Company and the Affiliates in the prosecution of any claims that may be made by the Company or 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, including travel expenses. For periods after the Executive's employment with the Company terminates, the Company agrees to provide reasonable compensation to the Executive any expert testimony provided by the Executive. 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. 12. Change in Control Definition. For purposes of this Agreement, the term "Change in Control" shall mean any one or more of the following: the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of -11- 12 1934, as amended (the "Exchange Act")) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can (the "Outstanding Common Stock"), a merger or consolidation of U.S. Can in which U.S. Can does not survive as an independent public company, a sale of all or substantially all of the assets of U.S. Can, a liquidation or dissolution of U.S. Can or, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of U.S. Can cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by U.S. Can's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, however, that the following acquisitions shall not constitute a Change of Control for the purpose of this section: (A) any acquisition directly from U.S. Can, or (B) any acquisition of stock by any employee benefit plan (or related trust) sponsored or maintained by U.S. Can or its affiliates. 13. 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. 14. 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. 15. 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. 16. 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). 17. 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. 18. 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 -12- 13 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 or beneficiaries 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, and regardless of whether before, on, or after a Change in Control), 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 18, 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. 19. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by registered or certified mail, return receipt requested, 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 addresses set forth below (or such other addresses as shall be specified by the parties by 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 for 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 receipt by facsimile, telephone or otherwise; -13- 14 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 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 20. 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. 21. Legal and Enforcement Costs. The provisions of this paragraph 21 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 and all of his rights 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 21 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. -14- 15 (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 21 be reasonable. (d) The Executive's rights to payments under this paragraph 21 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 repay such amounts to the Company. 22. 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. 23. Entire Agreement. Except as otherwise provided herein, and except as provided with respect to periods prior to a Change in Control under the employment agreement between the Executive and the Company dated as of the Effective Date of this Agreement, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof; provided, however, that nothing in this Agreement shall be construed to limit any policy or agreement that is otherwise applicable relating to confidentiality, rights to inventions, copyrightable material, business and/or technical information, trade secrets, solicitation of employees, interference with relationships with other businesses, competition, and other similar policies or agreement for the protection of the business and operations of the Company and the Affiliates (including, without limitation, the Employee Agreement described in paragraph 10). 24. 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. -15- 16 IN WITNESS THEREOF, 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 Executive U.S. Can Corporation By: /s/ Paul W. Jones Its: Chairman and CEO United States Can Company By: /s/ Paul W. Jones Its: Chairman and CEO -16- 17 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 U.S. 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. -17- 18 (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. --------------------------- Executive Date: State of County of Subscribed Before Me This Day of , . - -------- ----------- --------- - ------------------------------------- Notary Public -18- 19 Supplement B Employee Agreement -19- EX-10.32 6 ROGER B. FARLEY EMPLOYMENT AGREEMENT 1 EXHIBIT 10.32 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 3rd day of February, 2000 (the "Effective Date"), by and among Roger B. Farley (the "Executive") and 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 Executive's employment by the Company; WHEREAS, by letter dated July 7, 1998, the Company made certain commitments to the Executive concerning certain terms of Executive's employment with the Company and this Agreement will serve to formally memorialize such commitments and reflect certain other terms of employment; WHEREAS, this Agreement provides that, under certain circumstances, the Executive is to be granted awards based on the common stock of U.S. Can ("U.S. Can Stock") under one or more plans maintained by U.S. Can; 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. (c) The term "Cause" shall have the meaning ascribed to it in paragraph 4(c). (d) "Date of Termination" means the last day the Executive is employed by the Company, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 4. (e) The term "Good Reason" shall have the meaning ascribed to it in paragraph 4(d). (f) The Executive's "Supervisor" shall be Paul W. Jones, Chairman & CEO or his successor. 2 (g) "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 the rank he holds as of the date hereof. 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 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 be the period beginning on the Effective Date and ending on the day two years after the Effective Date. This Agreement shall be inapplicable to periods of employment after the end of the Agreement Term. Thereafter, and subject to the provisions of paragraph 2(g), and subject to the Executive then becoming eligible to participate in the Executive Severance Plan (as in effect from time to time), the Executive's continuing employment with the Company shall be at-will. (g) As of the Effective Date of this Agreement, the Executive and the Company are entering into an agreement relating to certain terms of employment in the event of a change in control of U.S. Can Corporation (the "Change in Control Agreement"). If a Change in Control (as that term is defined in the Change in Control Agreement) occurs during the Agreement Term, the Agreement Term will end on the date of such Change in Control. Immediately following such expiration, the terms of the Executive's employment shall be governed by the Change in Control Agreement. 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: -2- 3 (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 Two Hundred Sixteen Thousand U.S. Dollars ($216,000) (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Compensation Committee of the Board of Directors, if the Executive's Supervisor is the Chief Executive Officer ("CEO") or, if the Executive's Supervisor is not the CEO, by the Executive's 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 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). The amount of the payment shall be reduced on a pro rata basis to reflect the portion of the performance period prior to the first date of employment. 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) Options. (i) If and to the extent the Executive is eligible for matching stock options, the terms and conditions of those options shall be governed by such Executive's offer letter and option award letter or agreement. (ii) For fiscal years after 1999, the Executive may, in the discretion of the Board of Directors of U.S. Can (or a committee thereof) (the "Compensation Committee") be granted options to purchase U.S. Can Stock at such times as options are granted to the Company's other senior executives. Subject to the foregoing provisions of this paragraph (c), options to purchase U.S. Can Stock shall be subject to such terms, and shall cover a number of shares, as are determined by the Compensation Committee. (d) Life Insurance. The Company shall obtain term life insurance coverage on the Executive's life providing not less than two times the Executive's base salary in death benefits, 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. (e) 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. (f) 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. (g) Vacation and Holidays. During each year of the Agreement Term, the Executive shall be entitled to four (4) weeks of paid vacation plus the paid holidays observed by the Company. -3- 4 (h) Car Allowance. During the Agreement Term, the Executive shall be entitled to a net after-tax car allowance of $900 per month. (i) 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 (i) 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 selected by the Company and reasonably acceptable to the Executive, and the Executive agrees to submit to such tests and examination 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 mean: (i) the willful and continued failure by the Executive to substantially perform his duties with the Company after notice and failure to cure; or (ii) willful gross misconduct that is materially and demonstrably injurious to the Company or the Affiliates. (d) Constructive Discharge. If: (i) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time after the Executive has knowledge of the circumstances constituting Good Reason, which notice shall identify in reasonable detail the circumstances which the Executive believes constitute Good Reason; (ii) the Company fails to notify the Executive of the Company's intended method of correction within 14 days after the Company receives the notice, or the Company fails to reasonably correct the circumstances within 14 days after such notice; and (iii) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances; or within a reasonable time after the Company fails to reasonably correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent (and except in consequence of a prior termination of the Executive's employment), the occurrence of any of the following circumstances: -4- 5 (I) Assignment of duties inconsistent in any material respect with the Executive's position, authority or duties specified in the Agreement (provided