-----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, LeUyxCKWh0nu6c53r3KGfJRWUoplaSXru2hQ3HlbnMlS5+2cHuX45RHuAxmCN7Iy xsYvm/hZPY0FUUC8fT3a0A== 0000912057-01-006094.txt : 20010223 0000912057-01-006094.hdr.sgml : 20010223 ACCESSION NUMBER: 0000912057-01-006094 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20010215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US CAN CORP CENTRAL INDEX KEY: 0000895726 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061094196 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-53276 FILM NUMBER: 1548477 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 6305712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATES CAN COMPANY /DE/ CENTRAL INDEX KEY: 0000880657 STANDARD INDUSTRIAL CLASSIFICATION: METAL CANS [3411] IRS NUMBER: 061145011 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-53276-01 FILM NUMBER: 1548478 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: SUITE 302 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DRIVE CITY: OAK BROOK STATE: IL ZIP: 60521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USC MAY VERPACKUNGEN HOLDING INC CENTRAL INDEX KEY: 0001131341 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 364335392 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-53276-02 FILM NUMBER: 1548479 BUSINESS ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: STE 300 CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 6305712500 MAIL ADDRESS: STREET 1: 900 COMMERCE DR STREET 2: STE 300 CITY: OAK BROOK STATE: IL ZIP: 60523 S-4/A 1 a2037960zs-4a.txt S-4/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 2001 REGISTRATION NO. 333-53276 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ U.S. CAN CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 06-1094196 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------------ UNITED STATES CAN COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 06-1145011 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ USC MAY VERPACKUNGEN HOLDING INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3411 36-4335392 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 700 EAST BUTTERFIELD ROAD SUITE 250 LOMBARD, ILLINOIS 60148 TELEPHONE: (630) 678-8000 FACSIMILE: (630) 678-8135 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) STEVEN K. SIMS VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY UNITED STATES CAN COMPANY 700 EAST BUTTERFIELD ROAD SUITE 250 LOMBARD, ILLINOIS 60148 TELEPHONE: (630) 678-8000 FACSIMILE: (630) 678-8135 (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS FOR EACH REGISTRANT) COPY TO: JANE D. GOLDSTEIN, ESQ. ROPES & GRAY ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110 TELEPHONE: (617) 951-7000 FACSIMILE: (617) 951-7050 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. ------------------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED FEBRUARY , 2001 PROSPECTUS UNITED STATES CAN COMPANY OFFER TO EXCHANGE ALL OUTSTANDING 12 3/8% SENIOR SUBORDINATED NOTES DUE 2010 ($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING) FOR 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 GUARANTEED BY U.S. CAN CORPORATION, ITS PARENT, AND USC MAY VERPACKUNGEN HOLDING INC., ITS WHOLLY-OWNED SUBSIDIARY --------------------- We are offering to exchange our 12 3/8% Series B Senior Subordinated Notes due 2010, or exchange notes, for all of our outstanding 12 3/8% Senior Subordinated Notes due 2010, or notes. We are making this exchange offer on the terms and conditions set forth in this prospectus and the accompanying letter of transmittal. We have registered the exchange notes under the Securities Act of 1933, while we have not registered the notes. The form and terms of the exchange notes and the notes are identical in all material respects, except for various transfer restrictions and registration rights relating to the notes. The exchange offer will remain open for not less than 20 days from the date we mail notice of the exchange offer to note holders. We do not expect to keep the exchange offer open for more than 30 days from the mailing date, including all extensions. We will accept for exchange all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , unless we extend this exchange offer. You may withdraw the tender of your notes at any time prior to this date and time. Although our offer is subject to customary conditions, it is not conditioned upon any minimum principal amount of notes being tendered for exchange. Information about the exchange notes: - The exchange notes will mature on October 1, 2010. - We will pay interest on the exchange notes every six months, on April 1 and October 1, beginning on April 1, 2001. - We may redeem the exchange notes at any time after October 1, 2005. - Before October 1, 2003, we may redeem up to 35% of the aggregate principal amount of the exchange notes with the net proceeds of specified public offerings of common equity by us. - If we sell certain assets or experience specific kinds of changes in control, we must offer to repurchase all or a portion of the exchange notes. - The exchange notes are subordinated to all of our current and future senior indebtedness, except indebtedness that expressly provides otherwise. We will not receive any proceeds from the issuance of the exchange notes. We will pay all the expenses incurred by us in connection with this exchange offer and issuance of the exchange notes. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for notes where the notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business one year after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any resale of the exchange notes. See "Plan of Distribution." YOU SHOULD CAREFULLY REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 14 IN CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. Neither the Securities and Exchange Commission (the Commission) nor any state securities commission has approved or disapproved of our offer of the exchange notes or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. THE DATE OF THIS PROSPECTUS IS . TABLE OF CONTENTS SUMMARY..................................................... 1 RISK FACTORS................................................ 14 THE TRANSACTIONS............................................ 21 USE OF PROCEEDS............................................. 24 CAPITALIZATION.............................................. 25 UNAUDITED PRO FORMA FINANCIAL DATA.......................... 26 SELECTED FINANCIAL DATA..................................... 34 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 36 BUSINESS.................................................... 45 MANAGEMENT.................................................. 55 PRINCIPAL STOCKHOLDERS...................................... 61 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 63 OTHER INDEBTEDNESS.......................................... 67 DESCRIPTION OF U.S. CAN CORPORATION'S CAPITAL STOCK......... 70 DESCRIPTION OF UNITED STATES CAN COMPANY'S CAPITAL STOCK.... 72 DESCRIPTION OF EXCHANGE NOTES............................... 73 THE EXCHANGE OFFER.......................................... 114 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS............. 123 PLAN OF DISTRIBUTION........................................ 128 LEGAL MATTERS............................................... 128 INDEPENDENT PUBLIC ACCOUNTANTS.............................. 128 WHERE YOU CAN FIND MORE INFORMATION......................... 129 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES.......................... F-1
i This prospectus contains summaries of the terms of several material documents. These summaries include the terms that we believe to be material, but are qualified in their entirety by reference to the full and complete text of the related documents. We will make copies of these documents available to you at your request. This exchange offer is not being made to, and we will not accept surrenders for exchange from, holders of the outstanding notes in any jurisdiction in which the exchange offer or its acceptance would not comply with the securities or blue sky laws of that jurisdiction. All resales must be made in compliance with state securities or blue sky laws. Compliance with these laws may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility for compliance with these requirements. THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. YOU SHOULD READ THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER YOUR NOTES. ------------------------ MARKET AND INDUSTRY DATA Unless otherwise indicated, the market share and industry data used throughout this prospectus were obtained primarily from internal company surveys and management estimates based on these surveys and our management's knowledge of the industry. Where we have relied on third-party market and industry data, we have so noted. The Chemical Specialties Manufacturers Association, European Aerosol Federation and Can Manufacturers Institute were the primary sources for third-party industry data. We have not independently verified any of the data from third-party sources, and no independent source has verified our internal surveys or management estimates. While we are not aware of any misstatements regarding our industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors" in this prospectus. TRADEMARKS U.S. Can-Registered Trademark- and Plastite-Registered Trademark- are our trademarks. All other trademarks and service marks used in this prospectus are the property of their respective owners. ii SUMMARY THIS SUMMARY HIGHLIGHTS MATERIAL INFORMATION ABOUT UNITED STATES CAN COMPANY AND THE EXCHANGE OFFER. IT DOES NOT CONTAIN ALL THE INFORMATION THAT YOU MAY CONSIDER IMPORTANT IN MAKING YOUR INVESTMENT DECISION. THEREFORE, YOU SHOULD READ THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE ACCOMPANYING NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. UNLESS OTHERWISE INDICATED, REFERENCES IN THIS PROSPECTUS TO "OUR COMPANY," "WE," "US," OR "OUR" REFER TO THE COMBINED BUSINESS OF U.S. CAN CORPORATION, THE PARENT COMPANY OF UNITED STATES CAN COMPANY, AND ALL OF ITS SUBSIDIARIES. ALL PRO FORMA FINANCIAL INFORMATION IN THIS PROSPECTUS INCLUDES THE OPERATIONS OF MAY VERPACKUNGEN, OUR GERMAN SUBSIDIARY THAT WE ACQUIRED ON DECEMBER 30, 1999, AND REFLECTS U.S. CAN CORPORATION'S 20 FOR 1 STOCK SPLIT THAT OCCURRED ON OCTOBER 4, 2000. THE COMPANY We are a leading manufacturer, by sales volume, of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in the United States and food cans in Europe. Our product offerings include a wide variety of steel containers, such as aerosol cans, paint cans, oblong containers and a large number of custom and specialty products, and plastic containers, such as plastic pails for industrial and consumer products. We have long-standing customer relationships with many leading consumer products companies in the United States and Europe, including Gillette, Reckitt Benckiser and Sherwin Williams. In steel aerosol cans, based on sales volume, we hold the number one market position in the United States and the number two market position in Europe. We also hold the number two market position in paint cans in the United States, as measured by sales volume. We attribute our market leadership to our ability to consistently provide high-quality products and service at competitive prices, while continually improving our product-related technologies. We compete in three major business segments within the container industry: Aerosol Products; Paint, Plastic and General Line Products; and Custom and Specialty Products. In addition, we recently acquired May Verpackungen, a German manufacturer of steel food packaging and aerosol cans. May has a reputation for manufacturing excellence and has long-term relationships with several leading consumer products companies. For the twelve months ended October 1, 2000, we had pro forma net sales of $803.6 million and EBITDA of $101.7 million. Our aerosol and paint products represented approximately 78% of our total pro forma net sales for the same period. Domestic operations represented approximately 69% of total pro forma net sales, with the remainder generated by our European operations. Our principal executive offices are located at 700 East Butterfield Road, Suite 250, Lombard, Illinois 60148 (Telephone Number: (630) 678-8000). THE TRANSACTIONS On October 4, 2000, we and our parent company, U.S. Can Corporation: - consummated the merger of Pac Acquisition Corporation and U.S. Can Corporation in a recapitalization transaction, with U.S. Can Corporation being the surviving corporation; - Berkshire Partners LLC and its co-investors, several existing stockholders of U.S. Can Corporation, referred to as the "rollover stockholders," and several members of U.S. Can Corporation's management team made common stock investments and preferred stock investments totaling $160 million; - purchased approximately 13.5 million shares of U.S. Can Corporation's common stock for cash at $20.00 per share and outstanding options to purchase approximately 1.6 million shares of U.S. 1 Can Corporation's common stock at $20.00 per underlying share, less the applicable option exercise price; - entered into a $400 million senior secured credit facility secured by substantially all our assets and guaranteed by U.S. Can Corporation and its domestic subsidiaries, and comprised of term loans totaling $260 million and a revolving line of credit totaling $140 million; - issued $175.0 million aggregate principal amount of notes in the original offering; and - repurchased $235.7 million aggregate principal amount of U.S. Can Corporation's outstanding 10 1/8% notes due 2006. The recapitalization and the related transactions are referred to as the "transactions." As a result of the transactions, U.S. Can Corporation became a private company and its common stock was delisted from the New York Stock Exchange. In addition, we significantly increased our outstanding debt in effecting the transactions. 2 THE EXCHANGE OFFER The exchange offer relates to the exchange of up to $175,000,000 aggregate principal amount of our outstanding 12 3/8% Senior Subordinated notes due 2010 for an equal aggregate principal amount of our new 12 3/8% Series B Senior Subordinated notes due 2010. The exchange notes will be obligations of United States Can Company entitled to the benefits of the indenture governing the outstanding notes. Registration Rights Agreement................ You are entitled to exchange your notes for exchange notes with terms that are identical in all material respects to the notes. The exchange offer is intended to satisfy these rights. After the exchange offer is complete, you may no longer be entitled to the benefits of the rights granted under the registration rights agreement that we entered into as part of the offering of the notes. The Exchange Offer........................... We are offering to exchange $1,000 principal amount of exchange notes which have been registered under the Securities Act for each $1,000 principal amount of notes that were issued on October 4, 2000 in a transaction exempt from registration under the Securities Act in accordance with Rule 144A. Each of your notes must be properly tendered and accepted in order to be exchanged. We will exchange all notes that are properly tendered and not validly withdrawn. As of this date, there are $175,000,000 in aggregate principal amount of notes outstanding. We will issue the exchange notes on or promptly after the expiration of the exchange offer. Expiration Date.............................. The exchange offer will expire at 5:00 p.m., New York City time, on , unless we decide to extend the exchange offer. Conditions to the Exchange Offer............. The exchange offer is subject to the condition that it does not violate applicable law or interpretations of the staff of the Commission. If we determine that applicable federal law does not permit the exchange offer, we may terminate the offer. The exchange offer is not conditioned upon any minimum principal amount of notes being tendered. The holders of notes have rights under the registration rights agreement should we fail to consummate the exchange offer. Resales of the Exchange Notes................ We believe that you may offer for resale, resell or otherwise transfer the exchange notes without complying with the registration and prospectus delivery requirements of the Securities Act if you: - acquire the notes issued in the exchange offer in the ordinary course of your business;
3 - are not participating, do not intend to participate, and have no arrangement or undertaking with anyone to participate, in the distribution of the notes issued to you in the exchange offer; and - are not an "affiliate" of U.S. Can Corporation as defined in Rule 405 of the Securities Act. We have based our belief on interpretations of the staff of the Commission set forth in no-action letters issued to other companies. We have not, however, requested the Commission to issue an interpretation with respect to resales of the exchange notes, and we do not expect to do so in the future. If any of these conditions are not satisfied and you transfer any exchange notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We will not be responsible for or indemnify you against any liability you may incur. Each broker-dealer that receives exchange notes for its own account in exchange for notes, where the notes were acquired by a broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. See "Plan of Distribution." This offer is not being made to, nor will we accept surrenders for exchange from, holders of outstanding notes in any jurisdiction in which this offer or its acceptance would not comply with the securities or blue sky laws of that jurisdiction. Furthermore, persons who acquire the exchange notes are responsible for compliance with these securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. Accrued Interest on the Exchange Notes and the Notes.................................. Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders who exchange their notes for exchange notes will receive the same interest payment on April 1, 2001 (the first interest payment date with respect to the notes and the exchange notes to be issued pursuant to the exchange offer) that they
4 would have received had they not accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. Procedures for Tendering Notes............... If you wish to tender your notes for exchange pursuant to the exchange offer, you must transmit to Bank One Trust Company, N.A., as exchange agent, on or prior to the expiration date either: - a properly completed and duly executed copy of the letter of transmittal accompanying this prospectus, or a facsimile of this letter of transmittal, together with your outstanding notes and any other documentation required by this letter of transmittal, at the address set forth on the cover page of the letter of transmittal; or - if you are effecting delivery by book-entry transfer, a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of a confirmation of book-entry transfer; In addition, you must deliver to the exchange agent on or prior to the expiration date: - if you are effecting delivery by book-entry transfer, a timely confirmation of book-entry transfer of your outstanding notes into the account of the exchange agent at The Depository Trust Company pursuant to the procedures for book-entry transfers described in this prospectus under the heading "The Exchange Offer--Procedures for Tendering;" or - if necessary, the documents required for compliance with the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." By executing and delivering the accompanying letter of transmittal or effective delivery by book-entry transfer, you are representing to us that, among other things, (i) the person receiving the exchange notes pursuant to the exchange offer, whether or not this person is the holder, is receiving them in the ordinary course of business, (ii) neither the holder nor any other person receiving the exchange notes pursuant to the
5 exchange offer has an arrangement or understanding with any person to participate in the distribution of the exchange notes and that this holder is not engaged in, and does not intend to engage in, a distribution of the exchange notes and (iii) neither the holder nor any other person receiving the exchange notes pursuant to the exchange offer is an "affiliate" of ours within the meaning of Rule 405 under the Securities Act. Special Procedures for Beneficial Owners..... If you are a beneficial owner of notes and your name does not appear on a security listing of The Depository Trust Company as the holder of those notes or if you are a beneficial owner of notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender those notes in the exchange offer, you should promptly contact the person in whose name your notes are registered and instruct that person to tender on your behalf. If you, as a beneficial holder, wish to tender on your own behalf you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Guaranteed Delivery Procedures............... If you wish to tender your notes and time will not permit the letter of transmittal or any of the documents required by the letter of transmittal to reach the exchange agent by the expiration date, or the procedure for book-entry transfer cannot be completed on time or certificates for your notes cannot be delivered on time, you may tender your notes pursuant to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." Shelf Registration Statement................. If any changes in law or of the applicable interpretation of the staff of the Commission do not permit us to effect the exchange offer, or upon the request of any holder of the notes under specified circumstances, we have agreed to register the notes on a shelf registration statement and use our best efforts to cause this shelf registration statement to be declared effective by the Commission. We have agreed to maintain the effectiveness of the shelf registration statement for, under specified circumstances, at least two
6 years from the date of the original issuance of the notes to cover resales of the notes. Withdrawal Rights............................ You may withdraw the tender of your outstanding notes at any time prior to 5:00 p.m., New York City time, on the expiration date. Acceptance of Outstanding Notes and Delivery of Exchange Notes.......................... Subject to certain conditions, we will accept for exchange any and all outstanding notes that are properly tendered and not validly withdrawn. The exchange notes issued pursuant to the exchange offer will be delivered promptly following the expiration date. Certain U.S. Federal Income Tax Consequences............................... The exchange of notes for the exchange notes should not be a taxable exchange for United States federal income tax purposes. See "Certain United States Federal Tax Considerations." Use of Proceeds.............................. We will not receive any proceeds from the issuance of the exchange notes. We will pay all of our expenses relating to the exchange offer. Exchange Agent............................... Bank One Trust Company, N.A. is serving as exchange agent in connection with the exchange offer. The exchange agent can be reached at One North State Street, 9th Floor, Chicago, Illinois 60602. For more information with respect to the exchange offer, please contact the exchange agent at (800) 524-9472 or send your questions by facsimile to the exchange agent at (312) 407-2088.
7 THE EXCHANGE NOTES General...................................... The form and terms of the exchange notes are identical in all material respects to the form and terms of the outstanding notes except that: - the exchange notes will bear a Series B designation; - we will have registered the exchange notes under the Securities Act and, therefore, they generally will not bear legends restricting their transfer; and - the holders of exchange notes will not be entitled to rights under the registration rights agreement. The exchange notes will evidence the same debt as the outstanding notes and will be entitled to the benefits of the indenture under which the notes were issued. Issuer....................................... United States Can Company. Notes Offered................................ $175.0 million aggregate principal amount of 12 3/8% Series B Senior Subordinated Notes due 2010. Maturity..................................... October 1, 2010. Interest Payments............................ April 1 and October 1, commencing April 1, 2001. Optional Redemption.......................... We may redeem the exchange notes in whole or in part, at redemption prices set forth in the section entitled "Description of the Exchange Notes--Redemption," plus accrued and unpaid interest, if any, to the redemption date. Optional Redemption After Some Equity Offerings.................................. At any time and from time to time before October 1, 2003, we may apply the proceeds of a prior equity offering, within 180 days of that offering, to redeem up to 35% of the aggregate principal amount of the exchange notes at a redemption price equal to 112.375% of the principal amount plus accrued and unpaid interest, if any, through the date of redemption if at least 65% of the aggregate principal amount of the exchange notes originally issued remains outstanding immediately after giving effect to the redemption.
8 Change of Control............................ Upon a change of control, as defined under the section entitled "Description of the Exchange Notes," you will have the right, as a holder of exchange notes, to require us to repurchase all or part of your exchange notes at the repurchase price set forth in the section entitled "Description of the Exchange Notes," plus accrued and unpaid interest, if any, to the date of repurchase. Guarantee.................................... United States Can Company's obligations under the exchange notes will be guaranteed on a senior subordinated basis (the "Guarantees") by our parent, U.S. Can Corporation, and all of its domestic restricted subsidiaries (collectively, the "Guarantors"). Currently, the only domestic restricted subsidiary and the only subsidiary guarantor is USC May Verpackungen Holding Inc. No foreign subsidiaries will guarantee the notes. The Guarantees will be general, unsecured obligations of the Guarantors, subordinate in right of payment to all the Guarantors' senior indebtedness. As of October 1, 2000, after giving pro forma effect to the transactions and the original offering, the Guarantees were subordinated to $319.8 million of senior indebtedness. See "Description of Exchange Notes." Ranking...................................... The exchange notes will be unsecured and will rank in right of payment behind all of our existing and future senior debt and will rank equal in right of payment to all of our existing and future senior subordinated debt. The exchange notes will be effectively subordinated to all liabilities of our subsidiaries that do not guarantee the notes. The exchange notes will rank equally with any notes issued in the original offering that are not exchanged pursuant to the exchange offer. As of October 1, 2000, after giving pro forma effect to the transactions and the original offering: - we had approximately $319.8 million of senior debt outstanding and approximately $104.6 million of unused commitment under our senior secured credit facility; - we had approximately $175.0 million of senior subordinated debt represented by the notes and approximately $0.9 million of senior subordinated debt represented by U.S. Can Corporation's outstanding 10 1/8% notes due 2006; and
9 - our subsidiaries that are not guarantors of the exchange notes had $98.1 million of liabilities, excluding liabilities owed to us. See "Summary Historical and Pro Forma Financial Information" and "Capitalization." Restrictive Covenants........................ United States Can Company will issue the exchange notes under an indenture between us and Bank One Trust Company, N.A., as trustee. The indenture also governs the notes. The indenture limits our ability and the ability of our restricted subsidiaries to: - incur more debt; - pay dividends or make other distributions, repurchase stock, repurchase subordinated debt and make investments; - create liens; - create restrictions on the payment of dividends and other amounts to us from our restricted subsidiaries; - sell assets or consolidate or merge with or into other companies; and - engage in transactions with affiliates. These covenants are subject to a number of important exceptions and limitations that are described under the heading "Description of the Exchange Notes." Risk Factors................................. You should consider carefully all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in the exchange notes.
10 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES The following tables present our summary financial data. The summary historical financial data for the years ended December 31, 1995 through 1999 have been derived from our consolidated financial statements. The summary financial data for the nine months ended October 1, 2000 and October 3, 1999 have been derived from our unaudited interim condensed consolidated financial statements, which in our opinion include all adjustments, consisting only of normal recurring adjustments, that we consider necessary for the fair presentation of our financial position and results of operations for these periods. Our October 1, 2000 financial statements include the results of operations of our German subsidiary, May Verpackungen, which we acquired in December 1999, but our historical income statements for all other periods presented below do not reflect the results of May. Operating results for the nine months ended October 1, 2000 are not necessarily indicative of results that may be expected for the entire year or any future period. The summary unaudited pro forma consolidated financial statements have been prepared by applying certain pro forma adjustments resulting from the transactions, the acquisition of May on December 30, 1999 and the sale of our Wheeling metal closures and Warren lithography businesses on March 10, 2000 to our historical audited financial statements. The transactions have been reflected as a recapitalization. The pro forma consolidated balance sheet as of October 1, 2000 has been derived from our historical balance sheet (which includes the impact of the acquisition of May and the sale of our Wheeling and Warren operations), adjusted to give effect to the transactions, as if they occurred on October 1, 2000. The pro forma consolidated statement of operations for the twelve months ended December 31, 1999 and the nine months ended October 1, 2000 gives effect to the acquisition of May, the sale of our Wheeling and Warren operations and the recapitalization as if each occurred on January 1, 1999. The pro forma consolidated statements of operations exclude non-recurring items directly attributable to the transactions. The pro forma consolidated financial statements are presented for informational purposes only and have been derived from, and should be read in conjunction with, our consolidated financial statements and accompanying notes. The pro forma adjustments, as described in the notes to the unaudited pro forma statements of operations and balance sheet contained in "Unaudited Pro Forma Financial Data," are based on currently available information and certain adjustments that we believe are reasonable. The pro forma financial information is not necessarily indicative of the financial position or results of operations of U.S. Can Corporation or United States Can Company that would have occurred had the transactions, the May acquisition and the sale of our Wheeling and Warren operations taken place on the date indicated, nor are they necessarily indicative of our future financial position or results of operations. We have not provided separate financial statements or data for U.S. Can Corporation in this prospectus. U.S. Can Corporation's only assets are its investment in and advances to United States Can Company. We believe that the financial statements of U.S. Can Corporation and the consolidated financial statements of United States Can Company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. The following summary historical and pro forma financial data should be read in conjunction with "Capitalization," "Selected Financial Data," "Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus. 11 HISTORICAL AND PRO FORMA FINANCIAL DATA (DOLLARS IN MILLIONS)
HISTORIAL ---------------------------------------------------------------------------- NINE MONTHS YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- --------------------- OCTOBER OCTOBER 3, 1, 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- --------- --------- (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales..................................... $562.7 $660.6 $755.7 $710.2 $714.1 $549.8 $607.0 Cost of Sales................................. 491.1 571.7 665.8 618.1 611.6 470.1 517.6 ------ ------ ------ ------ ------ ------ ------ Gross income.................................. 71.6 88.9 89.9 92.1 102.5 79.7 89.4 Selling, general and administrative expenses.................................... 26.5 28.4 33.0 32.6 33.8 25.0 32.4 Special charges(1)............................ 8.0 -- 63.0 35.9 -- -- 3.4 ------ ------ ------ ------ ------ ------ ------ Operating income (loss)....................... 37.1 60.5 (6.1) 23.6 68.7 54.7 53.6 Interest expense.............................. 24.5 28.4 36.9 33.2 28.7 21.8 24.6 Amortization of deferred financing costs...... 1.5 1.4 1.7 1.8 1.2 0.9 1.2 Other expenses................................ 2.0 1.7 2.0 1.8 1.7 1.3 1.9 ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes............. 9.1 29.0 (46.7) (13.2) 37.1 30.7 25.9 Provision (benefit) for income taxes.......... 4.2 12.3 (16.8) (5.7) 14.6 12.0 9.8 ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before discontinued operations, extraordinary item and nonrecurring charges directly attributable to the transactions(2)............................. 4.9 16.7 (29.9) (7.5) 22.5 18.7 16.1 Net Income (loss) from discontinued operations.................................. (1.0) 0.4 1.1 -- -- -- -- Net loss on sale of discontinued business(3)................................. -- -- (3.2) (8.5) -- -- -- Extraordinary item(4)......................... -- (5.3) -- -- (1.3) (1.3) -- ------ ------ ------ ------ ------ ------ ------ Net income (loss) before preferred stock dividend.................................... $ 3.9 $ 11.8 $(32.0) $(16.0) $ 21.2 $ 17.4 $ 16.1 ====== ====== ====== ====== ====== ====== Preferred stock dividend...................... Net loss available for common stockholders.... OTHER FINANCIAL DATA: Cash flows from operating activities.......... $ 24.8 $ 30.9 $ 64.1 $ 65.0 $ 62.5 $ 59.3 $ 25.9 Cash flows from investing activities.......... (64.2) (127.2) (64.8) 9.1 (91.5) (16.3) (1.5) Cash flows from financing activities.......... 39.4 103.6 1.9 (63.1) 27.3 (28.4) (32.8) EBITDA(5)..................................... $ 69.8 $ 91.4 $ 93.1 $ 91.3 $ 97.7 $ 77.9 $ 80.7 Depreciation and amortization................. 28.2 34.0 39.9 35.4 31.9 25.4 26.8 Capital expenditures.......................... 31.4 48.6 54.0 22.8 31.0 19.7 16.5 Ratio of earnings to fixed charges(6)......... 1.3x 1.9x NM 0.7x 2.2x 2.3x 1.9x BALANCE SHEET DATA: Cash and cash equivalents..................... $ 0.1 $ 8.0 $ 6.8 $ 18.1 $ 15.7 $ 32.2 $ 7.4 Working capital............................... 48.9 105.6 80.8 76.1 37.7 69.9 71.0 Total assets.................................. 455.4 643.6 633.7 555.6 663.6 558.6 626.0 Total debt.................................... 244.6 375.8 376.1 316.7 359.3 281.5 318.9 Preferred Stock............................... -- -- -- -- -- -- -- Stockholders' equity (deficit)................ 81.8 96.8 62.3 50.2 68.6 67.2 68.5 PRO FORMA -------------------------- NINE YEAR MONTHS ENDED ENDED DECEMBER 31, OCTOBER 1, 1999 2000 ------------ ----------- (UNAUDITED) (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales..................................... $843.1 $603.8 Cost of Sales................................. 723.5 515.0 ------ ------ Gross income.................................. 119.6 88.8 Selling, general and administrative expenses.................................... 44.5 32.5 Special charges(1)............................ -- 3.4 ------ ------ Operating income (loss)....................... 75.1 52.9 Interest expense.............................. 50.4 39.2 Amortization of deferred financing costs...... 3.8 1.4 Other expenses................................ 2.8 1.9 ------ ------ Income (loss) before income taxes............. 18.1 10.4 Provision (benefit) for income taxes.......... 7.1 3.9 ------ ------ Income (loss) from continuing operations before discontinued operations, extraordinary item and nonrecurring charges directly attributable to the transactions(2)............................. 11.0 6.5 Net Income (loss) from discontinued operations.................................. -- -- Net loss on sale of discontinued business(3)................................. -- -- Extraordinary item(4)......................... -- -- ------ ------ Net income (loss) before preferred stock dividend.................................... $ 11.0 $ 6.5 Preferred stock dividend...................... 11.1 9.1 ------ ------ Net loss available for common stockholders.... $ (0.1) $ (2.6) ====== ====== OTHER FINANCIAL DATA: Cash flows from operating activities.......... Cash flows from investing activities.......... Cash flows from financing activities.......... EBITDA(5)..................................... $107.1 $ 79.9 Depreciation and amortization................. 38.6 26.9 Capital expenditures.......................... 31.0 16.5 Ratio of earnings to fixed charges(6)......... 1.0x 0.9x BALANCE SHEET DATA: Cash and cash equivalents..................... Working capital............................... Total assets.................................. Total debt.................................... Preferred Stock............................... Stockholders' equity (deficit)................
- ---------------------------------- (1) The 1995 special charge relates to an overhead reduction program. See note (3) to the audited consolidated financial statements for a description of the 1997 and 1998 special charges and note (2) to the unaudited consolidated financial statements for a description of the third quarter 2000 special charge. In connection with the recapitalization, we expect to take a special charge in the fourth quarter of 2000 of approximately $18.9 million. This amount includes charges for advisory, management and transactional fees. 12 (2) The following pro forma adjustments have been excluded from the pro forma statements of operations because these costs are one-time, non-recurring items that are directly attributable to the recapitalization.
INCOME PRETAX TAX ACCUMULATED DESCRIPTION EXPENSE BENEFIT DEFICIT - ----------- -------- -------- ------------ Advisory fees............................................... $16.4 $ (6.2) $10.2 Redemption premium on the 10 1/8% notes due 2006............ 18.9 (7.2) 11.7 Vest unearned deferred compensation and restricted stock.... 1.5 (0.6) 0.9 Pay optionholders the difference between the transaction price and the option exercise price....................... 6.1 (2.3) 3.8 Write-off of deferred financing costs related to the existing credit agreement and 10 1/8% notes due 2006...... 4.7 (1.8) 2.9 ----- ------ ----- Pro forma adjustment........................................ $47.4 $(17.9) $29.5
(3) See note (3) to the consolidated financial statements for a description of the sale of United States Can Company's metal services segment. (4) Represents premium paid and write-offs of deferred financing costs in conjunction with the early extinguishment of debt. We expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. (5) Earnings before interest, taxes, depreciation, amortization and special charges. We consider EBITDA to be an important indicator of the performance of our business, including our ability to provide cash flows to service debt and fund capital expenditures. EBITDA, however, should not be considered an alternative to operating or net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. In addition, our definition of EBITDA may not be comparable to similarly-titled measures reported by other companies. For purposes of determining compliance with the financial covenants under our new senior secured credit facility, EBITDA is adjusted for our reduction in force program that we adopted in July 2000. The calculation of adjusted EBITDA is shown below (in millions):
TWELVE MONTHS NINE MONTHS DESCRIPTION ENDED DECEMBER 31, 1999 ENDED OCTOBER 1, 2000 - ----------- ----------------------- --------------------- EBITDA...................................................... $107.1 $ 79.9 Salaries of employees terminated in connection with reduction in force program................................ 5.0 2.5 ------ ------ Adjusted EBITDA............................................. $112.1 $ 82.4 ====== ======
(6) For purposes of computing the ratio of earnings to fixed charges, earnings represents earnings from continuing operations plus fixed charges. Fixed charges include interest expense on indebtedness, amortization of debt discount and the portion of rent deemed representative of an interest factor. Approximately $46.7 million and $13.2 million of additional pretax earnings for the fiscal years ended December 31, 1997 and 1998, respectively, would be required for our company to have achieved a ratio of earnings to fixed charges of 1.0. As pretax earnings were reduced by non-cash special charges of $41.7 million and $27.7 million for the respective fiscal years, the ratios do not indicate an inability of our company to make cash payments necessary to support its fixed charges. Approximately $4.2 million of additional pre-tax earnings would be required in order for our company to have achieved a pro forma ratio of earnings to fixed charges of 1.0 for the nine-month period ended October 1, 2000. As pro forma non-cash depreciation and amortization amounted to $26.9 million for the nine-month period ended October 1, 2000, we do not expect that we will be unable to make the cash payments necessary to support our fixed charges. 13 RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE INVESTING IN THE EXCHANGE NOTES. WE HAVE SUBSTANTIAL DEBT THAT COULD NEGATIVELY IMPACT OUR BUSINESS BY, AMONG OTHER THINGS, INCREASING OUR VULNERABILITY TO GENERAL ADVERSE ECONOMIC AND INDUSTRY CONDITIONS AND PREVENTING US FROM FULFILLING OUR OBLIGATIONS UNDER THE EXCHANGE NOTES. As a result of the transactions and the original offering, we have significant debt outstanding. As of October 1, 2000, taking into account the transactions and the original offering, we would have had total consolidated debt outstanding of $495.7 million and $104.6 million of unused commitment under our revolving credit facility. Our high level of debt could: - make it difficult for us to satisfy our obligations, including making interest payments under the exchange notes and our other debt obligations; - limit our ability to obtain additional financing to operate our business; - limit our financial flexibility in planning for and reacting to industry changes; - place us at a competitive disadvantage as compared to less leveraged companies; - increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates; and - require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing the availability of our cash flow for other purposes. We may borrow additional funds to fund our capital expenditures and working capital needs. We also may incur additional debt to finance future acquisitions. The incurrence of additional debt could make it more likely that we will experience some or all of the risks described above. IF WE DO NOT GENERATE POSITIVE CASH FLOWS, WE MAY BE UNABLE TO SERVICE OUR DEBT AND, AS A RESULT, WE MAY BE FORCED INTO BANKRUPTCY OR OTHERWISE MAY BE UNABLE TO REPAY THE EXCHANGE NOTES. Our ability to pay principal and interest on the exchange notes and on our senior debt depends on our future operating performance. Future operating performance is subject to market conditions and business factors that often are beyond our control. Consequently, we cannot assure you that we will have sufficient cash flows to pay the principal, premium, if any, and interest on our debt. If our cash flows and capital resources are insufficient to allow us to make scheduled payments on our debt, we may have to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our debt. We cannot assure you that the terms of our debt will allow these alternative measures or that alternative measures would satisfy our scheduled debt service obligations. If we cannot make scheduled payments on our debt, we will be in default and, as a result: - our debt holders could declare all outstanding principal and interest to be due and payable; - our senior debt lenders could terminate their commitments and commence foreclosure proceedings against our assets; and - we could be forced into bankruptcy or liquidation. 14 THE TERMS OF OUR DEBT MAY SEVERELY LIMIT OUR ABILITY TO PLAN FOR OR RESPOND TO CHANGES IN OUR BUSINESS. Our senior secured credit facility and the indenture governing the exchange notes restrict, among other things, our ability to take specific actions, even if these actions may be in our best interest. These restrictions limit our ability to: - incur liens or make negative pledges on our assets; - merge, consolidate or sell our assets; - issue additional debt; - pay dividends or redeem capital stock and prepay other debt; - make investments and acquisitions; - enter into transactions with affiliates; - make capital expenditures; - materially change our business; - amend our debt and other material agreements; - issue and sell capital stock; - allow distributions from our subsidiaries; or - prepay specified indebtedness. Our debt requires us to maintain specified financial ratios and meet specific financial tests. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we were unable to make this repayment or otherwise refinance these borrowings, our lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our business could be adversely impacted. OUR SENIOR DEBT BEARS INTEREST AT A FLOATING RATE, AND IF INTEREST RATES RISE, OUR PAYMENTS WILL INCREASE AND WE MAY INCUR LOSSES. Outstanding amounts under our senior secured credit facility bear interest at a floating rate that will not be capped at a maximum interest rate. If interest rates rise, our senior debt interest payments also will increase, which could make it more difficult for us to satisfy our debt obligations and further reduce availability of our cash flow for operations and other purposes. Although we may enter into agreements to hedge our interest rate risk, we cannot assure you that these agreements will protect us fully against our interest rate risk. YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS SUBORDINATED TO ALL OF OUR EXISTING AND FUTURE SENIOR DEBT AND ALL OF THE GUARANTORS' EXISTING AND FUTURE SENIOR DEBT. The exchange notes are our general, unsecured obligations and are subordinate to all of our existing and future senior debt. The exchange notes will rank senior or equal to all of our existing and future subordinated debt. The Guarantors will guarantee our obligations under the exchange notes on a senior subordinated basis. The Guarantees will be the Guarantors' general, unsecured obligations, subordinate to all of the Guarantors' senior debt. The Guarantors include U.S. Can Corporation, our parent company. U.S. Can Corporation is a holding company and has no assets other than the stock of United States Can Company to support its guarantee of the exchange notes. The Guarantors also include all of our domestic subsidiaries. Our foreign restricted subsidiaries are not guarantors of the exchange notes. We may designate other subsidiaries to be non-guarantors in the future, in accordance with the indenture. In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiaries in the future, holders of their debt will generally be entitled to payment of their claims from the assets of those subsidiaries 15 before any assets are made available for distribution to us. As of October 1, 2000, our non-guarantor subsidiaries had $98.1 million of liabilities, excluding liabilities owed to us. In addition, all payments on the exchange notes will be blocked in the event of a payment default on our senior debt and may be blocked for up to 179 consecutive days in any given year in the event of a non-payment default on our senior debt. In the event of a default on the exchange notes and any resulting acceleration of the exchange notes, the holders of senior debt will be entitled to payment in full before any payment or distribution may be made with respect to the exchange notes. As of October 1, 2000, on a pro forma basis after giving effect to the transactions and the original offering, we had approximately $319.8 million of debt that ranks senior to the exchange notes and a stockholders' deficit of $178.9 million. In addition, we may be able to incur substantial additional debt in the future. The terms of the indenture governing the exchange notes permit us to incur additional debt, including additional debt under our new senior secured credit facility. Our senior secured credit facility permits additional borrowings of up to $119.5 million as of October 1, 2000 on a pro forma basis after giving effect to the transactions and the original offering, and all of those borrowings would be senior to the exchange notes. If we are declared insolvent, liquidated or reorganized, our assets will be available to pay our obligations on the exchange notes only after all senior debt has been paid in full. Accordingly, there may be insufficient assets remaining after payment of prior senior claims to pay amounts due on the exchange notes. In addition, we generally may not make any payments with respect to the exchange notes if a default exists with respect to our senior debt. WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY OUR INDENTURE. The indenture provides that, upon a change in control of our company or the parent guarantor, we will be required to offer to repurchase all of the outstanding exchange notes at 101% of the principal amount of the notes, plus accrued interest. This provision will not necessarily protect exchange note holders in a highly leveraged exchange transaction. In addition, our financial resources may limit our ability to repurchase the notes or repay our outstanding debt under the senior secured credit facility. For example, our senior secured credit facility prohibits our repurchase of the exchange notes if we have outstanding debt under the facility. Furthermore, any future debt that we incur would also likely limit our ability to repurchase the exchange notes. We currently anticipate that we will need additional financing to pay the principal of the exchange notes or to repurchase the exchange notes upon a change of control as required under the indenture. We may obtain additional financing by refinancing our debt, selling our equity securities or selling the equity securities or assets of our subsidiaries. However, we may not have sufficient funds, or be permitted by our outstanding debt, to purchase the exchange notes tendered by holders. See "Description of the Exchange Notes--Change of Control." THE EXCHANGE NOTES AND THE GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF FRAUDULENT CONVEYANCE LAWS. Federal bankruptcy law and comparable provisions of state fraudulent transfer laws allow courts to void the exchange notes or the Guarantees, or to subordinate the exchange notes or the Guarantees to the debt owed to our or a Guarantor's existing or future creditors. A court must find, however, that, at the time we incurred the indebtedness evidenced by the exchange notes, either: - we incurred the debt, or the Guarantors incurred the Guarantees, with the intent of hindering, delaying or defrauding current or future creditors; or - we received less than reasonably equivalent value or fair consideration for the incurrence of the indebtedness or the Guarantors did not receive reasonably equivalent value or fair consideration for their Guarantees, and we or the Guarantors, as the case may be, were found to be insolvent under various definitions. 16 If any of our future subsidiaries guarantee the exchange notes, those guarantees will be subject to the same risks as the Guarantees. If the Guarantees are avoided as a fraudulent conveyance or found to be unenforceable for any other reason, you will not have a claim against the Guarantors and will be a creditor only of United States Can Company and any Guarantor whose Guarantee was not set aside or found to be unenforceable. BERKSHIRE PARTNERS OWNS A CONTROLLING INTEREST IN OUR VOTING SECURITIES AND ITS INTERESTS COULD BE INCONSISTENT WITH THE INTERESTS OF THE EXCHANGE NOTE HOLDERS. Berkshire Partners and its affiliates own approximately 77.3% of the total common equity of our parent company, U.S. Can Corporation. Subject to specified limitations contained in our stockholders agreement, Berkshire Partners controls us. Accordingly, Berkshire and its affiliates will control the power to elect directors and to approve many actions requiring the approval of our stockholders, such as adopting most amendments to our certificate of incorporation and approving mergers, sales of all or substantially all of our assets and other corporate transactions that could result in a change of control of our company. Berkshire Partners' interest may be inconsistent with the exchange note holders' interests. THERE MAY BE NO ACTIVE TRADING MARKET FOR THE EXCHANGE NOTES. FURTHER, RESALES OF THE EXCHANGE NOTES MUST COMPLY WITH APPLICABLE STATE SECURITIES LAWS. The exchange notes are new securities for which there currently is no market. Although Salomon Smith Barney and Banc of America Securities, LLC, the initial purchasers of the outstanding notes, have informed us that they intend to make a market in the exchange notes, they are not obligated to do so and they may discontinue any market making activities at any time without notice. Accordingly, the development or liquidity of any market for the exchange notes is uncertain. We do not intend to apply for listing of the exchange notes on any securities exchange or for quotation through The Nasdaq National Market. In addition, changes in the overall market for high yield securities and changes in our financial performance or prospects or in the prospects for companies in our industry generally may adversely affect the liquidity of the trading market in the exchange notes and the market price quoted for the exchange notes. See "Description of Exchange Notes" and "The Exchange Offer." All resales must be made in compliance with state securities or "blue sky" laws. Compliance with these laws may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements. YOUR FAILURE TO EXCHANGE YOUR NOTES IN THE EXCHANGE OFFER WILL RESTRICT YOUR ABILITY TO RESELL THEM. Untendered outstanding notes that you do not exchange for the registered exchange notes pursuant to the exchange offer will remain restricted securities, subject to the following restrictions on transfer: - you may resell only if registered pursuant to the Securities Act or if an exemption from registration is available; - the notes will bear a legend restricting transfer in the absence of registration or an exemption; and - a holder of the notes who wants to sell or otherwise dispose of all or any part of its notes under an exemption from registration under the Securities Act, if requested by us, must deliver to us an opinion of independent counsel experienced in Securities Act matters, reasonably satisfactory in form and substance to us, that an exemption is available. 17 Except under limited circumstances, we have no obligation to register any notes not tendered in the exchange offer. RISKS RELATED TO OUR BUSINESS WE FACE COMPETITIVE RISKS FROM MANY SOURCES THAT MAY NEGATIVELY IMPACT OUR PROFITABILITY. The can and container industry is highly competitive with some of our competitors having greater financial resources than we do. Quality, service and price are the principal methods of competition in our industry. Because our customers have the ability to buy similar products from our competitors, we are limited in our ability to increase prices. Our capital investments have improved our operating efficiencies, and consequently, improved profitability, but we cannot assure you that we will continue to improve profit margins in this manner. In addition, our profit margins could decrease if we are unable to meet our customers' quality and service demands. We also face competitive risks from substitute products, such as aluminum, glass and plastic containers. Our business also is affected by changes in consumer demand for our customers' products. A decrease in the costs of substitute products or a decline in consumer demand for our customers' products, particularly their aerosol-based products, could reduce our customers' orders and adversely affect our business, including our profitability. THE LOSS OF A KEY CUSTOMER COULD HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR SALES. We make a significant percentage of our sales to a limited number of customers. On a pro forma basis, our top ten customers accounted for approximately 32.9% of our sales in 1999, with our largest customer accounting for approximately 7.2%. The loss of a key customer could adversely affect our business because we may be unable to lower our operating costs quickly enough to offset the resulting sales decrease. In addition, several of our manufacturing plants are dependent on high volume orders from customers. The loss of any of these customers or a decrease in demand for their products, which are packaged in our containers, could adversely affect our business and force us to close manufacturing plants. Product quality is a key element in customer retention in the packaging industry. In August 2000, a manufacturing facility owned by our May Verpackungen subsidiary supplied a small number of defective pet food cans to a major customer. We have determined the cause of the production defect and have implemented additional policies and training at our May Verpackungen subsidiary to prevent a recurrence of this problem in the future. While our overall relationship with this customer is positive, the customer stopped orders from the production line that produced the defective cans through the end of 2000 and reduced purchases of other products from the facility. The customer recently requested that we resume shipments of cans from this production line. We do not expect a negative impact from this production defect on 2001 results of operations. However, we estimate that our results of operations for 2000 have been negatively impacted by approximately $3.0 million with respect to EBITDA, and we cannot assure you that we will return to previous levels of shipments to this customer. INCREASES IN TIN-PLATED STEEL PRICES COULD CAUSE OUR PRODUCTION COSTS TO INCREASE, WHICH COULD REDUCE OUR ABILITY TO COMPETE EFFECTIVELY. Tin-plated steel is the most significant raw material used to make our products. In 1999, our domestic and European operations (including those of May, our recently acquired German subsidiary) purchased approximately 500,000 tons of tin-plated steel. Negotiations with our domestic and European tin-plated steel suppliers generally occur once per year. Failure to negotiate favorable tin-plated steel prices in the future could result in an increase in production costs and a negative impact on our results of operations. 18 Some customer contracts allow us to pass tin-plated steel price increases through to our customers. However, these contracts generally limit pass-throughs and also may require us to match other competitive bids. If we cannot pass through all future tin-plated steel price increases to our customers or match other packaging suppliers' bids, our financial condition may be adversely affected. OUR FAILURE TO IMPLEMENT OUR COST SAVINGS STRATEGY COULD NEGATIVELY IMPACT OUR ABILITY TO INCREASE OUR REVENUES AND IMPROVE OUR PROFITABILITY. A significant element of our business strategy is the improvement of our operating efficiencies and a reduction of our operating costs. In order to accomplish these goals, we will consider opportunities to consolidate our manufacturing plants, implement programs to lower our operating costs, implement new manufacturing technology and continue our focus on overhead reductions. Our failure to successfully implement this strategy could adversely affect our revenues and profit margins. WE MAY NOT SUCCEED IN INTEGRATING THE BUSINESS WE RECENTLY ACQUIRED OR ANY BUSINESSES WE MAY ACQUIRE IN THE FUTURE. We recently acquired May, a German manufacturer of pet food and specialty food packaging and aerosol cans. We are currently in the process of integrating May's operations into our existing business. The process of integrating an acquired business involves numerous risks, including difficulties in assimilating operations and products, diversion of management time and attention from existing operations and activities and potential loss of key employees from the acquired business. As an international acquisition, the process of integrating May is more complex. As a result, we may fail to realize the expected benefits of the acquisition. In addition, as part of our strategy, we expect to continue to make acquisitions as opportunities arise. Our failure to integrate successfully any businesses we acquire in the future could adversely affect our business. WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS. We operate facilities and sell products in several countries outside the United States. We have significant foreign operations, including plants and sales offices in Denmark, France, Germany, Italy, Spain and the United Kingdom. In addition, we currently own 36.5% of an aerosol can manufacturer located in Argentina and intend to acquire the remaining 63.5% of this manufacturer. Our international operations subject us to risks associated with selling and operating in foreign countries. These risks include: - fluctuations in currency exchange rates; - political instability; - limitations on conversion of foreign currencies into United States dollars; - restrictions on dividend payments and other payments by our foreign subsidiaries; - withholding and other taxes on dividend payments and other payments by our foreign subsidiaries; - hyperinflation in some foreign countries; and - investment regulation and other restrictions by foreign governments. We may enter into transactions to hedge the risk of exchange rate fluctuations or take other steps to protect against these risks. However, these steps may not fully protect us against these risks, and we could incur losses. 19 OUR BUSINESS IS SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REMEDIATION AND COMPLIANCE COSTS. Our operations are subject to federal, state, local and foreign laws and regulations relating to pollution, the protection of the environment, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. In particular, our lithography operations' air emissions are strictly regulated. We spend significant funds each year to upgrade emissions control equipment to comply with changes in environmental regulations and increase the efficiencies of our manufacturing operations. Changes in applicable environmental regulations could increase the capital expenditures necessary to bring manufacturing facilities into compliance with changing environmental laws. We also could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as a result of violations of, or liabilities under, environmental laws or non-compliance with environmental permits required for our production facilities. Occasionally, contaminants from current or historical operations have been detected at some of our present and former sites. Although we are not currently aware of any material claims or obligations with respect to these sites, the detection of additional contaminants or the imposition of cleanup obligations at existing or unknown sites of contamination could result in significant liability. We cannot predict the amount or timing of costs imposed under environmental laws. Liability under certain environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis (i.e., one liable party could be held liable for all costs at a site). We have been named as a potentially responsible party for costs incurred in the clean up of a regional groundwater plume partially extending underneath property located in San Leandro, California, formerly a site of one of our can assembly plants. We have agreed to indemnify the owner of this property against this matter. We do not believe the past operations of our can assembly plant caused or contributed to this groundwater plume. However, any liability in connection with this or other environmental matters could result in substantial costs. IF WE FAIL TO RETAIN KEY MANAGEMENT AND PERSONNEL, WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS PLAN. We believe that our future success depends, in large part, on our experienced senior management team. Losing the services of one or more members of our senior management team could make it difficult for us to manage our business and meet key objectives. A SIGNIFICANT PORTION OF OUR WORKFORCE IS UNIONIZED AND LABOR DISRUPTIONS COULD DECREASE OUR PRODUCTIVITY. As of October 1, 2000, we had approximately 4,200 employees. Nearly 1,750 of our United States employees are subject to collective bargaining agreements that expire on various dates between June 2001 and March 2004. In keeping with common practice, virtually all manufacturing employees at our European plants are unionized. Although we consider our current relations with our employees to be good, if we do not maintain these good relations, or if major work disruptions were to occur, our production costs could increase. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT MAY NOT BE ACCURATE INDICATORS OF OUR FUTURE PERFORMANCE. Many statements under the captions "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus are "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements use words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions and give our current expectations or forecasts of future events. Such statements involve known and unknown risks and uncertainties which may cause our company's actual results, performance or achievements to be materially different than future results, performance or achievements expressed or implied in this release. By way of example and not limitation, and in no particular order, known risks and uncertainties include the timing of, and net proceeds realized from, divestitures, the timing and cost of plant closures, the level of cost reduction achieved through restructuring, the success of new technology, the timing of, and synergies achieved through, integration of acquisitions, changes in raw material costs and currency fluctuations. In light of these and other risks and uncertainties, the inclusion of a forward-looking statement in this prospectus should not be regarded as a representation by us that any future results, performance or achievements will be attained. 20 THE TRANSACTIONS THE RECAPITALIZATION On June 1, 2000, Pac Packaging Acquisition Corporation and U.S. Can Corporation entered into an Agreement and Plan of Merger (as amended, the "recapitalization agreement"), which provided for the merger of Pac Acquisition and U.S. Can Corporation in a recapitalization transaction, with U.S. Can Corporation being the surviving corporation. On October 4, 2000, the recapitalization was consummated. In connection with the recapitalization, the following transactions occurred: - U.S. Can Corporation purchased approximately 13.5 million shares of its common stock for cash at $20.00 per share; - U.S. Can Corporation purchased options to purchase approximately 1.6 million shares of its common stock for cash at $20.00 per underlying share, less the applicable option exercise price; - Berkshire Partners, its co-investors and several of the rollover stockholders purchased preferred stock of U.S. Can Corporation for $106.7 million; - Berkshire Partners, its co-investors, several of the rollover stockholders and management purchased common stock of U.S. Can Corporation for $53.3 million; - we borrowed $260.0 million in term loans under our new senior secured credit facility; - we borrowed $20.5 million under the revolving credit facility that is part of our new senior secured credit facility; - United States Can Company issued $175.0 million aggregate principal amount of its 12 3/8% senior subordinated notes due 2010 in the original offering; and - U.S. Can Corporation repurchased $235.7 million aggregate principal amount of its outstanding 10 1/8% notes due 2006. As a result of the recapitalization and the other transactions, U.S. Can Corporation, which was previously a publicly traded company, became a private company and its common stock was delisted from the New York Stock Exchange. 21 The following table lists the rollover stockholders and the management stockholders, together with the cash consideration they received in the recapitalization from the sale of common stock and their ownership percentages before and after the recapitalization.
CASH RECEIVED PERCENTAGE FROM SALE OF PERCENTAGE OWNERSHIP PRIOR EXISTING COMMON OWNERSHIP AFTER TO TRANSACTION STOCK TRANSACTION(1) --------------- --------------- --------------- MANAGEMENT STOCKHOLDERS: Gillian V. N. Derbyshire......................... 0.04% -- 0.62% David R. Ford.................................... 0.11% -- 0.85% Paul W. Jones.................................... 0.24% -- 3.63% J. Michael Kirk.................................. 0.04% -- 0.62% John L. Workman.................................. 0.07% -- 1.88% Roger B. Farley.................................. 0.04% -- 1.00% ROLLOVER STOCKHOLDERS: Salcorp Ltd...................................... 2.52% $ 3,842,660 1.73% Barcel Corporation............................... 3.85% $ 6,360,000 2.35% Scarsdale Company N.V., Inc...................... 0.03% -- 0.05% Windsor International Corporation................ 1.68% $ 3,164,660 0.80% Atlas World Carriers S.A......................... 0.91% $ 1,660,000 0.47% The World Financial Corporation S.A.............. 0.87% $ 1,560,000 0.47% Salomon Smith Barney Inc......................... 8.92% $15,736,280 4.90% Lennoxville Investments, Inc..................... 1.10% $ 1,164,000 1.06% Empire Investments S.A........................... 2.26% $ 3,894,000 1.29% Carl Ferenbach................................... 0.54% $ 459,840 0.59%
- ------------------------ (1) Percentages reflect the number of shares of common stock issued in the name of the corresponding stockholder and do not include additional shares issued to affiliates that may be beneficially owned, as defined in Rule 13d-3(d)(1) of the Exchange Act, by the stockholder. SOURCES OF FUNDS The recapitalization was funded with a combination of debt and equity comprised of the following: THE EQUITY FINANCING. As part of the recapitalization, Berkshire Partners and its co-investors, along with the rollover stockholders and members of management, contributed approximately $160.0 million in cash and rollover stock to Pac Acquisition in exchange for securities consisting of approximately $53.3 million in U.S. Can Corporation common stock and approximately $106.7 million in U.S. Can Corporation preferred stock. See "Certain Relationships and Related Party Transactions." As a result of these transactions, Berkshire Partners and its affiliates own approximately 77.3% of U.S. Can Corporation's common stock. THE NEW SENIOR SECURED CREDIT FACILITY. We entered into a $400.0 million senior secured credit facility with a group of lenders. The senior secured credit facility consists of term loan facilities in an aggregate principal amount of $260.0 million and a $140.0 million revolving credit facility available for loans and letters of credit. All of the term debt and approximately $20.5 million under the revolving credit facility were used to finance a portion of the recapitalization. See "Other Indebtedness--Senior Secured Credit Facility." THE NOTES. We issued $175.0 million aggregate principal amount of the company's 12 3/8% senior subordinated notes due 2010. 22 USES OF FUNDS We used the net proceeds from these debt and equity financings to: - fund the payments required to effect the recapitalization; - tender for all of our subordinated debt (including paying accrued interest and the bond tender premium) and refinance a majority of our existing senior debt; and - pay related fees and expenses. As part of the debt refinancing, U.S. Can Corporation repurchased $235.7 million of its outstanding 10 1/8% notes due 2006 and paid the accrued interest and a bond tender premium associated with those notes. The original offering, the initial borrowings under the senior secured credit facility, the investment by Berkshire Partners and its co-investors in U.S. Can Corporation's preferred and common stock, the repurchase of U.S. Can Corporation's outstanding 10 1/8% notes due 2006 and the recapitalization, including the purchase of U.S. Can Corporation common stock, investment by the rollover stockholders and investment by management contemplated by the recapitalization agreement, are collectively referred to in this prospectus as the "transactions." The following table sets forth the sources and uses of funds in connection with the transactions as of October 4, 2000:
AMOUNT ----------- (DOLLARS IN MILLIONS) SOURCES OF FUNDS: New Senior Secured Credit Facility: Revolving Credit Facility(1)............................ $ 20.5 Term Loans.............................................. 260.0 12 3/8% Senior Subordinated Notes due October 1, 2010..... 175.0 Preferred Stock(2)........................................ 106.7 Common Stock(3)........................................... 53.3 Available Cash............................................ 2.3 Assumed Debt(4)........................................... 40.2 ------ Total Sources............................................... $658.0 USES OF FUNDS: Purchase Capital Stock(5)................................. $277.5 Refinance Existing Debt(6)................................ 309.0 Payment of Fees and Expenses.............................. 31.3 Assumed Debt.............................................. 40.2 ------ Total Uses.................................................. $658.0
- ------------------------ (1) The total commitment under the revolving credit facility is $140.0 million. (2) Consists of the purchase of $91.3 million of preferred stock by Berkshire Partners and its co-investors and $15.4 million by several of the rollover stockholders. (3) Consists of the purchase (by cash and/or rollover stock) of $41.5 million of common stock by Berkshire Partners and its co-investors, $7.0 million by several of the rollover stockholders and $4.8 million by management. (4) Includes mortgages of $23.6 million, outstanding bank borrowings of $4.7 million, industrial revenue bonds of $4.0, capitalized lease obligations of $7.0 million and $0.9 million of untendered 10 1/8% notes due 2006. 23 (5) Includes $24.8 million of rollover stock. (6) Includes amounts outstanding under the credit facility in place prior to the original offering and the principal, accrued interest and a bond tender premium in connection with the repurchase of U.S. Can Corporation's 10 1/8% notes due 2006. USE OF PROCEEDS There will be no proceeds from the issuance of the exchange notes. 24 CAPITALIZATION The following table sets forth as of October 1, 2000 our actual capitalization and our pro forma capitalization as adjusted to give effect to the transactions and the original offering as if they had occurred on that date. See "The Transactions" and "Unaudited Pro Forma Financial Data."
AS OF OCTOBER 1, 2000 ----------------------- PRO FORMA ACTUAL AS ADJUSTED --------- ----------- (DOLLARS IN MILLIONS) Cash and cash equivalents................................ $ 7.4 $ 5.1 ====== ======= Debt: Existing credit facility............................... $ 41.8 $ -- New senior secured credit facility: Revolving credit facility(1)......................... -- 20.5 Term loans........................................... -- 260.0 Other senior debt(2)................................... 40.5 39.3 10 1/8% senior subordinated notes due 2006(3) 236.6 0.9 Notes offered in the original offering................. -- 175.0 ------ ------- Total debt......................................... $318.9 $ 495.7 ====== ======= Preferred stock.......................................... $ -- $ 106.7 ====== ======= Stockholders' equity: Common stock and additional paid-in capital............ $114.6 $ 53.3 Treasury stock and unearned restricted stock........... (2.2) -- Currency translation adjustment........................ (25.4) (25.4) Accumulated deficit(4)................................. (18.5) (206.8) ------ ------- Total stockholders' equity (deficit)............... $ 68.5 $(178.9) ------ ------- Total capitalization............................... $387.4 $ 423.5 ====== =======
- ------------------------ (1) Upon completion of the transactions, we had letters of credit of $14.9 million outstanding and $104.6 million of unused commitment under the revolving credit facility. (2) Pro forma as adjusted other senior debt includes mortgages of $23.6 million, outstanding bank borrowings of $4.7 million, industrial revenue bonds of $4.0 million and capitalized lease obligations of $7.0 million. (3) As part of the transactions, U.S. Can Corporation repurchased $235.7 million aggregate principal amount of its outstanding 10 1/8% notes due 2006. (4) See notes (h) and (i) to the Pro Forma Consolidated Balance Sheet for a description of the transaction-related adjustments that cause the increase in the pro forma as adjusted accumulated deficit. 25 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma consolidated financial statements have been prepared by applying certain pro forma adjustments resulting from the transactions, the acquisition of our German subsidiary, May, on December 30, 1999 and the sale of our Wheeling and Warren operations on March 10, 2000 to our historical consolidated financial statements. The transactions have been reflected as a recapitalization. The pro forma consolidated balance sheet as of October 1, 2000 has been derived from our historical balance sheet (which includes the impact of the acquisition of May and the sale of the Wheeling and Warren operations), adjusted to give effect to the transactions as if they occurred on October 1, 2000. The pro forma consolidated statements of operations for the year ended December 31, 1999 and for the nine-month period ended October 1, 2000 give effect to the acquisition of May, the sale of the Wheeling and Warren operations and the recapitalization as if each occurred on January 1, 1999. The pro forma consolidated statements of operations exclude non-recurring items directly attributable to the transactions. The pro forma consolidated financial statements are presented for informational purposes only and have been derived from, and should be read in conjunction with, our historical consolidated financial statements and accompanying notes. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed consolidated financial statements, are based on currently available information and certain adjustments that we believe are reasonable. They are not necessarily indicative of the financial position or results of operations of U.S. Can Corporation or United States Can Company that would have occurred had the transactions, the May acquisition and the sale of the Wheeling metal closures and Warren lithography businesses taken place on the dates indicated, nor are they necessarily indicative of future financial position or results of operations. We have not provided separate pro forma financial statements or data for United States Can Company in this prospectus. U.S. Can Corporation's only assets are its investment in and advances to the company. We believe that the financial statements of U.S. Can Corporation and the consolidated financial statements of United States Can Company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. The unaudited pro forma financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes, included elsewhere in this prospectus. 26 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN MILLIONS) (UNAUDITED)
AS ADJUSTED FOR PRO FORMA MAY PRO FORMA EFFECT OF U.S. CAN HISTORICAL(A) ADJUSTMENTS RECAPITALIZATION -------- ------------- ----------- ---------------- Sales........................................ $714.1 $146.7 $(17.7)(b) $843.1 Cost of Sales................................ 611.6 130.5 (18.6)(c) 723.5 ------ ------ ------ ------ Gross Income............................... 102.5 16.2 0.9 119.6 Selling, General and Administrative Expenses................................... 33.8 11.3 (0.6)(d) 44.5 ------ ------ ------ ------ Operating Income........................... 68.7 4.9 1.5 75.1 Interest Expense............................. 28.7 0.9 20.8 (e) 50.4 Amortization of Deferred Financing Costs..... 1.2 -- 2.6 (f) 3.8 Other Expenses............................... 1.7 0.3 0.8 (g) 2.8 ------ ------ ------ ------ Income before Income Taxes................... 37.1 3.7 (22.7) 18.1 Income Tax Expense........................... 14.6 0.6 (8.1)(h) 7.1 ------ ------ ------ ------ Income (Loss) from Operations Before Extraordinary Items and Nonrecurring Charges Directly Attributable to the Transactions(j)............................ 22.5 3.1 (14.6) 11.0 Preferred Stock Dividends.................... -- -- 11.1 (i) 11.1 ------ ------ ------ ------ Net Income (Loss) Available for Common Stockholders............................... $ 21.2 $ 3.1 $(25.7) $ (0.1) ====== ====== ====== ======
See Notes to Pro Forma Consolidated Statements of Operations 27 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (DOLLARS IN MILLIONS) (UNAUDITED)
AS ADJUSTED FOR PRO FORMA U.S. CAN PRO FORMA EFFECT OF HISTORICAL ADJUSTMENTS RECAPITALIZATION ---------- ----------- ---------------- Sales..................................................... $607.0 $ (3.2)(b) $603.8 Cost of Sales............................................. 517.6 (2.6)(c) 515.0 ------ ------ ------ Gross Income............................................ 89.4 (0.6) 88.8 Selling, General and Administrative Expenses.............. 32.4 0.1 (d) 32.5 Special Charge............................................ 3.4 -- 3.4 ------ ------ ------ Operating Income........................................ 53.6 (0.7) 52.9 Interest Expense.......................................... 24.6 14.6 (e) 39.2 Amortization of Deferred Financing Costs.................. 1.2 0.2 (f) 1.4 Other Expenses............................................ 1.9 -- 1.9 ------ ------ ------ Income before Income Taxes................................ 25.9 (15.5) 10.4 Income Tax Expense........................................ 9.8 (5.9)(h) 3.9 ------ ------ ------ Income (Loss) from Operations Before Extraordinary Items and Nonrecurring Charges Directly Attributable to the Transactions(j)......................................... 16.1 (9.6) 6.5 Preferred Stock Dividends................................. -- 9.1 (i) 9.1 ------ ------ ------ Net Income (Loss) Available for Common Stockholders....... $ 16.1 $(18.7) $ (2.6) ====== ====== ======
See Notes to Pro Forma Consolidated Statements of Operations 28 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (a) Represents the historical results of May Verpackungen, which we acquired on December 30, 1999 in a transaction accounted for as a purchase. (b) Represents the elimination of sales of our former Wheeling metal closures business and the Warren lithography operation. We sold these facilities on March 10, 2000. (c) The pro forma adjustment relating to cost of sales is as follows (in millions):
NINE MONTHS DECEMBER 31, ENDED 1999 OCTOBER 1, 2000 ------------- --------------- Cost of sales related to Wheeling and Warren................ $(14.2) $(2.6) Pro forma impact of May contractual arrangements entered into as a result of the acquisition....................... (2.0) -- Depreciation expense benefit from the lengthening of lives, net of increased depreciation expense due to the write up of property and equipment acquired in the May acquisition to fair value............................................. (2.4) -- ------ ----- $(18.6) $(2.6) ====== =====
The contractual arrangement benefit applicable to the first nine months of 2000 was realized and is included in the historical results. The lengthened depreciable lives are in accordance with our accounting policies relating to depreciable lives. (d) The pro forma adjustment relating to selling, general and administrative expenses is as follows (in millions):
NINE MONTHS DECEMBER 31, ENDED DESCRIPTION 1999 OCTOBER 1, 2000 - ----------- ------------- ---------------- May historical expenses related to sale of May.............. $(0.5) $ -- Amortization of unearned restricted stock, which became 100% vested as a result of the transaction..................... (0.1) (0.3) New management fee.......................................... 0.8 0.6 Selling, general and administrative expenses of Wheeling and Warren.................................................... (0.8) (0.2) ----- ----- Total pro forma adjustment.................................. $(0.6) $ 0.1 ===== =====
(e) The pro forma adjustment relating to interest expense is as follows (in millions):
NINE MONTHS DECEMBER 31, ENDED DESCRIPTION 1999 OCTOBER 1, 2000 - ----------- ------------- ---------------- Interest on new term loans.................................. $ 22.4 $ 18.4 Interest on outstanding senior subordinated notes........... 21.7 16.2 Interest on new revolving loan agreement.................... 2.4 2.0 Interest on borrowings under the credit agreement in place prior to the original offering and U.S. Can Corporation's 10 1/8% notes due 2006.................................... (25.7) (22.0) ------ ------ Pro forma adjustment........................................ $ 20.8 $ 14.6 ====== ======
29 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) (UNAUDITED) The interest rates to be charged under the new term loan agreement and the new revolving loan agreement are based on LIBOR plus a margin, or on the applicable base rate plus a margin. The assumed interest rates applicable to these agreements were 8.66% and 9.70% for 1999 and the first nine months of 2000, respectively. A 1/8% increase in the LIBOR rate would cause an increase in interest expense of $323,000 and $236,000 for 1999 and the first nine months of 2000, respectively. The assumed interest rate for the outstanding notes was 12 3/8% for both periods. Interest expense for the new revolving loan agreement includes commitment fees of 0.5% per annum of the unused amount. (f) The pro forma adjustment relating to deferred financing expense is as follows (in millions):
NINE MONTHS DECEMBER 31, ENDED DESCRIPTION 1999 OCTOBER 1, 2000 - ----------- ------------- --------------- Amortization of deferred financing costs in connection with new senior and senior subordinated debt facilities........ $ 3.4 $ 1.1 Historical deferred financing expense related to the existing credit agreement and the 10 1/8% notes due 2006...................................................... (0.8) (0.9) ----- ----- Pro forma adjustment........................................ $ 2.6 $ 0.2 ===== =====
(g) Amortization of goodwill incurred in connection with the acquisition of May. (h) Represents income taxes (at our U.S. effective tax rate of 39.44% for the year ended December 31, 1999 and 38% for the first nine months ended October 1, 2000) related to the pro forma adjustments. The 1999 adjustment includes an increase in income tax expense of $700,000, which will be incurred by May due to the change in its tax structure as a result of the acquisition. (i) Represents the cumulative dividend payable on the preferred stock issued in connection with the recapitalization. (j) See note (i) to the pro forma consolidated balance sheet for a description of transactions that have been excluded from the pro forma statements of operations. Pro forma adjustments were not made relating to these items because these costs are one-time, non-recurring items that are directly attributable to the recapitalization. 30 U.S. CAN CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OCTOBER 1, 2000 (DOLLARS IN MILLIONS) (UNAUDITED)
PRO FORMA U.S. CAN U.S. CAN ADJUSTMENTS PRO FORMA -------- ----------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 7.4 $ (2.3)(a) $ 5.1 Accounts receivable, less allowances of $10.8............. 107.3 -- 107.3 Inventories............................................... 112.6 -- 112.6 Prepaid Expenses and other current assets................. 21.2 (0.3)(b) 20.9 Prepaid income taxes...................................... 16.2 1.6 (c) 17.8 ------ ------- ------- Total Current Assets.................................... 264.7 (1.0) 263.7 PROPERTY, PLANT AND EQUIPMENT............................... 271.7 -- 271.7 INTANGIBLE ASSETS, less amortization of $13.0............... 65.1 -- 65.1 OTHER ASSETS................................................ 24.5 9.2(d) 33.7 ------ ------- ------- Total Assets............................................ $626.0 $ 8.2 $ 634.2 ====== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 11.0 $ 3.3(e) $ 14.3 Accounts payable.......................................... 108.5 -- 108.5 Accrued payroll, benefits and insurance................... 24.3 -- 24.3 Restructuring reserves.................................... 13.7 -- 13.7 Other current liabilities................................. 36.2 (27.9)(c)(f) 8.3 ------ ------- ------- Total current liabilities............................... 193.7 (24.6) 169.1 SENIOR DEBT................................................. 71.3 234.2 (e) 305.5 SUBORDINATED DEBT........................................... 236.6 (60.7)(e) 175.9 ------ ------- ------- Total long-term debt.................................... 307.9 173.5 481.4 OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 13.3 -- 13.3 Other long-term liabilities............................... 42.6 -- 42.6 ------ ------- ------- Total other long-term liabilities....................... 55.9 -- 55.9 COMMITMENTS AND CONTINGENCIES PREFERRED STOCK............................................. 106.7 (g) 106.7 STOCKHOLDERS' EQUITY Common Stock.............................................. 0.1 0.4 (h) 0.5 Paid-in capital........................................... 114.5 (61.7)(h) 52.8 Unearned restricted stock................................. (0.3) 0.3 (h) -- Treasury common stock, at cost............................ (1.9) 1.9 (h) -- Currency translation adjustment........................... (25.4) -- (25.4) Accumulated deficit....................................... (18.5) (188.3)(h)(i) (206.8) ------ ------- ------- Total stockholders' equity.............................. 68.5 (247.4) (178.9) ------ ------- ------- Total liabilities and stockholders' equity.............. $626.0 $ 8.2 $ 634.2 ====== ======= =======
See Notes to Pro Forma Consolidated Balance Sheet 31 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET OCTOBER 1, 2000 (UNAUDITED) (a) Represents use of existing cash to consummate the recapitalization. (b) Represents deferred financing costs written off related to facilities that will be terminated in connection with the recapitalization. (c) Represents the income tax impact related to the items discussed in note (i). (d) Represents $13.6 million of costs related to the new senior and senior subordinated debt facilities to be deferred over the estimated terms of the related facilities, net of $4.4 million of deferred financing costs written off related to facilities that will be terminated in connection with the recapitalization. (e) Represents the borrowings made under the new senior secured credit facilities and the notes offered by this prospectus, net of the repayment of borrowings under our existing credit agreement (as defined below) and the 10 1/8% notes due 2006, as follows (in millions):
CURRENT MATURITIES OF SENIOR SUBORDINATED DESCRIPTION LONG-TERM DEBT DEBT DEBT - ----------- --------------------- -------- ------------ New term loan......................... $ 5.0 $255.0 $ -- New revolving loan.................... -- 20.5 -- New senior subordinated borrowings.... -- -- 175.0 Existing credit agreement............. (1.7) (41.3) -- Existing 10 1/8% notes due 2006....... -- -- (235.7) ----- ------ ------- Pro forma adjustment.................. $ 3.3 $234.2 $ (60.7) ===== ====== =======
(f) See notes (c) and (i). Also includes payment of accrued interest of $11.4 million required to repay the borrowings outstanding under our existing credit agreement and the 10 1/8% notes due 2006 and $0.1 million related to the accelerated vesting (as a result of the transaction) of units under our Executive Deferred Compensation Plan. (g) Represents 10% cumulative preferred stock issued in connection with the recapitalization. (h) Represents capital transactions required to effect the recapitalization, as follows (in millions):
TREASURY COMMON PAID-IN- RESTRICTED COMMON ACCUMULATED DESCRIPTION STOCK CAPITAL STOCK STOCK DEFICIT - ----------- -------- -------- ---------- -------- ----------- Vest unearned restricted stock...................... $ -- $ -- $0.3 $ -- $ (0.2) Issue common stock........... 0.5 52.8 -- -- -- Cancel treasury stock........ -- (1.9) -- 1.9 -- Purchase common stock of current U.S. Can Corporation stockholders... (0.1) (112.6) -- -- (158.6) ----- ------- ---- ---- ------- Pro forma adjustment......... $ 0.4 $ (61.7) $0.3 $1.9 $(158.8) ===== ======= ==== ==== =======
32 U.S. CAN CORPORATION NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (i) In addition to the items described in (h), includes the following net of tax impact (in millions):
INCOME PRETAX TAX ACCUMULATED DESCRIPTION EXPENSE BENEFIT DEFICIT - ----------- -------- -------- ----------- Advisory fees.................................... $16.4 $ (6.2) $10.2 Redemption premium on the 10 1/8% notes due 2006........................................... 18.9 (7.2) 11.7 Vest unearned deferred compensation and restricted stock............................... 1.5 (0.6) 0.9 Pay optionholders the difference between the transaction price and the option exercise price.......................................... 6.1 (2.3) 3.8 Write-off of deferred financing costs related to the existing credit agreement and 10 1/8% notes due 2006....................................... 4.7 (1.8) 2.9 ----- ------ ----- Pro forma adjustment............................. $47.4 $(17.9) $29.5 ===== ====== =====
33 SELECTED FINANCIAL DATA INTRODUCTION The following consolidated selected financial data as of and for each of the fiscal years in the five years ended December 31, 1999, were derived from our audited financial statements. The following consolidated selected financial data as of and for each of the nine-month periods ended October 1, 2000 and October 3, 1999 were derived from our unaudited financial statements. We believe that the selected financial data as of and for the nine months ended October 1, 2000 and October 3, 1999, include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the information included therein. You should not regard the results of operations for the nine months ended October 1, 2000 as indicative of the results that may be expected for the full year. We have not provided separate financial statements or data for United States Can Company in this prospectus. U.S. Can Corporation's only assets are its investment in and advances to United States Can Company. We believe that the financial statements of U.S. Can Corporation and the consolidated financial statements of United States Can Company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. You should read all of this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements for the year ended December 31, 1999 and for the nine months ended October 1, 2000, and accompanying notes contained elsewhere in this prospectus.
