<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 2001
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------
U.S. CAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3411 06-1094196
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------------
UNITED STATES CAN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3411 06-1145011
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
USC MAY VERPACKUNGEN HOLDING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3411 36-4335392
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
900 COMMERCE DRIVE
OAK BROOK, ILLINOIS 60523
TELEPHONE: (630) 571-2500
FACSIMILE: (630) 573-0715
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN K. SIMS
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
UNITED STATES CAN COMPANY
900 COMMERCE DRIVE
OAK BROOK, ILLINOIS 60523
TELEPHONE: (630) 571-2500
FACSIMILE: (630) 573-0715
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS FOR EACH
REGISTRANT)
COPY TO:
JANE D. GOLDSTEIN, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
TELEPHONE: (617) 951-7000
FACSIMILE: (617) 951-7050
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
12 3/8% Series B Senior Subordinated Notes
due 2010.................................. $175,000,000 100% $175,000,000 $43,750
Guarantees of 12 3/8% Series B Senior
Subordinated Notes due 2010............... $175,000,000 (2) (2) None(2)
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
(2) No further fee is payable pursuant to Rule 457(n) under the Securities Act
of 1933.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 5, 2001
PROSPECTUS
UNITED STATES CAN COMPANY
OFFER TO EXCHANGE ALL OUTSTANDING
12 3/8% SENIOR SUBORDINATED NOTES DUE 2010
($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
12 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2010
---------------------
We are offering to exchange our 12 3/8% Series B Senior Subordinated Notes
due 2010, or exchange notes, for all of our outstanding 12 3/8% Senior
Subordinated Notes due 2010, or notes. We are making this exchange offer on the
terms and conditions set forth in this prospectus and the accompanying letter of
transmittal. We have registered the exchange notes under the Securities Act of
1933, while we have not registered the notes. The form and terms of the exchange
notes and the notes are identical in all material respects, except for various
transfer restrictions and registration rights relating to the notes.
We will accept for exchange all outstanding notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on , unless we
extend this exchange offer. You may withdraw the tender of your notes at any
time prior to such date and time. Although our offer is subject to certain
customary conditions, it is not conditioned upon any minimum principal amount of
notes being tendered for exchange.
Information about the exchange notes:
- The exchange notes will mature on October 1, 2010.
- We will pay interest on the exchange notes every six months, on April 1
and October 1, beginning on April 1, 2001.
- We may redeem the exchange notes at any time after October 1, 2005.
- Before October 1, 2003, we may redeem up to 35% of the aggregate principal
amount of the exchange notes with the net proceeds of certain public
offerings of common equity by us.
- If we sell certain assets or experience specific kinds of changes in
control, we must offer to repurchase all or a portion of the exchange
notes.
- The exchange notes are subordinated to all of our current and future
senior indebtedness, except indebtedness that expressly provides
otherwise.
We will not receive any proceeds from the issuance of the exchange notes. We
will pay all the expenses incurred by us in connection with this exchange offer
and issuance of the exchange notes.
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
exchange notes received in exchange for notes where such notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, starting on the expiration date of the exchange
offer and ending on the close of business one year after the expiration date, we
will make this prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
YOU SHOULD CAREFULLY REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 16 IN
CONNECTION WITH THIS EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES.
Neither the Securities and Exchange Commission (the Commission) nor any
state securities commission has approved or disapproved of our offer of the
exchange notes or determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS .
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
RISK FACTORS................................................ 16
THE TRANSACTIONS............................................ 23
USE OF PROCEEDS............................................. 25
CAPITALIZATION.............................................. 26
UNAUDITED PRO FORMA FINANCIAL DATA.......................... 27
SELECTED FINANCIAL DATA..................................... 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 39
BUSINESS.................................................... 48
MANAGEMENT.................................................. 58
PRINCIPAL STOCKHOLDERS...................................... 64
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 66
OTHER INDEBTEDNESS.......................................... 70
DESCRIPTION OF U.S. CAN'S CAPITAL STOCK..................... 73
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK.................. 75
DESCRIPTION OF EXCHANGE NOTES............................... 76
THE EXCHANGE OFFER.......................................... 116
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... 125
PLAN OF DISTRIBUTION........................................ 130
LEGAL MATTERS............................................... 130
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 130
WHERE YOU CAN FIND MORE INFORMATION......................... 131
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF U.S. CAN
CORPORATION AND ITS SUBSIDIARIES.......................... F-1
</TABLE>
i
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements regarding, among other
things, our plans, strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations reflected in or
suggested by these forward-looking statements are reasonable, we can give no
assurance that we will achieve or realize these plans, intentions or
expectations. Forward-looking statements are inherently subject to risks,
uncertainties and assumptions. Important factors that could cause actual results
to differ materially from the forward-looking statements we make in this
prospectus are set forth below under the caption "Risk Factors" and elsewhere in
this prospectus. We expressly qualify all forward-looking statements
attributable to us or persons acting on our behalf in their entirety by those
cautionary statements. We will not update these forward-looking statements even
though our situation will change in the future.
------------------------
This prospectus contains summaries of the terms of certain documents. Such
summaries are qualified in their entirety by reference to the full and complete
text of such documents (copies of which will be made available to you upon
request to United States Can Company) for complete information with respect
thereto.
This exchange offer is not being made to, and we will not accept surrenders
for exchange from, holders of the outstanding notes in any jurisdiction in which
the exchange offer or its acceptance would not comply with the securities or
blue sky laws of such jurisdiction.
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL BEFORE DECIDING WHETHER TO TENDER YOUR NOTES.
------------------------
MARKET AND INDUSTRY DATA
Unless otherwise indicated, the market share and industry data used
throughout this prospectus were obtained primarily from internal company surveys
and management estimates based on these surveys and our management's knowledge
of the industry. Where we have relied on third-party market and industry data,
we have so noted. The Chemical Specialties Manufacturers Association, European
Aerosol Federation and Can Manufacturers Institute were the primary sources for
third party industry data. Industry surveys and publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but there can be no assurance as to the accuracy and
completeness of such information. We have not independently verified any of the
data from third-party sources. Similarly, internal company surveys and
management estimates, while we believe they are reliable, have not been verified
by any independent sources. While we are not aware of any misstatements
regarding our industry data presented in this prospectus, our estimates involve
risks and uncertainties and are subject to change based on various factors,
including those discussed under the heading "Risk Factors" in this prospectus.
TRADEMARKS
U.S. Can-Registered Trademark- and Plastite-Registered Trademark- are our
trademarks. All other trademarks and service marks used in this prospectus are
the property of their respective owners.
ii
<PAGE>
SUMMARY
THIS SUMMARY CONTAINS BASIC INFORMATION ABOUT UNITED STATES CAN COMPANY AND
THE EXCHANGE OFFER. IT DOES NOT CONTAIN ALL THE INFORMATION THAT YOU MAY
CONSIDER IMPORTANT IN MAKING YOUR INVESTMENT DECISION. THEREFORE, YOU SHOULD
READ THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE
ACCOMPANYING NOTES, APPEARING ELSEWHERE IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT DECISION. EXCEPT AS OTHERWISE REQUIRED BY THE CONTEXT, REFERENCES IN
THIS PROSPECTUS TO "OUR COMPANY," "WE," "US," OR "OUR" REFER TO THE COMBINED
BUSINESS OF U.S. CAN CORPORATION, THE PARENT COMPANY OF UNITED STATES CAN
COMPANY, AND ALL OF ITS SUBSIDIARIES. ALL REFERENCES TO "U.S. CAN" REFER TO U.S.
CAN CORPORATION, AND REFERENCES TO THE "COMPANY" REFER TO UNITED STATES CAN
COMPANY. ALL PRO FORMA FINANCIAL INFORMATION IN THIS PROSPECTUS INCLUDES THE
OPERATIONS OF MAY VERPACKUNGEN, OUR GERMAN SUBSIDIARY THAT WE ACQUIRED ON
DECEMBER 30, 1999, AND REFLECTS U.S. CAN'S 20 FOR 1 STOCK SPLIT THAT OCCURRED ON
OCTOBER 4, 2000.
THE COMPANY
GENERAL
We are a leading manufacturer of steel containers for personal care,
household, automotive, paint, industrial and specialty products in the United
States and Europe. We also are a manufacturer of plastic containers in the
United States and food cans in Europe. Our product offerings include a wide
variety of steel containers, such as aerosol cans, paint cans, oblong containers
and a large number of custom and specialty products, and plastic containers,
such as plastic pails for industrial and consumer products. We have
long-standing customer relationships with many leading consumer products
companies in the United States and Europe, including Gillette, Reckitt Benckiser
and Sherwin Williams. In steel aerosol cans, we hold the number one market
position in the United States and the number two market position in Europe. We
also hold the number two market position in paint cans in the United States. We
attribute our market leadership to our ability to consistently provide
high-quality products and service at competitive prices, while continually
improving our product-related technologies.
For the twelve months ended October 1, 2000, we had pro forma net sales of
$803.6 million and adjusted EBITDA of $105.5 million. Our aerosol and paint
products represented approximately 78% of our total pro forma net sales for the
same period. Domestic operations represented approximately 69% of total pro
forma net sales, with the remainder generated by our European operations.
Our principal executive offices are located at 900 Commerce Drive, Suite
302, Oak Brook, Illinois 60523 (Telephone Number: (630) 571-2500).
We compete in three major business segments within the container industry:
Aerosol Products; Paint, Plastic and General Line Products; and Custom and
Specialty Products. In addition, we recently acquired May Verpackungen, a German
manufacturer of metal food packaging and steel aerosol cans.
- AEROSOL PRODUCTS. Steel aerosol cans represent our largest segment and
accounted for approximately 59% of our total pro forma net sales for the
last twelve months ended October 1, 2000. In 1999, we manufactured over
50% of the steel aerosol cans produced in the United States and over 25%
of the steel aerosol cans produced in Europe. We also supply steel aerosol
cans to customers in Latin America through an Argentinian joint venture.
We offer a wide range of steel aerosol cans that enhance our customers'
product offerings, including stylized and barrier-pack cans. Most of the
aerosol cans that we produce employ a lithography process that prints our
customers' designs and logos on the cans. Examples of products using our
steel aerosol cans include Right Guard deodorant, Easy-Off oven cleaner
and Krylon spray paint.
- PAINT, PLASTIC AND GENERAL LINE PRODUCTS. These products are our second
largest segment and accounted for approximately 19% of our total pro forma
net sales for the last twelve months ended October 1, 2000. Our primary
paint, plastic and general line products include paint and
1
<PAGE>
coating containers, oblong steel cans, plastic pails and other containers
for industrial and consumer products. We produce nearly half of all
one-gallon paint cans sold in the United States. Examples of products
using our containers include Dutch Boy paint, Thompson's Water Seal and
Arch pool chemicals.
- CUSTOM AND SPECIALTY PRODUCTS. Our custom and specialty products accounted
for approximately 6% of our total pro forma net sales for the last twelve
months ended October 1, 2000. We believe that we offer the industry's
widest range of decorative and specialty products. Our primary products
include a wide array of functional and decorative containers and tins,
fitments and stampings, and collectible items, such as decorative metal
signs and canister sets. Examples of products packaged with our containers
include holiday tins sold by mass merchandisers, Keebler cracker tins and
Liz Claiborne fragrance gift boxes.
MAY VERPACKUNGEN ACQUISITION
On December 30, 1999, we acquired May Verpackungen, a German manufacturer of
steel food packaging and aerosol cans. May is a leading European food can
producer with more than 20% of the German food can market. For the last twelve
months ended October 1, 2000, May generated approximately 16% of our total pro
forma net sales. The May acquisition allows us to:
- increase our scale and presence in Europe;
- improve our ability to reduce manufacturing costs;
- take advantage of purchasing synergies; and
- enhance our ability to offer global manufacturing services to our
customers.
May has a reputation for manufacturing excellence and has long-term
relationships with several leading consumer products companies. As a result of
this increased diversification and our larger European presence, we expect to
realize additional cross-selling opportunities between our traditional customers
and those of May. Generally, we serve different customers than May, with no
overlap among our top ten customers.
COMPETITIVE STRENGTHS
We believe we have the following competitive strengths:
- MARKET LEADERSHIP. Domestically, we hold the number one market position in
our steel aerosol can lines and the number two market position in our
paint product lines. In Europe, we are the second largest manufacturer of
steel aerosol cans. Collectively, our aerosol can and paint product lines
represent approximately 78% of our annual sales. We believe our
technological innovation and product quality have resulted in an over 50%
share of the domestic United States aerosol container market. We also
produce nearly half of all one-gallon paint cans sold annually in the
United States. Through May, we have strengthened our position in Europe
and Germany, as well as expanded our product offerings.
- LONG-STANDING CUSTOMER RELATIONSHIPS. We have long-standing relationships
with many of our customers and have been able to expand our market share
with many key customers. Our market share makes us an important supplier
to the leading users of aerosol and paint cans, while our scale allows us
to respond quickly to customer demands. We believe our long-standing
customer relationships have developed as a result of our reputation for
quality and service, providing competitively priced products and providing
global supply services to multi-national consumer products companies.
2
<PAGE>
- INDUSTRY-LEADING TECHNICAL CAPABILITIES. Over the last two years, we have
invested heavily in equipment and systems that improve our manufacturing
quality and efficiency. We have made a significant investment in new
technology, including the installation of two new high-speed, six-color
presses that we expect will improve the quality and lower the cost of
printing. We also have been at the forefront of technological improvements
in the packaging industry, including the production of barrier-pack cans
and the development of advanced interior container coatings.
- EFFICIENT MANUFACTURING OPERATIONS. Since 1997, we have rationalized
manufacturing facilities and centralized operations to lower our overall
costs. As of October 1, 2000, we have sold or closed 18 manufacturing
facilities. The closing of these facilities, in conjunction with
investments in new technology, has created a lower-cost, more efficient
manufacturing base, while improving product quality and customer service.
In addition, we recently reduced our workforce by eliminating 73 salaried
and 34 hourly positions. This plan is expected to reduce expenses by
approximately $5 million per year. We expect that these and future
initiatives will continue to improve our manufacturing efficiencies and
our customer service capabilities.
- STRATEGICALLY POSITIONED MANUFACTURING FACILITIES. We strategically locate
our manufacturing facilities near our customers to provide time sensitive
product delivery and improve inventory management and product design. We
have 16 facilities in the United States and ten facilities in Europe. Our
broad U.S. and European presence allows us to reduce costs, improve
delivery times and meet our customers' growing needs for global supply
solutions. To expand our global presence, we recently entered the growing
South American market through an Argentinian joint venture.
- EXPERIENCED MANAGEMENT TEAM. Our management team consists of highly
qualified senior managers with significant industry experience. Our
management team owns 9.00% of U.S. Can's common stock and has time and
performance-based options to acquire an additional 5.75% over the next
five years.
BUSINESS STRATEGY
Our business strategy focuses on the following:
- FOCUSING ON CUSTOMER SERVICE. By providing improved customer service and
support, we believe we can enhance our market share with existing
customers and further distinguish ourselves in the container and packaging
industry. We are currently implementing new systems and technology,
including just-in-time delivery, customer order tracking and demand
forecasting that will further enhance our value-added service offerings.
In addition, we have invested in new lithography capacity, including two
high-speed, six-color presses that allow us to offer sophisticated
printing capabilities.
- MEETING OUR CUSTOMERS' GLOBAL NEEDS. Our customers are expanding
internationally and have an increasing need for global supply sources. To
meet their needs, we are integrating our global manufacturing capabilities
and selectively expanding into new geographic regions. We believe our
recent success in securing global supply relationships validates our
global strategy.
- IMPROVING OPERATING EFFICIENCIES. We plan to continue to reduce
manufacturing costs and enhance operating efficiencies by further
reconfiguring our manufacturing base, improving our efficiency in
purchasing and investing in new equipment and technology. For example, we
are consolidating our purchasing in both the United States and Europe. As
a result of these efforts, we have secured steel purchase agreements that
will provide us with approximately $2 million in annual cost savings.
3
<PAGE>
- MAKING SELECTIVE ACQUISITIONS. We plan to continue to evaluate and
selectively pursue acquisitions of rigid packaging businesses that will
help fulfill our customer needs, attract new customers, add new products,
complement our existing businesses, enhance our earnings or expand our
geographic reach.
THE TRANSACTIONS
On October 4, 2000, we and our parent company, U.S. Can:
- consummated the merger of Pac Acquisition Corporation and U.S. Can, with
U.S. Can being the surviving corporation;
- Berkshire Partners LLC and its co-investors, certain existing stockholders
of U.S. Can, referred to as the "rollover stockholders," and several
members of U.S. Can's management team made common stock investments and
preferred stock investments totaling $160 million;
- purchased approximately 13.5 million shares of U.S. Can's common stock for
cash at $20.00 per share and outstanding options to purchase approximately
1.6 million shares of U.S. Can's common stock at $20.00 per underlying
share, less the applicable option exercise price;
- entered into a $400 million senior secured credit facility comprised of
term loans totaling $260 million and a revolving line of credit totaling
$140 million;
- issued $175.0 million aggregate principal amount of notes in the original
offering; and
- repurchased $235.7 million aggregate principal amount of U.S. Can's
outstanding 10 1/8% notes due 2006.
OVERVIEW OF BERKSHIRE PARTNERS LLC
Berkshire Partners LLC is a Boston-based private investment firm that
invests in businesses that offer strong growth prospects and that are supported
by high quality management teams interested in becoming owners of the companies
they operate. Berkshire Partners' private equity investments have taken many
forms, including leveraged buyouts, recapitalizations, privatizations, minority
investments and industry consolidations.
Since 1984, Berkshire Partners has made investments in over 65 operating
companies in a wide variety of industries, including manufacturing, business
services, retail and related services, telecommunications and transportation.
Berkshire Partners manages $1.8 billion of capital through five private equity
partnerships. The most recent of these, Berkshire Fund V, L.P. (inclusive of
Berkshire Fund V Coinvestment Fund, L.P.), has capital commitments of
approximately $1.0 billion. Berkshire Partners' current and former portfolio
companies include Crown Castle International Corporation, Wisconsin Central
Transportation Company, Profit Recovery Group, The Holmes Group, Thomas Built
Buses and Weigh-Tronix LLC. The investment by Berkshire Fund V and its
affiliates of approximately $131.8 million in U.S. Can represents one of the
largest investments Berkshire Partners has made in a single entity.
4
<PAGE>
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.
<TABLE>
<S> <C>
Registration Rights Agreement................ You are entitled to exchange your notes for
exchange notes with terms that are identical
in all material respects to the notes. The
exchange offer is intended to satisfy these
rights. After the exchange offer is complete,
you may no longer be entitled to the benefits
of the rights granted under the registration
rights agreement that we entered into as part
of the offering of the notes.
The Exchange Offer........................... We are offering to exchange $1,000 principal
amount of exchange notes which have been
registered under the Securities Act for each
$1,000 principal amount of notes that were
issued on October 4, 2000 in a transaction
exempt from registration under the Securities
Act in accordance with Rule 144A. Each of
your notes must be properly tendered and
accepted in order to be exchanged. We will
exchange all notes that are properly tendered
and not validly withdrawn.
As of this date, there are $175,000,000 in
aggregate principal amount of notes
outstanding.
We will issue the exchange notes on or
promptly after the expiration of the exchange
offer.
Expiration Date.............................. The exchange offer will expire at 5:00 p.m.,
New York City time, on , unless
we decide to extend the exchange offer.
Conditions to the Exchange Offer............. The exchange offer is subject to the
condition that it does not violate applicable
law or interpretations of the staff of the
Commission. If we determine that applicable
federal law does not permit the exchange
offer, we may terminate the offer. The
exchange offer is not conditioned upon any
minimum principal amount of notes being
tendered. The holders of notes have certain
rights under the registration rights
agreement should we fail to consummate the
exchange offer.
Resales of the Exchange Notes................ Based on interpretations of the staff of the
Commission, we believe that you may offer for
resale, resell or otherwise transfer the
exchange notes without complying with the
registration and
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
prospectus delivery requirements of the
Securities Act if you:
- acquire the notes issued in the exchange
offer in the ordinary course of your
business;
- are not participating, do not intend to
participate, and have no arrangement or
undertaking with anyone to participate, in
the distribution of the notes issued to you
in the exchange offer; and
- are not an "affiliate" of U.S. Can as
defined in Rule 405 of the Securities Act.
If any of these conditions are not satisfied
and you transfer any exchange notes without
delivering a proper prospectus or without
qualifying for a registration exemption, you
may incur liability under the Securities Act.
We will not be responsible for or indemnify
you against any liability you may incur. Each
broker-dealer that receives exchange notes
for its own account in exchange for notes,
where such notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
in connection with any resale of those
exchange notes. See "Plan of Distribution."
Accrued Interest on the Exchange Notes and
the Notes.................................. Interest on each exchange note will accrue
from the last date on which interest was paid
on the note being tendered for exchange or,
if no interest has been paid, from the date
on which the notes were issued in the
original offering. Consequently, holders who
exchange their notes for exchange notes will
receive the same interest payment on April 1,
2001 (the first interest payment date with
respect to the notes and the exchange notes
to be issued pursuant to the exchange offer)
that they would have received had they not
accepted the exchange offer. Interest on the
notes accepted for exchange will cease to
accrue upon issuance of the exchange notes.
Procedures for Tendering Notes............... If you wish to tender your notes for exchange
pursuant to the exchange offer, you must
transmit to Bank One Trust Company, N.A., as
exchange agent, on or prior to the expiration
date either:
- a properly completed and duly executed copy
of the letter of transmittal accompanying
this prospectus, or a facsimile of such
letter of transmittal, together with your
outstanding
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
notes and any other documentation required
by such letter of transmittal, at the
address set forth on the cover page of the
letter of transmittal; or
- if you are effecting delivery by book-entry
transfer, a computer-generated message
transmitted by means of the Automated
Tender Offer Program System of The
Depository Trust Company in which you
acknowledge and agree to be bound by the
terms of the letter of transmittal and
which, when received by the exchange agent,
forms a part of a confirmation of
book-entry transfer;
In addition, you must deliver to the exchange
agent on or prior to the expiration date:
- if you are effecting delivery by book-entry
transfer, a timely confirmation of
book-entry transfer of your outstanding
notes into the account of the exchange
agent at The Depository Trust Company
pursuant to the procedures for book-entry
transfers described in this prospectus
under the heading "The Exchange
Offer--Procedures for Tendering;" or
- if necessary, the documents required for
compliance with the guaranteed delivery
procedures described in this prospectus
under the heading "The Exchange
Offer--Guaranteed Delivery Procedures."