that a change in the Executive's reporting relationship shall not constitute "Good Reason"). (II) A reduction in the Executive's Salary rate to an amount that is less than what is required by the Agreement. (III) The proposed or actual relocation of the Executive's base office on terms that would impose an unreasonable financial or personal hardship on the Executive. (IV) The failure of a successor to assume this Agreement in accordance with paragraph 16. (V) Any attempt by the Company or a successor to terminate the Executive's employment that is not materially in accordance with this Agreement. (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. However, to the extent that the procedures specified in paragraph 4(d) are required, the procedures of this paragraph 4(e) may not be used in lieu of the procedures required under paragraph 4(d). (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)(i)), 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 payments 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. -5- 6 (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 pursuant to any employee benefit plans or arrangements adopted 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 or 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 Company's Management Incentive Plan 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 Constructive Discharge) 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 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 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 described in paragraph 9, the Executive shall receive from the Company payment of the award under the Company's Management Incentive Plan 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 -6- 7 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. (iii) If the Executive holds any options to purchase U.S. Can Stock on the Date of Termination that are not then exercisable, then during the Severance Period the options shall become exercisable as though the Executive continued to be employed for the duration of the Severance Period, provided that any such options that remain outstanding immediately after the last day of the Severance Period (regardless of whether they are then exercisable) shall expire at that time. 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. 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 Executive Severance Plan, or any other arrangement of the Company (or any Affiliate), providing benefits upon involuntary termination of employment. However, this paragraph shall not affect the Executive's right to receive any benefits with respect to termination of employment outside of the Agreement Term. 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 -7- 8 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. Covenants. As a condition of entering into this Agreement, the Executive is required to enter into the Company' standard form of Employee Agreement, as of the date hereof, which relates to non-competition, confidentiality, inventions, and certain other matters. 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 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 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 -8- 9 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 U.S. mail, postage prepaid, effective three days after deposit, (iii) sent by facsimile transmission, effective upon confirmation of transmission and deposit of a hard copy 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 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 -9- 10 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 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, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof; provided, however, that 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 described in paragraph 9. 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. -10- 11 IN WITNESS THEREOF, 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 Executive U.S. Can Corporation By: /s/ Paul W. Jones Its: Chairman and CEO United States Can Company By: /s/ Paul W. Jones Its: Chairman and CEO -11- 12 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. (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; -12- 13 (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. ------------------------- EXECUTIVE Date: State of County of Subscribed Before Me This Day of , . - ----- --------- ------- - ---------------------------- Notary Public -13- EX-10.33 7 ROGER B. FARLEY CHANGE-IN-CONTROL AGREEMENT 1 EXHIBIT 10.33 CHANGE IN CONTROL AGREEMENT THIS AGREEMENT (the "Agreement"), made and entered into this 3rd day of February, 2000 (the "Effective Date"), by and among Roger B. Farley (the "Executive") and U.S. Can Company, a Delaware Corporation, 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 Company wishes to assure itself of the continuity of the Executive's services prior to, and in the event of a Change in Control (as described below); and WHEREAS, the Company, U.S. Can, and the Executive accordingly desire to enter into this Agreement providing for certain rights and benefits if a "Change in Control" occurs during the "Agreement Term," including certain employment rights during the "Employment Period" that follows a Change in Control, and certain separation benefits in the event of the Executive's termination of employment under specified circumstances during the Employment Period, subject to the terms and conditions set forth below; and WHEREAS, this Agreement provides that, under certain circumstances, the Executive is to be granted awards based on the common stock of U.S. Can ("U.S. Can Stock") under one or more plans maintained by U.S. Can; 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 "Agreement Term" shall begin on the Effective Date and shall continue through December 31, 2001, subject to the following: (i) As of December 31, 2001, and on each December 31 thereafter, the Agreement Term shall automatically be extended for one additional year unless, not later than the preceding October 31, either party shall have given notice that such party does not wish to extend the Agreement Term. (ii) If a Change in Control (as defined in paragraph 12) occurs during the Agreement Term (as it may be extended from time to time), the Agreement Term shall continue for a period of twenty-four calendar months beyond the calendar month in which such Change in Control occurs and, following an extension in 2 accordance with this paragraph (ii), no further extensions shall occur under paragraph 1(b)(i). (iii) If a Change in Control described in the first clause in the definition of Change in Control in paragraph 12 (relating to the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can occurs during the Agreement Term (as it may be extended from time to time), but the Board of Directors of U.S. Can thereafter determines that the such acquisition will not substantially affect the control of U.S. Can, then such Board may reduce the 24-month extension period set forth in paragraph (ii) next above; provided that the Agreement Term may not end earlier than six (6) months after such notice of reduction is provided by the Board or, if earlier, the date such Agreement Term would end in the absence of action under this paragraph (iii). (c) The term "Change in Control" shall have the meaning ascribed to it in paragraph 12. (d) The term "Cause" shall have the meaning ascribed to it in paragraph 5(c). (e) "Date of Termination" means the last day the Executive is employed by the Company, provided that the Executive's employment is terminated in accordance with the provisions of paragraph 5. (f) 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. (g) The "Employment Period" is the period commencing on the date of the Change in Control and ending on the last day of the Agreement Term. (h) The term "Good Reason" shall have the meaning ascribed to it in paragraph 5(d). (i) The Executive's "Supervisor" shall be Paul W. Jones, Chairman & CEO. (j) "U.S. Can Stock" is common stock of U.S. Can or a successor to U.S. Can. -2- 3 2. Employment After a Change in Control. If a Change in Control occurs during the Agreement Term, and the Executive is in the employ of the Company on the date of the Change in Control, the Company hereby agrees to continue the Executive in its employ for the Employment Period, subject to the following: (a) Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive during the Employment Period, and the Executive hereby agrees to remain in the employ of the Company during the Employment Period. (b) During the Employment Period, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving in the position with the Company as in effect immediately prior to the Change in Control, 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 the rank he held immediately prior to the Change in Control. 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 his position determined in accordance with paragraph 2(b). 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. If the Executive's duties change between the Effective Date and the date immediately prior to a Change in Control, the Executive's duties immediately prior to the Change in Control shall govern the application of this paragraph 2. However, if (i) the Executive's duties are changed, (ii) the change is materially related to a Change in Control, and (iii) the Executive does not consent to the change in duties in writing, the determination of the Executive's duties prior to the time they are so changed shall be used in applying the provisions of the preceding sentence. (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, membership on the boards of directors of other organizations, 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 ; provided, however, that the -3- 4 Executive shall not serve on the board of any business, or hold any other 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. 