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED ---------------------------------------------------- ------------------------- OCTOBER 3, OCTOBER 1, 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS: Net Sales............................ $562.7 $660.6 $755.7 $710.2 $714.1 $549.8 $607.0 Cost of Sales........................ 491.1 571.7 665.8 618.1 611.6 470.1 517.6 ------ ------ ------ ------ ------ ------ ------ Gross income......................... 71.6 88.9 89.9 92.1 102.5 79.7 89.4 Selling, general and administrative expenses........................... 26.5 28.4 33.0 32.6 33.8 25.0 32.4 Special charges(1)................... 8.0 -- 63.0 35.9 -- -- 3.4 ------ ------ ------ ------ ------ ------ ------ Operating income (loss).............. 37.1 60.5 (6.1) 23.6 68.7 54.7 53.6 Interest expense..................... 24.5 28.4 36.9 33.2 28.7 21.8 24.6 Amortization of deferred financing costs.............................. 1.5 1.4 1.7 1.8 1.2 0.9 1.2 Other expenses....................... 2.0 1.7 2.0 1.8 1.7 1.3 1.9 ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes.... 9.1 29.0 (46.7) (13.2) 37.1 30.7 25.9 Provision (benefit) for income taxes.............................. 4.2 12.3 (16.8) (5.7) 14.6 12.0 9.8 ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before discontinued operations and extraordinary item............................... 4.9 16.7 (29.9) (7.5) 22.5 18.7 16.1 Income from discontinued operations......................... (1.0) 0.4 1.1 -- -- -- -- Net loss on sale of discontinued business(2)........................ -- -- (3.2) (8.5) -- -- -- Extraordinary item(3)................ -- (5.3) -- -- (1.3) (1.3) -- ------ ------ ------ ------ ------ ------ ------ Net income (loss).................... $ 3.9 $ 11.8 $(32.0) $(16.0) $ 21.2 $ 17.4 $ 16.1 ====== ====== ====== ====== ====== ====== ======
34
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED ---------------------------------------------------- ------------------------- OCTOBER 3, OCTOBER 1, 1995 1996 1997 1998 1999 1999 2000 -------- -------- -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS) OTHER FINANCIAL DATA: EBITDA(4)............................ $ 69.8 $ 91.4 $ 93.1 $ 91.3 $ 97.7 $ 77.9 $ 80.7 Depreciation and amortization........ 28.2 34.0 39.9 35.4 31.9 25.4 26.8 Capital expenditures................. 31.4 48.6 54.0 22.8 31.0 19.7 16.5 Ratio of earnings to fixed charges(5)......................... 1.3x 1.9x NM 0.7x 2.2x 2.3x 1.9x BALANCE SHEET DATA: Cash and cash equivalents............ $ 0.1 $ 8.0 $ 6.8 $ 18.1 $ 15.7 $ 32.2 $ 7.4 Working capital...................... 48.9 105.6 80.8 76.1 37.7 69.9 71.0 Total assets......................... 455.4 643.6 633.7 555.6 663.6 558.6 626.0 Total debt........................... 244.6 375.8 376.1 316.7 359.3 281.5 318.9 Stockholders' equity................. 81.8 96.8 62.3 50.2 68.6 67.2 68.5
- -------------------------- (1) The 1995 special charge relates to an overhead reduction program. See note (3) to the audited consolidated financial statements for a description of the 1997 and 1998 special charges and note (2) to the unaudited consolidated financial statements for a description of the third quarter 2000 special charge. (2) See note (3) to the consolidated financial statements for a description of the sale of United States Can Company's metal services segment (3) Represents premium paid and write-offs of deferred financing costs in conjunction with the early extinguishment of debt (4) Earnings before interest, taxes, depreciation, amortization and special charges. We consider EBITDA to be an important indicator of the performance of our business including our ability to provide cash flows to service debt and fund capital expenditures. EBITDA, however, should not be considered an alternative to operating or net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity, in each case determined in accordance with generally accepted accounting principles. In addition, our definition of EBITDA may not be comparable to similarly-titled measures reported by other companies. (5) See note (7) to the Summary Historical and Pro Forma Financial Information for a description of this ratio. Approximately $46.7 million and $13.2 million of additional pretax earnings for the fiscal years ended December 31, 1997 and 1998, respectively, would be required for our company to have achieved a ratio of earnings to fixed charges of 1.0. As pretax earnings are reduced by non-cash special charges of $41.7 million and $27.7 million for the respective fiscal years, the ratio does not indicate an inability of our company to make cash payments necessary to support our fixed charges. 35 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YOU SHOULD READ THE FOLLOWING DISCUSSION ALONG WITH THE "SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. SUMMARY The following discussion summarizes the significant factors affecting the consolidated operating results and financial condition of our company and our subsidiaries for the three years ended December 31, 1999 and the nine months ended October 1, 2000. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements. We have not provided separate financial statements or data for United States Can Company in this prospectus. U.S. Can Corporation's only assets are its investment in and advances to United States Can Company. We believe that the financial statements of U.S. Can Corporation and the consolidated financial statements of United States Can Company do not vary significantly. We believe that the material differences are, and will be, related to stockholders' equity and intercompany indebtedness. We took special charges in 1997 and 1998 and in 2000. In 1997, we took pre-tax special charges of $63.0 million in connection with plant closings and overhead cost reductions. In 1998, we took a pre-tax special charge of $35.9 million in connection with the closure of several facilities and write-downs of several non-core businesses. In 2000 we instituted a reduction in force program, under which we have eliminated 73 salaried and 34 hourly positions. We took a one-time charge of approximately $3.4 million for severance and other termination related costs in connection with the program. We expect to realize projected annual savings of $5.0 million from this program beginning in July 2000. In addition, we expect to take a special charge in the fourth quarter of 2000 in connection with the transactions totaling approximately $18.9 million, including charges for advisory, management and transactional fees. We also expect to take an extraordinary charge of approximately $14.9 million, after tax, in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. 36 RESULTS OF OPERATIONS The following table sets forth our results of operations based on the percentage relationship of certain items to net sales during the period shown.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, ----------------------- ------------------------------ OCTOBER 3, OCTOBER 1, 1997 1998 1999 1999 2000 -------- -------- -------- ---------- ---------- (UNAUDITED) STATEMENT OF OPERATIONS: Net Sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales....................................... 88.1 87.0 85.7 85.5 85.3 ----- ----- ----- ----- ----- Gross income........................................ 11.9 13.0 14.3 14.5 14.7 Selling, general and administrative expenses........ 4.4 4.6 4.8 4.5 5.3 Special charges..................................... 8.3 5.1 -- -- 0.6 ----- ----- ----- ----- ----- Operating income (loss)............................. (0.8) 3.3 9.5 10.0 8.8 Interest expense.................................... 4.9 4.6 4.0 4.0 4.0 Amortization of deferred financing costs............ 0.2 0.3 0.2 0.2 0.2 Other expenses...................................... 0.3 0.3 0.2 0.2 0.3 ----- ----- ----- ----- ----- Income (loss) before income taxes................... (6.2) (1.9) 5.1 5.6 4.3 Provision (benefit) for income taxes................ (2.2) (0.8) 2.0 2.2 1.6 ----- ----- ----- ----- ----- Income (loss) from continuing operations before discontinued operations and extraordinary item.... (4.0) (1.1) 3.1 3.4 2.7 Income from discontinued operations................. 0.1 -- -- -- -- Net loss on sale of discontinued Business........... (0.4) (1.2) -- -- -- Extraordinary item.................................. -- -- (0.2) (0.2) -- ----- ----- ----- ----- ----- Net income (loss)................................... (4.3)% (2.3)% 2.9% 3.2% 2.7% ===== ===== ===== ===== =====
37 NINE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO NINE MONTHS ENDED OCTOBER 3, 1999 NET SALES Net sales for the nine-month period ended October 1, 2000 totaled $607.0 million, an increase of 10.4% versus $549.8 million for the corresponding period in 1999. The increase was principally due to the inclusion of the sales of May, which we acquired in December 1999. Along business segment lines, Aerosol net sales in the first three quarters of 2000 were $362.8 million, a decline of 2.7% versus $372.7 million in the same period last year. The decrease is due to a decline in U.S. volumes and a $13.2 million negative impact due to the effect of U.S. dollar translation on sales made in foreign currencies by our European operations. Paint, Plastic and General Line sales decreased 5.3% from $127.2 million to $120.5 million due to the loss of a Plastite customer in 1999. Custom and Specialty net sales of $123.7 million increased $73.9 million from $49.8 million in the first nine months of 1999 due to the inclusion of the sales of May. Net sales for the first nine months for May were $85.4 million. Excluding May's sales, the Custom and Specialty segment had net sales of $38.3 million, an $11.5 million decrease from $49.8 million in the first three-quarters of 1999 due to the sale of the Wheeling metal closure and Warren lithography businesses (see Note (2) to the Consolidated Financial Statements). GROSS INCOME Gross income of $89.4 million for the nine-month period ended October 1, 2000 increased $9.7 million, or 12.2%, versus $79.7 million for the corresponding period of 1999. Gross margin of 14.7% for the nine months of 2000 increased slightly from the 14.5% reported in the first nine months of 1999, due to the continuing focus on productivity improvements and cost savings opportunities. Aerosol gross income declined 6.4% due to a decline in U.S. sales volume and a $1.0 million negative impact due to the effect of U.S. dollar translation on sales made in foreign currencies by our European operations. Paint, Plastic and General Line gross income decreased $3.9 million versus the first nine months of 1999 due to the loss of a Plastite customer in 1999 and a decline in general line volume. Custom and Specialty gross income increased $9.9 million versus the first nine months of 1999 due primarily to the inclusion of the results of operations of May. Excluding May and the divested Wheeling closure and Warren lithography businesses, gross income in the Custom and Specialty segment increased 18.8%. Not all expenses are allocated to specific business segments. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $32.5 million in the first nine months of 2000, a $7.5 million increase in comparison to $25.0 million in the same period in 1999. The increase is primarily due to the inclusion of the results of operations of May, which accounted for $6.0 million of the increase. The remainder of the increase is due to higher marketing expenses incurred in improving customer service. INTEREST AND OTHER EXPENSES Interest expense for the first nine months of 2000 increased 12.9%, or $2.8 million, versus the first nine months of 1999. The increase was due to interest incurred in connection with borrowings made to acquire May, offset by the interest reduction due to the repurchase and early retirement of the 10 1/8% notes due 2006 in the second and third quarters of 2000. OTHER CHARGES In the third quarter of 2000, we announced a reduction in force program and recorded a one-time charge of $3.4 million for severance and other termination related costs. For further discussion on this program (see Note (2) to the Consolidated Financial Statements). 38 YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 NET SALES Consolidated net sales for the year ended December 31, 1999 were $714.1 million, an increase of 0.5% versus $710.0 million in 1998. Along business segment lines, Aerosol net sales in 1999 increased 3.8% over 1998, primarily due to increased efficiencies and production at our Wales facility, as well as increased U.S. demand. Consistent with expectations, the Paint, Plastic and General Line segment had a 1.4% decrease in net sales due to reduced customer requirements during the year. In the Custom and Specialty segment, sales were down 8.7% due principally to significant liquidation of excess holiday products in early 1998 and softer markets in 1999. Key management changes were made in mid-1999 to address sales and operational issues. GROSS INCOME Consolidated gross income of $102.5 million for 1999 was up $10.4 million, an 11.3% increase versus $92.1 million in 1998. Gross margin of 14.3% compares favorably to the 13.0% reported in 1998 due to benefits derived from restructuring programs, productivity improvements as a result of line speed-ups and cost reduction programs instituted in the plants, as well as the ramp-up of the Wales facility. Aerosol gross income increased from $80.2 million to $85.7 million, a 6.9% increase versus 1998, aided by higher sales volume, the Welsh operation improvements, and the effects of consolidating manufacturing operations. Paint, Plastic and General Line gross income increased to $16.9 million versus $15.6 million in 1998, a 7.9% increase, primarily due to productivity improvements. Custom and Specialty gross income decreased from $11.0 million to $8.9 million in 1999 due to softer markets in 1999 and a loss in productivity during plant consolidation activities. Not all expenses are allocated to specific business segments including special charges and other corporate and miscellaneous costs. OPERATING INCOME Operating income in 1999 was $68.7 million versus $23.6 million in 1998. Excluding special charges recorded in 1998, operating income improved 15.6% from $59.4 million in 1998 to $68.7 million in 1999. The operating margin of 9.6% in 1999 compares favorably to the 8.4% reported in 1998, before the special charge. 1998 operating margins were negatively impacted by $35.9 million of special charges for plant closings, additional losses on the sale of the Orlando Machine Engineering Center and a reassessment of 1997 special charges. See note (3) to the consolidated financial statements. Other improvements versus the prior year reflect stronger gross margins coupled with benefits realized from the 1997 and 1998 restructuring programs. Selling, general and administrative costs as a percent of sales remained relatively flat at 4.7% in 1999. INTEREST AND OTHER EXPENSES Interest expense in 1999 was $28.7 million, down 13.4%, or $4.5 million, versus $33.2 million in 1998. Prior to the May acquisition in late December, long-term debt had been reduced by $48.0 million as excess cash was used to redeem some of the 10 1/8% notes due 2006. Including the May acquisition, long-term debt increased 3.4% or $10.6 million in 1999 as compared to 1998. Average borrowings under the credit agreement (as defined below) in 1999 were $12.3 million in letters of credit and $0.1 million in loans and $12.3 million in letters of credit and $4.8 million in loans after the May acquisition. In 1999, there were 10 months in which no borrowings were made under the credit agreement. See "Liquidity and Capital Resources." 39 EXTRAORDINARY ITEM In 1999, we recorded a $1.3 million extraordinary charge (net of related income taxes of $0.8 million) due to the early redemption premium on $27.7 million of our 10 1/8% notes and the write-off of related deferred financing costs. NET INCOME 1999 net income of $21.2 million compares favorably to the 1998 net loss of $16.1 million. Income improvements in 1999 are a reflection of higher margins, productivity improvements and lower interest expense and the absence of a special charge in 1999. YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 NET SALES Consolidated net sales for the year ended December 31, 1998 were $710.2 million, a decrease of 6.0% versus $755.7 million in 1997. This decrease reflected the sale of our Metal Pail business and the loss of a major Aerosol customer, both in late 1997. Along business segment lines, Aerosol net sales in 1998 of $466.0 million declined 2.8% versus 1997, reflecting the loss of a major customer in late 1997. European net sales, included within the Aerosol business segment, increased 11.1% from the prior year as the Wales facility achieved qualification with its primary customer in 1998. Paint, Plastic and General Line net sales of $164.1 million were down 12.0% from 1997 due to the sale of the Metal Pail business in November 1997. Custom and Specialty 1998 net sales of $74.9 million were 11.7% lower than 1997. The decline in this business segment was largely a function of product mix and management's decision not to pursue certain unprofitable popcorn tin business it had in 1997. GROSS INCOME Consolidated gross income improved 2.4% from $89.9 million for the year ended December 31, 1997 to $92.1 million for the year ended December 31, 1998. Gross margin of 13.0% for the full-year 1998 compared favorably to the 11.9% reported in 1997. Margin rate increases were primarily in the Paint, Plastic and General Line and the Custom and Specialty business segments and reflected improved productivity as a result of line speed-ups and cost reduction programs instituted in the plants, the sale of the unprofitable Metal Pail business and the shedding of the popcorn tin business. The Wales facility impacted Aerosol operations gross margins favorably. Aerosol gross income increased slightly to $80.2 million versus $79.9 million in 1997. Gross margins in this sector increased 0.5% versus 1997 despite a lower sales volume base. Paint, Plastic and General Line gross income improved 26.1% to $15.6 million. Custom and Specialty gross income improved 60.8% versus 1997 to a level of $11.0 million. Not all expenses are allocated to specific business segments including special charges and other corporate and miscellaneous costs. OPERATING INCOME Consolidated operating income of $23.6 million for the year ended December 31, 1998 compared favorably to an operating loss of $6.1 million for the same period in 1997. Improvements versus 1997 reflected a $27.1 million decrease in special charges (see note (3) to the consolidated financial statements) and stronger gross margins coupled with the benefits realized late in 1998 from the restructuring programs initiated in 1997. 40 INTEREST EXPENSE Interest expense for the full-year 1998 of $33.2 million declined 10.0% versus $36.9 million in 1997. Our focus on cash flow, working capital improvements and controlled capital programs resulted in a year-to-year debt reduction of $59.5 million. NET LOSS Net loss from continuing operations in 1998 was $7.5 million versus a net loss of $29.9 million in 1997. Special charges recorded in 1998 had a negative after-tax effect of $21.4 million. Special charges recorded in 1997 had an after-tax effect of $37.8 million. Net loss for 1998 was $16.1 million (including $8.5 million loss on the sale of the discontinued Metal Services business) versus 1997 net loss of $32.0 million. Net loss for 1997 included a $2.1 million loss on the discontinued Metal Services business. SPECIAL CHARGES 2000 On July 7, 2000, we announced a reduction in force program, under which 73 salaried and 34 hourly positions have been eliminated. A one-time charge of $3.4 million for severance and other termination related costs was recorded in the third quarter of 2000. We expect to realize annual savings of $5.0 million from this program. 1998 In the third quarter of 1998, we established a pre-tax special charge of $35.9 million. The provision was for the closure of several facilities and write-downs of non-core businesses. Costs related to closing and realigning selected lithography facilities servicing our core business were also included in the provision as part of our national lithography strategy. Working capital improvements are expected to partially offset new capital costs associated with the 1998 restructuring program and the acquisition of new lithography technology. The restructuring program and related capital investment in new technology are expected to generate after-tax savings of $10.0 million annually at maturity. The 1998 special charge included charges for non-cash items of $27.7 million. 1997 In the third quarter of 1997, we established a pre-tax special charge of $35 million primarily for plant closings and overhead cost reductions. These actions were due to the loss of a major aerosol customer (the customer represented approximately $35 million of annual sales) and to enhance efficiencies at other locations. In addition, we established a disposition provision for the anticipated loss on the closure of our Metal Pail operation in North Brunswick, New Jersey. Also in the fourth quarter of 1997, we, at the direction of our Board of Directors, employed the assistance of external business consultants to review operations and explore other avenues for enhancing shareholder value. As a result of this review, a provision was established primarily to include further personnel reductions and the reduction of asset value associated with equipment used in the businesses we had exited or were in the process of exiting. The 1997 special charge included $41.7 million for the non-cash write-off of assets related to the facilities to be closed or sold (comprised of fixed assets of $34.1 million and unamortized goodwill of $7.6 million), $13.2 million for severance and related termination benefits and $8.1 million for other related closure costs. We continuously evaluate the composition of our various manufacturing facilities in light of current and expected market conditions and demands. Our current restructuring activities are substantially on 41 target with the original planned shutdown or closure dates and, therefore, we believe that significant changes to these plans are unlikely. In connection with the May acquisition, we are reviewing our European operations for potential consolidation opportunities. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of 2000, we met our liquidity needs through internally generated cash flow, the sale of the Wheeling metal closures and Warren lithography businesses, borrowings made under our lines of credit and a sale/leaseback transaction of certain manufacturing assets. Cash flow provided by operations was $25.9 million in the first nine months of 2000, compared to cash provided of $59.3 million in the first three quarters of 1999. Principal liquidity needs included working capital (primarily accounts receivable and inventory), debt payments and capital expenditures. The increased use of cash for working capital is attributable to an increase in accounts receivable and inventory within our domestic operations. The increase in accounts receivables is due to increased sales late in the third quarter of 2000 versus the timing of 1999 third quarter sales. We continue to focus on inventory management and have instituted programs to monitor inventory levels throughout our company. We also paid $2.9 million in restructuring costs and anticipate expending an additional $3.2 million in restructuring costs during the remainder of 2000. Cash flow from operations before working capital was $65.4 million in 1999, compared to $56.9 million in 1998 and $68.0 million in 1997. We expect total capital expenditures in 2000 to be approximately $20.0 million, of which $16.5 million was spent in the first nine months. Our total capital expenditures of $31.0 million in 1999 included the installation of two new state-of-the-art lithography presses. We expect to spend approximately $150.0 to $200.0 million on capital expenditures during the five years commencing 1999, in roughly equal amounts of $30.0 million to $40.0 million a year. We also expect to increase our ownership interest in Formametal, S.A., our Argentinian joint venture, in 2001. We expect to use approximately $6.0 million in cash for this acquisition. We expect to fund this acquisition and other future capital expenditures from operations and borrowings under our revolving credit facility. Our capital investments have historically yielded reduced operating costs and improved our profit margins, and we believe that the strategic deployment of capital will enable us to improve our overall profitability by leveraging the economies of scale inherent in the manufacturing of containers. In 1999, our excess cash provided by operations over our cash required for capital expenditures and other investing activities (before acquisitions) was $34.8 million. Of the excess, $27.7 million was used to redeem a portion of the 10 1/8% notes due 2006. As of December 31, 1999, we had redeemed a total principal amount of $40.0 million of the 10 1/8% notes due 2006, the maximum allowed under the credit agreement. Our primary sources of liquidity are cash flow from operations and borrowings under our new revolving credit facility. We expect that ongoing requirements for debt service, working capital and capital expenditures will be funded from these sources. Concurrent with the recapitalization, we issued the notes and entered into the senior secured credit facility. The senior secured credit facility provides for two tranches of term loans in the aggregate principal amount of $260.0 million. In addition, the senior secured credit facility provides for a revolving credit facility that will provide revolving loans in an aggregate amount up to $140.0 million. Upon closing of the recapitalization, we borrowed the full amount available under the term loan facilities and approximately $20.5 million under the revolving credit facility. The borrowings under the revolving credit facility are available to fund our working capital requirements, capital expenditures and other general corporate purposes. The tranche A term loan facility of $80.0 million matures in quarterly installments from December 31, 2000 through September 30, 2006. The tranche B term loan facility of $180.0 million matures in quarterly installments from December 31, 2000 through September 30, 2008. Principal repayments required under the term loan facilities are $6.0 million in 2001 and $9.0 million in 2002. Additionally, the senior secured credit facility requires a prepayment in 42 the event that we have excess cash flow (as defined) and following certain other events, including asset sales and issuances of debt and equity. We also expect to assume between $6.0 million and $7.0 million in debt in connection with the acquisition of Formametal, S.A. Our significant debt service obligations following the recapitalization could have material consequences to our security holders, including holders of the notes. In addition, we issued $106.7 million in preferred stock and $53.3 million in common stock concurrent with the recapitalization. See "Other Indebtedness," "Description of U.S. Can Corporation's Capital Stock--Preferred Stock" and "Risk Factors." Based upon the current level of operations and anticipated growth, we believe that cash generated from operations together with amounts available under the revolving credit facility will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs for the next several years. We cannot assure you, however, that we will generate sufficient cash flow from operations or that future borrowings will be available under the senior secured credit facility or otherwise to enable us to service our indebtedness, including the senior secured credit facility and the notes or to make anticipated capital expenditures. Our future operating performance and our ability to service or refinance the notes, to service, extend or refinance the senior secured credit facility and to redeem or refinance our preferred stock will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 (amended by SFAS No. 137 to delay required implementation) and will be adopted by us in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that we recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We are currently evaluating SFAS No. 133, but do not believe this pronouncement will have a material impact on our financial position or results of operations. Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates and market prices. To reduce this risk, we may at times use financial instruments. All hedging transactions are authorized and executed under clearly defined policies and procedures, which prohibit the use of financial instruments for trading purposes. FOREIGN CURRENCY AND INTEREST RATE RISK FOREIGN CURRENCY RISK We have engaged in transactions that carry some degree of foreign currency risk. As such, we have entered into a series of forward hedge contracts to mitigate the foreign currency risks associated with the financing of one of our production facilities in the United Kingdom. We are a party to a series of British Pound forward exchange contracts, not exceeding a notional amount of $23.1 million, that carry a term of not more than five years. We also bear foreign exchange risk because much of our financing is currently obtained in United States dollars, but we receive a portion of our revenues and incur a portion of our expenses in the various currencies of our foreign subsidiaries' operations. Our new revolving credit facility will allow certain of our foreign subsidiaries to borrow up to $75 million in British Pounds Sterling, German Deutsche Marks and Euros. We have not yet determined what amount of borrowings, if any, we expect to make in these currencies. INTEREST RATE RISK We are exposed to interest rate risk primarily as a result of our floating rate borrowings. We have hedged a portion of our interest rate risks by entering into a swap and collar agreements. The swap 43 agreement is a three-year agreement for a notional amount of $83.3 million. Under the swap agreement, we pay a fixed rate of 6.65% and receive the three-month LIBOR. The collar agreement is also a three-year agreement for a notional amount of $41.7 million. Under the collar agreement, we pay the bank if the three-month LIBOR is less than 6.1% (the floor) and receive a payment if the three-month LIBOR is greater than 7.25% (the cap). Since the counterparties to the agreements are also lenders under the senior secured credit facility, our obligations under these agreements are subject to the security interest under the terms of the senior secured credit facility. See "Other Indebtedness." TIN-PLATED STEEL PRICING Tin-plated steel represents the primary component of our raw materials requirement. Historically, we have not always been able to immediately offset increases in tinplate prices with price increases to our customers. However, in most years, a combination of factors has permitted us to maintain our profitability notwithstanding these conditions. 44 BUSINESS OUR BUSINESS GENERAL We are a leading manufacturer, by sales volume, of steel containers for personal care, household, automotive, paint, industrial and specialty products in the United States and Europe. We also are a manufacturer of plastic containers in the United States and food cans in Europe. Our product offerings include a wide variety of steel containers, such as aerosol cans, paint cans and oblong containers for products such as turpentine and charcoal lighter fluid, as well as a large number of custom and specialty products and plastic containers. We attribute our market leadership to our ability to consistently provide high-quality products and service at competitive prices, while continually improving our product-related technologies. We have long-standing relationships with many well-known consumer products and paint manufacturers in the United States and Europe, including Gillette, Reckitt Benckiser and Sherwin Williams. We produce containers for many of these customers' products, including Right Guard deodorant, Easy-Off oven cleaner and Dutch Boy paint. We also produce seasonal holiday tins sold by mass merchandisers. In steel aerosol cans, based on sales volume, we hold the number one market position in the United States and the number two market position in Europe. In addition, we hold the number two market position in paint cans in the United States, by sales volume. Our aerosol and paint products represented approximately 78% of our total pro forma net sales for the last twelve months ended October 1, 2000. We had pro forma sales of $803.6 million and EBITDA of $101.7 million for the same period. Domestic operations represented approximately 69% of total pro forma net sales, with the remainder generated by our European operations. We compete in three major business segments within the container industry: Aerosol Products; Paint, Plastic and General Line Products; and Custom and Specialty Products. In addition, we recently acquired May, a German manufacturer of metal food packaging and steel aerosol cans. AEROSOL PRODUCTS As the largest producer of steel aerosol cans in the United States and the second largest producer in Europe, by sales volume, we have a leading position in all of the major aerosol consumer product lines, including personal care, household, automotive and spray paint cans. We offer a wide range of aerosol containers to meet our customer requirements including stylized necked-in cans and barrier pack cans used for products that cannot be mixed with a propellant, such as shaving gel. Most of the aerosol cans that we produce employ a lithography process that consists of printing our customers' designs and logos on the cans. Examples of products using our steel aerosol cans include Right Guard deodorant, Easy-Off oven cleaner and Krylon spray paint. Steel aerosol cans represent our largest segment, accounting for approximately 59% of our total pro forma net sales for the last twelve months ended October 1, 2000. In 1999, we manufactured over 50% of the steel aerosol cans produced in the United States and over 25% of the steel aerosol cans produced in Europe. We also supply steel aerosol cans to customers in Latin America through Formametal S.A., our joint venture in Argentina. PAINT, PLASTIC AND GENERAL LINE PRODUCTS Our primary paint, plastic and general line products include paint and coating containers, oblong steel cans for products such as turpentine and charcoal lighter fluid, plastic pails and other containers for industrial products, such as spackle and dry wall compounds, and consumer products, such as swimming pool chemicals and paint. Among our largest customers for these products are Sherwin 45 Williams and Behr. Examples of products using our containers include Dutch Boy paint, Thompson's Water Seal and Arch pool chemicals. Paint, plastic and general line products are our second largest segment, accounting for approximately 19% of our total pro forma net sales for the last twelve months ended October 1, 2000. Within this segment, our steel round paint cans and oblong cans accounted for approximately 71% of our sales during the same period. Our plastic containers accounted for approximately 22% of our sales in this segment, and our general line containers, used for products such as engine additives, colorants and lighter fluid, accounted for 7% of our 1999 sales in this segment during the same period. CUSTOM AND SPECIALTY PRODUCTS We also have a significant presence in the custom and specialty products market. We believe that we offer the industry's widest range of decorative and specialty products. Our primary products include a wide array of functional and decorative containers and tins, fitments and stampings, and collectible items, such as decorative metal signs and canister sets. These products are generally custom designed and decorated and are typically produced in smaller quantities than our other products. Our customers in this segment include Wyeth Nutritionals, Keebler Company and Liz Claiborne Cosmetics. Examples of products packaged with our containers include holiday tins sold by mass merchandisers, Keebler cracker tins and Liz Claiborne Cosmetics fragrance gift boxes. Our custom and specialty products accounted for approximately 6% of our total pro forma net sales for the last twelve months ended October 1, 2000. MAY VERPACKUNGEN ACQUISITION On December 30, 1999, we acquired May, a German manufacturer of steel food packaging and aerosol cans. May is a leading European food can producer with more than 20% of the German food can market, by sales volume. For the last twelve months ended October 1, 2000, May generated approximately 16% of our total pro forma net sales. This acquisition allows us to: - increase our scale and presence in Europe; - improve our ability to reduce manufacturing costs; - take advantage of purchasing synergies; and - enhance our ability to offer global manufacturing services to our customers. May has a reputation for manufacturing excellence and has established long-term relationships with several leading consumer products companies. May also has provided us with diversification across our product lines and customer base. As a result of this increased diversification and our larger European presence, we expect to realize additional cross-selling opportunities between our traditional customers and those of May. Generally, we serve different customers than May, with no overlap among our respective top ten customers. As an example of the benefits that our increased scale and presence in Europe can provide, we recently negotiated an agreement with one of May's existing customers to expand May's supply of pet food cans to this customer in the United Kingdom. May has state-of-the-art manufacturing technology and processes, including a new high-speed production line that increased May's production capacity and new quality testing equipment and procedures. We plan to utilize May's manufacturing expertise at our other facilities. 46 COMPETITIVE STRENGTHS We believe we have the following competitive strengths: MARKET LEADERSHIP Domestically, we hold the number one market position in our steel aerosol can lines and the number two market position in our paint product lines, by sales volume. In Europe, based on sales volume, we are the second largest manufacturer of steel aerosol cans. Collectively, our aerosol can and paint product lines represent approximately 78% of our annual sales. We believe our technological innovation and product quality have been instrumental in securing over 50% of the domestic United States aerosol container market. We also produce nearly one half of all one-gallon paint cans sold annually in the United States. Additionally, our acquisition of May strengthened our position both in Europe and in Germany, the number two European aerosol container market, and expanded our product offering. LONG-STANDING CUSTOMER RELATIONSHIPS We have long-standing relationships with many of our customers and have been able to expand our market share with many of our key customers over time by continuing to expand our product capabilities and increasing the quality of our services. Currently, we believe we are the number one or number two supplier, based on sales volume, to each of our top customers in each business segment. In addition, as we have expanded internationally, we have increased the number of sole source relationships we have with our customers. We believe our long-standing customer relationships have developed as a result of our reputation for providing: - quality and service; - competitively priced products; - global supply services to multi-national consumer products companies; and - technological innovations in product and service offerings. INDUSTRY-LEADING TECHNICAL CAPABILITIES Over the last two years, we have invested heavily in equipment and systems that improve our manufacturing quality and efficiency. We have made a significant investment in new technology, including the installation of two new high-speed, six-color presses that we expect to improve the quality and lower the cost of printing. We also have been at the forefront of technological improvements in the packaging industry, including the production of barrier-pack cans and the development of advanced interior container coatings. EFFICIENT MANUFACTURING OPERATIONS We continue to reduce our overall cost of manufacturing while improving product quality and customer service. We also have invested in new technology, including barrier package design equipment, high-speed production lines and assembly equipment and two high-speed lithography presses. These new lithography presses improve lithography cycle and set-up time, increase throughput, reduce inventory requirements and shorten lead times. Lithography quality is critical to our consumer product customers, as product appearance is a determining factor in the consumer's choice of products. In addition, since 1997, we have rationalized manufacturing facilities and centralized operations to lower our overall costs. As of October 1, 2000, we have sold or closed 18 manufacturing facilities. The closing of these facilities, in conjunction with investments in new technology, has created a lower-cost, more efficient manufacturing base, while improving product quality and customer service. We are 47 continually evaluating the benefits of closing additional plants. In addition, we recently reduced our workforce by eliminating 73 salaried and 34 hourly positions. This plan is expected to reduce expenses by approximately $5 million per year. We expect that these and future initiatives will continue to improve our manufacturing efficiencies and our customer service capabilities. STRATEGICALLY POSITIONED MANUFACTURING FACILITIES We strategically locate our manufacturing facilities near our customers to provide time sensitive product delivery and improve inventory management and product design. The close proximity of our facilities to our customers improves customer service and reduces the substantial costs involved in transporting empty cans over long distances. We have 16 facilities located in the United States and ten facilities located in the largest European markets. Our local presence in regions throughout the United States and Europe allows us to lower costs, improve delivery times and meet our customers' growing need for a global supply solution. The May acquisition also enhanced our manufacturing and customer service capabilities in Europe. To further enhance our global capabilities, we have entered the growing South American market through an Argentinian joint venture. Through this joint venture, we recently secured a multi-year supply agreement with a leading consumer products company to be its sole source of steel aerosol containers in this region. EXPERIENCED MANAGEMENT TEAM Our management team consists of highly qualified senior managers with significant industry experience. Paul W. Jones, our Chairman and Chief Executive Officer, spent nine years as chief executive officer of Greenfield Industries, Inc., which grew from $70 million in sales in 1989 to more than $700 million in 1996 during his tenure, and 19 years with General Electric Corporation, where he served as General Manager of Manufacturing for GE Transportation Systems and General Manager of GE Drives, Motor and Generator Operations. In addition, Mr. Jones has recruited a senior management team with significant packaging industry experience, including prior positions with Tetra Pak, Inc., American National Can and Crown Cork & Seal. Our management team owns 9.00% of our company's common stock after this offering and a substantial portion of their overall targeted compensation is tied to time and performance-based options to acquire an additional 5.75% of our company's common stock over the next five years. BUSINESS STRATEGY FOCUSING ON CUSTOMER SERVICE By providing improved customer service and support, we believe we can enhance our market share with existing customers and further distinguish ourselves in the container and packaging industry. We are currently implementing new systems and technology, including just-in-time delivery, customer order tracking and demand forecasting that will further enhance our value-added service offerings. In addition, we have invested in new lithography capacity, including two high-speed, six-color presses that allow us to offer sophisticated printing capabilities. These systems and technology are aimed at meeting our customers' quality and supply needs, enhancing communication with customers and improving our order fulfillment and manufacturing capabilities. By providing improved customer service and support, we believe that we can enhance our market share with existing customers and further differentiate ourselves in the container and packaging industry. MEETING OUR CUSTOMERS' GLOBAL NEEDS Our customers are expanding internationally, increasing the need for high-quality global supply sources. To meet our customers' needs and secure new global supply contracts, we are integrating our global manufacturing capabilities and selectively expanding into new geographic regions. We entered 48 the South American market in 1998 through our joint venture in Argentina, and we expanded our European presence in 1999 through our acquisition of May. We believe our global strategy has been validated by our recent success in securing global supply relationships with Gillette, Reckitt Benckiser and CCL Custom Manufacturing. IMPROVING OPERATING EFFICIENCIES We plan to continue to reduce manufacturing costs and enhance operating efficiencies through the ongoing reconfiguration of our manufacturing base, improvements to our purchasing efficiency and investments in equipment and technology. For example, we are consolidating our purchasing in both the United States and Europe. As a result of these efforts, we recently secured steel purchase agreements that we expect will provide us with approximately $2 million in annual cost savings. In addition, we expect to realize additional efficiencies in connection with our consolidation of purchasing other non-raw materials. MAKING SELECTIVE ACQUISITIONS We plan to continue to evaluate and selectively pursue acquisitions of rigid packaging businesses that will help fulfill our customer needs, attract new customers, add new products, complement our existing businesses, enhance our earnings or expand our geographic reach. PRODUCTS We believe that we offer the widest range of aerosol, round, general line and specialty metal containers in the U.S. general packaging industry. In 1999, on a pro forma basis, we produced approximately 4.5 billion cans. We emphasize quality and breadth of product line in marketing our steel aerosol cans. We offer full-color, quality lithographed cans in a wide range of styles and sizes. Our necked-in cans (aerosol cans where the plastic cap is flush with the metal exterior of the can) offer a distinctive look and feel to our customers' products. Our barrier packaging cans (cans that separate the product from the can's propellant) provide our customers with an effective solution for delivering a complex product. Our European operations accounted for production of over 25% of the 3 billion steel aerosol cans produced in Europe in 1999. These aerosol cans cover the most popular size diameters in Europe and, when supplemented by various heights, enable our European subsidiaries to offer customers a full range of cost efficient sizes. We offer round paint cans, oblong containers, plastic pails and specialty containers in the industry's widest choice of sizes. Our containers range from one-quarter pint to six and one-half gallons, and feature a variety of interior linings, making them suitable for a wide variety of applications. Our general line product offerings also include a wide range of open-top and AccuPor metal cans used primarily for automotive products. Additionally, we are a leader in the production of plastic paint cans and two sizes of plastic pails. Our plastic product line also includes molded drums, pails and containers and products used in the farming industry. Our custom and specialty products consist of a wide array of functional and decorative containers, tins, metal housewares and collectible items. This line includes the following: - hermetic containers and slipcover tins of both three-piece and seamless construction manufactured in round and off-round configurations; - standard and custom fitments and stampings; and - decorative metal signs, posters, serving trays and canister sets. 49 We also provide containers for the cosmetic and retail accessory markets. These products signal an expansion of the custom and specialty products into areas not traditionally supplied by the metal packaging industry, such as perfume and jewelry, as manufacturers seek to differentiate the appearance of their products. We believe that we offer the industry's widest range of related products within this product grouping. Since our acquisition of May, we also provide tin-plated packaging for the European food market. We produce packaging in various sizes for whipped cream, pet food, snack products, ready-to-serve soups and other meals, meat products and fruits and vegetables. Our food containers are specially coated to maintain the quality of their contents. CUSTOMERS AND SALES FORCE As of October 1, 2000, in the United States, we had approximately 7,500 customers worldwide, with our largest customer accounting for 7.2% of our pro forma total net sales in 1999. To the extent possible, we enter into one-year or multi-year supply agreements with our major customers. Some of these agreements specify the number of containers a customer will purchase (or the mechanism for determining this number), pricing, volume discounts (if any) and, in the case of many of our domestic and some of our international multi-year supply agreements, a provision permitting us to pass through price increases in specified raw material and other costs. We market our products primarily through a sales force comprised of inside and outside sales representatives dedicated to each segment. As of October 1, 2000, we had 85 sales representatives in the United States and 39 sales representatives in Europe. Each sales representative is responsible for growing sales in a specific geographic region and is compensated by a salary and a bonus based on sales volume targets. Over the past several years, we have focused on providing value added services to our customers. In 1999, we established a new marketing organization, implemented a strategic marketing plan and conducted customer interviews to determine our performance against customer service expectations. A key element to our strategic marketing plan is changing the selling process from being product-driven to being solution-driven. The ultimate objective of this program is to position us as an informed business partner with our customers rather than merely a product supplier. COMPETITION Quality, service and price are the principal methods of competition in the rigid metal and plastic container industry. To compete effectively, we must strategically locate supply facilities to reduce the added cost of shipping cans long distances. In addition, competition in our industry limits our ability to raise prices for many of our top products. In the U.S. steel aerosol can market, we compete primarily with Crown Cork & Seal. Our European subsidiaries compete in the steel aerosol can market with Crown Cork & Seal, Impress Metal Packaging and a group of other smaller regional producers. Crown Cork & Seal is larger and may have greater financial resources than we do. Because steel aerosol cans are pressurized and are used for personal care, household and other packaged products, they are more sensitive to quality, can decoration and other consumer-oriented features than some of our other products. In metal paint and general line products, we compete primarily with BWAY Corporation and one smaller, regional manufacturer. Our plastic products line competes with many regional companies. Our custom and specialty products compete with a large number of container manufacturers, but we do not compete across the entire product spectrum with any single company. Competition is based principally on quality, service, price, geographical proximity to customers and production capability, with varying degrees of intensity according to the specific product category. 50 Our products also face competition from aluminum, glass and plastic containers. RAW MATERIALS Our principal raw materials are tin-plated steel, referred to as tin-plate, and coatings and inks used to print our customers' designs and logos onto tin-plate. Tin-plate represents one of our largest raw material costs. Our domestic operations purchase tin-plate principally from domestic steel manufacturers, with a smaller portion purchased from foreign suppliers. Our European operations purchase tin-plate principally from European suppliers. We believe that adequate quantities of tin-plate will continue to be available from steel manufacturers. Our largest domestic steel suppliers are U.S. Steel, Weirton Steel and LTV, while Corus, Usinor and Aceralia supply the largest volume in Europe. We have not historically entered into written supply contracts with steel makers and believe that other container manufacturers follow the same practice. Our domestic and European operations (including May) purchase approximately 500,000 tons of tin-plate annually. Tin-plate prices have increased slightly over the last five years. Historically, we have been able to negotiate lower price increases than those announced by our major suppliers. In Europe, we expect a slight decrease in tin-plate prices due to the increased purchasing power following the May acquisition and other consolidation factors influencing European steel. Many of our domestic and some of our international multi-year supply agreements with our customers permit us to pass through tin-plate price increases and, in some cases, other raw material costs. However, we have not always been able to immediately offset increases in tin-plate prices with price increases on our products. While there is some long-term variability, tin prices are fairly stable and price increases are announced several months before implementation. This stability enhances our ability to communicate and negotiate required selling price increases with our customers and minimizes fluctuations of our gross margins. Coatings and inks, which are used to coat tin-plate and print designs and logos, represent our second largest raw material expense. We purchase coatings and inks from regional suppliers in the United States and Europe. These products historically have been readily available, and we expect to be able to meet our needs for coatings and inks in the foreseeable future. Our plastic products are produced from two main types of resins, which are petroleum- or natural gas-based products. High-density polyethylene resin is used to make pails, drums and agricultural products. We use 100% post-industrial and post-consumer use, recycled polypropylene resin in the production of the Plastite line of paint cans. The price of resin fluctuates significantly, and we believe that it is standard industry practice, as well as a requirement in many contracts, to pass on increases and decreases in resin prices to our customers. LABOR As of October 1, 2000, we employed approximately 2,800 salaried and hourly employees in the United States. Of our total U.S. workforce, approximately 1,750 employees, or 63%, were members of various labor unions, including the United Steelworkers of America, the International Association of Machinists and the Graphic Communications International Union. Labor agreements covering 670 employees were successfully negotiated in 1999 and 2000. As of October 1, 2000, our European subsidiaries employed approximately 1,400 people. In line with common European practices, all plants are unionized. We have followed a labor strategy designed to enhance our flexibility and productivity through constructive relations with our employees and collective bargaining units. Our practice is to deal directly with labor unions on employment contract issues and other employee concerns. We believe that 51 we and our employees have benefited from this approach, and we intend to continue this practice in the future. This practice also has the effect of staggering renewal negotiations with the various bargaining units. We believe that our relations with our employees and their collective bargaining units are generally good. PROPERTIES We have 16 plants located in the United States, many of which are strategically positioned near principal customers and suppliers. Through our European subsidiaries, we also have production locations in the largest regional markets in Europe, including Denmark, France, Germany, Italy, Spain and the United Kingdom. The following table sets forth certain information with respect to our principal plants as of October 1, 2000.
LOCATION SIZE (IN SQ. FT.) STATUS - -------- ----------------- -------- UNITED STATES Commerce, CA.......................................... 215,860 Leased Morrow, GA............................................ 110,160 Leased Newnan, GA............................................ 95,000 Leased Tallapoosa, GA........................................ 249,480 Owned Danville, IL.......................................... 100,000 Owned Elgin, IL............................................. 481,346 Owned Burns Harbor, IN...................................... 190,000 Leased Baltimore, MD......................................... 150,000 Leased Baltimore, MD......................................... 137,000 Owned Baltimore, MD......................................... 55,000 Leased Alliance, OH.......................................... 52,000 Leased Hubbard, OH........................................... 174,970 Owned Horsham, PA........................................... 132,000 Owned New Castle, PA........................................ 22,750 Leased Dallas, TX............................................ 87,000 Owned Weirton, WV........................................... 108,000 Leased EUROPE Esbjerg, Denmark...................................... 66,209 Owned Laon, France.......................................... 220,000 Owned(1) Dageling, Germany..................................... 172,224 Owned Erftstadt, Germany.................................... 369,000 Leased Itzehoe, Germany...................................... 80,730 Owned Schwedt, Germany...................................... 35,500 Leased Voghera, Italy........................................ 45,200 Leased Reus, Spain........................................... 182,250 Owned Merthyr Tydfil, United Kingdom........................ 320,000 Leased(2) Southall, United Kingdom.............................. 253,000 Owned
- ------------------------ (1) Subject to a mortgage in favor of Societe Generale. (2) The property at Merthyr Tydfil is subject to a 999-year lease with a pre-paid option to buy that becomes exercisable in January 2007. Up to that time, the landowner may require us to purchase the property for a payment of one Pound Sterling. Currently, the leasehold interest in, and personal property located at, Merthyr Tydfil is subject to a pledge to secure amounts outstanding under a credit agreement with General Electric Capital Corporation. 52 We believe our facilities are adequate for our present needs and that our properties are generally in good condition, well-maintained and suitable for their intended use. We continuously evaluate the composition of our various manufacturing facilities in light of current and expected market conditions and demand, and may further consolidate our plant operations in the future. ENVIRONMENTAL MATTERS Our operations are subject to environmental laws in the United States and abroad, including those described below. Our capital and operating budgets include costs and expenses associated with complying with these laws, including the acquisition, maintenance and repair of pollution control equipment, and routine measures to prevent, contain and clean up spills of materials that occur in the ordinary course of our business. In addition, our production facilities require environmental permits that are subject to revocation, modification and renewal. We believe that we are in substantial compliance with environmental laws and our environmental permit requirements, and that the costs and expenses associated with this compliance are not material to our business. However, additional operating costs and capital expenditures could be incurred if, among other developments, additional or more stringent requirements relevant to our operations are promulgated. Among other environmental laws, our operations are subject to regulation under the federal Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act, as well as similar state statutes. Capital costs for additional air pollution controls or monitors may be required at certain of our sites if certain Clean Air Act regulations become effective. The proposed regulations are currently under review, and no definitive date has been set for issuance. Under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state statutes, an owner or operator of real property or a person who arranges for disposal of hazardous substances may be liable for the costs of removing or remediating hazardous substance contamination. Liability may be imposed under these statutes regardless of whether the owner or operator owned or operated the real property at the time of the release of the hazardous substances, and regardless of whether the release or disposal was in compliance with law at the time it occurred. We are not aware of any current material claims under CERCLA or similar state statutes against us. We have been, however, designated as a potentially responsible party at various superfund sites in the United States. As a potentially responsible party, we are or may be legally responsible, jointly and severally with other members of the potentially responsible party group, for the cost of environmental remediation of these sites. Based on currently available data, we believe our contribution to these sites was, in most cases, minimal. We have been named as a potentially responsible party for costs incurred in the clean-up of a groundwater plume partially extending underneath a property located in San Leandro, California, formerly a site of one of our can assembly plants. We are a party to an indemnity agreement related to this matter with the owner of the property. Extensive soil and groundwater investigative work has been performed at this site. We, along with other potentially responsible parties at the site, participated in a coordinated sampling event in 1999. The results of the sampling were inconclusive as to the source of the contamination. While the State of California has not yet commented on the sampling results, we believe that the source of contamination is unrelated to our past operations. From time to time, contaminants from current or historical operations have been detected at some of our present and former sites, principally in connection with the removal or closure of underground storage tanks. We are not currently aware that any of our facility locations have material outstanding claims or obligations relating to contamination issues. 53 LITIGATION We are involved in litigation from time to time in the ordinary course of our business. In our opinion, none of this litigation is material to our financial condition or results of operations. In May 1998, the National Labor Relations Board issued a decision ordering us to pay $1.5 million in back pay, plus interest, for a violation of certain sections of the National Labor Relations Act. The violation was a result of our closure of several facilities in 1991 and our failure to offer inter-plant job opportunities to all affected employees. We have appealed this decision on the grounds, among others, that we are entitled to a credit against this award for certain supplemental unemployment benefits and pension payments. We presented oral arguments in late September 2000, and we are waiting for the court's decision. We believe this appeal will be successful. On September 20, 2000, a class action lawsuit was filed against U.S. Can Corporation, Pac Acquisition, the directors of U.S. Can Corporation and Carl Ferenbach. The complaint challenges the recapitalization and alleges inadequate disclosure with respect to U.S. Can Corporation's filings with the Securities and Exchange Commission and violations of Delaware law. The complaint seeks to rescind the recapitalization and requests that the defendants pay unspecified monetary damages, costs and attorney's fees. The recapitalization was consummated on October 4, 2000. We have reached an agreement in principle to settle the lawsuit. The terms of the settlement agreement require us to pay $0.20 per share to the former stockholders of U.S. Can Corporation as of October 4, 2000, less a fee award to the plaintiffs' counsel. The settlement agreement remains subject to final approval by the parties involved, the preparation of definitive settlement documents, delivery of notice to the relevant U.S. Can Corporation stockholders and approval by the Delaware Court of Chancery following a hearing. We cannot assure you that the settlement agreement will be approved by the required parties. 54 MANAGEMENT BOARD OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age as of October 1, 2000 and position of each of our directors, officers and other key employers. Each of our directors will hold office until the next annual meeting of shareholders or until his successor has been elected and qualified. Our officers are elected by our Board of Directors and serve at the discretion of the Board of Directors.
NAME AGE POSITION - ---- -------- ------------------------------------------------ Paul W. Jones................................ 52 Chairman of the Board, President and Chief Executive Officer John L. Workman.............................. 49 Director, Executive Vice President and Chief Financial Officer J. Michael Kirk.............................. 42 Executive Vice President, Corporate Marketing and Aerosol Sales Gillian V. N. Derbyshire..................... 46 Senior Vice President and General Manager, Paint, Plastic, Custom and General Line Operations Roger B. Farley.............................. 56 Senior Vice President, Human Resources David R. Ford................................ 54 Senior Vice President, International, and President, European Operations Thomas A. Scrimo............................. 52 Senior Vice President and General Manager, Aerosol Operations and Business Support John R. McGowan.............................. 58 Vice President and Controller Larry S. Morrison............................ 46 Vice President, Operational Excellence Emil P. Obradovich........................... 54 Vice President and Chief Technical Officer Steven K. Sims............................... 36 Vice President, General Counsel and Secretary Sandra K. Vollman............................ 42 Vice President, Finance Carl Ferenbach............................... 58 Director Richard K. Lubin............................. 54 Director Ricardo Poma................................. 54 Director Francisco A. Soler........................... 54 Director Louis B. Susman.............................. 62 Director
PAUL W. JONES. Mr. Jones has been our President and Chief Executive Officer since April 1998, and our Chairman of the Board since July 1998. From 1989 to 1998, Mr. Jones was the President of Greenfield Industries, Inc., an international tool manufacturer. Prior to joining Greenfield Industries, Inc., Mr. Jones held various positions with General Electric for 19 years, including serving as General Manager--Manufacturing for General Electric Transportation Systems from 1988 to 1989. Prior to that time, Mr. Jones was the General Manager of General Electric Drives, Motor and Generator Operations. Mr. Jones is a member of the Board of Directors of Federal Signal Corporation and Regal-Beloit Corporation. JOHN L. WORKMAN. Mr. Workman has been our Executive Vice President and Chief Financial Officer since his appointment in August 1998. Prior to his appointment, Mr. Workman served as Executive Vice President and Chief Restructuring Officer at Montgomery Ward Holding Corporation. Montgomery Ward is one of the nation's largest privately-held retailers. Mr. Workman joined 55 Montgomery Ward in 1984 as a general auditor and held a variety of financial positions with Montgomery Ward, including Vice President--Controller, Vice President--Finance and Chief Financial Officer. Mr. Workman was an executive officer of Montgomery Ward in July 1997 when it filed for reorganization under Chapter 11 of the Federal bankruptcy laws. Prior to joining Montgomery Ward, Mr. Workman was a partner in Main Hurdman CPAs which later merged into KPMG. J. MICHAEL KIRK. Mr. Kirk has served as our Executive Vice President, Marketing since August 1999. In February 2000, Aerosol sales were also added to his duties. Prior to joining us, he served as General Manager of Blank Fed Packaging Systems for Tetra Pak, Inc., a manufacturer of beverage packaging products. He joined Tetra Pak in 1986 as a sales manager and held a number of sales and marketing positions. At Tetra Pak, he became General Manager of the nine state Southern Region of Tetra Pak and in 1996 was named General Manager of Tetra Pak's 33-state Central Region. GILLIAN V. N. DERBYSHIRE. Ms. Derbyshire has served as our Senior Vice President, Paint, Plastic and General Line since September 1999. In February 2000, Custom and Specialty operations were added to Ms. Derbyshire's responsibilities. Prior to joining us, she served as Vice President and General Manager of American National Can's Worldwide Plastic Bottle Group, a position held from June 1997 to September 1999. Prior to joining American National Can, Ms. Derbyshire was Vice President and General Manager of Tenneco Packaging's EZ Foil-Registered Trademark- Products Group (from June 1995 to June 1997). Prior to that, Ms. Derbyshire was Vice President and General Manager, Marketing of the Tenneco Packaging Specialty Packaging Group. ROGER B. FARLEY. Mr. Farley has served as our Senior Vice President, Human Resources since August 1998. Prior to joining us, Mr. Farley was Senior Vice President, Human Resources from July 1997 to July 1998 and Vice President, Human Resources from June 1994 to June 1997 of Greenfield Industries, Inc., an international tool manufacturer. Before joining Greenfield Industries, Inc., Mr. Farley spent 28 years with General Electric in various operating and human resources positions. DAVID R. FORD. Mr. Ford has served as our Senior Vice President, International and President, European Operations since November 1997. From 1987 until 1997, Mr. Ford held a number of senior management positions with CMB Packaging Group, a division of CarnaudMetalbox (a Crown Cork & Seal company), including Vice President, Eastern Europe; Vice President, European Food Can business; Regional Vice President, Northern Europe; and Managing Director, CMB Food Can UK. Crown Cork & Seal is a global metal and plastic packaging company. THOMAS A. SCRIMO. Mr. Scrimo has served as our Senior Vice President and General Manager, Aerosol Operations and Business Support since February 2000. From August 1998 to February 2000, Mr. Scrimo served as our Vice President, Business Support Operations. Prior to joining us, he served as Vice President of Operations for Greenfield Industries, Inc., an international tool manufacturer, from January 1997 to August 1998. From July 1992 to January 1997, he served as Vice President of Manufacturing of Commercial Cam Co., Wheeling, Illinois, a division of Emerson Electric Co., a manufacturer of precision material handling equipment. JOHN R. MCGOWAN. Mr. McGowan has served as our Vice President and Controller since August 1989. Mr. McGowan joined us in May 1987 and served as Vice President, Planning from September 1987 to July 1989. Prior to joining us, Mr. McGowan held a number of financial and management positions during his 25-year tenure with Continental Can Company. Mr. McGowan was employed in Continental Can Company's general packaging operations as Division Manager, Finance from February to May 1987 and as Division Controller from February 1982 to January 1987. LARRY S. MORRISON. Mr. Morrison has served as our Vice President, Operational Excellence since February 2000. From 1998 to February 2000, Mr. Morrison served as our Vice President and General 56 Manager, Custom and Specialty Products. From July 1995 to 1998, Mr. Morrison served as our Vice President of Manufacturing of Custom and Specialty Products. From October 1991 to July 1995, Mr. Morrison served as Director of Operations at our Hubbard, Ohio and Baltimore, Maryland plants. Mr. Morrison was with Sherwin Williams' container division for 10 years prior to our acquisition of the division in 1983. EMIL P. OBRADOVICH. Mr. Obradovich has served as our Vice President and Chief Technical Officer since February 2000. From 1996 to February 2000, Mr. Obradovich served as our Managing Director of Technical Service. From 1983 to 1996, Mr. Obradovich served as our Technical Director. He also spent 10 years with Sherwin-Williams prior to our formation. STEVEN K. SIMS. Mr. Sims has served as our Vice President, General Counsel and Secretary since June 1998. From April 1995 to May 1998, Mr. Sims served as our Assistant General Counsel. From September 1989 to March 1995, Mr. Sims was engaged in private practice at the Chicago-based law firm of Ross & Hardies, representing public and private companies in corporate and securities matters and mergers and acquisitions. SANDRA K. VOLLMAN. Ms. Vollman has served as our Vice President--Finance since July 2000. From July 1999 to July 2000, Ms. Vollman served as our Vice President--Business Development. From 1997 to 1999, Ms. Vollman was Vice President and Corporate Controller for Montgomery Ward and Co. Prior to 1997, Ms. Vollman held a variety of financial and information systems positions at Montgomery Ward and was vice president and controller of Signature Financial/Marketing, Inc., Montgomery Ward's direct marketing subsidiary. Before joining Montgomery Ward in 1983, Ms. Vollman was audit manager for Arthur Andersen in Chicago. CARL FERENBACH. Mr. Ferenbach, who was one of our founding directors in 1983 and served as a member of our Board of Directors until February 2000, was elected as a Director at the time of the recapitalization. Mr. Ferenbach is also a Managing Director of Berkshire Partners, which he co-founded in 1986. He has been a director of many of Berkshire Partners' manufacturing, transportation and telecommunications investments, including, among others, Crown Castle International Corporation, Wisconsin Central Transportation Corporation, Tranz Rail Limited and Trico Marine Services, Inc. RICHARD K. LUBIN. Mr. Lubin has served as a Director since the recapitalization. Mr. Lubin is a Managing Director of Berkshire Partners, which he co-founded in 1986. He has been a director of many of Berkshire Partners' manufacturing, retailing and transportation investments, including, among others, The Holmes Group, Inc., InteSys Technologies, Inc. and Wisconsin Central Transportation Corporation. RICARDO POMA. Mr. Poma has served as a Director since 1983. Since 1979, Mr. Poma has served as the Managing Partner and Chief Executive Officer of Group Poma, a family holding company involved in automobile distribution, hotels, real estate development and manufacturing. Mr. Poma is also Vice Chairman of International Bancorp of Miami, Inc.; a member of the Advisory Board of Bain Capital, an investment fund; and President of the School for Economics and Business, a private university in El Salvador. FRANCISCO A. SOLER. Mr. Soler has served as a Director since 1983. Since 1985, Mr. Soler has served as the Chairman of International Bancorp of Miami, Inc., the holding company for The International Bank of Miami, N.A. Mr. Soler is also President of Harbour Club Milano Spa. and a director of various industrial and commercial companies in the United Kingdom and El Salvador. LOUIS B. SUSMAN. Mr. Susman has served as a Director since 1998. Mr. Susman is a Vice Chairman of the Citigroup Global Corporate Investment Bank, Chairman of the Citigroup North American Customer Committee, and a Vice Chairman of Investment Banking and Managing Director of Salomon Smith Barney Inc. Prior to joining Salomon Brothers Inc (one of the predecessors of 57 Salomon Smith Barney) in June 1989, Mr. Susman was a senior partner at the St. Louis-based law firm of Thompson & Mitchell. Mr. Susman is a Director of Drury Inns and has previously served on the boards of the St. Louis National Baseball Club, Inc., Silver Eagle, Inc., Hasco International, PennCorp Financial, Avery, Inc. and other publicly-held corporations. In addition to the directors listed above, we expect to expand our board to include up to four additional independent directors as a result of the recapitalization. COMPENSATION OF DIRECTORS We pay our non-employee directors customary fees and reimburse their expenses for each board and committee meeting attended. EXECUTIVE COMPENSATION The following tables set forth information for the fiscal year ended December 31, 1999 concerning compensation paid to our Chief Executive Officer and our other four most highly compensated executive officers during fiscal years 2000, 1999 and 1998. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION --------------------------- ANNUAL COMPENSATION AWARDS PAYOUT ---------------------------------------------- ----------- ------------- SECURITIES UNDERLYING OTHER ANNUAL OPTIONS/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION SARS (#)(C) COMPENSATION - --------------------------- -------- -------- -------- ------------- ----------- ------------- Paul W. Jones(b) ............................. 2000 $614,473 none $7,521 212,202 $2,351,037(d) President and Chief Executive Officer 1999 $572,800 $830,200 $7,500 none $ 96,300(e) 1998 $384,900 $618,750 $5,500 450,000 $ 68,100 David R. Ford(f) ............................. 2000 $395,000 none none 141,468 $ 771,266(d) Senior Vice President, International and 1999 $383,000 $251,300 none none $ 239,116(d) President, European Operations 1998 $365,100 $143,100 none 28,000 $ 116,600 John L. Workman(b) ........................... 2000 $398,088 none $7,521 353,669 $1,066,672(d) Executive Vice President and Chief Financial 1999 $378,600 $270,700 $7,500 none $ 54,100(e) Officer 1998 $119,600 $165,000 $2,900 117,500 $ 2,200 Gillian V.N. Derbyshire(b) ................... 2000 $277,069 none $7,521 212,202 $ 344,503(d) Senior Vice President and General Manager, 1999 $ 62,138 $102,500 $2,025 50,000 $ 1,080(e) Paint, Plastic, Custom and General Line Operations J. Michael Kirk(b) ........................... 2000 $243,088 none $7,521 212,202 $ 358,139(d) Senior Vice President, Corporate Marketing 1999 $ 79,892 $77,500 $2,603 50,000 $ 3,691(e) and Aerosol Sales
- ------------------------------ (a) The 1998 amounts for Messrs. Jones and Workman and the 1999 amounts for Ms. Derbyshire and Mr. Kirk consist of a signing or make-whole bonus (based on foregone bonus from their previous employers) and a guaranteed partial year incentive payout. For 1998 and 1999, the amounts shown for all officers include the dollar value of additional deferred stock units provided by us to the named executive officers in connection with their deferral of a portion of their 1998 and 1999 bonuses into deferred stock units under our Executive Deferred Compensation Plan. Under this plan, eligible executives were able to defer up to 25% of their annual incentive compensation into deferred United States Can Company stock units, which were settled in cash at the reorganization date. We contributed one additional deferred stock unit for each five deferred stock units elected by the executive. (b) Mr. Jones, Mr. Workman, Ms. Derbyshire and Mr. Kirk joined our company in April 1998, August 1998, September 1999 and August 1999, respectively. (c) Options granted in 1999 and 1998 were granted under various option or equity incentive plans that were terminated as of the October 4, 2000 recapitalization date and reflect shares prior to the recapitalization. Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire and 58 Mr. Kirk, respectively, under the plans in effect prior to the recapitalization. All of the foregone options were cancelled at the time of the recapitalization, and each holder received a cash payment equal to the product of (i) the $20.00 price per share paid to shareholders in connection with the recapitalization less the exercise price of the option and (ii) the number of shares of common stock subject to the option. Options reflected in this table for 2000 were granted on October 4, 2000 under the U.S. Can Corporation 2000 Equity Incentive Plan in connection with the recapitalization. (d) The 2000 amounts include one-time bonuses in connection with the recapitalization of $697,500, $156,600, $309,000, $90,700 and $99,400 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, cash proceeds from the cancellation of employee stock options in the recapitalization of $1,291,312, $252,250, $624,713, $220,000 and $220,288 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, distribution of cash from U.S. Can Corporation's executive deferred compensation program to the extent not reported as 1999 or 1998 bonuses, of $124,384, $39,399, $38,852, $6,053 and $6,053 for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, contributions or payments for their benefit to U.S. Can Corporation's Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") of $10,200 for each named executive officer other than Mr. Ford and $214,538, $80,314, $16,470 and $19,823 for Messrs. Jones and Workman, Ms. Derbyshire and Mr. Kirk, respectively, pursuant to nonqualified retirement plans. The 2000 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of our standard benefit ($5,803, $1,080 and $1,369, respectively). The 2000 amounts shown for Messrs. Jones, Workman and Kirk include payments for personal financial planning of $7,300, $3,593 and $1,200, respectively. The 2000 and 1999 amounts for Mr. Ford include contributions to an executive retirement plan and an overseas employee benefit trust, of which Mr. Ford is the beneficiary, designed to provide contractual retirement benefits ($227,011 and $229,424 for 2000 and 1999, respectively) and the cost of life insurance ($8,958 and $9,692 for 2000 and 1999, respectively). The 2000 amount for Mr. Ford also includes reimbursement for relocation expenses as provided under his Service Agreement of $87,048. (e) The 1999 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in excess of our standard benefit ($5,803, $1,080 and $1,175, respectively). The 1999 amounts shown for Messrs. Jones, Workman and Kirk include contributions or payments for their benefit to U.S. Can Corporation's Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") and pursuant to nonqualified retirement plans ($90,500, $54,100 and $2,515, respectively). (f) Mr. Ford is compensated in British Pounds. Certain amounts shown for Mr. Ford have been converted to U.S. dollars at the exchange rate in effect as of the calendar year-end for the year in which payment was made. OPTION GRANTS IN 2000
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE % OF TOTAL OPTIONS APPRECIATION FOR NUMBER OF SECURITIES GRANTED TO OPTION TERM UNDERLYING OPTIONS EMPLOYEES IN EXERCISE OR ------------------- NAME GRANTED (#)(A) FISCAL YEAR BASE PRICE EXPIRATION DATE 5%($) 10%($) - ---- -------------------- ------------------ ----------- --------------- ----- ------ Paul W. Jones.............. 70,734(b) 2.17% $1.00 October 4, 2010 $ 44,484 $112,729 141,468(c) 8.93% $1.00 October 4, 1010 $ 88,969 $225,458 David R. Ford.............. 141,468(b) 4.35% $1.00 October 4, 2010 $ 88,969 $225,458 John L. Workman............ 70,734(b) 2.17% $1.00 October 4, 2010 $ 44,484 $112,729 282,935(c) 17.86% $1.00 October 4, 2010 $177,938 $450,914 Gillian V.N. Derbyshire.... 84,881(b) 2.61% $1.00 October 4, 2010 $ 53,382 $135,275 127,321(c) 8.04% $1.00 October 4, 2010 $ 80,072 $202,911 J. Michael Kirk............ 84,881(b) 2.61% $1.00 October 4, 2010 $ 53,382 $135,275 127,321(c) 8.04% $1.00 October 4, 2010 $ 80,072 $202,911
- ------------------------------ (a) Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000 and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively, under the plans in effect prior to the recapitalization, which were cancelled at the time of the recapitalization. See note (c) to the Summary Compensation Table. (b) Represents time-vested options to purchase shares of common stock. These options vest in equal installments of 20% on October 4 of each of 2001, 2002, 2003, 2004 and 2005, subject to accelerated vesting upon a change of control of United States Can Company. (c) Represents performance-based options to purchase shares of common stock. These options are exercisable only as to the total number of shares that are both vested and earned. These options vest in equal installments of 20% on October 4 of each of 2001, 2002, 2003, 2004 and 2005. These options are earned at the time of an initial public offering or if Berkshire Fund V Investment Corp. and its affiliates receive a specified return on their investment in United States Can Company under specific, enumerated circumstances. 59 AGGREGATED OPTIONS/SAR EXERCISES IN 2000 AND 2000-END OPTIONS/SAR VALUED No shares were acquired as a result of option exercises by the named executive officers during 2000. See note (d) to the Summary Compensation Table for a description of the cash proceeds from the cancellation of employee stock options in the recapitalization. We have not awarded any stock appreciation rights ("SARs").