By executing and delivering the accompanying
letter of transmittal or effective delivery
by book-entry transfer, you are representing
to us that, among other things, (i) the
person receiving the exchange notes pursuant
to the exchange offer, whether or not such
person is the holder, is receiving them in
the ordinary course of business, (ii) neither
the holder nor any such other person has an
arrangement or understanding with any person
to participate in the distribution of such
exchange notes and that such holder is not
engaged in, and does not intend to engage in,
a distribution of the exchange notes and
(iii) neither the holder nor any such other
person is an "affiliate" of ours within the
meaning of Rule 405 under the Securities Act.
Special Procedures for Beneficial Owners..... If you are a beneficial owner of notes and
your name does not appear on a security
listing of The Depository Trust Company as
the holder of such notes or if you are a
beneficial owner of notes that are registered
in the name of a broker,
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
dealer, commercial bank, trust company or
other nominee and you wish to tender such
notes in the exchange offer, you should
promptly contact the person in whose name
your notes are registered and instruct such
person to tender on your behalf. If you, as a
beneficial holder, wish to tender on your own
behalf you must, prior to completing and
executing the letter of transmittal and
delivering your outstanding notes, either
make appropriate arrangements to register
ownership of the outstanding notes in your
name or obtain a properly completed bond
power from the registered holder. The
transfer of record ownership may take
considerable time.
Guaranteed Delivery Procedures............... If you wish to tender your notes and time
will not permit the letter of transmittal or
any of the documents required by the letter
of transmittal to reach the exchange agent by
the expiration date, or the procedure for
book-entry transfer cannot be completed on
time or certificates for your notes cannot be
delivered on time, you may tender your notes
pursuant to the guaranteed delivery
procedures described in this prospectus under
the heading "The Exchange Offer--Guaranteed
Delivery Procedures."
Shelf Registration Statement................. If any changes in law or of the applicable
interpretation of the staff of the Commission
do not permit us to effect the exchange
offer, or upon the request of any holder of
the notes under certain circumstances, we
have agreed to register the notes on a shelf
registration statement and use our best
efforts to cause such shelf registration
statement to be declared effective by the
Commission. We have agreed to maintain the
effectiveness of the shelf registration
statement for, under certain circumstances,
at least two years from the date of the
original issuance of the notes to cover
resales of such notes held by such holders.
Withdrawal Rights............................ You may withdraw the tender of your
outstanding notes at any time prior to 5:00
p.m., New York City time, on the expiration
date.
Acceptance of Outstanding Notes and Delivery
of Exchange Notes.......................... Subject to certain conditions, we will accept
for exchange any and all outstanding notes
that are properly tendered and not validly
withdrawn. The exchange notes issued pursuant
to the exchange offer will be delivered
promptly following the expiration date.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
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.
</TABLE>
9
<PAGE>
THE EXCHANGE NOTES
<TABLE>
<S> <C>
General...................................... The form and terms of the exchange notes are
identical in all material respects to the
form and terms of the outstanding notes
except that:
- the exchange notes will bear a Series B
designation;
- we will have registered the exchange notes
under the Securities Act and, therefore,
they generally will not bear legends
restricting their transfer; and
- the holders of exchange notes will not be
entitled to rights under the registration
rights agreement.
The exchange notes will evidence the same
debt as the outstanding notes and will be
entitled to the benefits of the indenture
under which the notes were issued.
Issuer....................................... United States Can Company.
Notes Offered................................ $175.0 million aggregate principal amount of
12 3/8% Series B Senior Subordinated Notes
due 2010.
Maturity..................................... October 1, 2010.
Interest Payments............................ April 1 and October 1, commencing April 1,
2001.
Optional Redemption.......................... We may redeem the exchange notes in whole or
in part, at redemption prices set forth in
the section entitled "Description of the
Exchange Notes--Redemption," plus accrued and
unpaid interest, if any, to the redemption
date.
Optional Redemption After Some Equity
Offerings.................................. At any time and from time to time before
October 1, 2003, we may apply the proceeds of
a prior equity offering, within 180 days of
that offering, to redeem up to 35% of the
aggregate principal amount of the exchange
notes at a redemption price equal to 112.375%
of the principal amount thereof, plus accrued
and unpaid interest, if any, through the date
of redemption if at least 65% of the
aggregate principal amount of the exchange
notes originally issued remains outstanding
immediately after giving effect to the
redemption.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Control............................ Upon a change of control, as defined under
the section entitled "Description of the
Exchange Notes," you will have the right, as
a holder of exchange notes, to require us to
repurchase all or part of your exchange notes
at the repurchase price set forth in the
section entitled "Description of the Exchange
Notes," plus accrued and unpaid interest, if
any, to the date of repurchase.
Guarantee.................................... The company's obligations under the exchange
notes will be guaranteed on a senior
subordinated basis (the "Guarantees") by our
parent, U.S. Can, and all of our domestic
restricted subsidiaries (collectively, the
"Guarantors"). Currently, our only domestic
restricted subsidiary and our only subsidiary
guarantor is USC May Verpackungen Holding
Inc. None of our foreign subsidiaries will
guarantee the notes. The Guarantees will be
general, unsecured obligations of the
Guarantors, subordinate in right of payment
to all the Guarantors' senior indebtedness.
As of October 1, 2000, after giving pro forma
effect to the transactions and the original
offering, the Guarantees were subordinated to
$319.8 million of senior indebtedness. See
"Description of Exchange Notes."
Ranking...................................... The exchange notes will be unsecured and will
rank in right of payment behind all of our
existing and future senior debt and will rank
equal in right of payment to all of our
existing and future senior subordinated debt.
The exchange notes will be effectively
subordinated to all liabilities of our
subsidiaries that do not guarantee the notes.
The exchange notes will rank equally with any
notes issued in the original offering that
are not exchanged pursuant to the exchange
offer.
As of October 1, 2000, after giving pro forma
effect to the transactions and the original
offering:
- we had approximately $319.8 million of
senior debt outstanding and approximately
$104.6 million of unused commitment under
our senior secured credit facility;
- we had approximately $175.0 million of
senior subordinated debt represented by the
notes and approximately $0.9 million of
senior subordinated debt represented by
U.S. Can's outstanding 10 1/8% notes due
2006; and
- our subsidiaries that are not guarantors of
the exchange notes had $98.1 million of
liabilities, excluding liabilities owed to
us.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
See "Summary Historical and Pro Forma
Financial Information" and "Capitalization."
Restrictive Covenants........................ The company will issue the exchange notes
under an indenture between us and Bank One
Trust Company, N.A., as trustee. The
indenture also governs the notes. The
indenture limits the company's ability and
the ability of our restricted subsidiaries
to:
- incur more debt;
- pay dividends or make other distributions,
repurchase stock, repurchase subordinated
debt and make certain investments;
- create liens;
- create restrictions on the payment of
dividends and other amounts to us from our
restricted subsidiaries;
- sell assets or consolidate or merge with or
into other companies; and
- engage in transactions with affiliates.
These covenants are subject to a number of
important exceptions and limitations that are
described under the heading "Description of
the Exchange Notes."
Risk Factors................................. You should consider carefully all of the
information set forth in this prospectus and,
in particular, you should evaluate the
specific factors set forth under "Risk
Factors" in deciding whether to invest in the
exchange notes.
</TABLE>
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES
The following tables present our summary financial data. The summary
historical financial data for the years ended December 31, 1995 through 1999
have been derived from our consolidated financial statements. The summary
financial data for the nine months ended October 1, 2000 and October 3, 1999
have been derived from our unaudited interim condensed consolidated financial
statements, which in our opinion include all adjustments, consisting only of
normal recurring adjustments, that we consider necessary for the fair
presentation of our financial position and results of operations for these
periods. Our October 1, 2000 financial statements include the results of
operations of our German subsidiary, May Verpackungen, which we acquired in
December 1999, but our historical income statements for all other periods
presented below do not reflect the results of May. Operating results for the
nine months ended October 1, 2000 are not necessarily indicative of results that
may be expected for the entire year or any future period.
The summary unaudited pro forma consolidated financial statements have been
prepared by applying certain pro forma adjustments resulting from the
transactions, the acquisition of May on December 30, 1999 and the sale of our
Wheeling metal closures and Warren lithography businesses on March 10, 2000 to
our historical audited financial statements. The transactions have been
reflected as a recapitalization. The pro forma consolidated balance sheet as of
October 1, 2000 has been derived from our historical balance sheet (which
includes the impact of the acquisition of May and the sale of our Wheeling and
Warren operations), adjusted to give effect to the transactions, as if they
occurred on October 1, 2000. The pro forma consolidated statement of operations
for the twelve months ended December 31, 1999 and October 1, 2000 and the nine
months ended October 1, 2000 gives effect to the acquisition of May, the sale of
our Wheeling and Warren operations and the recapitalization as if each occurred
on January 1, 1999. The pro forma consolidated statements of operations exclude
non-recurring items directly attributable to the transactions.
The pro forma consolidated financial statements are presented for
informational purposes only and have been derived from, and should be read in
conjunction with, our consolidated financial statements, including the notes
thereto. The pro forma adjustments, as described in the notes to the unaudited
pro forma statements of operations and balance sheet contained in "Unaudited Pro
Forma Financial Data," are based on currently available information and certain
adjustments that we believe are reasonable. The pro forma financial information
is not necessarily indicative of the financial position or results of operations
of U.S. Can or the company that would have occurred had the transactions, the
May acquisition and the sale of our Wheeling and Warren operations taken place
on the date indicated, nor are they necessarily indicative of our future
financial position or results of operations.
We have not provided separate financial statements or data for the company
in this prospectus. U.S. Can's only assets are its investment in and advances to
the company. We believe that the financial statements of U.S. Can and the
consolidated financial statements of the company do not vary significantly. We
believe that the material differences are, and will be, related to stockholders'
equity and intercompany indebtedness.
The following summary historical and pro forma financial data should be read
in conjunction with "Capitalization," "Selected Financial Data," "Unaudited Pro
Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and the notes thereto included elsewhere in this prospectus.
13
<PAGE>
HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORIAL
---------------------------------------------------------------------------- PRO FORMA
NINE MONTHS ------------
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------- --------------------- YEAR
OCTOBER OCTOBER ENDED
3, 1, DECEMBER 31,
1995 1996 1997 1998 1999 1999 2000 1999
-------- -------- -------- -------- -------- --------- --------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net Sales.......................... $562.7 $660.6 $755.7 $710.2 $714.1 $549.8 $607.0 $843.1
Cost of Sales...................... 491.1 571.7 665.8 618.1 611.6 470.1 517.6 723.5
------ ------ ------ ------ ------ ------ ------ ------
Gross income....................... 71.6 88.9 89.9 92.1 102.5 79.7 89.4 119.6
Selling, general and administrative
expenses......................... 26.5 28.4 33.0 32.6 33.8 25.0 32.4 44.5
Special charges(1)................. 8.0 -- 63.0 35.9 -- -- 3.4 --
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)............ 37.1 60.5 (6.1) 23.6 68.7 54.7 53.6 75.1
Interest expense................... 24.5 28.4 36.9 33.2 28.7 21.8 24.6 50.4
Amortization of deferred financing
costs............................ 1.5 1.4 1.7 1.8 1.2 0.9 1.2 3.8
Other expenses..................... 2.0 1.7 2.0 1.8 1.7 1.3 1.9 2.8
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income
taxes............................ 9.1 29.0 (46.7) (13.2) 37.1 30.7 25.9 18.1
Provision (benefit) for income
taxes............................ 4.2 12.3 (16.8) (5.7) 14.6 12.0 9.8 7.1
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from continuing
operations before discontinued
operations, extraordinary item
and preferred stock dividend..... 4.9 16.7 (29.9) (7.5) 22.5 18.7 16.1 11.0
Net Income (loss) from discontinued
operations....................... (1.0) 0.4 1.1 -- -- -- -- --
Net loss on sale of discontinued
business(2)...................... -- -- (3.2) (8.5) -- -- -- --
Extraordinary item(3).............. -- (5.3) -- -- (1.3) (1.3) -- (1.3)
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) before preferred
stock dividend................... $ 3.9 $ 11.8 $(32.0) $(16.0) $ 21.2 $ 17.4 $ 16.1 $ 9.7
====== ====== ====== ====== ====== ====== ======
Preferred stock dividend........... 11.1
------
Net loss available for common
stockholders..................... $ (1.4)
======
OTHER FINANCIAL DATA:
EBITDA(4).......................... $ 69.8 $ 91.4 $ 93.1 $ 91.3 $ 97.7 $ 77.9 $ 80.7 $107.1
Adjusted EBITDA(5)................. -- -- -- -- -- -- -- 112.1
Depreciation and amortization...... 28.2 34.0 39.9 35.4 31.9 25.4 26.8 38.6
Capital expenditures(6)............ 31.4 48.6 54.0 22.8 31.0 19.7 16.5 31.0
Ratio of earnings to fixed
charges(7)....................... 1.3x 1.9x NM 0.7x 2.2x 2.3x 1.9x 1.0x
Ratio of adjusted EBITDA to cash
interest expense................. 2.2x
Ratio of total debt to adjusted
EBITDA...........................
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 0.1 $ 8.0 $ 6.8 $ 18.1 $ 15.7 $ 32.2 $ 7.4
Working capital.................... 48.9 105.6 80.8 76.1 37.7 69.9 71.0
Total assets....................... 455.4 643.6 633.7 555.6 663.6 558.6 626.0
Total debt......................... 244.6 375.8 376.1 316.7 359.3 281.5 318.9
Preferred Stock.................... -- -- -- -- -- -- --
Stockholders' equity (deficit)..... 81.8 96.8 62.3 50.2 68.6 67.2 68.5
<CAPTION>
PRO FORMA
-------------------------
NINE TWELVE
MONTHS MONTHS
ENDED ENDED
OCTOBER 1, OCTOBER 1,
2000 2000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS:
Net Sales.......................... $603.8 $803.6
Cost of Sales...................... 515.0 687.9
------ ------
Gross income....................... 88.8 115.7
Selling, general and administrative
expenses......................... 32.5 44.4
Special charges(1)................. 3.4 3.4
------ ------
Operating income (loss)............ 52.9 67.9
Interest expense................... 39.2 51.9
Amortization of deferred financing
costs............................ 1.4 1.8
Other expenses..................... 1.9 2.6
------ ------
Income (loss) before income
taxes............................ 10.4 11.6
Provision (benefit) for income
taxes............................ 3.9 4.5
------ ------
Income (loss) from continuing
operations before discontinued
operations, extraordinary item
and preferred stock dividend..... 6.5 7.1
Net Income (loss) from discontinued
operations....................... -- --
Net loss on sale of discontinued
business(2)...................... -- --
Extraordinary item(3).............. -- --
------ ------
Net income (loss) before preferred
stock dividend................... $ 6.5 $ 7.1
Preferred stock dividend........... 9.1 11.9
------ ------
Net loss available for common
stockholders..................... $ (2.6) $ (4.8)
====== ======
OTHER FINANCIAL DATA:
EBITDA(4).......................... $ 79.9 $101.7
Adjusted EBITDA(5)................. 82.4 105.5
Depreciation and amortization...... 26.9 34.8
Capital expenditures(6)............ 16.5 27.8
Ratio of earnings to fixed
charges(7)....................... 0.9x 0.9x
Ratio of adjusted EBITDA to cash
interest expense................. 2.1x 2.0x
Ratio of total debt to adjusted
EBITDA........................... 4.7x
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 5.1
Working capital.................... 94.6
Total assets....................... 634.2
Total debt......................... 495.7
Preferred Stock.................... 106.7
Stockholders' equity (deficit)..... (178.9)
</TABLE>
----------------------------------
(1) The 1995 special charge relates to an overhead reduction program. See
note (3) to the audited consolidated financial statements for a description
of the 1997 and 1998 special charges and note (2) to the unaudited
consolidated financial statements for a description of the third quarter
2000 special charge.
(2) See note (3) to the consolidated financial statements for a description of
the sale of the company's metal services segment.
14
<PAGE>
(3) Represents premium paid and write-offs of deferred financing costs in
conjunction with the early extinguishment of debt.
(4) Earnings before interest, taxes, depreciation, amortization and special
charges. We consider EBITDA to be an important indicator of the performance
of our business, including our ability to provide cash flows to service debt
and fund capital expenditures. EBITDA, however, should not be considered an
alternative to operating or net income as an indicator of our performance,
or as an alternative to cash flows from operating activities as a measure of
liquidity, in each case determined in accordance with generally accepted
accounting principles. In addition, our definition of EBITDA may not be
comparable to similarly-titled measures reported by other companies.
(5) Adjusted EBITDA is EBITDA adjusted for our reduction in force program. Pro
forma adjusted EBITDA for the twelve months ended December 31, 1999 and
October 1, 2000 and the nine months ended October 1, 2000 of
$112.1 million, $105.5 million and $82.4 million, respectively, are derived
by adding $5.0 million, $3.8 million and $2.5 million, respectively,
consisting of the net reduction in salaries of employees terminated in
connection with our reduction in force program, to the pro forma EBITDA for
the twelve months ended December 31, 1999 and October 1, 2000 and the nine
months ended October 1, 2000 of $107.1 million, $101.7 million and
$79.9 million respectively.
(6) The pro forma data for the twelve months ended October 1, 2000 excludes
capital expenditures for May for the three-month period from October 3, 1999
to December 31, 1999.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
represents earnings from continuing operations plus fixed charges. Fixed
charges include interest expense on indebtedness, amortization of debt
discount and the portion of rent deemed representative of an interest
factor. Approximately $46.7 million and $13.2 million of additional pretax
earnings for the fiscal years ended December 31, 1997 and 1998,
respectively, would be required for our company to have achieved a ratio of
earnings to fixed charges of 1.0. As pretax earnings were reduced by
non-cash special charges of $41.7 million and $27.7 million for the
respective fiscal years, the ratios do not indicate an inability of the
company to make cash payments necessary to support its fixed charges.
Approximately $7.8 million and $4.2 million of additional pre-tax earnings
would be required in order for our company to have achieved a pro forma
ratio of earnings to fixed charges of 1.0 for the nine-month and
twelve-month periods ended October 1, 2000. As pro forma non-cash
depreciation and amortization amounted to $26.9 million and $34.8 million
for the nine-month and twelve-month periods ended October 1, 2000,
respectively, we do not expect that we will be unable to make the cash
payments necessary to support our fixed charges.
15
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE INVESTING IN THE EXCHANGE NOTES.
WE HAVE SUBSTANTIAL DEBT THAT COULD NEGATIVELY IMPACT OUR BUSINESS AND PREVENT
US FROM FULFILLING OUR OBLIGATIONS UNDER THE EXCHANGE NOTES.
As a result of the transactions and the original offering, we have
significant debt outstanding. As of October 1, 2000, taking into account the
transactions and the original offering, we would have had total consolidated
debt outstanding of $495.7 million and $104.6 million of unused commitment under
our revolving credit facility.
Our high level of debt could:
- make it difficult for us to satisfy our obligations, including making
interest payments under the exchange notes and our other debt obligations;
- limit our ability to obtain additional financing to operate our business;
- limit our financial flexibility in planning for and reacting to industry
changes;
- place us at a competitive disadvantage as compared to less leveraged
companies;
- increase our vulnerability to general adverse economic and industry
conditions, including changes in interest rates; and
- require us to dedicate a substantial portion of our cash flow to payments
on our debt, reducing the availability of our cash flow for other
purposes.
We may borrow additional funds to fund our capital expenditures and working
capital needs. We also may incur additional debt to finance future acquisitions.
The incurrence of additional debt could make it more likely that we will
experience some or all of the risks described above.
IF WE DO NOT GENERATE POSITIVE CASH FLOWS, WE MAY BE UNABLE TO SERVICE OUR DEBT.
Our ability to pay principal and interest on the exchange notes and on our
senior debt depends on our future operating performance. Future operating
performance is subject to market conditions and business factors that often are
beyond our control. Consequently, we cannot assure you that we will have
sufficient cash flows to pay the principal, premium, if any, and interest on our
debt.
If our cash flows and capital resources are insufficient to allow us to make
scheduled payments on our debt, we may have to reduce or delay capital
expenditures, sell assets, seek additional capital or restructure or refinance
our debt. We cannot assure you that the terms of our debt will allow these
alternative measures or that such measures would satisfy our scheduled debt
service obligations.
If we cannot make scheduled payments on our debt, we will be in default and,
as a result:
- our debt holders could declare all outstanding principal and interest to
be due and payable;
- our senior debt lenders could terminate their commitments and commence
foreclosure proceedings against our assets; and
- we could be forced into bankruptcy or liquidation.
THE TERMS OF OUR DEBT MAY SEVERELY LIMIT OUR ABILITY TO PLAN FOR OR RESPOND TO
CHANGES IN OUR BUSINESS.
Our senior secured credit facility and the indenture governing the exchange
notes restrict, among other things, our ability to take specific actions, even
if such actions may be in our best interest. These restrictions limit our
ability to:
- incur liens or make negative pledges on our assets;
16
<PAGE>
- merge, consolidate or sell our assets;
- issue additional debt;
- pay dividends or redeem capital stock and prepay other debt;
- make investments and acquisitions;
- enter into transactions with affiliates;
- make capital expenditures;
- materially change our business;
- amend our debt and other material agreements;
- issue and sell capital stock;
- allow distributions from our subsidiaries; or
- prepay specified indebtedness.
Our debt requires us to maintain specified financial ratios and meet
specific financial tests. Our failure to comply with these covenants could
result in an event of default that, if not cured or waived, could result in us
being required to repay these borrowings before their due date. If we were
unable to make this repayment or otherwise refinance these borrowings, our
lenders could foreclose on our assets. If we were unable to refinance these
borrowings on favorable terms, our business could be adversely impacted.
In addition, our senior debt will bear interest at a floating rate that will
not be capped at a maximum interest rate. If interest rates rise, our senior
debt interest payments also will increase, which could adversely affect our
business. Although we may enter into agreements to hedge our interest rate risk,
we cannot assure you that these agreements will protect us fully against our
interest rate risk.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS SUBORDINATED TO ALL OF
OUR EXISTING AND FUTURE SENIOR DEBT AND ALL OF THE GUARANTORS' EXISTING AND
FUTURE SENIOR DEBT.