3. Compensation During the Employment Period. Subject to the terms of this Agreement, during the Employment Period, 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 at a rate which is not less than his highest annual base Salary rate during the one-year period prior to the date of the Change in Control (the "Salary"). The Executive's Salary rate shall be reviewed annually by the Executive's 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 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 Management Incentive Plan in which any portion of the Employment Period occurs, the Executive shall be provided with an opportunity for an incentive payment equal to not less than the greatest incentive compensation opportunity provided to the Executive during the one-year period prior to the Change in Control. (c) Options. (i) The Executive shall be granted options to purchase U.S. Can Stock at such times as options are granted to the Company's other senior executives, and shall be subject to such terms as are comparable to other senior executives of the Company; provided that the Executive shall receive annual option grants having a value (using a Black-Scholes or similar methodology) that is comparable to the average annual value of grants received by the Executive during the two-year period prior to the Change in Control. (ii) If the Executive is in the employ of the Company on the date of a Change in Control, then any options to purchase U.S. Can Stock then held by the Executive that are not then exercisable shall become immediately exercisable, and shall remain exercisable until the expiration of the option in accordance with its terms. (d) Life Insurance. The Company shall obtain term life insurance coverage on the Executive's life providing not less than two times the Executive's base salary in death benefits. Death benefits under such coverage shall be payable to the beneficiary named -4- 5 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. (e) 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 Employment Period 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 6(b) or 6(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. (f) 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. (g) Vacation and Holidays. During each year of the Employment Period, the Executive shall be entitled to not less than the amount of paid vacation he was entitled to receive prior to the Change in Control, plus the paid holidays observed by the Company. (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. Compensation and benefit amounts due from the Company under this paragraph 3 may be provided to the Executive by an Affiliate; provided, however, that the Company shall be relieved of the obligation to provide such compensation or benefit amounts only to the extent that they are in fact provided by the Affiliate. 4. Tax Limitations. If, during the Agreement Term, any payment or benefit to which the Executive is entitled from the Company, any affiliate, or trusts established by the Company or by any affiliate (the "Payments," which shall include, without limitation, the vesting of an option or other non-cash benefit or property) are more likely than not to result in a loss of a -5- 6 deduction to the Company by reason of section 280G of the Internal Revenue Code of 1986 or any successor provision to that section, the Payments shall be reduced to the extent required to avoid such loss of deduction. The Executive shall be entitled to select the order in which payments are to be reduced in accordance with the preceding sentence. If requested by the Executive, the Company shall provide complete compensation and tax data on a timely basis to the Executive and to an accounting or law firm designated by the Executive in order to enable the Executive to determine the extent to which payments from the Company and its affiliates may result in a loss of a deduction, and the Company shall reimburse the Executive for any reasonable expenses incurred by the Executive for such purpose. If the Executive and the Company shall disagree as to whether a payment under this Agreement is more likely than not to result in the loss of a deduction, the matter shall be resolved by an opinion of tax counsel chosen by the Company's independent auditors. The Company shall pay the fees and expenses of such counsel, and shall make available such information as may be reasonably requested by such counsel to prepare the opinion. If, by reason of the limitations of this paragraph 4, the maximum amount payable to the Executive under this Agreement cannot be determined prior to the due date for such payment, the Company shall pay on the due date the undisputed amount which it in good faith determines to be payable and shall pay the remaining amount, with interest at a rate, compounded semi-annually, equal to 120% of the applicable Federal rate determined under section 1274(d) of the Internal Revenue Code of 1986, as soon as such remaining amount is determined in accordance with this paragraph 4. 5. Termination. The Executive's employment with the Company during the Employment Period may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 5(a) through 5(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 selected by the Company and reasonably acceptable to the Executive, and the Executive agrees to submit to such tests and examination 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 mean: (i) the willful and continued failure by the Executive to substantially perform his duties with the Company after notice and failure to cure; or (ii) willful gross misconduct that is materially and demonstrably injurious to the Company or the Affiliates. (d) Constructive Discharge. If: -6- 7 (i) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time after the Executive has knowledge of the circumstances constituting Good Reason, which notice shall identify in reasonable detail the circumstances which the Executive believes constitute Good Reason; (ii) the Company fails to notify the Executive of the Company's intended method of correction within 14 days after the Company receives the notice, or the Company fails to reasonably correct the circumstances within 14 days after such notice (except that no such opportunity to reasonably correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph (III) below, relating to relocation); and (iii) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances; or within a reasonable time after the Company fails to reasonably correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent (and except in consequence of a prior termination of the Executive's employment), the occurrence of any of the following circumstances: (I) Assignment of duties, responsibilities, or status inconsistent with those specified in the Agreement (provided that a change in the Executive's reporting relationship shall not constitute "Good Reason"). (II) A reduction in the Executive's Salary rate to an amount that is less than what is required by the Agreement. (III) The relocation of the Executive's base office to an office that is more than 50 miles from the Executive's base office immediately prior to the Change in Control. (IV) The failure of a successor to assume this Agreement in accordance with paragraph 18. (V) Any attempt by the Company or a successor to terminate the Executive's employment that is not materially in accordance with this Agreement. (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. However, to the extent that the procedures specified in paragraph 5(d) are required, the procedures of this paragraph 5(e) may not be used in lieu of the procedures required under paragraph 5(d). -7- 8 (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 5(f), provided that termination of the Executive's employment by the Company shall be deemed to have occurred under this paragraph 5(f) only if it is not for reasons described in paragraph 5(b), 5(c), 5(d), or 5(e). (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 and the Affiliates, the Executive shall resign from all such positions as of the Date of Termination. 6. Rights Upon Termination. The Executive's right 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 6: (a) If the Executive's Date of Termination occurs during the Employment Period 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 payment for unused vacation days from the Company, as determined in accordance with Company policy as in effect from time to time. (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 such incentive compensation award at the regularly scheduled time. (iv) Any other payments or benefits to be provided to the Executive by the Company pursuant to any employee benefit plans or arrangements adopted by the Company, to the extent such amounts are due from the Company. -8- 9 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 Employment Period under circumstances described in paragraph 5(a) (relating to the Executive's death) or paragraph 5(b) (relating to the Executive's being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 6(a): (i) The Executive (or his estate) shall receive from the Company a lump sum payment of not less than twelve (12) months of Salary (based on the Salary rate in effect on the Date of Termination; provided, however, that if the Date of Termination occurs because of the Executive's death, then the amount otherwise payable under this paragraph (i) shall be reduced (but not below zero) by the amount of any life insurance benefits payable with respect to the Executive to the estate or beneficiaries of the Executive under any program maintained by the Company or the Affiliates. (ii) The Executive (or his estate) shall receive from the Company payment of the award under the Company's Management Incentive Plan 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 Employment Period under circumstances described in paragraph 5(d) (relating to Constructive Discharge) or paragraph 5(f) (relating to termination by the Company without Cause), then: (i) As soon as practicable (but in no event later than ten business days) after the Date of Termination, the Executive shall receive from the Company a lump sum payment equal to the sum of all of the Salary payments the Executive would have received (based on the Salary rate in effect on the Date of Termination) if he remained in the employ of the Company until the Eighteen (18) month anniversary of the Date of Termination. (ii) Provided that the Executive is not in actual or threatened breach of any of the covenants contained in the Employee Agreement described in paragraph 10, the Executive shall receive from the Company payment of the award under the Company's Management Incentive Plan for the performance period in which the Date of Termination occurs, based on actual performance for the entire period; -9- 10 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 6, no payment will be made or benefit provided under this paragraph 6(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 Employment Period under circumstances described in paragraphs 5(c) (relating to Cause) or 5(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. 7. Other Benefits. Except as may be otherwise specifically provided in an amendment of this Agreement adopted in accordance with paragraph 14, in the event of a termination of employment during the Employment Period, 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 Executive Severance Plan, or any other arrangement of the Company (or any Affiliate) providing benefits upon involuntary termination of employment. However, this paragraph shall not affect the Executive's right to receive any benefits with respect to termination of employment outside of the Employment Period. 8. 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 smooth transition to the Executive's successor, if any. Notwithstanding the foregoing provisions of this paragraph 8, 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. -10- 11 (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, 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 Company. 