EXERCISABLE/UNEXERCISABLE NUMBER OF SECURITIES EXERCISABLE/UNEXERCISABLE UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS NAME AT 2000-YEAR END (#) AT 2000-YEAR END ($)(A) - ---- ------------------------- ------------------------- Paul W. Jones...................................... 0/212,202 $0/$0 David R. Ford...................................... 0/141,468 $0/$0 John L. Workman.................................... 0/353,669 $0/$0 Gillian V.N. Derbyshire............................ 0/212,202 $0/$0 J. Michael Kirk.................................... 0/212,202 $0/$0
- ------------------------ (a) Because there was no established trading market for United States Can Company's common stock as of December 31, 2000, management has determined that the fair market value of the common stock underlying these options did not exceed $1.00 (the exercise price of these options) and, accordingly, none of these options were in-the-money. 60 PRINCIPAL STOCKHOLDERS Following the consummation of the transactions on October 4, 2000, we had one class of issued and outstanding common stock, and U.S. Can Corporation owned all of it. The following table sets forth certain information with respect to the ownership of U.S. Can Corporation's common stock immediately after consummation of the transactions and reflects U.S. Can Corporation's 20 for 1 stock split, which was effected upon the closing of the recapitalization. As of October 4, 2000, immediately following the consummation of the transactions, U.S. Can Corporation had 53,333,333 shares of issued and outstanding common stock. U.S. Can Corporation's preferred stock, which has no voting rights other than those provided by Delaware law, is owned by Berkshire Partners and its co-investors and the rollover stockholders. See "Description of U.S. Can Corporation's Capital Stock--Preferred Stock." Notwithstanding the beneficial ownership of common stock presented below, the stockholders agreement entered into upon consummation of the transactions governs the stockholders' exercise of their voting rights with respect to the election of directors and other material events. The parties to the stockholders agreement have agreed to vote their shares to elect the Board of Directors as set forth therein. See "Certain Relationships and Related Party Transactions." The following table describes the beneficial ownership of each class of issued and outstanding common stock of U.S. Can Corporation by each of our directors and executive officers, our directors and executive officers as a group and each person who beneficially owns more than 5% of the outstanding shares of common stock of U.S. Can Corporation as of October 1, 2000. As used in the table, beneficial ownership has the meaning set forth in Rule 13d-3(d)(1) of the Exchange Act.
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OWNERSHIP - ---------------- ---------------- ----------------- Berkshire Partners LLC(1)................................... 41,229,278 77.30% Salomon Smith Barney Inc.(2)................................ 2,613,332 4.90 Paul W. Jones............................................... 1,933,334 3.63 John L. Workman............................................. 1,000,000 1.88 J. Michael Kirk............................................. 333,333 * Gillian V. N. Derbyshire.................................... 333,333 * Roger B. Farley............................................. 533,333 1.00 David R. Ford............................................... 453,333 * Thomas A. Scrimo............................................ 213,334 * Carl Ferenbach(3)........................................... 41,229,278 77.30 Richard K. Lubin(4)......................................... 41,229,278 77.30 Ricardo Poma(5)............................................. 2,202,344 4.13 Francisco A. Soler(6)....................................... 951,485 1.79 Louis B. Susman(7).......................................... 2,613,332 4.90 All officers and directors as a group (12 persons).......... 51,769,758 97.07
- ------------------------ * Less than 1% (1) Includes 25,847,737 shares of common stock held by Berkshire Fund V Investment Corp.; 2,584,771 shares of common stock held by Berkshire Investors LLC; and 12,796,770 shares of 61 common stock held by Berkshire Fund V Coinvestment Corp. The address of Berkshire Partners LLC is One Boston Place, Suite 3300, Boston, Massachusetts 02108. (2) The address of Salomon Smith Barney Inc. is 8700 Sears Tower, Chicago, Illinois 60606. (3) Mr. Ferenbach is a Managing Director of Berkshire Partners LLC. (4) Mr. Lubin is a Managing Director of Berkshire Partners LLC. (5) Mr. Poma beneficially owns 2,202,344 shares of U.S. Can Corporation common stock as a result of his relationship to (i) Salcorp Ltd., a company of which Mr. Poma is the sole stockholder, director and executive officer, and which is the record holder of 924,804 shares, (ii) Scarsdale Company N.V., Inc., a company of which Mr. Poma is a director and executive officer and which is the record holder of 26,681 shares, and (iii) Barcel Corporation, which is the record holder of 1,250,859 shares and is wholly owned by United Capital Corporation, which is wholly owned by Inversal Trust, a family trust of which Mr. Poma is the trustee. (6) Mr. Soler beneficially owns 951,485 shares of U.S. Can Corporation common stock as a result of his relationship to (i) Windsor International Corporation, a company of which Mr. Soler is a director and executive officer and which is the record holder of 424,460 shares, (ii) Atlas World Carriers S.A., a company of which Mr. Soler is a director and executive officer and which is the record holder of 250,172 shares, (iii) The World Financial Corporation S.A., a company of which Mr. Soler is a director and executive officer and which is the record holder of 250,172 shares, and (iv) Scarsdale Company N.V., Inc., a company of which Mr. Soler is an executive officer and which is the record holder of 26,681 shares. (7) Mr. Susman is the Vice Chairman of Investment Banking and Managing Director of Salomon Smith Barney Inc. Salomon Smith Barney owns 2,613,332 shares of common stock. 62 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH BERKSHIRE PARTNERS Berkshire Partners has been actively involved in our company through Carl Ferenbach, a founding partner of Berkshire Partners. Mr. Ferenbach was one of our founding directors in 1983 and served as a member of our Board of Directors until February 2000. Upon the completion of the transactions, Berkshire Partners received a fee of $2.0 million. In addition, Berkshire Partners will receive a management fee of $750,000 per year. RELATIONSHIP WITH SALOMON SMITH BARNEY Salomon Smith Barney currently beneficially owns 4.62% of our common stock and provides us with investment banking and financial advisory services. Between 1997 and 1998, we paid Salomon Brothers Inc, one of Salomon Smith Barney's predecessors, approximately $800,000 in fees in connection with the sale of our commercial metal services business. We paid Salomon Smith Barney $2.0 million in fees for financial advisory services provided in connection with the transactions. In addition, we paid Salomon Smith Barney customary fees for serving as sole book running manager for the original offering, as dealer manager in U.S. Can Corporation's tender offer for all of its outstanding 10 1/8% notes due 2006 and as joint arranger under our new senior secured credit facility. STOCKHOLDERS AGREEMENT In connection with the recapitalization, we entered into a stockholders agreement with our stockholders which provides for, among other things, certain restrictions and rights related to the transfer, sale or purchase of our common stock and preferred stock. See "Description of U.S. Can Corporation's Capital Stock--Stockholders Agreement." TRANSACTIONS WITH MANAGEMENT EXECUTIVE DEFERRED COMPENSATION PLAN Our executive deferred compensation plan permits eligible executives to reduce the amount of their current taxable income by deferring payment of up to 25% of their annual cash bonus under our management incentive plan. The deferrals are invested in stock units of U.S. Can Corporation and the executive is entitled to a 20% company match on the number of stock units credited. The matching stock units generally vest over five years. As a result of the recapitalization, each executive who continued to be a stockholder of our company after the recapitalization received a cash distribution from the executive deferred compensation plan equal to the product of: - the number of stock units held by the executive, including vested and unvested matching stock units; and - $20.00. Participants in our executive deferred compensation plan who did not continue to be stockholders of our company after the recapitalization became vested in their matching stock units in the amount of $20.00 per matching stock unit. The vested amount was transferred to other investments. EXECUTIVE SEVERANCE PLAN Several of our executive officers are eligible to participate in our executive severance plan. The executive severance plan provides an executive with a severance payment equal to 12 months (18 months for certain executives) of the executive's base salary in the event the executive is terminated without cause or leaves for good reason. In the cases of Ms. Derbyshire and Messrs. Farley, Kirk, Morrison, Scrimo, Sims and Workman, the executive severance plan will not provide a severance 63 benefit if these executives are entitled to receive a severance benefit under their change in control agreements (described below). U.S. CAN CORPORATION 2000 EQUITY INCENTIVE PLAN In connection with the recapitalization, the Board of Directors and stockholders of U.S. Can Corporation approved the U.S. Can Corporation Corporation 2000 Equity Incentive Plan. The Board of Directors administers the plan and may, from time to time, grant option awards to directors of U.S. Can Corporation, including directors who are not employees of U.S. Can Corporation, all executive officers of U.S. Can Corporation and its subsidiaries, and other employees, consultants, and advisers who, in the opinion of the Board, are in a position to make a significant contribution to the success of U.S. Can and its subsidiaries. The Board of Directors may grant options that are time-vested and options that vest based on the attainment of performance goals specified by the Board of Directors. CHANGE IN CONTROL AGREEMENTS Certain of our executive officers are a party to a change in control agreement. The recapitalization constituted a change in control under each agreement, which generally requires us to provide severance benefits to the executive officer upon his or her termination of employment during the agreement term. The agreements with Messrs. Morrison and Sims provide that, until the end of the 24th month following October 2000, the executive will be entitled to the following benefits during the term of the executive's agreement while employed by us: - a salary which is not less than his or her highest annual base salary rate during the one-year period before the change in control; - continued participation in our management incentive plan or any replacement bonus plan providing an opportunity for an incentive payment equal to at least the greatest incentive compensation opportunity provided to him or her during the one-year period prior to the change in control; - life insurance coverage providing an amount in death benefits that is not less than two times the executive's base salary and disability income replacement coverage; and - participation in health, welfare, retirement and other fringe benefit programs on substantially the same terms as those benefits that are provided to other senior management employees. If we terminate the executive without cause at any time prior to the end of the 24th month following October 2000, or if the executive leaves employment as a result of a constructive termination, the executive is entitled to a lump sum severance payment. This payment will equal 18 months of base salary for Mr. Morrison and 12 months of base salary for Mr. Sims. In addition, the executives will be entitled to pro rata payments of bonus awards under the management incentive plan. The agreements with Messrs. Ford, McGowan and Obradovich provide that upon termination by us or constructive termination by the executive within two years of a change in control, the executive will be entitled to: - a severance payment equal to two times the greater of his current annual base salary or the annual base salary immediately before the change in control in the cases of Messrs. Ford and McGowan and equal to one times this amount in the case of Mr. Obradovich; - a pro-rated bonus based on the executive's target bonus; - accelerated vesting of all restricted stock grants awarded to Mr. McGowan; and 64 - continuation of health and welfare benefits for two years following termination in the cases of Messrs. Ford and McGowan and for one year in the case of Mr. Obradovich. EMPLOYMENT AGREEMENT WITH MR. JONES As of the recapitalization, Mr. Jones terminated his then existing change of control agreement and entered into a new employment agreement with us. We entered into a two-year employment agreement with Mr. Jones on October 4, 2000. Under the terms of Mr. Jones' employment agreement, he will be paid an annual base salary of at least $610,000. His base salary and other compensation will be reviewed annually by the Compensation Committee of the Board of Directors. Mr. Jones participates in our management incentive plan with an opportunity to receive a bonus payment equal to 100% of his base salary. We have also agreed to provide Mr. Jones with term life insurance coverage with death benefits at least equal to twice his base salary, an automobile allowance and employee benefits comparable to those provided to our other senior executives. In the event of the termination of Mr. Jones' employment with us due to his death or permanent disability, we will pay him or his estate: (1) an amount equal to one year's base salary reduced by any amounts received from any life or disability insurance provided by us; and (2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. In the event Mr. Jones terminates his employment for good reason or we terminate his employment without cause, we will pay him: (1) his base salary and benefits for the earliest to occur of 18 months, his death or the date that he breaches the provisions of his employee agreement (relating to non-competition, confidentiality and inventions); and (2) if Mr. Jones is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. If Mr. Jones' employment is terminated for cause or by voluntary resignation, he will receive no further compensation. EMPLOYMENT AGREEMENTS WITH MS. DERBYSHIRE AND MESSRS. FARLEY, KIRK, SCRIMO AND WORKMAN As of the recapitalization, Ms. Derbyshire and Messrs. Farley, Kirk, Scrimo and Workman, referred to as the executives, terminated their then existing change of control agreements and entered into new employment agreements with us. We entered into two-year employment agreements with each of the executives on October 4, 2000. Under the terms of these employment agreements, Ms. Derbyshire and each of Messrs. Farley, Kirk, Scrimo and Workman will be paid an annual base salary of at least $260,000, $226,000, $235,000, $220,000 and $390,000, respectively. Each executive's base salary and other compensation will be reviewed annually by that executive's supervisor. Each executive also participates in our management incentive plan with an opportunity to receive a bonus payment equal to 50% of his or her base salary. We have also agreed to provide each executive with term life insurance coverage with death benefits at lease equal to twice his or her base salary, an automobile allowance and employee benefits comparable to those provided to our other senior executives. In the event of the termination of an executive's employment with us due to his or her death or permanent disability, we will pay him or her or his or her estate: (1) an amount equal to one year's base salary reduced by any amounts received from any life or disability insurance provided by us; and 65 (2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. In the event an executive terminates his or her employment for good reason or we terminate his or her employment without cause, we will pay him or her: (1) his or her base salary and benefits for the earliest to occur of 18 months, his or her death or the date that he or she breaches the provisions of his or her employee agreement (relating to non-competition, confidentiality and inventions); and (2) if the executive is entitled to receive a bonus payment under the management incentive plan, a bonus payment prorated to reflect any partial year of employment. If an executive's employment is terminated for cause or by voluntary resignation, he or she will receive no further compensation. SERVICE AGREEMENT WITH MR. FORD We have entered into a service agreement with Mr. Ford through our wholly owned subsidiary, USC Holding UK Limited. The service agreement will continue in effect until it is terminated by us or Mr. Ford, but not beyond Mr. Ford's attainment of USC Holding UK Limited's retirement age (currently 65). We have agreed to pay Mr. Ford a base salary of L232,000 per year during the term of his agreement and to provide him with an automobile and retirement benefits no less beneficial than those provided by his previous employer. We have agreed to provide a target bonus for Mr. Ford of 50% of his base salary with the actual amount based upon the attainment of pre-established performance goals. Mr. Ford may terminate his employment by providing us with 12 months notice. We may terminate Mr. Ford's employment by giving him 24 months notice, except we may terminate Mr. Ford's employment for cause without prior notice. After termination notice is given and prior to expiration of the notice period, we are required to continue to pay Mr. Ford's salary and provide other contractual benefits. If Mr. Ford's employment is terminated by reason of redundancy, we are required to make an additional payment to Mr. Ford equal to two times his entitlement to statutory redundancy pay (to include the statutory entitlement). Additionally, the service agreement requires Mr. Ford to refrain from disclosing confidential information acquired in connection with his employment with us and also requires Mr. Ford to refrain from working for any other firm during the term of the agreement. 66 OTHER INDEBTEDNESS SENIOR SECURED CREDIT FACILITY GENERAL. On October 4, 2000, in connection with the recapitalization, United States Can Company entered into a senior secured credit facility with Bank of America, N.A., Citicorp North America, Inc. and certain other lenders. The senior secured credit facility provides for aggregate borrowings by us of $400.0 million. As of October 1, 2000, after giving pro forma effect to the transactions, there would have been approximately $295.4 million (including $14.9 million of letters of credit) of outstanding indebtedness under the senior secured credit facility and approximately $104.6 million of unused commitment under the senior secured credit facility for working capital and other corporate purposes. The senior secured credit facility includes: - an $80.0 million tranche A term loan; - a $180.0 million tranche B term loan; and - a $140.0 million revolving credit facility. Up to $75.0 million of the revolving credit facility is available in certain foreign currencies, including British Pounds Sterling, French Francs, German Deutsche Marks and Euros and other foreign currencies approved by the lenders for borrowings by certain of our foreign subsidiaries. INTEREST. Amounts outstanding under the senior secured credit facility bear interest, at our option, at a rate per annum equal to either: (1) the base rate (as defined in the senior secured credit facility) or (2) the LIBOR rate (as defined in the senior secured credit facility), in each case, plus an applicable margin. The applicable margin for the tranche A term loan and the revolving credit facility is initially 2.25% for base rate loans and 3.25% for LIBOR loans. The applicable margin for the tranche A term loan and the revolving credit facility is subject to reduction based on the achievement of specified leverage ratio targets and provided that no event of default has occurred and is continuing. The applicable margin for the tranche B term loan is fixed at 2.75% for base rate loans and 3.50% for LIBOR loans, subject to reduction based on our senior secured credit rating. The applicable margins are not subject to reduction until after March 2001. As of October 1, 2000, our borrowings under the senior secured credit facility would have borne interest at rates ranging from 9.58% to 9.83%. The interest rate otherwise payable under the senior secured credit facility will increase by 2% per annum during the continuance of a payment default or another event of default for which the lenders have taken affirmative action. MATURITY AND MANDATORY PREPAYMENTS. Borrowings under the tranche A term loan are due and payable in quarterly installments, which are initially $1 million and increase over time to $8 million, until the final balance is due on the sixth anniversary of the closing of the recapitalization. Borrowings under the tranche B term loan are due and payable in quarterly installments (the quarterly payments due before December 31, 2006 being in nominal amounts), with the final balance due on the eighth anniversary of the closing of the recapitalization. The revolving credit facility is available until the sixth anniversary of the closing of the recapitalization. In addition, we are required to prepay the facilities under the senior secured credit facility in an amount equal to: - 100% of the net cash proceeds from specified asset sales by us subject to baskets and reinvestment provisions; - 75% (if our senior debt/EBITDA ratio is equal to or greater than 3.0:1.0) or 50% (if our senior debt/EBITDA ratio is less than 3.0:1.0) of excess cash flow (as defined); - 100% of the net cash proceeds from the issuance of any debt (excluding the proceeds from the notes) by us; and 67 - 50% of the net cash proceeds from our issuance of equity, excluding, among other things, (a) proceeds from any issuance of equity within one year of the closing of the recapitalization which are applied to permanently reduce the outstanding bridge notes, and (b) when no bridge notes are outstanding, (i) any equity invested by Berkshire Partners and the rollover stockholders and (ii) equity invested in connection with a permitted acquisition. SECURITY AND GUARANTEES. The senior secured credit facility is secured by a first priority security interest in all existing and after-acquired assets of us and all of our direct and indirect domestic subsidiaries' existing and after-acquired assets, including, without limitation, real property and all of the capital stock owned by us and our direct and indirect domestic subsidiaries (including capital stock of their direct foreign subsidiaries only to the extent permitted by applicable law). In addition, the loans made to our foreign subsidiaries under the senior secured credit facility will be secured by the existing and after-acquired assets of certain of our foreign subsidiaries. All of our obligations under the senior secured credit facility are fully and unconditionally guaranteed by U.S. Can Corporation and all of United States Can Company's present and future domestic subsidiaries. In addition, U.S. Can Corporation, United States Can Company, each guarantor and, to the extent permitted by law, each subsidiary and parent of any foreign subsidiary authorized to borrow amounts under the senior secured credit facility will guarantee any borrowings by any designated foreign subsidiaries permitted to borrow amounts under the senior secured credit facility. COVENANTS. The senior secured credit facility requires us to meet certain financial tests, including, without limitation: - minimum interest coverage; - minimum EBITDA; - minimum fixed charge coverage; and - maximum leverage. The senior secured credit facility contains certain covenants which, among other things, limit: - the incurrence of additional debt; - investments; - dividends; - transactions with affiliates; - capital expenditures; - asset sales; - acquisitions, mergers and consolidations; - prepayments of other debt (including the notes); - amendments to the terms of any debt (including the notes) that would be adverse to the lenders; and - liens, encumbrances and negative pledges. EVENTS OF DEFAULT. The senior secured credit facility contains customary events of default, including, among other things: - payment defaults; - breaches of representations and warranties; 68 - covenant defaults; - cross-defaults to certain other debt (including the notes); - certain events of bankruptcy and insolvency; - failure of the subordination provisions in the notes to be effective with respect to each holder of the notes; - judgment defaults; - failure of any guarantee or security document supporting the senior secured credit facility to be in full force and effect; and - a change of control of United States Can Company or U.S. Can Corporation. WAIVER AND MODIFICATION. The terms of the senior secured credit facility may be waived or modified upon approval by United States Can Company and the required percentage of the senior lenders and without the consent of the exchange note holders. 69 DESCRIPTION OF U.S. CAN CORPORATION'S CAPITAL STOCK GENERAL U.S. Can Corporation has two authorized classes of capital stock: preferred stock and common stock, each with par value $.01 per share. The number of authorized shares of preferred stock is 200,000,000 and the number of authorized shares of common stock is 100,000,000. Immediately following the recapitalization, there were 106,666,667 shares of U.S. Can Corporation preferred stock and 53,333,333 shares of U.S. Can Corporation common stock outstanding. In addition, U.S. Can Corporation has reserved 3,253,761 shares of common stock for issuance upon exercise of employee stock options. PREFERRED STOCK As part of the transactions, U.S. Can Corporation issued and sold in a private placement shares of preferred stock having an aggregate value of $106.7 million to Berkshire Partners and its affiliates and the rollover stockholders. The principal terms of the preferred stock are summarized below. This summary, however, is not complete and is qualified in its entirety by reference to the provisions of U.S. Can Corporation's certificate of incorporation, as in effect at the time of the closing of the transactions. DIVIDENDS. Dividends accrue on the preferred stock at an annual rate of 10%, are cumulative from the date of issuance and compounded quarterly, on March 31, June 30, September 30 and December 31 of each year and are payable in cash when and as declared by our Board of Directors, so long as sufficient cash is available to make the dividend payment and has been obtained in a manner permitted under the terms of our new senior secured credit facility and the indenture. VOTING RIGHTS. Holders of the preferred stock have no voting rights, except as otherwise required by law. RANKING. The preferred stock has a liquidation preference equal to the purchase price per share, plus all accrued and unpaid dividends. The preferred stock ranks senior to all classes of U.S. Can Corporation common stock and is not convertible into common stock. REDEMPTION. U.S. Can Corporation is required to redeem the preferred stock, at the option of the holders, at a price equal to its liquidation preference, plus accrued and unpaid dividends, upon the occurrence of any of the following events and so long as sufficient cash is available at U.S. Can or available from dividend payments permitted under the terms of the indenture: - the bankruptcy of either U.S. Can Corporation or United States Can Company; - the acceleration of debt under any major loan agreement to which U.S. Can Corporation or any of its subsidiaries is a party; or - public offerings of shares of capital stock of U.S. Can Corporation. No holder of preferred stock, however, may require U.S. Can Corporation to redeem the preferred stock if doing so would cause the bankruptcy of U.S. Can Corporation or United States Can Company or a breach of the indenture. In addition, if proceeds from public offerings of U.S. Can Corporation's stock are insufficient to redeem all of the shares of the preferred stock that the holders wish to be redeemed, U.S. Can Corporation is required to redeem the remaining shares at a price equal to its liquidation preference, 366 days after the tenth anniversary of the closing of the transactions or the payment in full of the notes and the debt outstanding under the new senior secured credit facility, whichever is earlier. U.S. Can Corporation's certificate of incorporation expressly states that any redemption rights of holders of preferred stock shall be subordinate or otherwise subject to prior rights of the lenders under our new senior secured credit facility and the holders of the exchange notes. 70 Upon a change of control of U.S. Can Corporation (as defined in the indenture), the shares of preferred stock may be redeemed at the option of either the holders or U.S. Can Corporation, subject to the terms of our new senior secured credit facility and after the holders of the notes have been made and completed the requisite offer to repurchase following a change of control under the indenture. The new senior secured credit facility prohibits our ability to redeem the preferred stock, and the indenture restricts U.S. Can Corporation's ability to obtain funds that may be necessary to redeem the preferred stock. COMMON STOCK Each share of common stock entitles the holder of the share to one vote in the election of directors and all other matters submitted to a vote of U.S. Can Corporation's stockholders. Holders of U.S. Can Corporation common stock do not have cumulative voting rights. Subject to any preferential rights of any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive, pro rata based on the number of shares held, cash dividends when and if declared by the Board of Directors from funds legally available for this purpose. However, U.S. Can Corporation does not expect to pay cash dividends in the foreseeable future. As a holding company, U.S. Can Corporation's ability to pay dividends depends on the receipt of dividends or other payments from United States Can Company. The senior secured credit facility and the indenture limit United States Can Company's ability to pay dividends or otherwise transfer cash to U.S. Can Corporation. See "Other Indebtedness" and "Description of Exchange Notes." In the event of a liquidation of U.S. Can Corporation, holders of shares of common stock are entitled to receive, pro rata based on the number of shares held, all of the assets remaining available for distribution to holders of common stock after payment of all prior claims, including any preferential liquidation rights of any preferred stock then outstanding. Holders of shares of common stock have no preemptive rights to subscribe to additional shares of any class of common stock or other securities of U.S Can Corporation. All outstanding shares of common stock are fully paid and nonassessable. STOCKHOLDERS AGREEMENT In connection with the recapitalization, we entered into a stockholders agreement with our stockholders. The stockholders agreement has the following provisions: - Prior to the third anniversary of the closing of the recapitalization, no stockholder may transfer shares of U.S. Can Corporation capital stock (other than limited exceptions including permitted transfers to an affiliate or in connection with estate planning). - After the third anniversary of the closing of the recapitalization, a stockholder may only transfer shares of U.S. Can Corporation capital stock (other than limited exceptions including permitted transfers to an affiliate or in connection with estate planning) after the transferring stockholder first gives U.S. Can Corporation, and then the other stockholders on a pro rata basis, a right of first refusal to purchase all or a portion of the shares at the same price. - U.S. Can Corporation has the right to purchase U.S. Can Corporation equity securities held by a management stockholder (as defined) in the event the management stockholder's employment with U.S. Can Corporation is terminated for any reason. - If a management stockholder's employment with U.S. Can Corporation is terminated by virtue of death, disability or retirement in accordance with U.S. Can Corporation policy, the 71 management stockholder will have the right to require U.S. Can Corporation to purchase his or her equity securities of U.S. Can Corporation. - If, at any time, specified stockholders holding 75% of the outstanding common stock equivalents (as defined) (i.e., Berkshire Partners, its affiliates and another stockholder) elect to consummate the sale of 50% or more of the common stock of U.S. Can Corporation to an unaffiliated third party, the remaining stockholders will be obligated to consent to and take all actions necessary to complete the proposed sale of the same proportion of their stock on the same terms. - After the third anniversary of the closing of the recapitalization, a stockholder (or a group of stockholders together) owning more than 4% of the outstanding shares of U.S. Can Corporation capital stock may only (other than in connection with estate planning transfers) transfer the shares to an unaffiliated third party, so long as other stockholders are given the option to participate in the proposed transfer on the same terms and conditions on a pro rata basis (except in connection with transfers permitted by the stockholders agreement). - The stockholders have agreed to elect directors of U.S. Can Corporation such that the Board of Directors will consist of two designees of Berkshire and its affiliates so long as the Berkshire stockholders maintain ownership of at least 25% of the U.S. Can Corporation common stock, two designees of management stockholders, Louis Susman, Ricardo Poma, Francisco Soler (or other designees of the Scarsdale Group if Francisco Soler and Ricardo Poma both no longer serve on the Board of Directors so long as the Scarsdale Group owns at least 5% of the U.S. Can Corporation common stock) and two other independent directors acceptable to the other directors. - Following an initial public offering of U.S. Can Corporation common stock, specified stockholders will have either one or two demand registration rights. The stockholders will be entitled to "piggy-back" registration rights on all registrations of U.S. Can Corporation common stock by U.S. Can Corporation or any other stockholder, subject to customary underwriter cutback. - So long as U.S. Can Corporation is not paying default interest under any of its financing arrangements, an 80% vote of the common stockholders will be required to approve and adopt mergers, acquisitions, charter or bylaw amendments, extraordinary borrowings, dividends, stock issuances and other specified matters. An 80% vote will be required at all times for a financial restructuring that treats the management stockholders differently and adversely from the rest of the common stockholders. - Stockholders have pre-emptive rights to subscribe for newly issued shares on a pro rata basis, subject to certain exclusions. - Most of the restrictions contained in the stockholders agreements terminate upon consummation of a qualified initial public offering of common stock by U.S. Can Corporation or specified changes in control of U.S. Can Corporation. DESCRIPTION OF UNITED STATES CAN COMPANY'S CAPITAL STOCK All of United States Can Company's issued and outstanding capital stock is owned beneficially by U.S. Can Corporation. United States Can Company has no outstanding capital stock other than common stock, and there are no outstanding options, warrants or other rights to purchase United States Can Company's capital stock. 72 DESCRIPTION OF EXCHANGE NOTES CAPITALIZED TERMS USED IN THIS SECTION OF THE PROSPECTUS ARE DEFINED LATER UNDER THE HEADING "DEFINITIONS." FOR PURPOSES OF THIS SECTION OF THE PROSPECTUS, UNITED STATES CAN COMPANY IS REFERRED TO AS THE "COMPANY." The Company will issue the exchange notes under the indenture dated October 4, 2000 (the "Indenture") among the Company, the Parent Guarantor, the Subsidiary Guarantors and Bank One Trust Company, N.A., as trustee (the "Trustee"). The terms of the exchange notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939. The exchange notes are subject to all those terms, and reference is made to the Indenture and the Trust Indenture Act for a statement of those terms. Copies of the Indenture and the form of exchange notes have been filed as exhibits to the registration statement of which this prospectus is a part. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes issued in the original offering, except that: - the exchange notes will bear a Series B designation; - the exchange notes have been registered under the Securities Act and, therefore, will generally not bear legends restricting their transfer; and - the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement dated as of October 4, 2000 by and among, the Company, Salomon Smith Barney and Banc of America Securities LLC, including the provision providing for liquidated damages in certain circumstances relating to the timing of the exchange notes. The exchange notes will evidence the same debt as the notes issued in the original offering and will be entitled to the benefits of the Indenture. The exchange notes will rank equally with the notes issued in the original offering if all of these notes are not exchanged pursuant to the exchange offer and will vote together with the notes on all matters voted upon under the Indenture. The following summary of the material provisions of the Indenture is not intended to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Indenture and the exchange notes, including the definitions of terms in the Indenture and those terms made a part of the Indenture by the Trust Indenture Act. Capitalized terms used in this section and not otherwise defined below under the heading "Definitions" have the respective meanings assigned to them in the Indenture. GENERAL The exchange notes are the Company's general unsecured senior subordinated obligations and will initially be limited to $175.0 million aggregate principal amount. The exchange notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples of $1,000. Except in limited circumstances, the exchange notes will be issued as a global note. See "The Exchange Offer--Procedures for Tendering." No service charge will be made for any registration of transfer of notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection with the registration of transfer of notes. The payment of principal, premium, if any, and interest on the exchange notes is unconditionally guaranteed on a senior subordinated and unsecured basis by the Parent Guarantor (the "Parent Guarantee") and the Subsidiary Guarantors (the "Subsidiary Guarantees" and, together with the Parent Guarantee, referred to as the "Guarantees"). The Parent Guarantor and the Subsidiary Guarantors are 73 collectively referred to as the "Guarantors" and are individually referred to as a "Guarantor." See "--Parent and Subsidiary Guarantees." ADDITIONAL NOTES The Company may, without the consent of the Holders of exchange notes, create and issue up to $100.0 million aggregate principal amount of additional notes ranking equally with the exchange notes in all respects. These additional notes will be consolidated with the exchange notes and form a single series with the exchange notes and will have the same terms as to status, redemption or otherwise as the exchange notes. Additional notes may be issued from time to time subject to the limitations set forth under "--Certain Covenants--Limitation on Indebtedness." PAYMENT TERMS The exchange notes will mature on October 1, 2010 and will bear interest at a rate of 12 3/8% per annum until maturity. The Company will pay interest semiannually on April 1 and October 1 of each year, beginning April 1, 2001, to the persons who are registered Holders of the exchange notes at the close of business on the March 15 or September 15 immediately preceding the interest payment date. The Company will pay interest on overdue principal at 1% per annum in excess of the set rate, and it will pay interest on overdue installments of interest at the same higher rate to the extent lawful. Interest on the exchange notes will accrue from the last date on which interest was paid on the notes being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. The Indenture provides that interest on the exchange notes will be computed on the basis of a 360-day year of twelve 30-day months. Initially, the Trustee will act as Paying Agent and Registrar. Principal and interest will be payable initially at the Trustee's offices within the City and State of New York but, at the Company's option, interest may be paid by check mailed to the Holders at their addresses as they appear in the exchange notes register; PROVIDED that the Company will be required to make, by wire transfer of immediately available funds to the accounts specified by any Holder of at least $5 million aggregate principal amount of exchange notes, all payments of principal of, premium, if any, and interest with respect to the Holder's exchange notes if the Holder has given wire transfer instructions to the Company. The notes may be presented for registration of transfer and exchange at the Registrar's offices, which initially will be the Trustee's offices. PARENT AND SUBSIDIARY GUARANTEES The Parent Guarantor and each Subsidiary Guarantor unconditionally guarantee, jointly and severally, on a senior subordinated basis to each Holder and the Trustee, the full and prompt performance of the Company's obligations under the Indenture and the exchange notes, including the payment of principal of, and interest on, the exchange notes. As of the Issue Date, USC May Verpackungen Holding, Inc., as the Company's only Domestic Restricted Subsidiary, is the only Subsidiary Guarantor. In the future, each Domestic Restricted Subsidiary created or acquired by the Company that has at any time a Fair Market Value of more than $500,000 is required to become an additional Subsidiary Guarantor; PROVIDED that the aggregate Fair Market Value of Domestic Restricted Subsidiaries that are not Subsidiary Guarantors will not at any time exceed $1.5 million. See "--Certain Covenants--Future Subsidiary Guarantors." The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of the Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of the other Guarantor under its Parent Guarantee or Subsidiary Guarantee, as the case may be, or pursuant to its contribution obligations under the Indenture, will result in the obligations of the Guarantor under 74 its Parent Guarantee or Subsidiary Guarantee, as the case may be, not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Parent Guarantee or Subsidiary Guarantee, as the case may be, will be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP. Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company without limitation, or with other Persons upon the terms and conditions set forth in the Indenture. See "--Merger, Consolidation and Sale of Assets." In the event the Company sells all of the capital stock of a Subsidiary Guarantor and the sale complies with the provisions set forth in "--Certain Covenants--Limitation on Asset Dispositions," the Subsidiary Guarantor's Subsidiary Guarantee will be released. SUBORDINATION OF EXCHANGE NOTES The exchange notes are subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of the Company. The exchange notes will in all respects rank equally with all other Senior Subordinated Indebtedness of the Company, and only Indebtedness of the Company that is Senior Indebtedness will rank senior to the exchange notes. Except with respect to limitations on consolidated Indebtedness that the Company and the Subsidiary Guarantors may incur, the Indenture does not limit the ability of the Company or the Guarantors to incur Senior Indebtedness or restrict the ability of the Company or the Parent Guarantor to transfer assets to and among the Restricted Subsidiaries. As described below, in the event of bankruptcy, liquidation or reorganization of the Company, the Company's assets will be available to make payments on the exchange notes only after all Senior Indebtedness has been paid in full, and there may not be sufficient assets remaining to pay amounts due on the exchange notes. In the event of any payment or distribution of the Company's assets in any foreclosure, dissolution, winding up, liquidation or reorganization, holders of any secured Indebtedness will have a secured prior claim to the assets of the Company and its Subsidiaries. Under circumstances described below, holders of Senior Indebtedness may block payments on the exchange notes. Any claims by Holders against the assets of the Company's subsidiaries (except the Subsidiary Guarantors) would be subordinate to all existing and future obligations of these subsidiaries (including trade payables and preferred stock, if any, of these subsidiaries). As of October 1, 2000, after giving effect to the original offering and application of the net proceeds from the original offering (including the repayment through a successful tender offer of the 10 1/8% notes), the aggregate Senior Indebtedness of the Company and the Guarantors would have been $319.8 million (all of which is secured Indebtedness), and the Company and the Guarantors had no outstanding Senior Subordinated Indebtedness (other than the Notes and related Guarantees) after giving effect to the repayment of the 10 1/8% notes. Indebtedness and other liabilities of subsidiaries of the Company that are not Subsidiary Guarantors, on an adjusted basis, aggregated approximately $98.1 million as of October 1, 2000. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness will be entitled to receive payment in full of the Senior Indebtedness before Holders will be entitled to receive any payment of principal of or interest on the exchange notes; and (2) until the Senior Indebtedness is paid in full, any distribution to which Holders would be entitled but for this provision will be made to holders of Senior Indebtedness as their interests may 75 appear, except that Holders may receive shares of stock and any debt securities that are subordinated to Senior Indebtedness to at least the same extent as the exchange notes. The Company may not pay the principal of or interest on the exchange notes or make any deposit for the purpose of the discharge of its liabilities under the Indenture and may not repurchase, redeem or otherwise retire any notes (collectively, "pay the exchange notes") if (1) a default in the payment of principal or interest on any Senior Indebtedness occurs and is continuing beyond any applicable grace period, or (2) any other default on Senior Indebtedness occurs and the maturity of this Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, (A) the default has been cured or waived and any acceleration has been rescinded, or (B) the Senior Indebtedness has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness pursuant to which the maturity may be accelerated immediately without further notice (except the notice as may be required to effect this acceleration) or the expiration of any applicable grace periods, the Company may not pay the exchange notes for a period (a "Payment Blockage Period") commencing upon the date of receipt by the Company and the Trustee of written notice of this default from the Representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Blockage Notice") and ending 179 days after that date, or earlier if this Payment Blockage Period is terminated - by written notice to the Trustee and the Company from the Person or Persons who gave the Blockage Notice, - by repayment in full of the Designated Senior Indebtedness, or - because the default giving rise to the Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the next preceding paragraph), unless the holders of the Designated Senior Indebtedness or the Representative of these holders will have accelerated the maturity of the Designated Senior Indebtedness, the Company may resume payments on the exchange notes after the Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during this period. In the event of the Company's insolvency, liquidation, reorganization, dissolution or other proceedings, funds which would otherwise be payable to Holders will be paid to the holders of Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full. Moreover, the Company's creditors who are holders of Senior Indebtedness may recover more, ratably, than the Holders, and the Company's creditors who are not holders of Senior Indebtedness or of the exchange notes may recover less, ratably, than holders of the Senior Indebtedness and may recover more, ratably, than the Holders. The Company currently has no Indebtedness that is subordinated to the exchange notes. SUBORDINATION OF GUARANTEES The Parent Guarantee is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of the Parent Guarantor. The Subsidiary Guarantees are subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or cash equivalents, of all existing and future Senior Indebtedness of Subsidiary Guarantors. As of October 1, 2000, after giving effect to the exchange offer, 76 there would have been no Senior Indebtedness of the Parent Guarantor to which the Parent Guarantee would be subordinated and no Senior Indebtedness of Subsidiary Guarantors to which the Subsidiary Guarantees would be subordinated. The Guarantees will in all respects rank equally with all other Senior Subordinated Indebtedness of the Guarantors, and only Indebtedness of the Guarantors which is Senior Indebtedness of the Guarantors will rank senior to the Guarantees. Except with respect to limitations on consolidated Indebtedness that the Company and the Restricted Subsidiaries (including the Subsidiary Guarantors) may incur, the Indenture does not limit the ability of the Guarantors to incur additional Senior Indebtedness or restrict the ability of the Guarantors to transfer assets to and among the Restricted Subsidiaries. As described below, in the event of bankruptcy, liquidation or reorganization of a Guarantor, the assets of the Guarantor will be available to make payments under the Parent Guarantee or Subsidiary Guarantee, as the case may be, only after all Senior Indebtedness of the Guarantors has been paid in full, and there may not be sufficient assets remaining to pay amounts due on the Guarantees. As of the date of this Prospectus, substantially all of the Senior Indebtedness of the Guarantors is secured by substantially all their respective assets. In the event of any payment or distribution of the assets of the Guarantors in any foreclosure, dissolution, winding up, liquidation or reorganization, holders of the secured Indebtedness will have a secured prior claim to the assets of the Guarantors and their Subsidiaries. Under certain circumstances, as described below, holders of Senior Indebtedness may block payments on the Guarantees. Any claims by Holders against the assets of Subsidiaries of the Subsidiary Guarantors (that are themselves not Subsidiary Guarantors) would be subordinate to all existing and future obligations (including trade payables and preferred stock, if any) of these Subsidiaries. Upon any payment or distribution of the assets of the Guarantors to creditors upon a total or partial liquidation or a total or partial dissolution of the Guarantors or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to any Guarantor or its property: (1) holders of Senior Indebtedness of the Guarantors will be entitled to receive payment in full of the Senior Indebtedness before Holders will be entitled to receive any payment under the Guarantees; and (2) until the Senior Indebtedness of the Guarantors is paid in full, any distribution to which Holders would be entitled but for this provision will be made to holders of the Senior Indebtedness as their interests may appear, except that Holders may receive shares of stock and any debt securities that are subordinated to Senior Indebtedness of the Guarantors to at least the same extent as the Guarantees. The Guarantors may not pay the principal of or interest on the exchange notes pursuant to the Guarantees or make any deposit for the purpose of the discharge of their liabilities under the Indenture and may not repurchase, redeem or otherwise retire any notes pursuant to the Guarantees (collectively, "pay the exchange notes") if (1) any Senior Indebtedness of the Guarantors is not paid when due or (2) any other default on Senior Indebtedness of the Guarantors occurs and the maturity of the Designated Senior Indebtedness of the Guarantors is accelerated in accordance with its terms, unless, in either case, (A) the default has been cured or waived and any acceleration has been rescinded or (B) the Senior Indebtedness of the Guarantors has been paid in full. During the continuance of any default (other than a default described in clause (1) or (2) of the preceding paragraph) with respect to any Designated Senior Indebtedness of the Guarantors pursuant 77 to which the maturity may be accelerated immediately without further notice (except any notice required to effect acceleration) or the expiration of any applicable grace periods, the Guarantors may not pay the exchange notes for a period (a "Guarantor Payment Blockage Period") commencing upon the date of receipt by the Guarantors and the Trustee of written notice of the default from the Representative of any Designated Senior Indebtedness of the Guarantors specifying an election to effect a Guarantor Payment Blockage Period (a "Guarantor Blockage Notice") and ending 179 days after that date, or earlier if the Guarantor Payment Blockage Period is terminated - by written notice to the Trustee and the Guarantors from the Person or Persons who gave the Guarantor Blockage Notice, - by repayment in full of the Designated Senior Indebtedness of Guarantors, or - because the default giving rise to the Guarantor Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the next preceding paragraph), unless the holders of the Senior Indebtedness of Guarantors or the Representative of these holders will have accelerated the maturity of the Designated Senior Indebtedness of the Guarantors, the Guarantors may resume payments under the Guarantees after the Guarantor Payment Blockage Period. Not more than one Guarantor Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of Guarantors during this period. In the event of a Guarantor's insolvency, liquidation, reorganization, dissolution or other proceedings, funds which would otherwise be payable to Holders will be paid to the holders of Senior Indebtedness of Guarantors to the extent necessary to pay the Senior Indebtedness of Guarantors in full. Moreover, the Guarantors' creditors who are holders of Senior Indebtedness of Guarantors may recover more, ratably, than the Holders, and the Guarantors' creditors who are not holders of Senior Indebtedness of Guarantors or of the exchange notes may recover less, ratably, than holders of the Senior Indebtedness of Guarantors and may recover more, ratably, than the Holders. The Guarantors currently have no Indebtedness that is subordinated to the Guarantees. REDEMPTION OPTIONAL REDEMPTION Except as set forth below, the Company may not redeem the exchange notes before October 1, 2005. On or after that date, the Company may redeem the exchange notes, in whole at any time or in part from time to time, on at least 30 but not more than 60 days prior notice, mailed by first-class mail to the Holders at their registered addresses, at the redemption prices (expressed in percentages of principal amount) specified below plus accrued and unpaid interest, if any, through the redemption date (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date), if redeemed during the twelve-month period beginning October 1, of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2005........................................................ 106.188% 2006........................................................ 104.125% 2007........................................................ 102.063% 2008 and thereafter......................................... 100.000%
78 OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS At any time, or from time to time, on or before October 1, 2003, the Company may, at its option, use all or any portion of the net cash proceeds of one or more Public Equity Offerings (as defined below) to redeem up to 35% of the aggregate principal amount of the exchange notes issued at a redemption price equal to 112.375% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption; PROVIDED that at least 65% of the aggregate principal amount of exchange notes initially issued remains outstanding immediately after any redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company will make this redemption not more than 180 days after the consummation of the Public Equity Offering. As used in the preceding paragraph, "Public Equity Offering" means an underwritten public offering of Capital Stock of the Company (other than Disqualified Stock) pursuant to a registration statement filed with the Commission in accordance with the Securities Act or a firm commitment private placement of Capital Stock (other than Disqualified Stock) pursuant to an agreement that requires the registration of the resale of this Capital Stock contemporaneously with the issuance of the Capital Stock or as soon as practical after the issuance. In the case of any partial redemption, selection of the exchange notes for redemption will be made by the Trustee on a pro rata basis, by lot or by any other method as the Trustee in its sole discretion will deem to be fair and appropriate (and which complies with applicable legal and securities exchange requirements), although no exchange note of $1,000 in original principal amount or less will be redeemed in part. If a partial redemption is made with the proceeds of a Public Equity Offering, selection of the exchange notes or portions of the exchange notes for redemption will be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC (as defined below) procedures), unless the method is otherwise prohibited. If any exchange note is to be redeemed in part only, the notice of redemption relating to the exchange note will state the portion of the principal amount of the exchange note to be redeemed. A new exchange note in principal amount equal to the unredeemed portion will be issued in the name of the Holder of the exchange note upon cancellation of the original exchange note. MANDATORY SINKING FUND There are no mandatory sinking fund payments for the exchange notes. CHANGE OF CONTROL Upon a Change of Control, each Holder will have the right to require that the Company repurchase all or any part of the Holder's exchange notes at a repurchase price in cash equal to 101% of the principal amount plus accrued and unpaid interest, if any, through the date of repurchase. See "Risk Factors--We May Be Unable to Raise the Funds Necessary to Finance the Change of Control Offer Required by our Indenture." If at the time of the Change of Control the terms of the Bank Indebtedness or other Senior Indebtedness restrict or prohibit the repurchase of exchange notes pursuant to this provision, then before mailing the notice to Holders provided for in the next paragraph below, but in any event within 30 days following any Change of Control, the Company covenants to - repay in full all Bank Indebtedness or any other Senior Indebtedness to the extent required to permit the repurchase of exchange notes pursuant to this provision or - obtain the requisite consent under the agreements governing the Bank Indebtedness or any other Senior Indebtedness to permit the repurchase of the exchange notes as provided for in the next paragraph. 79 Within 30 days following any Change of Control, the Company will send, by first-class mail to each Holder, a notice to each Holder with a copy to the Trustee stating: - that a Change of Control has occurred and that the Holder has the right to require the Company to purchase the Holder's exchange notes at a purchase price in cash equal to 101% of the principal amount plus accrued and unpaid interest, if any, to the date of purchase; - the purchase date (which will be no earlier than 30 days nor later than 60 days from the date the notice is mailed); and - the instructions determined by the Company, consistent with this provision, that a Holder must follow in order to have its exchange notes purchased, together with the information contained in the next paragraph (and including any related materials). Holders electing to have a exchange note purchased will be required to surrender the exchange note, with an appropriate form duly completed, to the Company at the address specified in the notice at least five Business Days before the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than three business days prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the exchange note that was delivered for purchase by the Holder and a statement that the Holder is withdrawing its election to have the exchange note purchased. On the purchase date, all exchange notes purchased by the Company under this provision will be delivered by the Trustee for cancellation, and the Company will pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled to receive these amounts. The occurrence of certain of the events that would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events that would constitute a Change of Control or require the Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the exchange notes could cause a default under the Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of the repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. The Company can give no assurance that sufficient funds will be available when necessary to make any repurchases required in connection with a Change of Control. The Company's failure to purchase the exchange notes in connection with a Change in Control would result in a default under the Indenture that would, in turn, constitute a default under the Credit Agreement. In these circumstances, the subordination provisions in the Indenture would likely restrict payment to the Holders of the exchange notes. See "Risk Factors--We May Be Unable to Raise the Funds Necessary to Finance the Change of Control Offer Required by our Indenture." The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of exchange notes pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant by virtue of complying with the applicable securities laws and regulations. The Company's obligations to repurchase the exchange notes upon a Change of Control will be guaranteed on a senior subordinated basis by the Guarantors pursuant to the Guarantees. The Guarantees will be subordinated to Senior Indebtedness of the Guarantors to the same extent described above under "--Subordination of Guarantees." 80 COVENANTS The Indenture contains covenants including, among others, the following: LIMITATION ON INDEBTEDNESS The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness, unless this Indebtedness is Permitted Indebtedness. LIMITATION ON RESTRICTED PAYMENTS The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (each of which is hereafter referred to as a "Restricted Payment"): - declare or pay any dividend on, or make any distribution in respect of, any Capital Stock of the Company or the Parent Guarantor, as the case may be, except for dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) of the Company or the Parent Guarantor, as the case may be; - purchase, redeem, retire or acquire for value any Capital Stock of the Company, the Parent Guarantor or any Subsidiary of the Company or the Parent Guarantor (other than a Restricted Subsidiary); - purchase, repurchase, redeem, defease or acquire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligation; or - make any Investment (other than Permitted Investments) in any Person, if at the time of and after giving effect to the proposed Restricted Payment: - any Default or Event of Default has occurred and is continuing; - the Company could not incur at least $1.00 of additional Indebtedness pursuant to clause (1) of the definition of Permitted Indebtedness; or - the aggregate amount expended or declared for all Restricted Payments after the Issue Date exceeds (without duplication) the sum of (1) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the first day of the fiscal quarter in which the exchange notes are issued to the end of the most recent fiscal quarter ending at least 30 days prior to the date of the Restricted Payment (or, if the Consolidated Net Income will be a deficit, minus 100% of the deficit), (2) 100% of the aggregate Net Cash Proceeds plus the Fair Market Value of property other than cash received by the Company from the issuance or sale of its respective Capital Stock (excluding the issuance or sale of Disqualified Stock) subsequent to the Issue Date (other than an issuance or a sale to a Subsidiary of the Company or an employee stock ownership plan or trust), (3) the amount by which Indebtedness of the Company or the Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date, of any Indebtedness of the Company or the Restricted Subsidiaries that is convertible or exchangeable, or is exchanged, for Capital Stock (other than Disqualified Stock) of the Company, (4) an amount equal to the net reduction in Investments resulting from dividends, distributions, repayments of loans or advances or other transfers of assets (to the extent not included in Consolidated Net Income), in each case, to the Company or any Restricted Subsidiary, 81 not to exceed the amount of Investments previously made that were included as Restricted Payments, and (5) 50% of the gain realized by the Company or any Restricted Subsidiary from the cash sale (other than to the Company or a Restricted Subsidiary) of Restricted Investments made by the Company or any Restricted Subsidiary after the issue date of the exchange notes to the extent not included in Consolidated Net Income. The foregoing limitations will not prevent the Company or a Restricted Subsidiary from: (A) paying a dividend on its Capital Stock within 60 days after the declaration of the dividend, if, on the declaration date, the Company could have paid the dividend in compliance with the Indenture; (B) redeeming, repurchasing, defeasing, acquiring or retiring for value, Subordinated Obligations in exchange for or from proceeds of Refinancing Indebtedness permitted by clause (8) of the definition of Permitted Indebtedness; (C) acquiring, redeeming or retiring Capital Stock or Subordinated Obligations of the Company in exchange for, or in connection with a substantially concurrent issuance of, Capital Stock (other than Disqualified Stock) of the Company; (D) repurchasing or redeeming (or paying a dividend to the Parent Guarantor to enable the Parent Guarantor to purchase or redeem) shares of, or options to purchase shares of, Capital Stock of the Company or the Parent Guarantor or stock appreciation rights from officers, directors and employees (or the heirs of these persons) of the Company, the Parent Guarantor or any Restricted Subsidiary whose employment has terminated or who have died or retired or become disabled or upon the vesting of stock appreciation rights, so long as the aggregate amount of these payments in any fiscal year does not exceed the sum of (1) $2.5 million plus (2) the proceeds of any "key man" life insurance policies purchased by the Company for the specific purpose of making the repurchases or redemptions, it being understood that the cancellation of Indebtedness owed by management to the Company in connection with the repurchase or redemption will not be deemed to be a Restricted Payment; (E) any purchase of Subordinated Obligations from Excess Proceeds remaining after an Offer made pursuant to the "Limitations on Asset Dispositions" covenant below to the extent permitted to be used for general corporate purposes; (F) cash dividends to the Parent Guarantor in amounts equal to (1) the amounts required for the Parent Guarantor to pay any Federal, state or local income taxes to the extent that these income taxes are attributable to the income of the Company and its Subsidiaries, (2) the amounts required for the Parent Guarantor to pay franchise taxes and other fees required to maintain its legal existence, (3) an amount not to exceed $200,000 in any fiscal year to permit the Parent Guarantor to pay corporate overhead expenses incurred in the ordinary course of business, (4) on or about the Issue Date the amount required to enable the Parent Guarantor to repay the 10 1/8% exchange notes and to enable the Parent Guarantor to make the payments due under the Recapitalization Agreement; and (5) reasonable and customary costs and expenses incident to a public offering of the common stock of the Parent Guarantor to the extent that the proceeds therefrom are intended to be contributed to the Company; (G) repurchases of Capital Stock deemed to occur upon the exercise of employee stock options if the Capital Stock is surrendered in lieu of the exercise price of the employee stock options; 82 (H) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its equity interests on a pro rata basis; and (I) so long as no Event of Default will have occurred and be continuing, other Restricted Payments not otherwise permitted pursuant to this covenant up to $10.0 million in the aggregate. Proceeds of Capital Stock used to make Restricted Payments described in clause (C) of the immediately preceding paragraph will not increase the amount available for Restricted Payments. The Restricted Payments made pursuant to clauses (B), (C), (D)(2), (E), (F), (G), (H) and (I) of the immediately preceding paragraph will not be included in the calculation of subsequent Restricted Payments. Restricted Payments made pursuant to clauses (A) and (D)(1) of the immediately preceding paragraph will be included in the calculation of subsequent Restricted Payments. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, cause to exist or become effective or enter into any encumbrance or restriction (other than pursuant to law or regulation) on the ability of any Restricted Subsidiary (A) to pay dividends or make any other distributions in respect of its Capital Stock or pay any debt or other obligation owed to the Company or any other Restricted Subsidiary; (B) to make loans or advances to the Company or any other Restricted Subsidiary; or (C) to transfer any of its property or assets to the Company or any other Restricted Subsidiary. This limitation will not apply (1) with respect to clauses (A), (B) and (C), to encumbrances and restrictions (a) in existence under or by reason of any agreements (not otherwise described in clause (c)) in effect on the Issue Date, (b) relating to Indebtedness of a Restricted Subsidiary and existing at the Restricted Subsidiary at the time it became a Restricted Subsidiary if the encumbrance or restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which the Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, (c) pursuant to the Credit Agreement, PROVIDED that these restrictions or encumbrances are not more restrictive with respect to dividend and other payment restrictions than those contained in the Credit Agreement as in effect on the Issue Date, (d) pursuant to the Indenture and the exchange notes, (e) which result from the renewal, refinancing, extension or amendment of an agreement referred to in clauses (1)(a), (b) and (f) and in clauses (2)(a) and (b) PROVIDED, these encumbrances or restrictions, when taken as a whole, are no more restrictive to the Restricted Subsidiary and are not materially less favorable to the Holders than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced, or (f) relating to Refinancing Indebtedness incurred pursuant to the definition of Permitted Indebtedness, and 83 (2) with respect to clause (C) only, to (a) any encumbrance or restriction relating to Indebtedness that is permitted to be Incurred and secured pursuant to the provisions under "--Limitation on Indebtedness" and "--Limitation on Liens" that limits the right of the debtor to dispose of the assets or property securing the Indebtedness, (b) any encumbrance or restriction in connection with an acquisition of property, so long as the encumbrance or restriction relates solely to the property so acquired and was not created in connection with or in anticipation of the acquisition, (c) customary non-assignment and non-transfer provisions in leases, contracts or licenses entered into in the ordinary course of business, (d) customary restrictions contained in asset sale agreements limiting the transfer of the assets pending the closing of the sale, (e) Liens permitted pursuant to the provisions of "Limitations on Liens" below and restrictions in the agreements creating these Liens, (f) any agreement or instrument governing Indebtedness of a Foreign Subsidiary now or hereafter outstanding if it constitutes Permitted Indebtedness, and (g) any amendments to any of the foregoing that, when taken as a whole, are not more restrictive than those contained in the agreement being amended. LIMITATION ON ASSET DISPOSITIONS The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless (A) the Company or the Restricted Subsidiary receives consideration at the time of the Asset Disposition at least equal to the Fair Market Value of the shares and assets subject to the Asset Disposition; (B) at least 75% of the consideration received by the Company or the Restricted Subsidiary is in the form of cash or cash equivalents; PROVIDED, HOWEVER, that any securities or exchange notes received by the Company or the Restricted Subsidiary in connection with the Asset Disposition that are converted by the Company or the Restricted Subsidiary into cash or cash equivalents within 10 business days of the date of the Asset Disposition will be deemed to be cash equivalents; (C) the Company delivers an Officers' Certificate to the Trustee certifying that the Asset Disposition complies with clauses (A) and (B); and (D) an amount equal to 100% of the Net Available Cash from the Asset Disposition is applied by the Company (or the Restricted Subsidiary) (1) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness or Senior Indebtedness of the Subsidiary Guarantors (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) or, if the Asset Disposition is made by a Foreign Restricted Subsidiary, Senior Indebtedness of a Foreign Restricted Subsidiary, within 270 days from the later of the date of the Asset Disposition or the receipt of the Net Available Cash; PROVIDED, HOWEVER that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to this clause (1), the Company or the Restricted Subsidiary will retire the Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased; 84 (2) second, to the extent of the balance of Net Available Cash after application in accordance with clause (1), to the extent the Company or the Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by the Company or a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) within 270 days from the later of the Asset Disposition or the receipt of the Net Available Cash; and (3) third, to the extent of the balance of the Net Available Cash after application in accordance with clauses (1) and (2) (which balance should constitute "Excess Proceeds"), to make an Offer (as defined) to purchase exchange notes pursuant to and subject to the conditions of the following paragraph. Pending application of Net Available Cash pursuant to this provision, the Net Available Cash will be invested in Temporary Cash Investments or used to reduce revolving credit borrowings of Senior Indebtedness. The Indenture provides that, when the aggregate amount of Excess Proceeds exceeds $15 million, the Company will apply the Excess Proceeds to the repayment of the exchange notes pursuant to an offer to purchase (an "Offer") from all Holders in accordance with the procedures set forth in the Indenture in the principal amount (expressed as a multiple of $1,000) of exchange notes that may be purchased out of an amount (the "Exchange Note Amount") equal to the Excess Proceeds. The offer price for the exchange notes will be payable in cash in an amount equal to 100% of the principal amount of the exchange notes plus accrued and unpaid interest, if any, to the date (the "Offer Date") the Offer is consummated (the "Offered Price"), in accordance with the procedures set forth in the Indenture. To the extent that the aggregate Offered Price of the exchange notes tendered pursuant to the Offer is less than the Exchange Note Amount, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of exchange notes surrendered by holders exceeds the amount of Excess Proceeds, the Trustee will select the exchange notes to be purchased on a pro rata basis. Upon the completion of the purchase of all the exchange notes tendered pursuant to an Offer, the amount of Excess Proceeds, if any, will be reset at zero. Within 10 days after the Company becomes obligated to make an Offer, the Company will deliver to the Trustee and mail to each Holder a written notice of its Offer to purchase exchange notes in whole or in part (subject to proration as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice will specify a purchase date not less than 30 days nor more than 60 days after the date of this notice (the "Purchase Date") and all instructions and materials necessary to tender the exchange notes pursuant to the Offer, together with the information contained in the next following paragraph. Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company will deliver to the Trustee an Officers' Certificate as to - the Offered Price, - the allocation of the Net Available Cash from the Asset Dispositions pursuant to which the Offer is being made and - the compliance of the allocation with the provisions of the Indenture. On this date, the Company will also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments an amount equal to the Offered Price to be held for payment in accordance with the provisions of the Indenture. If the terms of any outstanding PARI PASSU Indebtedness require the Company to make a similar offer to purchase to all holders of the PARI PASSU Indebtedness with the proceeds from any Asset 85 Disposition, the Excess Proceeds available to fund an Offer to the Holders of exchange notes will be reduced on a pro rata basis to reflect the Company's offer to purchase obligations under the PARI PASSU Indebtedness. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of exchange notes pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant by virtue of complying with these laws and regulations. LIMITATION ON TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into any transaction or series of related transactions with or for the benefit of any Affiliate, unless (A) the terms of the transaction or series of related transactions are - set forth in writing, and - no less favorable to the Company or the Restricted Subsidiary than those that could reasonably be obtained at that time in a comparable arm's-length transaction with an unrelated third party; (B) with respect to a transaction or series of related transactions involving aggregate payments or value in excess of $3 million, the Board of Directors of the Company (including a majority of the Disinterested Directors) approves the transaction or related series of transactions and, in its good faith judgment, believes that the transaction or series of related transactions complies with clause (A) of this paragraph, as evidenced by a Certified Resolution delivered to the Trustee; and (C) with respect to a transaction or series of related transactions involving aggregate payments or value in excess of $15 million, the Company will, prior to consummation, obtain a written opinion of a nationally recognized accounting, appraisal or investment banking firm stating that the transaction is fair to the Company or the Restricted Subsidiary from a financial point of view and file the same with the Trustee. The provisions described above will not prohibit - any Restricted Payment permitted to be paid pursuant to "--Limitation on Restricted Payments" above, - any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Company (including a majority of the Disinterested Directors), - any transaction pursuant to any agreement in existence on the Issue Date or any amendment or replacement of that agreement that, taken in its entirety, is no less favorable to the Company than the agreement as in effect on the Issue Date, - loans or advances to employees in the ordinary course of business of the Company, not to exceed $1 million per employee and $3 million in the aggregate, - the payment of indemnities provided for by the Company's charter, by-laws and written agreements and reasonable fees to directors of the Company, the Parent Guarantor and the 86 Restricted Subsidiaries who are not employees of the Company, the Parent Guarantor or the Restricted Subsidiaries, - any transaction between or among the Company and a Restricted Subsidiary or between Restricted Subsidiaries, - the making of payments to Salomon Smith Barney Inc. or its Affiliates for investment banking or other financial services, - fees, compensation, and indemnities under employment arrangements entered into by the Company or its Restricted Subsidiaries in the ordinary course of business, and - issuance of Capital Stock (other than Disqualified Stock) of the Company and the granting of registration rights with respect to that Capital Stock. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary if - the Subsidiary to be so designated does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary, - the Subsidiary to be so designated is not obligated under any Indebtedness or other obligation that, if in default, would result (with the passage of time or the giving of notice or otherwise) in a default on any Indebtedness of the Company or any Restricted Subsidiary and - either (1) the Subsidiary to be so designated has total assets of $1,000 or less or (2) if the Subsidiary has assets greater than $1,000, the designation would be permitted under "--Certain Covenants--Limitation on Restricted Payments" as a "Restricted Payment." Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or of any Restricted Subsidiary will be classified as a Restricted Subsidiary. Notwithstanding the foregoing sentence, the Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to the designation, - the Company could incur $1.00 of additional Indebtedness pursuant to clause (1) of the definition of "Permitted Indebtedness" and - no Default will have occurred and be continuing. Any designation by the Board of Directors will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Certified Resolution giving effect to the designation and an Officers' Certificate certifying that the designation complies with the foregoing provisions. LIMITATION ON LAYERED INDEBTEDNESS Each of the Company and the Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness that is subordinate in right of payment to any other Indebtedness of the Company, the Parent Guarantor or the Restricted Subsidiary, as the case may be, unless the Indebtedness is subordinate in right of payment to, or ranks PARI PASSU with, the exchange notes in the case of the Company or the Guarantees in the case of the Guarantors. The Guarantors will not, directly or indirectly, Guarantee any Indebtedness of the Company that is subordinated in right of payment to any other Indebtedness of the Company unless the Guarantee is subordinate in right of payment to, or ranks PARI PASSU with, the Guarantees. 87 LIMITATION ON LIENS Each of the Company and the Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Lien of any kind, other than Permitted Liens, on or with respect to any property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom to secure Indebtedness that is subordinate in right of payment to, or ranks PARI PASSU with, in the case of the Company, the exchange notes, or, in the case of the Guarantors, the Guarantees, unless the exchange notes are secured prior to (in the case of any Indebtedness that is subordinated in right of payment), or equally and ratably with (in the case of any Indebtedness that ranks PARI PASSU), the Indebtedness so secured. FUTURE SUBSIDIARY GUARANTORS The Company will cause each Domestic Restricted Subsidiary created or acquired after the Issue Date that has at any time a Fair Market Value of more than $500,000 to execute and deliver to the Trustee a supplemental indenture pursuant to which the Restricted Subsidiary will Guarantee payment of the exchange notes on the same terms and conditions as those set forth in the Indenture; PROVIDED that the aggregate Fair Market Value of Domestic Restricted Subsidiaries that are not Subsidiary Guarantors will not at any time exceed $1.5 million. Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Notwithstanding the foregoing, if any Foreign Restricted Subsidiary shall Guarantee any Indebtedness of the Company, the Parent Guarantor or any Domestic Subsidiary while the exchange notes are outstanding, then the Company will cause the Foreign Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which the Foreign Restricted Subsidiary will guarantee payment of the exchange notes on the same terms and conditions as those set forth in the Indenture. COMMISSION REPORTS The Company will file with the Trustee and provide the Holders at the Company's expense, within 15 days after filing them with the Commission, copies of their annual, quarterly and other reports, documents and information that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with the annual, quarterly and other reports, documents and information specified in Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the other provisions of Section 314(a) of the TIA. MERGER, CONSOLIDATION AND SALE OF ASSETS The Company will not, and will not permit any Restricted Subsidiary to, merge or consolidate with or into any other entity or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Restricted Subsidiaries) unless (1) the entity formed by or surviving any consolidation or merger (if other than the Company or the Restricted Subsidiary) or to which a sale, transfer or conveyance is made (the "Surviving Entity") will be a corporation organized and existing under the laws of the United States of America or any state within the United States of America and the corporation expressly assumes, by supplemental indenture satisfactory to the Trustee, all obligations of the Company or the Restricted Subsidiary, as the case may be, pursuant to the Indenture; 88 (2) immediately before and after giving effect to the transaction or series of transactions on a pro forma basis, no Default or Event of Default (and no event that, after notice or lapse of time, or both, would become an Event of Default) will have occurred and be continuing; (3) immediately after giving effect to the transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness Incurred or anticipated to be Incurred in connection with the transaction or series of transactions), the Company or the Surviving Entity, as the case may be, would be able to Incur at least $1.00 of additional debt pursuant to clause (1) of the definition of Permitted Indebtedness and (4) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the consolidation, merger or transfer and the supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing, no Subsidiary Guarantor will merge or consolidate with or into any other entity or sell, convey, assign, transfer, lease or otherwise dispose of all or substantially all of its assets (other than to the Company or another Subsidiary Guarantor) unless the Company and its remaining Restricted Subsidiaries are in compliance with the provisions of subclauses (2), (3) and (4) above. The Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company or the Restricted Subsidiary, as the case may be, under the Indenture, but in the case of a lease, the Company or the Restricted Subsidiary, as the case may be, will not be released from the obligation to pay the principal of and interest on the exchange notes. Notwithstanding the foregoing clauses (2), (3) and (4), any Domestic Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any other Domestic Restricted Subsidiary, and any Foreign Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties or assets to (A) any other Foreign Restricted Subsidiary or (B) the Company or any Domestic Restricted Subsidiary, PROVIDED that the surviving company or the transferee entity, as applicable, in the consolidation, merger or transfer is the Company or the Domestic Restricted Subsidiary. EVENTS OF DEFAULT An "Event of Default" occurs if: (1) the Company and the Guarantors default in any payment of interest on any exchange note when the same becomes due and payable, and the default continues for a period of 30 days; (2) the Company and the Guarantors (A) default in the payment of the principal of any exchange note when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration or otherwise, or (B) fail to redeem or purchase exchange notes when required pursuant to the Indenture or the exchange notes; (3) the Company or any Restricted Subsidiary fails to comply with the provisions of "--Merger, Consolidation and Sale of Assets" above; (4) the Company, the Parent Guarantor or any Restricted Subsidiary, as the case may be, fails to comply with "--Change of Control" above, or the covenants described under "--Limitation on Indebtedness," "--Limitation on Restricted Payments," "--Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries," "--Limitation on Asset Dispositions," "--Limitation on Transactions with Affiliates," "--Limitation on Layered Indebtedness," "--Limitation on Liens" or "--Future Subsidiary Guarantors" in "--Certain Covenants" (other 89 than a failure to purchase exchange notes when required under "--Change of Control" or "--Certain Covenants--Limitation on Asset Dispositions") above and the failure continues for 30 days after the notice specified under "--Acceleration" below; (5) the Company, the Parent Guarantor or any Restricted Subsidiary fails to comply with any of its agreements in the exchange notes, or the Indenture (other than those referred to in (1), (2), (3) or (4) above) and the failure continues for 60 days after the notice specified under "--Acceleration" below; (6) the principal, any premium or accrued and unpaid interest of Indebtedness of the Company, the Parent Guarantor or any Restricted Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders because of a default, the total amount of the Indebtedness unpaid or accelerated exceeds $10 million at the time and the default continues for 10 days; (7) the Company, any Guarantor or any Foreign Significant Subsidiary pursuant to or within the meaning of any bankruptcy law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, any Guarantor or any Foreign Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company, any Guarantor or any Foreign Significant Subsidiary or for any substantial part of the Company's, any Guarantor's or any Foreign Significant Subsidiary's property; or (C) orders the winding up or liquidation of the Company or any Guarantor or any Foreign Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10 million at the time is entered against the Company, the Parent Guarantor or any Restricted Subsidiary and is not discharged and either (A) an enforcement proceeding has been commenced by any creditor upon the judgment or decree or (B) there is a period of 60 days following the entry of the judgment or decree during which the judgment or decree is not discharged or waived or the execution of the judgment or decree is not stayed and, in the case of (A) or (B), the default continues for 10 days; or (10) the Parent Guarantee or any Subsidiary Guarantee is held to be unenforceable or invalid or ceases to be in full force and effect. 90 ACCELERATION If an Event of Default (other than an Event of Default specified in clauses (7) or (8) in "Events of Default" above with respect to the Company or any Guarantor) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the exchange notes by notice to the Company and the Trustee, may declare the principal of and accrued interest on all the exchange notes to be due and payable. Upon this declaration, the principal and interest will be due and payable immediately. If an Event of Default specified in clauses (7) or (8) above with respect to the Company or any Guarantor occurs, the principal of and interest on all the exchange notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate principal amount of the exchange notes by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. This rescission will not affect any subsequent Default or impair any right related to that Default. Except as provided below under "--Rights of Holders to Receive Payment," a Holder may not pursue any remedy with respect to the Indenture or the exchange notes unless: - the Holder gives to the Trustee written notice stating that an Event of Default is continuing; - the Holders of at least 25% in aggregate principal amount of the exchange notes make a written request to the Trustee to pursue the remedy; - the Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; - the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and - the Holders of a majority in aggregate principal amount of the exchange notes do not give the Trustee a direction inconsistent with the request during the 60-day period. A Holder may not use the Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. LIMITATIONS ON SUITS BY HOLDERS The ability of Holders to bring lawsuits against the Company or the Guarantors with respect to the exchange notes is limited by the Indenture. The Indenture precludes Holders from bringing suit or pursuing any other remedy with respect to the exchange notes or the Guarantees unless: - a Holder gives the Trustee written notice stating that an Event of Default has occurred and is continuing; - Holders of at least 25% in aggregate principal amount of the exchange notes make a written request to the Trustee to pursue the remedy; - the Holders offer the Trustee indemnity against any loss, liability or expense; - the Trustee does not comply with the Holders' request to pursue the remedy within 60 days after receipt of the offer of indemnity; and - the Holders of a majority in principal amount of the exchange notes do not give the Trustee a direction inconsistent with the request during the same 60-day period. 