The exchange notes are our general, unsecured obligations and are
subordinate to all of our existing and future senior debt. The exchange notes
will rank senior or equal to all of our existing and future subordinated debt.
The Guarantors will guarantee our obligations under the exchange notes on a
senior subordinated basis. The Guarantees will be the Guarantors' general,
unsecured obligations, subordinate to all of the Guarantors' senior debt.
Our foreign restricted subsidiaries are not guarantors of the exchange
notes. We may designate other subsidiaries to be non-guarantors in the future,
in accordance with the indenture. In the event of a bankruptcy, liquidation or
reorganization of any non-guarantor subsidiaries in the future, holders of their
debt will generally be entitled to payment of their claims from the assets of
those subsidiaries before any assets are made available for distribution to us.
As of October 1, 2000, our non-guarantor subsidiaries had $98.1 million of
liabilities, excluding liabilities owed to us.
In addition, all payments on the exchange notes will be blocked in the event
of a payment default on our senior debt and may be blocked for up to 179
consecutive days in any given year in the event of a non-payment default on our
senior debt. In the event of a default on the exchange notes and any resulting
acceleration of the exchange notes, the holders of senior debt will be entitled
to payment in full before any payment or distribution may be made with respect
to the exchange notes.
As of October 1, 2000, on a pro forma basis after giving effect to the
transactions and the original offering, we had approximately $319.8 million of
debt that ranks senior to the exchange notes and a stockholders' deficit of
$178.9 million. If we are declared insolvent, liquidated or reorganized, our
assets will be available to pay our obligations on the exchange notes only after
all senior debt has been paid in full. Accordingly, there may be insufficient
assets remaining after payment of prior senior claims
17
<PAGE>
to pay amounts due on the exchange notes. In addition, we generally may not make
any payments with respect to the exchange notes if a default exists with respect
to our senior debt.
WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL
OFFER REQUIRED BY OUR INDENTURE.
The indenture provides that, upon a change in control of our company or the
parent guarantor, we will be required to offer to repurchase all of the
outstanding exchange notes at 101% of the principal amount thereof, plus accrued
interest. This provision will not necessarily protect exchange note holders in a
highly leveraged exchange transaction or certain other transactions. In
addition, our financial resources may limit our ability to repurchase the notes
or repay our outstanding debt under the senior secured credit facility. For
example, our senior secured credit facility prohibits our repurchase of the
exchange notes if we have outstanding debt under the facility. Furthermore, any
future debt that we incur would also likely limit our ability to repurchase the
exchange notes.
We currently anticipate that we will need additional financing to pay the
principal of the exchange notes or to repurchase the exchange notes upon a
change of control as required under the indenture. We may obtain such financing
by refinancing our debt, selling our equity securities or selling the equity
securities or assets of our subsidiaries. We cannot assure you that upon a
change of control we will have sufficient funds, or will be permitted by our
outstanding debt, to purchase the exchange notes tendered by holders. See
"Description of the Exchange Notes--Change of Control."
THE EXCHANGE NOTES AND THE GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF
FRAUDULENT CONVEYANCE LAWS.
Federal bankruptcy law and comparable provisions of state fraudulent
transfer laws allow courts to void the exchange notes or the Guarantees, or to
subordinate the exchange notes or the Guarantees to the debt owed to our or a
Guarantor's existing or future creditors. A court must find, however, that, at
the time we incurred the indebtedness evidenced by the exchange notes, either:
- we incurred the debt, or the Guarantors incurred the Guarantees, with the
intent of hindering, delaying or defrauding current or future creditors;
or
- we received less than reasonably equivalent value or fair consideration
for the incurrence of the indebtedness or the Guarantors did not receive
reasonably equivalent value or fair consideration for their Guarantees,
and we or the Guarantors, as the case may be, were found to be insolvent
under various definitions.
If any of our future subsidiaries guarantee the exchange notes, those
guarantees will be subject to the same risks as the Guarantees.
If the Guarantees are avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against the
Guarantors and will be a creditor only of the company and any Guarantor whose
Guarantee was not set aside or found to be unenforceable.
BERKSHIRE PARTNERS OWNS A CONTROLLING INTEREST IN OUR VOTING SECURITIES AND ITS
INTERESTS COULD BE INCONSISTENT WITH THE INTERESTS OF THE EXCHANGE NOTE HOLDERS.
Berkshire Partners and its affiliates own approximately 77.3% of our total
common equity. Subject to certain limitations contained in our stockholders
agreement, Berkshire Partners controls us. We cannot assure you that Berkshire
Partners' interest will be consistent with the exchange note holders' interests.
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE
NOTES. FURTHER, RESALES OF THE EXCHANGE NOTES MUST COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
The exchange notes are new securities for which there currently is no
market. Although Salmon Smith Barney and Banc of America Securities, LLC, the
initial purchasers of the outstanding notes,
18
<PAGE>
have informed us that they intend to make a market in the exchange notes, they
are not obligated to do so and they may discontinue any such market making at
any time without notice. Accordingly, we cannot assure you as to the development
or liquidity of any market for the exchange notes. We expect the exchange notes
to be eligible for trading by qualified buyers in the PORTAL market. We do not
intend to apply for listing of the exchange notes on any securities exchange or
for quotation through The Nasdaq National Market.
In addition, changes in the overall market for high yield securities and
changes in our financial performance or prospects or in the prospects for
companies in our industry generally may adversely affect the liquidity of the
trading market in the exchange notes and the market price quoted for the
exchange notes. See "Description of Exchange Notes" and "The Exchange Offer."
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
YOUR FAILURE TO EXCHANGE YOUR NOTES IN THE EXCHANGE OFFER WILL RESTRICT YOUR
ABILITY TO RESELL THEM.
Untendered outstanding notes that you do not exchange for the registered
exchange notes pursuant to the exchange offer will remain restricted securities,
subject to the following restrictions on transfer:
- you may resell only if registered pursuant to the Securities Act or if an
exemption from registration is available;
- the notes will bear a legend restricting transfer in the absence of
registration or an exemption; and
- a holder of the notes who wants to sell or otherwise dispose of all or any
part of its notes under an exemption from registration under the
Securities Act, if requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to us, that such exemption is
available.
Except under limited circumstances, we have no obligation to register any notes
not tendered in the exchange offer.
RISKS RELATED TO OUR BUSINESS
WE FACE COMPETITIVE RISKS FROM MANY SOURCES THAT MAY NEGATIVELY IMPACT OUR
BUSINESS.
The can and container industry is highly competitive with some of our
competitors having greater financial resources than we do. Quality, service and
price are the principal methods of competition in our industry. Because our
customers have the ability to buy similar products from our competitors, we are
limited in our ability to increase prices. Our capital investments have improved
our operating efficiencies, and consequently, improved profitability, but we
cannot assure you that we will continue to improve profit margins in this
manner. In addition, our business could be adversely affected if we are unable
to meet our customers' quality and service demands.
We also face competitive risks from substitute products, such as aluminum,
glass and plastic containers. Our business also is affected by changes in
consumer demand for our customers' products. A decrease in the costs of
substitute products or a decline in consumer demand for our customers' products,
particularly their aerosol-based products, could reduce our customers' orders
and adversely affect our business.
19
<PAGE>
THE LOSS OF A KEY CUSTOMER COULD HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR
BUSINESS.
We make a significant percentage of our sales to a limited number of
customers. On a pro forma basis, our top ten customers accounted for
approximately 32.9% of our sales in 1999, with our largest customer accounting
for approximately 7.2%. The loss of a key customer could adversely affect our
business because we may be unable to lower our operating costs quickly enough to
offset the resulting sales decrease.
In addition, several of our manufacturing plants are dependent on high
volume orders from customers. The loss of any of these customers or a decrease
in demand for their products, which are packaged in our containers, could
adversely affect our business and force us to close manufacturing plants.
Product quality is a key element in customer retention in the packaging
industry. In August 2000, a manufacturing facility owned by our May Verpackungen
subsidiary supplied a small number of defective pet food cans to a major
customer. We have determined the cause of the production defect and have
implemented additional policies and training at our May Verpackungen subsidiary
to prevent a recurrence of this problem in the future. While our overall
relationship with this customer is positive, the customer stopped orders from
the production line that produced the defective cans through the end of 2000 and
reduced purchases of other products from the facility. The customer recently
requested that we resume shipments of cans from this production line. We do not
expect a negative impact from this production defect on 2001 results of
operations. However, we estimate that our results of operations for 2000 have
been negatively impacted by approximately $3.0 million with respect to EBITDA,
and we cannot assure you that we will return to previous levels of shipments to
this customer.
INCREASES IN TIN-PLATED STEEL PRICES COULD NEGATIVELY IMPACT OUR BUSINESS.
Tin-plated steel is the most significant raw material used to make our
products. In 1999, our domestic and European operations (including those of May,
our recently acquired German subsidiary) purchased approximately 500,000 tons of
tin-plated steel. Negotiations with our domestic and European tin-plated steel
suppliers generally occur once per year. We cannot assure you that we will be
able to negotiate favorable tin-plated steel prices in the future.
Some customer contracts allow us to pass tin-plated steel price increases
through to our customers. However, these contracts generally limit pass-throughs
and also may require us to match other competitive bids. If we cannot pass
through all future tin-plated steel price increases to our customers or match
other packaging suppliers' bids, our business may be adversely affected.
OUR FAILURE TO IMPLEMENT OUR COST SAVINGS STRATEGY COULD NEGATIVELY IMPACT OUR
BUSINESS.
A significant element of our business strategy is the improvement of our
operating efficiencies and a reduction of our operating costs. In order to
accomplish these goals, we will consider opportunities to consolidate our
manufacturing plants, implement programs to lower our operating costs, implement
new manufacturing technology and continue our focus on overhead reductions. Our
failure to successfully implement this strategy could negatively impact our
business.
OUR FAILURE TO INTEGRATE THE BUSINESS WE RECENTLY ACQUIRED OR ANY BUSINESSES WE
MAY ACQUIRE IN THE FUTURE COULD NEGATIVELY IMPACT OUR BUSINESS.
We recently acquired May, a German manufacturer of pet food and specialty
food packaging and aerosol cans. We are currently in the process of integrating
May's operations into our existing business. This integration may be disruptive
and may divert management time and attention from existing operations and
activities. As an international acquisition, the process of integrating May is
more complex. As a result, we may fail to realize the expected benefits of the
acquisition. Our failure to integrate the May acquisition effectively could
adversely affect our business.
20
<PAGE>
As part of our strategy, we expect to continue to make acquisitions as
opportunities arise. We cannot assure you that we will integrate successfully
any businesses we acquire in the future. Difficulties encountered in any
integration process for newly acquired companies could adversely affect our
business.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS.
We operate facilities and sell products in several countries outside the
United States. We have significant foreign operations, including plants and
sales offices in Denmark, France, Germany, Italy, Spain and the United Kingdom.
In addition, we currently own 36.5% of an aerosol can manufacturer located in
Argentina and intend to acquire the remaining 63.5% of this manufacturer. Our
international operations subject us to risks associated with selling and
operating in foreign countries. These risks include:
- fluctuations in currency exchange rates;
- political instability;
- limitations on conversion of foreign currencies into United States
dollars;
- restrictions on dividend payments and other payments by our foreign
subsidiaries;
- withholding and other taxes on dividend payments and other payments by our
foreign subsidiaries;
- hyperinflation in some foreign countries; and
- investment regulation and other restrictions by foreign governments.
We may enter into transactions to hedge the risk of exchange rate
fluctuations or take other steps to protect against these risks. However, we
cannot assure you that we can protect ourselves against these risks or that
these risks will not adversely affect our business.
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REMEDIATION AND COMPLIANCE
COSTS.
Our operations are subject to federal, state, local and foreign laws and
regulations relating to pollution, the protection of the environment, the
management and disposal of hazardous substances and wastes and the cleanup of
contaminated sites. In particular, our lithography operations' air emissions are
strictly regulated. We spend significant funds each year to upgrade emissions
control equipment to comply with changes in environmental regulations and
increase the efficiencies of our manufacturing operations. Changes in applicable
environmental regulations could increase the capital expenditures necessary to
bring manufacturing facilities into compliance with changing environmental laws.
We also could incur substantial costs, including cleanup costs, fines and
civil or criminal sanctions, as a result of violations of, or liabilities under,
environmental laws or non-compliance with environmental permits required for our
production facilities. Occasionally, contaminants from current or historical
operations have been detected at some of our present and former sites. Although
we are not currently aware of any material claims or obligations with respect to
these sites, the detection of additional contaminants or the imposition of
cleanup obligations at existing or unknown sites of contamination could result
in significant liability.
We cannot predict the amount or timing of costs imposed under environmental
laws. Liability under certain environmental laws relating to contaminated sites
can be imposed retroactively and on a joint and several basis (i.e., one liable
party could be held liable for all costs at a site). We have been named as a
potentially responsible party for costs incurred in the clean up of a regional
groundwater plume partially extending underneath property located in San
Leandro, California, formerly a site of one of our can assembly plants. We have
agreed to indemnify the owner of this property against this matter. We do not
believe the past operations of our can assembly plant caused or contributed to
this
21
<PAGE>
groundwater plume. However, any liability in connection with this or other
environmental matters could adversely affect our business.
IF WE FAIL TO RETAIN KEY MANAGEMENT AND PERSONNEL, WE MAY BE UNABLE TO IMPLEMENT
OUR BUSINESS PLAN.
We believe that our future success depends, in large part, on our
experienced senior management team. Losing the services of one or more members
of our senior management team could adversely affect our business.
A SIGNIFICANT PORTION OF OUR WORKFORCE IS UNIONIZED AND LABOR DISRUPTIONS COULD
ADVERSELY AFFECT OUR BUSINESS.
As of October 1, 2000, we had approximately 4,200 employees. Nearly 1,750 of
our United States employees are subject to collective bargaining agreements that
expire on various dates between June 2001 and March 2004. In keeping with common
practice, virtually all manufacturing employees at our European plants are
unionized. Although we consider our current relations with our employees to be
good, if we do not maintain these good relations, or if major work disruptions
were to occur, our business could be adversely affected.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT MAY NOT BE ACCURATE
INDICATORS OF OUR FUTURE PERFORMANCE.
Many statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and elsewhere in this prospectus are
"forward-looking statements." You can identify these statements by the fact that
they do not relate strictly to historical or current facts. These statements use
words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions and give our current expectations or
forecasts of future events. Such statements involve known and unknown risks and
uncertainties which may cause the company's actual results, performance or
achievements to be materially different than future results, performance or
achievements expressed or implied in this release. By way of example and not
limitation, and in no particular order, known risks and uncertainties include
the timing of, and net proceeds realized from, divestitures, the timing and cost
of plant closures, the level of cost reduction achieved through restructuring,
the success of new technology, the timing of, and synergies achieved through,
integration of acquisitions, changes in raw material costs and currency
fluctuations. In light of these and other risks and uncertainties, the inclusion
of a forward-looking statement in this prospectus should not be regarded as a
representation by the Company that any future results, performance or
achievements will be attained.
22
<PAGE>
THE TRANSACTIONS
THE RECAPITALIZATION
On June 1, 2000, Pac Packaging Acquisition Corporation and U.S. Can entered
into an Agreement and Plan of Merger (as amended, the "recapitalization
agreement"), which provided for the merger of Pac Acquisition and U.S. Can in a
recapitalization transaction, with U.S. Can being the surviving corporation.
On October 4, 2000, the recapitalization was consummated. In connection with
the recapitalization, the following transactions occurred:
- U.S. Can purchased approximately 13.5 million shares of its common stock
for cash at $20.00 per share;
- U.S. Can purchased options to purchase approximately 1.6 million shares of
its common stock for cash at $20.00 per underlying share, less the
applicable option exercise price;
- Berkshire Partners, its co-investors and certain of the rollover
stockholders purchased preferred stock of U.S. Can for $106.7 million;
- Berkshire Partners, its co-investors, certain of the rollover stockholders
and management purchased common stock of U.S. Can for $53.3 million;
- we borrowed $260.0 million in term loans under the new senior secured
credit facility;
- we borrowed $20.5 million under a revolving credit facility that is part
of our new senior secured credit facility;
- we issued $175.0 million aggregate principal amount of the company's
12 3/8% senior subordinated notes due 2010 in the original offering; and
- U.S. Can repurchased $235.7 million aggregate principal amount of its
outstanding 10 1/8% notes due 2006.
SOURCES OF FUNDS
The recapitalization was funded with a combination of debt and equity
comprised of the following:
THE EQUITY FINANCING. As part of the recapitalization, Berkshire Partners
and its co-investors, along with the rollover stockholders and members of
management, contributed approximately $160.0 million in cash and rollover stock
to Pac Acquisition in exchange for securities consisting of approximately
$53.3 million in U.S. Can common stock and approximately $106.7 million in U.S.
Can preferred stock. See "Certain Relationships and Related Party Transactions."
As a result of these transactions, Berkshire Partners and its affiliates own
approximately 77.3% of U.S. Can's common stock.
THE NEW SENIOR SECURED CREDIT FACILITY. We entered into a $400.0 million
senior secured credit facility with a group of lenders. The senior secured
credit facility consists of term loan facilities in an aggregate principal
amount of $260.0 million and a $140.0 million revolving credit facility
available for loans and letters of credit. All of the term debt and
approximately $20.5 million under the revolving credit facility were used to
finance a portion of the recapitalization. See "Other Indebtedness--Senior
Secured Credit Facility."
THE NOTES. We issued $175.0 million aggregate principal amount of the
company's 12 3/8% senior subordinated notes due 2010.
23
<PAGE>
USES OF FUNDS
We used the net proceeds from these debt and equity financings to:
- fund the payments required to effect the recapitalization;
- tender for all of our subordinated debt (including paying accrued interest
and the bond tender premium) and refinance a majority of our existing
senior debt; and
- pay related fees and expenses.
As part of the debt refinancing, U.S. Can repurchased $235.7 million of its
outstanding 10 1/8% notes due 2006 and paid the accrued interest and a bond
tender premium associated with those notes.
The original offering, the initial borrowings under the senior secured
credit facility, the investment by Berkshire Partners and its co-investors in
U.S. Can's preferred and common stock, the repurchase of U.S. Can's outstanding
10 1/8% notes due 2006 and the recapitalization, including the purchase of U.S.
Can common stock, investment by the rollover stockholders and investment by
management contemplated by the recapitalization agreement, are collectively
referred to in this prospectus as the "transactions."
The following table sets forth the sources and uses of funds in connection
with the transactions as of October 4, 2000:
<TABLE>
<CAPTION>
AMOUNT
-----------
(DOLLARS IN
MILLIONS)
<S> <C>
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
</TABLE>
------------------------
(1) The total commitment under the revolving credit facility is $140.0 million.
(2) Consists of the purchase of $91.3 million of preferred stock by Berkshire
Partners and its co-investors and $15.4 million by certain of the rollover
stockholders.
(3) Consists of the purchase (by cash and/or rollover stock) of $41.5 million of
common stock by Berkshire Partners and its co-investors, $7.0 million by
certain of the rollover stockholders and $4.8 million by management.
24
<PAGE>
(4) Includes mortgages of $23.6 million, outstanding bank borrowings of
$4.7 million, industrial revenue bonds of $4.0, capitalized lease
obligations of $7.0 million and $0.9 million of untendered 10 1/8% notes due
2006.
(5) Includes $24.8 million of rollover stock.
(6) Includes amounts outstanding under the credit facility in place prior to the
original offering and the principal, accrued interest and a bond tender
premium in connection with the repurchase of U.S. Can's 10 1/8% notes due
2006.
USE OF PROCEEDS
There will be no proceeds from the issuance of the exchange notes.
25
<PAGE>
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."
<TABLE>
<CAPTION>
AS OF OCTOBER 1, 2000
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
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
====== =======
</TABLE>
------------------------
(1) Upon completion of the transactions, we had letters of credit of
$14.9 million outstanding and $104.6 million of unused commitment under the
revolving credit facility.
(2) Pro forma as adjusted other senior debt includes mortgages of
$23.6 million, outstanding bank borrowings of $4.7 million, industrial
revenue bonds of $4.0 million and capitalized lease obligations of
$7.0 million.
(3) As part of the transactions, U.S. Can repurchased $235.7 million aggregate
principal amount of its outstanding 10 1/8% notes due 2006.
(4) See notes (h) and (i) to the Pro Forma Consolidated Balance Sheet for a
description of the transaction-related adjustments that cause the increase
in the pro forma as adjusted accumulated deficit.
26
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial statements have
been prepared by applying certain pro forma adjustments resulting from the
transactions, the acquisition of our German subsidiary, May, on December 30,
1999 and the sale of our Wheeling and Warren operations on March 10, 2000 to our
historical consolidated financial statements. The transactions have been
reflected as a recapitalization. The pro forma consolidated balance sheet as of
October 1, 2000 has been derived from our historical balance sheet (which
includes the impact of the acquisition of May and the sale of the Wheeling and
Warren operations), adjusted to give effect to the transactions as if they
occurred on October 1, 2000. The pro forma consolidated statements of operations
for the year ended December 31, 1999 and for the nine-month and twelve-month
periods ended October 1, 2000 give effect to the acquisition of May, the sale of
the Wheeling and Warren operations and the recapitalization as if each occurred
on January 1, 1999. The pro forma consolidated statements of operations exclude
non-recurring items directly attributable to the transactions.
The pro forma consolidated financial statements are presented for
informational purposes only and have been derived from, and should be read in
conjunction with, our historical consolidated financial statements, including
the notes thereto. The pro forma adjustments, as described in the notes to the
unaudited pro forma condensed consolidated financial statements, are based on
currently available information and certain adjustments that we believe are
reasonable. They are not necessarily indicative of the financial position or
results of operations of U.S. Can or the company that would have occurred had
the transactions, the May acquisition and the sale of the Wheeling metal
closures and Warren lithography businesses taken place on the dates indicated,
nor are they necessarily indicative of future financial position or results of
operations.
We have not provided separate pro forma financial statements or data for the
company in this prospectus. U.S. Can's only assets are its investment in and
advances to the company. We believe that the financial statements of U.S. Can
and the consolidated financial statements of the company do not vary
significantly. We believe that the material differences are, and will be,
related to stockholders' equity and intercompany indebtedness.
The unaudited pro forma financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes thereto,
included elsewhere in this prospectus.