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 (on which the Illinois Trade Secrets Act is based). 9. 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 owed to the Company by the Executive, 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. 10. Covenants. As a condition of entering into this Agreement, the Executive is required to enter into the Employee Agreement, which is set forth as Supplement B to this Agreement, and which relates to certain protections as to competition, confidentiality, inventions, and certain other matters. 11. 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 of any claims that may be made against the Company and the Affiliates, and will assist the Company and the Affiliates in the prosecution of any claims that may be made by the Company or 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, including travel expenses. For periods after the Executive's employment with the Company terminates, the Company agrees to provide reasonable compensation to the Executive any expert testimony provided by the Executive. 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. 12. Change in Control Definition. For purposes of this Agreement, the term "Change in Control" shall mean any one or more of the following: the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of -11- 12 1934, as amended (the "Exchange Act")) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can (the "Outstanding Common Stock"), a merger or consolidation of U.S. Can in which U.S. Can does not survive as an independent public company, a sale of all or substantially all of the assets of U.S. Can, a liquidation or dissolution of U.S. Can or, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of U.S. Can cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by U.S. Can's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, however, that the following acquisitions shall not constitute a Change of Control for the purpose of this section: (A) any acquisition directly from U.S. Can, or (B) any acquisition of stock by any employee benefit plan (or related trust) sponsored or maintained by U.S. Can or its affiliates. 13. 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. 14. 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. 15. 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. 16. 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). 17. 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. 18. 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 -12- 13 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 or beneficiaries 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, and regardless of whether before, on, or after a Change in Control), 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 18, 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. 19. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by registered or certified mail, return receipt requested, 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 addresses set forth below (or such other addresses as shall be specified by the parties by 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 for 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 receipt by facsimile, telephone or otherwise; -13- 14 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 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 20. 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. 21. Legal and Enforcement Costs. The provisions of this paragraph 21 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 and all of his rights 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 21 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. -14- 15 (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 21 be reasonable. (d) The Executive's rights to payments under this paragraph 21 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 repay such amounts to the Company. 22. 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. 23. Entire Agreement. Except as otherwise provided herein, and except as provided with respect to periods prior to a Change in Control under the employment agreement between the Executive and the Company dated as of the Effective Date of this Agreement, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior or contemporaneous agreements, if any, between the parties relating to the subject matter hereof; provided, however, that nothing in this Agreement shall be construed to limit any policy or agreement that is otherwise applicable relating to confidentiality, rights to inventions, copyrightable material, business and/or technical information, trade secrets, solicitation of employees, interference with relationships with other businesses, competition, and other similar policies or agreement for the protection of the business and operations of the Company and the Affiliates (including, without limitation, the Employee Agreement described in paragraph 10). 24. 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. -15- 16 IN WITNESS THEREOF, 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 Executive U.S. Can Corporation By: /s/ Paul W. Jones Its: Chairman and CEO United States Can Company By: /s/ Paul W. Jones Its: Chairman and CEO -16- 17 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 U.S. 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. -17- 18 (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. ----------------------------------- Executive Date: State of County of Subscribed Before Me This Day of , . - ------ ------ ---------- - -------------------------------- Notary Public -18- 19 Supplement B Employee Agreement -19- EX-10.34 8 EXECUTIVE SEVERANCE PLAN 1 EXHIBIT 10.34 UNITED STATES CAN COMPANY EXECUTIVE SEVERANCE PLAN SECTION 1 General 1.1. Purpose and Effective Date. United States Can Company (the "Company") has established the United States Can Company Executive Severance Plan (the "Plan"), effective as of October 13, 1999, the "Effective Date" of the Plan as set forth herein. The purpose of the Plan is to provide severance payments for eligible employees of the Employers (as defined in subsection 1.2) in the event their employment is terminated under the circumstances described herein, which payments are intended to provide financial assistance during a period of unemployment following such terminations. 1.2. Affiliates. For purposes of the Plan, 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. Any Affiliate that, with the consent of the Company, adopts the Plan for the benefit of its eligible employees shall be referred to herein as an "Adopting Affiliate." The Company and the Adopting Affiliate shall be referred to herein collectively as the "Employers" and individually as an "Employer." 1.3. Plan Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a Committee consisting of the Chief Executive Officer and the senior human resources officer of the Company, or such other members as may be appointed by the Company. The members of the Committee shall be "named fiduciaries" as described in section 402 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with respect to their authority under the Plan. Except as otherwise specifically provided in Section 4, the Company shall be the Administrator of the Plan and shall have the rights, duties, and obligations of an "Administrator" as that term is defined in Section 3(16)(A) of ERISA. The Company shall have the sole authority to appoint and remove members of the Committee. 1.4. Source of Payments. Each Employer shall be liable for payment of cash due under the Plan with respect to any Participant (as defined hereinafter) to the extent that such benefits are attributable to the services rendered for that Employer by the Participant. Any disputes relating to liability of an Employer for cash payments shall be resolved by the Committee. Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Affiliate whatsoever, including, without limitation, any specific funds, assets, or other property which any Employer, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only 2 a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Affiliate, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Affiliate shall be sufficient to pay any benefits to any person. 1.5. Notices. Any notice or document required to be filed under the Plan shall be considered to be properly filed if delivered or mailed by certified mail, postage prepaid, to the Committee, in care of United States Can Company, 900 Commerce Drive, Oak Brook, Illinois 60523, or such other address the Company has designated for such purpose hereunder and communicated to Participants. Any notice required under the Plan may be waived by the person entitled thereto. 1.6. Action by Employers. Any action required or permitted to be taken by any Employer shall be by resolution of its board of directors, or by action of one or more members of the board (including a committee of the board) who are duly authorized to act for the board, or by a duly authorized officer of such company. Following adoption of the Plan by any Affiliate, and until the board of directors of that Employer takes action to the contrary, the Chief Executive Officer of that Employer shall be authorized to act on behalf of that Employer under the Plan. However, the Chief Executive Officer may not decide or determine any matter or question concerning his own benefits under the Plan or how such benefits are to be paid unless such decision could be made by him under the Plan if he were not so authorized. 1.7. Gender and Number. Where the context admits, words in any gender shall include any the other gender, words in the singular shall include the plural, and the plural shall include the singular. 1.8. Governing Laws. The Plan shall be construed and administered in accordance with the internal laws of the State of Illinois, to the extent that such laws are not preempted by the laws of the United States of America. 1.9. Plan Year. The initial Plan Year shall be the period beginning on the Effective Date and ending on December 31, 1999. Thereafter, the Plan Year shall be the calendar year. 1.10. Plan Not Guarantee of Employment. The Plan does not constitute a guarantee of employment by the Employers, and participation in the Plan will not give any individual the right to be retained in the employ of the Employers, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically arisen under the Plan. The Employers reserve all of their rights to discharge employees at-will or to amend or modify any of the terms and conditions of their employment. 1.11. Prior Plans. The Plan supersedes any and all severance plans, programs, arrangements or policies of the Employers, whether written or oral, pursuant to custom or informal understanding, except any written employment agreement, severance agreement, retention agreement, or change in control agreement between an individual employee and an Employer. 