91 RIGHTS OF HOLDERS TO RECEIVE PAYMENT Notwithstanding any other provision of the Indenture, the right of any Holder to receive payment of principal of and interest on the exchange notes held by the Holder, on or after the respective due dates expressed in the exchange notes, or to bring suit for the enforcement of any payment on or after the respective dates, will not be impaired or affected without the consent of the Holder. DISCHARGE OF INDENTURE AND DEFEASANCE When (1) the Company delivers to the Trustee all outstanding exchange notes (other than exchange notes replaced because of mutilation, loss, destruction or wrongful taking) for cancellation or (2) all outstanding exchange notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption as described above, and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding exchange notes, including interest thereon, and if in either case the Company pays all other sums payable hereunder by the Company, then the Indenture will, subject to specified surviving provisions, cease to be of further effect. The Trustee will acknowledge satisfaction and discharge of the Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. Subject to conditions to defeasance described below and the survival of specified provisions, the Company at any time may terminate (1) all its obligations under the exchange notes and the Indenture ("legal defeasance option") or (2) its obligations under specified restrictive covenants and the related Events of Default ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the exchange notes may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the exchange notes may not be accelerated because of an Event of Default specified in clause (2) of the immediately preceding paragraph. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (A) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the exchange notes to maturity or redemption, as the case may be; (B) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent certified public accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at the times and in the amounts as will be sufficient to pay principal and interest when due on all the exchange notes to maturity or redemption, as the case may be; (C) 91 days pass after the deposit is made and during the 91-day period no Default described in clauses (7) or (8) under "--Events of Default" occurs with respect to the Company which is continuing at the end of the period; 92 (D) no Default or Event of Default has occurred and is continuing on the date of, and after giving effect to, the deposit; (E) the deposit does not constitute a default under any other agreement or instrument binding on the Company; (F) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (G) in the case of the legal defeasance option, the Company delivers to the Trustee an Opinion of Counsel stating that - the Company has received from the Internal Revenue Service a ruling, or - since the date of the Indenture there has been a change in the applicable Federal income tax law, to the effect that, and based on the ruling or change in law the Opinion of Counsel will confirm that, the Holders of the exchange notes will not recognize income, gain or loss for Federal income tax purposes as a result of the defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same time as would have been the case if the legal defeasance had not occurred; (H) in the case of the covenant defeasance option, the Company delivers to the Trustee an Opinion of Counsel to the effect that the Holders of the exchange notes will not recognize income, gain or loss for Federal income tax purposes as a result of the covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the covenant defeasance had not occurred; and (I) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the exchange notes have been complied with as required by the Indenture. TRANSFER AND EXCHANGE Holders may transfer or exchange notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any exchange note selected for redemption, or any exchange note for a period of 15 days before a selection of exchange notes to be redeemed, or any exchange note for a period of 15 days before an interest payment date. The registered holder of a exchange note may be treated as the owner of it for all purposes. AMENDMENT AND SUPPLEMENT Subject to the exceptions described in the Indenture, the Indenture, the exchange notes, or the Guarantees may be amended or supplemented by the Company or the Guarantors and the Trustee with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding exchange notes. Without notice to or the consent of any Holder, the Company, the Guarantors and the Trustee may amend the Indenture or the exchange notes, among other things, - to cure any ambiguity, defect or inconsistency; 93 - to provide for the assumption of the Company's or a Guarantor's obligations to Holders by a Surviving Entity; - to provide for uncertificated exchange notes in addition to or in place of certificated exchange notes; or - to make any change that does not adversely affect the rights of any Holder. Without the consent of each Holder affected, the Company may not - reduce the principal amount of exchange notes the Holders of which must consent to an amendment of the Indenture; - reduce the rate or extend the time for payment of interest on any exchange note; - reduce the principal of or extend the fixed maturity of any exchange note; - reduce the premium payable upon the redemption of any exchange note or change the time at which any exchange note may or will be redeemed; - reduce the premium payable upon the repurchase of any exchange note upon a Change of Control; - make any exchange note payable in money other than that stated in the exchange note; - make any change in the provisions concerning waiver of Defaults or Events of Default by Holders of the exchange notes or rights of Holders to receive payment of principal or interest; - make any change in the subordination provisions in the Indenture that affects the rights of any Holder; - release the Company or the Guarantors from their respective obligations under the exchange notes, or the Guarantees (except pursuant to the provisions described above in "--Merger, Consolidation and Sale of Assets"); or - make any change in the exchange notes not otherwise permitted by the Indenture that would adversely affect the rights of any Holder. NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS No director, officer, employee or stockholder, as such, of the Company, the Guarantors or the Trustee (as the case may be) will have any personal liability in respect of the obligations of the Company, the Guarantors or the Trustee (as the case may be) under the exchange notes or the Indenture by reason of his or its status as a director, officer, employee or stockholder of the Company. THE TRUSTEE Bank One Trust Company, N.A. is the Trustee under the Indenture. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only the duties specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise the rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise under the circumstances in the conduct of that Person's own affairs. DEFINITIONS In addition to terms defined elsewhere in this prospectus, set forth below is a summary of specific defined terms used in the Indenture. Reference is made to the Indenture and the Trust Indenture Act 94 for the full definition of all these terms, as well as any other terms used in this section for which no definition is provided. "10 1/8% EXCHANGE NOTES" means the 10 1/8% senior subordinated exchange notes due 2006 of the Parent Guarantor. "ADDITIONAL ASSETS" means (1) any property or assets (other than Indebtedness and Capital Stock) that are used or intended to be used in a Related Business; (2) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of the Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at that time is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (2) and (3), the Restricted Subsidiary is primarily engaged in a Related Business. "AFFILIATE" of any specified Person means (1) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with the specified Person or (2) any other Person who is a director or officer of the specified Person, of any Subsidiary of the specified Person or of any Person described in clause (1) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of the Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the section "Certain Covenants--Limitation on Transactions with Affiliates" only, "Affiliate" also means any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase this Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any beneficial owner referred to above pursuant to the first sentence of the preceding paragraph. "ASSET DISPOSITION" means any direct or indirect sale including a Sale/Leaseback Transaction, lease, transfer, conveyance or other disposition (or series of related sales, Sale/Leaseback Transactions, leases, transfers, conveyances or dispositions) of shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares), property or other assets (each referred to for the purposes of this definition as a "disposition") by the Company, the Parent Guarantor or any of the Restricted Subsidiaries other than - a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, - a disposition of property or assets at Fair Market Value in the ordinary course of business of the Company or any of the Restricted Subsidiaries, as applicable, - a disposition with a Fair Market Value and a sale price of less than $5 million, - operating leases entered in the ordinary course of business, - for purposes of the provisions of "--Certain Covenants--Limitation on Asset Dispositions" only, a disposition subject to the limitations set forth under "--Certain Covenants--Limitation on Restricted Payments" and 95 - when used with respect to the Company or any Guarantor, any Asset Disposition pursuant to "--Merger, Consolidation and Sale of Assets" which constitutes a disposition of all or substantially all of the Company's or the Guarantor's property. "ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be Incurred in respect of a Sale/ Leaseback Transaction and will be, at the date of determination, the present value (discounted at the actual rate of interest implicit in the transaction, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in the Sale/Leaseback Transaction (including any period for which the lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing - the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of the Indebtedness or redemption or similar payment with respect to the Preferred Stock and the amount of the payment by - the sum of all of these payments. "BANK INDEBTEDNESS" means any and all amounts payable under or in respect of the Credit Agreement from time to time, whether outstanding on the Issue Date or incurred after the Issue Date, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Guarantor whether or not a claim for post-filing interest is allowed in these proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect of these items. "BOARD OF DIRECTORS" means, as applicable, the Board of Directors of the Company or the Parent Guarantor, or any committee of the Board of Directors duly authorized to act on behalf of the Board. "CAPITAL EXPENDITURE INDEBTEDNESS" means Indebtedness issued to finance the purchase or construction of any assets acquired or constructed after the Issue Date - to the extent the purchase or construction prices for these assets are or should be included in "addition to property, plant or equipment" in accordance with GAAP, - if the acquisition or construction of these assets is not part of any acquisition of a person or business unit, and - if the Indebtedness is Incurred within 360 days of the acquisition or completion of construction of these assets. "CAPITALIZED LEASE OBLIGATIONS" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP; and the amount of Indebtedness represented by the obligation will be the capitalized amount of the obligation determined in accordance with GAAP; and the Stated Maturity of the obligation will be the date of the last payment of rent or any other amount due under the lease prior to the first date upon which the lease may be terminated by the lessee without payment of a penalty. "CAPITAL STOCK" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of that Person, including any Preferred Stock, but excluding any debt securities convertible or exchangeable into equity of that Person. "CERTIFIED RESOLUTION" means a duly adopted resolution of the Board of Directors in full force and effect at the time of determination and certified as such by the Secretary or an Assistant Secretary of the Company or the Parent Guarantor, as applicable. 96 "CHANGE OF CONTROL" means the occurrence of any of the following events: (A) before the first Public Equity Offering that results in a Public Market, (1) the Permitted Holders cease to be the "beneficial owners" (as defined in Rule 13-3 under the Exchange Act, except that a Person will be deemed to have "beneficial ownership" of all shares that Person has the right to acquire, whether this right is exercisable immediately or only after the passage of time), directly or indirectly, of at least 40% of the total voting power of the Voting Stock of the Company or the Parent Guarantor, whether as a result of the issuance of securities of the Company or the Parent Guarantor, any merger, consolidation, liquidation or dissolution of the Company or the Parent Guarantor, any direct or indirect transfer of securities by the Permitted Holders or otherwise, or (2) any "person" or "group" (as these terms are used in Section 13(d) or Section 14(d) of the Exchange Act or any successor provisions to either of the foregoing, including any group acting for the purpose of acquiring, voting or disposing of securities within the meaning of Rule 13-5(b)(1) under the Exchange Act) becomes the "beneficial owner" (as defined above), directly or indirectly, of more Voting Stock of the Company or the Parent Guarantor than is "beneficially owned" by the Permitted Holders (for purposes of this clause (A) the Permitted Holders will be deemed to beneficially own any Voting Stock of a specified corporation held by a parent corporation so long as the Permitted Holders beneficially own, directly or indirectly, in the aggregate a majority of the total voting power of the Voting Stock of the parent corporation); (B) on or after the first Public Equity Offering that results in a Public Market, if any "person" or "group" (as these terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13-5(b)(1) under the Exchange Act, other than one or more Permitted Holders or an underwriter engaged in a firm commitment underwriting in connection with a public offering of the Voting Stock of the Company or the Parent Guarantor, is or becomes the "beneficial owner" (as this term is used in Rules 13-3 and 13-5 under the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all shares that this person has the right to acquire, whether this right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company or the Parent Guarantor; (C) the Company or the Parent Guarantor consolidates or merges with or into any other Person, other than a consolidation or merger (1) with a Wholly Owned Subsidiary or a Permitted Holder or (2) pursuant to a transaction in which the outstanding Voting Stock of the Company or the Parent Guarantor is changed into or exchanged for cash, securities or other property with the effect that the outstanding Voting Stock of the Company or the Parent Guarantor is changed into or exchanged for other Voting Stock of the Company, the Parent Guarantor or the surviving corporation, or the beneficial owners of the outstanding Voting Stock of the Company or the Parent Guarantor immediately prior to the transaction, beneficially own, directly or indirectly, more than 50% of the total voting power of the Voting Stock of the surviving corporation immediately following the transaction, (D) the Company, the Parent Guarantor or any of the Restricted Subsidiaries, directly or indirectly, sells, assigns, conveys, transfers, leases, or otherwise disposes of, in one transaction or a series of related transactions, all or substantially all of the property or assets of the Company, the Parent Guarantor and the Restricted Subsidiaries to any Person or group of related Persons (as 97 this term is used in Section 13(d) of the Exchange Act), other than the Company, a Wholly Owned Subsidiary or a Permitted Holder or (E) the stockholders of the Company or the Parent Guarantor will have approved any plan of liquidation or dissolution of the Company or the Parent Guarantor, as the case may be. For purposes of the definition of Change of Control, the collective parties to the Stockholder Agreement, as may be amended from time to time, shall not constitute a group solely as a result of being parties to the Stockholder Agreement. "COMMISSION" means the Securities and Exchange Commission. "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of - the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 30 days prior to the date of this determination to - Consolidated Interest Expense for the four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness (other than revolving credit borrowings made in the ordinary course of business for working capital purposes) since the beginning of the period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, Consolidated Interest Expense for the period will be calculated after giving effect on a pro forma basis to the Indebtedness as if the Indebtedness had been Incurred on the first day of the period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of the new Indebtedness as if the discharge had occurred on the first day of the period, (2) if since the beginning of the period the Company or any Restricted Subsidiary will have made any Asset Disposition or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Asset Disposition, the EBITDA for the period will be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of the Asset Disposition for the period, or increased by an amount equal to the EBITDA (if negative), directly attributable to these assets for the period as if the Asset Disposition had occurred on the first day of this period and Consolidated Interest Expense for the period will be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with the Asset Disposition for the period as if the Asset Disposition had occurred on the first day of this period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for the period as if the Asset Disposition had occurred on the first day of this period directly attributable to the Indebtedness of the Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for the Indebtedness after the sale), (3) if since the beginning of the period the Company or any Restricted Subsidiary (by merger or otherwise) will have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for the period will be calculated after giving pro forma effect to these items (including the Incurrence of any Indebtedness) as if the Investment or acquisition occurred on the first day of this period, and 98 (4) if since the beginning of the period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of this period will have made any Asset Disposition or any Investment that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during this period, EBITDA and Consolidated Interest Expense for the period will be calculated after giving pro forma effect to these items as if the Asset Disposition or Investment occurred on the first day of this period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the pro forma calculations of the amount of income or earnings relating to the acquisition and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection with the acquisition, will be determined in good faith by a responsible financial or accounting officer of the Company and as further contemplated by the definition of pro forma. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on this Indebtedness will be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to the Indebtedness if the Interest Rate Agreement has a remaining term in excess of 12 months). "CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest expense of the Company and its Restricted Subsidiaries determined in accordance with GAAP, plus, to the extent not included in this interest expense, (1) interest expense attributable to Capital Lease Obligations, (2) amortization of debt discount and debt issuance cost, (3) capitalized interest, (4) non-cash interest expense, (5) accrued interest, (6) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (7) to the extent any Indebtedness of any Person is Guaranteed by the Company or any Restricted Subsidiary, the aggregate amount of interest related to the Guarantee actually paid or required by GAAP to be accrued in the Company's financial statements, (8) net costs associated with Interest Rate Agreements and Currency Exchange Agreements (including, in each case, amortization of fees), (9) the interest portion of any deferred obligation, (10) Preferred Stock Dividends in respect of all Preferred Stock of the Company and its Restricted Subsidiaries and Redeemable Stock of the Company held by Persons other than the Company or a Wholly Owned Subsidiary, (11) fees payable in connection with financings to the extent not being amortized as contemplated by (2) above, including commitment, availability and similar fees, and (12) the cash contributions to any employee stock ownership plan or similar trust to the extent the contributions are used by the plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by the plan or trust. "CONSOLIDATED NET INCOME" means, for any period, the net income (loss) of the Company and its Subsidiaries determined in accordance with GAAP; PROVIDED, HOWEVER, that there will not be included in Consolidated Net Income 99 (1) any net income (loss) of any Person that is not a Restricted Subsidiary, except that subject to the limitations contained in (4) below, the Company's equity in the net income of any above referenced Person for the period will be included in Consolidated Net Income up to the aggregate amount of cash actually distributed by this Person during this period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (3) below), and the Company's equity in a net loss of any above referenced Person (including an Unrestricted Subsidiary) for this period will be included in determining Consolidated Net Income to the extent funded in cash by the Company, (2) except as required by the pro forma requirements of the definition of "Consolidated Coverage Ratio", any net income (loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of the acquisition, (3) any net income (loss) of any Restricted Subsidiary if the Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by the Restricted Subsidiary, directly or indirectly, to the Company (other than pursuant to the Credit Agreement) except that subject to the limitations contained in (4) below, the Company's equity in the net income of any above referenced Restricted Subsidiary for the period will be included in Consolidated Net Income up to the aggregate amount of cash that could have been distributed by the Restricted Subsidiary during this period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause) and the Company's equity in a net loss of any above referenced Restricted Subsidiary for the period will be included in determining Consolidated Net Income, (4) any gain or loss realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Subsidiaries (including pursuant to any Sale/ Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person, (5) any extraordinary gain or loss, (6) the cumulative effect of a change in accounting principles, (7) non-cash compensation charges incurred as a result of the issuance of employee stock options or restricted stock for less than fair market value and (8) the non-recurring fees, expenses and other costs incurred in connection with the Transactions that are reflected in the financial statements of the Company in the period the Transactions are consummated. "CREDIT AGREEMENT" means the Credit Agreement, dated as of the closing of the recapitalization, as amended, among the Company and the Guarantors and the syndicate of lenders named in the Credit Agreement, together with any Guarantees, collateral documents or other instruments or agreements executed in connection with the Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time and any renewal, extensions, revisions, restructuring, refinancings or replacements thereof (whether with the original agent or agents or lenders or other agents or lenders and whether pursuant to the original credit agreement or another credit or other agreement or indenture). "CURRENCY EXCHANGE AGREEMENT" means, in respect of any Person, any foreign currency swap agreement or other agreement pursuant to which the Company, the Parent Guarantor or any of the Company's Subsidiaries hedge their exposure to foreign currency exchange rates in connection with their business operations. 100 "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DESIGNATED SENIOR INDEBTEDNESS" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders are committed to lend up to, at least $25 million and is specifically designated by the Company in the instrument evidencing or governing this Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture and has been designated as "Designated Senior Indebtedness" for purposes of the Indenture in an Officers' Certificate received by the Trustee. "DESIGNATED SENIOR INDEBTEDNESS OF GUARANTORS" means (1) with respect to the Guarantors, the Bank Indebtedness and (2) any other Senior Indebtedness of the Guarantors which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders are committed to lend up to, at least $25 million and is specifically designated by the Guarantors in the instrument evidencing or governing this Senior Indebtedness of the Guarantors as "Designated Senior Indebtedness of Guarantors" for purposes of the Indenture and has been designated as "Designated Senior Indebtedness of Guarantors" for purposes of the Indenture in an Officers' Certificate received by the Trustee. "DISINTERESTED DIRECTOR" means a director of the Company other than a director (1) who is an employee of the Company or a Subsidiary of the Company, or (2) who is a party, or who is a director, officer, employee or Affiliate (or is related by blood or marriage to this Person) of a party, to the transaction in question, and who is, in fact, independent in respect of the transaction. "DISQUALIFIED STOCK" of a Person means Redeemable Stock of that Person as to which the maturity, mandatory redemption, conversion or exchange or redemption at the option of the holder occurs, or may occur, on or prior to the first anniversary of the Stated Maturity of the exchange notes. "DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the Company other than a Foreign Restricted Subsidiary. "DOMESTIC SUBSIDIARY" means any subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" means, for any period, the sum for that period, of Consolidated Net Income plus, to the extent reflected in the income statement of the Person for the period from which Consolidated Net Income is determined, without duplication, - Consolidated Interest Expense, - net provision for plant closing costs, - income tax expense, - depreciation expense, - amortization expense, - any charge related to any premium or penalty paid in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity, and - any other non-cash charges to the extent deducted from or reflected in Consolidated Net Income except for any non-cash charges that represent accruals of, or reserves for, cash disbursements to be made in any future accounting period (less any non-cash items increasing Consolidated Net Income for the period that were not accrued in the ordinary course of business). 101 "FAIR MARKET VALUE" means, with respect to any asset or property, the price which could be negotiated in an arms' length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined, except as otherwise provided, - if the property or asset has a Fair Market Value of less than $3 million, by any Officer of the Company, or - if the property or asset has a Fair Market Value in excess of $3 million, by a majority of the Board of Directors of the Company and evidenced by a Certified Resolution dated within 30 days of the relevant transaction. "FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any state within the United States of America or the District of Columbia. "FOREIGN SIGNIFICANT SUBSIDIARY" means any Foreign Restricted Subsidiary of the Company meeting the standards specified in Rule 1-02(w) of Regulation S-X promulgated by the Commission as in effect on the Issue Date. "FOREIGN SUBSIDIARY" means any Subsidiary of the Company that is not organized under the laws of the United States of America or any state within the United States of America or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in - the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, - statements and pronouncements of the Financial Accounting Standards Board, and - other statements by other entities as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture will be computed in conformity with GAAP consistently applied. "GUARANTORS" means the Parent Guarantor and the Subsidiary Guarantors, collectively. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of that Person - to purchase or pay (or advance or supply funds for the purchase or payment of) the Indebtedness or other obligation of that other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or - entered into for purposes of assuring in any other manner the obligee of the Indebtedness or other obligation of the payment of that Indebtedness or other obligation or to protect the obligee against loss in respect of that Indebtedness of other obligation (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" will not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "HOLDER" means the Person in whose name an exchange note is registered on the Registrar's books. 102 "INCUR" means issue, assume, Guarantee, incur or otherwise become liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time that Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) will be deemed to be incurred by that Subsidiary at the time it becomes a Subsidiary. The terms "Incurred", "Incurrence" and "Incurring" will each have a correlative meaning. "INDEBTEDNESS" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of indebtedness of that Person for borrowed money; (2) the principal of and premium (if any) in respect of obligations of that Person evidenced by bonds, debentures, exchange notes or other similar instruments; (3) all Capitalized Lease Obligations and Attributable Indebtedness of that Person; (4) all obligations of that Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables), which purchase price is due more than six months after the date of placing the property in service or taking delivery and title of the property or the completion of these services; (5) all obligations of that Person in respect of letters of credit, banker's acceptances or other similar instruments or credit transactions (including reimbursement obligations with respect to these obligations), other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (4) above) entered into in the ordinary course of business of that Person to the extent the letters of credit are not drawn upon or, if and to the extent drawn upon, the drawing is reimbursed no later than the third business day following receipt by that Person of a demand for reimbursement following payment on the letter of credit; (6) the amount of all obligations of that Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) all Indebtedness of other Persons secured by a Lien on any asset of that Person, whether or not the Indebtedness is assumed by that Person; PROVIDED, HOWEVER, that the amount of the Indebtedness will be the lesser of (a) the fair market value of the asset at the date of determination and (b) the amount of the Indebtedness of the other Persons; (8) all Indebtedness of other Persons to the extent guaranteed by that Person; and (9) to the extent not otherwise included in this definition, net obligations in respect of Interest Rate Agreements and Currency Exchange Agreements. The amount of Indebtedness of any Person at any date will be the outstanding balance at that date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at that date. "INTEREST RATE AGREEMENT" means, in respect of a Person, any interest rate swap agreement, interest rate option agreement, interest rate cap agreement, interest rate collar agreement, interest rate floor agreement or other similar agreement or arrangement. "INVESTMENT" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable or trade receivables on the balance sheet of that Person) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any 103 purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by that Person. For purposes of the covenant described under "--Covenants--Designation of Restricted and Unrestricted Subsidiaries" and the limitations set forth in "--Covenants--Limitation on Restricted Payments," - "Investment" will include the portion (proportionate to the Company's equity interest in the Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that the Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of the Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to the Company's "Investment" in the Subsidiary at the time of the redesignation less the portion (proportionate to the Company's equity interest in the Subsidiary) of the Fair Market Value of the net assets of the Subsidiary at the time that the Subsidiary is so redesignated a Restricted Subsidiary; and - any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of the transfer. In determining the amount of any Investment in respect of any property or assets other than cash, the property or asset will be valued at its Fair Market Value at the time of the Investment (unless otherwise specified in this definition), as determined in good faith by the Board of Directors, whose determination will be evidenced by a Certified Resolution. "ISSUE DATE" means the date on which the notes were issued in the original offering. "LIEN" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature of one of the foregoing items) or any Sale/Leaseback Transaction. "NET AVAILABLE CASH" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a exchange note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets or received in any other noncash form) therefrom, in each case net of - all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of the Asset Disposition, - all payments made on any Indebtedness that is secured by any assets subject to the Asset Disposition, in accordance with the terms of any Lien upon the assets, or which must by its terms, or in order to obtain a necessary consent to the Asset Disposition, or by applicable law, be repaid out of the proceeds from the Asset Disposition, - all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of the Asset Disposition, and - the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in the Asset Disposition and retained by the Company or any Restricted Subsidiary after the Asset Disposition. "NET CASH PROCEEDS," with respect to any issuance or sale of Capital Stock, means the cash proceeds of the issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with the issuance or sale and net of taxes paid or payable as a result of the issuance or sale. 104 "OFFICER" means the Chairman of the Board, President, Chief Executive Officer, Chief Operating Officer, Senior Vice President, Chief Financial Officer, Treasurer or Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers at least one of whom will be the principal executive officer, principal accounting officer or principal financial officer of the Company. "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be outside counsel to the Company or an employee of or outside counsel to the Trustee. "PARENT GUARANTOR" means U.S. Can Corporation, the Company's sole stockholder and parent corporation. "PARI PASSU," as applied to the ranking of any Indebtedness of a Person in relation to other Indebtedness of that Person, means that the other Indebtedness either (1) is not subordinate in right of payment to any Indebtedness or (2) is subordinate in right of payment to the same Indebtedness as is the other, and is so subordinate to the same extent, and is not subordinate in right of payment to each other or to any Indebtedness as to which the other is not so subordinate. "PERMITTED HOLDER" means Berkshire Partners LLC (and its Affiliates) or any Person of which the foregoing "beneficially owns" (as defined in Rules 13-3 and 13-5 under the Exchange Act) voting securities representing at least 75% of the total voting power of all classes of Capital Stock of that Person (exclusive of any matters as to which class voting rights exist). "PERMITTED INDEBTEDNESS" is defined to include: (1) Indebtedness Incurred if, after giving pro forma effect to the Incurrence and application of the proceeds of the Indebtedness, the Consolidated Coverage Ratio exceeds 2.0 to 1.0; (2) Indebtedness Incurred pursuant to the Credit Agreement in an amount outstanding at any time not to exceed $400 million (reduced by any required permanent repayments of the principal amount of Indebtedness under the Credit Agreement with the proceeds of Asset Dispositions that are accompanied by a corresponding permanent commitment reduction thereunder); (3) Capital Expenditure Indebtedness incurred in an aggregate principal amount not to exceed $15 million in any fiscal year of the Company; (4) Indebtedness under Interest Rate Agreements and Currency Exchange Agreements, entered into for the purpose of limiting interest rate or foreign exchange risk, as the case may be, provided that the obligations under Interest Rate Agreements are related to payment obligations on Permitted Indebtedness and provided further that obligations under Currency Exchange Agreements are entered into in connection with foreign business transactions in the ordinary course of business; (5) Indebtedness of the Company to any Restricted Subsidiary or of any Restricted Subsidiary to the Company or any other Restricted Subsidiary for so long as the Indebtedness is held by the Company or the Restricted Subsidiary, in each case subject to no Lien held by a Person other than the Company or a Restricted Subsidiary; PROVIDED that if as of any date any Person other than the Company or a Restricted Subsidiary owns or holds any above referenced Indebtedness or holds a Lien in respect of that Indebtedness, that date will be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness (under any clause other than clause (1) of the definition of Permitted Indebtedness) by the issuer of that Indebtedness; (6) Indebtedness evidenced by the Initial Notes and the Guarantees not to exceed the $175 million initially outstanding on the Issue Date; 105 (7) Indebtedness outstanding immediately after the issuance of the Initial Notes and the application of the proceeds of the Indebtedness reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (8) Refinancing Indebtedness incurred with respect to Indebtedness referred to in clauses (1), (3), (6), (7) and (13) of this paragraph; (9) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims and letters of credit and bankers acceptances for the purchase of inventory and other goods; (10) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, or other similar obligations (exclusive of any Guarantee of Indebtedness of the purchaser in the transaction), in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, provided that the maximum assumable liability in respect of all above referenced Indebtedness will at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with the disposition; (11) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (12) Indebtedness of Foreign Subsidiaries not borrowed under the Credit Agreement in an amount outstanding at any time not to exceed $75 million, including any guarantees that Indebtedness by the Company, PROVIDED, HOWEVER, that the amount of Indebtedness of Foreign Subsidiaries outstanding at any particular time under this clause (12) shall reduce on a dollar-for-dollar basis both the amount that may be borrowed at that time under the Credit Agreement referred to in clause (2) of this paragraph and under the sub-facility available to Foreign Subsidiaries under said Credit Agreement; (13) Indebtedness in an amount not to exceed $7 million that is incurred or assumed by the Company or a Subsidiary in connection with its acquisition of the majority interest in the Company's Formametal S.A. joint venture in Argentina; and (14) Indebtedness not otherwise permitted to be incurred pursuant to the covenant described under "--Limitation on Indebtedness" in an aggregate principal amount not to exceed at any one time outstanding $15 million. "PERMITTED INVESTMENT" means an Investment by the Company or any Restricted Subsidiary in - a Restricted Subsidiary or a Person which will, upon the making of the Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the primary business of the Restricted Subsidiary is a Related Business; - another Person if as a result of the Investment that other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that the above referenced Person's primary business is a Related Business; - Temporary Cash Investments; 106 - receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that the trade terms may include any concessionary trade terms as the Company or any Restricted Subsidiary deems reasonable under the circumstances; - payroll, travel and similar advances to cover matters that are expected at the time of the advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; - loans or advances to employees made in the ordinary course of business of the Company or the Restricted Subsidiary, as the case may be, not to exceed $1 million per employee and $3 million in the aggregate; - stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; - Investments in foreign joint ventures in an aggregate amount not to exceed $5 million; and - any securities received or other Investments made as a result of the receipt of non-cash consideration received in connection with an Asset Disposition that was made pursuant to and in compliance with the provisions of the covenant described under the caption "--Limitation on Asset Disposition" or in connection with any other disposition of assets not constituting an Asset Disposition. "PERMITTED LIENS" means, with respect to any Person, (1) pledges or deposits by that Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which that Person is a party, or deposits to secure public or statutory obligations of that Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which that Person is a party, or deposits and other Liens as security for taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (2) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings, or other Liens arising out of judgments or awards against that Person with respect to which that Person will then be prosecuting an appeal or other proceedings for review; (3) Liens for property taxes not yet delinquent or which are being contested in good faith by appropriate proceedings; (4) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of that Person in the ordinary course of its business; (5) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of that Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of that Person; (6) Liens existing on the Issue Date; (7) Liens on property or shares of stock of a Person at the time that Person becomes a Subsidiary; PROVIDED, HOWEVER, that any Lien of this type may not extend to any other property 107 owned by the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED FURTHER that these Liens are not Incurred in anticipation of or in connection with the transaction or series of related transactions pursuant to which that Person became a Restricted Subsidiary; (8) Liens on property at the time the Company, the Parent Guarantor or a Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED, HOWEVER, that any Lien of this type may not extend to any other property owned by the Company, the Parent Guarantor or any Restricted Subsidiary; PROVIDED FURTHER that these Liens are not Incurred in anticipation of or in connection with the acquisition of that property; (9) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7) and (8); PROVIDED, HOWEVER, that - the new Lien will be limited to all or part of the same property that secured the original Lien (plus improvements on the property) and - the Indebtedness secured by the Lien at that time is not increased to any amount greater than the sum of - the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7) and (8) at the time the original Lien became a Permitted Lien under the Indenture, and - an amount necessary to pay any fees and expenses, including premiums, related to the refinancing, refunding, extension, renewal or replacement; (10) Liens securing Senior Indebtedness that the Company or its Restricted Subsidiaries are permitted to incur under the Indenture, including Capital Expenditure Indebtedness; (11) Liens in favor of the Company or the Guarantors; (12) Liens upon specific items of inventory or other goods and proceeds of any Person securing that Person's obligations in respect of bankers' acceptances and letters of credit issued or created for the account of that Person to facilitate the purchase, shipment or storage of the inventory or other goods incurred in the ordinary course of business; (13) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off incurred in the ordinary course of business; (14) Leases or subleases granted to others and entered into in the ordinary course of business; and (15) Liens to secure the performance of statutory obligations and Liens imposed by law, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision of the government or any other entity. "PREFERRED STOCK", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of the corporation, over shares of Capital Stock of any other class of that corporation. 108 "PREFERRED STOCK DIVIDENDS" means all dividends with respect to Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Subsidiary. The amount of any dividend of this type will be equal to the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of the Preferred Stock. "PRINCIPAL" of a exchange note means the principal of the exchange note plus the premium, if any, payable on the exchange note which is due or overdue or is to become due at the relevant time. "PRO FORMA" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation in accordance with Article 11 of Regulation S-X promulgated under the Securities Act (to the extent applicable). "PUBLIC EQUITY OFFERING" has the meaning set forth under "--Optional Redemption upon Public Equity Offerings." "PUBLIC MARKET" means any time after (1) a Public Equity Offering has been consummated and (2) at least 10.0% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "REDEEMABLE STOCK" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event - matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, - is convertible or exchangeable for Indebtedness or Disqualified Stock or - is redeemable at the option of the holder, in whole or in part. "REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" will have a correlative meaning) any Indebtedness existing on the date of the Indenture or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that - the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced, - the Refinancing Indebtedness has an Average Life at the time the Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, - the Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus an amount necessary to pay any fees and expenses, including premiums, related to the refinancing, and - if the Indebtedness of the Company or a Restricted Subsidiary being refinanced is subordinated to other Indebtedness of the Company or a Restricted Subsidiary in any respect, the Refinancing Indebtedness is subordinated at least to the same extent; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness will not include - Indebtedness of a Subsidiary that refinances Indebtedness of the Company, or 109 - Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "RELATED BUSINESS" means any business related, or complementary (as determined in good faith by the Board of Directors), to the business of the Company and the Restricted Subsidiaries on the Issue Date. "REPRESENTATIVE" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "RESTRICTED INVESTMENT" means any Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" means - U.S.C. Europe N.V., - U.S.C. Europe Netherlands B.V., - U.S.C. Holding U.K. Ltd., - U.K. Can Ltd., - U.S.C. Europe U.K. Ltd., - U.S.C. Europe Italia, S.r.l., - U.S.C. France Holding, S.A.S., - USC Aerosols France, S.A.S., - USC May Verpackungen Holding Inc., - U.S.C. Aerosoldosen Deutschland GmbH, - U.S.C. Can Espana Holding SCpA, - U.S.C. Europe Espana SA, - May Verpackungen GmbH & Co. KG, - Wilhelm Wessel Nachfl. GmbH & Co. KG, - May Verpackungen Verwaltung GmbH, - May Can Company GmbH, - Wessel Emballagen GmbH, - any other direct or indirect Subsidiary of the Company that is not designated by the Board of Directors to be an Unrestricted Subsidiary, and - an Unrestricted Subsidiary that is redesignated as a Restricted Subsidiary as permitted pursuant to the definition of "Unrestricted Subsidiary." "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now owned or hereafter acquired whereby the Company, the Parent Guarantor or a Restricted Subsidiary transfers the property to a Person and the Company, the Parent Guarantor or a Restricted Subsidiary leases it from that Person. "SENIOR INDEBTEDNESS" means - all monetary obligations under the Credit Agreement, including without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities under the Credit Agreement, and 110 - all Indebtedness of the Company including interest thereon, whether outstanding on the date of the Indenture or issued after that date, created or incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that the obligations are not superior in right of payment to the exchange notes; PROVIDED, HOWEVER, that Senior Indebtedness will not include - any obligation of the Company to any Subsidiary, - any liability for federal, state, local, foreign or other taxes owed or owing by the Company, - any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees or instruments evidencing these liabilities), - any Indebtedness, Guarantee or obligation of the Company which is subordinate or junior in any respect to any other Indebtedness, Guarantee or obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, - any obligations with respect to any Capital Stock, or - any Indebtedness Incurred in violation of the Indenture. "SENIOR INDEBTEDNESS OF THE GUARANTORS" means all Indebtedness of the Guarantors including interest thereon, whether outstanding on the date of the Indenture or issued after that date, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that the obligations are not superior in right of payment to the Guarantees, PROVIDED, HOWEVER, that Senior Indebtedness of the Guarantors will not include - any obligation of the Guarantors to any Subsidiary, - any liability for federal, state, local, foreign or other taxes owed or owing by the Guarantors, - any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees or instruments evidencing these liabilities), - any Indebtedness, Guarantee or obligation of the Guarantors that is subordinate or junior in any respect to any other Indebtedness, Guarantee or obligation of the Guarantors, including Senior Subordinated Indebtedness of Guarantors and any Subordinated Obligations, - any obligations with respect to any Capital Stock, or - any Indebtedness Incurred in violation of the Indenture. "SENIOR SUBORDINATED INDEBTEDNESS" means the exchange notes and any other Indebtedness of the Company that specifically provides that this Indebtedness is to rank PARI PASSU with the exchange notes and is not subordinated by its terms to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "SENIOR SUBORDINATED INDEBTEDNESS OF THE GUARANTORS" means (1) the Guarantees and (2) any other Indebtedness of the Guarantors that specifically provides that the Indebtedness is to rank PARI PASSU with the Guarantees and is not subordinated by its terms to any Indebtedness or other obligation of the Guarantors which is not Senior Indebtedness of the Guarantors. "STATED MATURITY" means, with respect to any security, the date specified in the security as the fixed date on which the payment of principal of the security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of the security at the option of the holder upon the happening of any contingency beyond the control of the issuer unless this contingency has occurred). 111 "STOCKHOLDER AGREEMENT" means that certain Stockholder Agreement by and among the common equity stockholders of the Parent Guarantor, including the Permitted Holders, the management investors and other Persons listed therein, as in effect on the date of the Indenture. "SUBORDINATED OBLIGATION" means - any Indebtedness of the Company (whether outstanding on the date of the Indenture or Incurred after that date) which is subordinate or junior in right of payment to the exchange notes, - any Indebtedness of the Guarantors (whether outstanding on the date of the Indenture or Incurred after that date) which is subordinate or junior in right of payment to the Guarantees or - any Disqualified Stock of the Company or the Guarantors. "SUBSIDIARY" OR "SUBSIDIARY" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, - in the case of a corporation, of which at least 50% of the total voting power of the Voting Stock is held by the first-named Person or any of its Subsidiaries and that first-named Person or any of its Subsidiaries has the power to direct the management, policies and affairs of the corporation; or - in the case of a partnership, joint venture, association, or other business entity, with respect to which the first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of the entity by contract or otherwise if in accordance with GAAP that entity is consolidated with the first-named Person for financial statement purposes. "SUBSIDIARY GUARANTORS" means (1) USC May Verpackungen Holding Inc. and (2) each Domestic Restricted Subsidiary that in the future executes a supplemental indenture in which that Subsidiary agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor, PROVIDED that any Person constituting a Subsidiary Guarantor as described above will cease to constitute a Subsidiary Guarantor when its respective Subsidiary Guarantee is released in accordance with the terms of the Indenture. "TEMPORARY CASH INVESTMENTS" means any of the following: (1) investments in U.S. Government Obligations maturing within one year of the date of acquisition, (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within one year of the date of acquisition, issued by a bank or trust company which is organized under the laws of the United States of America or any state within the United States of America having capital, surplus and undivided profits aggregating in excess of $500 million and whose long-term debt (or that of its parent) is rated "A-3" or A- or higher according to Moody's Investors Service, Inc. or Standard and Poor's (or a similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), (3) repurchase obligations with a term of not more than 7 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above, (4) investments in commercial paper, maturing not more than six months after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America with a rating at the time as of which any 112 investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's, and (5) mutual funds whose assets consist primarily of Investments of the type described in clauses (1) through (4) above. "TRADE PAYABLES" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by that Person arising in the ordinary course of business of that Person in connection with the acquisition of goods or services. "TRANSACTIONS" means the recapitalization of the Company and the Parent Guarantor pursuant to which Pac Packaging Acquisition Corporation was merged with and into the Parent Guarantor and the related financing transactions of the Company and the Parent Guarantor. "TRUSTEE" means the party named as Trustee in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and, after this replacement, means any successor. "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time. "UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary of the Company that at the time of determination will be designated an Unrestricted Subsidiary by the Board of Directors as permitted or required pursuant to the covenant described under "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries" and not redesignated after the time of determination as a Restricted Subsidiary as permitted pursuant that covenant and (2) any Subsidiary of an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in these obligations) of the United States of America (including any agency or instrumentality) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "VOTING STOCK" of a corporation means all classes of Capital Stock of that corporation then outstanding and normally entitled to vote in the election of directors. "WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary of the Company, all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 113 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We originally sold the notes on October 4, 2000 to Salomon Smith Barney and Banc of America Securities LLC (the "Initial Purchasers") pursuant to a purchase agreement dated September 26, 2000. The Initial Purchasers subsequently resold the notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to a limited number of persons outside the United States under Regulation S. As a condition to the purchase agreement, we entered into a registration rights agreement with the Initial Purchasers in which we agreed to: (1) file a registration statement registering the exchange notes with the Commission within 120 days after the original issuance of the notes, and (2) use our best efforts to have the registration statement relating to the exchange notes declared effective by the Commission within 150 days after the original issuance of the notes. We have agreed to keep the exchange offer open for not less than 20 days (or longer if required by applicable law) after the date on which notice of the exchange offer is mailed to note holders. This prospectus covers the offer and sale of the exchange notes pursuant to the exchange offer and the resale of exchange notes received in the exchange offer by any broker-dealer who held notes, other than notes purchased directly from us or one of our affiliates. For each note surrendered to us pursuant to the exchange offer, the holder of the surrendered note will receive an exchange note having a principal amount equal to that of the surrendered note. Interest on each exchange note will accrue from the last date on which interest was paid on the surrendered note or, if no interest has been paid, from the date of original issuance of the surrendered note. Although we have not requested, and do not intend to request, the Commission to issue an interpretation with respect to resales of the exchange notes, we believe that under existing Commission interpretations, the exchange notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the exchange notes represents that it is acquiring the exchange notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the exchange notes and that it is not one of our affiliates, as these terms are interpreted by the Commission. If our belief is inaccurate, holders who transfer exchange notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration may incur liability under the Securities Act. We do not assume or indemnify holders against this liability. Broker-dealers ("Participating Broker-Dealers") receiving exchange notes in the exchange offer will have a prospectus delivery requirement with respect to resales of the exchange notes. While the Commission has not taken a position with respect to this particular transaction, under existing Commission interpretations relating to transactions structured substantially like the exchange offer, Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to exchange notes (other than a resale of an unsold allotment from the original sale of the notes) with the prospectus contained in the registration statement relating to the exchange offer. Under the registration agreement, we are required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the registration statement relating to the exchange offer in connection with the resale of the exchange notes. A holder of notes (other than specified holders) tendering notes in the exchange offer is required to represent that: - any exchange notes to be received by it will be acquired in the ordinary course of business; 114 - the holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes; and - it is not one of our "affiliates" as defined in Rule 405 of the Securities Act or, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent practicable. If a holder is a broker-dealer that will receive exchange notes for its own account in exchange for notes that were acquired as a result of market-making or other trading activities, the holder will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. In the event that - applicable interpretations of the staff of the Commission do not permit us to effect the exchange offer, - for any other reason, we do not consummate the exchange offer within 180 days after issuance of the original notes, - the Initial Purchasers so request with respect to notes not eligible to be exchanged for exchange notes in the exchange offer, - any holder of notes is not eligible to participate in the exchange offer, or - an Initial Purchaser does not receive freely tradable exchange notes in exchange for notes constituting any portion of an unsold allotment (unless current interpretations by the Commission's staff permit the filing in lieu of a shelf registration statement of a post-effective amendment to the registration statement relating to the exchange offer), we will, at our cost, - as promptly as practicable, file a shelf registration statement covering resales of the notes or the exchange notes, as the case may be, - use our best efforts to cause the shelf registration statement to be declared effective under the Securities Act and - keep the shelf registration statement effective until two years after its effective date (or until one year after the effective date if the registration statement is filed at the request of an Initial Purchaser). An Initial Purchaser or holder of a note is ineligible to participate in the exchange offer if the Initial Purchaser or holder cannot execute the letter of transmittal because it is unable to make the required representations therein. We will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom the shelf registration statement was filed copies of the prospectus that is a part of the shelf registration statement, notify each holder when the shelf registration statement has become effective and take other actions required to permit unrestricted resales of the notes or the exchange notes, as the case may be. A holder selling notes or exchange notes pursuant to the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the registration agreement that are applicable to that holder (including indemnification obligations). In the event that - within 120 days after the issuance of the original notes, neither the registration statement relating to the exchange offer nor the shelf registration statement has been filed with the Commission, 115 - within 150 days after the issuance of the original notes, the registration statement relating to the exchange offer has not been declared effective. - within 180 days after the issuance of the original notes, neither the exchange offer has been consummated nor the shelf registration statement has been declared effective, or - after either the registration statement relating to the exchange offer or the shelf registration statement has been declared effective, the registration statement ceases to be effective or usable (subject to specified exceptions) in connection with resales of notes or exchange notes in accordance with and during the periods specified in the registration agreement (each of these events, a "Registration Default"), additional interest will accrue on the notes and the exchange notes (in addition to the stated interest on the notes and the exchange notes) from and including the date on which any Registration Default has occurred to but excluding the date on which all Registration Defaults have been cured. The additional interest will accrue at a rate of 0.50% per annum during the 90-day period immediately following the occurrence of any Registration Default and will increase by 0.25% per annum at the end of each subsequent 90-day period, but in no effect will the rate exceed 1.00% per annum in the aggregate, regardless of the number of Registration Defaults. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, we will accept all notes validly tendered prior to 5:00 p.m., New York City time, on the expiration date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their notes pursuant to the exchange offer in integral multiples of $1,000. The form and terms of the exchange notes are identical in all material respects to the form and terms of the notes except for the following: (1) the exchange notes bear a Series B designation and different CUSIP number from the notes; (2) the exchange notes have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer; and (3) the holders of the exchange notes will not be entitled to all of rights under the registration rights agreement, including the provisions providing for liquidated damages relating to the timing of the exchange offer, all of which rights will terminate when the exchange offer is terminated. The exchange notes will evidence the same debt as the notes and will be entitled to the benefits of the indenture. As of the date of this prospectus, $175.0 million aggregate principal amount of the notes is outstanding. Solely for reasons of administration and no other reason, we have fixed the close of business on as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. Only a registered holder of notes (or that holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the indenture may participate in the exchange offer. There will be no fixed record date, however, for determining registered holders of the notes entitled to participate in the exchange offer. The holders of notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the indenture. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission. We shall be deemed to have accepted validly tendered notes when, as and if the holder of the note has given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. 116 If any tendered notes are not accepted for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, the certificates for any unaccepted notes will be returned, without expense, to the tendering holder as promptly as practicable after the expiration date. Those holders who tender notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of notes. We will pay all charges and expenses, other than specified applicable taxes, in connection with the exchange offer. See "--Fees and Expenses." EXPIRATION DATES; EXTENSIONS; AMENDMENTS The exchange offer will remain open for not less than 20 days from the date we mail notice of the exchange offer to note holders. We do not expect to keep the exchange offer open for more than 30 days from the mailing date, including all extensions. The "expiration date" will be 5:00 p.m., New York City time, on , unless we, in our sole discretion, extend the exchange offer, in which case the expiration date will be the latest date to which the exchange offer is extended. Notwithstanding the foregoing, we will not extend the expiration date beyond . We have no current plans to extend the exchange offer. In order to extend the expiration date, we will notify the exchange agent of any extension by oral or written notice and will make a public announcement of the extension, in each case prior to 9:00 a.m., New York City time, no later than the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion, to (1) delay accepting any notes; (2) extend the exchange offer; or (3) terminate the exchange offer if any of the conditions set forth below under "--Conditions of the Exchange Offer" shall not have been satisfied, in each case by giving oral or written notice of the delay, extension or termination to the exchange agent, and to amend the terms of the exchange offer in any manner. Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement of the event. If we amend the exchange offer in a manner determined by us to constitute a material change, we will promptly disclose the amendment by means of a prospectus supplement that will be distributed to the registered holders of the notes, and the exchange offer will be extended for a period of five to ten business days, as required by law, depending upon the significance of the amendment and the manner of disclosure to the registered holders, assuming the exchange offer would otherwise expire during this five to ten business day period. Without limiting the manner in which we may choose to make public announcement of any delay, extension, termination or amendment of the exchange offer, we will not have an obligation to publish, advertise, or otherwise communicate any public announcement other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest from their date of issuance. Interest is payable semiannually on April 1 and October 1 of each year, commencing on April 1, 2001, at the rate of 12 3/8% per annum. Interest on each exchange note will accrue from the last date on which interest was paid on the note being tendered for exchange or, if no interest has been paid, from the date on which the notes were issued in the original offering. Consequently, holders who exchange their notes for exchange notes will receive the same interest payment on April 1, 2001 that they would have received had they not 117 accepted the exchange offer. Interest on the notes accepted for exchange will cease to accrue upon issuance of the exchange notes. PROCEDURES FOR TENDERING Only a registered holder of notes may tender notes in the exchange offer. To effectively tender in the exchange offer, a holder must complete, sign and date a copy or facsimile of the letter of transmittal, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver the letter of transmittal or a facsimile of the letter of transmittal, together with the notes and any other required documents, to the exchange agent at the address set forth below under "Exchange Agent" for receipt on or prior to the expiration date. Delivery of the notes also may be made by book-entry transfer in accordance with the procedures described below. If you are effecting delivery by book-entry transfer, (1) confirmation of the book-entry transfer must be received by the exchange agent prior to the expiration date; and (2) you must transmit to the exchange agent on or prior to the expiration date a computer-generated message transmitted by means of the Automated Tender Offer Program System of The Depository Trust Company ("DTC") in which you acknowledge and agree to be bound by the terms of the letter of transmittal and which, when received by the exchange agent, forms a part of the confirmation of book-entry transfer. By executing the letter of transmittal or effecting delivery by book-entry transfer, each holder is making to us those representations set forth under the heading "--Purpose and Effect of the Exchange Offer." The tender by a holder of notes will constitute an agreement between that holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. The method of delivery of the notes and the letter of transmittal and all other required documents to the exchange agent is at the election and sole risk of the holder. As an alternative to delivery by mail, holders may wish to consider overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the exchange agent on or prior to the expiration date. You should not send any letters of transmittal or notes to us. Holders may request that their respective brokers, dealers, commercial banks, trust companies or nominees effect the above transactions for these holders. The term "holder" with respect to the exchange offer means any person in whose name notes are registered on our books or any other person who has obtained a properly completed bond power from the registered holder, or any person whose notes are held of record by DTC who desires to deliver the notes by book-entry transfer at DTC. If your notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender, you should promptly contact the person in whose name the notes are registered and instruct that registered holder to tender on your behalf. If a beneficial owner wishes to tender on his or her own behalf, the holder must, prior to completing and executing the letter of transmittal and delivering the notes, either make appropriate arrangements to register ownership of the notes in his or her name or to obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (defined below) unless the notes are tendered: (1) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or (2) for the account of an Eligible Institution. 118 If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed, the guarantee must be by a participant in a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If the letter of transmittal is signed by a person other than the registered holder of any notes listed therein, the notes must be endorsed or accompanied by properly completed bond powers, signed by the registered holder as that registered holder's name appears on the notes with the signature guaranteed by an Eligible Institution. If the letter of transmittal or any notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing, and submit with the letter of transmittal evidence satisfactory to so act. We understand that the exchange agent will make a request, promptly after the date of this prospectus, to establish accounts with respect to the notes at the book-entry transfer facility of DTC for the purpose of facilitating this exchange offer, and subject to the establishment of these accounts, any financial institution that is a participant in the book-entry transfer facility system may make book-entry delivery of notes by causing the transfer of the notes into the exchange agent's account with respect to the notes in accordance with DTC's procedures for the transfer. Although delivery of the notes may be effected through book-entry transfer into the exchange agent's account at the book-entry transfer facility, unless the holder complies with the procedures described in the following paragraph or the guaranteed delivery procedures described below, an appropriate letter of transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the exchange agent at its address set forth below before the expiration date. The delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent. The exchange agent and DTC have confirmed that the exchange offer is eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer notes to the exchange agent in accordance with the procedures for transfer established under ATOP. DTC will then send an Agent's Message to the exchange agent. The term "Agent's Message" means a message transmitted by DTC that, when received by the exchange agent, forms part of the confirmation of a book-entry transfer and that states that DTC has received an express acknowledgment from the DTC participant that this participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the agreement against this participant. In the case of an Agent's Message relating to guaranteed delivery, the term means a message transmitted by DTC and received by the exchange agent that states that DTC has received an express acknowledgment from the DTC participant that this participant has received and agrees to be bound by the Notice of Guaranteed Delivery. We will determine all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered notes in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all notes not validly tendered or any notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects, irregularities or conditions of tender as to particular notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of notes must be cured within the time that we determine. Although we intend to notify holders of defects or irregularities with respect to the tender of notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give this notification. Tenders of notes will not be deemed to have been made until defects or irregularities have been cured or waived. Any notes received by the exchange agent that are not validly tendered and as to which the defects or irregularities have not been cured or waived, or if notes are submitted in a principal amount greater than the principal amount of notes being tendered by the tendering holder, the unaccepted or non-exchanged notes will be returned by the exchange agent to the tendering holders (or, in the case of 119 notes tendered by book-entry transfer into the exchange agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, the unaccepted or non-exchanged notes will be credited to an account maintained with the book-entry transfer facility), unless otherwise provided in the letter of transmittal designated for the notes, as soon as practicable following the expiration date. GUARANTEED DELIVERY PROCEDURES Those holders who wish to tender their notes and (1) whose notes are not immediately available; or (2) who cannot deliver their notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date; or (3) who cannot complete the procedures for book-entry transfer before the expiration date; may effect a tender if: (1) the tender is made through an Eligible Institution; (2) before the expiration date, the exchange agent receives from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number or numbers of the notes and the principal amount of notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the expiration date, either (a) that a copy or facsimile of the letter of transmittal, together with the certificate(s) representing the notes and any other documents required by the letter of transmittal, will be deposited by the Eligible Institution with the exchange agent or (b) that a confirmation of book-entry transfer of the notes into the exchange agent's account at DTC, will be delivered to the exchange agent; and (3) either (a) a copy or facsimile of the properly completed and executed letter of transmittal, together with the certificate(s) representing all tendered notes in proper form for transfer and all other documents required by the letter of transmittal, or (b) if applicable, confirmation of a book-entry transfer into the exchange agent's account at DTC, are actually received by the exchange agent within five business days after the expiration date. Upon request, the exchange agent will send a Notice of Guaranteed Delivery to holders who wish to tender their notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of notes may be withdrawn at any time on or prior to the expiration date. To validly withdraw a tender of notes in the exchange offer, the exchange agent must receive a telegram, telex, letter or facsimile transmission notice of withdrawal at its address set forth herein on or prior to the expiration date. The notice of withdrawal must: (1) specify the name of the person having deposited the notes to be withdrawn (the "Depositor"); (2) identify the notes to be withdrawn, including the certificate number or numbers and the aggregate principal amount of the notes or, in the case of notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which the notes were tendered, including any required signature guarantees, or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the 120 notes to register the transfer of the notes into the name of the person withdrawing the tender; and (4) specify the name in which the notes are to be registered, if different from the name of the Depositor. We will determine all questions as to the validity, form and eligibility (including time of receipt) of these notices in our sole discretion, and our determination will be final and binding. Any notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no exchange notes will be issued in exchange for withdrawn notes unless those notes are validly retendered. Any notes that have been tendered but that are not accepted for exchange because of the rejection of the tender due to uncured defects or the prior termination of the exchange offer, or which have been validly withdrawn, will be returned to the relevant holder without cost to that holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the expiration date. CONDITIONS OF THE EXCHANGE OFFER The offer is subject to the condition that the exchange offer, or the making of any exchange by a holder, does not violate applicable law or any applicable interpretation of the staff of the Commission. If there has been a change in policy of the Commission such that, in the reasonable opinion of our counsel, there is a substantial question whether the exchange offer is permitted by applicable federal law, we have agreed to seek a no-action letter or other favorable decision from the Commission allowing us to consummate the exchange offer. If we determine that the exchange offer is not permitted by applicable federal law, we may terminate the exchange offer. In connection with any termination we may: (1) refuse to accept any notes and return any notes that have been tendered by the holders; (2) extend the exchange offer and retain all notes tendered prior to the expiration date, subject to the rights of the holders of tendered notes to withdraw their tendered notes; or (3) waive the termination event with respect to the exchange offer and accept all properly tendered notes that have not been properly withdrawn. If the waiver of a termination event constitutes a material change in the exchange offer, we will disclose the change by means of a supplement to this prospectus that will be distributed to each registered holder of notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver, if the exchange offer would otherwise expire during this period. Persons who acquire the exchange notes are responsible for compliance with the state securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. EXCHANGE AGENT Bank One Trust Company, N.A., the Trustee under the indenture, has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for the Notice of Guaranteed Delivery should 121 be directed to the exchange agent addressed as follows: By Hand Delivery, Overnight Courier, or Registered or Certified Mail: Bank One Trust Company, N.A. One North State Street, 9th Floor Chicago, Illinois 60602 Attention: Exchanges Facsimile: (312) 407-2088 Any requests or deliveries to an address or facsimile number other than as set forth above will not constitute a valid delivery. FEES AND EXPENSES We will bear the expenses of soliciting tenders. We are making the principal solicitation by mail, but our officers, employees and affiliates may make additional solicitations in person, by telegraph or telephone. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We will pay the exchange agent, however, reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with the exchange offer. We will pay the cash expenses incurred in connection with the exchange offer. These expenses include fees and expenses of the exchange agent and the Trustee, accounting and legal fees and printing costs, among others. We will pay all transfer taxes, if any, applicable to the exchange of the notes in the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the notes in the exchange offer, then the amount of any transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of or exemption from these taxes is not submitted with the letter of transmittal, the amount of the transfer taxes will be billed directly to the tendering holder. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the notes, which is face value, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. The costs of the exchange offer will be amortized over the term of the exchange notes. CONSEQUENCES OF FAILURE TO EXCHANGE The notes that are not exchanged for exchange notes in the exchange offer will remain restricted securities. Accordingly, those notes may be resold only as follows: (1) to us, upon redemption or otherwise; (2) (a) so long as the notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, (b) in accordance with Rule 144 under the Securities Act, or (c) pursuant to another exemption from the registration requirements of the Securities Act and based upon an opinion of counsel reasonably acceptable to us; (3) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act; or (4) pursuant to an effective registration statement under the Securities Act. Persons who acquire the exchange notes are responsible for compliance with the state securities or blue sky laws regarding resales. We assume no responsibility for compliance with these requirements. 122 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of United States federal income tax consequences relevant to the acquisition, ownership and disposition of the exchange notes by the beneficial owners who exchange the outstanding notes for the exchange notes ("Holders"). This discussion is limited to the tax consequences to the initial Holders of exchange notes and does not address the tax consequences to subsequent purchasers of exchange notes. This summary does not purport to be a complete analysis of all of the potential United States federal income tax consequences relating to the acquisition, ownership and disposition of the exchange notes, nor does this summary describe any federal estate tax consequences (except with respect to Foreign Holders (as defined below)). There can be no assurance that the Internal Revenue Service ("IRS") will take a similar view of the tax consequences described herein. Furthermore, this discussion does not address all aspects of taxation that might be relevant to particular Holders in light of their individual circumstances or to Holders who are subject to special treatment under United States federal tax law or to certain types of Holders (including dealers in securities, insurance companies, financial institutions, tax-exempt entities and, except to the extent discussed below, Foreign Holders (as defined below)). This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect as of the date of this prospectus and all of which are subject to change (possibly on a retroactive basis). The discussion below assumes that the exchange notes are held as capital assets (generally, property held for investment) within the meaning of Code Section 1221. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THAT INVESTOR'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF A PURCHASE OF EXCHANGE NOTES IN LIGHT OF THAT INVESTOR'S PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF THE CODE, AS WELL AS STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. TAX CONSEQUENCES TO UNITED STATES HOLDERS The following summary is a general description of United States federal income tax consequences applicable to a "United States Holder." For the purpose of this discussion, a "United States Holder" means a Holder that is for United States federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any political subdivision of the United States or (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust, and (b) one or more United States persons have the authority to control all substantial decisions of the trust. TAXATION OF INTEREST Interest paid on an exchange note will generally be taxable to you as ordinary interest income at the time the interest accrues or is received in accordance with your method of accounting for United States federal income tax purposes. ADDITIONAL PAYMENTS We intend to take the position for United States federal income tax purposes that any additional payments as a result of a redemption pursuant to a change of control should be taxable to you as additional interest income when received or accrued, in accordance with your method of tax accounting. This position is based in part on the assumption that as of the date of issuance of the exchange notes, the possibility that additional payments will have to be paid is a "remote" or 123 "incidental" contingency within the meaning of applicable Treasury regulations. Our determination that such possibility is a remote or incidental contingency is binding on you, unless you explicitly disclose to the IRS, on your return for the year during which the exchange note is acquired, that you are taking a different position. Regardless of our position, however, the IRS may take the contrary position that the payment of additional payments is not a remote or incidental contingency. This contrary position could affect the timing and character of both your income from the exchange notes and our deduction with respect to payments of additional payments. SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF THE EXCHANGE NOTES: GENERAL In general, upon the sale, exchange, redemption or retirement of an exchange note, you will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange, redemption or retirement (not including any amount attributable to accrued but unpaid interest that you have not already included in gross income) and your adjusted tax basis in the exchange note. To the extent attributable to accrued but unpaid interest that you have not already included in gross income, the amount recognized by you will be treated as a payment of interest. See "Tax Consequences to United States Holders--Taxation of Interest" above. Your adjusted tax basis in an exchange note generally will equal the issue price of the exchange note, reduced by any principal payments you received. The excess of net long-term capital gains over net short-term capital losses is subject to tax at a lower rate for non-corporate taxpayers. Non-corporate taxpayers are generally subject to a maximum tax rate of 20% on capital gain realized on the disposition of a capital asset (including an exchange note) held for more than one year. The distinction between capital gain or loss and ordinary income or loss is relevant for purposes of, among other things, limitations on the deductibility of capital losses. SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF NOTES: EXCHANGE OFFER The exchange of an outstanding note for an exchange note pursuant to the exchange offer is not anticipated to be taxable to the Holder. As a result, a Holder: - would not be expected to recognize any gain or loss on the exchange; - would be expected to have a holding period for the exchange note that includes the holding period for the note exchanged therefor; - would be expected to have an adjusted tax basis in the exchange note equal to its adjusted tax basis in the note exchanged therefor; and - would be expected to recognize taxable gain or loss on a subsequent sale, exchange, redemption or retirement of an exchange note under the same circumstances and conditions as a holder of the outstanding note would have with respect to a sale, exchange, redemption or retirement of an outstanding note. See "Tax Consequences to United States Holders--Sale, Exchange, Redemption or Retirement of the Exchange Notes: General" above. The exchange offer is not expected to result in any United States federal income tax consequences to a nonexchanging holder of outstanding notes. TAX CONSEQUENCES TO FOREIGN HOLDERS The following summary is a general description of certain United States federal income tax consequences to a "Foreign Holder" (which, for the purpose of this discussion, means a Holder that is not a United States Holder). The following summary is subject to the discussion below concerning 124 backup withholding and assumes that a Holder is not subject to provisions of the Code applicable to expatriates such as Code Section 877. (a) In general, payments of interest on an exchange note by United States Can Company or any paying agent to a Foreign Holder will not be subject to United States federal income tax or withholding tax, provided that: - the interest received is not effectively connected with a United States trade or business; - the Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of United States Can Company entitled to vote; - the Holder is not, for United States federal income tax purposes, a controlled foreign corporation related, directly or indirectly, to United States Can Company through stock ownership; - the Holder is not a bank receiving interest described in Code Section 881(c)(3)(A); and - the certification requirements under Code Section 871(h) or 881(c) and Treasury Regulations thereunder (summarized below) are met. Subject to any treaty exemption or rate reduction payments of interest on an exchange note that do not satisfy all of the foregoing requirements are generally subject to United States federal income tax and withholding tax at a flat rate of 30%. Federal withholding tax is not an additional tax. Rather, any amounts withheld from a payment to a Holder are generally allowed as a credit against the affected Foreign Holder's United States federal income tax liability. Payments of interest which are effectively connected with a United States trade or business conducted by the Holder will be subject to tax at graduated rates applicable to United States Holders. In the event any additional payments we are required to pay as a result of a redemption pursuant to a change of control are treated as interest, the tax treatment of these payments should be the same as other interest payments received by a Foreign Holder. However, the IRS may treat these payments as other than interest, in which case (i) if these payments are not effectively connected with a United States trade or business conducted by the Holder they would be subject to United States federal withholding tax at a rate of 30%, unless the Holder qualifies for a reduced rate of tax or an exemption under a tax treaty, or (ii) if these payments are effectively connected with a United States trade or business conducted by the Holder, they would be subject to tax at graduated rates applicable to United States Holders. (b) In general, a Foreign Holder of an exchange note will not be subject to United States federal withholding tax on the receipt of payments of principal on the exchange note and will not be subject to United States federal income tax on any gain recognized on the sale, exchange, redemption, retirement or other disposition of any exchange note, unless (i) the Foreign Holder is a non-resident alien individual who is present in the United States for 183 or more days in the taxable year of disposition and other specified conditions are met, or (ii) the Foreign Holder is engaged in a United States trade or business and the gain is effectively connected with that trade or business. Under Code Sections 871(h) and 881(c) and the underlying Treasury Regulations, in order to obtain the exemption from withholding tax described in paragraph (a) above, either (1) the Holder of an exchange note must provide its name and address, and certify, under penalties of perjury, to United States Can Company or paying agent, as the case may be, that the Holder is a Foreign Holder or (2) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and holds the exchange note on behalf of the Holder must certify, under penalties of perjury, to United States Can Company or paying agent, as the case may be, that the certificate has been received from the Holder by it or by a Financial 125 Institution between it and the Holder and must furnish the payor with a copy of the certificate. A certificate described in this paragraph is effective only with respect to payments of interest made to the certifying Foreign Holder after issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. Under Treasury Regulations, the foregoing certification may be provided by the Holder of an exchange note on IRS Form W-8BEN, W-8ECI, W-8IMY or W-8EXP, as applicable. Notwithstanding the provision of a Form W-8ECI, a Holder who is engaged in a United States trade or business will be subject to tax as described above with respect to amounts which are effectively connected with that trade or business. If any of the payments with respect to the exchange notes are effectively connected with a United States trade or business conducted by a Holder and that Holder is a foreign corporation, that Holder may also be subject to a United States "branch profits" tax on the effectively connected income at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty, subject to adjustments). An exchange note held by an individual who is not a citizen or resident of the United States at the time of death will not be includible in the decedent's gross estate for United States estate tax purposes, provided that the Holder or beneficial owner did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of stock of United States Can Company entitled to vote, and provided that, at the time of death, payments with respect to the exchange note would not have been effectively connected with the conduct by the Holder of a trade or business within the United States. BACKUP WITHHOLDING AND INFORMATION REPORTING Under current United States federal income tax law, a 31% backup withholding tax and information reporting requirements apply to certain payments of principal and interest made to, and to the proceeds of sale before maturity by, certain Holders. In the case of a non-corporate United States Holder, information reporting requirements will apply to payments of principal or interest made by United States Can Company or any paying agent acting for United States Can Company on an exchange note. The payor will be required to withhold backup withholding tax if: a Holder fails to furnish its Taxpayer Identification Number ("TIN") (which, for an individual, is his Social Security number) to the payor in the manner required; a Holder furnishes an incorrect TIN and the payor is so notified by the IRS; the payor is notified by the IRS that the Holder has failed to properly report payments of interest or dividends; or under specified circumstances, a Holder fails to certify, under penalties of perjury, that it has furnished a correct TIN and has not been notified by the IRS that it is subject to backup withholding for failure to report interest or dividend payments. Backup withholding and information reporting does not apply with respect to payments made to certain exempt recipients, including a corporation (within the meaning of Code Section 7701(a)). United States Holders should consult their tax advisors regarding their qualification for exemption from backup withholding and information reporting, and the procedure for obtaining this exemption if applicable. The amount of any backup withholding imposed upon a payment to a United States Holder will be allowed as a credit against that Holder's United States federal income tax liability and may entitle that Holder to a refund, provided that required information is furnished to the IRS. In the case of a Foreign Holder, under currently applicable Treasury Regulations, backup withholding and information reporting will not apply to payments of principal or interest made by the Issuer or any paying agent acting for the Issuer on an exchange note (absent actual knowledge that the Holder is actually a United States Holder) if the Holder has provided the required certification under penalties of perjury that it is not a United States Holder or has otherwise established an exemption. If the Holder provides the required certification, that Holder may nevertheless be subject to withholding 126 of United States federal income tax as described above under "Tax Consequences to Foreign Holders." Foreign Holders of exchange notes should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining this exemption, if available. Any amounts withheld from a payment to a Foreign Holder under the backup withholding rules will be allowed as a credit against that Holder's United States federal income tax liability and may entitle that Holder to a refund, provided that required information is furnished to the IRS. New Treasury Regulations relating to withholding tax on income paid to Foreign Holders will generally be effective for payments made after December 31, 2000, subject to certain transition rules. In general, these new regulations do not significantly alter the substantive withholding and information reporting requirements, but rather unify current certification procedures and forms, and clarify reliance standards. The new regulations also alter the procedures for claiming benefits of an income tax treaty and permit the shifting of primary responsibility for withholding to specified financial intermediaries acting on behalf of beneficial owners under some circumstances. On January 24, 2000, the IRS issued Rev. Proc. 2000-12 providing guidance for entering into a "qualified intermediary" withholding agreement with the IRS to allow specified institutions to certify on behalf of their non-United States customers or account holders who invest in United States securities. We strongly urge prospective Foreign Holders to consult their own tax advisors for information on the impact, if any, of these new withholding regulations. 127 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer in exchange for notes that the broker-dealer acquired as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Any broker-dealer may use this prospectus, as we may amend or supplement it from time to time, in connection with resales of exchange notes received in exchange for notes. For a period of one year after we complete the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. All resales must be made in compliance with state securities or blue sky laws. We assume no responsibility for compliance with these requirements. We will not receive any proceeds from any sales of the exchange notes by broker-dealers. Broker-dealers may sell exchange notes received for their own account pursuant to the exchange offer from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or at negotiated prices. Any resale of this type may be made directly to the purchaser or to or through brokers-dealers who may receive compensation in the form of commissions or concessions from any broker-dealer and/or the purchasers of any exchange notes. Any broker-dealer that resells the exchange notes that it received for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any resale of exchange notes and any commissions or concessions received by these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holder of the notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. The initial purchasers have advised us that, following completion of this exchange offer, they intend to make a market in the exchange notes. However, the initial purchasers are under no obligation to do so, and they may discontinue any market activities with respect to the exchange notes at any time. LEGAL MATTERS The validity of the notes will be passed upon for United States Can Company by Ropes & Gray, Boston, Massachusetts. INDEPENDENT PUBLIC ACCOUNTANTS The consolidated financial statements of U.S. Can Corporation and its subsidiaries as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 included in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing herein. 128 WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement on Form S-4 under the Securities Act with the Securities and Exchange Commission with respect to the exchange notes. This prospectus, which forms a part of the registration statement, does not contain all of the information included in the registration statement. Certain parts of this registration statement are omitted in accordance with the rules and regulations of the Commission. For further information about us and the exchange notes, we refer you to the registration statement. You should be aware that statements made in this prospectus as to the contents of any agreement or other document filed as an exhibit to the registration statement are not complete. Although we believe that we have summarized the material terms of these documents in the prospectus, these statements are qualified in their entirety by reference to the full and complete text of the related documents. We are not currently subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended. We have agreed that, whether or not we are required to do so by the rules and regulations of the Commission, for so long as any of the exchange notes remain outstanding, we will furnish to the holders of the exchange notes and, if permitted, will file with the Commission, within the time periods specified in the rules and regulations of the Commission: (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if we were required to file these forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations," and, with respect to the annual information only, a report thereon by our certified independent accountants; and (ii) all reports that would be required to be filed with the Commission on Form 8-K if we were required to file these reports in each case. Any reports or documents we file with the Commission, including the registration statement, may be inspected and copied at the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of these reports or other documents may be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a web site that contains reports and other information that is filed through the Commission's Electronic Data Gathering Analysis and Retrieval System. The web site can be accessed at http://www.sec.gov. This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. We will provide without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request of that person, a copy of any and all of this information. Requests for copies should be directed to the Treasurer, United States Can Company, 700 East Butterfield Road, Suite 250, Lombard, Illinois 60148 (Telephone Number (630) 678-8000). You should request this information at least five days in advance of the date on which you expect to make your decision with respect to the exchange offer. In any event, you must request this information prior to . 129 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES
PAGE -------- AUDITED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants.................... F-2 Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997...................................................... F-3 Consolidated Balance Sheets as of December 31, 1999 and 1998...................................................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997.............. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997...................................................... F-6 Notes to Consolidated Financial Statements.................. F-7 UNAUDITED QUARTERLY FINANCIAL DATA.......................... F-34 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Operations for the Quarterly Periods Ended October 1, 2000 and October 3, 1999 and for the Nine Months Ended October 1, 2000 and October 3, 1999...................................................... F-35 Consolidated Balance Sheets as of October 1, 2000 and December 31, 1999......................................... F-36 Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2000 and October 3, 1999................. F-37 Notes to Consolidated Financial Statements.................. F-38
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO U.S. CAN CORPORATION: We have audited the accompanying consolidated balance sheets of U.S. CAN CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of U.S. Can Corporation and Subsidiaries as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Chicago, Illinois February 2, 2000, except with respect to the matters discussed in Notes (13) and (14), as to which the date is October 4, 2000 F-2 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (000'S OMITTED)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 1997 --------- --------- --------- NET SALES................................................... $714,115 $710,246 $755,675 COST OF SALES............................................... 611,629 618,156 665,755 -------- -------- -------- Gross income.............................................. 102,486 92,090 89,920 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 33,783 32,651 33,047 SPECIAL CHARGES............................................. -- 35,869 62,980 -------- -------- -------- Operating income (loss)................................... 68,703 23,570 (6,107) INTEREST EXPENSE ON BORROWINGS.............................. 28,726 33,182 36,867 AMORTIZATION OF DEFERRED FINANCING COSTS.................... 1,175 1,753 1,738 OTHER EXPENSES.............................................. 1,728 1,822 1,986 -------- -------- -------- Income (loss) before income taxes........................... 37,074 (13,187) (46,698) PROVISION (BENEFIT) FOR INCOME TAXES........................ 14,622 (5,662) (16,792) -------- -------- -------- Income (loss) from continuing operations before discontinued operations and extraordinary item......................... 22,452 (7,525) (29,906) DISCONTINUED OPERATIONS, net of income taxes Net income from discontinued operations................... -- -- 1,078 Net loss on sale of discontinued business................. -- (8,528) (3,204) -------- -------- -------- EXTRAORDINARY ITEM, net of income taxes Net loss from early extinguishment of debt................ (1,296) -- -- -------- -------- -------- NET INCOME (LOSS)........................................... $ 21,156 $(16,053) $(32,032) ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-3 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (000'S OMITTED, EXCEPT PER SHARE DATA)
DECEMBER 31, DECEMBER 31, 1999 1998 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 15,697 $ 18,072 Accounts receivables, less allowances of $13,367 and $17,063 as of December 31, 1999 and December 31, 1998, respectively............................................ 91,864 63,742 Inventories............................................... 115,979 94,887 Prepaid expenses and other current assets................. 19,677 16,011 Deferred income taxes..................................... 16,114 22,934 --------- --------- Total current assets.................................... 259,331 215,646 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land...................................................... 14,541 5,862 Buildings................................................. 83,106 63,026 Machinery, equipment and construction in process.......... 463,400 416,940 --------- --------- 561,047 485,828 Less--Accumulated depreciation............................ (228,543) (217,826) --------- --------- Total property, plant and equipment..................... 332,504 268,002 --------- --------- INTANGIBLE ASSETS, less accumulated amortization of $12,211 and $11,853 as of December 31, 1999 and December 31, 1998, respectively.............................................. 50,478 51,928 OTHER ASSETS................................................ 21,257 19,995 --------- --------- Total assets............................................ $ 663,570 $ 555,571 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 38,824 $ 6,731 Accounts payable.......................................... 104,189 52,317 Accrued payroll, benefits and insurance................... 29,500 31,282 Restructuring reserves.................................... 25,016 25,674 Other current liabilities................................. 24,068 23,530 --------- --------- Total current liabilities............................... 221,597 139,534 --------- --------- SENIOR DEBT................................................. 83,864 45,617 SUBORDINATED DEBT........................................... 236,629 264,325 --------- --------- Total long-term debt.................................... 320,493 309,942 --------- --------- OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 10,670 5,595 Other long-term liabilities............................... 42,254 50,323 --------- --------- Total other long-term liabilities....................... 52,924 55,918 --------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued or outstanding.................. -- -- Common stock, $0.01 par value; 50,000,000 shares authorized, 13,446,933 and 13,278,223 shares issued as of December 31, 1999 and December 31, 1998, respectively............................................ 135 133 Paid-in-capital........................................... 112,840 109,839 Unearned restricted stock................................. (629) (829) Treasury common stock, at cost; 83,024 and 90,011 shares at December 31, 1999 and December 31, 1998, respectively............................................ (1,380) (1,728) Cumulative translation adjustment......................... (7,771) (1,443) Accumulated deficit....................................... (34,639) (55,795) --------- --------- Total stockholders' equity.............................. 68,556 50,177 --------- --------- Total liabilities and stockholders' equity.............. $ 663,570 $ 555,571 ========= =========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-4 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (000'S OMITTED)
ACCUMULATED OTHER COMPREHENSIVE INCOME -------------------------------------- UNEARNED TREASURY CUMULATIVE PENSION COMMON PAID-IN- RESTRICTED COMMON TRANSLATION LIABILITY ACCUMULATED COMPREHENSIVE STOCK CAPITAL STOCK STOCK ADJUSTMENT ADJUSTMENT DEFICIT INCOME -------- -------- ---------- -------- ----------- ---------- ----------- ------------- BALANCE AT DECEMBER 31, 1996..................... $130 $105,582 $(2,581) $ (256) $ 1,622 $ (2) $ (7,710) $ -- Net loss................... -- -- -- -- -- -- (32,032) (32,032) Issuance of stock under employee benefit plans... -- 778 -- 721 -- -- -- -- Purchase of treasury stock.................... -- -- -- (1,179) -- -- -- -- Exercise of stock options.................. -- 152 -- -- -- -- -- -- Issuance of restricted stock.................... 1 1,491 (1,492) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 1,515 -- -- -- -- -- Equity adjustment to reflect minimum pension liability................ -- -- -- -- -- (612) -- (612) Cumulative translation adjustment............... -- -- -- -- (3,815) -- -- (3,815) -------- Comprehensive loss......... -- -- -- -- -- -- -- $(36,459) ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1997..................... 131 108,003 (2,558) (714) (2,193) (614) (39,742) -- Net loss................... -- -- -- -- -- -- (16,053) (16,053) Issuance of stock under employee benefit plans... -- -- -- 716 -- -- -- -- Purchase of treasury stock.................... -- -- -- (1,730) -- Exercise of stock options.................. 2 1,656 -- -- -- -- -- -- Issuance of restricted stock.................... -- 180 (180) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 1,909 -- -- -- -- -- Equity adjustment to reflect minimum pension liability................ -- -- -- -- -- 614 -- 614 Cumulative translation adjustment............... -- -- -- -- 750 -- -- 750 -------- Comprehensive loss......... -- -- -- -- -- -- -- $(14,689) ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1998..................... 133 109,839 (829) (1,728) (1,443) -- (55,795) -- Net income................. -- -- -- -- -- -- 21,156 21,156 Issuance of stock under employee benefit plans... -- -- -- 850 -- -- -- -- Purchase of treasury stock.................... -- -- -- (502) -- Exercise of stock options.................. 2 2,818 -- -- -- -- -- -- Issuance of restricted stock.................... -- 183 (183) -- -- -- -- -- Amortization of unearned restricted stock......... -- -- 383 -- -- -- -- -- Cumulative translation adjustment............... -- -- -- -- (6,328) -- -- (6,328) -------- Comprehensive income....... -- -- -- -- -- -- -- $ 14,828 ---- -------- ------- ------- ------- ----- -------- ======== BALANCE AT DECEMBER 31, 1999..................... $135 $112,840 $ (629) $(1,380) $(7,771) $ -- $(34,639) ==== ======== ======= ======= ======= ===== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-5 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (000'S OMITTED)
FOR THE YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 1997 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss)......................................... $ 21,156 $(16,053) $(32,032) Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization........................... 31,863 35,439 39,866 Special charges......................................... -- 35,869 62,980 Loss on sale of business................................ -- 8,528 3,204 Extraordinary loss on extinguishment of debt............ 1,296 -- -- Deferred income taxes................................... 11,124 (6,916) (17,788) Change in operating assets and liabilities, net of effect of acquired and disposed of businesses: Accounts receivable..................................... (14,464) 10,275 12,074 Inventories............................................. 4,211 15,324 3,204 Accounts payable........................................ 14,805 (667) (5,204) Accrued payroll, benefits, insurance and special charge cash costs............................................ (10,641) (8,228) (7,100) Other, net.............................................. 3,102 (8,608) 4,905 -------- -------- -------- Net cash provided by operating activities............. 62,452 64,963 64,109 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (30,982) (22,828) (54,030) Acquisition of businesses, net of cash acquired........... (63,847) -- (12,398) Proceeds on sale of business.............................. 4,500 28,296 1,000 Proceeds from sale of property............................ 448 6,601 630 Investment in Formametal S.A.............................. (1,600) (3,000) -- -------- -------- -------- Net cash provided by (used in) investing activities... (91,481) 9,069 (64,798) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock and exercise of stock options.... 2,820 1,658 152 Net borrowings (payments) under the revolving line of credit and changes in cash overdrafts................... 23,553 (36,770) 5,962 Repurchase of 10 1/8% notes............................... (27,696) (10,675) -- Borrowings of other long-term debt, including capital lease obligations....................................... 38,598 -- 24,935 Payments of other long-term debt, including capital lease obligations............................................. (9,449) (15,618) (26,386) Payments of debt refinancing costs........................ -- -- (1,574) Purchase of treasury stock................................ (502) (1,730) (1,179) -------- -------- -------- Net cash provided by (used in) financing activities... 27,324 (63,135) 1,910 -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (670) 402 (2,414) -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (2,375) 11,299 (1,193) CASH AND CASH EQUIVALENTS, beginning of year................ 18,072 6,773 7,966 -------- -------- -------- CASH AND CASH EQUIVALENTS, end of year...................... $ 15,697 $ 18,072 $ 6,773 ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-6 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (1) BASIS OF PRESENTATION AND OPERATIONS The consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation"), its wholly owned subsidiary, United States Can Company ("U.S. Can"), and U.S. Can's subsidiaries (the "Subsidiaries"). All significant intercompany balances and transactions have been eliminated. The consolidated group is referred to herein as the Company. These financial statements are prepared in accordance with generally accepted accounting principles. Certain reclassifications have been made to conform prior years' data to current presentation. These reclassifications had no effect on previously reported earnings. The Company is a packaging supplier of steel and plastic containers for personal care, household, food, automotive, paint and industrial supplies, and other specialty products. The Company owns or leases 21 plants in the United States and 11 plants located in Europe. Certain operations and plants are being discontinued or closed as further described in Note 3. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) CASH AND CASH EQUIVALENTS--The Company considers all liquid interest-bearing instruments purchased with an original maturity of three months or less to be cash equivalents. (b) ACCOUNTS RECEIVABLE ALLOWANCES--Activity in the accounts receivable allowances accounts was as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Balance at beginning of year................................ $17,063 $15,134 $10,895 Provision for doubtful accounts........................... 997 881 1,065 Change in discounts, allowances and rebates, net of recoveries.............................................. (3,914) 2,525 3,734 Net write-offs of doubtful accounts....................... (779) (1,477) (560) ------- ------- ------- Balance at end of year...................................... $13,367 $17,063 $15,134 ======= ======= =======
(c) INVENTORIES--Inventories are stated at the lower of cost or market and include material, labor and factory overhead. Costs for United States inventory have been determined using the last-in, first-out ("LIFO") method. Costs for Subsidiaries and machine shop inventories of approximately $49.6 million at December 31, 1999 and $19.9 million as of December 31, 1998 have been determined by the first-in, first-out ("FIFO") method. Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
1999 1998 -------- -------- Raw materials............................................ $ 30,821 $21,171 Work in progress......................................... 49,884 42,146 Finished goods........................................... 35,274 26,848 Machine shop inventory................................... -- 4,722 -------- ------- $115,979 $94,887 ======== =======
F-7 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is recorded at cost. Major renewals and betterments which extend the useful life of an asset are capitalized; routine maintenance and repairs are expensed as incurred. Maintenance and repairs charged against earnings were approximately $29.4 million, $29.9 million and $30.9 million in 1999, 1998 and 1997, respectively. Upon sale or retirement of these assets, the asset cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in income. Depreciation for financial reporting purposes is principally provided using the straight-line method over the estimated useful lives of the assets, as follows: buildings-25 to 40 years; machinery and equipment-5 to 20 years. Property, plant and equipment under capital leases are amortized over the economic useful life of the asset. (e) INTANGIBLES--Intangible assets consist principally of the excess purchase price over the fair value of the net assets of businesses acquired ("goodwill"), amortized on a straight-line basis over the periods of expected benefit, ranging from 20 to 40 years. The related amortization expense was $1.7 million, $1.8 million and $2.0 million for the years ended December 31, 1999, 1998 and 1997, respectively. The Company continually reviews whether subsequent events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or its recoverable value requires adjustment. In assessing and measuring recoverability, the Company uses projections to determine whether future operating income (net of tax) exceeds the goodwill amortization. (f) REVENUE--Revenue is recognized when goods are shipped to the customer. Estimated sales returns and allowances are recognized as an offset against revenue in the period in which the related revenue is recognized. (g) FOREIGN CURRENCY TRANSLATION--The functional currency for substantially all the Company's Subsidiaries is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate prevailing during the period. The gains or losses resulting from such translation are included in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in other income and were not material in 1999, 1998 or 1997. (h) NEW ACCOUNTING PRONOUNCEMENTS--SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998 (amended by SFAS No. 137 to delay required implementation) and will be adopted by the Company in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating SFAS No. 133, but does not believe this pronouncement will have a material impact on the Company's financial position or results of operations. (i) USE OF ESTIMATES--The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-8 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (3) SPECIAL CHARGES AND DISCONTINUED OPERATIONS 1998 SPECIAL CHARGES In 1998, the Company established a pre-tax restructuring provision of $35.9 million for additional plant closings, implementation of a national lithography strategy, an incremental provision for the anticipated loss on the sale of the Orlando Machine Engineering Center ("OMEC") and a reassessment of 1997 special charges. The key elements of the 1998 restructuring provision include the closure of the Green Bay, Wisconsin aerosol assembly plant, the Alsip, Illinois general line plant, and the Columbiana, Ohio specialty plant (which occurred in the first half of 1999); a write-down to estimated proceeds for the sale of the metal closure business located in Glen Dale, West Virginia; and selected closures and realignment of facilities servicing the lithography needs of the Company's core businesses. The restructuring provision included $5.2 million for severance and related termination benefits for approximately 45 salaried and 250 production employees; $24.4 million for the non-cash write off of assets related to the facilities being closed or consolidated (includes fixed assets of $9.3 million and unamortized goodwill of $15.1 million); $3.3 million for the estimated net loss (book value in excess of proceeds) on the sale of the closure business and OMEC; $4.2 million for other related closure costs and ($1.2) million adjustment for 1997 items. 1997 SPECIAL CHARGES In 1997, the Company established a pre-tax special charge of $63.0 million as follows: $35.0 million, primarily for plant closings and overhead cost reductions associated with the loss of a major aerosol customer; $13.3 million for the loss on the closure of its Metal Pail operation in North Brunswick, New Jersey; and $14.7 million, related to personnel reductions and the reduction of asset values associated with equipment used in the businesses the Company had exited or was in the process of exiting. The key elements of the restructuring included closure in 1998 of the Racine, Wisconsin aerosol assembly plant, the Midwest litho center in Alsip, Illinois, the Sparrows Point litho center in Baltimore, Maryland, and the California Specialty plant in Vernalis, California; a write-down to estimated proceeds for the sale of the OMEC; and organizational changes designed to reduce general overhead. On January 29, 1999, the Company completed the sale of OMEC for $4.5 million in cash. The special charge included $41.7 million for the non-cash write-off of assets related to the facilities to be closed or sold, (comprised of fixed assets of $34.1 million and unamortized goodwill of $7.6 million), $13.2 million for severance and related termination benefits for approximately 115 salaried and 370 hourly employees, and $8.1 million for other related closure costs. DISCONTINUED OPERATIONS On November 9, 1998, the Company sold its commercial metal services business ("Metal Services") for net cash proceeds of approximately $28 million. Metal Services included one plant in each of Chicago, Illinois; Trenton, New Jersey; and Brookfield, Ohio, and the closed Midwest Litho plant in Alsip, Illinois. The Company's historical financial statements have been restated to reflect Metal F-9 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (3) SPECIAL CHARGES AND DISCONTINUED OPERATIONS (CONTINUED) Services as a discontinued operation. Based on the proceeds received, the Company recorded an incremental $8.5 million after-tax charge for the loss on the sale of Metal Services in 1998. Revenues to third parties from these operations were $94.3 million and $115.7 million in the periods ended November 8, 1998 and December 31, 1997, respectively (excluding intra-company sales continued by the buyer and ongoing third-party sales from the closed Midwest Litho facility, which were transferred to other Metal Services facilities). Reserves as of December 31, 1999 include $8.0 million for severance and related termination benefits for approximately 42 salaried and 166 hourly employees; $6.0 million for non-cash write-off of assets related to facilities being closed or consolidated; $10.1 million for the estimated loss on the sale of the closure business; and $4.4 million primarily for on-going carrying costs for facilities already closed located in Green Bay, Wisconsin and Vernalis, California. The actions identified under the 1997 restructuring plan have essentially been completed, however, there are some ongoing costs resulting from the actions taken and these will be charged against the reserve as they are paid. Under the union contract at the Racine, Wisconsin facility, the Company is obligated to fund increased pension amounts to certain terminated hourly employees as a direct result of closing the Racine facility. These amounts are payable over five years and began on the date of the plant closure in April 1998. Additionally, the company has long-term lease obligations (plus related utilities and security costs) for its Vernalis, California (part of the 1997 special charge; closed in June 1998) and Green Bay, Wisconsin (part of the 1998 special charge; closed in June 1999) facilities which will continue for several years into the future. The actions management committed to as part of the 1998 restructure plan are also substantially complete. Remaining actions to be completed include the closure of certain lithography facilities. When the Company recorded the charge related to these facilities, it was expected that the actions related to these operations would extend into 2000. The current status of the exit plan activities is substantially the same as the original exit plan, supporting the Company's assertion that significant changes to the plan are not likely. Cash costs for restructuring activities in 1999 were $6.9 million and the Company anticipates spending another $11.0 million of such costs in 2000 and $3.5 million in the year 2001 and beyond. The remainder of the restructuring provision primarily consists of non-cash items associated with the write-off of assets. The details of the changes in accrued restructuring costs are as follows (000's omitted):
1999 1998 -------- -------- Balance at beginning of the year........................ $43,387 $ 35,081 Special charge........................................ -- 35,869 Discontinued operations charge........................ -- 14,261 Payments against reserve.............................. (6,856) (8,251) Non-cash charges against reserve...................... (8,017) (33,573) ------- -------- Balance at end of the year............................ $28,514 (a) $ 43,387 (a) ======= ========
- ------------------------ (a) Includes $3.5 million and $17.7 million of long-term liabilities as of December 31, 1999 and 1998, respectively. F-10 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (4) ACQUISITIONS On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH & Co., KG ("May"), a German limited liability company. The acquisition was financed using borrowings made by U.S. Can under the Credit Agreement (refer to Note (5)) for an aggregate amount of $63.9 million. The following is a summary of the preliminary allocation of the aggregate purchase price for May (000's omitted): Current Assets.............................................. $ 53,744 Property, Plant and Equipment............................... 74,640 Goodwill.................................................... 277 Other Assets................................................ 3,708 Current Portion of Long-Term Debt........................... (17,023) Current Liabilities......................................... (39,432) Long-Term Debt.............................................. (6,552) Other Liabilities........................................... (5,484) -------- Total Purchase Price...................................... $ 63,878 ========
The acquisition was accounted for as a purchase for financial reporting purposes; therefore, 1999 results do not include operations related to the acquired business. Certain assets and liabilities of May were revalued to estimated fair values as of the acquisition date. The final amounts recorded may differ based on results of further evaluations of the fair value of the acquired assets and liabilities. The following represents the Company's unaudited pro forma results of operations as if the May acquisition had occurred on January 1 of the applicable year (000's omitted):
1999 1998 -------- -------- Net Sales................................................... $859,478 $857,322 Income Before Discontinued Operations and Extraordinary Item...................................................... 21,928 (9,130) Net Income.................................................. 20,632 (17,658)
May's pre-acquisition results have been adjusted to reflect amortization of goodwill, the depreciation expense impact of the increased fair market value of property plant and equipment, interest expense on the acquisition borrowings and the effect of income taxes on the pro forma adjustments. The pro forma information given above does not purport to be indicative of the results that would have been obtained if the operations were combined during the periods presented and is not intended to be a projection of future results or trends. In March 1998, a European Subsidiary acquired a 36.5% equity interest in Formametal S.A. ("Formametal"), an aerosol can manufacturer located in Argentina, for $4.6 million, payable over a 15-month period. In connection with this investment, the Company has provided a guarantee in an amount not to exceed $3.8 million, to secure the repayments of certain indebtedness of Formametal. In 1999, the Company loaned Formametal $1.0 million for capital expenditures with all principal and interest payable in January 2004. In addition, the Company received a three-year option to convert this F-11 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (4) ACQUISITIONS (CONTINUED) loan into additional shares of Formametal, which, if exercised, would take the Company's interest in Formametal up to 39.8%. This investment is being accounted for using the equity method. (5) DEBT OBLIGATIONS Long-term debt obligations of the Company at December 31, 1999 and 1998, consisted of the following (000's omitted):
1999 1998 -------- -------- Senior debt-- Revolving line of credit.............................. $ 56,100 $ -- Capital lease obligations............................. 10,869 15,511 Secured term loan..................................... 21,156 25,128 Industrial revenue bonds.............................. 7,500 7,500 Mortgages and other................................... 27,063 4,209 -------- -------- 122,688 52,348 Less--Current maturities................................ (38,824) (6,731) -------- -------- Total long-term senior debt......................... 83,864 45,617 Senior Subordinated 10 1/8% notes....................... 236,629 264,325 -------- -------- Total long-term debt................................ $320,493 $309,942 ======== ========
In 1997, U.S. Can entered into an Amended and Restated Credit Agreement with a group of banks (the "Credit Agreement"), providing a revolving credit facility for working capital requirements, letters of credit and permitted acquisitions. The Credit Agreement was amended twice in 1999. In April 1999, the Company reduced the available amount under the Credit Agreement to $50 million from the previous $80 million level. Obligations under the Credit Agreement were secured by U.S. Can's domestic accounts receivable and inventories; however, this collateral was released in May, 1999 because of the improved credit profile of the Company. In connection with the May acquisition, the Company added a $70 million, 364-day facility in December 1999, which expires on December 26, 2000. The remainder of the facilities under the Credit Agreement expire in 2002. As of December 31, 1999, the Company had borrowed $56.1 million under the Credit Agreement, $11.4 million outstanding under the letter of credit portion of the facility and $52.5 million of unused credit remaining available under the Credit Agreement. The Company expects to refinance any borrowings outstanding under the 364-day facility prior to its expiration. The loans under the Credit Agreement, at the election of U.S. Can, bear interest at a floating rate equal to one of the following: (i) the Base Rate (as defined in the Credit Agreement) per annum, or (ii) based on the current pricing ratio, a reserve-adjusted Eurodollar rate plus the then applicable margin, for specified interest periods of one, two, three, or six months. Prime rate loans outstanding as of December 31, 1999 were converted on January 4, 2000 to libor-based borrowings bearing a weighted average rate of 6.9%. U.S. Can is required to pay letter of credit fees based on the outstanding face amount on each letter of credit and a commitment fee based on the average daily unused portion of each lender's commitment under the Credit Agreement. F-12 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (5) DEBT OBLIGATIONS (CONTINUED) Capital lease obligations mature in varying amounts from 2000 to 2005 and bear interest at various rates between 4.6% and 15.8%. Other debt, consisting of various governmental loans, real estate mortgages and secured equipment notes bearing interest at rates between 3.4% and 8.4%, matures at various times through 2015, and was used to finance the expansion of several manufacturing facilities. In an effort to limit foreign exchange risks, the Company has entered into several forward hedge contracts. The Merthyr Tydfil facility was financed by a series of British Pound/Dollar forward hedge contracts, which will not exceed $23.1 million in notional amount or a term of not more than five years. In connection with the acquisition of May, the Company purchased a series of German Deutsche Mark/ Dollar forward hedge contracts. As of December 31, 1999, the remaining contracts did not exceed $14.3 million, with the final contract payment due in February 2000. The Senior Subordinated 10 1/8% notes (the "10 1/8% notes") are unsecured and are subordinated to all other senior debt of the Corporation and its subsidiaries. The 10 1/8% notes are fully and unconditionally guaranteed on an unsecured senior subordinated basis by U.S. Can and USC May Verpackungen Holding, Inc. On or after October 15, 2001, the Corporation may, at its option, redeem all or some of the 10 1/8% notes at declining redemption premiums which begin at approximately 105.1% in 2001. Upon a change of control of the Corporation, as defined, the Note holders could require that the Corporation repurchase all or some of the 10 1/8% notes at a 101% premium. As part of the Company's focus on debt reduction, it repurchased through the open market and subsequently retired $27.7 and $10.7 million in 1999 and 1998, respectively, of the outstanding 10 1/8% notes. The associated redemption premiums and the write-off of the related deferred financing costs resulted in an extraordinary charge in 1999 of $1.3 million, net of taxes of $0.8 million. The Credit Agreement restricts the Company's ability to repurchase the 10 1/8% notes. As of December 31, 1999, the Company had purchased the maximum amount allowed under the Credit Agreement. Based upon borrowing rates currently available to the Company for borrowings with similar terms and maturities, the fair value of the Company's total debt was approximately $366 million and $324 million as of December 31, 1999 and 1998, respectively. No quoted market value is available (except on the 10 1/8% notes). These amounts, because they do not include certain costs such as prepayment penalties, do not represent the amount the Company would have to pay to reacquire and retire all of its outstanding debt in a current transaction. Financing costs related to the issuance of new debt are deferred and amortized over the terms of the related debt agreements. Net deferred financing costs are recorded as other assets in the accompanying balance sheets. The Company paid interest on borrowings of $26.5 million, $33.2 million and $35.2 million in 1999, 1998 and 1997, respectively. The Credit Agreement and certain of the Company's other debt agreements contain various financial and other restrictive covenants, as well as cross-default provisions. The financial covenants include, but are not limited to, limitations on annual capital expenditures and certain ratios of borrowings to earnings before interest, taxes, depreciation and amortization ("EBITDA"), senior debt to EBITDA and interest coverage. The covenants also restrict the Company's and U.S. Can's ability to distribute dividends, to incur additional indebtedness, to dispose of assets and to make investments, F-13 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (5) DEBT OBLIGATIONS (CONTINUED) acquisitions, mergers and transactions with affiliates. The Company was in compliance with all of the required financial ratios and other covenants under the Credit Agreement at year-end. Under existing agreements, contractual maturities of long-term debt as of December 31, 1999 (including capital lease obligations), are as follows (000's omitted): 2000........................................................ $ 38,824 2001........................................................ 6,185 2002........................................................ 45,012 2003........................................................ 4,065 2004........................................................ 16,637 Thereafter.................................................. 248,594 -------- $359,317 ========
For further discussion on lease obligations refer to Note (9) which includes operating and capital lease information. (6) INCOME TAXES The provision (benefit) for income taxes before discontinued operations and extraordinary item consisted of the following (000's omitted):
1999 1998 1997 -------- -------- -------- Current......................................... $ 1,304 $ -- $ -- Deferred........................................ 11,124 (6,916) (17,788) Foreign......................................... 2,194 1,254 996 ------- ------- -------- Total....................................... $14,622 $(5,662) $(16,792) ======= ======= ========
Income taxes, net of refunds, of $1.1 million and $0.5 million were paid in 1999 and 1997, respectively. No income taxes were paid in 1998. A reconciliation of the difference between taxes on pre-tax income from continuing operations before discontinued operations and extraordinary item computed at the Federal statutory rate and the actual provision (benefit) for such income taxes for the years presented were as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Tax provision (benefit) computed at the statutory rates..... $12,605 $(4,483) $(16,344) Nondeductible amortization of intangible assets............. 253 238 396 State taxes, net of Federal tax effect...................... 1,483 (659) (801) Other, net.................................................. 281 (758) (43) ------- ------- -------- Provision (benefit) for income taxes...................... $14,622 $(5,662) $(16,792) ======= ======= ========
F-14 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (6) INCOME TAXES (CONTINUED) Deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. Significant temporary differences representing deferred income tax benefits and obligations consisted of the following (000's omitted):
DECEMBER 31, 1999 DECEMBER 31, 1998 ---------------------- ---------------------- BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS -------- ----------- -------- ----------- Restructuring reserves............................... $13,527 $ -- $19,544 $ -- Postretirement benefits.............................. 12,068 -- 12,694 -- Accrued liabilities.................................. 6,143 -- 6,183 -- Alternative minimum tax credit carry-forwards........ 5,273 -- 4,310 -- Capitalized leases................................... 1,904 -- 1,687 -- Property and equipment............................... 2,316 -- 2,481 -- Pension accrual...................................... 1,848 -- 3,221 -- Accelerated Depreciation............................. -- (32,545) -- (32,914) Inventory valuation reserves......................... -- (6,246) -- (6,888) Net operating loss................................... 949 -- 6,168 -- Other................................................ 5,190 (4,983) 4,598 (3,745) ------- -------- ------- -------- Total deferred income tax benefits (obligations).................................. $49,218 $(43,774) $60,886 $(43,547) ======= ======== ======= ========
The Company does not provide for U. S. income taxes which would be payable if undistributed earnings of the European Subsidiaries were remitted to the U.S. because the Company either considers these earnings to be invested for an indefinite period or anticipates that if such earnings were distributed, the U.S. income taxes payable would be substantially offset by foreign tax credits. Such unremitted earnings were $8.3 million and $4.0 million as of December 31, 1999 and 1998, respectively. (7) EMPLOYEE BENEFIT PLANS The Company maintains separate noncontributory pension and defined contribution plans covering most domestic hourly employees and all domestic salaried personnel, respectively. It is the Company's policy to fund accrued pension and defined contribution plan costs in compliance with ERISA requirements. The total cost of these plans charged against earnings was approximately $3.9 million, $5.2 million and $6.5 million for 1999, 1998 and 1997, respectively. F-15 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (7) EMPLOYEE BENEFIT PLANS (CONTINUED) The following presents the changes in the projected benefit obligations for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Projected benefit obligation at the beginning of the year... $31,164 $30,637 Net increase (decrease) during the year attributed to: Service cost.............................................. 854 912 Interest cost............................................. 2,180 2,028 Actuarial gain............................................ (3,479) (1,104) Benefits paid............................................. (2,037) (1,685) Plan amendments........................................... -- 376 ------- ------- Net (decrease) increase during the year..................... (2,482) 527 ------- ------- Projected benefit obligation at the end of the year......... $28,682 $31,164 ======= =======
The following table presents the changes in the fair value of net assets available for plan benefits for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Fair value of plan assets at the beginning of the year.... $30,448 $24,965 Increase (decrease) during the year: Return on plan assets................................... 5,366 4,388 Sponsor contributions................................... 1,496 2,780 Benefits paid........................................... (2,037) (1,685) ------- ------- Net increase during the year.............................. 4,825 5,483 ------- ------- Fair value of plan assets at the end of the year.......... $35,273 $30,448 ======= =======
The following table sets forth the funded status of the Company's domestic defined benefit pension plans, at December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Actuarial present value of benefit obligation-- Vested benefits........................................... $(26,680) $(28,563) Nonvested benefits........................................ (2,002) (2,601) -------- -------- Accumulated benefit obligation.............................. (28,682) (31,164) Fair value of plan assets................................... 35,273 30,448 Accumulated benefit obligation in excess of plan assets..... 6,591 (716) Unrecognized transition obligation.......................... 3 4 Unrecognized net loss....................................... (8,538) (2,243) Unrecognized prior-service costs............................ 1,589 1,903 -------- -------- Net amount recognized....................................... $ (355) $ 1,052 ======== ======== Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability................................. $ (355) $ (1,132) Intangible asset.......................................... -- 80 -------- -------- Net amount recognized....................................... $ (355) $ (1,052) ======== ========
F-16 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (7) EMPLOYEE BENEFIT PLANS (CONTINUED) The projected benefit obligation as of December 31, 1999, 1998 and 1997 was determined using an assumed discount rate of 7.8%, 7.0% and 7.0%, respectively. The expected long-term rate of return on plan assets used in determining net periodic pension cost was 8.5% in 1999, 1998, and 1997. The plan has a flat benefit formula; accordingly, the effect of projected future compensation levels is zero. The plan's assets consist primarily of shares of the Corporation's common stock, equity and bond funds, corporate bonds and investment contracts with insurance companies. The United States net periodic pension cost was as follows (000's omitted):
1999 1998 1997 -------- -------- -------- Service costs..................................... $ 854 $ 912 $ 871 Interest costs.................................... 2,180 2,028 1,825 Return on assets.................................. (3,215) (2,501) (4,535) Amortization of unrecognized transition obligation...................................... 2 2 (11) Prior service cost recognized..................... 977 666 468 Curtailment loss on severed employees............. -- -- 2,595 ------- ------- ------- Net periodic pension cost......................... $ 798 $ 1,107 $ 1,213 ======= ======= =======
In addition, hourly employees at eight plants are covered by union-sponsored collectively bargained, multi-employer pension plans. The Company contributed to these plans and charged to expense approximately $1.4 million, $1.3 million and $1.4 million in 1999, 1998 and 1997, respectively. The contributions are generally determined in accordance with the provisions of the negotiated labor contracts and are generally based on a per employee, per week amount. In March 1999, 1998 and 1997, the Corporation contributed shares of Common Stock, valued at $0.9 million, $0.7 million and $0.9 million, respectively, to U.S. Can's Salaried Employees Savings and Retirement Accumulation Plan. The Company maintains three defined benefit plans for certain of its employees in the United Kingdom, Germany and France. The plan benefits are based primarily on years of service, employee compensation or a combination thereof. As of December 31, 1999, 1998 and 1997, the preliminary actuarially-determined accumulated benefit obligations were $35.3 million, $30.8 million and $30.9 million, respectively, of which $29.0 million, $28.8 million and $29.1 million, respectively, were funded. The aggregate net pension expense in 1999, 1998 and 1997, for these plans was approximately $1.1 million, $1.3 million and $0.8 million, respectively. (8) POSTRETIREMENT BENEFIT PLANS The Company provides health and life insurance benefits for certain domestic retired employees in connection with certain collective bargaining agreements. F-17 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (8) POSTRETIREMENT BENEFIT PLANS (CONTINUED) The following presents the changes in the accumulated postretirement benefit obligations for the plan years ended December 31, 1999 and 1998 (000's omitted):
1999 1998 -------- -------- Accumulated postretirement benefit obligations at the beginning of the year................................... $29,128 $29,533 Net decrease during the year attributable to: Service cost............................................ 373 424 Interest cost........................................... 1,929 1,907 Actuarial gains......................................... (3,306) (1,731) Benefits paid........................................... (1,316) (1,005) ------- ------- Net decrease for the year................................. (2,320) (405) ------- ------- Accumulated postretirement benefit obligations at the end of the year............................................. $26,808 $29,128 ======= =======
The Company's postretirement benefit plans currently are not funded. The status of the plans at December 31, 1999 and 1998, is as follows (000's omitted):
1999 1998 -------- -------- Accumulated postretirement benefit obligations: Active employees........................................ $ 7,586 $11,477 Retirees................................................ 19,222 17,651 ------- ------- Total accumulated postretirement benefit obligations...... 26,808 29,128 Unrecognized net gain (loss).............................. 721 (2,586) ------- ------- Net amount recognized..................................... $27,529 $26,542 ======= =======
Net periodic postretirement benefit costs for the Company's domestic postretirement benefit plans for the years ended December 31, 1999, 1998 and 1997, included the following components (000's omitted):
1999 1998 1997 -------- -------- -------- Service cost........................................ $ 373 $ 424 $ 406 Interest cost....................................... 1,929 1,907 1,994 Amortization of net loss............................ -- -- 10 ------ ------ ------ Net periodic postretirement benefit cost............ $2,302 $2,331 $2,410 ====== ====== ======
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 7% in 1999 and remaining at 7% thereafter, 8% in 1998 and 9% in 1997. A one percentage point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of December 31, 1999 and 1998, by approximately $2.8 million and $3.1 million, respectively, and the total of the service and interest cost components of net postretirement benefit cost for each year then ended by approximately $0.3 million. A one F-18 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (8) POSTRETIREMENT BENEFIT PLANS (CONTINUED) percentage point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation as of December 31, 1999 and 1998, by approximately $2.6 million and $2.8 million, respectively, and the total of the service and interest cost components of net postretirement benefit cost for each year then ended by approximately $0.3 million. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.8%, 7.0% and 7.0%, in 1999, 1998 and 1997, respectively. As of December 31, 1999, 1998 and 1997, the Company had recorded a liability of $3.3 million, $3.4 million and $3.3 million, respectively, for benefit obligations for which a former executive was fully eligible to receive on a periodic payment basis beginning August 1, 1998. The principal source of funding for this obligation is an insurance policy on the executive's life. (9) COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL The processes involved in lithography and certain aspects of the manufacturing of steel containers have historically involved the use and handling of materials now classified as hazardous substances under various laws. The Company has a policy to comply with applicable legal requirements. The Company may be subject to liabilities for previously owned or operated sites or sites where the Company or its predecessors shipped waste. The Company accrues for the estimated cost of environmental matters, on a non-discounted basis. Such provisions and accruals exclude claims for recoveries from insurance carriers or other third parties. The Company has been named as a potentially responsible party ("PRP") for costs incurred in the clean-up of a regional groundwater plume partially extending underneath a property located in San Leandro, California, formerly a site of one of the Company's can assembly plants. The Company has entered into an indemnity agreement related to this matter with the owner of the property. Extensive soil and groundwater investigative work has been performed at this site. The Company, along with other PRPs, participated in a coordinated sampling event in 1999. The results of the sampling were inconclusive as to the source of the contamination. While the State has not yet commented on the sampling results, the Company believes that the source of contamination is unrelated to its past operations. As a PRP at various superfund sites in the U.S., the Company is or may be legally responsible, jointly and severally with other members of the PRP group, for the cost of remediation of these sites. Based on currently available data, the Company believes its contribution, and/or the contribution of its predecessors, to these sites was, in most cases, DE MINIMIS. The Company has established reserves of $0.6 million for future ascertainable costs of environmental remediation. Management does not believe that such costs, if any, in excess of the reserve will have a material adverse effect on the Company's results of operations or financial condition. In making this assessment, the Company considered all information available to it including its and other companies' reported prior experience in dealing with such matters, data released by the EPA and reports by independent environmental consultants regarding certain matters. The Company has made, and expects to continue to make, significant capital expenditures to upgrade its facilities in accordance with current and pending environmental regulations and administrative proceedings. F-19 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (9) COMMITMENTS AND CONTINGENCIES (CONTINUED) LEGAL The National Labor Relations Board ("NLRB") issued a decision ordering the Company to pay $1.5 million in back pay, plus interest, for a violation of certain sections of the National Labor Relations Act as a result of the Company's closure of certain facilities in 1991 and the failure to offer inter- plant job opportunities to affected certain employees. The Company appealed this decision on the grounds, among others, that the Company is entitled to a credit against this award for certain pension payments. The Company believes its appeal will be successful and the claim will not exceed the liability recorded. The Company, including the Subsidiaries, is involved in various legal actions and administrative proceedings. Management is of the opinion that their outcome will not have a material effect on the Company's financial position or results of operations. PURCHASE COMMITMENTS As part of its national lithography strategy, the Company is investing in certain lithography process equipment with a foreign vendor. In an effort to limit foreign exchange risk related to this purchase commitment, the Company entered into a series of German Deutsche Mark/Dollar forward hedge contracts with a sole remaining payment of $0.5 million due in February 2000. LEASES The Company has entered into agreements to lease certain property under terms which qualify as capital leases. Capital leases consist primarily of data processing equipment and various production machinery and equipment. Most capital leases contain renewal options and some contain purchase options. The December 31, 1999 and 1998 capital lease asset balances were $23.5 million and $31.7 million, net of accumulated amortization of $16.6 million and $20.4 million, respectively. The Company also maintains operating leases on various plant and office facilities, vehicles and office equipment. Rent expense under operating leases for the years ended December 31, 1999, 1998 and 1997, was $7.1 million, $6.8 million and $6.8 million, respectively. At December 31, 1999, minimum payments due under these leases were as follows (000's omitted):
CAPITAL OPERATING LEASES LEASES -------- --------- 2000..................................................... $ 2,666 $ 7,329 2001..................................................... 3,931 4,652 2002..................................................... 4,439 4,738 2003..................................................... 503 2,963 2004..................................................... 497 1,951 Thereafter............................................... 257 7,846 ------- ------- Total minimum lease payments....................... 12,293 $29,479 ======= Amount representing interest............................. (1,424) ------- Present value of net minimum capital lease payments...... $10,869 =======
F-20 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (10) EQUITY INCENTIVE PLANS The Company has one active plan, the 1999 Equity Incentive Plan, which provides options for management so as to align management's interest with those of the Company's shareholders. Under this program, 1,250,000 shares are available for issuance under options priced at market price on the grant date. All options issued to date under the 1999 Plan have a vesting schedule as follows: 30% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 110% of the market price on the grant date, 30% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 125% of the market price on the grant date, and the remaining 40% of the options vest following any 10-day consecutive period in which each closing price equals or exceeds 150% of the market price on the grant date. All previous plans have been frozen and no future grants will be made under those plans. Restricted shares are charged to stockholders' equity at their fair value and amortized as expense on a straight-line basis over the restriction period. Shares awarded were: 10,582 shares or $0.2 million in 1999; 17,140 shares or $0.3 million in 1998; 95,630 shares or $1.4 million in 1997. Amortization charges were $0.2 million, $1.7 million and $2.4 million during 1999, 1998 and 1997, respectively. A summary of the status of the Company's stock option plans at December 31, 1999, 1998 and 1997, and changes during the years then ended, are presented in the tables below:
OPTIONS OUTSTANDING EXERCISABLE OPTIONS --------------------- -------------------- WTD. AVG. WTD. AVG. EXERCISE EXERCISE SHARES PRICE SHARES PRICE --------- --------- -------- --------- January 1, 1997....................... 917,772 $13.63 744,499 $13.15 Granted............................. 100,000 19.03 Exercised........................... (12,000) 12.00 Canceled............................ (129,272) 3.63 --------- ------ December 31, 1997..................... 876,500 $14.63 867,250 $14.59 Granted............................. 916,750 16.91 Exercised........................... (112,222) 12.01 Canceled............................ (79,726) 17.38 --------- ------ December 31, 1998..................... 1,601,302 $15.93 820,280 $15.03 Granted............................. 154,300 21.95 Exercised........................... (225,280) 13.41 Canceled............................ (92,172) 16.88 --------- ------ December 31, 1999..................... 1,438,150 $16.82 801,212 $15.90 ========= ======
OPTIONS OUTSTANDING AT DECEMBER 31, 1999 EXERCISABLE OPTIONS ----------------------------------- AT DECEMBER 31, 1999 REMAINING --------------------- CONTRACTUAL WTD. AVG. WTD. AVG. LIFE EXERCISE EXERCISE SHARES (YEARS) PRICE SHARES PRICE --------- ----------- --------- --------- --------- $8.00 to $15.75............ 204,500 3.0 $11.42 194,501 $11.28 $16.00 to $27.00........... 1,233,650 8.0 17.72 606,711 17.38 --------- ------- 1,438,150 7.3 $16.82 801,212 $15.90 ========= =======
F-21 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (10) EQUITY INCENTIVE PLANS (CONTINUED) The Company accounts for the plan under APB Opinion No. 25; therefore, no compensation costs have been recognized for options granted. Had compensation costs been determined on the fair value-based accounting method for options granted in 1999, 1998 and 1997, pro forma net income (loss) would have been $20.1 million, ($19.5) million and ($32.4) million for 1999, 1998 and 1997, respectively. The weighted-average estimated fair value of options granted during 1999, 1998 and 1997 was $12.92, $8.80 and $6.80, respectively. The fair value of each option grant is determined on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for options granted in 1999, 1998 and 1997, respectively: risk-free interest rate of 5.8%, 5.2% and 6.2%; expected lives of 10.0 years, 8.9 years and 7.0 years; expected volatility of 35.2%, 33.1% and 28.3%; and no dividends for any year. (11) SHAREHOLDER RIGHTS PLAN/CHANGE OF CONTROL On October 19, 1995, the Corporation's Board of Directors adopted a Shareholder Rights Plan. The Board declared a distribution of one right (a "Right") for each share of Common Stock outstanding on October 19, 1995 (the "Record Date"). Each share of Common Stock issued after the Record Date will be issued with an attached Right. Rights will become exercisable and detachable only following the acquisition by a person or a group of 15 percent or more of the outstanding Common Stock of U.S. Can Corporation or following the announcement of a tender or exchange offer for 15 percent or more of the outstanding Common Stock. The Rights will, if they become exercisable, permit the holders of the Rights to purchase a certain amount of preferred stock of the Corporation at a 50 percent discount, or to exchange the Rights for Common Stock, if the Board permits. Where an acquiring company effects a merger or other control transaction with the Corporation, the Rights may also entitle the holder to acquire stock of the acquiring company at a 50 percent discount. If a person or group acquires 15 percent or more of the Common Stock (or announces a tender or exchange offer for 15 percent or more of the Common Stock), the acquiring person's or group's Rights become void. In certain circumstances, the Rights may be redeemed by the Company at an initial redemption price of $.01 per Right. If not redeemed, the Rights will expire ten years after the Record Date. In addition, the Company has adopted certain change of control protections that, under certain circumstances, would increase compensation and benefits of certain executive officers and other key managers. (12) BUSINESS SEGMENTS The Company has established three segments by which management monitors and evaluates business performance, customer base and market share. These segments (Aerosol; Paint, Plastic & General Line and Custom & Specialty) have separate management teams and distinct product lines. The aerosol segment has two units: United States and International. The segment primarily produces steel aerosol containers for personal care, household, automotive, paint and industrial products. The Paint, Plastic & General Line segment produces round cans for paint and coatings, oblong cans for such items as lighter fluid and turpentine as well as plastic containers for paint and F-22 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (12) BUSINESS SEGMENTS (CONTINUED) industrial and consumer products. The Custom & Specialty segment produces a wide array of functional and decorative tins, containers and other products. The accounting policies of the segments are the same as those described in Note (2) to the Consolidated Financial Statements. No single customer accounted for more than 10% of the Company's total net sales during 1999, 1998 or 1997. Financial information relating to the Company's operations by geographic area was as follows (000's omitted):
UNITED STATES EUROPE CONSOLIDATED -------- -------- ------------ 1999 Net sales................................... $587,780 $126,335 $714,115 Identifiable assets......................... 397,327 266,243 663,570 1998 Net sales................................... $593,606 $116,640 $710,246 Identifiable assets......................... 424,404 131,167 555,571 1997 Net sales................................... 650,643 $105,032 $755,675 Identifiable assets......................... 517,283 116,421 633,704
F-23 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (12) BUSINESS SEGMENTS (CONTINUED) The following is a summary of revenues from external customers, income (loss) from operations, capital spending, depreciation and amortization and identifiable assets for each segment for the years ended December 31, 1999, 1998 and 1997 (000's omitted):
1999 1998 1997 -------- -------- --------- Revenues from external customers: Aerosol..................................................... $483,459 $465,960 $ 479,521 Paint, Plastic, & General Line.............................. 161,698 164,050 186,509 Custom & Specialty.......................................... 68,367 74,873 84,829 Other....................................................... 591 5,363 4,816 -------- -------- --------- Total revenues........................................ $714,115 $710,246 $ 755,675 ======== ======== ========= Income (loss) from operations: Aerosol..................................................... $ 85,727 $ 80,168 $ 79,894 Paint, Plastic, & General Line.............................. 16,871 15,640 12,394 Custom & Specialty.......................................... 8,928 10,972 6,823 Corporate and eliminations (a) (b).......................... (42,823) (83,210) (105,218) -------- -------- --------- Total income (loss) from operations................... $ 68,703 $ 23,570 $ (6,107) ======== ======== ========= Capital spending: Aerosol..................................................... $ 21,877 $ 16,704 $ 33,847 Paint, Plastic, & General Line.............................. 5,866 1,360 8,560 Custom & Specialty.......................................... 956 547 7,270 Corporate................................................... 2,283 4,217 4,353 -------- -------- --------- Total capital spending................................ $ 30,982 $ 22,828 $ 54,030 ======== ======== ========= Depreciation and amortization: Aerosol..................................................... $ 18,554 $ 20,761 $ 22,481 Paint, Plastic, & General Line.............................. 5,680 5,649 6,051 Custom & Specialty.......................................... 2,476 2,457 2,577 Corporate................................................... 5,153 6,572 11,325 -------- -------- --------- Total depreciation and amortization................... $ 31,863 $ 35,439 $ 42,434 ======== ======== ========= Identifiable assets: Aerosol..................................................... $441,126 $308,944 $ 307,590 Paint, Plastic, & General Line.............................. 92,471 92,629 100,600 Custom & Specialty.......................................... 71,625 73,019 93,972 Corporate................................................... 58,348 80,979 131,542 -------- -------- --------- Total identifiable assets............................. $663,570 $555,571 $ 633,704 ======== ======== =========
- ------------------------ (a) Special charges are included in Corporate costs. Management does not evaluate segment performance including such charges. (b) Selling, general and administrative costs are not allocated to individual segments. (13) RECENT DEVELOPMENTS On October 4, 2000, U.S. Can Corporation and Berkshire Partners LLC completed a recapitalization of the Company through a merger. As a result of the recapitalization, all of U.S. Can's common stock, other than certain shares held by designated continuing shareholders (the rollover shareholders), was converted into the right to receive $20.00 in cash per share and options to purchase F-24 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999, 1998 AND 1997 (13) RECENT DEVELOPMENTS (CONTINUED) approximately 1.6 million shares of U.S. Can's common stock were retired in exchange for a cash payment of $20.00 per underlying share, less the applicable option price. Certain shares held by the rollover shareholders were converted into the right to receive $20.00 in cash per share and certain shares held by the rollover shareholders were converted into the right to receive shares of capital stock of the surviving corporation in the merger. The recapitalization was financed by: - a $106.7 million preferred stock investment by Berkshire Partners, its co-investors and certain of the rollover stockholders; - a $53.3 million common stock investment by Berkshire Partners, its co-investors, certain of the rollover stockholders and management; - $260.0 million in term loans under a new senior bank credit facility; - $20.5 million in borrowings under a new revolving credit facility; and - $175.0 million from the sale of 12 3/8% Senior Subordinated Notes due 2010. Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the Company's former the credit agreement, to repay the principal, accrued interest and tender premium applicable to U.S. Can's 10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to U.S. Can's existing stockholders and optionholders as previously described. The recapitalization will have a significant impact on the balance sheet and results of operations of the Company. The Company expects to record a charge of approximately $18.9 million related to the recapitalization in the fourth quarter of 2000. We also expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. (14) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent Guarantor"), United States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"), and the Parent Guarantor's European subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor Subsidiaries"), as of and for the years ended December 31, 1999, 1998 and 1997. The Subsidiary Guarantor was formed by the Issuer in December 1999. Investments in subsidiaries are accounted for by the Parent Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, therefore, reflected in their parent's investment accounts and earnings. This consolidating information reflects the guarantors and non-guarantors of the new 12 3/8% senior subordinated notes due 2010. Previously provided condensed consolidating financial data included in the Parent Guarantor's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 reflected the guarantors and non-guarantors of the old 10 1/8% senior subordinated notes due 2006. The 12 3/8% senior subordinated notes due 2010 are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted subsidiary of the Issuer. USC May Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only Subsidiary Guarantor. The Parent Guarantor has no assets or operations separate from its investment in the Issuer. F-25 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES...................... $ -- $587,780 $126,335 $ -- $714,115 COST OF SALES.................. -- 501,201 110,428 -- 611,629 ------- -------- -------- -------- -------- Gross income................. -- 86,579 15,907 -- 102,486 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... -- 26,627 7,156 -- 33,783 ------- -------- -------- -------- -------- Operating income............. -- 59,952 8,751 -- 68,703 INTEREST EXPENSE ON BORROWINGS................... -- 26,272 2,454 -- 28,726 AMORTIZATION OF DEFERRED FINANCING COSTS.............. -- 1,175 -- -- 1,175 OTHER EXPENSES................. -- 1,728 -- -- 1,728 EQUITY IN EARNINGS OF SUBSIDIARIES................. 21,156 4,103 -- (25,259) -- ------- -------- -------- -------- -------- Income (loss) before income taxes...................... 21,156 34,880 6,297 (25,259) 37,074 PROVISION FOR INCOME TAXES..... -- 12,428 2,194 -- 14,622 EXTRAORDINARY ITEM--LOSS ON THE EARLY EXTINGUISHMENT OF DEBT, net of income tax............ -- (1,296) -- -- (1,296) ------- -------- -------- -------- -------- NET INCOME..................... $21,156 $ 21,156 $ 4,103 $(25,259) $ 21,156 ======= ======== ======== ======== ========
F-26 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (000'S OMITTED)
USC USC MAY EUROPE/ MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- U.S. CAN (PARENT COMPANY (SUBSIDIARY GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- ------------- ------------ ------------ CURRENT ASSETS: Cash and cash equivalents.... $ -- $ 2,095 $ -- $ 13,602 $ -- $ 15,697 Accounts receivable.......... -- 45,205 -- 46,659 -- 91,864 Inventories.................. -- 66,360 -- 49,619 -- 115,979 Prepaid expenses and other assets..................... -- 30,377 5,414 -- 35,791 -------- -------- ------- -------- --------- -------- Total current assets....... -- 144,037 -- 115,294 -- 259,331 NET PROPERTY, PLANT AND EQUIPMENT.................... -- 191,997 -- 140,507 -- 332,504 INTANGIBLE ASSETS.............. -- 50,200 -- 278 -- 50,478 OTHER ASSETS................... 4,891 6,202 -- 10,164 -- 21,257 INTERCOMPANY ADVANCES.......... 242,654 -- -- -- (242,654) -- INVESTMENT IN SUBSIDIARIES..... 57,640 50,919 63,847 -- (172,406) -- -------- -------- ------- -------- --------- -------- Total assets............... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt............. $ -- $ 19,562 $ -- $ 19,262 $ -- $ 38,824 Accounts payable............. -- 50,083 -- 54,106 -- 104,189 Other current liabilities.... -- 62,594 -- 15,990 -- 78,584 -------- -------- ------- -------- --------- -------- Total current liabilities.............. -- 132,239 -- 89,358 -- 221,597 SENIOR DEBT.................... -- 54,536 -- 29,328 -- 83,864 SUBORDINATED DEBT.............. 236,629 -- -- -- -- 236,629 OTHER LONG-TERM LIABILITIES.... -- 43,317 -- 9,607 -- 52,924 INTERCOMPANY ADVANCES.......... -- 155,623 63,847 23,184 (242,654) -- STOCKHOLDERS' EQUITY........... 68,556 57,640 -- 114,766 (172,406) 68,556 -------- -------- ------- -------- --------- -------- Total liabilities and stockholders' equity..... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ========
F-27 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (000'S OMITTED)
USC MAY USC EUROPE/ MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- (PARENT COMPANY (SUBSIDIARY GUARANTOR U.S. CAN GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) CORPORATION ----------- ------------- ----------- --------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES.......................... $ -- $ 51,865 $ -- $10,587 $ 62,452 -------- -------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures................ -- (24,909) -- (6,073) (30,982) Acquisition of businesses, net of cash acquired..................... -- -- (63,847) -- (63,847) Proceeds on the sale of business.... -- 4,500 -- -- 4,500 Proceeds on the sale of property.... 448 -- -- 448 Investment in Formametal S.A........ -- -- -- (1,600) (1,600) -------- -------- -------- ------- -------- Net cash used in investing activities...................... -- (19,961) (63,847) (7,673) (91,481) -------- -------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances..... 25,378 (95,917) 63,847 6,692 -- Issuance of common stock and exercise of stock options......... 2,820 -- -- 2,820 Net borrowings under the revolving line of credit and changes in cash overdrafts........................ -- 23,159 -- 394 23,553 Repurchase of 10 1/8% notes......... (27,696) -- -- -- (27,696) Borrowings of other long-term debt, including capital lease obligations....................... -- 38,598 -- -- 38,598 Payments of other long-term debt, including capital lease obligations....................... -- (5,057) -- (4,392) (9,449) Purchase of treasury stock.......... (502) -- -- -- (502) -------- -------- -------- ------- -------- Net cash (used in) provided by financing activities............ -- (39,217) 63,847 2,694 27,324 -------- -------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ -- -- -- (670) (670) -------- -------- -------- ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... -- (7,313) -- 4,938 (2,375) CASH AND CASH EQUIVALENTS, beginning of year............................. -- 9,408 -- 8,664 18,072 -------- -------- -------- ------- -------- CASH AND CASH EQUIVALENTS, end of period.............................. $ -- $ 2,095 $ -- $13,602 $ 15,697 ======== ======== ======== ======= ========
F-28 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES............................. $ -- $593,606 $116,640 $ -- $710,246 COST OF SALES......................... -- 513,886 104,270 -- 618,156 -------- -------- -------- ------- -------- Gross income........................ -- 79,720 12,370 -- 92,090 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................ -- 26,183 6,468 -- 32,651 SPECIAL CHARGES....................... -- 35,869 -- -- 35,869 -------- -------- -------- ------- -------- Operating income.................... -- 17,668 5,902 -- 23,570 INTEREST EXPENSE ON BORROWINGS........ -- 30,582 2,600 -- 33,182 AMORTIZATION OF DEFERRED FINANCING COSTS............................... -- 1,753 -- 1,753 OTHER EXPENSES........................ -- 1,822 -- -- 1,822 EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY.......................... (16,053) 2,048 -- 14,005 -- -------- -------- -------- ------- -------- Income (loss) before income taxes... (16,053) (14,441) 3,302 14,005 (13,187) PROVISION (BENEFIT) FOR INCOME TAXES............................... -- (6,916) 1,254 -- (5,662) NET LOSS FROM DISCONTINUED OPERATIONS.......................... -- (8,528) -- -- (8,528) -------- -------- -------- ------- -------- NET INCOME (LOSS)..................... $(16,053) $(16,053) $ 2,048 $14,005 $(16,053) ======== ======== ======== ======= ========
F-29 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE (PARENT COMPANY (NON-GUARANTOR U.S. CAN GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CORPORATION ----------- ------------- -------------- ------------ ----------- CURRENT ASSETS: Cash and cash equivalents........... $ -- $ 9,408 $ 8,664 $ -- $ 18,072 Accounts receivable................. -- 41,461 22,281 -- 63,742 Inventories......................... -- 74,965 19,922 -- 94,887 Prepaid expenses and other assets... -- 35,856 3,089 -- 38,945 -------- -------- -------- --------- -------- Total current assets.............. -- 161,690 53,956 -- 215,646 NET PROPERTY, PLANT AND EQUIPMENT..... -- 197,677 70,325 -- 268,002 INTANGIBLE ASSETS..................... -- 51,928 -- -- 51,928 OTHER ASSETS.......................... 6,262 6,847 6,886 -- 19,995 INTERCOMPANY ADVANCES................. 265,428 15,387 -- (280,815) -- INVESTMENT IN SUBSIDIARIES............ 42,812 53,144 -- (95,956) -- -------- -------- -------- --------- -------- Total assets...................... $314,502 $486,673 $131,167 $(376,771) $555,571 ======== ======== ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt.............................. $ -- $ 3,922 $ 2,809 $ -- $ 6,731 Accounts payable.................... -- 37,089 15,228 -- 52,317 Other current liabilities........... -- 67,735 12,751 -- 80,486 -------- -------- -------- --------- -------- Total current liabilities......... -- 108,746 30,788 -- 139,534 SENIOR DEBT........................... -- 19,134 26,483 -- 45,617 SUBORDINATED DEBT..................... 264,325 -- -- -- 264,325 OTHER LONG-TERM LIABILITIES........... -- 51,656 4,262 -- 55,918 INTERCOMPANY PAYABLES................. -- 264,325 16,490 (280,815) -- STOCKHOLDERS' EQUITY.................. 50,177 42,812 53,144 (95,956) 50,177 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity............ $314,502 $486,673 $131,167 $(376,771) $555,571 ======== ======== ======== ========= ========
F-30 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES.............. $ -- $54,913 $10,050 $64,963 ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................ -- (17,266) (5,562) (22,828) Proceeds on the sale of business................ -- 28,296 -- 28,296 Proceeds on the sale of property................ 6,578 23 6,601 Investment in Formametal S.A.................... -- -- (3,000) (3,000) ------- ------- ------- ------- Net cash used in investing activities......... -- 17,608 (8,539) 9,069 ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances................. 10,747 (13,747) 3,000 -- Issuance of common stock and exercise of stock options....................................... 1,658 -- -- 1,658 Net borrowings under the revolving line of credit and changes in cash overdrafts......... -- (36,770) -- (36,770) Repurchase of 10 1/8% notes..................... (10,675) -- -- (10,675) Payments of other long-term debt, including capital lease obligations..................... -- (13,011) (2,607) (15,618) Purchase of treasury stock...................... (1,730) -- -- (1,730) ------- ------- ------- ------- Net cash (used in) provided by financing activities.................................. -- (63,528) 393 (63,135) ------- ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH........... -- -- 402 402 ------- ------- ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS............. -- 8,993 2,306 11,299 CASH AND CASH EQUIVALENTS, beginning of year...... -- 415 6,358 6,773 ------- ------- ------- ------- CASH AND CASH EQUIVALENTS, end of period.......... $ -- $ 9,408 $ 8,664 $18,072 ======= ======= ======= =======
F-31 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
U.S. CAN CORPORATION UNITED STATES USC EUROPE U.S. CAN (PARENT CAN COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- -------------- ------------ ------------ NET SALES............................. $ -- $650,643 $105,032 $ -- $755,675 COST OF SALES......................... -- 569,292 96,463 -- 665,755 -------- -------- -------- ------- -------- Gross income........................ -- 81,351 8,569 -- 89,920 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................ -- 28,784 4,263 -- 33,047 SPECIAL CHARGES....................... -- 62,980 -- -- 62,980 -------- -------- -------- ------- -------- Operating income (loss)............. -- (10,413) 4,306 (6,107) INTEREST EXPENSE ON BORROWINGS........ -- 34,869 1,998 -- 36,867 AMORTIZATION OF DEFERRED FINANCING COSTS............................... -- 1,738 -- 1,738 OTHER EXPENSES........................ -- 1,986 -- -- 1,986 EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY.......................... (32,032) 1,312 -- 30,720 -- -------- -------- -------- ------- -------- Income (loss) before income taxes... (32,032) (47,694) 2,308 30,720 (46,698) PROVISION (BENEFIT) FOR INCOME TAXES............................... -- (17,788) 996 -- (16,792) NET INCOME FROM DISCONTINUED OPERATIONS.......................... -- 1,078 -- -- 1,078 NET LOSS FROM DISCONTINUATION OF BUSINESS............................ -- (3,204) -- -- (3,204) -------- -------- -------- ------- -------- NET INCOME (LOSS)..................... $(32,032) $(32,032) $ 1,312 $30,720 $(32,032) ======== ======== ======== ======= ========
F-32 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH PROVIDED BY OPERATING ACTIVITIES........... $ -- $ 73,220 $ (9,111) $ 64,109 ------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.......................... -- (36,122) (17,908) (54,030) Acquisition of businesses, net of cash acquired.................................... -- (12,398) -- (12,398) Proceeds on the sale of business.............. -- 1,000 -- 1,000 Proceeds on the sale of property.............. -- 630 630 ------- -------- -------- -------- Net cash used in investing activities....... -- (47,520) (17,278) (64,798) ------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances............... 1,027 (3,553) 2,526 -- Issuance of common stock and exercise of stock options..................................... 152 -- -- 152 Net borrowings under the revolving line of credit and changes in cash overdrafts....... 5,962 -- 5,962 Borrowings of other long-term debt, including capital lease obligations................... -- (1,086) 26,021 24,935 Payments of other long-term debt, including capital lease obligations..................... -- (25,662) (724) (26,386) Payments of debt refinancing costs............ -- (1,574) -- (1,574) Purchase of treasury stock.................... (1,179) -- -- (1,179) ------- -------- -------- -------- Net cash (used in) provided by financing activities................................ -- (25,913) 27,823 1,910 ------- -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH......... -- -- (2,414) (2,414) ------- -------- -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS........... -- (213) (980) (1,193) CASH AND CASH EQUIVALENTS, beginning of year.... -- 628 7,338 7,966 ------- -------- -------- -------- CASH AND CASH EQUIVALENTS, end of period........ $ -- $ 415 $ 6,358 $ 6,773 ======= ======== ======== ========
F-33 U.S. CAN CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL DATA (UNAUDITED) (000'S OMITTED) The following is a summary of the unaudited interim results of operations for each of the quarters in 1999 and 1998.