27
<PAGE>
U.S. CAN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
PRO FORMA
MAY PRO FORMA EFFECT OF
U.S. CAN HISTORICAL(A) ADJUSTMENTS RECAPITALIZATION
-------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Sales........................................ $714.1 $146.7 $(17.7)(b) $843.1
Cost of Sales................................ 611.6 130.5 (18.6)(c) 723.5
------ ------ ------ ------
Gross Income............................... 102.5 16.2 0.9 119.6
Selling, General and Administrative
Expenses................................... 33.8 11.3 (0.6)(d) 44.5
------ ------ ------ ------
Operating Income........................... 68.7 4.9 1.5 75.1
Interest Expense............................. 28.7 0.9 20.8 (e) 50.4
Amortization of Deferred Financing Costs..... 1.2 -- 2.6 (f) 3.8
Other Expenses............................... 1.7 0.3 0.8 (g) 2.8
------ ------ ------ ------
Income before Income Taxes................... 37.1 3.7 (22.7) 18.1
Income Tax Expense........................... 14.6 0.6 (8.1)(h) 7.1
------ ------ ------ ------
Income (Loss) from Continuing Operations
Before Extraordinary Items................. 22.5 3.1 (14.6) 11.0
Extraordinary Item........................... (1.3) -- -- (1.3)
------ ------ ------ ------
Net Income before Preferred Dividends........ 21.2 3.1 (14.6) 9.7
Preferred Stock Dividends.................... -- -- 11.1 (i) 11.1
------ ------ ------ ------
Net Income (Loss) Available for Common
Stockholders............................... $ 21.2 $ 3.1 $(25.7) $ (1.4)
====== ====== ====== ======
Other Financial Information:
---------------------------------------------
EBITDA(j).................................... $107.1
Adjusted EBITDA(k)........................... 112.1
Depreciation and Amortization Expense........ 38.6
Capital Expenditures(l)...................... 31.0
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations
28
<PAGE>
U.S. CAN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 1, 2000
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
PRO FORMA
U.S. CAN PRO FORMA EFFECT OF
HISTORICAL ADJUSTMENTS RECAPITALIZATION
---------- ----------- ----------------
<S> <C> <C> <C>
Sales..................................................... $607.0 $ (3.2)(b) $603.8
Cost of Sales............................................. 517.6 (2.6)(c) 515.0
------ ------ ------
Gross Income............................................ 89.4 (0.6) 88.8
Selling, General and Administrative Expenses.............. 32.4 0.1 (d) 32.5
Special Charge............................................ 3.4 -- 3.4
------ ------ ------
Operating Income........................................ 53.6 (0.7) 52.9
Interest Expense.......................................... 24.6 14.6 (e) 39.2
Amortization of Deferred Financing Costs.................. 1.2 0.2 (f) 1.4
Other Expenses............................................ 1.9 -- 1.9
------ ------ ------
Income before Income Taxes................................ 25.9 (15.5) 10.4
Income Tax Expense........................................ 9.8 (5.9)(h) 3.9
------ ------ ------
Net Income before Preferred Dividends..................... 16.1 (9.6) 6.5
Preferred Stock Dividends................................. -- 9.1 (i) 9.1
------ ------ ------
Net Income (Loss) Available for Common Stockholders....... $ 16.1 $(18.7) $ (2.6)
====== ====== ======
Other Financial Information:
----------------------------------------------------------
EBITDA(j)................................................. $ 79.9
Adjusted EBITDA(k)........................................ 82.4
Depreciation and Amortization Expense..................... 26.9
Capital Expenditures...................................... 16.5
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations
29
<PAGE>
U.S. CAN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
LAST TWELVE MONTHS ENDED OCTOBER 1, 2000
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
MAY AS
U.S. CAN HISTORICAL PRO FORMA ADJUSTED
HISTORICAL 10/99-12/99(A) ADJUSTMENTS 10/99-9/00
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Sales........................................... $771.3 $39.8 $ (7.5)(b) $803.6
Cost of Sales................................... 659.1 35.7 (6.9)(c) 687.9
------ ----- ------ ------
Gross Income.................................. 112.2 4.1 (0.6) 115.7
Selling, General and Administrative Expenses.... 41.2 3.5 (0.3)(d) 44.4
Special Charge.................................. 3.4 -- -- 3.4
------ ----- ------ ------
Operating Income.............................. 67.6 0.6 (0.3) 67.9
Interest Expense................................ 31.5 0.4 20.0 (e) 51.9
Amortization of Deferred Financing Costs........ 1.4 -- 0.4 (f) 1.8
Other Expenses.................................. 2.3 0.1 0.2 (g) 2.6
------ ----- ------ ------
Income before Income Taxes...................... 32.4 0.1 (20.9) 11.6
Income Tax Expense.............................. 12.4 0.1 (8.0)(h) 4.5
------ ----- ------ ------
Net Income Before Preferred Dividends........... 20.0 -- (12.9) 7.1
Preferred Stock Dividends....................... -- -- 11.9 (i) 11.9
------ ----- ------ ------
Net Income (Loss) Available for Common
Shareholders.................................. $ 20.0 $ -- $(24.8) $ (4.8)
====== ===== ====== ======
Other Financial Information:
------------------------------------------------
EBITDA(j)....................................... $101.7
Adjusted EBITDA(k).............................. 105.5
Depreciation and Amortization Expense........... 34.8
Capital Expenditures(l)......................... 27.8
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations
30
<PAGE>
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):
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED ENDED
1999 OCTOBER 1, 2000 OCTOBER 1, 2000
------------- --------------- ---------------
<S> <C> <C> <C>
Cost of sales related to Wheeling and Warren......... $(14.2) $(2.6) $(6.0)
Pro forma impact of May contractual arrangements
entered into as a result of the acquisition........ (2.0) -- (0.5)
Depreciation expense benefit from the lengthening of
lives, net of increased depreciation expense due to
the write up of property and equipment acquired in
the May acquisition to fair value.................. (2.4) -- (0.4)
------ ----- -----
$(18.6) $(2.6) $(6.9)
====== ===== =====
</TABLE>
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):
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED ENDED
DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000
----------- ------------- ---------------- ----------------
<S> <C> <C> <C>
May historical expenses related to sale of the
Company............................................ $(0.5) $ -- $(0.5)
Amortization of unearned restricted stock, which
became 100% vested as a result of the
transaction........................................ (0.1) (0.3) (0.2)
New management fee................................... 0.8 0.6 0.8
Selling, general and administrative expenses of
Wheeling and Warren................................ (0.8) (0.2) (0.4)
----- ----- -----
Total pro forma adjustment........................... $(0.6) $ 0.1 $(0.3)
===== ===== =====
</TABLE>
31
<PAGE>
U.S. CAN CORPORATION
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
(e) The pro forma adjustment relating to interest expense is as follows (in
millions):
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED ENDED
DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000
----------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Interest on new term loans........................... $ 22.4 $ 18.4 $ 24.0
Interest on outstanding senior subordinated notes.... 21.7 16.2 21.7
Interest on new revolving loan agreement............. 2.4 2.0 2.6
Interest on borrowings under the credit agreement in
place prior to the original offering and U.S. Can's
10 1/8% notes due 2006............................. (25.7) (22.0) (28.3)
------ ------ ------
Pro forma adjustment................................. $ 20.8 $ 14.6 $ 20.0
====== ====== ======
</TABLE>
The interest rates to be charged under the new term loan agreement and the
new revolving loan agreement are based on LIBOR plus a margin, or on the
applicable base rate plus a margin. The assumed interest rates applicable to
these agreements were 8.66%, 9.70% and 9.44% for 1999, the first nine months
of 2000 and the last twelve months ended October 1, 2000, respectively. A
1/8% increase in the LIBOR rate would cause an increase in interest expense
of $323,000, $236,000 and $316,000 for 1999, the first nine months of 2000
and the last twelve months ended October 1, 2000, respectively. The assumed
interest rate for the outstanding notes was 12 3/8% for both periods.
Interest expense for the new revolving loan agreement includes commitment
fees of 0.5% per annum of the unused amount.
(f) The pro forma adjustment relating to deferred financing expense is as
follows (in millions):
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED ENDED
DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000
----------- ------------- --------------- ---------------
<S> <C> <C> <C>
Amortization of deferred financing costs in
connection with new senior and senior subordinated
debt facilities.................................... $ 3.4 $ 1.1 $ 1.5
Historical deferred financing expense related to the
existing credit agreement and the 10 1/8% notes due
2006............................................... (0.8) (0.9) (1.1)
----- ----- -----
Pro forma adjustment................................. $ 2.6 $ 0.2 $ 0.4
===== ===== =====
</TABLE>
(g) Amortization of goodwill incurred in connection with the acquisition of May.
(h) Represents income taxes (at our U.S. effective tax rate of 39.44% for the
year ended December 31, 1999 and 38% for the first nine months of 2000 and
the last twelve months ended October 1, 2000) related to the pro forma
adjustments. The 1999 and last twelve months ended October 1, 2000
adjustments include an increase in income tax expense of $700,000 and
$189,000, respectively, which will be incurred by May due to the change in
its tax structure as a result of the acquisition.
(i) Represents the cumulative dividend payable on the preferred stock issued in
connection with the recapitalization.
(j) Earnings before interest, taxes, depreciation, amortization and special
charges. We consider EBITDA to be an important indicator of the performance
of our business including our ability to
32
<PAGE>
U.S. CAN CORPORATION
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
provide cash flows to service debt and fund capital expenditures. EBITDA,
however, should not be considered an alternative to operating or net income
as an indicator of our performance, or as an alternative to cash flows from
operating activities as a measure of liquidity, in each case determined in
accordance with generally accepted accounting principles. In addition, our
definition of EBITDA may not be comparable to similarly titled measures
reported by other companies.
(k) Pro forma adjusted EBITDA is EBITDA adjusted for our reduction in force
program we adopted in July 2000. The calculation of adjusted EBITDA is shown
below (in millions):
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
DECEMBER 31, ENDED ENDED
DESCRIPTION 1999 OCTOBER 1, 2000 OCTOBER 1, 2000
----------- ------------- --------------- ---------------
<S> <C> <C> <C>
EBITDA............................................... $107.1 $79.9 $101.7
Salaries of employees terminated in connection with
reduction in force program......................... 5.0 2.5 3.8
------ ----- ------
Adjusted EBITDA...................................... $112.1 $82.4 $105.5
====== ===== ======
</TABLE>
(l) The pro forma capital expenditures for the year ended December 31, 1999
exclude capital expenditures for May. The pro forma capital expenditures for
the twelve months ended October 1, 2000 exclude capital expenditures for May
for the three-month period from October 3, 1999 to December 31, 1999.
(m) See note (i) to the pro forma consolidated balance sheet for a description
of transactions that have been excluded from the pro forma statements of
operations. Pro forma adjustments were not made relating to these items
because these costs are one-time, non-recurring items that are directly
attributable to the recapitalization.
33
<PAGE>
U.S. CAN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 2000
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA U.S. CAN
U.S. CAN ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
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
====== ======= =======
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet
34
<PAGE>
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):
<TABLE>
<CAPTION>
CURRENT MATURITIES OF SENIOR SUBORDINATED
DESCRIPTION LONG-TERM DEBT DEBT DEBT
----------- --------------------- -------- ------------
<S> <C> <C> <C>
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)
===== ====== =======
</TABLE>
(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):
<TABLE>
<CAPTION>
TREASURY
COMMON PAID-IN- RESTRICTED COMMON ACCUMULATED
DESCRIPTION STOCK CAPITAL STOCK STOCK DEFICIT
----------- -------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Vest unearned restricted
stock...................... $ -- $ -- $0.3 $ -- $ (0.2)
Issue common stock........... 0.5 52.8 -- -- --
Cancel treasury stock........ -- (1.9) -- 1.9 --
Purchase common stock of
current U.S. Can
stockholders............... (0.1) (112.6) -- -- (158.6)
----- ------- ---- ---- -------
Pro forma adjustment......... $ 0.4 $ (61.7) $0.3 $1.9 $(158.8)
===== ======= ==== ==== =======
</TABLE>
35
<PAGE>
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):
<TABLE>
<CAPTION>
INCOME
PRETAX TAX ACCUMULATED
DESCRIPTION EXPENSE BENEFIT DEFICIT
----------- -------- -------- -----------
<S> <C> <C> <C>
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
===== ====== =====
</TABLE>
36
<PAGE>
SELECTED FINANCIAL DATA
INTRODUCTION
The following consolidated selected financial data as of and for each of the
fiscal years in the five years ended December 31, 1999, were derived from our
audited financial statements. The following consolidated selected financial data
as of and for each of the nine-month periods ended October 1, 2000 and
October 3, 1999 were derived from our unaudited financial statements. We believe
that the selected financial data as of and for the nine months ended October 1,
2000 and October 3, 1999, include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the information included
therein. You should not regard the results of operations for the nine months
ended October 1, 2000 as indicative of the results that may be expected for the
full year.
We have not provided separate financial statements or data for the company
in this prospectus. U.S. Can's only assets are its investment in and advances to
the company. We believe that the financial statements of U.S. Can and the
consolidated financial statements of the company do not vary significantly. We
believe that the material differences are, and will be, related to stockholders'
equity and intercompany indebtedness.
You should read all of this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements for the year ended December 31, 1999 and for the nine
months ended October 1, 2000, including the notes thereto, contained elsewhere
in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------------------------------- -------------------------
OCTOBER 3, OCTOBER 1,
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
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
====== ====== ====== ====== ====== ====== ======
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------------------------------- -------------------------
OCTOBER 3, OCTOBER 1,
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
--------------------------
(1) The 1995 special charge relates to an overhead reduction program. See
note (3) to the audited consolidated financial statements for a description
of the 1997 and 1998 special charges and note (2) to the unaudited
consolidated financial statements for a description of the third quarter
2000 special charge.
(2) See note (3) to the consolidated financial statements for a description of
the sale of the company's metal services segment
(3) Represents premium paid and write-offs of deferred financing costs in
conjunction with the early extinguishment of debt
(4) Earnings before interest, taxes, depreciation, amortization and special
charges. We consider EBITDA to be an important indicator of the performance
of our business including our ability to provide cash flows to service debt
and fund capital expenditures. EBITDA, however, should not be considered an
alternative to operating or net income as an indicator of our performance,
or as an alternative to cash flows from operating activities as a measure of
liquidity, in each case determined in accordance with generally accepted
accounting principles. In addition, our definition of EBITDA may not be
comparable to similarly-titled measures reported by other companies.
(5) See note (7) to the Summary Historical and Pro Forma Financial Information
for a description of this ratio. Approximately $46.7 million and
$13.2 million of additional pretax earnings for the fiscal years ended
December 31, 1997 and 1998, respectively, would be required for our company
to have achieved a ratio of earnings to fixed charges of 1.0. As pretax
earnings are reduced by non-cash special charges of $41.7 million and
$27.7 million for the respective fiscal years, the ratio does not indicate
an inability of our company to make cash payments necessary to support our
fixed charges.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION ALONG WITH THE "SELECTED FINANCIAL
DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
SUMMARY
We are a leading manufacturer of steel containers for personal care,
household, automotive, paint, industrial and specialty products in the United
States and Europe. We also are a manufacturer of plastic containers in the
United States and food cans in Europe. Our product offerings include a wide
variety of steel containers, such as aerosol cans, paint cans, oblong containers
and a large number of custom and specialty products, and plastic containers,
such as plastic pails for industrial and consumer products. We own or lease 16
plants in the United States and ten plants in Europe.
The highlights of our corporate history are as follows:
- We were formed in 1983 through the purchase of the container division of
Sherwin Williams and expanded our aerosol operations to customers other
than Sherwin Williams in 1987 by acquiring the United States general
packaging business of Continental Can Company.
- In 1993, we completed an initial public offering of common stock and
contributed the net proceeds of $48.6 million to our capital.
- In 1994, we completed a second public offering of common stock and
contributed the net proceeds of $34.2 million to our capital.
- In 1996, we issued $275.0 million of our 10 1/8% senior subordinated notes
due 2006 and used the proceeds to repay indebtedness. We also acquired a
significant part of Crown, Cork & Seal's and CarnaudMetalbox's aerosol
businesses in Europe in 1996. In addition, we expanded our plastics
business in 1996 through the acquisition of CPI Plastics.
- In 1998, we expanded into Latin America by purchasing a minority stake in
Formametal, S.A., an Argentinean aerosol can manufacturer.
- In 1999, we acquired May, a German manufacturer of metal food packaging
and steel aerosol cans.
- On June 1, 2000, we announced that we entered into the recapitalization
agreement with Pac Acquisition.
- On October 4, 2000, we consummated the original offering, the
recapitalization and the other transactions.
We took special charges in 1997 and 1998 and in 2000. In 1997, we took
pre-tax special charges of $63.0 million in connection with plant closings and
overhead cost reductions. In 1998, we took a pre-tax special charge of
$35.9 million in connection with the closure of certain facilities and
write-downs of certain non-core businesses. In 2000 we instituted a reduction in
force program, under which we have eliminated 73 salaried and 34 hourly
positions. We took a one-time charge of approximately $3.4 million for severance
and other termination related costs in connection with the program. We expect to
realize projected annual savings of $5.0 million from this program beginning in
July 2000. In addition, we expect to take after-tax extraordinary charges in the
fourth quarter of 2000 in connection with the transactions totaling
approximately $18.9 million, including charges for advisory fees and payments to
option holders. We also expect to take an extraordinary charge of approximately
$14.9 million in the fourth quarter of 2000, related to the tender offer and
consent solicitation of the 10 1/8% notes due 2006, including the tender premium
and the write-off of remaining deferred financing charges.
39
<PAGE>
In August 2000, May supplied a small number of defective pet food cans to a
major customer. While we have taken steps to remedy the situation and our
overall relationship with this customer remains positive, the customer responded
in August by reducing orders significantly. The customer recently requested that
we resume shipments. We do not expect a negative impact from this production
defect on 2001 results of operations. However, we estimate that our results of
operations for 2000 have been negatively impacted by approximately $3.0 million
with respect to EBITDA, and we cannot be assured that we will return to previous
levels of shipments to this customer. See "Risk Factors--The loss of a key
customer could have a significant negative impact on our business."
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of our company and our
subsidiaries for the three years ended December 31, 1999 and the nine months
ended October 1, 2000. This discussion should be read in conjunction with the
consolidated financial statements and notes to the consolidated financial
statements.
We have not provided separate financial statements or data for the Company
in this prospectus. U.S. Can's only assets are its investment in and advances to
the Company. We believe that the financial statements of U.S. Can and the
consolidated financial statements of the Company do not vary significantly. We
believe that the material differences are, and will be, related to stockholders'
equity and intercompany indebtedness.
RESULTS OF OPERATIONS
The following table sets forth our results of operations based on the
percentage relationship of certain items to net sales during the period shown.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------
------------------------------ OCTOBER 3, OCTOBER 1,
1997 1998 1999 1999 2000
-------- -------- -------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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%
===== ===== ===== ===== =====
</TABLE>
40
<PAGE>
NINE MONTHS ENDED OCTOBER 1, 2000 COMPARED TO NINE MONTHS ENDED OCTOBER 3, 1999
NET SALES
Net sales for the nine-month period ended October 1, 2000 totaled
$607.0 million, an increase of 10.4% versus $549.8 million for the corresponding
period in 1999. The increase was principally due to the inclusion of the sales
of May, which we acquired in December 1999. Along business segment lines,
Aerosol net sales in the first three quarters of 2000 were $362.8 million, a
decline of 2.7% versus $372.7 million in the same period last year. The decrease
is due to a decline in U.S. volumes and a $13.2 million negative impact due to
the effect of U.S. dollar translation on sales made in foreign currencies by our
European operations. Paint, Plastic and General Line sales decreased 5.3% from
$127.2 million to $120.5 million due to the loss of a Plastite customer in 1999.
Custom and Specialty net sales of $123.7 million increased $73.9 million from
$49.8 million in the first nine months of 1999 due to the inclusion of the sales
of May. Net sales for the first nine months for May were $85.4 million.
Excluding May's sales, the Custom and Specialty segment had net sales of
$38.3 million, an $11.5 million decrease from $49.8 million in the first
three-quarters of 1999 due to the sale of the Wheeling metal closure and Warren
lithography businesses (see Note (2) to the Consolidated Financial Statements).
GROSS INCOME
Gross income of $89.4 million for the nine-month period ended October 1,
2000 increased $9.7 million, or 12.2%, versus $79.7 million for the
corresponding period of 1999. Gross margin of 14.7% for the nine months of 2000
increased slightly from the 14.5% reported in the first nine months of 1999, due
to the continuing focus on productivity improvements and cost savings
opportunities. Aerosol gross income declined 6.4% due to a decline in U.S. sales
volume and a $1.0 million negative impact due to the effect of U.S. dollar
translation on sales made in foreign currencies by our European operations.
Paint, Plastic and General Line gross income decreased $3.9 million versus the
first nine months of 1999 due to the loss of a Plastite customer in 1999 and a
decline in general line volume. Custom and Specialty gross income increased
$9.9 million versus the first nine months of 1999 due primarily to the inclusion
of the results of operations of May. Excluding May and the divested Wheeling
closure and Warren lithography businesses, gross income in the Custom and
Specialty segment increased 18.8%. Certain expenses are not allocated to
specific business segments.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $32.5 million in the first
nine months of 2000, a $7.5 million increase in comparison to $25.0 million in
the same period in 1999. The increase is primarily due to the inclusion of the
results of operations of May, which accounted for $6.0 million of the increase.
The remainder of the increase is due to higher marketing expenses incurred in
improving customer service.
INTEREST AND OTHER EXPENSES
Interest expense for the first nine months of 2000 increased 12.9%, or
$2.8 million, versus the first nine months of 1999. The increase was due to
interest incurred in connection with borrowings made to acquire May, offset by
the interest reduction due to the repurchase and early retirement of the 10 1/8%
notes due 2006 in the second and third quarters of 2000.
OTHER CHARGES
In the third quarter of 2000, we announced a reduction in force program and
recorded a one-time charge of $3.4 million for severance and other termination
related costs. For further discussion on this program (see Note (2) to the
Consolidated Financial Statements).
41
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
NET SALES
Consolidated net sales for the year ended December 31, 1999 were
$714.1 million, an increase of 0.5% versus $710.0 million in 1998. Along
business segment lines, Aerosol net sales in 1999 increased 3.8% over 1998,
primarily due to increased efficiencies and production at our Wales facility, as
well as increased U.S. demand. Consistent with expectations, the Paint, Plastic
and General Line segment had a 1.4% decrease in net sales due to reduced
customer requirements during the year. In the Custom and Specialty segment,
sales were down 8.7% due principally to significant liquidation of excess
holiday products in early 1998 and softer markets in 1999. Key management
changes were made in mid-1999 to address sales and operational issues.