3 SECTION 2 Participation 2.1. Participation. An employee of an Employer shall be a "Participant" in the Plan during each calendar year (or partial calendar year) for which he has been designated as a Participant by the Compensation Committee of the Board of Directors of U.S. Can Corporation or the Chief Executive Officer of U.S. Can Corporation in accordance with approvals by the Compensation Committee, and for each succeeding calendar year, unless the Participant is given written notice that he will not be included in the Plan for such year by October 31 of the preceding year, subject to the following: (a) An individual shall not be a Participant in the Plan for any period (and shall not be entitled to benefits under the Plan if the individual's employment terminates during such period), if the individual is party to a written employment agreement with the Employer, or a written change in control agreement with the Employer, that provides for payment of severance benefits upon the termination of the individual's employment by that Employer during that period (regardless of whether the circumstances under which the individual would be eligible for severance payments, or the amount of such payments, are identical to those in this Plan). (b) An individual shall not be a Participant in the Plan (and shall not be entitled to benefits under the Plan if the individual's employment terminates) prior to the date on which he enters into the Company's standard form of Employee Agreement, as of the date he enters the Plan, and which relates to non-competition, confidentiality, inventions, and certain other matters. 2.2. Duration of Participation. A Participant who is entitled to payment of a benefit under the provisions of Section 3 shall remain a Participant in the Plan until the full amount of his benefit has been paid. SECTION 3 Severance Benefits 3.1. Entitlement to Severance Benefits. Subject to the terms and conditions of the Plan, a Participant will be entitled to a "Severance Benefit" from his Employer in an amount determined in accordance with the provisions of subsection 3.6 if his employment with the Employer terminates after the Effective Date while he is a Participant in the Plan for reasons other than voluntary resignation, death, Cause (as defined in subsection 3.2) or becoming Permanently Disabled (as defined in subsection 3.3). Notwithstanding the foregoing provisions of this 4 subsection 3.1, no payment will be made or benefit provided under this Section 3 unless (i) the Participant first executes the Company's standard form of release of employment-related claims, as then in effect, 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 Participant's employment, such revocation period has expired. 3.2. Cause. For purposes of the Plan, the term "Cause" shall mean: (a) the willful and continued failure by the Participant to substantially perform his duties with the Employer after notice and failure to cure; or (b) willful gross misconduct by the Participant that is materially and demonstrably injurious to the Employer or the Affiliates. 3.3. Permanently Disabled. A Participant 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 for the Employer; (ii) such disability is determined by the person to whom the Participant reports to be of a long-term nature; and (iii) the Participant is eligible for income replacement benefits under the Employer's long-term disability plan during such period of disability. In the event of a dispute as to whether the Participant is Permanently Disabled, the Employer may refer the same to a licensed practicing physician of the Employer's choice, and the Participant agrees to submit to such tests and examinations as such physician shall deem appropriate. 3.4. Constructive Discharge. A Participant's termination of employment shall not be considered to be on account of voluntary resignation if he is considered to have been subject to a Constructive Discharge by his Employer. If: (a) the Participant provides written notice to the Employer of the occurrence of Good Reason within a reasonable time after the Participant has knowledge of the circumstances constituting Good Reason, which notice shall identify in reasonable detail the circumstances which the Participant believes constitute Good Reason; (b) the Employer fails to notify the Participant of the Employer's intended method of correction within 21 days after the Employer receives the notice, or the Employer fails to reasonably correct the circumstances within 21 days after such notice; and (c) the Participant resigns within a reasonable time after receiving the Employer's response, if such notice does not indicate an intention to correct such circumstances; or within a reasonable time after the Employer fails to reasonably correct such circumstances; then the Participant shall be considered to have been subject to a Constructive Discharge by the 5 Employer. For purposes of this Plan, "Good Reason" shall mean, without the Participant's express written consent (and except in consequence of a prior termination of the Participant's employment), the occurrence of any of the following circumstances: (I) Assignment of a position that is of a lesser rank than held by the Participant prior to the assignment (provided that if the individual is a Participant immediately prior to such assignment, he shall not cease to be a Participant by reason of the assignment). A change in the Participant's reporting relationship shall not constitute "Good Reason". (II) A reduction in the Participant's Salary rate or bonus potential, or notice from the Employer that the Participant will not continue to be eligible to participate in the Plan. (III) The proposed or actual relocation of the Participant's base office on terms that would impose an unreasonable financial or personal hardship on the Participant. (IV) The failure of a successor to assume this Plan in accordance with subsection 5.2. 3.5. Transfers, Sales and Dispositions. Notwithstanding the provisions of this Section 3, no Severance Benefit shall be payable with respect to any Participant on account of his termination of employment with the Employers if: (a) he is transferred to a position with an Affiliate, or his termination occurs in connection with the sale or other disposition of any assets, business, division, facility or operating unit of the Employers and he is offered employment with the purchaser or transferee of such assets, business, division, facility or operating unit or with an Affiliate, and, in either case, his position with the Affiliate, purchaser or transferee, as applicable, is at least comparable in pay, benefits and position to the position he held with the Employers immediately prior to his termination of employment; or (b) his termination occurs under circumstances described in paragraph (a) and he accepts employment with the Affiliate, purchaser or transferee, as applicable, regardless of whether his position with the Affiliate, purchaser or transferee, as applicable, is at least comparable in pay, benefits and position to the position he held with the Employers immediately prior to his termination of employment. 3.6. Amount of Severance Benefit. Subject to the terms and conditions of the Plan, if a Participant becomes entitled to a Severance Benefit in accordance with the foregoing provisions of this Section 3, he shall receive from the Employer, 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 twelve (12) month anniversary (the eighteen (18) month anniversary in the case of 6 persons who are members of the Management Executive Committee) of the date of termination; (b) the date of the Participant's death; or (c) the date, if any, of the breach by the Participant of the provisions of the Employee Agreement described in paragraph 2.1(b). 3.7. Reemployment. If, prior to the payment of a Severance Benefit in accordance with the Plan, a Participant previously received a severance or termination benefit from an Employer or an Affiliate, such prior payment shall reduce, on a dollar-for-dollar basis, the amount otherwise payable for the aggregate of the expected Severance Period (with the reduction to be amortized equally over the expected Severance Period). 3.8. Nonalienation. Participants shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any benefits provided under the Plan, and no benefits payable hereunder shall be assignable in anticipation of payment, either by voluntary or involuntary acts, or by operation of law. Nothing in this subsection 3.8 shall limit a Participant's rights or powers to dispose of his property by will, limit any rights or powers which his executor or administrator would otherwise have with regard to benefits to which a Participant is entitled hereunder, or restrict any right of set-off, counterclaim or recoupment which the Employers may otherwise have against any Participant. 3.9. Withholding. All payments with respect to a Participant under the Plan will be subject to such deductions as may be required to be made pursuant to law, government regulations or order, or by agreement with or consent of the recipient. All tax liability of the recipient resulting from the payments under the Plan shall be the responsibility of the recipient. 3.10. Other Benefits. The Severance Benefit to which a Participant is entitled under this Section 3 shall be payable in addition to, and not in lieu of, all other compensation and benefits accrued by the Participant that are not conditioned upon his involuntary termination of employment, including but not limited to, accrued vacation pay and benefits payable under any pension or savings plan, or any life insurance, medical or disability plan. A Participant's coverage under any life, medical, accidental death and dismemberment, long-term disability and other welfare benefit plan maintained by the Employers or Affiliates shall cease upon the termination of the Participant's employment, notwithstanding his receipt of a Severance Benefit under the Plan, subject to the Participant's rights, if any, under the terms of such plans to extend, convert or otherwise continue coverage following termination of employment. Benefits under the Plan shall not be taken into account for purposes of eligibility, vesting or benefit accrual under any qualified or non-qualified retirement or deferred compensation plan maintained by the Employers or Affiliates, and active participation in all such plans shall cease as of the date of his termination of employment. 