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR ------------------- ------------------- ------------------- ------------------- 1999 1998 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- -------- -------- NET SALES................................. $184,916 $192,363 $186,773 $183,473 $178,123 $177,920 $164,303 $156,490 SPECIAL CHARGES(a)........................ -- -- -- -- -- 35,869 -- OPERATING INCOME (LOSS)................... 17,620 14,955 19,827 15,190 17,248 (20,099) 14,008 13,524 INCOME (LOSS) FROM CONTINUING OPERATIONS.............................. 5,551 3,082 7,138 3,805 6,006 (17,358) 3,757 2,946 NET INCOME (LOSS).................................. $ 5,551 $ 3,082 $ 6,330 $ 3,805 $ 5,518 $(25,886) $ 3,757 $ 2,946 ======== ======== ======== ======== ======== ======== ======== ========
- ------------------------------ (a) See Note 3 of the "Notes to Consolidated Financial Statements." F-34 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (000'S OMITTED)
FOR THE QUARTERLY FOR THE NINE MONTHS PERIOD ENDED ENDED ------------------------- ------------------------ OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3 2000 1999 2000 1999 ----------- ----------- ----------- ---------- NET SALES........................................... $194,655 $178,123 $607,000 $549,812 COST OF SALES....................................... 164,933 152,742 517,562 470,116 -------- -------- -------- -------- Gross income...................................... 29,722 25,381 89,438 79,696 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 10,079 8,133 32,457 25,001 SPECIAL CHARGES..................................... 3,413 -- 3,413 -- -------- -------- -------- -------- Operating income.................................... 16,230 17,248 53,568 54,695 INTEREST EXPENSE ON BORROWINGS...................... 8,184 6,841 24,556 21,758 AMORTIZATION OF DEFERRED FINANCING COSTS............ 381 278 1,161 898 OTHER EXPENSES...................................... 624 432 1,910 1,296 -------- -------- -------- -------- Income before income taxes.......................... 7,041 9,697 25,941 30,743 PROVISION FOR INCOME TAXES.......................... 2,665 3,691 9,807 12,048 -------- -------- -------- -------- Income from operations before extraordinary item.... 4,376 6,006 16,134 18,695 EXTRAORDINARY ITEM, net of income taxes Net loss from early extinguishment of debt.......... -- (488) -- (1,296) -------- -------- -------- -------- NET INCOME.......................................... $ 4,376 $ 5,518 $ 16,134 $ 17,399 ======== ======== ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-35 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE DATA)
OCTOBER 1, DECEMBER 31, 2000 1999 ---------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 7,414 $ 15,697 Accounts receivables, less allowances of $10,871 and $13,367 as of October 1, 2000 and December 31, 1999, respectively............................................ 107,377 91,864 Inventories............................................... 112,580 115,979 Prepaid expenses and other current assets................. 21,261 19,677 Prepaid income taxes...................................... 16,116 16,114 --------- --------- Total current assets.................................... 264,748 259,331 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land...................................................... 6,598 14,541 Buildings................................................. 65,109 83,106 Machinery, equipment and construction in process.......... 432,756 463,400 --------- --------- 504,463 561,047 Less--Accumulated depreciation and amortization........... (232,759) (228,543) --------- --------- Total property, plant and equipment..................... 271,704 332,504 --------- --------- INTANGIBLE ASSETS, less amortization of $13,042 and $12,211 as of October 1, 2000 and December 31, 1999, respectively.............................................. 65,144 50,478 OTHER ASSETS................................................ 24,429 21,257 --------- --------- Total assets............................................ $ 626,025 $ 663,570 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt...................... $ 10,955 $ 38,824 Accounts payable.......................................... 108,478 104,189 Accrued payroll, benefits and insurance................... 24,309 29,500 Restructuring reserves.................................... 13,652 25,016 Other current liabilities................................. 36,273 24,068 --------- --------- Total current liabilities............................... 193,667 221,597 --------- --------- SENIOR DEBT................................................. 71,239 83,864 SUBORDINATED DEBT........................................... 236,629 236,629 --------- --------- Total long-term debt.................................... 307,868 320,493 --------- --------- OTHER LONG-TERM LIABILITIES Deferred income taxes..................................... 13,259 10,670 Other long-term liabilities............................... 42,700 42,254 --------- --------- Total other long-term liabilities....................... 55,959 52,924 --------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued or outstanding.................. -- -- Common stock, $0.01 par value; 50,000,000 shares authorized, 13,659,278 and 13,446,933 shares issued as of October 1, 2000 and December 31, 1999, respectively............................................ 137 135 Paid-in-capital........................................... 114,541 112,840 Unearned restricted stock................................. (305) (629) Treasury common stock, at cost; 85,873 and 83,024 shares at October 1, 2000 and December 31, 1999, respectively............................................ (1,868) (1,380) Currency translation adjustment........................... (25,469) (7,771) Accumulated deficit....................................... (18,505) (34,639) --------- --------- Total stockholders' equity.............................. 68,531 68,556 --------- --------- Total liabilities and stockholders' equity.............. $ 626,025 $ 663,570 ========= =========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-36 U.S. CAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (000'S OMITTED)
NINE MONTH PERIOD ENDED ----------------------- OCTOBER 1, OCTOBER 3, 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 16,134 $ 17,399 Adjustments to reconcile net income to net cash provided by operating activities-- Depreciation and amortization........................... 26,788 25,419 Special Charge.......................................... 3,413 -- Extraordinary loss on extinguishment of debt............ -- 1,296 Deferred income taxes................................... 3,004 2,240 Change in operating assets and liabilities, net of effect of acquired and disposed of businesses: Accounts receivable..................................... (27,386) (16,835) Inventories............................................. (7,450) 5,847 Accounts payable........................................ 12,873 12,383 Accrued payroll, benefits and insurance................. 1,768 9,712 Other, net.............................................. (3,196) 1,877 -------- -------- Net cash provided by operating activities............. 25,948 59,338 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (16,519) (19,713) Proceeds from sale of business............................ 12,088 4,500 Proceeds from sale of property............................ 7,855 556 Investment in Formametal S.A.............................. (4,914) (1,644) -------- -------- Net cash used in investing activities................... (1,490) (16,301) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock and exercise of stock options.... 1,700 1,959 Repurchase of 10 1/8% notes............................... -- (27,696) Payments of long-term debt, including capital lease obligations............................................. (33,993) (2,478) Purchase of treasury stock................................ (488) (210) -------- -------- Net cash used in financing activities................... (32,781) (28,425) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 40 1 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (8,283) 14,613 CASH AND CASH EQUIVALENTS, beginning of year................ 15,697 18,072 -------- -------- CASH AND CASH EQUIVALENTS, end of year...................... $ 7,414 $ 32,685 ======== ========
The accompanying notes to Consolidated Financial Statements are an integral part of these statements. F-37 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 1, 2000 (UNAUDITED) (1) PRINCIPLES OF REPORTING The condensed consolidated financial statements include the accounts of U.S. Can Corporation (the "Corporation"), its wholly owned subsidiary, United States Can Company ("U.S. Can"), and U.S. Can's subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated. These financial statements, in the opinion of management, include normal recurring adjustments necessary for a fair presentation. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year. Generally, quarterly accounting periods are based upon two four-week periods and one five-week period. These financial statements are to be read in conjunction with the previously filed financial statements and footnotes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1999. (2) SPECIAL CHARGES On July 7, 2000, the Company announced a reduction in force program, under which 73 salaried and 34 hourly positions have been eliminated. A one-time charge of $3.4 million for severance and other termination related costs was recorded in the third quarter of 2000. The Company expects to realize annual savings of $5.0 million from this program. On March 10, 2000, the Company sold its Wheeling metal closures and the Warren lithography businesses for $12.1 million in cash. The Company established a disposition provision for the anticipated loss on the sale of the metal closures business in connection with the special charge taken in 1998. Cash costs for restructuring activities in the first nine months of 2000 were $2.9 million. The Company anticipates spending another $3.2 million of such costs in 2000 and $9.3 million in cash costs in 2001 and beyond. The Company continuously evaluates the composition of its various manufacturing facilities in light of current and expected market conditions and demand. (3) ACQUISITIONS On December 30, 1999, the Company acquired all of the partnership interests of May Verpackungen GmbH & Co., KG ("May"), a German limited liability company. The acquisition was financed using the borrowings made by U.S. Can under the Credit Agreement (see Note 6) for an aggregate amount of $64.6 million. F-38 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (3) ACQUISITIONS (CONTINUED) The following is a summary of the preliminary allocation of the aggregate purchase price for May (000's omitted): Current Assets.............................................. $ 53,744 Property, Plant and Equipment............................... 53,037 Goodwill.................................................... 21,880 Other Assets................................................ 3,708 Current Portion of Long Term Debt........................... (17,023) Current Liabilities......................................... (38,722) Long-Term Debt.............................................. (6,552) Other Liabilities........................................... (5,484) -------- Total Purchase Price........................................ $ 64,588 ========
The acquisition was accounted for as a purchase for financial reporting purposes; therefore 1999 results do not include operations related to the acquired business. Certain assets and liabilities of May were revalued to estimated fair values as of the acquisition date. The final amounts recorded may differ based on results of further evaluations of the fair value of the acquired assets and liabilities. The following represents the Company's unaudited pro forma results of operations for the third quarter and first nine months of 1999 as if the May acquisition had occurred on January 1, 1999 (000's omitted, except per share data):
FIRST NINE- THIRD QUARTER 1999 MONTHS 1999 ------------------ ----------- Net Sales....................................... $216,782 $656,754 Net Income...................................... 6,201 18,268
May's pre-acquisition results have been adjusted to reflect amortization of goodwill, the depreciation expense impact of the increased fair market value of property, plant and equipment, interest expense on acquisition borrowings, changes in contractual agreements and the effect of income taxes on the pro forma adjustments. The pro forma information given above does not purport to be indicative of the results that would have been obtained if the operations were combined during the periods presented and is not intended to be a projection of future results or trends. (4) INVENTORIES All domestic inventories, except machine parts, are stated at cost determined by the last-in, first-out ("LIFO") cost method, not in excess of market. Inventories of approximately $47.2 million at October 1, 2000 and $49.6 million at December 31, 1999, at the European subsidiaries and machine shop inventory are stated at cost determined by the first-in, first-out ("FIFO") cost method, not in excess of market. FIFO cost of LIFO inventories approximated their LIFO value at October 1, 2000 and at December 31, 1999. F-39 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (4) INVENTORIES (CONTINUED) Inventories reported in the accompanying balance sheets were classified as follows (000's omitted):
OCTOBER 1, DECEMBER 31, 2000 1999 ---------- ------------ Raw materials......................................... $ 25,920 $ 30,821 Work in process....................................... 50,324 49,884 Finished goods........................................ 36,336 35,274 -------- -------- $112,580 $115,979 ======== ========
(5) RECENT DEVELOPMENTS On October 4, 2000, U.S. Can Corporation and Berkshire Partners LLC completed a recapitalization of the Company through a merger. As a result of the recapitalization, all of U.S. Can's common stock, other than certain shares held by designated continuing shareholders (the rollover shareholders), was converted into the right to receive $20.00 in cash per share and options to purchase approximately 1.6 million shares of U.S. Can's common stock were retired in exchange for a cash payment of $20.00 per underlying share, less the applicable option price. Certain shares held by the rollover shareholders were converted into the right to receive $20.00 in cash per share and certain shares held by the rollover shareholders were converted into the right to receive shares of capital stock of the surviving corporation in the merger. The recapitalization was financed by: - a $106.7 million preferred stock investment by Berkshire Partners, its co-investors and certain of the rollover stockholders; - a $53.3 million common stock investment by Berkshire Partners, its co-investors, certain of the rollover stockholders and management; - $260.0 million in term loans under a new senior bank credit facility; - $20.5 million in borrowings under a new revolving credit facility; and - $175.0 million from the sale of 12 3/8% Senior Subordinated Notes due 2010. Funds generated from the recapitalization were used to retire all of the borrowings outstanding under the Company's former the credit agreement, to repay the principal, accrued interest and tender premium applicable to U.S. Can's 10 1/8% Notes due 2006, to pay fees and expenses associated with the transaction and to make payments to U.S. Can's existing stockholders and optionholders as previously described. The recapitalization will have a significant impact on the balance sheet and results of operations of the Company. The Company expects to record a charge of approximately $18.9 million related to the recapitalization in the fourth quarter of 2000. We also expect to take an extraordinary charge of approximately $14.9 million in the fourth quarter of 2000, related to the tender offer and consent solicitation of the 10 1/8% notes due 2006, including the tender premium and the write-off of remaining deferred financing charges. F-40 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (6) DEBT OBLIGATIONS In connection with the recapitalization discussed above, the Company entered into a Credit Agreement among United States Can Company, as Borrower, U.S. Can Corporation and Domestic Subsidiaries of U.S. Can Corporation as Domestic Guarantors, and certain lenders including Bank of America, N.A., Citicorp North America, Inc., and Bank One NA as of October 4, 2000 (the "Senior Secured Credit Facility"). The Senior Secured Credit Facility provides for aggregate borrowings of $400.0 million consisting of: (i)$80.0 million tranche A loan; (ii) $180.0 million tranche B loan; and (iii) $140.0 million in availability under a revolving credit facility. All of the term debt and approximately $20.5 million under the revolving credit facility were used to finance the recapitalization. Amounts outstanding under the Senior Secured Credit Facility bear interest at a rate per annum equal to either: (1) the base rate (as defined in the Senior Secured Credit Facility) or (2) the LIBOR rate (as defined in the Senior Secured Credit Facility), in each case, plus an applicable margin. The applicable margins are subject to future reductions based on the achievement of certain leverage ratio targets and on senior secured credit rating. The applicable margins are not subject to reduction until after March 2001. Borrowings under the tranche A term loan are due and payable in quarterly installments, which are initially $1.0 million and increase over time to $8.0 million, until the final balance is due on October 4, 2006. Borrowings under the tranche B term loan are due and payable in quarterly installments (the quarterly payments due before December 31, 2006 being in nominal amounts), with the final balance due on October 4, 2008. The revolving credit facility is available until October 4, 2006. In addition, the Company is required to prepay a portion of the facilities under the Senior Secured Credit Facility upon the occurrence of certain specified events. The Senior Secured Credit Facility is secured by a first priority security interest in all existing and after-acquired assets of the Company and its direct and indirect domestic subsidiaries' existing and after-acquired assets, including, without limitation, real property and all of the capital stock owned of our direct and indirect domestic subsidiaries (including certain capital stock of their direct foreign subsidiaries only to the extent permitted by applicable law). In addition, if loans are made to foreign subsidiaries, they will be secured by the existing and after-acquired assets of certain of our foreign subsidiaries. The Company also issued $175.0 million aggregate principal amount of 12 3/8% Senior Subordinated Notes due October 1, 2010 ("Notes"). The Notes are unsecured obligations of U.S. Can and are subordinated in right of payment to all of U.S. Can's senior indebtedness. The Notes are guaranteed by the Corporation and all of U.S. Can's domestic restricted subsidiaries. Both the Senior Secured Credit Facility and the Notes contain a number of financial and restrictive covenants. In general, the financial covenants require the achievement of specified earnings and debt levels. The restrictive covenants limit the Company's ability to incur debt, pay dividends or make distributions, sell assets or consolidate or merge with other companies. As part of the debt-refinancing portion of the recapitalization, the Corporation completed a tender offer and consent solicitation for all of its outstanding 10 1/8% notes due 2006, plus accrued interest and a bond tender premium. $235.7 million of the $236.6 million principal amount of bonds outstanding F-41 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (6) DEBT OBLIGATIONS (CONTINUED) were purchased by the Corporation in the tender offer. An extraordinary charge related to the tender premium and the write-off of remaining deferred financing charges will be taken in the fourth quarter of 2000. As of October 1, 2000, after giving pro forma effect to the recapitalization, there would have been approximately $502.1 million of outstanding indebtedness. For further discussion of the recapitalization see Note (5). (7) SUPPLEMENTAL CASH FLOW INFORMATION The Company paid interest of approximately $13.9 million and $14.3 million for the nine-month periods ended October 1, 2000 and October 3, 1999, respectively. The Company paid approximately $0.4 million and $0.8 million of income taxes for the nine-month periods ended October 1, 2000 and October 3, 1999, respectively. During the nine-month period ended October 3, 1999, the Company issued stock valued at approximately $0.9 million to certain of its employee benefit plans. No stock was contributed in 2000. (8) NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998 (amended by SFAS No. 137 to delay implementation) and will be adopted by the Company in 2001. This new pronouncement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is evaluating SFAS No. 133, but does not believe this pronouncement will have a material impact on the Company's financial position or results of operations. (9) BUSINESS SEGMENTS The Company has established three segments by which management monitors and evaluates business performance, customer base and market share. These segments (Aerosol; Paint, Plastic & General Line and Custom & Specialty) have separate management teams and distinct product lines. The aerosol segment produces steel aerosol containers for personal care, household, automotive, paint and industrial products and has two units: United States and International. The Paint, Plastic & General Line segment produces round metal cans for paint and coatings, oblong cans for items such as lighter fluid and turpentine, and plastic containers for industrial and consumer products. Custom & Specialty produces a wide array of functional and decorative tins and other containers, and beginning in the first quarter of 2000, the pet food and specialty food containers of May. The May acquisition was accounted for as a purchase for financial reporting purposes; therefore, previously reported 1999 results did not include May's operations. For the year ended December 31, 1999, identifiable assets of May were reported as part of the Aerosol segment. F-42 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (9) BUSINESS SEGMENTS (CONTINUED) The following is a summary of revenues from external customers and income (loss) from operations for the three and nine-month periods ended October 1, 2000 and October 3, 1999, respectively (000's omitted):
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------- ----------------------- OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- REVENUES FROM EXTERNAL CUSTOMERS: Aerosol............................................. $114,731 $119,787 $362,786 $372,742 Paint, Plastic, & General Line...................... 39,722 41,135 120,468 127,209 Custom & Specialty.................................. 40,202 17,201 123,746 49,861 -------- -------- -------- -------- Total revenues...................................... $194,655 $178,123 $607,000 $549,812 ======== ======== ======== ======== INCOME (LOSS) FROM OPERATIONS: Aerosol............................................. $ 19,986 $ 20,97 $ 62,411 $ 66,735 Paint, Plastic, & General Line...................... 4,070 4,190 10,475 14,380 Custom & Specialty.................................. 5,666 3,016 16,552 7,070 Corporate and eliminations.......................... (13,492) (10,934) (35,870) (33,490) -------- -------- -------- -------- Total income from operations........................ $ 16,230 $ 17,248 $ 53,568 $ 54,695 ======== ======== ======== ========
(10) COMPREHENSIVE NET INCOME The components of comprehensive income for the three months and nine months ended October 1, 2000 and October 3, 1999 are as follows (000's omitted):
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------- ----------------------- OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Income........................................... $ 4,376 $5,518 $ 16,134 $17,399 Foreign Currency Translation Adjustment.............. (7,669) 3,111 (17,698) (3,422) ------- ------ -------- ------- Comprehensive Income................................. $(3,293) $8,629 $ (1,564) $13,977 ======= ====== ======== =======
(11) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION The following presents the condensed consolidating financial data for U.S. Can Corporation (the "Parent Guarantor"), United States Can Company (the "Issuer"), USC May Verpackungen Holding Inc. (the "Subsidiary Guarantor"), and the Parent Guarantor's European subsidiaries, including May Verpackungen GmbH & Co., KG (the "Non-Guarantor Subsidiaries"), as of October 1, 2000 and December 31, 1999 and for the nine months ended October 1, 2000 and October 3, 1999. The Subsidiary Guarantor was formed by the Issuer in December 1999. Investments in subsidiaries are accounted for by the Parent Guarantor, the Issuer and the Subsidiary Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, F-43 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 1, 2000 (UNAUDITED) (11) PARENT GUARANTOR AND SUBSIDIARY GUARANTOR INFORMATION (CONTINUED) therefore, reflected in their parent's investment accounts and earnings. This consolidating information reflects the guarantors and non-guarantors of the new 12 3/8% senior subordinated notes due 2010. Previously provided condensed consolidating financial data included in the Parent Guarantor's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 reflected the guarantors and non-guarantors of the old 10 1/8% senior subordinated notes due 2006. The 12 3/8% senior subordinated notes due 2010 are guaranteed on a full, unconditional, unsecured, senior subordinated, joint and several basis by the Parent Guarantor, the Subsidiary Guarantor and any other domestic restricted subsidiary of the Issuer. USC May Verpackungen Holding Inc., which is wholly owned by the Issuer, currently is the only Subsidiary Guarantor. The Parent Guarantor has no assets or operations separate from its investment in the Issuer. F-44 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (UNAUDITED) (000'S OMITTED)
USC MAY USC EUROPE/ U.S. CAN VERPACKUGEN MAY CORPORATION UNITED STATES HOLDING VERPACKUGEN U.S. CAN (PARENT CAN COMPANY (SUBSIDIARY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- -------------- ------------ ------------ NET SALES.............................. $ -- $430,022 $ -- $176,978 $ -- $607,000 COST OF SALES.......................... -- 365,075 -- 152,487 -- 517,562 ------- -------- ------- -------- -------- -------- Gross income......................... -- 64,947 -- 24,491 89,438 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................. -- 21,258 -- 11,199 -- 32,457 SPECIAL CHARGES........................ 3,413 -- -- -- 3,413 ------- -------- ------- -------- -------- -------- Operating income..................... -- 40,276 -- 13,292 -- 53,568 INTEREST EXPENSE ON BORROWINGS......... 18,482 4,072 2,002 24,556 AMORTIZATION OF DEFERRED FINANCING COSTS................................ -- 781 380 -- -- 1,161 OTHER EXPENSES......................... -- 1,074 -- 836 -- 1,910 EQUITY IN EARNINGS OF SUBSIDIARIES..... 16,134 3,900 2,317 -- (22,351) -- PROVISION (BENEFIT) FOR INCOME TAXES... -- 7,705 (1,692) 3,794 -- 9,807 ------- -------- ------- -------- -------- -------- NET INCOME (LOSS)...................... $16,134 $ 16,134 $ (443) $ 6,660 $(22,351) $ 16,134 ======= ======== ======= ======== ======== ========
F-45 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF OCTOBER 1, 2000 (000'S OMITTED)
USC EUROPE/MAY USC MAY VERPACKUGEN U.S. CAN UNITED STATES VERPACKUGEN GMBH CORPORATION CAN HOLDING (NON- U.S. CAN (PARENT COMPANY (SUBSIDIARY GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- ------------- ------------ ------------ Current Assets: Cash and cash equivalents............. $ -- $ 3,015 $ -- $ 4,399 $ -- $ 7,414 Accounts receivable................... -- 59,209 -- 48,168 -- 107,377 Inventories........................... -- 65,327 -- 47,253 -- 112,580 Prepaid expenses and other assets..... -- 29,479 -- 7,898 -- 37,377 -------- -------- -------- -------- --------- -------- Total current assets................ -- 157,030 -- 107,718 -- 264,748 Net property, plant and equipment....... -- 169,036 -- 102,668 -- 271,704 Intangible assets....................... -- 42,315 -- 22,829 -- 65,144 Other assets............................ 10,513 -- 13,916 24,429 Intercompany advances................... 251,513 -- -- -- (251,513) -- Investment in subsidiaries.............. 53,647 37,525 57,061 -- (148,233) -- -------- -------- -------- -------- --------- -------- Total assets........................ $305,160 $416,419 $ 57,061 $247,131 $(399,746) $626,025 ======== ======== ======== ======== ========= ======== Current Liabilities Current maturities of long-term debt................................ $ -- $ 3,750 $ -- $ 7,205 $ -- $ 10,955 Accounts payable...................... -- 63,829 -- 44,649 -- 108,478 Other current liabilities............. -- 58,077 -- 16,157 -- 74,234 -------- -------- -------- -------- --------- -------- Total current liabilities........... -- 125,656 -- 68,011 -- 193,667 Senior debt............................. -- 50,182 -- 21,057 -- 71,239 Subordinated debt....................... 236,629 -- -- -- 236,629 Other long-term liabilities............. -- 46,904 -- 9,055 -- 55,959 INTERCOMPANY ADVANCES................... -- 140,030 67,348 44,135 (251,513) -- STOCKHOLDERS' EQUITY.................... 68,531 53,647 (10,287) 104,873 (148,233) 68,531 -------- -------- -------- -------- --------- -------- Total liabilities and stockholders' equity............................ $305,160 $416,419 $ 57,061 $247,131 $(399,746) $626,025 ======== ======== ======== ======== ========= ========
F-46 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED OCTOBER 1, 2000 (UNAUDITED) (000'S OMITTED)
USC EUROPE/ USC MAY MAY U.S. CAN UNITED STATES VERPACKUGEN VERPACKUGEN CORPORATION CAN HOLDING (NON- (PARENT COMPANY (SUBSIDIARY GUARANTOR U.S. CAN GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) CORPORATION ----------- ------------- ---------------- -------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES.............. $ -- $ 35,165 $(2,760) $ (6,457) $25,948 ------- -------- ------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................ -- (11,376) -- (5,143) (16,519) Proceeds on sale of business.................... -- 12,088 -- -- 12,088 Proceeds on the sale of property................ 7,855 -- -- 7,855 Investment in Formametal S.A.................... -- -- (4,914) (4,914) ------- -------- ------- -------- ------- Net cash used in investing activities......... -- 8,567 -- (10,057) (1,490) ------- -------- ------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances................. (1,212) (24,034) 2,760 22,486 -- Issuance of common stock and exercise of stock options....................................... 1,700 -- -- -- 1,700 Borrowings of other long-term debt, including capital lease obligations..................... -- (18,784) (15,209) (33,993) Purchase of treasury stock...................... (488) -- -- -- (488) ------- -------- ------- -------- ------- Net cash (used in) provided by financing activities.................................. -- (42,818) 2,760 7,277 (32,781) ------- -------- ------- -------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH........... -- -- -- 40 40 ------- -------- ------- -------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... -- 914 -- (9,197) (8,283) CASH AND CASH EQUIVALENTS, beginning of year...... -- 2,101 -- 13,596 15,697 ------- -------- ------- -------- ------- CASH AND CASH EQUIVALENTS, end of period.......... $ -- $ 3,015 $ -- $ 4,399 $ 7,414 ======= ======== ======= ======== =======
F-47 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTH PERIOD ENDED OCTOBER 3, 1999 (UNAUDITED) (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED -------------- ------------- -------------- ------------ ------------ NET SALES......................................... $ -- $424,465 $125,347 $ -- $549,812 COST OF SALES..................................... -- 361,358 108,758 -- 470,116 ------- -------- -------- -------- -------- Gross income.................................... -- 63,107 16,589 -- 79,696 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... -- 18,148 6,853 -- 25,001 ------- -------- -------- -------- -------- Operating Income................................ -- 44,959 9,736 -- 54,695 INTEREST EXPENSE ON BORROWINGS.................... -- 19,250 2,508 -- 21,758 AMORTIZATION OF DEFERRED FINANCING COSTS.......... -- 898 -- -- 898 OTHER EXPENSES.................................... -- 1,296 -- -- 1,296 EQUITY EARNINGS (LOSS) FROM SUBSIDIARY............ 17,399 4,772 -- (22,171) -- PROVISION FOR INCOME TAXES........................ -- 9,592 2,456 -- 12,048 EXTRAORDINARY ITEM--LOSS ON THE EARLY EXTINGUISHMENT OF DEBT, net of income tax....... -- (1,296) -- -- (1,296) ------- -------- -------- -------- -------- NET INCOME (LOSS)................................. $17,399 $ 17,399 $ 4,772 $(22,171) $ 17,399 ======= ======== ======== ======== ========
F-48 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE-MONTH PERIOD ENDED OCTOBER 3, 1999 (UNAUDITED) (000'S OMITTED)
U.S. CAN UNITED STATES CORPORATION CAN USC EUROPE U.S. CAN (PARENT COMPANY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED ----------- ------------- -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES........................ $ -- $ 52,165 $ 6,641 $ 58,806 ------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... -- (16,691) (3,022) (19,713) Proceeds on the sale of business............................ -- 4,500 -- 4,500 Proceeds on the sale of property............................ -- 556 -- 556 Investment in Formametal S.A................................ -- -- (1,644) (1,644) ------- -------- ------- -------- Net cash used in investing activities....................... -- (11,635) (4,666) (16,301) ------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in intercompany advances........................... (1,749) (3,993) 5,742 -- Issuance of common stock and exercise of stock options.... 1,959 -- -- 1,959 Net borrowings under the revolving line of credit and changes in cash overdrafts.............................. -- 6,014 203 6,217 Repurchase of 10 1/8% notes............................... -- (27,696) -- (27,696) Payments of other long-term debt, including capital lease obligations............................................. -- (4,539) (4,156) (8,695) Purchase of treasury stock, net........................... (210) -- -- (210) ------- -------- ------- -------- Net cash (used in) provided by financing activities..... -- (30,214) 1,789 (28,425) ------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... -- -- 1 1 ------- -------- ------- -------- DECREASE IN CASH AND CASH EQUIVALENTS....................... -- 10,316 3,765 14,081 ------- -------- ------- -------- CASH AND CASH EQUIVALENTS, beginning of year................ -- 9,408 8,664 18,072 ------- -------- ------- -------- CASH AND CASH EQUIVALENTS, end of period.................... -- 19,724 12,429 32,153 ======= ======== ======= ========
F-49 U.S. CAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (000'S OMITTED)
USC MAY USC EUROPE/ U.S. CAN UNITED STATES VERPACKUGEN MAY CORPORATION CAN HOLDING VERPACKUGEN U.S. CAN (PARENT COMPANY (SUBSIDIARY (NON-GUARANTOR CORPORATION GUARANTOR) (ISSUER) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED ----------- ------------- ----------- -------------- ------------ ------------ CURRENT ASSETS: Cash and cash equivalents............ $ -- $ 2,095 $ -- $ 13,602 $ -- $ 15,697 Accounts receivable.................. -- 45,205 -- 46,659 -- 91,864 Inventories.......................... -- 66,360 -- 49,619 -- 115,979 Prepaid expenses and other assets.... -- 30,377 5,414 -- 35,791 -------- -------- ------- -------- --------- -------- Total current assets............... -- 144,037 -- 115,294 -- 259,331 NET PROPERTY, PLANT AND EQUIPMENT...... -- 191,997 -- 140,507 -- 332,504 INTANGIBLE ASSETS...................... -- 50,200 -- 278 -- 50,478 OTHER ASSETS........................... 4,891 6,202 -- 10,164 -- 21,257 INTERCOMPANY ADVANCES.................. 242,654 -- -- -- (242,654) -- INVESTMENT IN SUBSIDIARIES............. 57,640 50,919 63,847 -- (172,406) -- -------- -------- ------- -------- --------- -------- Total assets....................... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ======== CURRENT LIABILITIES Current maturities of long-term debt............................... $ -- $ 19,562 $ -- $ 19,262 $ -- $ 38,824 Accounts payable..................... -- 50,083 -- 54,106 -- 104,189 Other current liabilities............ -- 62,594 -- 15,990 -- 78,584 -------- -------- ------- -------- --------- -------- Total current liabilities.......... -- 132,239 -- 89,358 -- 221,597 SENIOR DEBT............................ -- 54,536 -- 29,328 -- 83,864 SUBORDINATED DEBT...................... 236,629 -- -- -- -- 236,629 OTHER LONG-TERM LIABILITIES............ -- 43,317 -- 9,607 -- 52,924 INTERCOMPANY ADVANCES.................. -- 155,623 63,847 23,184 (242,654) -- STOCKHOLDERS' EQUITY................... 68,556 57,640 -- 114,766 (172,406) 68,556 -------- -------- ------- -------- --------- -------- Total liabilities and stockholders' equity........................... $305,185 $443,355 $63,847 $266,243 $(415,060) $663,570 ======== ======== ======= ======== ========= ========
F-50 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- You should rely only upon the information contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date. UNITED STATES CAN COMPANY EXCHANGE OFFER $175,000,000 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 ------------------------ [LOGO] ------------------------ , 2001 Until , all dealers effecting transactions in the notes or the exchange notes, whether or not participating in the exchange offer, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes a corporation to indemnify and advance reasonable expenses to any person who was a party, is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, Section 145 of the DGCL states that no indemnification may be made in respect of any claim, issue or matter as to which such person is adjudged to be liable to us unless and only to the extent that the Court of Chancery or the court in which the action was brought determines that, despite the adjudication of liability but in view of all of the circumstances of the case, he or she was fairly and reasonably entitled to indemnity for the expenses which the court deems proper. Our Certificate of Incorporation includes indemnification provisions that mirror Section 145 of the DGCL Consequently, any of our directors or officers or any person serving at our request in those capacities will be fully indemnified against such judgments, penalties, fines, settlements and reasonable expenses actually incurred, except if (1) he or she did not conduct himself or herself in good faith and did not reasonably believe his or her conduct was in the corporation's best interests; or (2) in the case of any criminal action or proceeding, he or she had reasonable cause to believe his or her conduct was unlawful. Our Certificate of Incorporation also contains a provision eliminating liability to us or our shareholders for monetary damages from breach of fiduciary duty as a director, except under certain specified circumstances. The inclusion of these indemnification provisions in our Certificate of Incorporation and is intended to enable us to attract qualified persons to serve as directors and officers who might otherwise be reluctant to serve. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following exhibits are either filed with this registration statement or incorporated by reference:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 2.1 Agreement and Plan of Merger (the "Merger Agreement") dated as of June 1, 2000 between U.S. Can Corporation and Pac Packaging Acquisition Corporation (Exhibit 2 to the current report on Form 8-K, filed on June 15, 2000).(2) 2.2 First Amendment to Merger Agreement dated as of June 28, 2000 (Exhibit 2.2 to the current report on Form 8-K, filed on June 30, 2000).(2) 2.3 Second Amendment to Merger Agreement dated as of August 22, 2000 (Exhibit 2.3 to the current report on Form 8-K, filed on August 31, 2000).(2) 3.1 Restated Certificate of Incorporation of U.S. Can Corporation.* 3.2 Amended and Restated By-laws of U.S. Can Corporation.* 3.3 Restated Certificate of Incorporation of United States Can Company.*
II-1
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 3.4 Amended and Restated By-laws of United States Can Company.* 3.5 Certificate of Incorporation of USC May Verpackungen Holding Inc.* 3.6 By-Laws of USC May Verpackungen Holding Inc.* 4.1 Indenture dated as of October 4, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 4.2 Registration Rights Agreement dated as of October 4, 2000 among United States Can Company, Salomon Smith Barney and Banc of America Securities LLC.* 4.3 Form of Letter of Transmittal.(1) 4.4 Form of Notice of Guaranteed Delivery.(1) 4.5 Form of Exchange Agent Agreement.(1) 4.6 Form of Exchange Note.(1) 5 Opinion of Ropes & Gray.(1) 10.1 Credit Agreement dated as of October 4, 2000, among United States Can Company, the guarantors and Bank of America, N.A. and the other financial institutions listed therein, as Lenders (Exhibit 10.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.* 10.3 Security Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.* 10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce, CA property (Exhibit 10.10 to the quarterly report on Form 10-Q for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.5 Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.11 to the quarterly report on Form 10-Q, for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000 (Exhibit 10.7 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2) 10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property.* 10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to the annual report on Form 10-K for the fiscal year ended December 31, 1996, filed on March 26, 1997).(2) 10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the quarterly report on Form 10-Q for the quarter ended July 2, 2000, filed on August 15, 2000).(2) 10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.55 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.13 Employment Agreement dated October 4, 2000 by and among Paul W. Jones, United States Can Company and U.S. Can Corporation.*
II-2
EXHIBIT NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 10.14 Employment Agreement dated October 4, 2000 by and among John L. Workman, United States Can Company and U.S. Can Corporation.* 10.15 Employment Agreement dated October 4, 2000 by and among Gillian V. Derbyshire, United States Can Company and U.S. Can Corporation.* 10.16 Employment Agreement dated October 4, 2000 by and among Roger B. Farley, United States Can Company and U.S. Can Corporation.* 10.17 Employment Agreement dated October 4, 2000 by and among J. Michael Kirk, United States Can Company and U.S. Can Corporation.* 10.18 Employment Agreement dated October 4, 2000 by and among Thomas A. Scrimo, United States Can Company and U.S. Can Corporation.* 10.19 Service Agreement with David R. Ford dated November 24, 1997 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.20 Employee Agreement dated October 4, 2000 by and among David R. Ford, United States Can Company and U.S. Can Corporation.(1) 10.21 Change-in-Control Agreement dated February 4, 1998 by and among David R. Ford, U.S. Can Corporation and United States Can Company (Exhibit 10.51 to the annual report on Form 10-K for the fiscal year ended December 31, 1997, filed on March 26, 1998).(2) 10.22 U.S. Can Corporation Executive Deferred Compensation Plan (Exhibit 10.30 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.23 Amendment No. 1 to the U.S. Can Corporation Executive Deferred Compensation Plan, dated as of October 4, 2000.(1) 10.24 U.S. Can Corporation 2000 Equity Incentive Plan.* 10.25 United States Can Company Executive Severance Plan, dated as of October 13, 1999 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2) 10.26 U.S. Can Corporation Stockholders Agreement, dated as of October 4, 2000.(1) 12 Computation of Ratio of Earnings to Fixed Charges.(1) 21 Subsidiaries of the Registrants.* 23.1 Consent of Arthur Andersen LLP.(1) 23.2 Consent of Ropes & Gray (included in Exhibit 5). 24 Power of Attorney (included as part of the Signature Pages). 25 Statement of Eligibility of Trustee.*
- ------------------------ * Previously filed. (1) Filed with this registration statement. (2) Incorporated by reference. (b) Other financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or the accompanying notes. ITEM 22. UNDERTAKINGS (1) United States Can Company undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (x) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-3 (y) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (z) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (2) The undersigned registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and where applicable, each filing of employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by that director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (4) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this registration statement, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request. (5) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on February 15, 2001. U.S. CAN CORPORATION By /s/ JOHN L. WORKMAN ----------------------------------------------- John L. Workman EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints John L. Workman, his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to the Registration Statement on Form S-4 of United States Can Company's 12 3/8% Series B Senior Subordinated Notes, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, making such changes in this Registration Statement as such person so acting deems appropriate, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities indicated and on February 15, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board, President and Chief - ------------------------------------------------- Executive Officer Paul W. Jones /s/ JOHN L. WORKMAN Director, Executive Vice President and Chief - ------------------------------------------------- Financial Officer John L. Workman /s/ CARL FERENBACH Director - ------------------------------------------------- Carl Ferenbach /s/ RICHARD K. LUBIN Director - ------------------------------------------------- Richard K. Lubin Director - ------------------------------------------------- Ricardo Poma Director - ------------------------------------------------- Francisco A. Soler /s/ LOUIS B. SUSMAN Director - ------------------------------------------------- Louis B. Susman
II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on February 15, 2001. UNITED STATES CAN COMPANY By /s/ JOHN L. WORKMAN ----------------------------------------------- John L. Workman EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints John L. Workman, his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to the Registration Statement on Form S-4 of United States Can Company's 12 3/8% Series B Senior Subordinated Notes, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, making such changes in this Registration Statement as such person so acting deems appropriate, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities indicated and on February 15, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board, President and Chief - ------------------------------------------------- Executive Officer Paul W. Jones /s/ JOHN L. WORKMAN Director, Executive Vice President and Chief - ------------------------------------------------- Financial Officer John L. Workman /s/ CARL FERENBACH Director - ------------------------------------------------- Carl Ferenbach /s/ RICHARD K. LUBIN Director - ------------------------------------------------- Richard K. Lubin Director - ------------------------------------------------- Ricardo Poma Director - ------------------------------------------------- Francisco A. Soler /s/ LOUIS B. SUSMAN Director - ------------------------------------------------- Louis B. Susman
II-6 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago, state of Illinois, on February 15, 2001. USC MAY VERPACKUNGEN HOLDING INC. By /s/ JOHN L. WORKMAN ------------------------------------------ John L. Workman VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints John L. Workman, his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to the Registration Statement on Form S-4 of United States Can Company's 12 3/8% Series B Senior Subordinated Notes, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, making such changes in this Registration Statement as such person so acting deems appropriate, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities indicated and on February 15, 2001.
SIGNATURE TITLE --------- ----- /s/ PAUL W. JONES Chairman of the Board and President - -------------------------------------------- Paul W. Jones /s/ JOHN L. WORKMAN Director, Vice President and Chief Financial - -------------------------------------------- Officer John L. Workman /s/ STEVEN K. SIMS Director, Vice President and Secretary - -------------------------------------------- Steven K. Sims Director, Vice President - -------------------------------------------- David R. Ford
II-7 EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 2.1 Agreement and Plan of Merger (the "Merger Agreement") dated as of June 1, 2000 between U.S. Can Corporation and Pac Packaging Acquisition Corporation (Exhibit 2 to the current report on Form 8-K, filed on June 15, 2000).(2) 2.2 First Amendment to Merger Agreement dated as of June 28, 2000 (Exhibit 2.2 to the current report on Form 8-K, filed on June 30, 2000).(2) 2.3 Second Amendment to Merger Agreement dated as of August 22, 2000 (Exhibit 2.3 to the current report on Form 8-K, filed on August 31, 2000).(2) 3.1 Restated Certificate of Incorporation of U.S. Can Corporation.* 3.2 Amended and Restated By-laws of U.S. Can Corporation.* 3.3 Restated Certificate of Incorporation of United States Can Company.* 3.4 Amended and Restated By-laws of United States Can Company.* 3.5 Certificate of Incorporation of USC May Verpackungen Holding Inc.* 3.6 By-Laws of USC May Verpackungen Holding Inc.* 4.1 Indenture dated as of October 4, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 4.2 Registration Rights Agreement dated as of October 4, 2000 among United States Can Company, Salomon Smith Barney and Banc of America Securities LLC.* 4.3 Form of Letter of Transmittal.(1) 4.4 Form of Notice of Guaranteed Delivery.(1) 4.5 Form of Exchange Agent Agreement.(1) 4.6 Form of Exchange Note.(1) 5 Opinion of Ropes & Gray.(1) 10.1 Credit Agreement dated as of October 4, 2000, among United States Can Company, the guarantors and Bank of America, N.A. and the other financial institutions listed therein, as Lenders (Exhibit 10.1 to the current report on Form 8-K, filed on October 18, 2000).(2) 10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.* 10.3 Security Agreement dated as of October 4, 2000 among U.S. Can Corporation, United States Can Company, each of the domestic subsidiaries of United States Can Company and Bank of America, N.A.* 10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce, CA property (Exhibit 10.10 to the quarterly report on Form 10-Q for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.5 Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.11 to the quarterly report on Form 10-Q, for the quarter ended April 6, 1997, filed on May 20, 1997).(2) 10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000 (Exhibit 10.7 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2)
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property.* 10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to the annual report on Form 10-K for the fiscal year ended December 31, 1996, filed on March 26, 1997).(2) 10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the quarterly report on Form 10-Q for the quarter ended July 2, 2000, filed on August 15, 2000).(2) 10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as amended, relating to the Weirton, WV property (Exhibit 10.55 to the annual report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 26, 1996).(2) 10.13 Employment Agreement dated October 4, 2000 by and among Paul W. Jones, United States Can Company and U.S. Can Corporation.* 10.14 Employment Agreement dated October 4, 2000 by and among John L. Workman, United States Can Company and U.S. Can Corporation.* 10.15 Employment Agreement dated October 4, 2000 by and among Gillian V. Derbyshire, United States Can Company and U.S. Can Corporation.* 10.16 Employment Agreement dated October 4, 2000 by and among Roger B. Farley, United States Can Company and U.S. Can Corporation.* 10.17 Employment Agreement dated October 4, 2000 by and among J. Michael Kirk, United States Can Company and U.S. Can Corporation.* 10.18 Employment Agreement dated October 4, 2000 by and among Thomas A. Scrimo, United States Can Company and U.S. Can Corporation.* 10.19 Service Agreement with David R. Ford dated November 24, 1997 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.20 Employee Agreement dated October 4, 2000 by and among David R. Ford, United States Can Company and U.S. Can Corporation.(1) 10.21 Change-in-Control Agreement dated February 4, 1998 by and among David R. Ford, U.S. Can Corporation and United States Can Company (Exhibit 10.51 to the annual report on Form 10-K for the fiscal year ended December 31, 1997, filed on March 26, 1998).(2) 10.22 U.S. Can Corporation Executive Deferred Compensation Plan (Exhibit 10.30 to the annual report on Form 10-K for the fiscal year ended December 31, 1998, filed on March 31, 1999).(2) 10.23 Amendment No. 1 to the U.S. Can Corporation Executive Deferred Compensation Plan, dated as of October 4, 2000.(1) 10.24 U.S. Can Corporation 2000 Equity Incentive Plan.* 10.25 United States Can Company Executive Severance Plan, dated as of October 13, 1999 (Exhibit 10.34 to the annual report on Form 10-K for the fiscal year ended December 31, 1999, filed on March 30, 2000).(2)
NUMBER EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 10.26 U.S. Can Corporation Stockholders Agreement, dated as of October 4, 2000.(1) 12 Computation of Ratio of Earnings to Fixed Charges.(1) 21 Subsidiaries of the Registrants.* 23.1 Consent of Arthur Andersen LLP.(1) 23.2 Consent of Ropes & Gray. (included in Exhibit 5) 24 Power of Attorney (included as part of the Signature Pages) 25 Statement of Eligibility of Trustee.*
- ------------------------ * Previously filed. (1) Filed with this registration statement. (2) Incorporated by reference. EX-4.3 2 a2037960zex-4_3.txt EXHIBIT 4.3 Exhibit 4.3 FORM OF LETTER OF TRANSMITTAL OF UNITED STATES CAN COMPANY OFFER TO EXCHANGE ITS 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR AN EQUAL PRINCIPAL AMOUNT OF ITS 12 3/8% SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE NOT BEEN SO REGISTERED PURSUANT TO THE PROSPECTUS DATED ____________, 2001 This Letter of Transmittal, Certificates (as defined below) and any other required documents should be sent or delivered by each holder of Notes (as defined below) or such holder's agent to the Exchange Agent at the address set forth below. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: BANK ONE TRUST COMPANY, N.A. BY OVERNIGHT COURIER OR REGISTERED OR CERTIFIED MAIL: Bank One Trust Company, N.A. Global Corporate Trust Services 1 Bank One Plaza, Suite IL1-0134 Chicago, Illinois 60670-0134 Attention: Exchanges BY HAND DELIVERY: Bank One Trust Company, N.A. Bank One Trust Company, N.A. 14 Wall Street, 8th Floor OR One North State Street, 9th Floor New York, New York 10005 Chicago, Illinois 60602 Attention: Exchanges Attention: Exchanges
Facsimile: (312) 407-8853 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. - ------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON _________, 2001, UNLESS EXTENDED. - ------------------------------------------------------------------------------- Capitalized terms used herein but not defined shall have the same meaning given them in the Prospectus (as defined below). This Letter of Transmittal is to be completed by holders of Notes (as defined below) either if Notes are to be forwarded herewith or if tenders of Notes are to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus and an Agent's message (as defined herein) is not delivered. Holders of Notes whose certificates ("Certificates") for such Notes are not immediately available or who cannot deliver their Certificates and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date (as defined in "Exchange Offer--Expiration Dates; Extensions; Amendments" of the Prospectus) or who cannot comply with the book-entry transfer procedures on a timely basis must tender their Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" of the Prospectus. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. List below the Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate numbers and/or the number of Notes tendered should be listed on a separate signed schedule and attached hereto. NOTE: SIGNATURES MUST BE PROVIDED ON THE FOLLOWING PAGE. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. - ------------------------------------------------------------------------------- ALL TENDERING HOLDERS MUST COMPLETE THIS BOX. - ------------------------------------------------------------------------------- DESCRIPTION OF NOTES TENDERED - -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON NOTES TENDERED NOTES TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------- ------------------------ CERTIFICATE PRINCIPAL AMOUNT OF NUMBER(S)* NOTES TENDERED** - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ TOTAL: - ------------------------------------------------------------------------------------------------------------------
*Need not be completed by holders tendering by book-entry transfer. **All Notes held shall be deemed tendered unless a lesser number is specified in this column. - ------------------------------------------------------------------------------- 2 BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY - ------------------------------------------------------------------------------- / / CHECK HERE IF NOTES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: -------------------------------------------- DTC Account Number: -------------------------------------------------- Transaction Code Number: --------------------------------------------- / / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Name(s) Holder(s): --------------------------------- Window Ticket Number (if any): ------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ---------------------- Name of Institution which Guaranteed Delivery: --------------------------- If Guaranteed Delivery is to be made by Book-Entry Transfer: Name of Tendering Institution: ----------------------------------- DTC Account Number: ---------------------------------------------- Transaction Code Number: ----------------------------------------- / / CHECK HERE IF NOTES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. / / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE TEN ADDITIONAL COPIES OF THE PROSPECTUS AND TEN COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------------------------- Address: ------------------------------------------------------------------ 3 LADIES AND GENTLEMEN: The undersigned hereby tenders to United States Can Company, a Delaware corporation (the "Purchaser"), the above-described principal amount of the Purchaser's outstanding 123/8% Senior Subordinated Notes due 2010 (collectively, the "Notes") in exchange for a like principal amount of the Purchaser's new 123/8% Series B Senior Subordinated Notes due 2010 (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated _______, 2001 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer"). Subject to and effective upon the acceptance for exchange of all or any portion of the Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Purchaser all right, title and interest in and to such Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Purchaser in connection with the Exchange Offer) with respect to the tendered Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Notes to the Purchaser, together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be issued in exchange for such Notes, (ii) present Certificates for such Notes for transfer, and to transfer the Notes on the books of the Purchaser, and (iii) receive for the account of the Purchaser all benefits and otherwise exercise all rights of beneficial ownership of such Notes, all in accordance with the terms and conditions of the Exchange Offer. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE PURCHASER WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE PURCHASER OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The name(s) and address(es) of the registered holder(s) of the Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Notes. The Certificate number(s) and the Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If any tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Notes will be returned (or, in the case of Notes tendered by book-entry transfer, such Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. If the undersigned is a broker-dealer holding Notes acquired for its own account as a result of market-making activities or other trading activities, it agrees to deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Notes pursuant to the Exchange Offer. The undersigned understands that tenders of Notes pursuant to any one of the procedures described in "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions will, upon the Purchaser's acceptance for exchange of such tendered Notes, constitute a binding agreement between the undersigned and the 4 Purchaser upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Purchaser may not be required to accept for exchange any of the Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the Exchange Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Notes, that such Exchange Notes be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions" below, please deliver Exchange Notes to the undersigned at the address shown below the undersigned's signature. BY TENDERING NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF THE PURCHASER, (II) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, (III) ANY EXCHANGE NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. ANY HOLDER OF NOTES THAT IS NOT A BROKER-DEALER AND THAT IS USING THE EXCHANGE OFFER TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE NOTES IS HEREBY NOTIFIED (1) THAT IT WILL NOT BE ABLE TO RELY ON THE POSITION OF THE STAFF OF THE DIVISION OF CORPORATE FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION (THE "STAFF") SET FORTH IN EXXON CAPITAL HOLDINGS CORPORATION (AVAILABLE APRIL 13, 1989) AND SIMILAR LETTERS AND (2) THAT IT MUST COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF EXCHANGE NOTES. ANY HOLDER OF NOTES THAT IS A BROKER-DEALER, BY TENDERING NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF TO THIRD PARTIES, THAT (A) SUCH NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). The Purchaser has agreed that, subject to the provisions of the Registration Rights Agreement, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer (as defined below) in connection with resales of Exchange Notes received in exchange for Notes, where such Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making activities or other trading activities, for a period ending one year after the Expiration Date (subject to extension under certain limited circumstances described in the Prospectus) or the earliest of: (1) the date on which a person other than a broker-dealer for an Exchange Note has exchanged such Exchange Note; (2) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer before the date of such sale a copy of the Prospectus; (3) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement; or (4) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act. In that regard, each Broker-Dealer who acquired Notes for its own account and as a result of market-making or other trading activities (a "Participating Broker-Dealer"), by tendering such Notes and executing this Letter of Transmittal, agrees that, upon receipt of notice from the Purchaser of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference therein, in light of the 5 circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to the Prospectus until the Purchaser has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Purchaser has given notice that the sale of the Exchange Notes may be resumed, as the case may be. If the Purchaser gives such notice to suspend the sale of the Exchange Notes, it shall extend the one-year period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of Exchange Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemented or amended Prospectus necessary to permit resales of the Exchange Notes or to and including the date on which the Purchaser has given notice that the sale of Exchange Notes may be resumed, as the case may be. As a result, a Participating Broker-Dealer who intends to use the Prospectus in connection with resales of Exchange Notes received in exchange for Notes pursuant to the Exchange Offer must notify the Purchaser, or cause the Purchaser to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided above or may be delivered to the Exchange Agent at the address set forth in the Prospectus under "The Exchange Offer--Exchange Agent." Holders of Notes whose Notes are accepted for exchange will not receive Distributions on such Notes, and the undersigned waives the right to receive any Distribution on such Notes accumulated from and after [________]. Accordingly, holders of Exchange Notes as of the record date for the payment of Distributions on [_________] will be entitled to Distributions accumulated from and after [__________]. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable. 6 - ------------------------------------------------------------------------------- HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) (NOTE: SIGNATURES(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) Must be signed by registered holder(s) exactly as name(s) appear(s) on Certificate(s) for the Notes hereby tendered or on a security position listing, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certificates and other information as may be required by the Purchaser for the Notes to comply with any restrictions on transfer applicable to the Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Signature(s) of Holder(s)) Date , 2001 -------------------- Name(s) ------------------------------------------------------------------------ - ------------------------------------------------------------------------------- Capacity or Title -------------------------------------------------------------- Address ------------------------------------------------------------------------ (Include Zip Code) Area Code and Telephone Number ------------------------------------------------- - ------------------------------------------------------------------------------- (Tax Identification Number(s)) - ------------------------------------------------------------------------------- 7
- ----------------------------------------------------------- ---------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if Exchange Notes or any Notes To be completed ONLY if Exchange Notes or that are not tendered are to be issued in the name of any Notes that are not tendered are to be sent to someone other than the registered holder of the Notes someone other than the registered holder of the whose name(s) appear(s) above. Notes whose name(s) appear(s) above, or to the registered holder(s) at an address other than that shown above. ISSUE: MAIL: / / Exchange Notes to: / / Exchange Notes to: / / Notes not tendered to: / / Notes not tendered to: Name(s): Name(s): --------------------------------- ------------------------------------------ (PLEASE PRINT) (PLEASE PRINT) Address: Address: ---------------------------------- ----------------------------------------- ----------------------------------------- ------------------------------------------------- (ZIP CODE) (ZIP CODE) ----------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE ENCLOSED SUBSTITUTE FORM W-9) - ----------------------------------------------------------- ----------------------------------------------------
8 - ------------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED - SEE INSTRUCTIONS 2 AND 5) Authorized Signature ------------------------------------------------------- Name ----------------------------------------------------------------------- (PLEASE PRINT OR TYPE) Full Title ----------------------------------------------------------------- Name of Firm --------------------------------------------------------------- Address -------------------------------------------------------------------- --------------------------------------------------------------------------- (Zip Code) Area Code and Telephone Number --------------------------------------------- Dated: _______________________, 2001 - ------------------------------------------------------------------------------- 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus and an Agent's Message is not delivered or (b) Certificates are to be forwarded herewith. Timely confirmation of a book-entry transfer of such Notes into the Exchange Agent's account at DTC, or Certificates as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its addresses set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC to, and received by, the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering Participant, which acknowledgment states that such Participant has received and agrees to be bound by the Letter of Transmittal and that the Purchaser may enforce the Letter of Transmittal against such Participant. The term "book-entry confirmation" means a timely confirmation of book-entry transfer of Notes into the Exchange Agent's account at DTC. Holders who wish to tender their Notes and (i) whose Notes are not immediately available, (ii) who cannot deliver their Notes, this Letter of Transmittal and any other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for book-entry transfer on or prior to the Expiration Date may tender their Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. Pursuant to such procedures: (a) such tender must be made by or through an Eligible Institution (as defined below); (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Exchange Agent on or prior to the Expiration Date; and (c) the Certificates (or a book-entry confirmation) representing tendered Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within five business days after the Expiration Date, all as provided in "The Exchange Offer--Procedures for Tendering" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. THE PURCHASER WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS. EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES ANY RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF SUCH TENDER. 10 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Notes) of Notes tendered herewith, unless such holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Notes Tendered" above is inadequate, the Certificate number(s) and/or the principal amount of Notes and any other required information should be listed on a separate signed schedule and such schedule should be attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Notes which are to be tendered in the box entitled "Principal Amount of Notes Tendered." In such case, new Certificate(s) for the remainder of the Notes that were evidenced by your old Certificate(s) will be sent to the holder of the Notes, promptly after the Expiration Date. All Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above or in the Prospectus on or prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person who tendered the Notes to be withdrawn, (ii) identify the Notes to be withdrawn, including the Certificate number(s) and the aggregate principal amount of such Notes or, in the case of Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited with the withdrawal of Notes, (iii) be signed by the holder in the same manner as the original signature on this Letter of Transmittal, including any required signature guarantees, or be accompanied by documents sufficient to permit the Exchange Agent to register the transfer of such Notes into the name of the person withdrawing the tender and (iv) if Certificates for Notes have been tendered, the name of the registered holder of the Notes as set forth on the Certificate for the Notes, if different from that of the person who tendered such Notes. Withdrawals of tenders of Notes may not be rescinded. Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding on all parties. Neither the Purchaser, any affiliates or assigns of the Purchaser, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder promptly after withdrawal. 5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) or on a security position listing without alteration, enlargement or any change whatsoever. If any of the Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. 11 If any tendered Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof or Agent's Message in lieu thereof) as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Purchaser, in its sole discretion, of such persons' authority to so act. When this Letter of Transmittal is signed by the registered owner(s) of the Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless Exchange Notes are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Purchaser may require in accordance with the restrictions on transfer applicable to the Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if Exchange Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. 7. IRREGULARITIES. The Purchaser will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Notes which determination shall be final and binding on all parties. The Purchaser reserves the absolute right, in its sole and absolute discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Purchaser, be unlawful. The Purchaser also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer--Conditions of the Exchange Offer" or any conditions or irregularity in any tender of Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Purchaser's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Purchaser, any affiliates or assigns of the Purchaser, the Exchange Agent, or any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance regarding how to complete and tender this Letter of Transmittal may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. All other questions should be directed to ______________. Additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a holder whose tendered Notes are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. 12 The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60-day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60-day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60-day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Notes. If the Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which holders are exempt from backup withholding. Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed. 11. SECURITY TRANSFER TAXES. Holders who tender their Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 13
- ------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: BANK ONE TRUST COMPANY, N.A., AS EXCHANGE AGENT - ------------------------------------------------------------------------------------------------------------------------- PART I-PLEASE PROVIDE YOUR TIN IN THE BOX AT SOCIAL SECURITY OR EMPLOYER RIGHT AND CERTIFY BY SIGNING AND DATING IDENTIFICATION NUMBER ------------------------------------- (If awaiting TIN write "Applied For") SUBSTITUTE -------------------------------------------------------------------------------------- FORM W-9 NAME (PLEASE PRINT) DEPARTMENT OF THE TREASURY -------------------------------------------------------------------------------------- INTERNAL REVENUE SERVICE ADDRESS -------------------------------------------------------------------------------------- PAYOR'S REQUEST FOR TAXPAYER CITY STATE ZIP CODE IDENTIFICATION NUMBER ("TIN") AND CERTIFICATION -------------------------------------------------------------------------------------- PART II-For Payees NOT subject to backup withholding, see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed therein. -------------------------------------------------------------------------------------- CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT: 1. The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), AND 2. I am not subject to backup withholding because either (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS-You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) Signature:_________________________________ Date:________________, 2001 - -------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. - ------------------------------------------------------------------------------ PAYOR'S NAME: BANK ONE TRUST COMPANY, N.A., AS EXCHANGE AGENT - ------------------------------------------------------------------------------ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature(s): ____________________________________ Date: ________________ - ------------------------------------------------------------------------------ 14 EX-4.4 3 a2037960zex-4_4.txt EXHIBIT 4.4 Exhibit 4.4 FORM OF NOTICE OF GUARANTEED DELIVERY FOR TENDER FOR EXCHANGE OF 12 3/8% SENIOR SUBORDINATED NOTES DUE 2010 FOR 12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010 OF UNITED STATES CAN COMPANY This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Exchange Offer (as defined below) if (i) the procedures for delivery by book-entry transfer cannot be completed on a timely basis, (ii) certificates for the Company's (as defined below) 12 3/8% Senior Subordinated Notes due 2010 (the "Notes") are not immediately available or (iii) the Notes, the Letter of Transmittal and all other required documents cannot be delivered to Bank One Trust Company, N.A. (the "Exchange Agent") on or prior to _________, 2001 (the "Expiration Date"). This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent. See "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. - ------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______________, 2001, UNLESS EXTENDED. - ------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: BANK ONE TRUST COMPANY, N.A. BY OVERNIGHT COURIER OR REGISTERED OR CERTIFIED MAIL: Bank One Trust Company, N.A. Global Corporate Trust Services 1 Bank One Plaza, Suite IL1-0134 Chicago, Illinois 60670-0134 Attention: Exchanges BY HAND DELIVERY: Bank One Trust Company, N.A. Bank One Trust Company, N.A. 14 Wall Street, 8th Floor OR One North State Street, 9th Floor New York, New York 10005 Chicago, Illinois 60602 Attention: Exchanges Attention: Exchanges
Facsimile: (312) 407-8853 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. IF YOU HAVE ANY QUESTIONS REGARDING THIS NOTICE OF GUARANTEED DELIVERY OR REQUESTS FOR ADDITIONAL INFORMATION, PLEASE CONTACT THE EXCHANGE AGENT AT (800) 524-9472. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED. LADIES AND GENTLEMEN: The undersigned hereby tenders to United States Can Company, a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus dated _______, 2001 (as the same may be amended or supplemented from time to time, the "Prospectus") and the related Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate liquidation amount of Notes set forth below pursuant to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." All authority herein conferred or agreed to be conferred in this Notice of Guarantee of Delivery and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, and legal representatives of the undersigned and shall not be affected by and shall survive the death or incapacity of the undersigned. Aggregate Principal Amount Tendered: -------------------------------- ------------------------------------------------- (Name(s) of Registered Holder(s) - Please Print ------------------------------- ------------------------------------------------- (Address of Registered Holder(s)) ------------------------------- ------------------------------------------------- (Zip Code) ------------------------------------------------- (Area Code and Telephone No.) ------------------------------------------------- Check box if Notes will be delivered (Name(s) of Authorized Signatory) by book-entry transfer and provide account number number. ------------------------------------------------- (Capacity) / / The Depository Trust Company ------------------------------------------------- DTC Account Number: (Address(es) of Authorized Signatory) Date: --------------------------- ------------------------------------------------- (Area Code and Telephone No.) ------------------------------------------------- ------------------------------------------------- Signature(s) of Record Holder or Authorized Signatory) Dated: -------------------------------------------