GROSS INCOME
Consolidated gross income of $102.5 million for 1999 was up $10.4 million,
an 11.3% increase versus $92.1 million in 1998. Gross margin of 14.3% compares
favorably to the 13.0% reported in 1998 due to benefits derived from
restructuring programs, productivity improvements as a result of line speed-ups
and cost reduction programs instituted in the plants, as well as the ramp-up of
the Wales facility.
Aerosol gross income increased from $80.2 million to $85.7 million, a 6.9%
increase versus 1998, aided by higher sales volume, the Welsh operation
improvements, and the effects of consolidating manufacturing operations. Paint,
Plastic and General Line gross income increased to $16.9 million versus
$15.6 million in 1998, a 7.9% increase, primarily due to productivity
improvements. Custom and Specialty gross income decreased from $11.0 million to
$8.9 million in 1999 due to softer markets in 1999 and a loss in productivity
during plant consolidation activities. Certain expenses are not allocated to
specific business segments including special charges and other corporate and
miscellaneous costs.
OPERATING INCOME
Operating income in 1999 was $68.7 million versus $23.6 million in 1998.
Excluding special charges recorded in 1998, operating income improved 15.6% from
$59.4 million in 1998 to $68.7 million in 1999. The operating margin of 9.6% in
1999 compares favorably to the 8.4% reported in 1998, before the special charge.
1998 operating margins were negatively impacted by $35.9 million of special
charges for plant closings, additional losses on the sale of the Orlando Machine
Engineering Center and a reassessment of 1997 special charges. See note (3) to
the consolidated financial statements. Other improvements versus the prior year
reflect stronger gross margins coupled with benefits realized from the 1997 and
1998 restructuring programs. Selling, general and administrative costs as a
percent of sales remained relatively flat at 4.7% in 1999.
INTEREST AND OTHER EXPENSES
Interest expense in 1999 was $28.7 million, down 13.4%, or $4.5 million,
versus $33.2 million in 1998. Prior to the May acquisition in late December,
long-term debt had been reduced by $48.0 million as excess cash was used to
redeem some of the 10 1/8% notes due 2006. Including the May acquisition,
long-term debt increased 3.4% or $10.6 million in 1999 as compared to 1998.
Average borrowings under the credit agreement (as defined below) in 1999 were
$12.3 million in letters of credit and $0.1 million in loans and $12.3 million
in letters of credit and $4.8 million in loans after the May acquisition. In
1999, there were 10 months in which no borrowings were made under the credit
agreement. See "Liquidity and Capital Resources."
42
<PAGE>
EXTRAORDINARY ITEM
In 1999, we recorded a $1.3 million extraordinary charge (net of related
income taxes of $0.8 million) due to the early redemption premium on
$27.7 million of our 10 1/8% notes and the write-off of related deferred
financing costs.
NET INCOME
1999 net income of $21.2 million compares favorably to the 1998 net loss of
$16.1 million. Income improvements in 1999 are a reflection of higher margins,
productivity improvements and lower interest expense and the absence of a
special charge in 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
NET SALES
Consolidated net sales for the year ended December 31, 1998 were
$710.2 million, a decrease of 6.0% versus $755.7 million in 1997. This decrease
reflected the sale of our Metal Pail business and the loss of a major Aerosol
customer, both in late 1997.
Along business segment lines, Aerosol net sales in 1998 of $466.0 million
declined 2.8% versus 1997, reflecting the loss of a major customer in late 1997.
European net sales, included within the Aerosol business segment, increased
11.1% from the prior year as the Wales facility achieved qualification with its
primary customer in 1998. Paint, Plastic and General Line net sales of
$164.1 million were down 12.0% from 1997 due to the sale of the Metal Pail
business in November 1997. Custom and Specialty 1998 net sales of $74.9 million
were 11.7% lower than 1997. The decline in this business segment was largely a
function of product mix and management's decision not to pursue certain
unprofitable popcorn tin business it had in 1997.
GROSS INCOME
Consolidated gross income improved 2.4% from $89.9 million for the year
ended December 31, 1997 to $92.1 million for the year ended December 31, 1998.
Gross margin of 13.0% for the full-year 1998 compared favorably to the 11.9%
reported in 1997. Margin rate increases were primarily in the Paint, Plastic and
General Line and the Custom and Specialty business segments and reflected
improved productivity as a result of line speed-ups and cost reduction programs
instituted in the plants, the sale of the unprofitable Metal Pail business and
the shedding of the popcorn tin business. The Wales facility impacted Aerosol
operations gross margins favorably.
Aerosol gross income increased slightly to $80.2 million versus
$79.9 million in 1997. Gross margins in this sector increased 0.5% versus 1997
despite a lower sales volume base. Paint, Plastic and General Line gross income
improved 26.1% to $15.6 million. Custom and Specialty gross income improved
60.8% versus 1997 to a level of $11.0 million. Certain expenses are not
allocated to specific business segments including special charges and other
corporate and miscellaneous costs.
OPERATING INCOME
Consolidated operating income of $23.6 million for the year ended
December 31, 1998 compared favorably to an operating loss of $6.1 million for
the same period in 1997. Improvements versus 1997 reflected a $27.1 million
decrease in special charges (see note (3) to the consolidated financial
statements) and stronger gross margins coupled with the benefits realized late
in 1998 from the restructuring programs initiated in 1997.
43
<PAGE>
INTEREST EXPENSE
Interest expense for the full-year 1998 of $33.2 million declined 10.0%
versus $36.9 million in 1997. Our focus on cash flow, working capital
improvements and controlled capital programs resulted in a year-to-year debt
reduction of $59.5 million.
NET LOSS
Net loss from continuing operations in 1998 was $7.5 million versus a net
loss of $29.9 million in 1997. Special charges recorded in 1998 had a negative
after-tax effect of $21.4 million. Special charges recorded in 1997 had an
after-tax effect of $37.8 million.
Net loss for 1998 was $16.1 million (including $8.5 million loss on the sale
of the discontinued Metal Services business) versus 1997 net loss of
$32.0 million. Net loss for 1997 included a $2.1 million loss on the
discontinued Metal Services business.
SPECIAL CHARGES
2000
On July 7, 2000, we announced a reduction in force program, under which 73
salaried and 34 hourly positions have been eliminated. A one-time charge of
$3.4 million for severance and other termination related costs was recorded in
the third quarter of 2000. We expect to realize annual savings of $5.0 million
from this program.
1998
In the third quarter of 1998, we established a pre-tax special charge of
$35.9 million. The provision was for the closure of certain facilities and
write-downs of non-core businesses. Costs related to closing and realigning
selected lithography facilities servicing our core business were also included
in the provision as part of our national lithography strategy. Working capital
improvements are expected to partially offset new capital costs associated with
the 1998 restructuring program and the acquisition of new lithography
technology. The restructuring program and related capital investment in new
technology are expected to generate after-tax savings of $10.0 million annually
at maturity. The 1998 special charge included charges for non-cash items of
$27.7 million.
1997
In the third quarter of 1997, we established a pre-tax special charge of
$35 million primarily for plant closings and overhead cost reductions. These
actions were due to the loss of a major aerosol customer (the customer
represented approximately $35 million of annual sales) and to enhance
efficiencies at certain other locations. In addition, we established a
disposition provision for the anticipated loss on the closure of our Metal Pail
operation in North Brunswick, New Jersey. Also in the fourth quarter of 1997,
we, at the direction of our Board of Directors, employed the assistance of
external business consultants to review operations and explore other avenues for
enhancing shareholder value. As a result of this review, a provision was
established primarily to include further personnel reductions and the reduction
of asset value associated with equipment used in the businesses we had exited or
were in the process of exiting.
The 1997 special charge included $41.7 million for the non-cash write-off of
assets related to the facilities to be closed or sold (comprised of fixed assets
of $34.1 million and unamortized goodwill of $7.6 million), $13.2 million for
severance and related termination benefits and $8.1 million for other related
closure costs.
We continuously evaluate the composition of our various manufacturing
facilities in light of current and expected market conditions and demands. Our
current restructuring activities are substantially on
44
<PAGE>
target with the original planned shutdown or closure dates and, therefore, we
believe that significant changes to these plans are unlikely. In connection with
the May acquisition, we are reviewing our European operations for potential
consolidation opportunities.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 2000, we met our liquidity needs through
internally generated cash flow, the sale of the Wheeling metal closures and
Warren lithography businesses, borrowings made under our lines of credit and a
sale/leaseback transaction of certain manufacturing assets. Cash flow provided
by operations was $25.9 million in the first nine months of 2000, compared to
cash provided of $59.3 million in the first three quarters of 1999. Principal
liquidity needs included working capital (primarily accounts receivable and
inventory), debt payments and capital expenditures. The increased use of cash
for working capital is attributable to an increase in accounts receivable and
inventory within our domestic operations. The increase in accounts receivables
is due to increased sales late in the third quarter of 2000 versus the timing of
1999 third quarter sales. We continue to focus on inventory management and have
instituted programs to monitor inventory levels throughout our company. We also
paid $2.9 million in restructuring costs and anticipate expending an additional
$3.2 million of such costs during the remainder of 2000. Cash flow from
operations before working capital was $65.4 million in 1999, compared to
$56.9 million in 1998 and $68.0 million in 1997.
We expect total capital expenditures in 2000 to be approximately
$20.0 million, of which $16.5 million was spent in the first nine months. Our
total capital expenditures of $31.0 million in 1999 included the installation of
two new state-of-the-art lithography presses. We expect to spend approximately
$150.0 to $200.0 million on capital expenditures during the five years
commencing 1999, in roughly equal amounts of $30.0 million to $40.0 million a
year. We also expect to increase our ownership interest in Formametal, S.A., our
Argentinian joint venture, in 2001. We expect to use approximately $6.0 million
in cash for this acquisition. We expect to fund this acquisition and other
future capital expenditures from operations and borrowings under our revolving
credit facility. Our capital investments have historically yielded reduced
operating costs and improved our profit margins, and we believe that the
strategic deployment of capital will enable us to improve our overall
profitability by leveraging the economies of scale inherent in the manufacturing
of containers.
In 1999, our excess cash provided by operations over our cash required for
capital expenditures and other investing activities (before acquisitions) was
$34.8 million. Of the excess, $27.7 million was used to redeem a portion of the
10 1/8% notes due 2006. As of December 31, 1999, we had redeemed a total
principal amount of $40.0 million of the 10 1/8% notes due 2006, the maximum
allowed under the credit agreement.
Our primary sources of liquidity are cash flow from operations and
borrowings under our new revolving credit facility. We expect that ongoing
requirements for debt service, working capital and capital expenditures will be
funded from these sources.
Concurrent with the recapitalization, we issued the notes and entered into
the senior secured credit facility. The senior secured credit facility provides
for two tranches of term loans in the aggregate principal amount of
$260.0 million. In addition, the senior secured credit facility provides for a
revolving credit facility that will provide revolving loans in an aggregate
amount up to $140.0 million. Upon closing of the recapitalization, we borrowed
the full amount available under the term loan facilities and approximately
$20.5 million under the revolving credit facility. The borrowings under the
revolving credit facility are available to fund our working capital
requirements, capital expenditures and other general corporate purposes. The
tranche A term loan facility of $80.0 million matures in quarterly installments
from December 31, 2000 through September 30, 2006. The tranche B term loan
facility of $180.0 million matures in quarterly installments from December 31,
2000 through September 30, 2008. Principal repayments required under the term
loan facilities are $6.0 million in 2001 and $9.0 million in 2002. Additionally,
the senior secured credit facility requires a prepayment in
45
<PAGE>
the event that we have excess cash flow (as defined) and following certain other
events, including asset sales and issuances of debt and equity. We also expect
to assume between $6.0 million and $7.0 million in debt in connection with the
acquisition of Formametal, S.A. Our significant debt service obligations
following the recapitalization could, under certain circumstances, have material
consequences to our security holders, including holders of the notes. In
addition, we issued $106.7 million in preferred stock and $53.3 million in
common stock concurrent with the recapitalization. See "Other Indebtedness,"
"Description of U.S. Can's Capital Stock--Preferred Stock" and "Risk Factors."
Based upon the current level of operations and anticipated growth, we
believe that cash generated from operations together with amounts available
under the revolving credit facility will be adequate to meet our anticipated
debt service requirements, capital expenditures and working capital needs for
the next several years. We cannot assure you, however, that we will generate
sufficient cash flow from operations or that future borrowings will be available
under the senior secured credit facility or otherwise to enable us to service
our indebtedness, including the senior secured credit facility and the notes or
to make anticipated capital expenditures. Our future operating performance and
our ability to service or refinance the notes, to service, extend or refinance
the senior secured credit facility and to redeem or refinance our preferred
stock will be subject to future economic conditions and to financial, business
and other factors, many of which are beyond our control.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
was issued in June 1998 (amended by SFAS No. 137 to delay required
implementation) and will be adopted by us in 2001. This new pronouncement
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that we recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. We are currently evaluating SFAS No. 133, but do not
believe this pronouncement will have a material impact on our financial position
or results of operations. Market risk generally represents the risk of loss that
may result from the potential change in the value of a financial instrument as a
result of fluctuations in interest rates and market prices. To reduce this risk,
we may at times use financial instruments. All hedging transactions are
authorized and executed under clearly defined policies and procedures, which
prohibit the use of financial instruments for trading purposes.
FOREIGN CURRENCY AND INTEREST RATE RISK
FOREIGN CURRENCY RISK
We have engaged in transactions that carry some degree of foreign currency
risk. As such, we have entered into a series of forward hedge contracts to
mitigate the foreign currency risks associated with the financing of one of our
production facilities in the United Kingdom. We are a party to a series of
British Pound forward exchange contracts, not exceeding a notional amount of
$23.1 million, that carry a term of not more than five years.
We also bear foreign exchange risk because much of our financing is
currently obtained in United States dollars, but we receive a portion of our
revenues and incur a portion of our expenses in the various currencies of our
foreign subsidiaries' operations. Our new revolving credit facility will allow
certain of our foreign subsidiaries to borrow up to $75 million in British
Pounds Sterling, German Deutsche Marks and Euros. We have not yet determined
what amount of borrowings, if any, we expect to make in these currencies.
INTEREST RATE RISK
We are exposed to interest rate risk primarily as a result of our floating
rate borrowings. We have hedged a portion of our interest rate risks by entering
into a swap and collar agreements. The swap
46
<PAGE>
agreement is a three-year agreement for a notional amount of $83.3 million.
Under the swap agreement, we pay a fixed rate of 6.65% and receive the
three-month LIBOR. The collar agreement is also a three-year agreement for a
notional amount of $41.7 million. Under the collar agreement, we pay the bank if
the three-month LIBOR is less than 6.1% (the floor) and receive a payment if the
three-month LIBOR is greater than 7.25% (the cap). Since the counterparties to
the agreements are also lenders under the senior secured credit facility, our
obligations under these agreements are subject to the security interest under
the terms of the senior secured credit facility. See "Other Indebtedness."
TIN-PLATED STEEL PRICING
Tin-plated steel represents the primary component of our raw materials
requirement. Historically, we have not always been able to immediately offset
increases in tinplate prices with price increases to our customers. However, in
most years, a combination of factors has permitted us to maintain our
profitability notwithstanding these conditions.
47
<PAGE>
BUSINESS
OUR BUSINESS
GENERAL
We are a leading manufacturer of steel containers for personal care,
household, automotive, paint, industrial and specialty products in the United
States and Europe. We also are a manufacturer of plastic containers in the
United States and food cans in Europe. Our product offerings include a wide
variety of steel containers, such as aerosol cans, paint cans and oblong
containers for products such as turpentine and charcoal lighter fluid, as well
as a large number of custom and specialty products and plastic containers. We
attribute our market leadership to our ability to consistently provide
high-quality products and service at competitive prices, while continually
improving our product-related technologies.
We have long-standing relationships with many well-known consumer products
and paint manufacturers in the United States and Europe, including Gillette,
Reckitt Benckiser and Sherwin Williams. We produce containers for many of these
customers' products, including Right Guard deodorant, Easy-Off oven cleaner and
Dutch Boy paint. We also produce seasonal holiday tins sold by mass
merchandisers. In steel aerosol cans, we hold the number one market position in
the United States and the number two market position in Europe. In addition, we
hold the number two market position in paint cans in the United States.
Our aerosol and paint products represented approximately 78% of our total
pro forma net sales for the last twelve months ended October 1, 2000. We had pro
forma sales of $803.6 million and adjusted EBITDA of $105.4 million for the same
period. Domestic operations represented approximately 69% of total pro forma net
sales, with the remainder generated by our European operations.
We compete in three major business segments within the container industry:
Aerosol Products; Paint, Plastic and General Line Products; and Custom and
Specialty Products. In addition, we recently acquired May, a German manufacturer
of metal food packaging and steel aerosol cans.
AEROSOL PRODUCTS
As the largest producer of steel aerosol cans in the United States and the
second largest producer in Europe, we have a leading position in all of the
major aerosol consumer product lines, including personal care, household,
automotive and spray paint cans. We offer a wide range of aerosol containers to
meet our customer requirements including stylized necked-in cans and barrier
pack cans used for products that cannot be mixed with a propellant, such as
shaving gel. Most of the aerosol cans that we produce employ a lithography
process that consists of printing our customers' designs and logos on the cans.
Examples of products using our steel aerosol cans include Right Guard deodorant,
Easy-Off oven cleaner and Krylon spray paint.
Steel aerosol cans represent our largest segment, accounting for
approximately 59% of our total pro forma net sales for the last twelve months
ended October 1, 2000. In 1999, we manufactured over 50% of the steel aerosol
cans produced in the United States and over 25% of the steel aerosol cans
produced in Europe. We also supply steel aerosol cans to customers in Latin
America through Formametal S.A., our joint venture in Argentina.
PAINT, PLASTIC AND GENERAL LINE PRODUCTS
Our primary paint, plastic and general line products include paint and
coating containers, oblong steel cans for products such as turpentine and
charcoal lighter fluid, plastic pails and other containers for industrial
products, such as spackle and dry wall compounds, and consumer products, such as
48
<PAGE>
swimming pool chemicals and paint. Among our largest customers for these
products are Sherwin Williams and Behr. Examples of products using our
containers include Dutch Boy paint, Thompson's Water Seal and Arch pool
chemicals.
Paint, plastic and general line products are our second largest segment,
accounting for approximately 19% of our total pro forma net sales for the last
twelve months ended October 1, 2000. Within this segment, our steel round paint
cans and oblong cans accounted for approximately 71% of our sales during the
same period. Our plastic containers accounted for approximately 22% of our sales
in this segment, and our general line containers, used for products such as
engine additives, colorants and lighter fluid, accounted for 7% of our 1999
sales in this segment during the same period.
CUSTOM AND SPECIALTY PRODUCTS
We also have a significant presence in the custom and specialty products
market. We believe that we offer the industry's widest range of decorative and
specialty products. Our primary products include a wide array of functional and
decorative containers and tins, fitments and stampings, and collectible items,
such as decorative metal signs and canister sets. These products are generally
custom designed and decorated and are typically produced in smaller quantities
than our other products. Our customers in this segment include Wyeth
Nutritionals, Keebler Company and Liz Claiborne Cosmetics. Examples of products
packaged with our containers include holiday tins sold by mass merchandisers,
Keebler cracker tins and Liz Claiborne Cosmetics fragrance gift boxes.
Our custom and specialty products accounted for approximately 6% of our
total pro forma net sales for the last twelve months ended October 1, 2000.
MAY VERPACKUNGEN ACQUISITION
On December 30, 1999, we acquired May, a German manufacturer of steel food
packaging and aerosol cans. May is a leading European food can producer with
more than 20% of the German food can market. For the last twelve months ended
October 1, 2000, May generated approximately 16% of our total pro forma net
sales. This acquisition allows us to:
- increase our scale and presence in Europe;
- improve our ability to reduce manufacturing costs;
- take advantage of purchasing synergies; and
- enhance our ability to offer global manufacturing services to our
customers.
May has a reputation for manufacturing excellence and has established
long-term relationships with several leading consumer products companies. May
also has provided us with diversification across our product lines and customer
base. As a result of this increased diversification and our larger European
presence, we expect to realize additional cross-selling opportunities between
our traditional customers and those of May. Generally, we serve different
customers than May, with no overlap among our respective top ten customers. As
an example of the benefits that our increased scale and presence in Europe can
provide, we recently negotiated an agreement with one of May's existing
customers to expand May's supply of pet food cans to this customer in the United
Kingdom.
May has state-of-the-art manufacturing technology and processes, including a
new high-speed production line that increased May's production capacity and new
quality testing equipment and procedures. We plan to utilize May's manufacturing
expertise at our other facilities.
49
<PAGE>
COMPETITIVE STRENGTHS
We believe we have the following competitive strengths:
MARKET LEADERSHIP
Domestically, we hold the number one market position in our steel aerosol
can lines and the number two market position in our paint product lines. In
Europe, we are the second largest manufacturer of steel aerosol cans.
Collectively, our aerosol can and paint product lines represent approximately
78% of our annual sales. We believe our technological innovation and product
quality have been instrumental in securing over 50% of the domestic United
States aerosol container market. We also produce nearly one half of all
one-gallon paint cans sold annually in the United States. Additionally, our
acquisition of May strengthened our position both in Europe and in Germany, the
number two European aerosol container market, and expanded our product offering.
LONG-STANDING CUSTOMER RELATIONSHIPS
We have long-standing relationships with many of our customers and have been
able to expand our market share with many of our key customers over time by
continuing to expand our product capabilities and increasing the quality of our
services. Currently, we believe we are the number one or number two supplier to
each of our top customers in each business segment. In addition, as we have
expanded internationally, we have increased the number of sole source
relationships we have with our customers. We believe our long-standing customer
relationships have developed as a result of our reputation for providing:
- quality and service;
- competitively priced products;
- global supply services to multi-national consumer products companies; and
- technological innovations in product and service offerings.
INDUSTRY-LEADING TECHNICAL CAPABILITIES
Over the last two years, we have invested heavily in equipment and systems
that improve our manufacturing quality and efficiency. We have made a
significant investment in new technology, including the installation of two new
high-speed, six-color presses that we expect to improve the quality and lower
the cost of printing. We also have been at the forefront of technological
improvements in the packaging industry, including the production of barrier-pack
cans and the development of advanced interior container coatings.