7 3.11. Benefits on Death. In the event of a Participant's death after becoming entitled to a benefit under the Plan but before complete payment of his benefit, his benefit shall be paid to his estate. SECTION 4 Committee 4.1. Duties and Authority of Committee. Except as otherwise specifically provided in this Section 4, in controlling and managing the operation and administration of the Plan, the Committee shall have the following discretionary authority, powers, rights, and duties in addition to those vested in it elsewhere in the Plan: (a) to enforce the Plan in accordance with its terms and with such applicable rules of procedure and regulations as may be adopted by the Committee; (b) to determine conclusively all questions arising under the Plan, including the power to determine the eligibility of employees and the rights of Participants to benefits under the Plan, to interpret and construe the provisions of the Plan, and to remedy any ambiguities, inconsistences or omissions of whatever kind; (c) to employ or utilize agents, attorneys, accountants or other persons (who may also be employed by or represent the Employers) for such purposes as the Committee considers necessary or desirable to discharge its duties; and (d) to establish a claim procedure in accordance with section 503 of ERISA. The Committee shall act by a majority of its then members or, if the Committee consists of two persons, by either or both of them, by meeting or by writing filed without a meeting. 4.2. Committee Decision Final. To the extent permitted by law, any interpretation of the Plan and any decision on any matter within the discretion of the Committee made by it in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Committee shall make such adjustment on account thereof as it considers equitable and practicable. 4.3. Exercise of Committee Duties. Notwithstanding any other provisions of the Plan, the Committee shall discharge its duties hereunder solely in the interests of the Participants entitled to benefits under the Plan and for the exclusive purpose of providing benefits to Participants according to the terms and conditions of the Plan. In exercising its authority under the Plan, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. 8 4.4. Interested Committee Member. A member of the Committee may not decide or determine any matter or question concerning his own benefits under the Plan or how such benefits are to be paid unless such decision could be made by him under the Plan if he were not a member of the Committee. SECTION 5 Amendment or Termination 5.1. Amendment or Termination. The Company may amend or terminate the Plan at any time; provided, however, that no amendment or termination shall adversely affect the Plan benefits, if any, payable with respect to (i) Participants whose employment with the Employers terminated prior to such amendment or termination of the Plan; or (ii) Participants whose employment with the Employers terminates within one year following the date of distribution of a summary of the amendment or termination of the Plan to individuals who are then Participants and who are adversely affected by the amendment or termination. 5.2. Successors. The obligations and rights of the Employers under the Plan shall be binding upon, and inure to the benefit of, any assignee or successor in interest to an Employer (whether direct or indirect, by purchase, merger, consolidation or otherwise). None of the Employers shall merge or consolidate with any other corporation, or liquidate or dissolve without making suitable arrangements for the payment of any benefits which are or may become payable under the Plan. EX-10.35 9 EMPLOYEE AGREEMENT WITH JOHN L. WORKMAN 1 EXHIBIT 10.35 EMPLOYEE AGREEMENT THIS EMPLOYEE AGREEMENT (this "Agreement"), made and entered into this 25th day of January, 2000, by and between John L. Workman (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 one or more of the following: (i) employment with Employer or one of its Affiliates; (ii) entering into an employment-related agreement with the Employer or one of its Affiliates of even date herewith and (iii) eligibility for participation in the Employer's Executive Severance Plan; 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 North America, South America or Europe. 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 3, for the Employee's personal benefit, directly or indirectly, or in any way which could be detrimental to the Employer or any 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 2. Change in Control. If the Employee's employment is terminated on or after the date of a Change in Control, the provisions of paragraphs 1(a) and 1(b) shall be canceled and shall be without effect for periods after the date of the Employee's termination with the Employer and the Affiliates. For purposes of this Agreement, the term "Change in Control" shall mean any one or more of the following: the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can Corporation (the "Outstanding Common Stock"), a merger or consolidation of U.S. Can Corporation in which U.S. Can Corporation does not survive as an independent public company, a sale of all or substantially all of the assets of U.S. Can Corporation, a liquidation or dissolution of U.S. Can Corporation or, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of U.S. Can Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by U.S. Can Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, however, that the following acquisitions shall not constitute a Change of Control for the purpose of this Agreement: (A) any acquisition of stock directly from U.S. Can Corporation, or (B) any acquisition of stock by any employee benefit plan (or related trust) sponsored or maintained by U.S. Can Corporation or its affiliates. 3. 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 the 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. 4. 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 to the Employee's employment by the Employer, entry into an employment-related agreement and/or eligibility to participate in the Employer's Executive Severance Plan. 5. 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. 2 3 6. 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. 7. 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 16 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. 8. 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. 9. 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. 10. 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. 11. 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. 12. 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. 13. Work-For-Hire Provisions. "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 3 4 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). 14. 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. 15. 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 addresses set forth below (or such other addresses as shall be specified by the parties by 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 for 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; 4 5 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 Oak Brook, Illinois 60523 Attention: General Counsel 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 16. 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 16 shall not be construed to limit the Employer's or an Affiliate's right to obtain relief under paragraph 8 with respect to any matter or controversy subject to paragraph 8, 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. 5 6 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/ Paul W. Jones Its: Chairman and CEO EMPLOYEE /s/ John L. Workman 6 7 FOR ILLINOIS EMPLOYEES EXHIBIT A N O T I C E 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 January 25, 2000, by signing below. EMPLOYEE /s/ John L. Workman Print Name: John L. Workman 7 EX-10.36 10 EMPLOYEE AGREEMENT WITH ROGER FARLEY 1 EMPLOYEE AGREEMENT THIS EMPLOYEE AGREEMENT (this "Agreement"), made and entered into this 3rd day of February, 2000, by and between Roger B. Farley (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 one or more of the following: (i) employment with Employer or one of its Affiliates; (ii) entering into an employment-related agreement with the Employer or one of its Affiliates of even date herewith and (iii) eligibility for participation in the Employer's Executive Severance Plan; 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 North America, South America or Europe. 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 3, for the Employee's personal benefit, directly or indirectly, or in any way which could be detrimental to the Employer or any Affiliate. For purposes of this Agreement, the term 2 "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. Change in Control. If the Employee's employment is terminated on or after the date of a Change in Control, the provisions of paragraphs 1(a) and 1(b) shall be canceled and shall be without effect for periods after the date of the Employee's termination with the Employer and the Affiliates. For purposes of this Agreement, the term "Change in Control" shall mean any one or more of the following: the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of a block of thirty percent (30%) or more of the shares of the then outstanding common stock of U.S. Can Corporation (the "Outstanding Common Stock"), a merger or consolidation of U.S. Can Corporation in which U.S. Can Corporation does not survive as an independent public company, a sale of all or substantially all of the assets of U.S. Can Corporation, a liquidation or dissolution of U.S. Can Corporation or, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of U.S. Can Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by U.S. Can Corporation's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; provided, however, that the following acquisitions shall not constitute a Change of Control for the purpose of this Agreement: (A) any acquisition of stock directly from U.S. Can Corporation, or (B) any acquisition of stock by any employee benefit plan (or related trust) sponsored or maintained by U.S. Can Corporation or its affiliates. 3. 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 the 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. 4. 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 to the Employee's employment by the Employer, entry into an employment-related agreement and/or eligibility to participate in the Employer's Executive Severance Plan. 5. 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 -2- 3 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. 6. 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. 7. 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 16 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. 8. 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. 9. 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. 10. 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. 11. 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. 12. 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. -3- 4 13. Work-For-Hire Provisions. "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). 14. 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. 15. 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 addresses set forth below (or such other addresses as shall be specified by the parties by 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 for delivery; -4- 5 (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 Oak Brook, Illinois 60523 Attention: General Counsel 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 16. 