2 This Notice of Guaranteed Delivery must be signed by the registered holder(s) of the Notes tendered hereby exactly as their name(s) appear on the certificates for such Notes or on a security position listing such holder(s) as the owner(s) of such Notes, or by person(s) authorized to become registered holder(s) of such Notes by endorsements and documents submitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in the fiduciary or representative capacity, such person must provide the preceding information and, unless waived by the Company, submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3 GUARANTEE OF DELIVERY (Not to be used for signature guarantee) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined therein): (1) a bank; (2) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, government securities dealer; (3) a credit union; (4) a national securities exchange, registered securities association or clearing agency; or (5) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent at its address set forth above, either the Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Notes to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and any other required documents within three business days after the date of execution of this Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letter(s) of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and the Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned. -------------------------------------------------------------------------- Name of Firm: -------------------------------------------------------------------------- Address: ------------------------------------------------------------------ -------------------------------------------------------------------------- -------------------------------------------------------------------------- ZIP CODE Area Code and Telephone Number: ------------------------------------------------------------------- AUTHORIZED SIGNATURE -------------------------------------------------------------------------- Name: -------------------------------------------------------------------------- PLEASE TYPE OR PRINT -------------------------------------------------------------------------- Title: -------------------------------------------------------------------- Dated: -------------------------------------------------------------------- , 2001 ------------------------------------------------------------ - ------------------------------------------------------------------------------- NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. 4 EX-4.5 4 a2037960zex-4_5.txt EXHIBIT 4.5 Exhibit 4.5 FORM OF EXCHANGE AGENT AGREEMENT UNITED STATES CAN COMPANY 900 Commerce Drive Oak Brook, Illinois 60523 ____________, 2001 Bank One Trust Company, N.A. One N. State Street, 9th Floor Chicago, Illinois 60602 Ladies and Gentlemen: United States Can Company, a Delaware corporation (the "Company"), proposes to make an offer (the "Exchange Offer") to exchange up to $175,000,000 aggregate principal amount of its 12 3/8% Series B Senior Subordinated Notes due 2010 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its outstanding 12 3/8% Senior Subordinated Notes due 2010 (the "Notes"), of which $175,000,000 aggregate principal amount is outstanding. The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated ________, 2001 (the "Prospectus"), a copy of which is attached to this Agreement as Attachment A and is a part of this Agreement, proposed to be distributed to all record holders of the Notes. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Prospectus. The Company hereby appoints Bank One Trust Company, N.A. to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to Bank One Trust Company, N.A. Bank One Trust Company, N.A. hereby accepts the appointment as Exchange Agent and shall perform the duties and services of the Exchange Agent described herein on the terms and conditions contained in this Agreement. The Exchange Offer is expected to be commenced by the Company on or about ________, 2001 (the "Commencement Date"). The Letter of Transmittal accompanying the Prospectus is to be used by the holders of the Notes to accept the Exchange Offer and contains instructions with respect to the Exchange Offer. The Exchange Offer shall expire at 5:00 p.m., New York City time, on ________, 2001 or on such later date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (promptly confirmed in writing) or written notice to you no later than 6:00 p.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company expressly reserves the right to amend or terminate the Exchange Offer and not to accept for exchange any Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified in the Prospectus under the caption "The Exchange Offer--Conditions of the Exchange Offer." The Company will give oral (promptly confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are set forth herein, and such duties that are necessarily incidental thereto in good faith, and no additional duties or responsibilities shall be implied against you. 2. You will establish an account with respect to the Notes at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer as soon as practicable after the Commencement Date. 3. You are to examine each of the Letters of Transmittal, certificates for the Notes and confirmations of book-entry transfers into your account at the Book-Entry Transfer Facility and any Agent's Message or other documents received by you by or for holders of the Notes to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and (ii) the Notes have otherwise been properly tendered. In each case where the Letter of Transmittal or any other document has been improperly completed or executed or any of the certificates for Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the exchanging holder or the Book-Entry Transfer Facility of the existence of the irregularity and the need for fulfillment of all requirements and to take any other action as may be reasonably necessary or advisable to cause such irregularity to be corrected. You are not authorized to accept any tender of Notes that you reasonably deem to be defective, unless you shall have received written notice from the Company as provided in paragraph 4 hereof that any defect or irregularity in such tender has been cured or waived and that such tender has been accepted by the Company. 4. Upon your determination that any tender is defective, you shall notify the Company and, after consultation with and on the written instructions of the Company, use reasonable efforts to notify the person tendering such Notes or the Book-Entry Transfer Facility, as the case may be, of such determination. If necessary, you will return the certificates evidencing such Notes in the manner described herein. The Company shall have the absolute right to (i) reject any and all Notes not properly tendered, (ii) determine whether any tender of Notes is valid and (iii) reject any Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful; it being understood that you shall have neither discretion nor responsibility with respect to such matters. The Company also shall have the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Notes. The interpretations by the Company of the terms and conditions of the Exchange Offer, each submitted Letter of Transmittal, each submitted Notice of Guaranteed Delivery and each other -2- document or instrument submitted to it in connection with the Exchange Offer (including, without limitation, the determination of whether any tender of Notes is valid) shall be final and binding. With the approval of either (a) the Chief Executive Officer and President or (b) the Executive Vice President and Chief Financial Officer of the Company (such approval, if given orally, to be promptly confirmed in writing), you are authorized to waive any irregularities in connection with any tender of Notes pursuant to the Exchange Offer. 5. Tenders of Notes may be made only as set forth in the section of the Prospectus captioned "The Exchange Offer--Procedures for Tendering" or in the Letter of Transmittal, and Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 5, Notes that the Company or any other party designated by the Company in writing shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be promptly confirmed in writing). 6. You shall advise the Company with respect to any Notes delivered subsequent to the Expiration Date and accept its instructions with respect to the disposition of such Notes. 7. You shall accept tenders: a. in cases where the Notes are registered in two or more names only if signed by all named holders; b. in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority to so act is submitted; and c. from persons other than the registered holder of Notes provided that customary transfer requirements, including any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Notes where so indicated and as permitted in the Letter of Transmittal and deliver certificates for Notes to the transfer agent for split-up and return any untendered Notes to the holder (or to such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, shall be promptly confirmed in writing) of the Company's acceptance, promptly after the Expiration Date, of all Notes properly tendered, and you, on behalf of the Company, will exchange such Notes for Exchange Notes and cause such Notes to be canceled. Delivery of Exchange Notes will be made on behalf of the Company by you at the rate of $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Notes tendered promptly after notice (such notice, if given orally, shall be promptly confirmed in writing) of acceptance of said Notes by the Company; PROVIDED, HOWEVER, that in all cases, Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Notes (or confirmation of book-entry transfer into your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or Agent's Message in lieu thereof) and any other required document. You shall issue Exchange Notes only in denominations of $1,000 or any integral multiple thereof. -3- 9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date. 10. The Company shall not be required to exchange any Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Notes tendered shall be given (such notice, if given orally, shall be promptly confirmed in writing) by the Company to you. 11. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer--Conditions of the Exchange Offer" or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Notes (or effect the appropriate book-entry transfer of the unaccepted Notes), and return any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them. 12. All certificates for reissued Notes or for unaccepted Notes shall be forwarded by (a) first-class mail, return receipt requested, under a blanket surety bond protecting you and the Company from loss or liability arising out of the non-receipt or non-delivery of such certificates or (b) by registered mail insured separately for the replacement value of such certificates. 13. You are not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, bank or other persons or to engage or utilize any person to solicit tenders. 14. As Exchange Agent hereunder you: a. will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of Notes, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; b. shall not be obligated to take any legal action hereunder which might in your good faith judgment involve any expense or liability, unless you shall have been furnished with satisfactory indemnity; c. shall not be liable to the Company for any action taken or omitted by you, or any action suffered by you to be taken or omitted, without gross negligence, misconduct or bad faith on your part, by reason of or as a result of the administration of your duties hereunder in accordance with the terms and conditions of this Agreement or by reason of your compliance with the instructions set forth herein or with any written or oral instructions delivered to you pursuant hereto, and may conclusively rely on and shall be fully protected in acting in good faith in reliance upon any certificate, instrument, opinion, notice, letter, facsimile or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; d. may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and the effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith reasonably believe to be genuine or to have been signed or represented by a proper person or persons; -4- e. may conclusively rely on and shall be fully protected in acting upon written or oral instructions from any officer of the Company with respect to the Exchange Offer; f. shall not advise any person tendering Notes pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Notes; and g. may consult with counsel, which may be counsel for the Company, with respect to any questions relating to your duties and responsibilities and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by you hereunder in good faith and in accordance with such advice or opinion of such counsel. 15. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery, or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with sufficient copies of such documents to complete the initial mailing as soon as practicable after the Commencement Date, and thereafter the Company will provide additional copies at your request. All other requests for information relating to the Exchange Offer shall be directed to the Secretary of the Company at 900 Commerce Drive, Oak Brook, Illinois 60523. 16. You shall provide a report, in the form attached hereto as Attachment B, by e-mail or facsimile transmission to the Company and Ropes & Gray, counsel for the Company, and such other person or persons as they may reasonably request, weekly, and during the week immediately prior to the Expiration Date, more frequently, if reasonably requested, up to and including the Expiration Date You shall also provide the Company or any such other person or persons as the Company may reasonably request from time to time prior to the Expiration Date with such other information as the Company or such other person may reasonably request. In addition, you shall grant to the Company and such persons as the Company may request reasonable access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date, the Company shall have received information in sufficient detail to enable them to decide whether to extend the Exchange Offer. 17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped by you as to the date and the time of receipt thereof and shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials as directed by the Company. 18. For services rendered as Exchange Agent hereunder, the Company will pay you fees and expenses as described in Attachment C. 19. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal attached hereto and further acknowledge that you have examined each of them to the extent necessary to perform your obligations hereunder. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, -5- shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent, which shall be controlled by this Agreement. 20. The Company agrees to indemnify and hold you (and your officers, directors, employees and agents) harmless in your capacity as Exchange Agent hereunder against any liability, cost or expense, including reasonable attorney's fees, arising out of or in connection with the acceptance or administration of your duties hereunder, including, without limitation, in connection with any act, omission, delay or refusal made by you in reasonable reliance upon any signature, enforcement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Notes; PROVIDED, HOWEVER, that the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence, willful breach of this Agreement, willful misconduct or bad faith. You shall notify the Company in writing of any assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or commencement of action. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action. You shall not compromise or settle any such action or claim without the consent of the Company. 21. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, without regard to conflicts of law principles, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 22. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which taken together constitute one and the same agreement. 23. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 24. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 25. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company, to: United States Can Company 700 East Butterfield Road Suite 250 Lombard, Illinois 60148 Attention: Steven K. Sims Facsimile: (630) 678-8135 -6- with a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attention: Jane D. Goldstein, Esq. Facsimile: (617) 951-7050 If to the Exchange Agent, to: Bank One Trust Company, N.A. One N. State Street, 9th Floor Chicago, Illinois 60602 Attention: Benita A. Pointer Facsimile: (312) 407-2088 With a copy to: Bank One Trust Company, N.A. One N. State Street, 9th Floor Chicago, Illinois 60602 Attention: Exchanges Facsimile: (312) 407-8853 26. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, Paragraphs 18 and 20 shall survive the termination of this Agreement. Except as provided in Paragraph 17, upon any termination of this Agreement, you shall promptly deliver to the Company any funds or property (including, without limitation, Letters of Transmittal and any other documents relating to the Exchange Offer) then held by you as Exchange Agent under this Agreement. 27. This Agreement shall be binding and effective as of the date hereof. -7- Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. UNITED STATES CAN COMPANY By: ------------------------------- Name: Title: Accepted as of the date first above written: BANK ONE TRUST COMPANY, N.A. as Exchange Agent By: -------------------------------------- Name: Title: ATTACHMENT B Date: ------------------------- [List Issuer & Other Addressees] SENT BY (check one): [ ] BY FAX: ________________________ [ ] BY E-MAIL: Re: Notice of Tenders With respect to Section 16 of the Exchange Agent Agreement, dated as of _______________, we confirm the following information as of the date hereof: 1. Principal amount of Notes tendered during the past week: $____________________. Principal amount of such Notes tendered pursuant to a Notice of Guaranteed Delivery: $____________________. 2. Principal amount of Notes referred to in paragraph 1. above regarding which Exchange Agent questions validity of the tender: $____________________. 3. Aggregate principal amount of Notes tendered since the Commencement Date as to which Exchange Agent questions the validity of the tender: $___________________. 4. Principal amount of Notes remaining unpresented (based on $______________ total Notes): $________________________ 5. Total aggregate principal amount of Notes validly tendered since the Effective Date: $_____________________ Bank One Trust Company, N.A., as Exchange Agent By: ------------------------------------ Name: Title: ATTACHMENT C Schedule of Fees Per letter of transmittal mailed: $150.00 Minimum fee: $2,000.00 Extraordinary services and special requests: by appraisal Out of pocket expenses incurred will be billed for reimbursement at invoiced cost The minimum fee of $2,000.00 shall be due and payable upon execution of the Exchange Agent Agreement. The remaining balance shall be due and payable upon receipt of Exchange Agent's invoice therefor. EX-4.6 5 a2037960zex-4_6.txt EXHIBIT 4.6 Exhibit 4.6 [FORM OF FACE OF EXCHANGE NOTE] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSORS NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. UNITED STATES CAN COMPANY Series B 12 3/8% Senior Subordinated Notes Due 2010 No. U.S. $175,000,000 CUSIP No.: U.S. Can Corporation, a Delaware corporation, promises to pay to CEDE & Co., or registered assigns, the principal sum of One Hundred Seventy-Five Million Dollars ($175,000,000) on October 1, 2010. Interest Payment Dates: April 1 and October 1 Record Dates: March 15 and September 15 1 Additional provisions of this Security are set forth on the other side of this Security. Dated: UNITED STATES CAN COMPANY by: --------------------------------------- President by: --------------------------------------- Secretary TRUSTEE'S CERTIFICATE OF AUTHENTICATION BANK ONE TRUST COMPANY, N.A., as Trustee, certifies that this is one of the Securities referred to in the Indenture. [seal] by: ------------------------------------ Authorized Signatory [FORM OF REVERSE SIDE OF EXCHANGE NOTE] UNITED STATES CAN COMPANY Series B 12 3/8% Senior Subordinated Notes Due 2010 1. INTEREST United States Can Company, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on April 1 and October 1 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year of 12 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. METHOD OF PAYMENT The Company, in accordance with Section 4.01 of the Indenture, will pay interest on the Securities (except defaulted interest) to the persons who are registered holders of Securities ("Holder" or "Holders") at the close of business on the Record Date next preceding the interest payment date even if Securities are cancelled after the Record Date and on or before the interest payment date. Holders must surrender Securities to an office or agency where Securities may be presented for payment (the "Paying Agent") to collect principal payments. The Securities will be payable as to principal and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the Securities register of Holders; PROVIDED that the Company will be required to make, by wire transfer of immediately available funds to the accounts specified by a Holder of at least $5 million aggregate principal amount of Securities, all payments of principal of, premium, if any, and interest with respect to such Holder's Securities if such Holder has provided wire transfer instructions to the Company. 3. PAYING AGENT AND REGISTRAR Initially, Bank One Trust Company, N.A., a national banking association ("Trustee"), will act as Paying Agent and the office or agency where Securities may be presented for registration or transfer or for exchange (the "Registrar"). 4. INDENTURE The Company issued the Securities under an Indenture dated as of October 4, 2000 (the "Indenture"), among the Company, the Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture and, to the extent required by any amendment to the Trust Indenture Act of 1939 1 after such date, as amended from time to time (the "Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $275,000,000 aggregate principal amount of which $175,000,000 aggregate principal amount will be initially issued on the Closing Date (subject to Section 2.07 of the Indenture). Subject to the conditions set forth in the Indenture, the Company may issue up to an additional $100,000,000 aggregate principal amount of Additional Notes. This Security is one of the Series B 12 3/8% Senior Subordinated Notes due 2010 (the "Exchange Notes") referred to in the Indenture. The Securities include the 12 3/8% Senior Subordinated Notes due 2010 originally issued under the Indenture (the "Initial Notes"), the Additional Notes and any Exchange Notes issued in exchange for the Initial Notes. The Initial Notes, the Additional Notes and the Exchange Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Company and the Restricted Subsidiaries, including the Incurrence of additional Indebtedness, payment of dividends or other distributions with respect to Capital Stock of the Company, sale of assets of the Company or its Restricted Subsidiaries, and restrictions on the ability of any Restricted Subsidiary to pay dividends or make any other distributions in respect of its Capital Stock. In addition, the Indenture contains certain covenants that, among other things, limit the ability of the Company and the Guarantors to Incur Indebtedness which is senior to or ranks PARI PASSU with the Securities or the Guarantees, as the case may be, create certain Liens, or enter into certain mergers and consolidations. The payment of principal and interest on the Securities is unconditionally guaranteed on a senior subordinated and unsecured basis by the Guarantors. 5. OPTIONAL REDEMPTION Except as set forth in paragraphs 6 and 7, the Securities may not be redeemed prior to October 1, 2005. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest, if any, to the redemption date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the related interest payment date), if redeemed during the 12-month period beginning October 1, of the years below: YEAR PERCENTAGE 2005........................... 106.188% 2006........................... 104.125% 2007........................... 102.063% 2008 and thereafter............ 100.000% At any time, or from time to time, on or prior to October 1, 2003, the Company, at its option, may use all or any portion of the net cash proceeds of one or more Public Equity Offerings (as defined below) to redeem up to 35% of the aggregate principal amount of the 2 Securities issued at a redemption price equal to 112.375% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; PROVIDED that at least 65% of the aggregate principal amount of Securities initially issued remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 180 days after the consummation of any such Public Equity Offering. As used in the preceding paragraph, "Public Equity Offering" means an underwritten public offering of the Company's Capital Stock (other than Disqualified Stock) pursuant to a registration statement filed with the Commission in accordance with the Securities Act or a firm commitment private placement of Capital Stock (other than Disqualified Stock) pursuant to an agreement that requires the registration of the resale of such Capital Stock (or Capital Stock issued upon conversion thereof) contemporaneously with the issuance thereof or as soon as practical thereafter. In the case of any partial redemption, selection of the Securities for redemption will be made by the Trustee (subject to DTC procedures) on a pro rata basis, by lot or by such other method as the Trustee, in its sole discretion, shall deem to be fair and appropriate (and which complies with applicable legal and securities exchange requirements), although no Security of $1,000 in original principal amount or less will be redeemed in part. In the case of any partial redemption made with the proceeds of a Public Equity Offering, selection of the Securities for redemption will be made by the Trustee on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited. If any Security is to be redeemed in part only, the notice of redemption relating to such Security shall state the portion of the principal amount thereof to be redeemed. Subject to DTC procedures, a new Security in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. 6. NOTICE OF REDEMPTION A notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. PUT PROVISIONS Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions, to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant Record Date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture. 3 8. SUBORDINATION The Securities are subordinated to Senior Indebtedness, as defined in the Indenture, and the Guarantees are subordinated to Senior Indebtedness of the Guarantors, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness or Senior Indebtedness of Subsidiary Guarantors must be paid before the Securities may be paid. The Company and the Guarantors agree, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give effect to such provisions and appoints the Trustee as attorney-in-fact for such purpose. 9. DENOMINATIONS; TRANSFER; EXCHANGE The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. 10. PERSONS DEEMED OWNERS The registered Holder of this Security may be treated as the owner of it for all purposes. 11. UNCLAIMED MONEY If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. DISCHARGE AND DEFEASANCE Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee payment of principal and interest on the Securities to redemption or maturity, as the case may be. 13. AMENDMENT, WAIVER Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 4 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the Commission in connection with qualifying the Indenture under the Act, or to make certain changes in the subordination provisions, or to make any change that does not adversely affect the rights of any Holder. 14. DEFAULTS AND REMEDIES Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption, upon declaration of acceleration or otherwise, or failure by the Company and the Guarantors to redeem or purchase Securities when required; (iii) failure by the Company or the Guarantors to comply with the provisions of Section 5.01 of the Indenture; (iv) failure by the Company, the Parent Guarantor or any Restricted Subsidiary to comply with certain other sections of the Indenture; (v) failure by the Company, the Parent Guarantor or any Restricted Subsidiary to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (vi) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $10 million and continue for 10 days; (vii) certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any Foreign Significant Subsidiary; (viii) certain judgments or decrees for the payment of money in excess of $10 million; and (ix) the Parent Guarantee or any Subsidiary Guarantee is held unenforceable or invalid or ceasing to be in full force and effect. If an Event of Default (other than an Event of Default specified in (vii) above) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may, by notice to the Company and, in the case of such Holders, to the Trustee, declare the principal amount of and accrued interest on the Securities to be due and payable immediately upon the occurrence of such Events of Default. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. TRUSTEE DEALINGS WITH THE COMPANY Subject to certain limitations imposed by the Act, the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 5 16. NO RECOURSE AGAINST OTHERS A director, officer, employee or stockholder, as such, of the Company, any Guarantor or the Trustee shall not have any liability for any obligations of the Company, any Guarantor or the Trustee under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. AUTHENTICATION This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 18. ABBREVIATIONS Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. CUSIP NUMBERS Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER, UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER, A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: UNITED STATES CAN COMPANY, 900 COMMERCE DRIVE, OAK BROOK, ILLINOIS 60521, ATTENTION: CHIEF FINANCIAL OFFICER. 6 [FORM OF NOTATION ON EXCHANGE NOTE RELATING TO GUARANTEE] SENIOR SUBORDINATED GUARANTEE U.S. CAN CORPORATION (the "Parent Guarantor") and MAY VERPACKUNGEN HOLDING INC. (together with any other Subsidiary Guarantor, the "Subsidiary Guarantors") have unconditionally guaranteed on a senior subordinated basis (such guaranty by each Guarantor being referred to herein as the "Guarantee") (i) the due and punctual payment of the principal of and interest on the Securities, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Securities, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in the Indenture and (ii) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth and are expressly subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness of Guarantors to the extent and in the manner provided in Article 11 of the Indenture, and reference is hereby made to such Indenture for the precise terms of the Guarantee therein made. No director, officer, employee or stockholder, as such, of any of the Guarantors shall have any liability under the Guarantee of such Guarantor by reason of such person's status as director, officer, employee or stockholder. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Guarantee. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories. U.S. CAN CORPORATION By: ----------------------------------------- Name: Title: MAY VERPACKUNGEN HOLDING INC. By: ----------------------------------------- Name: Title: ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint -------------------------------------------------------- as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date: Your Signature: -------- ---------------------------------------------- - ------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. Signature Guaranty: ------------------------------------------------------------ (Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company) [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made:
PRINCIPAL AMOUNT [AT MATURITY] OF THIS AMOUNT OF DECREASE AMOUNT OF INCREASE GLOBAL SECURITY SIGNATURE OF IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT FOLLOWING SUCH AUTHORIZED OFFICER OF [AT MATURITY] OF THIS [AT MATURITY] OF THIS DECREASE OR TRUSTEE OR SECURITIES DATE OF EXCHANGE GLOBAL SECURITY GLOBAL SECURITY INCREASE CUSTODIAN
OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box: |_| If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount: $_________________ Date: --------------- ----------------------------------------------- (Sign exactly as your name appears on the other side of the Security) Signature Guaranty: ----------------------------------------------- (Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company) EX-5 6 a2037960zex-5.txt EXHIBIT 5 Exhibit 5 [Ropes & Gray Letterhead] February 15, 2001 United States Can Company 700 East Butterfield Road, Suite 250 Lombard, Illinois 60148 Re: $175,000,000 in aggregate principal amount of 12 3/8% Series B Senior Subordinated Notes due 2010 of United States Can Company issued and exchanged for $175,000,000 in aggregate principal amount of 12 3/8% Senior Subordinated Notes due 2010 of United States Can Company Ladies and Gentlemen: We have acted as counsel to United States Can Company, a Delaware corporation (the "Company"), in connection with (i) the issuance by the Company in an exchange offer (the "Exchange Offer") of $175,000,000 in aggregate principal amount of its 12 3/8% Series B Senior Subordinated Notes due 2010 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), in exchange for $175,000,000 in aggregate principal amount of the Company's outstanding 12 3/8% Senior Subordinated Notes due 2010 (the "Initial Notes"), which have not been so registered, and (ii) the preparation of the registration statement on Form S-4 (File No. 333-53276) filed by the Company with the Securities and Exchange Commission (the "Registration Statement") for the purpose of registering the Exchange Notes under the Securities Act of 1933 (the "Act"). The Initial Notes have been, and the Exchange Notes will be, issued pursuant to an Indenture dated as of October 4, 2000 (the "Indenture") between the Company and Bank One Trust Company, N.A., as trustee (the "Trustee"). This opinion is furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act. We have examined such documents and made such other investigation as we have deemed appropriate to render the opinions set forth below. As to matters of fact material to our opinions, we have relied, without independent verification, on representations made in the Indenture and certificates and other inquiries of officers of the Company and of public officials. The opinions expressed below are limited to matters governed by the laws of The Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware, the laws of the State of New York and the federal laws of the United States of America. Based upon the foregoing, we are of the opinion that when the Exchange Notes have been duly executed and authenticated in accordance with the terms of the Indenture and have been delivered against receipt of the Initial Notes surrendered in exchange therefor upon completion of the Exchange Offer, (subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general application affecting the rights and remedies and to general principal of equity) the Exchange Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission. Very truly yours, /s/ Ropes & Gray Ropes & Gray EX-10.20 7 a2037960zex-10_20.txt EXHIBIT 10.20 Exhibit 10.20 EMPLOYEE AGREEMENT THIS EMPLOYEE AGREEMENT (this "Agreement") made and entered into this 4th day of October, 2000, by and between David Ford (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 receiving an option to purchase shares of stock of U.S. Can Corporation. NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. RESTRICTIVE COVENANTS. During the term of employment and for a period of 24 months, or for a period of time equal to the length of the Employee's tenure with the Employer (if such tenure is less than 24 months), after the employment relationship has been terminated for any reason, the Employee will not: (a) directly or indirectly on behalf of any other individual or entity, solicit or provide any services also provided by the Employer or any Affiliate to any individual or entity who is then or was at any time a client of the Employer and for whose account the Employee was responsible, in whole or in any part, at any time during the Employee's tenure with the Employer and the Affiliates or (b) directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business of the type and character in which the Employee was engaged on behalf of the Employer or any Affiliate which operates in the United States or Canada. At all times during and after employment with the Employer, the Employee will not use or disclose any trade secret of the Employer or any Affiliate or any proprietary or confidential information or data of the Employer or any Affiliate, including, without limitation, the Employer's or Affiliate's manufacturing technology, cost data, price data, customer lists, customer information and the other matters specified in paragraph 2 for the Employee's personal benefit, directly or indirectly, or in any way which could be detrimental to the Employer or any Affiliate. For purposes of this Agreement, the term "Affiliate" shall mean the Employer and any of its "affiliates" as that term is defined in the Securities Exchange Act of 1934 as amended. 2. EMPLOYER'S INFORMATION. The Employer and the Affiliates are in the business of container manufacturing and related businesses including, without limitation, aerosol containers; paint, plastic and general line containers; and custom and specialty products. The Employee acknowledges that: (i) the Employer's and Affiliates' manufacturing technology is highly evolved; (ii) the Employer's and Affiliates' purchasing practices and cost data are not generally known in the packaging industry; (iii) the Employer and the Affiliates have a proprietary interest in the identity of their customers and their customer lists and in their efforts to identify potential customers; and (iv) documents and information regarding the Employer's and the Affiliates' manufacturing methods, sales, pricing, costs and the requirements of the Employer's and the Affiliates' customers are confidential and constitute trade secrets. 3. RESTRICTION ACKNOWLEDGMENT. The Employee further acknowledges that: (1) in the event the Employee's employment with the Employer terminates for any reason, the Employee will be able to earn a livelihood without violating the restrictive covenants contained in this Agreement; and (2) the Employee's ability to earn a livelihood without violating such covenants is a material condition to the Employee's receipt of an option to purchase shares of stock of U.S. Can Corporation. 4. OTHER AGREEMENTS. It is expressly understood and agreed that no change, at any time, in compensation which may be given to the Employee and no change, at any time, in the nature of services to be performed by the Employee, shall amend, impair or otherwise affect any of this Agreement's terms or provisions. This Agreement may be amended only by a written document signed by the parties. 5. WAIVER. Any failure of the Employer to demand rigid adherence to one or more of this Agreement's terms on one or more occasions, shall not be construed as a waiver nor deprive the Employer of the right to insist upon strict compliance. 6. SEVERABILITY. If any one or more of the provisions of this Agreement should be ruled wholly or partially invalid or unenforceable by an arbitrator in accordance with the procedures set forth in paragraph 15 or a court of competent jurisdiction, then (i) the validity and enforceability of all provisions of this Agreement not ruled to be invalid or unenforceable shall be unaffected, and (ii) the provision(s) held wholly or partially invalid or unenforceable shall be deemed amended and such court is authorized to reform the provision(s), to the minimum extent necessary to render them valid and enforceable in conformity with the parties' intent as manifested herein. 7. REMEDIES. If the Employee shall violate or attempt to violate any of the restrictive covenants contained in this Agreement, then the Employer or the affected Affiliate shall be entitled, as of right, to an injunction and/or other equitable relief against the Employee, restraining the Employee from violating or attempting to violate any of said covenants. 8. SURVIVAL. Notwithstanding any employment termination, this Agreement shall remain a valid and enforceable contract between the parties, including (without limitation) this Agreement's restrictive covenants. 9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Employer and its Affiliates and the Employee and their respective successors and assigns. 2 10. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to its conflicts of law principles. 11. WARRANTY/AGREEMENT. Unless previously disclosed to the Employer in writing, the Employee represents and warrants to the Employer that the Employee is not a party to any agreement (other than an agreement with an Employer or an Affiliate) which contains a covenant-not-to-compete or other restriction with respect to: (i) the nature of any services or business which the Employee is entitled to perform or conduct for Employer or its Affiliate; or (ii) the disclosure or use of any information which directly or indirectly relates to the nature of the business of the Employer and Affiliates or the services to be rendered by the Employee for Employer or its Affiliate. THE EMPLOYEE AGREES NOT TO USE OR DISCLOSE ANY CONFIDENTIAL OR PROPRIETARY INFORMATION OR DATA OF ANY FORMER EMPLOYER OR OTHER THIRD PARTY IN CONNECTION WITH THE EMPLOYEE'S EMPLOYMENT BY THE EMPLOYER. 12. WORK-FOR-HIRE PROVISION. "Inventions" mean all systems, procedures, techniques, manuals, data bases, plans, lists, inventions, trade secrets, copyrights, patents, trademarks, discoveries, innovations, concepts, ideas and software conceived, compiled or developed by the Employee in the course of employment with the Employer and/or comprised, in whole or part, of the Employer's and the Affiliates' confidential information. Notwithstanding the foregoing, Inventions shall not include (a) any inventions independently developed by the Employee and not derived, in whole or part, from any Employer or Affiliate's confidential information, or (b) any invention made by the Employee prior to the Employee's exposure to any confidential information. The parties acknowledge and agree that all work performed by the Employee hereunder shall be deemed "work for hire." The Employer shall at all times own and have exclusive right, title and interest in and to all Employer and the Affiliates' confidential information and Inventions, and the Employer shall retain the exclusive right to license, sell, transfer and otherwise use and dispose of the same. Any and all enhancements of the Employer's and the Affiliates' manufacturing technology developed by the Employee shall be the exclusive property of the Employer. The employee hereby assigns to the Employer the Employee's sole and exclusive right, title and interest in and to all Inventions, without additional consideration of any kind whatsoever from the Employer or the Affiliates. The Employee agrees to execute and deliver any instruments or documents and to do all other things (including, without limitation, the giving of testimony) requested by the Employer (both during and after the Employee's employment by the Employer) in order to vest more fully in the Employer or the Affiliates all ownership rights in the Inventions (including, without limitation, obtaining patent, copyright to trademark protection therefor in the U.S. and/or foreign countries). 13. RETURN OF INFORMATION. Following the Employee's termination of employment with the Employer and the Affiliates, the Employee agrees to return to the Employer and the Affiliates any keys, credit cards, passes, confidential documents or material, or other property belonging to the Employer or the Affiliates, and to return all writing, 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. 3 14. NOTICES. Notices and all other communications provided for in this Agreement shall be in writing and shall be (i) delivered personally, (ii) sent by certified mail, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), (iii) sent by facsimile (provided that transmission by facsimile shall be effective only if accompanied by depositing a hard copy for delivery to the address specified below, postage prepaid (in the case of mailing in the U.S., by U.S. mail, and in the case of mailing outside the U.S. by mailing via overnight or two-day delivery)), or (iv) sent by prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties like notice). Such notices, demands, claims and other communications shall be deemed given: (a) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated by delivery; (b) in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or (c) in the case of facsimile, the date upon which the transmitting party received confirmation of transmission and deposited a hard copy of such notice in the mail. provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below: to the Employer by mail: United States Can Company 900 Commerce Drive Oakbrook, Illinois 60523 Attention: General Counsel to the Employer by facsimile: 630/572-0822 To Employee: at the address of the Employee as set forth in the payroll records at the Employer. 15. ARBITRATION OF ALL DISPUTES. Any dispute as to any claim under this Agreement (including, without limitation, disputes arising under Title VII of the Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, and the Age Discrimination in Employment Act) shall be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be appointed pursuant to the rules of the American Arbitration Association. The arbitration shall be conducted promptly and expeditiously in accordance with the National Rules for Resolution of Employment Disputes of American Arbitration Association. Any award issued as a 4 result of such arbitration shall be final and binding on the parties, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided, however, that any award issued as a result of arbitration shall be reviewable de novo by a court of competent jurisdiction for errors of law. Notwithstanding the foregoing, the parties hereto shall not be entitled to, and no award shall include in whole or in part, punitive damages or exemplary damages. This paragraph 15 shall not be construed to limit the Employer's or an Affiliate's right to obtain relief under paragraph 7 with respect to any matter or controversy subject to paragraph 7, and the Employer shall be entitled to obtain any such relief by direct application to state, federal, or other applicable court, without being required to first arbitrate such matter or controversy. 5 16. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the day and year first above written. UNITED STATES CAN COMPANY By /s/ John L. Workman ----------------------------------------- Its: ------------------------------------- EMPLOYEE /s/ David Ford -------------------------------------------- EX-10.23 8 a2037960zex-10_23.txt EXHIBIT 10.23 EXHIBIT 10.23 Amendment No. 1 of U.S. Can Corporation Executive Deferred Compensation Plan ------------------------------------ WHEREAS, U.S. Can Corporation (the "Company") maintains the U.S. Can Corporation Executive Deferred Compensation Plan (the "Plan"); and WHEREAS, amendment of the Plan is now considered desirable because of the recapitalization of the Company to be effective on or about October 4, 2000 (the date of the consummation of the recapitalization to be the "Effective Date"); NOW, THEREFORE, by virtue of the authority vested in the Board of Directors of the Company by Section 8 of the Plan, the Plan is hereby amended as of the Effective Date in the following particulars: 1. By substituting the following subsection 1.1 for subsection 1.1 of the Plan: "1.1. PURPOSE. The U.S. Can Corporation Executive Deferred Compensation Plan (the "Plan") has been established by U.S. Can Corporation (the "Company") so that it, and each of the Related Companies which, with the consent of the Company, adopts the Plan may provide tax planning benefits for eligible executives by permitting the executives to reduce the amount of their current taxable income and defer the income inclusion event until a specified future date. The Plan represents an unsecured, unfunded promise by the Company and the Related Companies to pay certain benefits to participating executives, and is maintained solely for the benefit of a select group of management and highly compensated employees within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")." 2. By substituting the following Section 3 of the Plan: "SECTION 3 ACCOUNTS 3.1 ACCOUNTS AND CREDITS. The Plan Administrator shall establish and maintain a bookkeeping account for each participant of the Plan. Such bookkeeping account is referred to below as the "Account." A participant's Account shall be adjusted in accordance with (a) and (b) below: (a) As of the last day of each calendar quarter ("Accounting Date"), the participant's Account shall be credited with an amount equal to the amount of the participant's deferrals made for the period since the last Accounting Date pursuant to his Deferral Election. (b) The Account shall be adjusted to reflect the Investment Return Rate(s) applicable to that Account in accordance with rules established by the Plan Administrator from time to time, but in no event shall such adjustment occur less frequently than annually. (c) As of the date of the Recapitalization (as defined in Section 5), the opening Account balance for any individual who was a participant in the Plan immediately prior to such date shall equal the product of $20.00 and the number of Stock Units (as defined in Section 5) in his Account as of the date of the Recapitalization. 3.2 ACCOUNT STATEMENTS. The Company shall maintain, or cause to be maintained, records showing the balance of each Account. At least once a year each participant shall be furnished with a statement setting forth the value of his Account." 3. By substituting the following subsection 4.1 for subsection 4.1 of the Plan: "4.1. AMOUNT OF BENEFITS. The benefits payable under the Plan to a participant (or to his beneficiary, in the event of the participant's death) shall be an amount equal to the balance in his Account as of the date of distribution." 4. By removing the word "vested" from subsection 4.3 of the Plan. 5. By deleting subsection 4.7 of the Plan and designating subsection 4.8 as subsection 4.7 of the Plan. 6. By substituting the following Section 5 for Section 5 of the Plan (including subsections 5.1 and 5.2): "SECTION 5 RECAPITALIZATION OF THE COMPANY Upon the consummation of the recapitalization of the Company, which will be effective on or about October 4, 2000 (the "Recapitalization"), all Participants will become immediately vested in their Accounts. A Participant who is designated as a "Rollover Stockholder" (as defined in the Agreement and Plan of Merger by and between the Company and Pac Packaging Acquisition Corporation) shall receive a lump sum distribution equal to the product of $20.00 and the number of units representing shares of Company common stock ("Stock Units") in his Account as of the date of the Recapitalization. Such distributions shall be made to such Participant regardless of any elections that may otherwise be applicable under the Plan, and shall be made as soon as practicable after the date of the Recapitalization, but in no event later than 15 days after the occurrence of the Recapitalization. A Participant who is not designated as a Rollover Stockholder shall not receive a distribution upon the date of Recapitalization but rather will have the value of the Stock Units in his Account, which shall be equal to the product of $20.00 and the number of Stock Units in his Account as of the date of the Recapitalization, transferred to Investment Funds in accordance with the Participant's direction." -2- EX-10.26 9 a2037960zex-10_26.txt EXHIBIT 10.26 EXHIBIT 10.26 U.S. CAN CORPORATION STOCKHOLDERS AGREEMENT Dated as of October 4, 2000 U.S. CAN CORPORATION STOCKHOLDERS AGREEMENT TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS.............................................................................................1 1.1. CERTAIN MATTERS OF CONSTRUCTION.................................................................1 1.2. DEFINITIONS.....................................................................................2 ARTICLE II COVENANTS AND CONDITIONS..............................................................................13 2.1. RESTRICTIONS ON TRANSFERS; RIGHTS OF FIRST REFUSAL.............................................13 2.2. CALL BY THE COMPANY............................................................................17 2.3. MANAGEMENT STOCKHOLDER PUT.....................................................................21 2.4. TAKE ALONG.....................................................................................24 2.5. COME ALONG.....................................................................................26 2.6. CORPORATE GOVERNANCE...........................................................................29 2.7. RIGHTS OF PARTICIPATION........................................................................32 2.8. FINANCIAL INFORMATION..........................................................................34 2.9. CONFIDENTIALITY................................................................................34 ARTICLE III REGISTRATION RIGHTS..................................................................................34 3.1. GENERAL........................................................................................34 3.2. DEMAND REGISTRATION INITIATED BY THE BERKSHIRE STOCKHOLDERS....................................34 3.3. DEMAND REGISTRATION INITIATED BY THE SALOMON SMITH BARNEY GROUP................................35 3.4. DEMAND REGISTRATION INITIATED BY THE SCARSDALE GROUP...........................................36 3.5. DEMAND REGISTRATION INITIATED BY THE MANAGEMENT STOCKHOLDERS...................................37 3.6. REDUCTION IN REGISTRATION; PIGGYBACK REGISTRATION..............................................38 3.7. OBLIGATIONS OF THE COMPANY.....................................................................39 3.8. FURNISH INFORMATION............................................................................41 3.9. EXPENSES OF REGISTRATION.......................................................................41 3.10. UNDERWRITING REQUIREMENTS......................................................................41 3.11. INDEMNIFICATION................................................................................42 3.12. REGISTRATION ON FORM S-3.......................................................................44 3.13. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934..................................................45 3.14. NO INCONSISTENT AGREEMENTS.....................................................................45 3.15. STOCK SPLIT....................................................................................45 3.16. TIMING AND OTHER LIMITATIONS...................................................................46 3.17. LOCK-UP........................................................................................46 -i- ARTICLE IV MISCELLANEOUS.........................................................................................47 4.1. REMEDIES.......................................................................................47 4.2. ENTIRE AGREEMENT; AMENDMENT; WAIVER............................................................47 4.3. SEVERABILITY...................................................................................48 4.4. NOTICES........................................................................................48 4.5. BINDING EFFECT; ASSIGNMENT.....................................................................49 4.6. GOVERNING LAW..................................................................................49 4.7. TERMINATION....................................................................................50 4.8. RECAPITALIZATIONS, EXCHANGES, ETC..............................................................50 4.9. ACTION NECESSARY TO EFFECTUATE THE AGREEMENT...................................................50 4.10. PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE.................................................50 4.11. EFFECTIVENESS OF TRANSFERS.....................................................................51 4.12. OTHER STOCKHOLDERS.............................................................................51 4.13. NO WAIVER......................................................................................52 4.14. COUNTERPART....................................................................................52 4.15. HEADINGS.......................................................................................52 4.16. THIRD PARTY BENEFICIARIES......................................................................52 4.17. CONSENT TO JURISDICTION........................................................................52 4.18. WAIVER OF JURY TRIAL...........................................................................52
-ii- STOCKHOLDERS AGREEMENT This Stockholders Agreement (this "Agreement") is entered into as of the 4th day of October, 2000 by and among (i) U.S. Can Corporation, a Delaware corporation (together with its successors and permitted assigns, the "Company") and (ii) the Stockholders (as defined below) party hereto. WHEREAS, upon consummation of the transactions contemplated by that certain Agreement and Plan of Merger dated as of June 1, 2000, as heretofore amended (the "Merger Agreement") by and between the Company and Pac Packaging Acquisition Corp., the Berkshire Stockholders (as defined below), the Management Stockholders (as defined below) and the Other Stockholders (as defined below) as of the date of such consummation will own the number of shares of Preferred Stock (as defined below), shares of Common Stock (as defined below) and options to purchase shares of Common Stock, each as set forth in the books and records of the Company; WHEREAS, each of the parties to this Agreement desires that this Agreement supersedes the existing Stockholders Agreement dated as of March 15, 1993 among the Company and Francisco A. Soler, Ricardo Poma, Salomon Brothers, Inc. and other parties thereto, and by execution of this Agreement, such Stockholders Agreement shall terminate effective as of the date of this Agreement; and WHEREAS, each of the Stockholders desires to enter into this Agreement for the purpose of regulating certain relationships of the Stockholders with regard to the Company and certain restrictions on the Common Stock and other equity securities owned by the Stockholders. NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1. CERTAIN MATTERS OF CONSTRUCTION. In addition to the definitions referred to or set forth below in this Section 1: (a) The words "hereof," "herein," "hereunder" and words of similar import shall refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement shall include all subsections thereof; (b) References to Sections and Articles refer to Sections and Articles of this Agreement; (c) Definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined; and (d) The masculine, feminine and neuter genders shall each include the other. 1.2. DEFINITIONS. For the purposes of this Agreement, the following terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. "Adverse Claim" shall have the meaning set forth in Section 8.102 of the applicable Uniform Commercial Code. "Affiliate" shall mean, with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agreement" shall have the meaning set forth in the first paragraph of this Agreement. "Associate" (i) when used to indicate a relationship with any Person shall mean, (a) any corporation or organization of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (b) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar fiduciary capacity, and (c) any relative of such Person who has the same home as such Person, is a parent, sibling, spouse, in-law, child or grandchild of such Person, or the spouse of any of them, or (ii) when used to indicate a relationship with the Company, shall also mean a director or officer of the Company or any Subsidiary. Neither the Company nor any of its Subsidiaries shall be deemed an Associate of any Stockholder. "Berkshire Representatives" shall have the meaning as set forth in Section 2.6(a). "Berkshire Stockholders" shall mean (i) those Persons listed as the Berkshire Stockholders on the Schedule and (ii) their Permitted Transferees (other than the Company). -2- "Board" or "Board of Directors" shall mean the Board of Directors of the Company as the same shall be constituted from time to time. "Board Determination Procedures" shall mean the procedures by which the Board calculates the Board Participation Determination. Such procedures shall include, but not be limited to, a good faith estimate by the Board of any acceleration of vesting of any Time Options, Time Vested Equity, Performance Options and/or Performance Vested Equity upon consummation of the proposed Transfer, the Applicable Percentage (as defined in the Performance Options and the Subscription Agreement governing the Performance Vested Equity), the IRR (as defined in the Performance Options and the Subscription Agreement governing the Performance Vested Equity) and the number of Shares the prospective transferee will ultimately purchase in the proposed Transfer. "Board Participation Determination" shall mean for each Management Stockholder a good faith estimate of the number of shares of Time Vested Equity and Time Options which will vest upon the consummation of the proposed Transfer and the number of shares of Performance Vested Equity and Performance Options which will vest and be earned upon consummation of the proposed Transfer, determined in accordance with the Board Determination Procedures. "Call Event" shall have the meaning as set forth in Section 2.2(a). "Call Group" shall have the meaning as set forth in Section 2.2(a). "Call Notice" shall have the meaning as set forth in Section 2.2(a). "Call Option" shall have the meaning as set forth in Section 2.2(a). "Call Price" shall have the meaning as set forth in Section 2.2(b). "Call Securities" shall mean all of (i) the Shares, (ii) vested Time Options, (iii) vested and earned Performance Options and (iv) if the Determination Date has not yet occurred, vested and unearned Performance Options, in each case which are owned by the members of the Call Group on the date of a Call Event. "Cause" shall have the meaning as set forth below, except with respect to any Management Stockholder who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if any, between the Company and/or one of its Subsidiaries and such Management Stockholder in which there is a definition of "Cause," in which event the definition of "Cause" as set forth in such employment agreement shall be deemed to be the definition of "Cause" herein solely for such Management Stockholder and only for so long as such employment agreement remains effective. -3- In all other events, the term "Cause" shall mean that any one or more of the following has occurred: (i) the Management Stockholder shall have committed a felony; (ii) the Management Stockholder shall have breached in any material respect any non-competition provisions of any written agreement between the Management Stockholder and the Company or any of its Affiliates; (iii) the Management Stockholder shall have openly disregarded his responsibilities to the Company and/or its Affiliates and shall have refused to devote substantial time and energy to the business and affairs of the Company and/or its Affiliates (other than due to Disability or temporary disability which, in the reasonable judgment of the Board of Directors, causes the Management Stockholder to be incapable of devoting such time and energy) and has failed to remedy any such action within thirty (30) days of notice to such Management Stockholder by the Board of Directors of such action. "Change in Control" shall mean (i) any transaction or series of related transactions in which any Person who is not an Affiliate of the Company, or any two or more such Persons acting as a group, and all Affiliates of such Person or Persons, who prior to such time owned no Shares or Shares representing less than fifty percent (50%) of the voting power at elections for the Board, shall (A) acquire, whether by purchase, exchange, tender offer, merger, consolidation, recapitalization or otherwise, or (B) otherwise be the owner of (as a result of a redemption of Shares or otherwise), Shares (or shares in a successor corporation by merger, consolidation or otherwise) such that following such transaction or transactions, such Person or group and their respective Affiliates beneficially own fifty percent (50%) or more of the voting power at elections for the board of directors of the Company or any successor corporation, or (ii) the sale or transfer of all or substantially all of the Company's or United States Can Company's assets and following such sale or transfer, there is a liquidation of the Company. For purposes of this definition, it is understood and agreed that as of the date hereof, the only stockholders of the Company which constitute Affiliates of the Company are Berkshire Fund V Investment Corp., Berkshire Fund V Coinvestment Corp. and Berkshire Investors LLC. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Come Along Percentage" shall have the meaning set forth in Section 2.5(a). "Common Stock" shall mean the Company's common stock, par value $.01 per share, that the Company may be authorized to issue from time to time, any other securities of the Company into which such Common Stock may hereafter be changed or for which such Common Stock may be exchanged after giving effect to the terms of such change or exchange (by way of reorganization, recapitalization, merger, consolidation or otherwise) and shall also include any common stock of the Company hereafter authorized and any capital stock of the Company of any -4- other class hereafter authorized which is not preferred as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company and which has ordinary voting power for the election of directors of the Company. Unless otherwise stated herein, Common Stock shall include, without limitation, all shares of the Management Stockholders' Time Vested Equity (whether or not vested) and Performance Vested Equity (whether or not vested or earned). "Common Stock Equivalents" shall mean all shares of Common Stock (i) owned by, or (ii) issuable upon exercise of Performance Options (solely to the extent such Performance Options, on or prior to the time the determination of Common Stock Equivalents is made, are both vested and earned) and Time Options (solely to the extent such Time Options, on or prior to the time the determination of Common Stock Equivalents is made, are vested) held by, each Stockholder. "Company" shall have the meaning set forth in the first paragraph of this Agreement. "Company Note" shall have the meaning as set forth in Section 2.2(c). "Company Option Period" shall have the meaning as set forth in Section 2.1(a). "Company Sale" shall mean any transaction or a series of related transactions through which the holders of Common Stock Equivalents and their Affiliates immediately prior to the transaction or series of related transactions shall own less than fifty percent (50%) of all Common Stock Equivalents (including without limitation, all shares issued in respect of any such Common Stock Equivalents by way of stock dividend, stock split or combination of shares) immediately following the transaction or series of related transactions. "Contingent Company Note" shall mean a Contingent Equity Company Note and/or a Contingent Option Company Note. "Contingent Equity Company Note" shall mean a note issued by the Company with a face value amount equal to the excess, if any, of the Fair Market Value (on the date of the Call Event or the Put Event, as the case may be) of the vested and unearned Performance Vested Equity (or the portion thereof contemplated by Section 2.2(b)(iv)(B)) over the Investment Price of such Performance Vested Equity or such portion, such Contingent Equity Company Note to be payable on the Determination Date if the vested Performance Vested Equity is earned, at the lesser of (i) its face amount plus interest at a rate equal to the Mid-term Applicable Federal Rate from the date of the Call Event or the Put Event, as the case may be, to the Determination Date and (ii) the difference between the Fair Market Value (on the Determination Date) and the Investment Cost. "Contingent Option Company Note" shall mean a note issued by the Company with a face value amount equal to the excess, if any, of the Fair Market Value (on the date of the Call Event or the Put Event, as the case may be) of the Shares acquirable upon exercise of the vested and unearned Performance Options (or the portion thereof contemplated by -5- Section 2.2(b)(vii)(B)), over the aggregate exercise price of such vested and unearned Performance Options or such portion, such Contingent Option Company Note to be payable on the Determination Date if the vested Performance Options are earned, at the lesser of (i) its face amount plus interest at a rate equal to the Mid-term Applicable Federal Rate from the date of the Call Event or the Put Event, as the case may be, to the Determination Date and (ii) the difference between the Fair Market Value (on the Determination Date) and the aggregate exercise price of such vested and unearned Performance Options. "Credit Agreement" shall mean the Credit Agreement dated as of October 4, 2000 by and among the Company, United States Can Company, USC May Verpackungen Holding, Inc., certain foreign subsidiaries of the Company, Bank of America, N.A., as Administrative Agent, Citicorp North America, Inc., as Syndication Agent, and Bank One, NA (Main Office Chicago), as Documentation Agent, as such Credit Agreement may be amended, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements and restatements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided in such Credit Agreement. "Default" shall have the meaning as set forth in Section 2.2(c). "Designated Employee" or "Designated Employees" shall have the meaning as set forth in Section 2.2(d). "Determination Date" shall have the meaning ascribed to it in the relevant Performance Option certificate or Subscription Agreement, as the case may be. "Director's Cause" shall mean (i) the Director's repeated failure to perform, or gross negligence in the performance of, his duties and responsibilities, (ii) the Director's fraud, embezzlement or other material dishonesty or (iii) the Director's conviction of, or plea of guilty or no contest to, a felony or crime involving moral turpitude. "Disability" shall mean permanent disability within the meaning of Section 22(e)(3) of the Code, unless otherwise defined in a separate written employment agreement between the Company and/or one of its Subsidiaries and the person whose disability is in question in which event the definition of "Disability" as set forth in such employment agreement shall be deemed to be the definition of "Disability" herein solely for such person and only for so long as such employment agreement remains effective. "Earned" shall mean, when used in connection with Performance Vested Equity or Performance Options, as the case may be, that such Performance Vested Equity or Performance Options have been earned in accordance with the relevant Subscription Agreement(s) or the Incentive Plan and the certificates issued pursuant thereto, as the case may be. -6- "Employment Ratio" shall mean a ratio equal to (i) the number of full months since the date of this Agreement that the Management Stockholder has remained employed by the Company, over (ii) 36 months. "Employment Ratio Remainder" shall mean 1 minus the Employment Ratio. "Fair Market Value" shall mean the fair value per share of the applicable Shares as of the applicable date on the basis of a sale of such Shares in an arms length private sale between a willing buyer and a willing seller, neither acting under compulsion. In determining such Fair Market Value, no discount shall be taken for constituting a minority interest or for the illiquidity of such Shares and no upward adjustment or discount shall be taken relating to the fact that the Shares in question are subject to the restrictions and entitled to the rights provided hereunder. In determining the fair value per share of the applicable Shares, all outstanding shares of the Company's Preferred Stock shall conclusively be considered to have a Fair Market Value equal to the principal amount thereof, plus any accrued but unpaid dividends. Such Fair Market Value shall be determined in good faith by the Board of Directors; PROVIDED, HOWEVER, that in each instance in which the Shares (or Options) of a Management Stockholder are to be purchased at Fair Market Value of such Shares (or at a price based on the Fair Market Value of the Shares underlying the Options) pursuant to Section 2.1(d), 2.2 or 2.3, the Management Stockholder may deliver to the Company a written objection to the initial Fair Market Value of the Shares as determined by the Board. If the Board and the Management Stockholder thereafter agree on a Fair Market Value of the Shares, such Fair Market Value shall be used to determine the Call Price or the Put Price, as the case may be. If the parties are unable to agree on the Fair Market Value, the Board shall select an independent appraiser having substantial knowledge and experience in valuing private companies and the financial markets, subject to the consent of the Management Stockholder (which consent shall not be unreasonably withheld), and such appraiser will determine the Fair Market Value of the Shares. The determination of such appraiser shall be binding on the Company and the Management Stockholder. In the event that the Fair Market Value ultimately determined by the appraiser is higher than that initially determined by the Board, the Company shall bear the costs of the appraisal. In the event that the Fair Market Value ultimately determined by the appraiser is lower than or equal to that initially determined by the Board, the Management Stockholder shall bear the costs of the appraisal. "Federal Bankruptcy Code" means Title 11 of the United States Code. "Good Reason" shall mean a material adverse change in the nature or scope of the employee's authorities, status, working conditions, duties or responsibilities ,or a material reduction in salary, in benefits or in bonus program inconsistent with reductions for similarly situated employees of the Company or any Subsidiary of the Company or inconsistent with the Company's or any such Subsidiary's past practices. A change in the employee's reporting relationships shall not constitute "Good Reason." "Holder" or "Holders" have the meaning as set forth in Section 3.1. -7- "Incentive Plan" shall mean the U.S. Can Corporation 2000 Equity Incentive Plan. "Investment Price" shall mean an amount per Share equal to the price per Share paid for such Share at the time of initial purchase thereof (subject to appropriate adjustments for stock splits, recapitalizations and the like). "Involuntary Transfer" shall have the meaning as set forth in Section 2.1(e). "Major Default" shall mean the occurrence of any of the following events: (a) the Company or any Subsidiary is, or has been, accruing any default interest under the Credit Agreement or any other material loan or credit agreement to which the Company or any Subsidiary is a party, or (b) the Company or any Subsidiary shall (I) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (II) make a general assignment for the benefit of its creditors, (III) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (IV) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, liquidation or composition or readjustment of debts, or (V) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code. "Management Representatives" shall have the meaning as set forth in Section 2.6(a). "Management Stockholders" shall mean (i) those Persons listed as the Management Stockholders on the Schedule and (ii) their Permitted Transferees (other than the Company). "Merger Agreement" shall have the meaning as set forth in the recitals. "Mid-term Applicable Federal Rate" shall mean the mid-term applicable federal rate as defined in Section 1274 of the Code. "New Securities" shall have the meaning as set forth in Section 2.7(b). "Offer Price" shall have the meaning as set forth in Section 2.1(a). "Offered Shares" shall have the meaning as set forth in Section 2.1(a). "Options" shall mean Performance Options and Time Options. "Other Stockholders" shall mean (i) those Persons listed as the Other Stockholders on the Schedule, (ii) their Permitted Transferees (other than the Company) and (iii) those Persons described in Section 4.12(iii). "Participating Offeree" shall have the meaning as set forth in Section 2.5(a). -8- "Participation Notice" shall have the meaning as set forth in Section 2.5(a). "Participation Securities" shall have the meaning as set forth in Section 2.5(a). "Performance Options" shall mean, collectively, the options granted to certain Management Stockholders under the Incentive Plan to purchase shares of Common Stock, the number of earned and vested options of which is subject to the attainment of certain targets set forth in the Incentive Plan and the option certificates issued pursuant thereto. "Performance Vested Equity" shall mean the Common Stock purchased by Management Stockholders the value of which, for certain purposes of this Agreement, is subject to the attainment of certain targets set forth in the Subscription Agreement(s) pursuant to which it is issued. "Permitted Transfer" shall mean: (i) a Transfer of Shares by any Stockholder who is a natural person to (a) such Stockholder's spouse, children (including legally adopted children and stepchildren), spouses of children, grandchildren, spouses of grandchildren, parents or siblings; (b) a trust for the benefit of the Stockholder and/or any of the Persons described in clause (a); or (c) a limited partnership or limited liability company whose sole partners or members, as the case may be, are the Stockholder and/or any of the Persons described in clause (a) or clause (b); PROVIDED, that in any of clauses (a), (b) or (c), the Stockholder transferring such Shares retains exclusive power to exercise all rights under this Agreement. (ii) a Transfer of Shares by any Stockholder to the Company; (iii) a Transfer of Shares by a Stockholder upon death or incapacity to such Stockholder's estate, executors, administrators and personal representatives, and then to such Stockholder's legal representatives, heirs or legatees (whether or not such recipients are a spouse, children, spouses of children, grandchildren, spouses of grandchildren, parents or siblings of such Stockholder); PROVIDED that, in the case of a Management Stockholder whose Shares were subject to the provisions of Section 2.2 immediately prior to such Management Stockholder's death, the Company has not exercised its Call Option with respect to such Shares under Section 2.2; (iv) a Transfer of Shares (a) by the initial Berkshire Stockholders to any Affiliate of Berkshire Partners LLC or any of the employees, partners, members or Affiliates of such Berkshire Stockholder or any such Affiliate, or (b) between any Berkshire Stockholders; -9- (v) a Transfer of Shares (a) by a member of the Scarsdale Group to any other member of the Scarsdale Group, or (b) from any Stockholder which is not a natural person to any Affiliate of such Stockholder; and (vi) A Transfer of Shares by the Squam Stockholder to any of its Affiliates or any of the employees, partners or members of the Squam Stockholder or any such Affiliate. PROVIDED, HOWEVER, that Performance Options and Time Options may only be transferred in accordance with the terms of the Incentive Plan; and PROVIDED, FURTHER, that no Permitted Transfer shall be effective unless and until the transferee of the Shares, Performance Options or Time Options so transferred complies with Section 4.12 including without limitation, executing and delivering to the Company a counterpart of this Agreement and agreeing to be bound hereunder in the same manner and to the same extent as the Stockholder from whom the Shares, Performance Options or Time Options were transferred. Except in the case of a Permitted Transfer pursuant to clause (ii) above, from and after the date on which a Permitted Transfer becomes effective, the Permitted Transferee of the Shares, Performance Options or Time Options so transferred shall have the same rights, and shall be bound by the same obligations, under this Agreement as the transferor of such Shares, Performance Options or Time Options and shall be deemed for all purposes hereunder (i) a "Berkshire Stockholder" in the case of a Permitted Transfer from a Berkshire Stockholder, (ii) a "Management Stockholder" in the case of a Permitted Transfer from a Management Stockholder or (iii) an "Other Stockholder" in the case of a Permitted Transfer from an Other Stockholder. No Permitted Transfer shall conflict with or result in any violation of a judgment, order, decree, statute, law, ordinance, rule or regulation. "Permitted Transferee" shall mean any Person who shall have acquired and who shall hold Shares, Performance Options or Time Options pursuant to a Permitted Transfer. "Person" shall mean any individual, partnership, corporation, association, limited liability company, trust, joint venture, unincorporated organization or entity, or any government, governmental department or agency or political subdivision thereof. "Preferred Stock" shall mean the Company's preferred stock, par value $.01 per share, that the Company may be authorized to issue from time to time, any other securities of the Company into which such Preferred Stock may hereafter be changed or for which such Preferred Stock may be exchanged after giving effect to the terms of such change or exchange (by way of reorganization, recapitalization, merger, consolidation or otherwise) and shall also include any preferred stock of the Company hereafter authorized. "Proportionate Share" shall have the meaning as set forth in Section 2.1(a) "Proprietary Information" shall have the meaning as set forth in Section 2.8. -10- "Public Offering" shall mean the completion of a sale of Common Stock pursuant to a registration statement which has become effective under the 1933 Act (excluding registration statements on Form S-4, S-8 or similar limited purpose forms), in which the Common Stock shall be listed and traded on a national exchange or on the NASDAQ National Market System. "Put Event" shall have the meaning as set forth in Section 2.3(a). "Put Notice" shall have the meaning as set forth in Section 2.3(a). "Put Option" shall have the meaning as set forth in Section 2.3(a). "Put Price" shall have the meaning as set forth in Section 2.3(b). "Put Securities" shall mean all of (i) the Shares, (ii) vested Time Options, (iii) vested and earned Performance Options and (iv) if the Determination Date has not yet occurred, vested and unearned Performance Options, in each case which are owned by the Management Stockholder exercising the Put Option or a Permitted Transferee of the Management Stockholder exercising the Put Option on the date of a Put Event. "Register," "registered" and "registration" shall have the meaning as set forth in Section 3.1. "Registrable Securities" shall mean (i) all shares of Common Stock held by any Stockholder, provided that in the case of Time Vested Equity, such shares of Common Stock shall be Registrable Securities solely to the extent vested and in the case of Performance Vested Equity, such shares of Common Stock shall be Registrable Securities solely to the extent vested and earned, (ii) all shares of Common Stock issuable upon the exercise of Performance Options and Time Options in each case, to the extent exercisable, held by any Stockholder, and (iii) any other common equity securities of the Company issued in exchange for, upon a reclassification of, or in a distribution with respect to, such Common Stock. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a registration statement (other than a registration statement on Form S-8) with respect to the sale of such securities shall have become effective under the 1933 Act and such securities shall have been disposed of in accordance with such registration statement, (b) a registration statement on Form S-8 with respect to such securities shall have become effective under the 1933 Act, or (c) such securities shall have been sold under Rule 144 (or any successor provision) under the 1933 Act and such securities may be resold by the Holder thereof without registration under the 1933 Act. "Sale Request" shall have the meaning as set forth in Section 2.4(a). "Salomon Smith Barney Group" shall mean Salomon Smith Barney Inc. and its Affiliates. -11- "Scarsdale Group" shall mean (i) those Persons listed as the Scarsdale Group on the Schedule and (ii) their Permitted Transferees (other than the Company). "Schedule" shall refer to the Schedule of Stockholders attached hereto as Exhibit A, as amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. "Seller" shall have the meaning as set forth in Section 2.4(a). "Shares" shall mean (i) shares of Common Stock held by Stockholders from time to time, (ii) shares of Preferred Stock held by Stockholders from time to time, or (iii) securities of the Company issued in exchange for, upon reclassification of, or as a distribution in respect of, any of the foregoing. "Squam Stockholder" shall mean Squam Lake Investors IV, L.P. and its Permitted Transferees (other than the Company). "Stockholder Offeree" shall have the meaning as set forth in Section 2.1(a). "Stockholder Offeror" shall have the meaning as set forth in Section 2.1(a). "Stockholders" shall mean, collectively, the Berkshire Stockholders, the Management Stockholders and the Other Stockholders. "Subscription Agreements" shall mean those subscription agreements dated as of October 4, 2000 pursuant to which certain Management Stockholders purchased Time Vested Equity and Performance Vested Equity. "Subsidiary" with respect to any entity (the "parent") shall mean any corporation, company, firm, association or trust of which such parent, at the time in respect of which such term is used, (i) owns directly or indirectly more than fifty percent (50%) of the equity or beneficial interest, on a consolidated basis, or (ii) owns directly or controls with power to vote, directly or indirectly through one or more Subsidiaries, shares of the equity or beneficial interest having the power to elect more than fifty percent (50%) of the directors, trustees, managers or other officials having powers analogous to that of directors of a corporation. Unless otherwise specifically indicated, when used herein the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company. "Supermajority Vote" shall mean an affirmative vote of eighty percent (80%) of the Common Stock. "Take Along Group" shall have the meaning as set forth in Section 2.4(a). "Third Party" shall mean any Person other than the Company. -12- "Time Options" shall mean, collectively, the time vested options, granted to certain Management Stockholders under the Incentive Plan, to purchase shares of Common Stock on the terms set forth therein and in the certificates issued pursuant thereto. "Time Vested Equity" shall mean the Common Stock purchased by Management Stockholders the value of which, for certain purposes of this Agreement, is subject to the vesting restrictions set forth in the Subscription Agreement(s) pursuant to which it is issued. "Transfer" shall mean to transfer, sell, assign, pledge, hypothecate, give, create a security interest in or lien on, place in trust (voting or otherwise), assign or in any other way encumber or dispose of, directly or indirectly and whether or not by operation of law or for value, any Shares, Performance Options or Time Options. "Transfer Notice" shall have the meaning as set forth in Section 2.1(a). "Transferor" shall have the meaning as set forth in Section 2.5(a). "Transferring Stockholder" shall have the meaning as set forth in Section 2.1(c). "vested" shall mean, when used in connection with Time Vested Equity, Performance Vested Equity, Time Options or Performance Options, as the case may be, that such Time Vested Equity, Performance Vested Equity, Time Options or Performance Options have vested under the terms of the relevant Subscription Agreement(s) or the Incentive Plan and the certificates issued pursuant thereto, as the case may be. "Voluntary Termination" shall mean any voluntary termination of employment with the Company or a Subsidiary of the Company by a Management Stockholder, except as otherwise specified in an effective written agreement, if any, between the Company and/or one of its Subsidiaries and such Management Stockholder and except for Good Reason. The term Voluntary Termination shall not include termination of employment due to death, Disability or retirement in accordance with Company policy. ARTICLE 2 COVENANTS AND CONDITIONS Subject to the provisions of Section 4.7 hereof relating to the termination of certain provisions of this Agreement, the following covenants and conditions shall apply. 2.1. RESTRICTIONS ON TRANSFERS; RIGHTS OF FIRST REFUSAL. No Stockholder may Transfer all or any of the Shares owned by such Stockholder to any Person other than (i) a Permitted Transferee, (ii) pursuant to Section 2.2 or 2.3, (iii) pursuant to Section 2.4 by any Take Along Group which has delivered a Sales Request under Section 2.4 and by any other Stockholder in accordance with such Sales Request, (iv) after the third anniversary of the date hereof, in -13- accordance with the following provisions of this Article II, and (v) by the Salomon Smith Barney Group prior to the third anniversary of the date hereof, solely to the extent such Transfer is required of the Salomon Smith Barney Group by any Third Party regulatory body and provided that such Transfer is made in accordance with the following provisions of this Article II. Any attempted Transfer of Shares not permitted by this Section 2.1 shall be null and void, and the Company shall not in any way give effect to such nonpermissible Transfer. Any attempted Transfer of Performance Options or Time Options not permitted by the Incentive Plan shall be null and void, and the Company shall not in any way give effect to such nonpermissible Transfer. (a) Rights of First Refusal on Transfers of Shares. (i) No Stockholder may Transfer its Shares to a Third Party (other than those Transfers described in clause (vii) of this Section 2.1(a)) other than in a transaction in which the only consideration is cash. If at any time a Stockholder receives, or otherwise negotiates with an unaffiliated Third Party, a written, bona fide offer to purchase all or any of such Stockholder's Shares for cash and such Stockholder (each, a "Stockholder Offeror") desires to Transfer such Shares in accordance with such offer, such Stockholder Offeror shall give notice of such offer (the "Transfer Notice") to the Company and all other Stockholders (such other Stockholders being hereafter referred to as the "Stockholder Offerees"). The Transfer Notice shall state the terms and conditions of such offer, including the name of the prospective purchaser, the proposed purchase price per share of such Shares (the "Offer Price"), payment terms, the type of disposition and the number of such Shares to be transferred (the "Offered Shares"). (ii) For a period of twenty (20) days after receipt of the Transfer Notice (the "Company Option Period"), the Company may, by notice in writing to the Stockholder Offeror delivering such Transfer Notice, elect in writing to purchase any or all of the Offered Shares at the Offer Price. (iii) If the Company does not elect to purchase any of the Offered Shares, or exercises such right only with respect to a portion of such Offered Shares, then for a period of twenty (20) days commencing on the earlier of (a) the date, if any, that the Stockholder Offeror notifies the Stockholder Offerees in writing that the Company has determined either not to exercise such right of purchase or to exercise such right only with respect to a portion of the Offered Shares, and (b) the expiration of the Company Option Period, the Stockholder Offerees shall have the right to purchase all or any portion of such Offered Shares not so elected to be purchased by the Company, at the Offer Price. The specific number of such Offered Shares remaining after the Company has exercised its right pursuant to clause (ii) to which each Stockholder Offeree shall be entitled to purchase shall be determined on a PRO RATA basis in proportion to the respective number of shares of Common Stock owned beneficially by each such Stockholder Offeree as of the date of the Transfer Notice in relation to the total number of -14- shares of Common Stock owned beneficially by all Stockholder Offerees (for each such Stockholder, its "Proportionate Share"). Each Stockholder Offeree shall also be entitled to indicate a desire to purchase all or a portion of any Offered Shares remaining after such PRO RATA allocation. Each Stockholder Offeree shall be allocated the maximum amount of Offered Shares set forth in such Stockholder Offeree's offer to purchase, unless such allocation would result in the allocation of more securities in the aggregate than are available for purchase by the Stockholder Offerees, in which case such Offered Shares shall be allocated among the Stockholder Offerees PRO RATA in accordance with each such Stockholder Offeree's Proportionate Share; PROVIDED, HOWEVER, that if the foregoing results in any Stockholder Offeree being allocated more than the maximum amount of Offered Shares specified in such Stockholder Offeree's offer to purchase, such Stockholder Offeree will be allocated such maximum amount and the excess will be allocated as provided in this sentence (including this proviso). (iv) If the Company and the Stockholder Offerees fail to accept the offer as to all of the Offered Shares, the Stockholder Offeror shall be permitted to sell, subject to Section 2.5, all Offered Shares to the original transferee named in the Transfer Notice upon the original terms set forth in the Transfer Notice, within sixty (60) days (subject to any extension for any regulatory approvals being diligently pursued) following termination of the offer period granted to the Stockholder Offerees. If such Transfer is not completed within such sixty (60) day period, the Stockholder Offeror may not Transfer such Offered Shares without again complying with this Section 2.1(a). (v) The closing of the purchase and sale of any Offered Shares to be acquired by the Company or the Stockholder Offerees hereunder shall be held at the offices of the Company on such dates and times as the parties may agree but in all events within twenty (20) days following termination of the offer period granted to the Stockholder Offerees. Five (5) days prior to the closing of the purchase of any Offered Shares by the original transferee named in the Transfer Notice, the Stockholder Offeror shall notify the Company of the disposition of such Offered Shares, including the name of each purchaser and the number of Offered Shares to be bought by each such purchaser. The closing of the purchase and sale of any Offered Shares to be acquired by the original transferee named in the Transfer Notice shall be held at the offices of the Company on such date and time as the parties may agree but in all events within sixty (60) days following termination of the offer period granted to the Stockholder Offerees. (vi) At any such closing, the Company, the Stockholder Offerees or the original transferee named in the Transfer Notice, as the case may be, shall deliver to the Stockholder Offeror against delivery of certificates duly endorsed and stock powers representing the Offered Shares being acquired by the Company, the -15- Stockholder Offerees or the original transferee named in the Transfer Notice, as the case may be, the Offer Price per Share, on the same terms as set forth in the Transfer Notice payable in respect of the Offered Shares being purchased. (vii) The provisions of this Section 2.1(a) shall not apply to a Transfer of Shares which (A) is pursuant to Section 2.2, (B) is pursuant to Section 2.3, (C) is pursuant to Section 2.4, (D) is a Transfer by a Participating Offeree pursuant to Section 2.5 or (E) is a Permitted Transfer. (b) Any Shares Transferred pursuant to this Section 2.1 shall remain subject to the Transfer restrictions of this Agreement and each intended transferee pursuant to this Section shall execute and deliver to the Company a counterpart of this Agreement, which shall evidence such transferee's agreement that the Shares intended to be transferred shall continue to be subject to this Agreement and that as to such Shares the transferee shall be bound by the restrictions of this Agreement as a Stockholder hereunder. (c) Any Stockholder who is the subject of an Involuntary Transfer (as defined below) (the "Transferring Stockholder"), shall notify the Company and the other Stockholders in writing within ten (10) days of such Involuntary Transfer (but the failure to give such notice shall not affect the rights of the parties hereunder). Upon the receipt of such notice by the Company and the other Stockholders, the Company and the other Stockholders shall treat the Involuntary Transfer as an offer under this Section 2.1. The Company and the other Stockholders shall act upon the deemed offer under this Section within the time periods and following the applicable procedures set forth in this Section 2.1, with the date of the deemed offer being the later of the date of the receipt by the Company and the other Stockholders of written notice setting forth the existence of such an Involuntary Transfer and the date of such Involuntary Transfer, such later date being the date of notification for the purpose of this Section 2.1. (d) The purchase price for the Shares being transferred as a result of an Involuntary Transfer under Section 2.1(c) shall be the Fair Market Value of such Shares. (e) For purposes of this Agreement, the term "Involuntary Transfer" shall mean any involuntary sale, transfer, encumbrance or other disposition (other than as a result of the death of the Stockholder) by or in which any Stockholder shall be deprived or divested of any right, title or interest in or to any Shares, including without limitation (I) any levy of execution, transfer in connection with bankruptcy, reorganization, insolvency or similar proceedings, (II) any transfer to a public officer or agency pursuant to any abandoned property or escheat law, or (III) any transfer to the spouse of an individual or change in the record holder made pursuant to divorce proceedings. A Transfer pursuant to Section 2.2 shall not be deemed to be an Involuntary Transfer. -16- 2.2. CALL BY THE COMPANY OF MANAGEMENT STOCKHOLDERS' EQUITY INTERESTS. (a) Upon the termination of the employment of any Management Stockholder by the Company or any of its Subsidiaries (a "Call Event") for any reason, the Company or its designee shall have the right to purchase (the "Call Option"), by delivery of a written notice (the "Call Notice") to such terminated Management Stockholder no later than sixty (60) days after the date of such Call Event, and such Management Stockholder and such Management Stockholder's Permitted Transferees (collectively, the "Call Group") shall be required to sell all (but not less than all) of the Call Securities at a price per share (or per option) equal to the Call Price (as defined below) of such Call Securities as of the date the Call Notice is delivered. (b) For purposes of this Section 2.2, the term "Call Price" shall mean: (i) with respect to vested Time Vested Equity, vested and earned Performance Vested Equity and any Shares purchased upon exercise of Time Options and Performance Options held by the Call Group, (A) in the event of a termination of a Management Stockholder's employment (v) by the Management Stockholder for Good Reason, (w) by the Company without Cause, (x) by virtue of death or Disability, (y) upon retirement in accordance with Company policy or (z) by Voluntary Termination on or after the third anniversary of the date hereof, the Fair Market Value of such Shares; (B) in the event of a termination of a Management Stockholder's employment by Voluntary Termination prior to the third anniversary of the date hereof, (x) for the Shares representing the product of the Employment Ratio and the number of shares of vested Time Vested Equity, vested and earned Performance Vested Equity and any Shares purchased upon exercise of Time Options and Performance Options held by the Call Group, the Fair Market Value of such Shares, and (y) for the Shares representing the product of the Employment Ratio Remainder and the number of shares of vested Time Vested Equity, vested and earned Performance Vested Equity and any Shares purchased upon exercise of Time Options and Performance -17- Options held by the Call Group, the lower of (I) the Investment Price of such Shares, or (II) the Fair Market Value of such Shares; and (C) in the event of a termination of a Management Stockholder's employment by the Company for Cause, the lower of (x) the Investment Price of such Shares or (y) the Fair Market Value of such Shares; (ii) with respect to any Shares purchased by the Management Stockholder which are not covered by clause (i) of this Section 2.2(b), the Fair Market Value of such Shares; (iii) with respect to unvested Time Vested Equity, unvested Performance Vested Equity, and vested but unearned Performance Vested Equity (if the Determination Date has occurred), the lower of (I) the Investment Price of such Shares, or (II) the Fair Market Value of such Shares; (iv) with respect to vested Performance Vested Equity which has been called pursuant to this section prior to a Determination Date (so it is not known how many, if any, of such shares of vested Performance Vested Equity will be earned), (A) in the event of a termination of a Management Stockholder's employment (v) by the Management Stockholder for Good Reason, (w) by the Company without Cause, (x) by virtue of death or Disability, (y) upon retirement in accordance with Company policy or (z) by Voluntary Termination on or after the third anniversary of the date hereof, (I) the lower of (i) the Investment Price of such Shares, or (ii) the Fair Market Value of such Shares plus (II) a Contingent Equity Company Note; (B) in the event of a termination of a Management Stockholder's employment by Voluntary Termination prior to the third anniversary of the date hereof, (x) for the Shares representing the product of the Employment Ratio and the number of shares of vested Performance Vested Equity which have not been earned prior to the Call Event, (I) the lower of (i) the Investment Price of such Shares, or (ii) the Fair Market Value of such Shares plus (II) a Contingent Equity Company Note; -18- and (y) for the Shares representing the product of the Employment Ratio Remainder and the number of shares of vested Performance Vested Equity which have not been earned prior to the Call Event, (I) the lower of (i) the Investment Price of such Shares, or (ii) the Fair Market Value of such Shares; and (C) in the event of a termination of a Management Stockholder's employment by the Company for Cause, the lower of (x) the Investment Price of such Shares or (y) the Fair Market Value of such Shares; (v) with respect to any vested Time Options, the difference between (x) the Call Price for the Shares underlying such Time Options (calculated as if the Shares underlying such Time Options were outstanding and had been called pursuant to this Section 2.2 and therefore calculated in accordance with the procedures set forth in clause 2.2(b)(i) above) minus (y) the exercise price of such vested Time Options; PROVIDED, that such difference shall not be less than zero; (vi) with respect to any vested and earned Performance Options, the difference between (x) the Call Price for the Shares underlying such Performance Options (calculated as if the Shares underlying such Performance Options were outstanding and had been called pursuant to this Section 2.2 and therefore calculated in accordance with the procedures set forth in clause 2.2(b)(i) above) minus (y) the exercise price of such vested and earned Performance Options; PROVIDED, that such difference shall not be less than zero; and (vii) with respect to any vested Performance Options which have been called pursuant to this section prior to a Determination Date (so it is not known how many, if any, of such Performance Options will be earned), (A) in the event of a termination of a Management Stockholder's employment (v) by the Management Stockholder for Good Reason, (w) by the Company without Cause, (x) by virtue of death or Disability, (y) upon retirement in accordance with Company policy or (z) by Voluntary Termination on or after the third anniversary of the date hereof, a Contingent Option Company Note; and -19- (B) in the event of a termination of a Management Stockholder's employment by Voluntary Termination prior to the third anniversary of the date hereof, (x) for the vested Performance Options representing the product of the Employment Ratio and the number of vested Performance Options which have not been earned prior to the Call Event, a Contingent Option Company Note (calculated separately for each group of vested Performance Options with different grant dates) and (y) the remainder of the vested Performance Options shall automatically expire. (c) The closing of any purchase of Call Securities by the Company pursuant to Section 2.2(a) shall take place at the principal office of the Company no later than the 150th day after the Call Event. At such closing, the Company shall deliver to the Call Group consideration in an amount equal to the aggregate Call Price payable in respect of such Call Securities against delivery of (i) original stock certificates and stock powers duly endorsed in favor of the Company representing the Call Securities, and (ii) an executed agreement, in form reasonably satisfactory to the Company, evidencing the cancellation of any vested Time Options and vested Performance Options purchased at such closing. The Company shall pay the Call Price by paying the Call Group in cash, or, as applicable, a Contingent Company Note; PROVIDED, HOWEVER, that in the event that any such cash payment would cause the Company or any Subsidiary to be in violation of applicable law or in default under or otherwise in violation of the terms of any material loan or credit agreement to which the Company or any of its Subsidiaries is a party (a "Default"), the Company shall pay such cash portion of the Call Price by issuing a subordinated promissory note in a principal amount equal to the cash portion of the purchase price (the "Company Note"). The principal of such note will be due and payable in five equal annual installments, the first such installment becoming due and payable on the first anniversary of the issuance of such note, and interest will accrue thereon at a rate equal to the Mid-term Applicable Federal Rate plus three percent (3%) from the date of issuance of the Company Note and will be payable quarterly in arrears. Such Company Note may be prepaid by the Company in whole at any time or in part from time to time without premium or penalty and shall otherwise be in the form of Exhibit B hereto. Notwithstanding anything to the contrary in this Agreement, the Company shall not be obligated to make any cash payment pursuant to this Section 2.2(c) or any cash payment of principal or interest due under a Company Note if such payment would cause a Default. In the event the Company cannot make any cash payment under this Section 2.2(c) or the cash payments of principal and interest due under a Company Note because it is in Default or would be in Default by virtue of such payments, the Company will undertake to make such payments at such time as the Company is no longer in, or would no longer be by virtue of such payments in, Default; PROVIDED, HOWEVER, (i) if a Change in Control has occurred, or (ii) if the Company or any Subsidiary shall (A) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial -20- part of its property, (B) make a general assignment for the benefit of its creditors, (C) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (D) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, liquidation or composition or readjustment of debts, or (E) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code, any such Company Note shall be due and payable and the Company shall be obligated to make all payments due under the Company Note. (d) Notwithstanding anything set forth in this Section 2.2 to the contrary, prior to the exercise by the Company of its Call Option to purchase Call Securities pursuant to this Section 2.2, the Board of Directors of the Company may designate one or more new or existing employees of the Company or any Subsidiary (individually a "Designated Employee" and collectively, the "Designated Employees") or another Stockholder who shall have the right, but not the obligation, to exercise the Call Option and to acquire, in lieu of the Company, some or all (as determined by the Company) of the Call Securities that the Company is entitled to purchase from the Call Group hereunder, on the same terms and conditions as set forth in Section 2.2(c) which apply to the purchase of Call Securities by the Company, except all payments pursuant to this Section 2.2(d) shall be made in immediately available funds or by certified or cashier's check, and shall not be payable in the form of a note of any kind. In no event shall the Company designate to any Person its call right with respect to any portion of the Call Securities payable in the form of a Contingent Option Company Note or a Contingent Equity Company Note. Concurrently with any such purchase of Call Securities by any such Designated Employee, such Designated Employee shall execute a counterpart of this Agreement, whereupon such Designated Employee shall be deemed a "Management Stockholder" and shall have the same rights and be bound by the same obligations as the Management Stockholders hereunder. 