EFFICIENT MANUFACTURING OPERATIONS
We continue to reduce our overall cost of manufacturing while improving
product quality and customer service. We also have invested in new technology,
including barrier package design equipment, high-speed production lines and
assembly equipment and two high-speed lithography presses. These new lithography
presses improve lithography cycle and set-up time, increase throughput, reduce
inventory requirements and shorten lead times. Lithography quality is critical
to our consumer product customers, as product appearance is a determining factor
in the consumer's choice of products.
In addition, since 1997, we have rationalized manufacturing facilities and
centralized operations to lower our overall costs. As of October 1, 2000, we
have sold or closed 18 manufacturing facilities. The closing of these
facilities, in conjunction with investments in new technology, has created a
lower-cost, more efficient manufacturing base, while improving product quality
and customer service. We are continually evaluating the benefits of closing
additional plants. In addition, we recently reduced our
50
<PAGE>
workforce by eliminating 73 salaried and 34 hourly positions. This plan is
expected to reduce expenses by approximately $5 million per year. We expect that
these and future initiatives will continue to improve our manufacturing
efficiencies and our customer service capabilities.
STRATEGICALLY POSITIONED MANUFACTURING FACILITIES
We strategically locate our manufacturing facilities near our customers to
provide time sensitive product delivery and improve inventory management and
product design. The close proximity of our facilities to our customers improves
customer service and reduces the substantial costs involved in transporting
empty cans over long distances. We have 16 facilities located in the United
States and ten facilities located in the largest European markets. Our local
presence in regions throughout the United States and Europe allows us to lower
costs, improve delivery times and meet our customers' growing need for a global
supply solution. The May acquisition also enhanced our manufacturing and
customer service capabilities in Europe. To further enhance our global
capabilities, we have entered the growing South American market through an
Argentinian joint venture. Through this joint venture, we recently secured a
multi-year supply agreement with a leading consumer products company to be its
sole source of steel aerosol containers in this region.
EXPERIENCED MANAGEMENT TEAM
Our management team consists of highly qualified senior managers with
significant industry experience. Paul W. Jones, our Chairman and Chief Executive
Officer, spent nine years as chief executive officer of Greenfield
Industries, Inc., which grew from $70 million in sales in 1989 to more than
$700 million in 1996 during his tenure, and 19 years with General Electric
Corporation, where he served as General Manager of Manufacturing for GE
Transportation Systems and General Manager of GE Drives, Motor and Generator
Operations. In addition, Mr. Jones has recruited a senior management team with
significant packaging industry experience, including prior positions with Tetra
Pak, Inc., American National Can and Crown Cork & Seal. Our management team owns
9.00% of our company's common stock after this offering and a substantial
portion of their overall targeted compensation is tied to time and
performance-based options to acquire an additional 5.75% of our company's common
stock over the next five years.
BUSINESS STRATEGY
FOCUSING ON CUSTOMER SERVICE
By providing improved customer service and support, we believe we can
enhance our market share with existing customers and further distinguish
ourselves in the container and packaging industry. We are currently implementing
new systems and technology, including just-in-time delivery, customer order
tracking and demand forecasting that will further enhance our value-added
service offerings. In addition, we have invested in new lithography capacity,
including two high-speed, six-color presses that allow us to offer sophisticated
printing capabilities. These systems and technology are aimed at meeting our
customers' quality and supply needs, enhancing communication with customers and
improving our order fulfillment and manufacturing capabilities. By providing
improved customer service and support, we believe that we can enhance our market
share with existing customers and further differentiate ourselves in the
container and packaging industry.
MEETING OUR CUSTOMERS' GLOBAL NEEDS
Our customers are expanding internationally, increasing the need for
high-quality global supply sources. To meet our customers' needs and secure new
global supply contracts, we are integrating our global manufacturing
capabilities and selectively expanding into new geographic regions. We entered
the South American market in 1998 through our joint venture in Argentina, and we
expanded our
51
<PAGE>
European presence in 1999 through our acquisition of May. We believe our global
strategy has been validated by our recent success in securing global supply
relationships with Gillette, Reckitt Benckiser and CCL Custom Manufacturing.
IMPROVING OPERATING EFFICIENCIES
We plan to continue to reduce manufacturing costs and enhance operating
efficiencies through the ongoing reconfiguration of our manufacturing base,
improvements to our purchasing efficiency and investments in equipment and
technology. For example, we are consolidating our purchasing in both the United
States and Europe. As a result of these efforts, we recently secured steel
purchase agreements that we expect will provide us with approximately
$2 million in annual cost savings. In addition, we expect to realize additional
efficiencies in connection with our consolidation of purchasing other non-raw
materials.
MAKING SELECTIVE ACQUISITIONS
We plan to continue to evaluate and selectively pursue acquisitions of rigid
packaging businesses that will help fulfill our customer needs, attract new
customers, add new products, complement our existing businesses, enhance our
earnings or expand our geographic reach.
PRODUCTS
We believe that we offer the widest range of aerosol, round, general line
and specialty metal containers in the U.S. general packaging industry. In 1999,
on a pro forma basis, we produced approximately 4.5 billion cans. We emphasize
quality and breadth of product line in marketing our steel aerosol cans. We
offer full-color, quality lithographed cans in a wide range of styles and sizes.
Our necked-in cans (aerosol cans where the plastic cap is flush with the metal
exterior of the can) offer a distinctive look and feel to our customers'
products. Our barrier packaging cans (cans that separate the product from the
can's propellant) provide our customers with an effective solution for
delivering a complex product.
Our European operations accounted for production of over 25% of the
3 billion steel aerosol cans produced in Europe in 1999. These aerosol cans
cover the most popular size diameters in Europe and, when supplemented by
various heights, enable our European subsidiaries to offer customers a full
range of cost efficient sizes.
We offer round paint cans, oblong containers, plastic pails and specialty
containers in the industry's widest choice of sizes. Our containers range from
one-quarter pint to six and one-half gallons, and feature a variety of interior
linings, making them suitable for a wide variety of applications. Our general
line product offerings also include a wide range of open-top and AccuPor metal
cans used primarily for automotive products. Additionally, we are a leader in
the production of plastic paint cans and two sizes of plastic pails. Our plastic
product line also includes molded drums, pails and containers and products used
in the farming industry.
Our custom and specialty products consist of a wide array of functional and
decorative containers, tins, metal housewares and collectible items. This line
includes the following:
- hermetic containers and slipcover tins of both three-piece and seamless
construction manufactured in round and off-round configurations;
- standard and custom fitments and stampings; and
- decorative metal signs, posters, serving trays and canister sets.
We also provide containers for the cosmetic and retail accessory markets.
These products signal an expansion of the custom and specialty products into
areas not traditionally supplied by the metal
52
<PAGE>
packaging industry, such as perfume and jewelry, as manufacturers seek to
differentiate the appearance of their products. We believe that we offer the
industry's widest range of related products within this product grouping.
Since our acquisition of May, we also provide tin-plated packaging for the
European food market. We produce packaging in various sizes for whipped cream,
pet food, snack products, ready-to-serve soups and other meals, meat products
and fruits and vegetables. Our food containers are specially coated to maintain
the quality of their contents.
CUSTOMERS AND SALES FORCE
As of October 1, 2000, in the United States, we had approximately 7,500
customers worldwide, with our largest customer accounting for 7.2% of our pro
forma total net sales in 1999. To the extent possible, we enter into one-year or
multi-year supply agreements with our major customers. Some of these agreements
specify the number of containers a customer will purchase (or the mechanism for
determining such number), pricing, volume discounts (if any) and, in the case of
many of our domestic and some of our international multi-year supply agreements,
a provision permitting us to pass through price increases in certain raw
material and other costs.
We market our products primarily through a sales force comprised of inside
and outside sales representatives dedicated to each segment. As of October 1,
2000, we had 85 sales representatives in the United States and 39 sales
representatives in Europe. Each sales representative is responsible for growing
sales in a specific geographic region and is compensated by a salary and a bonus
based on sales volume targets.
Over the past several years, we have focused on providing value added
services to our customers. In 1999, we established a new marketing organization,
implemented a strategic marketing plan and conducted customer interviews to
determine our performance against customer service expectations. A key element
to our strategic marketing plan is changing the selling process from being
product-driven to being solution-driven. The ultimate objective of this program
is to position us as an informed business partner with our customers rather than
merely a product supplier.
COMPETITION
Quality, service and price are the principal methods of competition in the
rigid metal and plastic container industry. To compete effectively, we must
strategically locate supply facilities to reduce the added cost of shipping cans
long distances. In addition, competition in our industry limits our ability to
raise prices for many of our top products.
In the U.S. steel aerosol can market, we compete primarily with Crown
Cork & Seal. Our European subsidiaries compete in the steel aerosol can market
with Crown Cork & Seal, Impress Metal Packaging and a group of other smaller
regional producers. Crown Cork & Seal is larger and may have greater financial
resources than we do. Because steel aerosol cans are pressurized and are used
for personal care, household and other packaged products, they are more
sensitive to quality, can decoration and other consumer-oriented features than
some of our other products.
In metal paint and general line products, we compete primarily with BWAY
Corporation and one smaller, regional manufacturer. Our plastic products line
competes with many regional companies.
Our custom and specialty products compete with a large number of container
manufacturers, but we do not compete across the entire product spectrum with any
single company. Competition is based principally on quality, service, price,
geographical proximity to customers and production capability, with varying
degrees of intensity according to the specific product category.
Our products also face competition from aluminum, glass and plastic
containers.
53
<PAGE>
RAW MATERIALS
Our principal raw materials are tin-plated steel, referred to as tin-plate,
and coatings and inks used to print our customers' designs and logos onto
tin-plate. Tin-plate represents one of our largest raw material costs. Our
domestic operations purchase tin-plate principally from domestic steel
manufacturers, with a smaller portion purchased from foreign suppliers. Our
European operations purchase tin-plate principally from European suppliers.
We believe that adequate quantities of tin-plate will continue to be
available from steel manufacturers. Our largest domestic steel suppliers are
U.S. Steel, Weirton Steel and LTV, while Corus, Usinor and Aceralia supply the
largest volume in Europe. We have not historically entered into written supply
contracts with steel makers and believe that other container manufacturers
follow the same practice.
Our domestic and European operations (including May) purchase approximately
500,000 tons of tin-plate annually. Tin-plate prices have increased slightly
over the last five years. Historically, we have been able to negotiate lower
price increases than those announced by our major suppliers. In Europe, we
expect a slight decrease in tin-plate prices due to the increased purchasing
power following the May acquisition and other consolidation factors influencing
European steel. Many of our domestic and some of our international multi-year
supply agreements with our customers permit us to pass through tin-plate price
increases and, in some cases, other raw material costs. However, we have not
always been able to immediately offset increases in tin-plate prices with price
increases on our products.
While there is some long-term variability, tin prices are fairly stable and
price increases are announced several months before implementation. This
stability enhances our ability to communicate and negotiate required selling
price increases with our customers and minimizes fluctuations of our gross
margins.
Coatings and inks, which are used to coat tin-plate and print designs and
logos, represent our second largest raw material expense. We purchase coatings
and inks from regional suppliers in the United States and Europe. These products
historically have been readily available, and we expect to be able to meet our
needs for coatings and inks in the foreseeable future.
Our plastic products are produced from two main types of resins, which are
petroleum- or natural gas-based products. High-density polyethylene resin is
used to make pails, drums and agricultural products. We use 100% post-industrial
and post-consumer use, recycled polypropylene resin in the production of the
Plastite line of paint cans. The price of resin fluctuates significantly, and we
believe that it is standard industry practice, as well as a requirement in many
contracts, to pass on increases and decreases in resin prices to our customers.
LABOR
As of October 1, 2000, we employed approximately 2,800 salaried and hourly
employees in the United States. Of our total U.S. workforce, approximately 1,750
employees, or 63%, were members of various labor unions, including the United
Steelworkers of America, the International Association of Machinists and the
Graphic Communications International Union. Labor agreements covering 670
employees were successfully negotiated in 1999 and 2000. As of October 1, 2000,
our European subsidiaries employed approximately 1,400 people. In line with
common European practices, all plants are unionized.
We have followed a labor strategy designed to enhance our flexibility and
productivity through constructive relations with our employees and collective
bargaining units. Our practice is to deal directly with labor unions on
employment contract issues and other employee concerns. We believe that we and
our employees have benefited from this approach, and we intend to continue this
practice in the future. This practice also has the effect of staggering renewal
negotiations with the various
54
<PAGE>
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.
<TABLE>
<CAPTION>
LOCATION SIZE (IN SQ. FT.) STATUS
-------- ----------------- --------
<S> <C> <C>
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
</TABLE>
------------------------
(1) Subject to a mortgage in favor of Societe Generale.
(2) The property at Merthyr Tydfil is subject to a 999-year lease with a
pre-paid option to buy that becomes exercisable in January 2007. Up to that
time, the landowner may require us to purchase the property for a payment of
one Pound Sterling. Currently, the leasehold interest in, and personal
property located at, Merthyr Tydfil is subject to a pledge to secure amounts
outstanding under a credit agreement with General Electric Capital
Corporation.
We believe our facilities are adequate for our present needs and that our
properties are generally in good condition, well-maintained and suitable for
their intended use. We continuously evaluate the
55
<PAGE>
composition of our various manufacturing facilities in light of current and
expected market conditions and demand, and may further consolidate our plant
operations in the future.
ENVIRONMENTAL MATTERS
Our operations are subject to environmental laws in the United States and
abroad, including those described below. Our capital and operating budgets
include costs and expenses associated with complying with these laws, including
the acquisition, maintenance and repair of pollution control equipment, and
routine measures to prevent, contain and clean up spills of materials that occur
in the ordinary course of our business. In addition, our production facilities
require environmental permits that are subject to revocation, modification and
renewal. We believe that we are in substantial compliance with environmental
laws and our environmental permit requirements, and that the costs and expenses
associated with such compliance are not material to our business. However,
additional operating costs and capital expenditures could be incurred if, among
other developments, additional or more stringent requirements relevant to our
operations are promulgated.
Among other environmental laws, our operations are subject to regulation
under the federal Clean Air Act, the Clean Water Act and the Resource
Conservation and Recovery Act, as well as similar state statutes. Capital costs
for additional air pollution controls or monitors may be required at certain of
our sites if certain Clean Air Act regulations become effective. The proposed
regulations are currently under review, and no definitive date has been set for
issuance.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), and similar state statutes, an
owner or operator of real property or a person who arranges for disposal of
hazardous substances may be liable for the costs of removing or remediating
hazardous substance contamination. Liability may be imposed under these statutes
regardless of whether the owner or operator owned or operated the real property
at the time of the release of the hazardous substances, and regardless of
whether the release or disposal was in compliance with law at the time it
occurred. We are not aware of any current material claims under CERCLA or
similar state statutes against us.
We have been, however, designated as a potentially responsible party at
various superfund sites in the United States. As a potentially responsible
party, we are or may be legally responsible, jointly and severally with other
members of the potentially responsible party group, for the cost of
environmental remediation of these sites. Based on currently available data, we
believe our contribution to these sites was, in most cases, minimal.
We have been named as a potentially responsible party for costs incurred in
the clean-up of a groundwater plume partially extending underneath a property
located in San Leandro, California, formerly a site of one of our can assembly
plants. We are a party to an indemnity agreement related to this matter with the
owner of the property. Extensive soil and groundwater investigative work has
been performed at this site. We, along with other potentially responsible
parties at the site, participated in a coordinated sampling event in 1999. The
results of the sampling were inconclusive as to the source of the contamination.
While the State of California has not yet commented on the sampling results, we
believe that the source of contamination is unrelated to our past operations.
From time to time, contaminants from current or historical operations have
been detected at some of our present and former sites, principally in connection
with the removal or closure of underground storage tanks. We are not currently
aware that any of our facility locations have material outstanding claims or
obligations relating to contamination issues.
56
<PAGE>
LITIGATION
We are involved in litigation from time to time in the ordinary course of
our business. In our opinion, none of this litigation is material to our
financial condition or results of operations.
In May 1998, the National Labor Relations Board issued a decision ordering
us to pay $1.5 million in back pay, plus interest, for a violation of certain
sections of the National Labor Relations Act. The violation was a result of our
closure of certain facilities in 1991 and our failure to offer inter-plant job
opportunities to certain affected employees. We have appealed this decision on
the grounds, among others, that we are entitled to a credit against this award
for certain supplemental unemployment benefits and pension payments. We
presented oral arguments in late September 2000, and we are waiting for the
court's decision. We believe this appeal will be successful.
On September 20, 2000, a class action lawsuit was filed against U.S. Can,
Pac Acquisition, the directors of U.S. Can and Carl Ferenbach. The complaint
challenges the recapitalization and alleges inadequate disclosure with respect
to U.S. Can's filings with the Securities and Exchange Commission and violations
of Delaware law. The complaint seeks to rescind the recapitalization and
requests that the defendants pay unspecified monetary damages, costs and
attorney's fees. The recapitalization was consummated on October 4, 2000. We
currently are engaged in settlement discussions with the plaintiffs. We believe
that this lawsuit is without merit and, if settlement discussions are
unsuccessful, we intend to contest this matter vigorously.
57
<PAGE>
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.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- ------------------------------------------------
<S> <C> <C>
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
</TABLE>
PAUL W. JONES. Mr. Jones has been our President and Chief Executive Officer
since April 1998, and our Chairman of the Board since July 1998. From 1989 to
1998, Mr. Jones was the President of Greenfield Industries, Inc., an
international tool manufacturer. Prior to joining Greenfield Industries, Inc.,
Mr. Jones held various positions with General Electric for 19 years, including
serving as General Manager--Manufacturing for General Electric Transportation
Systems from 1988 to 1989. Prior to that time, Mr. Jones was the General Manager
of General Electric Drives, Motor and Generator Operations. Mr. Jones is a
member of the Board of Directors of Federal Signal Corporation and Regal-Beloit
Corporation.
JOHN L. WORKMAN. Mr. Workman has been our Executive Vice President and
Chief Financial Officer since his appointment in August 1998. Prior to his
appointment, Mr. Workman served as Executive Vice President and Chief
Restructuring Officer at Montgomery Ward Holding Corporation. Montgomery Ward is
one of the nation's largest privately-held retailers. Mr. Workman joined
58
<PAGE>
Montgomery Ward in 1984 as a general auditor and held a variety of financial
positions with Montgomery Ward, including Vice President--Controller, Vice
President--Finance and Chief Financial Officer. Mr. Workman was an executive
officer of Montgomery Ward in July 1997 when it filed for reorganization under
Chapter 11 of the Federal bankruptcy laws. Prior to joining Montgomery Ward,
Mr. Workman was a partner in Main Hurdman CPAs which later merged into KPMG.
J. MICHAEL KIRK. Mr. Kirk has served as our Executive Vice President,
Marketing since August 1999. In February 2000, Aerosol sales were also added to
his duties. Prior to joining us, he served as General Manager of Blank Fed
Packaging Systems for Tetra Pak, Inc., a manufacturer of beverage packaging
products. He joined Tetra Pak in 1986 as a sales manager and held a number of
sales and marketing positions. At Tetra Pak, he became General Manager of the
nine state Southern Region of Tetra Pak and in 1996 was named General Manager of
Tetra Pak's 33-state Central Region.
GILLIAN V. N. DERBYSHIRE. Ms. Derbyshire has served as our Senior Vice
President, Paint, Plastic and General Line since September 1999. In
February 2000, Custom and Specialty operations were added to Ms. Derbyshire's
responsibilities. Prior to joining us, she served as Vice President and General
Manager of American National Can's Worldwide Plastic Bottle Group, a position
held from June 1997 to September 1999. Prior to joining American National Can,
Ms. Derbyshire was Vice President and General Manager of Tenneco Packaging's EZ
Foil-Registered Trademark- Products Group (from June 1995 to June 1997). Prior
to that, Ms. Derbyshire was Vice President and General Manager, Marketing of the
Tenneco Packaging Specialty Packaging Group.
ROGER B. FARLEY. Mr. Farley has served as our Senior Vice President, Human
Resources since August 1998. Prior to joining us, Mr. Farley was Senior Vice
President, Human Resources from July 1997 to July 1998 and Vice President, Human
Resources from June 1994 to June 1997 of Greenfield Industries, Inc., an
international tool manufacturer. Before joining Greenfield Industries, Inc.,
Mr. Farley spent 28 years with General Electric in various operating and human
resources positions.
DAVID R. FORD. Mr. Ford has served as our Senior Vice President,
International and President, European Operations since November 1997. From 1987
until 1997, Mr. Ford held a number of senior management positions with CMB
Packaging Group, a division of CarnaudMetalbox (a Crown Cork & Seal company),
including Vice President, Eastern Europe; Vice President, European Food Can
business; Regional Vice President, Northern Europe; and Managing Director, CMB
Food Can UK. Crown Cork & Seal is a global metal and plastic packaging company.
THOMAS A. SCRIMO. Mr. Scrimo has served as our Senior Vice President and
General Manager, Aerosol Operations and Business Support since February 2000.
From August 1998 to February 2000, Mr. Scrimo served as our Vice President,
Business Support Operations. Prior to joining us, he served as Vice President of
Operations for Greenfield Industries, Inc., an international tool manufacturer,
from January 1997 to August 1998. Prior to that, he served as Vice President of
Manufacturing of Commercial Cam Co., Wheeling, Illinois, a division of Emerson
Electric Co., a manufacturer of precision material handling equipment.
JOHN R. MCGOWAN. Mr. McGowan has served as our Vice President and
Controller since August 1989. Mr. McGowan joined us in May 1987 and served as
Vice President, Planning from September 1987 to July 1989. Prior to joining us,
Mr. McGowan held a number of financial and management positions during his
25-year tenure with Continental Can Company. Mr. McGowan was employed in
Continental Can Company's general packaging operations as Division Manager,
Finance from February to May 1987 and as Division Controller from February 1982
to January 1987.
LARRY S. MORRISON. Mr. Morrison has served as our Vice President,
Operational Excellence since February 2000. From 1998 to February 2000,
Mr. Morrison served as our Vice President and General
59
<PAGE>
Manager, Custom and Specialty Products. From July 1995 to 1998, Mr. Morrison
served as our Vice President of Manufacturing of Custom and Specialty Products.