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 16 shall not be construed to limit the Employer's or an Affiliate's right to obtain relief under paragraph 8 with respect to any matter or controversy subject to paragraph 8, 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. -5- 6 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/ Paul W. Jones Its: Chairman and CEO EMPLOYEE /s/ Roger B. Farley -6- 7 FOR ILLINOIS EMPLOYEES EXHIBIT A N O T I C E 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 February 3, 2000, by signing below. EMPLOYEE /s/ Roger B. Farley Print Name: Roger B. Farley -7- EX-10.38 11 DIRECTORS EQUITY PLAN 1 U.S. CAN CORPORATION DIRECTORS EQUITY PLAN 2 TABLE OF CONTENTS SECTION 1.........................................................................................................1 GENERAL...........................................................................................................1 Purpose..................................................................................................1 Participation 1 Operation, Administration, and Definitions...............................................................1 SECTION 2.........................................................................................................1 DEFERRAL AND DISTRIBUTION OF CASH FEES............................................................................1 Elective Deferral........................................................................................1 Crediting of Deferred Amounts............................................................................2 Distribution of Deferred Amounts.........................................................................2 SECTION 3.........................................................................................................3 OPERATION AND ADMINISTRATION......................................................................................3 Effective Date...........................................................................................3 Shares Subject to Plan...................................................................................3 General Restrictions.....................................................................................3 Tax Withholding..........................................................................................4 Distributions 4 Transferability..........................................................................................4 Form and Time of Elections...............................................................................4 Action by Company........................................................................................4 Gender and Number........................................................................................4 Limitation of Implied Rights.............................................................................5 Evidence 5 SECTION 4.........................................................................................................5 COMMITTEE.........................................................................................................5 Administration...........................................................................................5 Powers of Committee......................................................................................5 Delegation by Committee..................................................................................6 Information to be Furnished to Committee.................................................................6 SECTION 5.........................................................................................................6 AMENDMENT AND TERMINATION.........................................................................................6
-i- 3 SECTION 6.........................................................................................................6 DEFINED TERMS.....................................................................................................6
-ii- 4 U.S. CAN CORPORATION Certificate I, , of U.S. Can Corporation, having in my custody and possession the corporate records of said corporation, do hereby certify that attached hereto is a true and correct copy of the U.S. Can Corporation Directors Equity Plan as in effect as of , 1999. WITNESS my hand this , 1999. -------------------------- As Aforesaid 5 U.S. CAN CORPORATION DIRECTORS EQUITY PLAN SECTION 1 GENERAL 1.1. Purpose. The U.S. Can Corporation Directors Equity Plan (the "Plan") has been established by U.S. Can Corporation (the "Company") to provide compensation opportunities that are competitive with those of other similar companies and further identify outside directors' interests with those of the Company's other shareholders through compensation that is based on the Company's common stock, and thereby promote the long-term financial interest of the Company, including the growth in value of the Company's equity and enhancement of long-term shareholder return. 1.2. Participation. Subject to the terms and conditions of the Plan, Outside Directors are eligible to participate in the Plan. 1.3. Operation, Administration, and Definitions. The operation and administration of the Plan shall be subject to the provisions of Section 3 (relating to operation and administration). Capitalized terms in the Plan shall be defined as set forth in the Plan (including the definition provisions of Section 6 of the Plan). SECTION 2 DEFERRAL AND DISTRIBUTION OF CASH FEES 2.1. Elective Deferral. Subject to the terms of the Plan, each Outside Director, by filing a written "Deferral Election" with the Committee, may elect to defer the receipt of all or a portion of the director's Cash Fees otherwise payable to the director for any year of service, at the time and in the manner set forth below subject to the following: (a) An Outside Director's Deferral Election shall not be effective with respect to Cash Fees otherwise payable to him or her for services rendered prior to the last day of the year of service in which such election is filed with the Committee; provided, however, that a Deferral Election which is filed within 30 days of the date on which an individual first becomes Outside Director may be effective with respect to all Cash Fees otherwise payable to him or her for services performed after the date of the Deferral Election. (b) An election under this subsection 2.1 with respect to any year of service shall be irrevocable once that year has begun, and shall remain in effect with respect to succeeding years of service until it is revoked. Any such revocation shall be in writing, signed by the director and filed with the Committee. Any revocation shall be effective only with 6 respect to Cash Fees for years of service beginning after the date on which such revocation is filed with the Committee. For purposes of the Plan, an Outside Director's "Cash Fees" shall include his annual cash retainer fees and his cash meeting fees. 2.2. Crediting of Deferred Amounts. The amount of any Cash Fees deferred by a director pursuant to subsection 2.1 shall be credited as Stock Units to a bookkeeping account maintained by the Committee in the name of the director (the director's "Account") as of the date the Cash Fees subject to the deferral would otherwise have been paid to the director but for the deferral. Deferred amounts will be converted to, and credited as, Stock Units. The number of Stock Units to be credited to a director's Account as of any date shall equal the amount of the Cash Fees to be credited as of that date, divided by the Fair Market Value of a share of Stock on that date. Thereafter, the Stock Units will be adjusted to reflect the investment returns on Stock that apply during the deferral period. Any dividends payable with respect to deferred Stock Units will be deemed to be reinvested in additional shares of Stock during the period of deferral. 2.3. Distribution of Deferred Amounts. Distribution with respect to a director's Account shall be subject to the following: (a) Except as otherwise provided in this subsection 2.3, the balance credited to a director's Account shall be distributable to the director (or, in the event of his death, to his Beneficiary) in a lump sum as soon as practicable following the date on which the director ceases to be a director of the Company for any reason; provided, however, that a director may elect, by filing a notice with the Committee at least one year prior to the date on which he ceases to be a director of the Company, to have the lump sum distribution made at any other time after his termination as a member of the Board but not more than the three-year anniversary of the date on which the director ceases to be a member of the Board. The Committee, in its sole discretion, may distribute unpaid balances of any director's Account to the director at any time in a lump sum. (b) If any amounts distributable to a director under the Plan have not been distributed at the time of the director's death, such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of the Plan. A director's "Designated Beneficiary" shall be the beneficiary or beneficiaries designated by the director in a writing filed with the Committee in such form and at such time as the Committee shall require. If a deceased director fails to designate a beneficiary, or if the Designated Beneficiary does not survive the director, any benefits distributable to the director shall be exercised by or distributed to the legal representative of the estate of the director. If a deceased director designates a beneficiary but the Designated Beneficiary dies before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary. SECTION 3 7 OPERATION AND ADMINISTRATION 3.1. Effective Date. The Plan shall be effective as of July 22, 1999 (the "Effective Date"). The Plan shall be unlimited in duration and, in the event of Plan termination, shall remain in effect as long as any Accounts under it are outstanding. 3.2. Shares Subject to Plan. The shares of Stock which may be distributed under the Plan shall be subject to the following: (a) The shares of Stock which may be distributed under the Plan shall be shares currently authorized but unissued or currently held or subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions. (b) Subject to the following provisions of this subsection 3.2, the maximum number of shares of Stock that may be delivered to directors and their beneficiaries under the Plan shall be 50,000 shares of Stock. (c) To the extent any shares of Stock are not delivered because a director's Account is settled in cash, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan. (d) In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Committee may adjust Accounts to preserve the benefits or potential benefits thereof. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to be delivered under directors' Accounts; and (iii) any other adjustments that the Committee determines to be equitable. 3.3. General Restrictions. Delivery of shares of Stock or other amounts under the Plan shall be subject to the following: (a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity. (b) To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. -3- 8 3.4. Tax Withholding. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Committee, in its discretion, and subject to such requirements as the Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the director, through the surrender of shares of Stock which the director already owns, or through the surrender of shares of Stock to which the director is otherwise entitled under the Plan. 3.5. Distributions. A director's Account may be settled through cash payments, the delivery of shares of Stock, or a combination thereof as the Committee shall determine. 3.6. Transferability. Except as otherwise provided by the Committee, rights with respect to a director's Account under the Plan are not transferable except as designated by the director by will or by the laws of descent and distribution. 3.7. Form and Time of Elections. Unless otherwise specified herein, each election required or permitted to be made by any director or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing filed with the Committee at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Committee shall require. 3.8. Action by Company. Any action required or permitted to be taken by the Company shall be by resolution of the Board, or by action of one or more members of the Board (including a committee of the Board) who are duly authorized to act for the Board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of the Company. 3.9. Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. 3.10. Limitation of Implied Rights. (a) Neither a director nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company whatsoever, including, without limitation, any specific funds, assets, or other property which the Company, in its sole discretion, may set aside in anticipation of a liability under the Plan. A director shall have only a contractual right to the Stock or amounts, if any, distributable under the Plan, unsecured by any assets of the Company, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company shall be sufficient to distribute any benefits to any person. -4- 9 (b) Participation in the Plan will not give any director the right to remain a member of the Board, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no allocation under a director's Account shall confer upon the director any rights as a shareholder of the Company prior to the date on which the director fulfills all conditions for receipt of such rights. 3.11. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. SECTION 4 COMMITTEE 4.1. Administration. The authority to control and manage the operation and administration of the Plan shall be vested in a committee (the "Committee") in accordance with this Section 4. The Committee shall be selected by the Board. If the Committee does not exist, or for any other reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. 4.2. Powers of Committee. The Committee's administration of the Plan shall be subject to the following: (a) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. (b) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons. (c) In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the articles and by-laws of the Company, and applicable state corporate law. 4.3. Delegation by Committee. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. 4.4. Information to be Furnished to Committee. The Company shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company as to a service (and cessation of service) with the Company, -5- 10 leave of absence, and compensation shall be conclusive on all persons unless determined to be incorrect. Directors and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan. SECTION 5 AMENDMENT AND TERMINATION The Board may, at any time, amend or terminate the Plan, provided that no amendment or termination may, in the absence of written consent to the change by the affected director (or, if the director is not then living, the affected beneficiary), adversely affect the rights of any director or beneficiary under any amount credited to the director's Account under the Plan prior to the date such amendment is adopted by the Board; provided that adjustments pursuant to subject to subsection 3.2(d) shall not be subject to the foregoing limitations of this Section 5. SECTION 6 DEFINED TERMS In addition to the other definitions contained herein, the following definitions shall apply: (a) Board. The term "Board" shall mean the Board of Directors of the Company. (b) Outside Director. The term "Outside Director," as of any date, shall mean a person who is serving as a non-employee member of the Board. (c) Fair Market Value. For purposes of determining the "Fair Market Value" of a share of Stock as of any date, the following rules shall apply: (i) If the principal market for the Stock is a national securities exchange or the Nasdaq stock market, then the "Fair Market Value" as of that date shall be the closing price as reported in the Wall Street Journal for that date. (ii) If the day is not a business day, and as a result, paragraph (i) above is inapplicable, the Fair Market Value of the Stock shall be determined as the last closing price most recently reported in the Wall Street Journal for the last preceding business day. If paragraphs (i) and (ii) next above are otherwise inapplicable, then the Fair Market Value of the Stock shall be determined in good faith by the Committee. (d) Stock. The term "Stock" shall mean shares of common stock of the Company. -6- EX-21.1 12 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21.1 SUBSIDIARIES OF U.S. CAN CORPORATION - ----------------------------------- -------------------------- -------------- Name Place of Organization Trade Name - ---- --------------------- ---------- - ----------------------------------- -------------------------- -------------- United States Can Company State of Delaware, U.S.A. U.S. Can - ----------------------------------- -------------------------- -------------- USC May Verpackungen Holding, Inc. State of Delaware, U.S.A. n/a - ----------------------------------- -------------------------- -------------- U.S.C. Europe N.V. Netherlands Antilles n/a - ----------------------------------- -------------------------- -------------- U.S.C. Europe Netherlands B.V. Netherlands n/a - ----------------------------------- -------------------------- -------------- Note: 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. USC May Verpackungen Holding, Inc. owns May Verpackungen GmbH & Co. KG and its related companies. EX-23.1 13 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this form 10-K into the Company's previously filed Registration Statements File Nos. 33-76742, 333-23647, 333-84337, 333-84339 and 333-91031 on Form S-8, and 33-79556 on Form S-3. ARTHUR ANDERSEN LLP Chicago, Illinois March 29, 2000 EX-27.1 14 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 15,697 0 91,864 13,367 115,979 259,331 561,047 (228,543) 663,570 221,597 0 0 0 135 68,421 663,570 714,115 714,115 611,629 611,629 2,903 997 28,726 37,074 14,622 22,452 0 (1,296) 0 21,156 1.57 1.56
EX-99.1 15 OFFER LETTER 1 EXHIBIT 99.1 March 22, 2000 The Board of Directors of U.S. Can Corporation 900 Commerce Drive Oak Brook, Illinois 60523 Gentlemen: On behalf of Pac Packaging Acquisition Corporation ("Pac"), I am pleased to make the following proposal for your consideration. Pac is a newly formed Delaware corporation in which members of the senior management of U.S. Can Corporation (the "Company") and Berkshire Partners (collectively, the "Investor Group") are expected to participate. Based upon our due diligence investigation to date, we propose to effect a leveraged recapitalization of the Company in which the public shareholders of the Company would receive $21.00 per share in cash for their shares of Company common stock. Holders of options would receive cash equal to the positive difference between $21.00 and the per share exercise price of such options. The funds necessary to effect this transaction (including the repayment of outstanding bonds and bank indebtedness, payment of Pac's costs and expenses and funds for general corporate purposes after the transaction) would be obtained from (i) an equity investment of approximately $150 million to be made by Berkshire Partners and certain current investors in the Company, (ii) the issuance of approximately $200 million of subordinated debt securities by the Company or one of its subsidiaries and (iii) secured borrowings of approximately $350 million to be made by the Company or one of its subsidiaries. We have received signed letters from reputable financial institutions assuring us that such institutions are highly confident that all of the senior and subordinated debt financing will be available. Berkshire is committed to provide all of the equity financing required for the transaction, although we expect to allocate a portion of the equity financing to management and certain other current investors in the Company. Our financing structure contemplates the repayment of all existing debt of the Company. We ask that the Company cooperate with Pac and its financing partners to allow us to complete the necessary due diligence that will need to be performed. We are confident that all due diligence can be completed within 20 days. We are in the process of preparing a proposed merger agreement and related documentation. We expect to be in a position to provide this proposed documentation for your consideration in the coming days. 2 The transaction would be subject to approvals by the Company's Board of Directors and the Company's shareholders, confirmatory due diligence to be performed by the parties providing the financing referred to above, the negotiation and execution of mutually satisfactory definitive agreements and other customary conditions. In light of the interests of a number of the members of the Board of Directors in this matter, I believe that it would be most appropriate for this proposal to be considered by a committee of the Board of Directors consisting solely of directors who do not have any special interest in this transaction. I would urge that the Board of Directors promptly establish such a committee with authority to retain independent advisors of its choosing and to begin the process of evaluating this proposal. We would be pleased to meet with you to discuss our proposal and to answer your questions. Sincerely, PAC PACKAGING ACQUISITION CORPORATION By: /s/ Paul W. Jones -------------------------- Paul W. Jones President -----END PRIVACY-ENHANCED MESSAGE-----