2.3. MANAGEMENT STOCKHOLDER PUT. (a) Upon the termination of the employment of any Management Stockholder with the Company or any of its Subsidiaries (a "Put Event") by virtue of death or Disability or by virtue of retirement in accordance with Company policy, then such Management Stockholder (and each Permitted Transferee of such Management Stockholder who has been transferred Shares pursuant to this Agreement from such Management Stockholder) shall have the right to sell (the "Put Option"), by delivery of a written notice (the "Put Notice") to the Company no later than sixty (60) days after the date of such Put Event, and the Company shall be required to purchase all (but not less than all) of the Put Securities at a price per share equal to the Put Price (as defined below) of such Put Securities as of the date the Put Notice is delivered. (b) For purposes of this Section 2.3, the term "Put Price" shall mean -21- (i) with respect to vested Time Vested Equity, vested and earned Performance Vested Equity and any other Shares held by a Management Stockholder or his Permitted Transferees, the Fair Market Value of such Shares; (ii) with respect to unvested Time Vested Equity, unvested Performance Vested Equity, and vested but unearned Performance Vested Equity (if the Determination Date has occurred), the lower of (I) the Investment Price of such Shares, or (II) the Fair Market Value of such Shares; (iii) with respect to vested Performance Vested Equity which has been put pursuant to this section prior to a Determination Date (so it is not known how many, if any, of such shares of vested Performance Vested Equity will be earned), (x) the lower of (I) the Investment Price of such Shares, or (II) the Fair Market Value of such Shares plus (y) a Contingent Equity Company Note; (iv) with respect to any vested Time Options, the difference between (x) the Put Price for the Shares underlying such Time Options (calculated as if the Shares underlying such Time Options were outstanding and had been put pursuant to this Section 2.3 and therefore calculated in accordance with the procedures set forth in clause (i) above) minus (y) the exercise price of such vested Time Options; PROVIDED, that such difference shall not be less than zero; (v) with respect to any vested and earned Performance Options, the difference between (x) the Put Price for the Shares underlying such Performance Options (calculated as if the Shares underlying such Performance Options were outstanding and had been put pursuant to this Section 2.3 and therefore calculated in accordance with the procedures set forth in clause (i) above) minus (y) the exercise price of such vested and earned Performance Options; PROVIDED, that such difference shall not be less than zero; and (vi) with respect to any vested Performance Options which have been put pursuant to this section prior to a Determination Date (so it is not known how many, if any, of such Performance Options will be earned), a Contingent Option Company Note. (c) The closing of any purchase of Put Securities by the Company pursuant to Section 2.3(a) shall take place at the principal office of the Company no later than the 150th day after the Put Event. At such closing, the Company shall deliver to the Management Stockholder (and his or her Permitted Transferees, as the case may be) -22- exercising the Put Option consideration in an amount equal to the aggregate Put Price payable in respect of such Put Securities against delivery of (i) original stock certificates and stock powers duly endorsed in favor of the Company representing the Put Securities, and (ii) an executed agreement, in form reasonably satisfactory to the Company, evidencing the cancellation of any vested Time Options and vested Performance Options purchased at such closing. The Company shall pay the Put Price by paying the Management Stockholder (and his or her Permitted Transferees, as the case may be) in cash, or, as applicable, a Contingent Company Note; PROVIDED, HOWEVER, that in the event that any such cash payment would cause the Company or any Subsidiary to be in Default, the Company shall pay such cash portion of the Put Price by issuing a Company Note. The principal of such Company Note will be due and payable in five equal annual installments, the first such installment becoming due and payable on the first anniversary of the issuance of such note, and interest will accrue thereon at a rate equal to the Mid-term Applicable Federal Rate plus three percent (3%) from the date of issuance of the Company Note and will be payable quarterly in arrears. Such Company Note may be prepaid by the Company in whole at any time or in part from time to time without premium or penalty and shall otherwise be in the form of Exhibit B hereto. Notwithstanding anything to the contrary in this Agreement, the Company shall not be obligated to make any cash payment pursuant to this Section 2.3(c) or any cash payment of principal or interest due under a Company Note if such cash payment would cause a Default. In the event the Company cannot make any cash payment under this Section 2.3(c) or the cash payments of principal and interest due under a Company Note because it is in Default or would be in Default by virtue of such payments, the Company will undertake to make such payments at such time as the Company is no longer in, or would no longer be by virtue of such payments in, Default; PROVIDED, HOWEVER, (i) if a Change in Control has occurred, or (ii) if the Company or any Subsidiary shall (A) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (B) make a general assignment for the benefit of its creditors, (C) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (D) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, liquidation or composition or readjustment of debts, or (E) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code, any such Company Note shall be due and payable and the Company shall be obligated to make all payments due under the Company Note. In the event the Company intends to issue to the Management Stockholder (and his or her Permitted Transferees, as the case may be) a Company Note, it will so notify the Management Stockholder (and his or her Permitted Transferees, as the case may be) at least 10 days before such issuance and the Management Stockholder (and his or her Permitted Transferees, as the case may be) may, upon notice that the Company intends to issue such Company Note (but in no event after such Company Note is issued), withdraw the exercise of his or her put. -23- (d) Notwithstanding anything set forth in this Section 2.3 to the contrary, following the exercise by the Management Stockholder (and his or her Permitted Transferees, as the case may be) of his or her Put Option to sell Put Securities pursuant to this Section 2.3, the Board of Directors of the Company may designate one or more Designated Employees or another Stockholder who shall have the right, but not the obligation, to purchase, in lieu of the Company, some or all (as determined by the Company) of the Put Securities that the Company is required to purchase from the Management Stockholder hereunder, on the same terms and conditions as set forth in Section 2.3(c) which apply to the purchase of Put Securities by the Company, except all payments pursuant to this Section 2.3(d) shall be made in immediately available funds or by certified or cashier's check, and shall not be payable in the form of a note of any kind. In no event shall the Company designate to any Person its obligation with respect to any portion of the Put Securities payable in the form of a Contingent Option Company Note or a Contingent Equity Company Note. Concurrently with any such purchase of Put Securities by any such Designated Employee, such Designated Employee shall execute a counterpart of this Agreement, whereupon such Designated Employee shall be deemed a "Management Stockholder" and shall have the same rights and be bound by the same obligations as the Management Stockholders hereunder. 2.4. TAKE ALONG. (a) If at any time, any of the Stockholders constituting more than a seventy five percent (75%) of the Common Stock Equivalents, individually or acting as a group (such Stockholders, as applicable, being referred to herein as the "Take Along Group") elect to consummate, or cause the Company to consummate, a Company Sale to a Third Party which is not an Affiliate of any Stockholder included in the Take Along Group (in which Company Sale, outstanding shares of the Company's Preferred Stock will not entitle the holders thereof to receive any more than the liquidation preference as provided by the terms thereof), then upon twenty (20) days' written notice by the Take Along Group to each other Stockholder, which notice shall set forth the terms and conditions of such proposed Company Sale, including the name of the prospective transferee, the number of shares of Common Stock and Common Stock Equivalents proposed to be sold by the Take Along Group in the Company Sale, the consideration to be received by the Take Along Group and the proposed time and place of closing (such notice being referred to as the "Sale Request"), each other Stockholder (each, a "Seller"), in the event the Company Sale is consummated, shall be obligated to consummate, consent to and raise no objection to the proposed Company Sale and take all other actions reasonably necessary or desirable to consummate the proposed Company Sale on the terms proposed by the Take Along Group as set forth in the Sale Request. Without limiting the generality of the foregoing, (i) if the Company Sale is structured as a merger or consolidation, each Seller will vote or cause to be voted all Shares that he holds or with respect to which he has the power to direct the voting and which he is entitled to vote on such proposed Company Sale in favor of such proposed Company Sale and will waive all appraisal and dissenters rights and hereby grants a -24- proxy in favor of the Take Along Group to vote the Seller's Shares in accordance with this Section 2.4(a) and (ii) if the Company Sale is structured as a sale or redemption of Common Stock, each Seller will agree to sell his PRO RATA portion of Common Stock Equivalents (including his PRO RATA portion of Time Options and Performance Options which would become Common Stock Equivalents by reason of the Company Sale) being sold in the Company Sale on the same terms and conditions (subject to the last sentence of this Section 2.4(a)) as the Take Along Group. A Stockholder's PRO RATA portion, for purposes of this Section 2.4(a), is the product of (i) a fraction, the numerator of which is the number of outstanding Common Stock Equivalents which such Stockholder then owns and the denominator of which is the total number of such Common Stock Equivalents then actually outstanding and (ii) the total number of Common Stock Equivalents being sold in the Company Sale. Each proxy granted above in this Section 2.4(a) is irrevocable, coupled with an interest and shall survive until the expiration of the provisions of this Section 2.4(a). If required, each Seller shall (i) deliver certificates for all of its Shares being Transferred pursuant to this Section 2.4(a) at the closing of the proposed Transfer, free and clear of all claims, liens and encumbrances. The terms and conditions of any sale pursuant to this Section 2.4(a) shall be the same as set forth in the Sale Request; PROVIDED, HOWEVER, that in the case of Performance Options and Time Options, the holders of such securities shall have the opportunity to either (i) exercise such Performance Options and Time Options (if such Performance Options or Time Options are exercisable or would be exercisable upon consummation of the Company Sale) and participate in such sale as holders of Common Stock issuable upon such exercise, or (ii) upon the consummation of the sale, receive in exchange for such Performance Options and Time Options the amount determined by multiplying (1) the same amount of consideration per share received by the Stockholders for which the Performance Option or Time Option is exercisable less the exercise price or conversion price per share of such Performance Option or Time Option by (2) the number of shares of Common Stock represented by such Performance Options and Time Options; and PROVIDED, FURTHER, that (i) if such securities are, or upon consummation of the Company Sale would be vested (in the case of Time Vested Equity) or vested and earned (in the case of Performance Vested Equity), such vested Time Vested Equity and vested and earned Performance Vested Equity shall participate in such sale as all other shares of Common Stock, and (ii) if such securities would not be vested (in the case of Time Vested Equity) or vested and earned (in the case of Performance Vested Equity) upon consummation of the Company Sale, holders of such unvested Time Vested Equity and unvested or unearned Performance Vested Equity shall receive in exchange for such Shares the lesser of (I) the Investment Price of such Shares or (II) the price paid per share of Common Stock in the Company Sale. -25- (b) Each Stockholder, whether in his capacity as a Seller, Stockholder, officer or director of the Company, or otherwise, shall take or cause to be taken all commercially reasonable actions in order expeditiously to consummate any Company Sale and any related transactions, including, without limitation, executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments as may be reasonably requested and otherwise cooperating with the Take Along Group and any prospective buyer; PROVIDED, HOWEVER, that Stockholders shall be obligated to become liable in respect of any representations, warranties, covenants, indemnities or otherwise to the Third Party solely to the extent provided in the immediately following sentence. Without limiting the generality of the foregoing, each Stockholder agrees to execute and deliver such agreements as may be reasonably specified by the Take Along Group to which such Take Along Group will also be party, including, without limitation, agreements to (i) (1) make individual representations, warranties, covenants and other agreements as to the unencumbered title to its Shares and the power, authority and legal right to Transfer such Shares and the absence of any Adverse Claim with respect to such Shares and (2) be liable without limitation as to such representations, warranties, covenants and other agreements and (ii) be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its subsidiaries; PROVIDED, HOWEVER, that the aggregate amount of liability described in this clause (ii) in connection with any Company Sale shall not exceed the lesser of (I) such Stockholder's PRO RATA portion of any such liability, to be determined in accordance with such Stockholder's portion of the total value for his, her or its Shares included in such Company Sale or (II) the proceeds to such Stockholder in connection with such Company Sale. 2.5. COME ALONG. No Stockholder may Transfer Shares to a Third Party who is not a Permitted Transferee without complying with the terms and conditions set forth in this Section 2.5. (a) On or after the third anniversary of the date hereof, any Stockholder or group of Stockholders owning greater than four percent (4%) of the outstanding shares of Common Stock, when desiring to Transfer Shares (the "Transferor"), shall give not less than fifteen (15) days prior written notice of such intended Transfer to each other Stockholder and the Company. Such notice (which may be the same as the Transfer Notice delivered pursuant to Section 2.1(a)) (the "Participation Notice") shall set forth the terms and conditions of such proposed Transfer, including the name of the prospective transferee, the number of Shares proposed to be transferred (the "Participation Securities") by the Transferor, the percentage of the total number of shares of Common Stock and/or Preferred Stock, as the case may be, held by the Transferor that the Participation Securities constitutes of such class (the "Come Along Percentage"), the purchase price per share of Common Stock and/or Preferred Stock proposed to be paid therefor, the payment terms and type of transfer to be effectuated and the proposed time and place of closing. Within fifteen (15) days -26- following the delivery of the Participation Notice by the Transferor to each other Stockholder and to the Company, each other Stockholder desiring to participate in such proposed Transfer (each, a "Participating Offeree") shall, by notice in writing to the Transferor and to the Company, have the opportunity and right to sell to the purchasers in such proposed Transfer (upon the same terms and conditions as the Transferor) up to that number of shares of Common Stock and/or Preferred Stock, as the case may be, subject to the last sentence of Section 2.5(c) below, as shall equal the product of (i) the Come Along Percentage for the Common Stock and/or the Preferred Stock, as the case may be, and (ii) the number of shares of Common Stock (in the case of a Management Stockholder, vested Time Vested Equity and vested and earned Performance Vested Equity and other Shares held by such Management Stockholder) and/or Preferred Stock, as the case may be, which will be owned by such Participating Offeree as of the proposed date of closing set forth in the Participation Notice without giving effect to the transfer contemplated hereby; PROVIDED, HOWEVER, that for purposes of determining whether shares of Common Stock or Options owned by a Management Stockholder will be vested and/or earned, as the case may be, such determination will be made after giving effect to the transfer contemplated hereby and the Board, in its reasonable judgment, within five (5) business days after the Participation Notice is delivered to the Company, will make a Board Participation Determination for each Management Stockholder and notify such Management Stockholder of such Board Participation Determination. No Management Stockholder may participate in the proposed Transfer with respect to any Shares or Options which may vest and/or be earned upon consummation of the Transfer in excess of the Board Participation Determination and notwithstanding the Board Participation Determination, no Management Stockholder may sell or transfer in the proposed Transfer any unvested Time Vested Equity or Time Options or any unvested or unearned Performance Vested Equity or Performance Options if such equity or options do not become vested and/or earned, as the case may be, upon consummation of the proposed Transfer. The Transferor shall attempt to obtain inclusion in the proposed Transfer of the entire number of Shares which the Transferor and the Participating Offerees desire to have included in the proposed Transfer. In the event the Transferor shall be unable to obtain the inclusion of such entire number of shares of Common Stock and/or Preferred Stock, as the case may be, in the proposed Transfer, the number of shares of Common Stock and/or Preferred Stock, as the case may be, to be sold in the Proposed Transfer by each Participating Offeree and the Transferor shall be determined in accordance with Section 2.5(c) below. The terms and conditions of any sale pursuant to this Section 2.5(a) shall be the same as set forth in the Participation Notice, except as is provided in Section 2.5(c) below and except that the actual date of the closing of any proposed Transfer may change. -27- (b) At the closing of any proposed Transfer in respect of which a Participation Notice has been delivered, the Transferor, together with all Participating Offerees, shall deliver to the proposed transferee certificates evidencing the Shares to be sold thereto duly endorsed with stock powers and shall receive in exchange therefor the consideration to be paid or delivered by the proposed transferee in respect of such Shares as described in the Participation Notice. (c) The acceptance of each Participating Offeree shall be irrevocable except as hereinafter provided, and each such Participating Offeree shall be bound and obligated to sell, on the same terms and conditions specified in the Participation Notice as the Transferor (subject to all of the provisions of this Agreement), such number of Shares as specified in such Participating Offeree's written commitment; PROVIDED, HOWEVER, that in the case of Performance Options and Time Options (for which the exercise price is less than the price per share of Common Stock being paid in the Transfer), the holders of such securities shall have the opportunity to either (i) exercise such Performance Options and Time Options (if then exercisable) and participate in such sale as holders of Common Stock issuable upon such exercise or conversion, or (ii) upon the consummation of the sale, receive in exchange for such Options the amount determined by multiplying (1) the same amount of consideration per share of Common Stock received by the other Stockholders less the exercise price per share of such Performance Option and Time Option by (2) the number of shares of Common Stock of such class represented by such Performance Option or Time Option. In the event the Transferor shall be unable to obtain the inclusion in the sale of all Shares which the Transferor and each Participating Offeree desires to have included in the sale, the number of Shares to be sold in the sale by the Transferor and each Participating Offeree shall be reduced on a PRO RATA basis according to the proportion which the number of Shares which each such party desires to have included in the sale bears to the total number of Shares desired by all such parties to have included in the sale; PROVIDED, HOWEVER, in no event shall shares of Preferred Stock and Common Stock be substituted for one another. (d) The provisions of this Section 2.5 shall not in any way limit or affect the restrictions placed on the Stockholders by Section 2.1 and shall not apply to (i) any Transfer to the Company or other Stockholders pursuant to Section 2.1, (ii) any Transfer pursuant to Section 2.2, (iii) any Transfer pursuant to Section 2.3, (iv) any Transfer pursuant to Section 2.4, or (v) any Permitted Transfer. -28- 2.6. CORPORATE GOVERNANCE. (a) Subject to Section 2.6(b), at each annual meeting of the Stockholders and at each special meeting of the Stockholders called for the purpose of electing directors of the Company, and at any time at which Stockholders of the Company shall have the right to, or shall, vote for directors of the Company, then, and in each event, the Stockholders hereby agree to attend each meeting in person or by proxy and hereby agree to vote Shares now owned or hereafter acquired by him, her or it (whether at a meeting or by written consent in lieu thereof) (i) to fix the number of members of the Board at up to nine (9), and (ii) to elect and thereafter to continue in office as a director of the Company the following: (a) so long as the Berkshire Stockholders hold (I) at least five percent (5%) but less than twenty-five percent (25%) of the Common Stock, one director or (II) at least twenty-five percent (25%) of the Common Stock, two (2) directors, nominated by the Berkshire Stockholders (who shall initially be Richard K. Lubin and Carl Ferenbach) (collectively the "Berkshire Representatives"); (b) two (2) directors nominated by the Management Stockholders (who shall initially be Paul W. Jones and John L. Workman) (collectively, the "Management Representatives"); (c) Louis Susman; (d) Ricardo Poma; (e) Francisco Soler; and (f) up to two (2) directors who are not officers or employees of the Company who shall be reasonably acceptable to the other directors (such consent to appointment not to be unreasonably withheld); PROVIDED, that in the event that both Ricardo Poma and Francisco Soler cease to serve as members of the Board for any reason, and so long as the Scarsdale Group shall hold at least five percent (5%) of the Common Stock, the Scarsdale Group shall have the right to nominate (by written designation signed by the holders of a majority of shares of Common Stock owned by members of the Scarsdale Group) one (1) director. As to the directors elected to the Board pursuant to this Section 2.6(a) or Section 2.6(b), the following provisions shall apply: (I) no Berkshire Representative may be removed without the consent of a majority in interest of the Berkshire Stockholders, except in the event of Director's Cause as determined in good faith by unanimous decision of all directors other than the Berkshire Representatives, (II) no Management Representative may be removed without the consent of a majority in interest of the Management Stockholders, except in the event of Director's Cause as determined in good faith by unanimous decision of all directors other than the Management Representatives, and (III) neither Ricardo Poma nor Francisco Soler may be removed without the consent of a majority in interest of the Scarsdale Group, except in the event of Director's Cause as determined in good faith by unanimous decision of all directors other than Ricardo Poma and Francisco Soler; PROVIDED, that in the event of a determination by the Board pursuant to clause (I), (II) or (III) of this sentence to remove a director, each Stockholder shall take all action as may be necessary or appropriate, including without limitation, the voting of all Shares owned by such Stockholder, to effect the removal of such director. Any vacancy on the Board shall be filled by the designee of the Stockholders who would be entitled to designate such director pursuant to this Section 2.6(a) or Section 2.6(b), as the case may be, and if there shall be no such designation right, such vacancy may be filled by the remaining directors. Each Stockholder shall, upon receipt of notice identifying such designee, take all action as may be necessary or appropriate, including without limitation, the voting of all Shares owned by such Stockholder, to elect the director so designated. -29- (b) PROPORTIONAL REPRESENTATION. Upon a majority vote of the holders of Common Stock, the composition of the directors constituting the Board of Directors shall be changed so that after designating directors in accordance with this Section 2.6(b), each of the Berkshire Stockholders and the Management Stockholders shall have represented on the Board that number of directors (rounded up to the nearest whole number) represented by the percentage equal to (x) the number of shares of Common Stock held by such stockholder group over (y) the total number of shares of Common Stock held by all Stockholders (in the case of Time Vested Equity and Performance Vested Equity, such percentage to be calculated taking into account only vested Shares). Notwithstanding the foregoing: (i) If at or after the time of the election to change to proportional representation pursuant to this Section 2.6(b) Louis Susman would otherwise be entitled to serve on the Board of Directors pursuant to Section 2.6(a), he shall remain as a director pursuant to this Section 2.6(b). (ii) If at or after the time of the election to change to proportional representation pursuant to this Section 2.6(b), both Ricardo Poma and Francisco Soler are serving on the Board of Directors, at the option of the Scarsdale Group, either (A) the Scarsdale Group shall have represented on the Board that number of directors (rounded up to the nearest whole number) represented by the percentage equal to (x) the number of shares of Common Stock held by the Scarsdale Group over (y) the total number of shares of Common Stock (in the case of Time Vested Equity and Performance Vested Equity, taking into account only vested Shares) held by all Stockholders; or (B) both Ricardo Poma and Francisco Soler shall remain on the Board of Directors. (iii) If at or after the time of the election to change to proportional representation pursuant to this Section 2.6(b), only one of (A) Ricardo Poma, (B) Francisco Soler or (C) the designee of the Scarsdale Group pursuant to Section 2.6(a) if Ricardo Poma and Francisco Soler both cease to serve on the Board of Directors pursuant to Section 2.6(a), is serving on the Board of Directors, at the option of the Scarsdale Group, either (A) the Scarsdale Group shall have represented on the Board that number of directors (rounded up to the nearest whole number) represented by the percentage equal to (x) the number of shares of Common Stock held by the Scarsdale Group over (y) the total number of shares of Common Stock (in the case of Time Vested Equity and Performance Vested Equity, taking into account only vested Shares) held by all Stockholders; or (B) such person then serving on the Board of Directors shall remain on the Board of Directors. In the event that the size of the Board of Directors needs to be increased in order to establish the foregoing representation, each Stockholder shall take all action as may be -30- necessary or appropriate, including without limitation, the voting of all Shares owned by such Stockholder, to effect the increase in the size of the Board. Each Stockholder agrees that such Stockholder and its Permitted Transferees shall take all action as may be necessary or appropriate, including without limitation, the voting of all Shares owned by them, to elect the directors so designated by the Stockholders as set forth in this Section 2.6(b). (c) SUBSIDIARIES; COMMITTEES. Unless the Board unanimously determines otherwise, the board of directors of each Subsidiary of the Company and the audit committee, the compensation committee and all other authorized committees of the Board and of each Subsidiary's board of directors shall be composed so that the representation thereon shall be in the same proportion, as nearly as may be possible (subject to any foreign law requirements, where applicable), as the representation of such directors on the Board; PROVIDED, HOWEVER, that no Management Representative shall sit on the audit committee or the compensation committee. (d) SUPERMAJORITY PROVISIONS. Without a prior Supermajority Vote of the Stockholders, the Company shall not, and shall not permit any Subsidiary to, effect any: (i) merger or consolidation of the Company or any of its Subsidiaries (except in the case of such transaction among the Company and its Subsidiaries or among such Subsidiaries and except where the holders of the capital stock of the surviving or the resulting corporation immediately following such transaction are the same as those of the Company immediately prior to the transaction) or acquisition of all or substantially all of the business of another entity; (ii) amendment or repeal of its Certificate of Incorporation or By-laws as now in effect; (iii) sale, lease, transfer or other disposition of all or any substantial portion of the properties or assets of the Company or any of its Subsidiaries; (iv) declaration or payment of any dividends or other distributions to the Stockholders, including, but not limited to, any dividend or other distribution by means of a redemption or purchase of Common Stock or other securities held by the Stockholder other than pursuant to Section 2.2, Section 2.3 or any mandatory redemption provisions of the Preferred Stock; (v) issuance or sale of any equity securities of the Company, including, but not limited to, any public offering of securities of the Company; PROVIDED, HOWEVER, that this restriction shall not apply to the issuance of shares of Common Stock upon the exercise of options or other securities issued pursuant to the Incentive Plan; -31- (vi) incurrence of any indebtedness in excess of indebtedness permitted under the terms and conditions of the Credit Agreement (or any credit agreement or loan documentation put in place as a replacement or substitute for the Credit Agreement); (vii) any refinancing of any indebtedness under the Credit Agreement (or any credit agreement or loan documentation put in place as a replacement or substitute for the Credit Agreement); or (viii) any financial restructuring in which Management Stockholders are treated differently and adversely from other holders of Common Stock. PROVIDED, HOWEVER, that upon the occurrence of a Major Default, all actions which previously required a Supermajority Vote pursuant to this Section 2.6 (other than pursuant to clause (viii)) shall be decided by a simple majority vote of the Board as in effect at such time, or if required by law or otherwise, by a simple majority vote of the Stockholders. 2.7. RIGHTS OF PARTICIPATION. (a) RIGHTS OF PARTICIPATION. The Company hereby grants to each Stockholder so long as it shall own any Shares, the right to purchase up to a PRO RATA portion of New Securities (as defined in paragraph (b) below) which the Company, from time to time, proposes to sell or issue following the date hereof. A Stockholder's PRO RATA portion, for purposes of this Section 2.7, is the product of (i) a fraction, the numerator of which is the number of outstanding Common Stock Equivalents which such Stockholder then owns and the denominator of which is the total number of such Common Stock Equivalents then actually outstanding, multiplied by (ii) the number of New Securities the Company proposes to sell or issue. (b) DEFINITION OF NEW SECURITIES. "New Securities" shall mean any Common Stock or other equity securities of the Company whether now authorized or not, any rights, options or warrants to purchase Common Stock or other equity securities and any indebtedness or preferred stock of the Company which is convertible into Common Stock or other equity securities (or which is convertible into a security which is, in turn, convertible into Common Stock or other equity securities); PROVIDED, that the term "New Securities" does not include (i) indebtedness of the Company which is not by its terms convertible into Common Stock; (ii) Common Stock issued as a stock dividend to all holders of Common Stock PRO RATA or upon any subdivision or combination of shares of Common Stock; (iii) any employee or director stock options approved by the Board of Directors; (iv) Common Stock issued in exchange for the cancellation or retirement of -32- any debt securities of the Company or in connection with any restructuring or other financial workout of the Company; (v) Common Stock or warrants to purchase Common Stock issued to non-Affiliates of the Company as part of a bona fide debt offering of units comprised of such Common Stock or warrants and a debt security of the Company; (vi) Common Stock issued in connection with the acquisition of another corporation or other entity by the Company by merger, purchase of substantially all assets or other reorganization, PROVIDED, that upon any such issuance, the Board shall consider equitable equity incentives for the Management Stockholders in connection with such acquisition taking into account the arrangements that would likely have been effected if such acquisition had been part of the transactions contemplated by the Merger Agreement, the time passed since the consummation of the transactions contemplated by the Merger Agreement and the changes in the Fair Market Value of the Common Stock since the date of this Agreement; (vii) the issuance of Common Stock upon the exercise or conversion of any rights, options or warrants to purchase Common Stock; or (viii) Common Stock issuable in a Public Offering; and PROVIDED, FURTHER, that if any "New Securities" include Common Stock and other equity securities coupled as a package, "New Securities" shall mean the package of securities and not each class of securities individually. (c) NOTICE FROM THE COMPANY. In the event the Company proposes to issue New Securities, the Company shall give each Stockholder who has a right of participation under this Section 2.7 written notice of such proposal, describing the type of New Securities and the price and the terms upon which the Company proposes to issue the same. For a period of ten (10) business days following the delivery of such notice by the Company, the Company shall be deemed to have irrevocably offered to sell to each Stockholder its PRO RATA share of such New Securities for the price and upon the terms specified in the notice. Each Stockholder may exercise its rights of participation hereunder by giving written notice to the Company and stating therein the quantity of New Securities to be purchased. Each Stockholder shall also be entitled to indicate a desire to purchase all or a portion of any New Securities remaining after such PRO RATA allocation. If, as a result of such oversubscription right, such oversubscriptions exceed the total number of New Securities available in respect of such oversubscription right, the oversubscribing Stockholders shall be cut back with respect to their oversubscriptions on a PRO RATA basis or as they may otherwise agree among themselves. (d) SALE BY THE COMPANY. In the event that the Stockholders who have a right of participation under this Section 2.7 fail to commit to purchase all of such New Securities within said ten (10) business day period, the Company shall have ninety (90) days thereafter to sell the New Securities with respect to which the right of participation was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company's notice given pursuant to Section 2.7(c). (e) CLOSING. The closing for any such issuance shall take place as proposed by the Company with respect to the New Securities to be issued, at which closing the -33- Company shall deliver certificates for the New Securities in the respective names of the purchasing Stockholders against receipt of payment therefor. 2.8. FINANCIAL INFORMATION. From and after the date hereof, each holder of Common Stock and/or Preferred Stock shall be entitled to receive from the Company, upon written request and if not otherwise publicly available, the following information, if such information has been prepared by the Company for any other purpose: (i) as soon as practicable following the end of each fiscal quarter of the Company, unaudited quarterly financial reports and (ii) as soon as practicable following the end of each fiscal year of the Company, audited annual financial reports; PROVIDED, HOWEVER, that the terms of this Section 2.8 shall not apply to any holder of Common Stock or Preferred Stock when such Person ceases to own any Common Stock or Preferred Stock. 2.9. CONFIDENTIALITY. Each Stockholder shall maintain the confidentiality of any confidential and proprietary information of the Company ("Proprietary Information") using the same standard of care, but in no event less than reasonable care, as it applies to its own confidential information, except for any Proprietary Information which is publicly available or a matter of public knowledge generally. Nothing herein shall prevent any Stockholder from using Proprietary Information to enforce its rights under this Agreement or from disclosing a summary of Proprietary Information to the partners of such Stockholder as to the performance of the Company. ARTICLE 3 REGISTRATION RIGHTS 3.1. GENERAL. For purposes of Article III: (a) the terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the 1933 Act and the declaration or ordering of effectiveness of such registration statement; (b) the term "Holder" means any Stockholder holding Registrable Securities; and (c) the shares of Common Stock issuable upon the exercise of vested Time Options and vested and earned Performance Options shall be deemed to be outstanding and held by the holders of such vested Time Options and vested and earned Performance Options. 3.2. DEMAND REGISTRATION INITIATED BY THE BERKSHIRE STOCKHOLDERS. (a) Subject to paragraph (b) hereof, on or after the date on which the Company has effected a Public Offering, if the Company shall receive a written request (specifying that it is being made pursuant to this Section 3.2) by or on behalf of Berkshire Stockholders holding an aggregate of fifty percent (50%) or more of the Registrable Securities held by the Berkshire Stockholders that the Company file a registration statement under the 1933 Act, or a similar document pursuant to any other statute then in effect corresponding to the 1933 Act, covering the registration of at least the lesser of (i) $20 million of Registrable Securities (determined based upon the Fair Market Value of such Registrable Securities on the date of request), or (ii) one hundred percent (100%) -34- of the Registrable Securities then held by the Berkshire Stockholders, then the Company shall promptly notify all other Holders of such request pursuant to Section 3.6(b) and shall use its best efforts to cause all Registrable Securities that the Holders have requested (within thirty (30) days after such Company notice) be registered, to be registered under the 1933 Act. (b) If the total amount of Registrable Securities that the Holders request to be included in such offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which, in the opinion of such underwriters, can be sold in accordance with the procedures set forth in Section 3.6(b); (c) The Company shall be obligated to effect for the Berkshire Stockholders two (2) registrations of Registrable Securities pursuant to this Section 3.2; PROVIDED, that in the event that, at the request of the underwriters, the amount of Registrable Securities that the Berkshire Stockholders requested to be included in any offering is reduced by more than thirty percent (30%), such offering shall be deemed not to be a registration demanded by the Berkshire Stockholders for purposes of this Section 3.2(c). 3.3. DEMAND REGISTRATION INITIATED BY THE SALOMON SMITH BARNEY GROUP. (a) Subject to paragraph (b) hereof, on or after the date on which the Company has effected a Public Offering, if the Company shall receive a written request (specifying that it is being made pursuant to this Section 3.3) by or on behalf of the Salomon Smith Barney Group, so long as such request represents an aggregate of fifty percent (50%) or more of the Registrable Securities held by the Salomon Smith Barney Group, that the Company file a registration statement under the 1933 Act, or a similar document pursuant to any other statute then in effect corresponding to the 1933 Act, covering the registration of at least the lesser of (i) $20 million of Registrable Securities (determined based upon the Fair Market Value of such Registrable Securities on the date of request), or (ii) one hundred percent (100%) of the Registrable Securities then held by the Salomon Smith Barney Group, then the Company shall promptly notify all other Holders of such request pursuant to Section 3.6(b) and shall use its best efforts to cause all Registrable Securities that the Holders have requested (within thirty (30) days after such Company notice) be registered, to be registered under the 1933 Act. (b) If the total amount of Registrable Securities that all Holders request to be included in such offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which, in the opinion of such underwriters, can be sold in accordance with the procedures set forth in Section 3.6(b); -35- (c) The Company shall be obligated to effect for the Salomon Smith Barney Group one (1) registration of Registrable Securities pursuant to this Section 3.3; PROVIDED, that in the event that, at the request of the underwriters, the amount of Registrable Securities that the Salomon Smith Barney Group requested to be included in any offering is reduced by more than thirty percent (30%), such offering shall be deemed not to be a registration demanded by the Salomon Smith Barney Group for purposes of Section 3.3(c). 3.4. DEMAND REGISTRATION INITIATED BY THE SCARSDALE GROUP. (a) Subject to paragraph (b) hereof, on or after the date on which the Company has effected a Public Offering, if the Company shall receive a written request (specifying that it is being made pursuant to this Section 3.4) by or on behalf of the Scarsdale Group, so long as such request represents an aggregate of fifty percent (50%) or more of the Registrable Securities held by the Scarsdale Group, that the Company file a registration statement under the 1933 Act, or a similar document pursuant to any other statute then in effect corresponding to the 1933 Act, covering the registration of at least the lesser of (i) $20 million of Registrable Securities (determined based upon the Fair Market Value of such Registrable Securities on the date of request), or (ii) one hundred percent (100%) of the Registrable Securities then held by the Scarsdale Group, then the Company shall promptly notify all other Holders of such request pursuant to Section 3.6(b) and shall use its best efforts to cause all Registrable Securities that the Holders have requested (within thirty (30) days after such Company notice) be registered, to be registered under the 1933 Act. (b) If the total amount of Registrable Securities that all Holders request to be included in such offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which, in the opinion of such underwriters, can be sold in accordance with the procedures set forth in Section 3.6(b); (c) The Company shall be obligated to effect for the Scarsdale Group one (1) registration of Registrable Securities pursuant to this Section 3.4; PROVIDED, that in the event that, at the request of the underwriters, the amount of Registrable Securities that the Scarsdale Group requested to be included in any offering is reduced by more than thirty percent (30%), such offering shall be deemed not to be a registration demanded by the Scarsdale Group for purposes of Section 3.4(c). -36- 3.5. DEMAND REGISTRATION INITIATED BY THE MANAGEMENT STOCKHOLDERS. (a) Subject to paragraph (b) hereof, on or after the date on which the Company has effected a Public Offering, if the Company shall receive a written request (specifying that it is being made pursuant to this Section 3.5) by or on behalf of the Management Stockholders, so long as such request represents an aggregate of fifty percent (50%) or more of the Registrable Securities held by the Management Stockholders, that the Company file a registration statement under the 1933 Act, or a similar document pursuant to any other statute then in effect corresponding to the 1933 Act, covering the registration of at least the lesser of (i) $20 million of Registrable Securities (determined based upon the Fair Market Value of such Registrable Securities on the date of request), or (ii) one hundred percent (100%) of the Registrable Securities then held by the Management Stockholders, then the Company shall promptly notify all other Holders of such request pursuant to Section 3.6(b) and shall use its best efforts to cause all Registrable Securities that the Holders have requested (within thirty (30) days after such Company notice) be registered, to be registered under the 1933 Act. (b) If the total amount of Registrable Securities that all Holders request to be included in such offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which, in the opinion of such underwriters, can be sold in accordance with the procedures set forth in Section 3.6(b); (c) The Company shall be obligated to effect for the Management Stockholders one (1) registration of Registrable Securities pursuant to this Section 3.5; PROVIDED, that in the event that, at the request of the underwriters, the amount of Registrable Securities that the Management Stockholders requested to be included in any offering is reduced by more than thirty percent (30%), such offering shall be deemed not to be a registration demanded by the Management Stockholders for purposes of Section 3.5(c). -37- 3.6. REDUCTION IN REGISTRATION; PIGGYBACK REGISTRATION. (a) If, at any time, the Company determines to register any of its equity securities for its own account under the 1933 Act in connection with the public offering of such securities solely for cash on a form that would also permit the registration of any of the Registrable Securities, the Company shall, at each such time, promptly give each Holder written notice of such determination. Upon the written request of any Holder received by the Company within thirty (30) days after the giving of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the 1933 Act all of the Registrable Securities of such Holder that each Holder has requested be registered. If the total amount of Registrable Securities that are to be included by the Company for its own account and at the request of Holders exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which in the opinion of such underwriters can be sold, in the following order: (i) first, the equity securities to be registered on behalf of the Company; and (ii) then the Registrable Securities requested to be included by the Holders, PRO RATA, based on the number of Registrable Securities owned by each of them which each of them request be included in such registration; PROVIDED, HOWEVER, that if an underwriter who is not an Affiliate or Associate of any Holder, requires, in connection with such underwritten offering, that the number of Registrable Securities to be sold by any Holder be apportioned or excluded, such number of Registrable Securities of such Holder shall be reduced or not included to the extent so requested by said underwriter. (b) If the Company at any time proposes to register any of its equity securities for the account of any Holder pursuant to Section 3.2, Section 3.3, Section 3.4, Section 3.5 or Section 3.12 of this Agreement, under the 1933 Act in connection with the public offering of such securities solely for cash on a form that would also permit the registration of any of the Registrable Securities, the Company shall, at each such time, promptly give each Holder written notice of such determination. Upon the written request of any Holder received by the Company within thirty (30) days after the giving of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the 1933 Act all of the Registrable Securities of such Holder that such Holder has requested be registered. If the total amount of Registrable Securities that the requesting Holders and the Company propose to register under Section 3.2, Section 3.3, Section 3.4, Section 3.5 or Section 3.12, exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which in the opinion of such underwriters can be sold, in the following order: -38- (i) first, the equity securities to be registered on behalf of Stockholders initiating the demand, PRO RATA, based on the number of Registrable Securities owned by each of them which each of them request be included in such registration; (ii) second, the Registrable Securities requested to be included by the other Holders, PRO RATA, based on the number of Registrable Securities owned by each of them which each of them request be included in such registration; and (iii) third, the equity securities to be registered on behalf of the Company; PROVIDED, HOWEVER, that if an underwriter who is not an Affiliate or Associate of any Holder or the Company, in good faith, requires in connection with such underwritten offering that the number of Registrable Securities to be sold by any Holder or the Company be apportioned or excluded, such number of Registrable Securities of such Holder or the Company shall be reduced or not included to the extent so requested by said underwriter. 3.7. OBLIGATIONS OF THE COMPANY. Whenever required under Sections 3.2, 3.3, 3.4, 3.5, 3.6 or 3.12 to use its best efforts to effect the registration of any Registrable Securities, the Company shall: (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities, and use its best efforts to cause such registration statement to become and remain effective; (b) as expeditiously as reasonably possible, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement; (c) as expeditiously as reasonably possible, furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with requirements of the 1933 Act, and such other documents they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; (d) as expeditiously as reasonably possible, use its best efforts to register and qualify the securities covered by such registration statement under the securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by the registration statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction, and FURTHER -39- PROVIDED that (anything in this Agreement to the contrary notwithstanding with respect to the bearing of expenses) if any jurisdiction in which the securities shall be qualified shall require that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by selling stockholders, then such expenses shall be payable by selling stockholders PRO RATA, to the extent required by such jurisdiction; (e) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with, or approved by, such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (f) notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of any such seller or Holder, promptly prepare and file with the SEC and furnish to such seller or Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; PROVIDED, that, each Holder agrees that it shall not sell any Registrable Securities covered by such a registration statement upon notice from the Company until receipt of notice that such statement or omission has been corrected. (g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, and will furnish to each seller at least two (2) business days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any amendment or supplement thereof to which any such seller shall have reasonably objected, except to the extent required by law, on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the 1933 Act or of the rules or regulations thereunder; (h) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; and -40- (i) use its best efforts to list all Registrable Securities covered by such registration statement on a securities exchange or the NASDAQ National Market on which any class of Registrable Securities is then listed. 3.8. FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any act pursuant to this Article III that the Holders selling Registrable Securities shall furnish to the Company such information regarding them, the Registrable Securities held by them and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. 3.9. EXPENSES OF REGISTRATION. All expenses incurred in connection with a registration pursuant to Sections 3.2, 3.3, 3.4, 3.5, 3.6 or 3.12 (excluding underwriters' discounts and commissions, which shall be borne by the sellers), including without limitation all registration and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company (which counsel shall be reasonably satisfactory to the holders of a majority of the Registrable Securities then being registered), and the reasonable fees and disbursements of one counsel for the selling Holders (which counsel shall be selected by the Holders which own a majority of the Registrable Securities being sold under the applicable registration) shall be borne by the Company; PROVIDED, HOWEVER, that all such expenses in connection with any amendment or supplement to a registration statement or prospectus filed more than nine (9) months after the effective date of such registration statement because any Holder of Registrable Securities has not effected the disposition of the securities requested to be registered shall be paid by such Holder; PROVIDED, FURTHER, however, that Holders initiating a demand may withdraw any request made pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5, in which event such first withdrawn request shall be deemed for all purposes herein not to have been made. 3.10. UNDERWRITING REQUIREMENTS. Each Holder selling Registrable Securities in any registration pursuant to Sections 3.2, 3.3, 3.4, 3.5 or 3.6 shall, as a condition for inclusion of such Registrable Securities in such underwritten registration, execute and deliver an underwriting agreement acceptable to the Company, in the case of a registration pursuant to Section 3.6(a), or acceptable to Holders who own a majority of the Registrable Securities to be included in such registration, in the case of a registration pursuant to Section 3.2, Section 3.3, Section 3.4, Section 3.5 or Section 3.6(b), and the underwriters with respect to such registration. Such underwriters shall be selected (i) by the Company, in the case of a registration pursuant to Section 3.6(a), or (ii) by a majority in interest of the Registrable Securities to be included in such registration in all other cases and shall be reasonably acceptable to the Company, in the case of a registration pursuant to Section 3.6(b). Notwithstanding the foregoing, each Holder shall take all action reasonably necessary with respect to executing such underwriting agreement, including being liable in respect of (i) any representations and warranties being made by each selling Holder, and (ii) any indemnification agreements and "lock-up" agreements made by each selling Holder for the -41- benefit of the underwriters in such underwriting agreement; PROVIDED, HOWEVER, that except with respect to individual representations and warranties regarding such matters as legal capacity or due organization of such participating Holder, authority to participate in the Public Offering, compliance by such Holder with laws and agreements applicable to it, ownership (free and clear of liens, charges, encumbrances and adverse claims) of Registrable Securities to be sold by such Holder and accuracy of information with respect to such Holder furnished for inclusion in any disclosure document relating to each Public Offering, the aggregate amount of the liabilities of such participating Holder pursuant to such underwriting agreement shall not exceed the lesser of (a) such participating Holder's PRO RATA portion of any such liability, in accordance with such participating Holder's portion of the total number of Registrable Securities included in the public offering, or (b) the net proceeds received by such participating Holder from the public offering. 3.11. INDEMNIFICATION. In the event any Registrable Securities are included in a registration statement under this Article III: (a) To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder (which term, for purposes of this Section 3.11, shall include each Stockholder, including the Berkshire Stockholders, the Management Stockholders and the Other Stockholders holding Registrable Securities, and shall also include the directors, officers and employees of the Stockholders and their Affiliates) requesting or joining in a registration, any underwriter (as defined in the 1933 Act) for a registration, and each Person, if any, who controls such Holder or such underwriter within the meaning of the 1933 Act, against any and all losses, claims, damages or liabilities, joint or several, to which any such Holder, underwriter or Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based on any untrue or alleged untrue statement of any material fact contained in a registration statement relating to a registration pursuant to this Article III, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or arise out of any violation by the Company of the 1933 Act or any rule or regulation promulgated under the 1933 Act applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and will reimburse each such Holder, underwriter or control Person for any and all legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; PROVIDED, HOWEVER, that the indemnity agreement contained in this Section 3.11(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to anyone for any such loss, claim, damage, liability, action or proceeding to the extent that it arises out of or is based upon an untrue statement or omission made in connection with such -42- registration statement, preliminary prospectus, final prospectus or amendments or supplements thereto in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, underwriter or control Person. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder, underwriter or control Person and shall survive the transfer of such securities by such Holder. If Holder is entitled to indemnification under this Section 3.11, such Holder shall be entitled to advancement from the Company for reasonable attorneys' fees and expenses to be incurred by such Holder within the scope of the Company's indemnification and reimbursement obligations, upon receipt by the Company of a written undertaking by such Holder to repay such advancement if it shall be adjudicated finally that such Holder was not entitled to such payment. (b) To the fullest extent permitted by law, each Holder requesting or joining in a registration will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the 1933 Act, and each agent and any underwriter for the Company and any Person who controls any such agent or underwriter and each other Holder and any Person who controls such Holder (within the meaning of the 1933 Act) against any and all losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer, control Person, agent, underwriter or other Holder may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened in respect thereto) arise out of or are based upon an untrue statement of any material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in such registration statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by such Holder (other than information furnished by such Holder on behalf of the Company in his or her capacity as an officer or director of the Company) expressly for use in connection with such registration; and such Holder will reimburse the Company and each such director, officer, control Person, agent, underwriter or other Holder for any and all legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; PROVIDED, HOWEVER, the indemnity obligation of each such Holder hereunder shall be limited to and shall not exceed the proceeds actually received by such Holder upon a sale of Registrable Securities pursuant to a registration statement hereunder; and PROVIDED, FURTHER that the indemnity agreement contained in this Section 3.11(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld). Such indemnity shall remain in full force and effect regardless -43- of any investigation made by or on behalf of the Company or any such director, officer, Holder, underwriter or control Person and shall survive the transfer of such securities by such Holder. (c) Any Person seeking indemnification under this Section 3.11 will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification (but the failure to give such notice will not affect the right to indemnification hereunder, unless and to the extent the indemnifying party is materially prejudiced by such failure) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such indemnifying party, and other indemnifying parties similarly situated, jointly to assume the defense of such claim with counsel reasonably satisfactory to the parties. In the event that the indemnifying parties cannot mutually agree as to the selection of counsel, each indemnifying party may retain separate counsel to act on its behalf and at its expense. The indemnified party shall in all events be entitled to participate in such defense at its expense through its own counsel. If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel. (d) If for any reason the foregoing indemnification is unavailable to any party or insufficient to hold it harmless as and to the extent contemplated by the preceding paragraphs of this Section 3.11, then each indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits received by the applicable indemnifying party, on the one hand, and the applicable indemnified party, as the case may be, on the other hand, and also the relative fault of the applicable indemnifying party and the applicable indemnified party, as the case may be, as well as any other relevant equitable considerations. 3.12. REGISTRATION ON FORM S-3. After the date on which the Company has effected a Public Offering, if (i) a Holder or Holders request in writing (specifying that such request is being made pursuant to this Section 3.12) that the Company file a registration statement on Form S-3 (or any successor form to Form S-3 regardless of its designation) for a public offering of -44- securities having an aggregate value of not less than $1,000,000 and (ii) the Company is entitled to use such form to register such securities, then the Company shall file a Form S-3 with respect to such securities within ninety (90) days from the date of such request, and shall use its best efforts to cause such registration statement to become effective; PROVIDED, that the Company shall not be required to effect such registration more frequently than once every six (6) months. 3.13. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders and their Permitted Transferees the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company agrees to use its best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times subsequent to ninety (90) days after the effective date of the first registration statement covering a Public Offering filed by the Company; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; and (c) furnish to any Holder forthwith upon request a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of said first registration statement filed by the Company), and of the 1933 Act and the 1934 Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing any Holder of any rule or regulation of the SEC permitting the selling of any such securities without registration. 3.14. NO INCONSISTENT AGREEMENTS. The Company represents and warrants that it has not entered into, and covenants that it will not hereafter enter into, any agreement with respect to the registration of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement without the prior written consent of a majority in interest of the Holders. 3.15. STOCK SPLIT. If, on or after the receipt by the Company of a request for registration of a public offering pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5, the proposed managing underwriter or underwriters of such offering reasonably believes that the number of shares to be registered is less than the minimum number necessary for the success of such offering, the Company will promptly prepare and submit to its Board of Directors, use its best efforts to cause to be adopted by its Board of Directors and stockholders, and, if so adopted, file and cause to become effective, an amendment to its certificate of incorporation so as to cause each share of its outstanding Common Stock to be converted into such number of shares of such Common Stock so that the number of shares of Registrable Securities to be registered is equal to the minimum number which such managing underwriter or underwriters reasonably believes is -45- necessary for the success of such offering. Each Stockholder, together with his or its Permitted Transferees, hereby agrees to vote the shares of the Company's Common Stock held by him or it in favor of adopting such amendment. 3.16. TIMING AND OTHER LIMITATIONS. (a) No request shall be made with respect to any registration pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5 within one hundred twenty (120) days immediately following the effective date of any registration statement filed pursuant to this Article III. (b) If the Company shall furnish to the Holders of Registrable Securities requesting a registration pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5 a certificate signed by a majority of the Board of Directors of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company or its stockholders for such registration statement to be filed on or before the date filing would be required and it is therefore advisable to defer the filing of such registration statement, then the Company shall have the right to defer the filing of the registration statement for a period of not more than one hundred twenty (120) days and the request pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5 then made shall not be counted for purposes of determining the number of registrations pursuant to Section 3.2, Section 3.3, Section 3.4 or Section 3.5; PROVIDED, HOWEVER, that the Company may not utilize such right more than once in any twelve-month period. 3.17. LOCK-UP. In connection with any Public Offering of Shares, no holder of Shares shall Transfer any Shares for a period beginning seven (7) days immediately preceding the date upon which the Company in good faith believes that the relevant registration statement shall become effective, and ending on the one hundred eightieth (180th) day (or, at the discretion of the underwriter, such lesser period) following the effectiveness of such registration statement with respect to such Public Offering without the prior written consent of the underwriters managing the offering; PROVIDED, HOWEVER, that the provisions of this Section 3.17 shall not prohibit any Permitted Transfers, provided that the Permitted Transferee agrees to be bound by the terms of this Agreement, including this Section 3.17. -46- ARTICLE 4 MISCELLANEOUS 4.1. REMEDIES. The parties to this Agreement acknowledge and agree that the covenants of the Company and the Stockholders set forth in this Agreement may be enforced in equity by a decree requiring specific performance. In the event of a breach of any material provision of this Agreement, the aggrieved party will be entitled to institute and prosecute a proceeding to enforce specific performance of such provision, as well as to obtain damages for breach of this Agreement. Without limiting the foregoing, if any dispute arises concerning the Transfer of any of the Shares subject to this Agreement or concerning any other provisions hereof or the obligations of the parties hereunder, the parties to this Agreement agree that a temporary injunction may be issued in connection therewith (including, without limitation, restraining the Transfer of such Shares or rescinding any such Transfer). Such remedies shall be cumulative and non-exclusive and shall be in addition to any other rights and remedies the parties may have under this Agreement or otherwise. 4.2. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, together with the Schedule hereto, sets forth the entire understanding of the parties, and as of the closing contemplated by the Merger Agreement supersedes all prior agreements and all other arrangements and communications, whether oral or written, with respect to the subject matter hereof, including, without limitation, the Stockholders Agreement dated as of March 15, 1993 among the Company and Francisco A. Soler, Ricardo Poma, Salomon Brothers, Inc. and other parties thereto, and by execution hereof, such Stockholders Agreement shall terminate and be of no further force and effect. The Schedule may be amended to reflect changes in the composition of the Stockholders as a result of Permitted Transfers or Transfers permitted under Article II. Amendments to the Schedule reflecting Permitted Transfers or Transfers permitted under Article II shall become effective when a copy of the Agreement as executed by any new transferee is filed with the Company, except as otherwise provided in Section 4.12. Any other amendments to, or the termination of, this Agreement shall require the prior written consent of the Company and a Supermajority Vote of the Stockholders; PROVIDED, that (a) any such amendment which would have an adverse effect on the Management Stockholders, if such adverse effect would be borne solely by the Management Stockholders or would be borne disproportionately by the Management Stockholders relative to the Berkshire Stockholders, shall require the written consent of Management Stockholders holding a majority of the Shares held by the Management Stockholders and (b) any such amendment which would have an adverse effect on the Other Stockholders, if such adverse effect would be borne solely by the Other Stockholders or would be borne disproportionately by the Other Stockholders relative to the Berkshire Stockholders, shall require the written consent of Other Stockholders holding a majority of the Shares held by the Other Stockholders. Without the consent of the Management Stockholders holding a majority of the Shares held by the Management Stockholders, no amendment may be made to Sections 2.2 and 2.3. Notwithstanding any provisions to the contrary contained herein, any party may waive any rights with respect to which such party is entitled to benefits under this Agreement. No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof. -47- 4.3. SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, the invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if the invalid or unenforceable provision were omitted. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so more narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 4.4. NOTICES. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered in the manner specified herein or, in the absence of such specification, shall be deemed to have been duly given seven (7) days after mailing by certified mail, when delivered by hand, upon confirmation of receipt by telecopy, or one (1) business day after sending by overnight delivery service, to the respective addresses of the parties set forth below: (a) For notices and communications to the Company to: U.S. Can Corporation 900 Commerce Drive, Suite 302 Oak Brook, IL 60523 Attention: Paul W. Jones Facsimile: (630) 572-0825 with a copy to each of: Mayer Brown & Platt 190 South LaSalle Street Chicago, IL 60603 Attention: Frederick B. Thomas James T. Lidbury Facsimile: (312) 701-7711 Berkshire Partners LLC One Boston Place Boston, MA 02108 Attention: Richard K. Lubin Facsimile: (617) 227-6105 -48- Ropes & Gray One International Place Boston, MA 02110 Attention: David C. Chapin Facsimile: (617) 951-7050 (b) for notices and communications to the Berkshire Stockholders, to their respective addresses set forth in the Schedule, with a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attention: David C. Chapin Facsimile: (617) 951-7050 (c) for notices and communications to any Management Stockholders, to their respective addresses set forth in the Schedule, with a copy to: Mayer Brown & Platt 190 South LaSalle Street Chicago, IL 60603 Attention: Frederick B. Thomas James T. Lidbury Facsimile: (312) 701-7711 (d) for notices and communication to any Other Stockholders, to their respective addresses set forth in the Schedule. By notice complying with the foregoing provisions of this Section 4.4, each party shall have the right to change the mailing address for future notices and communications to such party. 4.5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective transferees, successors and assigns; PROVIDED, HOWEVER, that no right or obligation under this Agreement may be assigned except as expressly provided herein, it being understood that the Company's rights hereunder may be assigned by the Company to any corporation which is the surviving entity in a merger, consolidation or like event involving the Company. No such assignment shall relieve an assignor of its obligations hereunder. 4.6. GOVERNING LAW. This Agreement shall be governed by the law of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. -49- 4.7. TERMINATION. Without affecting any other provision of this Agreement requiring termination of any rights in favor of any Stockholder or any transferee of Shares, the provisions of Article II shall terminate as to such Stockholder or transferee, when, pursuant to and in accordance with this Agreement, such Stockholder or transferee, as the case may be, no longer owns any Shares, Performance Options or Time Options; PROVIDED, that termination pursuant to this Section 4.7. shall only occur in respect of a Stockholder after all Permitted Transferees in respect thereof also no longer own any Shares. Notwithstanding the foregoing, Article II shall terminate upon the earlier of a Change in Control or the consummation of the first Public Offering; PROVIDED, that the Company shall be obligated to consummate the purchase of any vested Time Options, vested Time Vested Equity, vested and earned Performance Options and vested and earned Performance Vested Equity which have been called pursuant to Section 2.2 or put pursuant to Section 2.3 prior to such termination, but have not otherwise been paid for as of such date ; and PROVIDED, FURTHER, that upon a Change in Control, prior to termination of Article II, unless the rights under this proviso are otherwise waived by any Stockholder with respect to his, her or its rights, (i) the Company or its designee shall make a repurchase offer to each Management Stockholder for all of his or her Common Stock Equivalents and any vested Performance Options for which a Determination Date has not yet occurred, on terms no less favorable than if such securities had been called pursuant to Section 2.2 and the Management Stockholder terminated his or her employment for Good Reason, (ii) the Company or its designee shall make a repurchase offer to each other Stockholder for all of his, her or its Common Stock Equivalents at a price per share no less than the Fair Market Value of such Common Stock Equivalents, and (iii) the consummation of any acceptance of such offer by any Stockholder under clause (i) or (ii) shall occur within a reasonable period of time after acceptance of such offer, which acceptance shall occur not more than ten (10) business days after notice to the Stockholders of the repurchase offer. 4.8. RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to Shares, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Shares, by reason of a stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise. 4.9. ACTION NECESSARY TO EFFECTUATE THE AGREEMENT. The parties hereto agree to take or cause to be taken all such corporate and other action as may be necessary to effect the intent and purposes of this Agreement. 4.10. PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE. Each of the parties acknowledges that all of the Shares held by such party are being (or have been) acquired for investment and not with a view to the distribution thereof and that no transfer, hypothecation or assignment of Shares may be made except in compliance with applicable federal and state securities laws. All the certificates of Shares which are now or hereafter owned by the Stockholders and which are subject to the terms of this Agreement shall have endorsed in writing, stamped or printed, thereon the following legend: -50- "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, OF A STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 4, 2000, AS AMENDED FROM TIME TO TIME, AND NONE OF SUCH SECURITIES, OR ANY INTEREST THEREIN, SHALL BE TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT AS PROVIDED IN THAT AGREEMENT. A COPY OF THE STOCKHOLDERS AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL BE MAILED TO ANY PROPERLY INTERESTED PERSON WITHOUT CHARGE WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT OF A WRITTEN REQUEST." All shares shall also bear all legends required by federal and state securities laws. 4.11. EFFECTIVENESS OF TRANSFERS. All Shares transferred by a Stockholder (other than pursuant to an effective registration statement under the 1933 Act or pursuant to a Rule 144 transaction) shall, except as otherwise expressly stated herein, be held by the transferee thereof subject to this Agreement. Such transferee shall, except as otherwise expressly stated herein, have all the rights and be subject to all of the obligations of a Stockholder under this Agreement (as though such party had so agreed pursuant to Section 4.12) automatically and without requiring any further act by such transferee or by any parties to this Agreement. Without affecting the preceding sentence, if such transferee is not a Stockholder on the date of such transfer, then such transferee, as a condition to such transfer, shall confirm such transferee's obligations hereunder in accordance with Section 4.12. No Shares shall be transferred on the Company's books and records, and no transfer of Shares shall be otherwise effective, unless any such transfer is made in accordance with the terms and conditions of this Agreement, and the Company is hereby authorized by all of the Stockholders to enter appropriate stop transfer notations on its transfer records to give effect to this Agreement. 4.12. OTHER STOCKHOLDERS. Subject to the restrictions on transfers of Shares contained herein, any Person who is not already a Stockholder acquiring Shares, shall, on or before the transfer or issuance to it of Shares, sign a counterpart or joinder to this Agreement in form reasonably satisfactory to the Company and shall thereby become a party to this Agreement to be bound hereunder as (i) a Berkshire Stockholder if a transferee (other than the Company) of a Berkshire Stockholder, (ii) a Management Stockholder if a transferee (other than the Company) of a Management Stockholder or (iii) an Other Stockholder if such transferee (other than the Company) does not fall within clause (i) or (ii) above. Each such additional Stockholder shall be listed on the Schedule, as amended from time to time. -51- 4.13. NO WAIVER. No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy conferred by this Agreement shall operate as waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 4.14. COUNTERPART. This Agreement may be executed in two or more counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 4.15. HEADINGS. All headings and captions in this Agreement are for purposes of reference only and shall not be construed to limit or affect the substance of this Agreement. 4.16. THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended or shall be construed to entitle any Person other than the Company and the Stockholders to any claim, cause of action, right or remedy of any kind. 4.17. CONSENT TO JURISDICTION. The Company and each of the Stockholders, by its, his or her execution hereof, (i) hereby irrevocably submit to the exclusive jurisdiction of the state courts in the State of Delaware for the purposes of any claim or action arising out of or based upon this Agreement or relating to the subject matter hereof, (ii) hereby waive, to the extent not prohibited by applicable law, and agree not to assert by way of motion, as a defense or otherwise, in any such claim or action, any claim that it or he is not subject personally to the jurisdiction of the above-named courts, that its, his or her property is exempt or immune from attachment or execution, that any such proceeding brought in the above-named court is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court and (iii) hereby agree not to commence any claim or action arising out of or based upon this Agreement or relating to the subject matter hereof other than before the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such claim or action to any court other than the above-named courts whether on the grounds of inconvenient forum or otherwise. The Company and each of the Stockholders hereby consent to service of process in any such proceeding, and agree that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 4.4 is reasonably calculated to give actual notice. 4.18. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW -52- EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 4.18 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.18 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. [Remainder of Page Intentionally Left Blank] -53- IN WITNESS WHEREOF, each of the undersigned has duly executed this Stockholders Agreement (or caused this Stockholders Agreement to be executed on its behalf by its officer or representative thereunto duly authorized) as of the date first above written. COMPANY: U.S. CAN CORPORATION By:______________________________ Name: Title: BERKSHIRE STOCKHOLDERS: BERKSHIRE FUND V INVESTMENT CORP. By:_____________________________ Name: Title: BERKSHIRE FUND V COINVESTMENT CORP. By: _____________________________ Name: Title: BERKSHIRE INVESTORS LLC By: ______________________________ Name: Title: MANAGEMENT STOCKHOLDERS: --------------------------------- Gillian V. N. Derbyshire --------------------------------- Roger B. Farley --------------------------------- David R. Ford --------------------------------- Paul W. Jones --------------------------------- J. Michael Kirk ---------------------------------- Thomas A. Scrimo ---------------------------------- John L. Workman ---------------------------------- Ian Anderson ---------------------------------- Francis T. Azzarello ---------------------------------- Robert L. Burkhardt ---------------------------------- Daniel P. DesRochers ---------------------------------- James J. Donnelly ---------------------------------- Bernard D. Grilli ---------------------------------- Neil Houghton ---------------------------------- Sarah T. Macdonald ---------------------------------- John R. McGowan ---------------------------------- Roger P. McSweeney ---------------------------------- Larry S. Morrison ---------------------------------- Thomas J. Nicoletto ---------------------------------- Emil P. Obradovich ---------------------------------- Thomas J. Olander ---------------------------------- Gregg S. Pearson ---------------------------------- Friedhelm Pilarski ---------------------------------- Steven K. Sims ---------------------------------- James K. Strasser ---------------------------------- Tim M. Tremper ----------------------------------- Nicola Valentini ---------------------------------- Sandra K. Vollman OTHER STOCKHOLDERS SALOMON SMITH BARNEY GROUP SALOMON SMITH BARNEY INC. By: ________________________________ Name: Title: SQUAM STOCKHOLDER SQUAM LAKE INVESTORS IV, L.P. By: GPI, Inc., its general partner By: ________________________________ Name: Alan K. Harris Title: Vice President SCARSDALE GROUP SALCORP LTD. By: ________________________________ Name: Title: BARCEL CORPORATION By: ________________________________ Name: Title: SCARSDALE COMPANY N.V., INC. By: ________________________________ Name: Title: WINDSOR INTERNATIONAL CORPORATION By: ________________________________ Name: Title: ATLAS WORLD CARRIERS S.A. By: ________________________________ Name: Title: THE WORLD FINANCIAL CORPORATION S.A. By: ________________________________ Name: Title: LENNOXVILLE INVESTMENTS, INC. By: ________________________________ Name: Title: EMPIRE INVESTMENTS S.A. By: ________________________________ Name: Title: EX-12 10 a2037960zex-12.txt EXHIBIT 12 Exhibit 12 U.S. Can Ratio of Earnings to Fixed Charges
Historical ------------------------------------------------------------------------------------------ As of and for the First As of and for the Fiscal Year Ended Nine Months Ended ---------------------------------------------------------- ------------------------------- December 31, October 1, October 3, 1999 1998 1997 1996 2000 1999 -------------- -------------- --------------- ------------ --------------- --------------- Pretax Income 37.1 (13.2) (46.7) 29.0 25.9 30.7 Add: Fixed Charges 32.1 37.8 41.9 32.2 28.4 24.5 Less: Interest Capitalized Preferred Stock Dividend Requirements of majority owned unconsolidated subs -------------- -------------- --------------- ------------ --------------- --------------- Total 69.2 24.6 (4.8) 61.2 54.3 55.2 Fixed Charges Total Interest, including capitalized interest 28.7 33.2 36.9 28.4 24.6 21.8 Amortization of Deferred Financing Costs 1.2 1.8 1.7 1.4 1.2 0.9 Interest component of rent 2.2 2.8 3.3 2.4 2.6 1.8 Preferred Stock Dividend Requirements of majority owned unconsolidated subs - -------------- -------------- --------------- ------------ --------------- --------------- Total Fixed Charges 32.1 37.8 41.9 32.2 28.4 24.5 Ratio of Earnings to Fixed Charges 2.2 0.7 (0.1) 1.9 1.9 2.3 Earnings Required to Equal 1.00 13.2 46.7
Pro Forma --------------------------------- 9 Months Year Ended Ended December 31, October 1, 1999 2000 ----------------- --------------- Pretax Income 18.1 10.4 Add: Fixed Charges 74.8 57.8 Less: Interest Capitalized Preferred Stock Dividend Requirements of majority owned unconsolidated subs (18.3) (14.6) ----------------- --------------- Total 74.6 53.6 Fixed Charges Total Interest, including capitalized interest 50.4 39.2 Amortization of Deferred Financing Costs 3.8 1.4 Interest component of rent 2.3 2.6 Preferred Stock Dividend Requirements of majority owned unconsolidated subs 18.3 14.6 ----------------- --------------- Total Fixed Charges 74.8 57.8 Ratio of Earnings to Fixed Charges 1.0 0.9 Earnings Required to Equal 1.00 4.2
EX-23.1 11 a2037960zex-23_1.txt EXHIBIT 23.1 Exhibit 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the use of our report dated February 2, 2000, except with respect to the matters discussed in Notes 13 and 14, as to which the date is October 4, 2000, included in this registration statement and to all references to our Firm included in this registration statement. Arthur Andersen LLP Chicago, Illinois February 15, 2001 -----END PRIVACY-ENHANCED MESSAGE-----