From October 1991 to July 1995, Mr. Morrison served as Director of Operations at
our Hubbard, Ohio and Baltimore, Maryland plants. Mr. Morrison was with Sherwin
Williams' container division for 10 years prior to our acquisition of the
division in 1983.
EMIL P. OBRADOVICH. Mr. Obradovich has served as our Vice President and
Chief Technical Officer since February 2000. From 1996 to February 2000,
Mr. Obradovich served as our Managing Director of Technical Service. From 1983
to 1996, Mr. Obradovich served as our Technical Director. He also spent
10 years with Sherwin-Williams prior to our formation.
STEVEN K. SIMS. Mr. Sims has served as our Vice President, General Counsel
and Secretary since June 1998. From April 1995 to May 1998, Mr. Sims served as
our Assistant General Counsel. From September 1989 to March 1995, Mr. Sims was
engaged in private practice at the Chicago-based law firm of Ross & Hardies,
representing public and private companies in corporate and securities matters
and mergers and acquisitions.
SANDRA K. VOLLMAN. Ms. Vollman has served as our Vice President--Finance
since July 2000. From July 1999 to July 2000, Ms. Vollman served as our Vice
President--Business Development. From 1997 to 1999, Ms. Vollman was Vice
President and Corporate Controller for Montgomery Ward and Co. Prior to 1997,
Ms. Vollman held a variety of financial and information systems positions at
Montgomery Ward and was vice president and controller of Signature
Financial/Marketing, Inc., Montgomery Ward's direct marketing subsidiary. Before
joining Montgomery Ward in 1983, Ms. Vollman was audit manager for Arthur
Andersen in Chicago.
CARL FERENBACH. Mr. Ferenbach has served as a Director since the
recapitalization. Mr. Ferenbach is a Managing Director of Berkshire Partners,
which he co-founded in 1986. In addition, he was one of our founding directors
in 1983 and served as a member of our Board of Directors until February 2000. He
has been a director of many of Berkshire Partners' manufacturing, transportation
and telecommunications investments, including, among others, Crown Castle
International Corporation, Wisconsin Central Transportation Corporation, Tranz
Rail Limited and Trico Marine Services, Inc.
RICHARD K. LUBIN. Mr. Lubin has served as a Director since the
recapitalization. Mr. Lubin is a Managing Director of Berkshire Partners, which
he co-founded in 1986. He has been a director of many of Berkshire Partners'
manufacturing, retailing and transportation investments, including, among
others, The Holmes Group, Inc., InteSys Technologies, Inc. and Wisconsin Central
Transportation Corporation.
RICARDO POMA. Mr. Poma has served as a Director since 1983. Since 1979,
Mr. Poma has served as the Managing Partner and Chief Executive Officer of Group
Poma, a family holding company involved in automobile distribution, hotels, real
estate development and manufacturing. Mr. Poma is also Vice Chairman of
International Bancorp of Miami, Inc.; a member of the Advisory Board of Bain
Capital, an investment fund; and President of the School for Economics and
Business, a private university in El Salvador.
FRANCISCO A. SOLER. Mr. Soler has served as a Director since 1983. Since
1985, Mr. Soler has served as the Chairman of International Bancorp of
Miami, Inc., the holding company for The International Bank of Miami, N.A.
Mr. Soler is also President of Harbour Club Milano Spa. and a director of
various industrial and commercial companies in the United Kingdom and El
Salvador.
LOUIS B. SUSMAN. Mr. Susman has served as a Director since 1998.
Mr. Susman is a Vice Chairman of the Citigroup Global Corporate Investment Bank,
Chairman of the Citigroup North American Customer Committee, and a Vice Chairman
of Investment Banking and Managing Director of Salomon Smith Barney Inc. Prior
to joining Salomon Brothers Inc (one of the predecessors of
60
<PAGE>
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
<TABLE>
<CAPTION>
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
--------------------------- -------- -------- -------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
------------------------------
(a) The 1998 amounts for Messrs. Jones and Workman and the 1999 amounts for
Ms. Derbyshire and Mr. Kirk consist of a signing or make-whole bonus (based
on foregone bonus from their previous employers) and a guaranteed partial
year incentive payout. For 1998 and 1999, the amounts shown for all officers
include the dollar value of additional deferred stock units provided by us
to the named executive officers in connection with their deferral of a
portion of their 1998 and 1999 bonuses into deferred stock units under our
Executive Deferred Compensation Plan. Under this plan, eligible executives
were able to defer up to 25% of their annual incentive compensation into
deferred Company stock units, which were settled in cash at the
reorganization date. We contributed one additional deferred stock unit for
each five deferred stock units elected by the executive.
(b) Mr. Jones, Mr. Workman, Ms. Derbyshire and Mr. Kirk joined our company in
April 1998, August 1998, September 1999 and August 1999, respectively.
(c) Options granted in 1999 and 1998 were granted under various option or equity
incentive plans that were terminated as of the October 4, 2000
recapitalization date and reflect shares prior to the recapitalization.
Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000
and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire
and
61
<PAGE>
Mr. Kirk, respectively, under the plans in effect prior to the
recapitalization. All of the foregone options were cancelled at the time of
the recapitalization, and each holder received a cash payment equal to the
product of (i) the $20.00 price per share paid to shareholders in connection
with the recapitalization less the exercise price of the option and
(ii) the number of shares of common stock subject to the option. Options
reflected in this table for 2000 were granted on October 4, 2000 under the
U.S. Can Corporation 2000 Equity Incentive Plan in connection with the
recapitalization.
(d) The 2000 amounts include one-time bonuses in connection with the
recapitalization of $697,500, $156,600, $309,000, $90,700 and $99,400 for
Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk, respectively,
cash proceeds from the cancellation of employee stock options in the
recapitalization of $1,291,312, $252,250, $624,713, $220,000 and $220,288
for Messrs. Jones, Ford and Workman, Ms. Derbyshire and Mr. Kirk,
respectively, distribution of cash from U.S. Can's executive deferred
compensation program to the extent not reported as 1999 or 1998 bonuses, of
$124,384, $39,399, $38,852, $6,053 and $6,053 for Messrs. Jones, Ford and
Workman, Ms. Derbyshire and Mr. Kirk, respectively, contributions or
payments for their benefit to U.S. Can's Salaried Employee Savings and
Retirement Accumulation Plan ("SRAP") of $10,200 for each named executive
officer other than Mr. Ford and $214,538, $80,314, $16,470 and $19,823 for
Messrs. Jones and Workman, Ms. Derbyshire and Mr. Kirk, respectively,
pursuant to nonqualified retirement plans. The 2000 amounts shown for
Mr. Jones, Ms. Derbyshire and Mr. Kirk include the cost of life insurance in
excess of our standard benefit ($5,803, $1,080 and $1,175, respectively).
The 2000 amounts shown for Messrs. Jones, Workman and Kirk include payments
for personal financial planning of $7,300, $3,593 and $1,200, respectively.
The 2000 and 1999 amounts for Mr. Ford include contributions to an executive
retirement plan and an overseas employee benefit trust, of which Mr. Ford is
the beneficiary, designed to provide contractual retirement benefits
($227,011 and $229,424 for 2000 and 1999, respectively) and the cost of life
insurance ($8,958 and $9,692 for 2000 and 1999, respectively). The 2000
amount for Mr. Ford also includes reimbursement for relocation expenses as
provided under his Service Agreement of $87,048.
(e) The 1999 amounts shown for Mr. Jones, Ms. Derbyshire and Mr. Kirk include
the cost of life insurance in excess of our standard benefit ($5,803, $1,080
and $1,175, respectively). The 1999 amounts shown for Messrs. Jones, Workman
and Kirk include contributions or payments for their benefit to U.S. Can's
Salaried Employee Savings and Retirement Accumulation Plan ("SRAP") and
pursuant to nonqualified retirement plans ($90,500, $54,100 and $2,515,
respectively).
(f) Mr. Ford is compensated in British Pounds. Certain amounts shown for
Mr. Ford have been converted to U.S. dollars at the exchange rate in effect
as of the calendar year-end for the year in which payment was made.
OPTION GRANTS IN 2000
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED
ANNUAL RATES OF
STOCK PRICE
% OF TOTAL OPTIONS APPRECIATION FOR
NUMBER OF SECURITIES GRANTED TO OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE OR -------------------
NAME GRANTED (#)(A) FISCAL YEAR BASE PRICE EXPIRATION DATE 5%($) 10%($)
---- -------------------- ------------------ ----------- --------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
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 $202,911
</TABLE>
------------------------------
(a) Options granted in 2000 exclude options for 50,000, 25,000, 30,000, 35,000
and 37,000 shares issued to Messrs. Jones, Ford and Workman, Ms. Derbyshire
and Mr. Kirk, respectively, under the plans in effect prior to the
recapitalization, which were cancelled at the time of the recapitalization.
See note (c) to the Summary Compensation Table.
(b) Represents time-vested options to purchase shares of common stock. These
options vest in equal installments of 20% on October 4 of each of 2001,
2002, 2003, 2004 and 2005, subject to accelerated vesting upon a change of
control of the Company.
(c) Represents performance-based options to purchase shares of common stock.
These options are exercisable only as to the total number of shares that are
both vested and earned. These options vest in equal installments of 20% on
October 4 of each of 2001, 2002, 2003, 2004 and 2005. These options are
earned at the time of an initial public offering or if Berkshire Fund V
Investment Corp. and its affiliates receive a specified return on their
investment in the Company under specific, enumerated circumstances.
62
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN 2000 AND 2000-END OPTIONS/SAR VALUED
No shares were acquired as a result of option exercises by the named
executive officers during 2000. See note (d) to the Summary Compensation Table
for a description of the cash proceeds from the cancellation of employee stock
options in the recapitalization. We have not awarded any stock appreciation
rights ("SARs").
<TABLE>
<CAPTION>
EXERCISABLE/UNEXERCISABLE
NUMBER OF SECURITIES EXERCISABLE/UNEXERCISABLE
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME AT 2000-YEAR END (#) AT 2000-YEAR END ($)(A)
---- ------------------------- -------------------------
<S> <C> <C>
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
</TABLE>
------------------------
(a) Because there was no established trading market for the Company's common
stock as of December 31, 2000, management has determined that the fair
market value of the common stock underlying these options did not exceed
$1.00 (the exercise price of these options) and, accordingly, none of these
options were in-the-money.
63
<PAGE>
PRINCIPAL STOCKHOLDERS
Following the consummation of the transactions on October 4, 2000, we had
one class of issued and outstanding common stock, and U.S. Can owned all of it.
The following table sets forth certain information with respect to the
ownership of U.S. Can's common stock immediately after consummation of the
transactions and reflects U.S. Can's 20 for 1 stock split, which was effected
upon the closing of the recapitalization. As of October 4, 2000, immediately
following the consummation of the transactions, U.S. Can had 53,333,333 shares
of issued and outstanding common stock.
U.S. Can's preferred stock, which has no voting rights other than those
provided by Delaware law, is owned by Berkshire Partners and its co-investors
and the rollover stockholders. See "Description of U.S. Can's Capital
Stock--Preferred Stock."
Notwithstanding the beneficial ownership of common stock presented below,
the stockholders agreement entered into upon consummation of the transactions
governs the stockholders' exercise of their voting rights with respect to the
election of directors and certain other material events. The parties to the
stockholders agreement have agreed to vote their shares to elect the Board of
Directors as set forth therein. See "Certain Relationships and Related Party
Transactions."
The following table describes the beneficial ownership of each class of
issued and outstanding common stock of U.S. Can by each of our directors and
executive officers, our directors and executive officers as a group and each
person who beneficially owns more than 5% of the outstanding shares of common
stock of U.S. Can as of October 1, 2000. As used in the table, beneficial
ownership has the meaning set forth in Rule 13d-3(d)(1) of the Exchange Act.
<TABLE>
<CAPTION>
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OWNERSHIP
---------------- ---------------- -----------------
<S> <C> <C>
Berkshire Partners LLC(1)................................... 41,229,278 77.30%
Salomon Smith Barney Inc.(2)................................ 2,613,332 4.90
Paul W. Jones............................................... 1,933,334 3.63
John L. Workman............................................. 1,000,000 1.88
J. Michael Kirk............................................. 333,333 *
Gillian V. N. Derbyshire.................................... 333,333 *
Roger B. Farley............................................. 533,333 1.00
David R. Ford............................................... 453,333 *
Thomas A. Scrimo............................................ 213,334 *
Carl Ferenbach(3)........................................... 41,229,278 77.30
Richard K. Lubin(4)......................................... 41,229,278 77.30
Ricardo Poma(5)............................................. 2,202,344 3.89
Francisco A. Soler(6)....................................... 951,485 1.68
Louis B. Susman(7).......................................... 2,613,332 4.62
All officers and directors as a group (12 persons).......... 51,769,758 96.41
</TABLE>
------------------------
* Less than 1%
(1) Includes 25,847,737 shares of common stock held by Berkshire Fund V
Investment Corp.; 2,584,771 shares of common stock held by Berkshire
Investors LLC; and 12,796,770 shares of
64
<PAGE>
common stock held by Berkshire Fund V Coinvestment Corp. The address of
Berkshire Partners LLC is One Boston Place, Suite 3300, Boston,
Massachusetts 02108.
(2) The address of Salomon Smith Barney Inc. is 8700 Sears Tower, Chicago,
Illinois 60606.
(3) Mr. Ferenbach is a Managing Director of Berkshire Partners LLC.
(4) Mr. Lubin is a Managing Director of Berkshire Partners LLC.
(5) Mr. Poma beneficially owns 2,202,344 shares of U.S. Can common stock as a
result of his relationship to (i) Salcorp Ltd., a company of which
Mr. Poma is the sole stockholder, director and executive officer, and which
is the record holder of 924,804 shares, (ii) Scarsdale Company N.V., Inc.,
a company of which Mr. Poma is a director and executive officer and which
is the record holder of 26,681 shares, and (iii) Barcel Corporation, which
is the record holder of 1,250,859 shares and is wholly owned by United
Capital Corporation, which is wholly owned by Inversal Trust, a family
trust of which Mr. Poma is the trustee.
(6) Mr. Soler beneficially owns 951,485 shares of U.S. Can common stock as a
result of his relationship to (i) Windsor International Corporation, a
company of which Mr. Soler is a director and executive officer and which is
the record holder of 424,460 shares, (ii) Atlas World Carriers S.A., a
company of which Mr. Soler is a director and executive officer and which is
the record holder of 250,172 shares, (iii) The World Financial Corporation
S.A., a company of which Mr. Soler is a director and executive officer and
which is the record holder of 250,172 shares, and (iv) Scarsdale Company
N.V., Inc., a company of which Mr. Soler is an executive officer and which
is the record holder of 26,681 shares.
(7) Mr. Susman is the Vice Chairman of Investment Banking and Managing Director
of Salomon Smith Barney Inc. Salomon Smith Barney owns 2,613,332 shares of
common stock.
65
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH BERKSHIRE PARTNERS
Berkshire Partners has been actively involved in our company through Carl
Ferenbach, a founding partner of Berkshire Partners. Mr. Ferenbach was one of
our founding directors in 1983 and served as a member of our Board of Directors
until February 2000. Upon the completion of the transactions, Berkshire Partners
received a fee of $2.0 million. In addition, Berkshire Partners will receive a
management fee of $750,000 per year.
RELATIONSHIP WITH SALOMON SMITH BARNEY
Salomon Smith Barney currently beneficially owns 4.62% of our common stock
and provides us with investment banking and financial advisory services. Between
1997 and 1998, we paid Salomon Brothers Inc, one of Salomon Smith Barney's
predecessors, approximately $800,000 in fees in connection with the sale of our
commercial metal services business. We paid Salomon Smith Barney $2.0 million in
fees for financial advisory services provided in connection with the
transactions. In addition, we paid Salomon Smith Barney customary fees for
serving as sole book running manager for the original offering, as dealer
manager in U.S. Can's tender offer for all of its outstanding 10 1/8% notes due
2006 and as joint arranger under our new senior secured credit facility.
STOCKHOLDERS AGREEMENT
In connection with the recapitalization, we entered into a stockholders
agreement with our stockholders which provides for, among other things, certain
restrictions and rights related to the transfer, sale or purchase of our common
stock and preferred stock. See "Description of U.S. Can's Capital
Stock--Stockholders Agreement."
TRANSACTIONS WITH MANAGEMENT
EXECUTIVE DEFERRED COMPENSATION PLAN
Our executive deferred compensation plan permits eligible executives to
reduce the amount of their current taxable income by deferring payment of up to
25% of their annual cash bonus under our management incentive plan. The
deferrals are invested in stock units of U.S. Can and the executive is entitled
to a 20% company match on the number of stock units credited. The matching stock
units generally vest over five years. As a result of the recapitalization, each
executive who continued to be a stockholder of our company after the
recapitalization received a cash distribution from the executive deferred
compensation plan equal to the product of:
- the number of stock units held by such executive, including vested and
unvested matching stock units; and
- $20.00.
Participants in our executive deferred compensation plan who did not
continue to be stockholders of our company after the recapitalization became
vested in their matching stock units in the amount of $20.00 per matching stock
unit. The vested amount was transferred to other investments.
EXECUTIVE SEVERANCE PLAN
Certain of our executive officers are eligible to participate in our
executive severance plan. The executive severance plan provides an executive
with a severance payment equal to 12 months (18 months in certain circumstances)
of the executive's base salary in the event the executive is terminated without
cause or leaves for good reason. In the cases of Ms. Derbyshire and
Messrs. Farley, Kirk, Morrison, Scrimo, Sims and Workman, the executive
severance plan will not provide a severance
66
<PAGE>
benefit if these executives are entitled to receive a severance benefit under
their change in control agreements (described below).
U.S. CAN CORPORATION 2000 EQUITY INCENTIVE PLAN
In connection with the recapitalization, the Board of Directors and
stockholders of U.S. Can approved the U.S. Can Corporation 2000 Equity Incentive
Plan. The Board of Directors administers the plan and may, from time to time,
grant option awards to directors of U.S. Can, including directors who are not
employees of U.S. Can, all executive officers of U.S. Can and its subsidiaries,
and other employees, consultants, and advisers who, in the opinion of the Board,
are in a position to make a significant contribution to the success of U.S. Can
and its subsidiaries. The Board of Directors may grant options that are
time-vested and options that vest based on the attainment of certain performance
goals determined by the Board of Directors.
CHANGE IN CONTROL AGREEMENTS
Certain of our executive officers are a party to a change in control
agreement. The recapitalization constituted a change in control under each
agreement, which generally requires us to provide severance benefits to the
executive officer upon his or her termination of employment during the agreement
term.
The agreements with Messrs. Morrison and Sims provide that, until the end of
the 24th month following October 2000, the executive will be entitled to the
following benefits during the term of such executive's agreement while employed
by the company:
- a salary which is not less than his or her highest annual base salary rate
during the one-year period before the change in control;
- continued participation in our management incentive plan or any
replacement bonus plan providing an opportunity for an incentive payment
equal to at least the greatest incentive compensation opportunity provided
to him or her during the one-year period prior to the change in control;
- life insurance coverage providing an amount in death benefits that is not
less than two times the executive's base salary and disability income
replacement coverage; and
- participation in health, welfare, retirement and other fringe benefit
programs on substantially the same terms as those benefits that are
provided to other senior management employees.
If we terminate the executive without cause at any time prior to the end of the
24th month following October 2000, or if the executive leaves employment as a
result of a constructive termination, the executive is entitled to a lump sum
severance payment. This payment will equal 18 months of base salary for
Mr. Morrison and 12 months of base salary for Mr. Sims. In addition, the
executives will be entitled to pro rata payments of bonus awards under the
management incentive plan.
The agreements with Messrs. Ford, McGowan and Obradovich provide that upon
termination by us or constructive termination by the executive within two years
of a change in control, the executive will be entitled to:
- a severance payment equal to two times the greater of his current annual
base salary or the annual base salary immediately before the change in
control in the cases of Messrs. Ford and McGowan and equal to one times
such amount in the case of Mr. Obradovich;
- a pro-rated bonus based on the executive's target bonus;
- accelerated vesting of all restricted stock grants awarded to
Mr. McGowan; and
67
<PAGE>
- continuation of health and welfare benefits for two years following
termination in the cases of Messrs. Ford and McGowan and for one year in
the case of Mr. Obradovich.
EMPLOYMENT AGREEMENT WITH MR. JONES
As of the recapitalization, Mr. Jones terminated his then existing change of
control agreement and entered into a new employment agreement with us. We
entered into a two-year employment agreement with Mr. Jones on October 4, 2000.
Under the terms of Mr. Jones' employment agreement, he will be paid an annual
base salary of at least $610,000. His base salary and other compensation will be
reviewed annually by the Compensation Committee of the Board of Directors.
Mr. Jones participates in our management incentive plan with an opportunity to
receive a bonus payment equal to 100% of his base salary. We have also agreed to
provide Mr. Jones with term life insurance coverage with death benefits at least
equal to twice his base salary, an automobile allowance and employee benefits
comparable to those provided to our other senior executives.
In the event of the termination of Mr. Jones' employment with us due to his
death or permanent disability, we will pay him or his estate:
(1) an amount equal to one year's base salary reduced by any amounts
received from any life or disability insurance provided by us; and
(2) if Mr. Jones is entitled to receive a bonus payment under the management
incentive plan, a bonus payment prorated to reflect any partial year of
employment.
In the event Mr. Jones terminates his employment for good reason or we terminate
his employment without cause, we will pay him:
(1) his base salary and benefits for the earliest to occur of 18 months, his
death or the date that he breaches the provisions of his employee
agreement (relating to non-competition, confidentiality and inventions);
and
(2) if Mr. Jones is entitled to receive a bonus payment under the management
incentive plan, a bonus payment prorated to reflect any partial year of
employment.
If Mr. Jones' employment is terminated for cause or by voluntary resignation, he
will receive no further compensation.
EMPLOYMENT AGREEMENTS WITH MS. DERBYSHIRE AND MESSRS. FARLEY, KIRK, SCRIMO AND
WORKMAN
As of the recapitalization, Ms. Derbyshire and Messrs. Farley, Kirk, Scrimo
and Workman, referred to as the executives, terminated their then existing
change of control agreements and entered into new employment agreements with us.
We entered into two-year employment agreements with each of the executives on
October 4, 2000. Under the terms of these employment agreements, Ms. Derbyshire
and each of Messrs. Farley, Kirk, Scrimo and Workman will be paid an annual base
salary of at least $260,000, $226,000, $235,000, $220,000 and $390,000,
respectively. Each executive's base salary and other compensation will be
reviewed annually by that executive's supervisor. Each executive also
participates in our management incentive plan with an opportunity to receive a
bonus payment equal to 50% of his or her base salary. We have also agreed to
provide each executive with term life insurance coverage with death benefits at
lease equal to twice his or her base salary, an automobile allowance and
employee benefits comparable to those provided to our other senior executives.
In the event of the termination of an executive's employment with us due to
his or her death or permanent disability, we will pay him or her or his or her
estate:
(1) an amount equal to one year's base salary reduced by any amounts
received from any life or disability insurance provided by us; and
68
<PAGE>
(2) if the executive is entitled to receive a bonus payment under the
management incentive plan, a bonus payment prorated to reflect any
partial year of employment.
In the event an executive terminates his or her employment for good reason or we
terminate his or her employment without cause, we will pay him or her:
(1) his or her base salary and benefits for the earliest to occur of
18 months, his or her death or the date that he or she breaches the
provisions of his or her employee agreement (relating to non-competition,
confidentiality and inventions); and
(2) if the executive is entitled to receive a bonus payment under the
management incentive plan, a bonus payment prorated to reflect any
partial year of employment.
If an executive's employment is terminated for cause or by voluntary
resignation, he or she will receive no further compensation.
SERVICE AGREEMENT WITH MR. FORD
We have entered into a service agreement with Mr. Ford through our wholly
owned subsidiary, USC Holding UK Limited. The service agreement will continue in
effect until it is terminated by us or Mr. Ford, but not beyond Mr. Ford's
attainment of USC Holding UK Limited's retirement age (currently 65). We have
agreed to pay Mr. Ford a base salary of L232,000 per year during the term of his
agreement and to provide him with an automobile and retirement benefits no less
beneficial than those provided by his previous employer. We have agreed to
provide a target bonus for Mr. Ford of 50% of his base salary with the actual
amount based upon the attainment of pre-established performance goals.
Mr. Ford may terminate his employment by providing us with 12 months notice.
We may terminate Mr. Ford's employment by giving him 24 months notice, except we
may terminate Mr. Ford's employment for cause without prior notice. After
termination notice is given and prior to expiration of the notice period, we are
required to continue to pay Mr. Ford's salary and provide other contractual
benefits. If Mr. Ford's employment is terminated by reason of redundancy, we are
required to make an additional payment to Mr. Ford equal to two times his
entitlement to statutory redundancy pay (to include the statutory entitlement).
Additionally, the service agreement requires Mr. Ford to refrain from
disclosing confidential information acquired in connection with his employment
with us and also requires Mr. Ford to refrain from working for any other firm
during the term of the agreement.
69
<PAGE>
OTHER INDEBTEDNESS
SENIOR SECURED CREDIT FACILITY
GENERAL. On October 4, 2000, in connection with the recapitalization, the
Company entered into a senior secured credit facility with Bank of America,
N.A., Citicorp North America, Inc. and certain other lenders. The senior secured
credit facility provides for aggregate borrowings by us of $400.0 million. As of
October 1, 2000, after giving pro forma effect to the transactions, there would
have been approximately $295.4 million (including $14.9 million of letters of
credit) of outstanding indebtedness under the senior secured credit facility and
approximately $104.6 million of unused commitment under the senior secured
credit facility for working capital and other corporate purposes. The senior
secured credit facility includes:
- an $80.0 million tranche A term loan;
- a $180.0 million tranche B term loan; and
- a $140.0 million revolving credit facility.
Up to $75.0 million of the revolving credit facility is available in certain
foreign currencies, including British Pounds Sterling, French Francs, German
Deutsche Marks and Euros and other foreign currencies approved by the lenders
for borrowings by certain of our foreign subsidiaries.
INTEREST. Amounts outstanding under the senior secured credit facility bear
interest, at our option, at a rate per annum equal to either: (1) the base rate
(as defined in the senior secured credit facility) or (2) the LIBOR rate (as
defined in the senior secured credit facility), in each case, plus an applicable
margin. The applicable margin for the tranche A term loan and the revolving
credit facility is initially 2.25% for base rate loans and 3.25% for LIBOR
loans. The applicable margin for the tranche A term loan and the revolving
credit facility is subject to reduction based on the achievement of certain
leverage ratio targets and provided that no event of default has occurred and is
continuing. The applicable margin for the tranche B term loan is fixed at 2.75%
for base rate loans and 3.50% for LIBOR loans, subject to reduction based on our
senior secured credit rating. The applicable margins are not subject to
reduction until after March 2001. As of October 1, 2000, our borrowings under
the senior secured credit facility would have borne interest at rates ranging
from 9.58% to 9.83%. The interest rate otherwise payable under the senior
secured credit facility will increase by 2% per annum during the continuance of
a payment default or another event of default for which the lenders have taken
affirmative action.
MATURITY AND MANDATORY PREPAYMENTS. Borrowings under the tranche A term
loan are due and payable in quarterly installments, which are initially
$1 million and increase over time to $8 million, until the final balance is due
on the sixth anniversary of the closing of the recapitalization. Borrowings
under the tranche B term loan are due and payable in quarterly installments (the
quarterly payments due before December 31, 2006 being in nominal amounts), with
the final balance due on the eighth anniversary of the closing of the
recapitalization. The revolving credit facility is available until the sixth
anniversary of the closing of the recapitalization. In addition, we are required
to prepay the facilities under the senior secured credit facility in an amount
equal to:
- 100% of the net cash proceeds from certain asset sales by us subject to
certain baskets and reinvestment provisions;
- 75% (if our senior debt/EBITDA ratio is equal to or greater than 3.0:1.0)
or 50% (if our senior debt/EBITDA ratio is less than 3.0:1.0) of excess
cash flow (as defined);
- 100% of the net cash proceeds from the issuance of any debt (excluding the
proceeds from the notes) by us; and
70
<PAGE>
- 50% of the net cash proceeds from our issuance of equity, excluding, among
other things, (a) proceeds from any issuance of equity within one year of
the closing of the recapitalization which are applied to permanently
reduce the outstanding bridge notes, and (b) when no bridge notes are
outstanding, (i) any equity invested by Berkshire Partners and the
rollover stockholders and (ii) equity invested in connection with a
permitted acquisition.
SECURITY AND GUARANTEES. The senior secured credit facility is secured by a
first priority security interest in all existing and after-acquired assets of us
and all of our direct and indirect domestic subsidiaries' existing and
after-acquired assets, including, without limitation, real property and all of
the capital stock owned by us and our direct and indirect domestic subsidiaries
(including certain capital stock of their direct foreign subsidiaries only to
the extent permitted by applicable law). In addition, the loans made to our
foreign subsidiaries under the senior secured credit facility will be secured by
the existing and after-acquired assets of certain of our foreign subsidiaries.
All of our obligations under the senior secured credit facility are fully and
unconditionally guaranteed by U.S. Can and all of the Company's present and
future domestic subsidiaries. In addition, U.S. Can, the Company, each guarantor
and, to the extent permitted by law, each subsidiary and parent of any foreign
subsidiary authorized to borrow amounts under the senior secured credit facility
will guarantee any borrowings by any designated foreign subsidiaries permitted
to borrow amounts under the senior secured credit facility.
COVENANTS. The senior secured credit facility requires us to meet certain
financial tests, including, without limitation:
- minimum interest coverage;
- minimum EBITDA;
- minimum fixed charge coverage; and
- maximum leverage.
The senior secured credit facility contains certain covenants which, among
other things, limit:
- the incurrence of additional debt;
- investments;
- dividends;
- transactions with affiliates;
- capital expenditures;
- asset sales;
- acquisitions, mergers and consolidations;
- prepayments of other debt (including the notes);
- amendments to the terms of any debt (including the notes) that would be
adverse to the lenders; and
- liens, encumbrances and negative pledges.
EVENTS OF DEFAULT. The senior secured credit facility contains customary
events of default, including, among other things:
- payment defaults;
- breaches of representations and warranties;
71
<PAGE>
- covenant defaults;
- cross-defaults to certain other debt (including the notes);
- certain events of bankruptcy and insolvency;
- failure of the subordination provisions in the notes to be effective with
respect to each holder of the notes;
- judgment defaults;
- failure of any guarantee or security document supporting the senior
secured credit facility to be in full force and effect; and
- a change of control of the Company or U.S. Can.
WAIVER AND MODIFICATION. The terms of the senior secured credit facility
may be waived or modified upon approval by the Company and the required
percentage of the senior lenders and without the consent of the exchange note
holders.
72
<PAGE>
DESCRIPTION OF U.S. CAN'S CAPITAL STOCK
GENERAL
U.S. Can has two authorized classes of capital stock: preferred stock and
common stock, each with par value $.01 per share. The number of authorized
shares of preferred stock is 200,000,000 and the number of authorized shares of
common stock is 100,000,000. Immediately following the recapitalization, there
were 106,666,667 shares of U.S. Can preferred stock and 53,333,333 shares of
U.S. Can common stock outstanding. In addition, U.S. Can has reserved 3,253,761
shares of common stock for issuance upon exercise of employee stock options.
PREFERRED STOCK
As part of the transactions, U.S. Can issued and sold in a private placement
shares of preferred stock having an aggregate value of $106.7 million to
Berkshire Partners and its affiliates and the rollover stockholders. The
principal terms of the preferred stock are summarized below. This summary,
however, is not complete and is qualified in its entirety by reference to the
provisions of U.S. Can's Certificate of Incorporation, as in effect at the time
of the closing of the transactions.
DIVIDENDS. Dividends accrue on the preferred stock at an annual rate of 10%,
are cumulative from the date of issuance and compounded quarterly, on March 31,
June 30, September 30 and December 31 of each year and are payable in cash when
and as declared by our Board of Directors, so long as sufficient cash is
available to make the dividend payment and such cash has been obtained in a
manner permitted under the terms of our new senior secured credit facility and
the indenture.
VOTING RIGHTS. Holders of the preferred stock have no voting rights, except
as otherwise required by law.
RANKING. The preferred stock has a liquidation preference equal to the
purchase price per share, plus all accrued and unpaid dividends. The preferred
stock ranks senior to all classes of U.S. Can common stock and is not
convertible into common stock.
REDEMPTION. U.S. Can is required to redeem the preferred stock, at the
option of the holders, at a price equal to its liquidation preference, plus
accrued and unpaid dividends, upon the occurrence of any of the following events
and so long as sufficient cash is available at U.S. Can or available from
dividend payments permitted under the terms of the indenture:
- the bankruptcy of either U.S. Can or the Company;
- the acceleration of debt under any major loan agreement to which U.S. Can
or any of its subsidiaries is a party; or
- public offerings of shares of capital stock of U.S. Can.
No holder of preferred stock, however, may require U.S. Can to redeem the
preferred stock if doing so would cause the bankruptcy of U.S. Can or the
Company or a breach of the indenture. In addition, if proceeds from public
offerings of U.S. Can's stock are insufficient to redeem all of the shares of
the preferred stock that the holders wish to be redeemed, U.S. Can is required
to redeem the remaining shares at a price equal to its liquidation preference,
366 days after the tenth anniversary of the closing of the transactions or the
payment in full of the notes and the debt outstanding under the new senior
secured credit facility, whichever is earlier.
U.S. Can's certificate of incorporation expressly states that any redemption
rights of holders of preferred stock shall be subordinate or otherwise subject
to prior rights of the lenders under our new senior secured credit facility and
the holders of the exchange notes.
73
<PAGE>
Upon a change of control of U.S. Can (as defined in the indenture), the
shares of preferred stock may be redeemed at the option of either the holders or
U.S. Can, subject to the terms of our new senior secured credit facility and
after the holders of the notes have been made and completed the requisite offer
to repurchase following a change of control under the indenture.
The new senior secured credit facility prohibits our ability to redeem the
preferred stock, and the indenture restricts U.S. Can's ability to obtain funds
that may be necessary to redeem the preferred stock.
COMMON STOCK
Each share of common stock entitles the holder of the share to one vote in
the election of directors and all other matters submitted to a vote of U.S.
Can's stockholders. Holders of U.S. Can common stock do not have cumulative
voting rights.
Subject to any preferential rights of any outstanding shares of preferred
stock, holders of shares of common stock are entitled to receive, pro rata based
on the number of shares held, cash dividends when and if declared by the Board
of Directors from funds legally available for such purpose. However, U.S. Can
does not expect to pay cash dividends in the foreseeable future. As a holding
company, U.S. Can's ability to pay dividends depends on the receipt of dividends
or other payments from the Company. The senior secured credit facility and the
indenture limit the Company's ability to pay dividends or otherwise transfer
cash to U.S. Can. See "Other Indebtedness" and "Description of Exchange Notes."
In the event of a liquidation of U.S. Can, holders of shares of common stock
are entitled to receive, pro rata based on the number of shares held, all of the
assets remaining available for distribution to holders of common stock after
payment of all prior claims, including any preferential liquidation rights of
any preferred stock then outstanding.
Holders of shares of common stock have no preemptive rights to subscribe to
additional shares of any such class or other securities of U.S Can. All
outstanding shares of common stock are fully paid and nonassessable.
STOCKHOLDERS AGREEMENT
In connection with the recapitalization, we entered into a stockholders
agreement with our stockholders. The stockholders agreement has the following
provisions:
- Prior to the third anniversary of the closing of the recapitalization, no
stockholder may transfer shares of U.S. Can capital stock (other than
certain limited exceptions including permitted transfers to an affiliate
or in connection with estate planning).
- After the third anniversary of the closing of the recapitalization, a
stockholder may only transfer shares of U.S. Can capital stock (other than
certain limited exceptions including permitted transfers to an affiliate
or in connection with estate planning) after the transferring stockholder
first gives U.S. Can, and then the other stockholders on a pro rata basis,
a right of first refusal to purchase all or a portion of the shares at the
same price.
- U.S. Can has the right to purchase U.S. Can equity securities held by a
management stockholder (as defined) in the event the management
stockholder's employment with U.S. Can is terminated for any reason.
- If a management stockholder's employment with U.S. Can is terminated by
virtue of death, disability or retirement in accordance with U.S. Can
policy, the management stockholder will have the right to require U.S. Can
to purchase his or her equity securities of U.S. Can.
74
<PAGE>
- If, at any time, certain stockholders holding 75% of the outstanding
common stock equivalents (as defined) (i.e., Berkshire Partners, its
affiliates and another stockholder) elect to consummate the sale of 50% or
more of the common stock of U.S. Can to an unaffiliated third party, the
remaining stockholders will be obligated to consent to and take all
actions necessary to complete the proposed sale of the same proportion of
their stock on the same terms.
- After the third anniversary of the closing of the recapitalization, a
stockholder (or a group of stockholders together) owning more than 4% of
the outstanding shares of U.S. Can capital stock may only (other than in
connection with estate planning transfers) transfer the shares to an
unaffiliated third party, so long as other stockholders are given the
option to participate in the proposed transfer on the same terms and
conditions on a pro rata basis (except in connection with certain
permitted transfers).
- The stockholders have agreed to elect directors of U.S. Can such that the
Board of Directors will consist of two designees of Berkshire and its
affiliates so long as the Berkshire stockholders maintain ownership of at
least 25% of the U.S. Can common stock, two designees of management
stockholders, Louis Susman, Ricardo Poma, Francisco Soler (or other
designees of the Scarsdale Group if Francisco Soler and Ricardo Poma both
no longer serve on the Board of Directors so long as the Scarsdale Group
owns at least 5% of the U.S. Can common stock) and two other independent
directors acceptable to the other directors.
- Following an initial public offering of U.S. Can common stock, certain
stockholders will have either one or two demand registration rights. The
stockholders will be entitled to "piggy-back" registration rights on all
registrations of U.S. Can common stock by U.S. Can or any other
stockholder, subject to customary underwriter cutback.
- So long as U.S. Can is not paying default interest under any of its
financing arrangements, an 80% vote of the common stockholders will be
required to approve and adopt mergers, acquisitions, charter or bylaw
amendments, extraordinary borrowings, dividends, stock issuances and
certain other matters. An 80% vote will be required at all times for a
financial restructuring that treats the management stockholders
differently and adversely from the rest of the common stockholders.
- Stockholders have pre-emptive rights to subscribe for newly issued shares
on a pro rata basis, subject to certain exclusions.
- Most of the restrictions contained in the stockholders agreements
terminate upon consummation of a qualified initial public offering of
common stock by U.S. Can or certain changes in control of U.S. Can.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
All of the Company's issued and outstanding capital stock is owned
beneficially by U.S. Can. The Company has no outstanding capital stock other
than common stock, and there are no outstanding options, warrants or other
rights to purchase the Company's capital stock.
75
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
CAPITALIZED TERMS USED IN THIS SECTION OF THE PROSPECTUS ARE DEFINED LATER
UNDER THE HEADING "DEFINITIONS."
The Company will issue the exchange notes under the indenture dated
October 4, 2000 (the "Indenture") among the Company, the Parent Guarantor, the
Subsidiary Guarantors and Bank One Trust Company, N.A., as trustee (the
"Trustee").
The terms of the exchange notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939. The exchange notes are subject to all those terms, and reference is made
to the Indenture and the Trust Indenture Act for a statement of those terms.
Copies of the Indenture and the form of exchange notes have been filed as
exhibits to the registration statement of which this prospectus is a part.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the notes issued in the original offering,
except that:
- the exchange notes will bear a Series B designation;
- the exchange notes have been registered under the Securities Act and,
therefore, will generally not bear legends restricting their transfer; and
- the holders of the exchange notes will not be entitled to certain rights
under the registration rights agreement dated as of October 4, 2000 by and
among, the Company, Salomon Smith Barney and Banc of America Securities
LLC, including the provision providing for liquidated damages in certain
circumstances relating to the timing of the exchange notes.
The exchange notes will evidence the same debt as the notes issued in the
original offering and will be entitled to the benefits of the Indenture. The
exchange notes will rank equally with the notes issued in the original offering
if all of these notes are not exchanged pursuant to the exchange offer and will
vote together with the notes on all matters voted upon under the Indenture.
The following summary of specific provisions of the Indenture is not
intended to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Indenture and the exchange notes,
including the definitions of certain terms therein and those terms made a part
thereof by the Trust Indenture Act. Capitalized terms used in this section and
not otherwise defined below under the heading "Definitions" have the respective
meanings assigned to them in the Indenture.
GENERAL
The exchange notes are the Company's general unsecured senior subordinated
obligations and will initially be limited to $175.0 million aggregate principal
amount. The exchange notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Except in
limited circumstances, the exchange notes will be issued as a global note. See
"The Exchange Offer--Procedures for Tendering." No service charge will be made
for any registration of transfer of notes, but the Company may require payment
of a sum sufficient to cover any transfer tax or other similar governmental
charge payable in connection therewith.
The payment of principal, premium, if any, and interest on the exchange
notes is unconditionally guaranteed on a senior subordinated and unsecured basis
by the Parent Guarantor (the "Parent Guarantee") and the Subsidiary Guarantors
(the "Subsidiary Guarantees" and, together with the Parent Guarantee, referred
to as the "Guarantees"). The Parent Guarantor and the Subsidiary Guarantors are
collectively referred to as the "Guarantors" and are individually referred to as
a "Guarantor." See "--Parent and Subsidiary Guarantees."
76
<PAGE>
ADDITIONAL NOTES
The Company may, without the consent of the Holders of exchange notes,
create and issue up to $100.0 million aggregate principal amount of additional
notes ranking equally with the exchange notes in all respects. Such additional
notes will be consolidated with the exchange notes and form a single series with
the exchange notes and will have the same terms as to status, redemption or
otherwise as the exchange notes. Additional notes may be issued from time to
time subject to the limitations set forth under "--Certain Covenants--Limitation
on Indebtedness."
PAYMENT TERMS
The exchange notes will mature on October 1, 2010 and will bear interest at
a rate of 12 3/8% per annum until maturity. The Company will pay interest
semiannually on April 1 and October 1 of each year, beginning April 1, 2001, to
the persons who are registered Holders of the exchange notes at the close of
business on the March 15 or September 15 immediately preceding such interest
payment date. The Company will pay interest on overdue principal at 1% per annum
in excess of the set rate, and it will pay interest on overdue installments of
interest at the same higher rate to the extent lawful. Interest on the exchange
notes will accrue from the last date on which interest was paid on the notes
being tendered for exchange or, if no interest has been paid, from the date on
which the notes were issued in the original offering.
The Indenture provides that interest on the exchange notes will be computed
on the basis of a 360-day year of twelve 30-day months. Initially, the Trustee
will act as Paying Agent and Registrar. Principal and interest will be payable
initially at the Trustee's offices within the City and State of New York but, at
the Company's option, interest may be paid by check mailed to the Holders at
their addresses as they appear in the exchange notes register; PROVIDED that the
Company will be required to make, by wire transfer of immediately available
funds to the accounts specified by a Holder of at least $5 million aggregate
principal amount of exchange notes, all payments of principal of, premium, if
any, and interest with respect to such Holder's exchange notes if such Holder
has given wire transfer instructions to the Company. The notes may be presented
for registration of transfer and exchange at the Registrar's offices, which
initially will be the Trustee's offices.
PARENT AND SUBSIDIARY GUARANTEES
The Parent Guarantor and each Subsidiary Guarantor unconditionally
guarantee, jointly and severally, on a senior subordinated basis to each Holder
and the Trustee, the full and prompt performance of the Company's obligations
under the Indenture and the exchange notes, including the payment of principal
of, and interest on, the exchange notes. As of the Issue Date, USC May
Verpackungen Holding, Inc., as the Company's only Domestic Restricted
Subsidiary, is the only Subsidiary Guarantor. In the future, each Domestic
Restricted Subsidiary created or acquired by the Company that has at any time a
Fair Market Value of more than $500,000 is required to become an additional
Subsidiary Guarantor; PROVIDED that the aggregate Fair Market Value of Domestic
Restricted Subsidiaries that are not Subsidiary Guarantors will not at any time
exceed $1.5 million. See "--Certain Covenants--Future Subsidiary Guarantors."
The obligations of each Guarantor are limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Parent Guarantee or Subsidiary Guarantee, as the case may
be, or pursuant to its contribution obligations under the Indenture, will result
in the obligations of such Guarantor under its Parent Guarantee or Subsidiary
Guarantee, as the case may be, not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
77
<PAGE>
Each Guarantor that makes a payment or distribution under a Parent Guarantee
or Subsidiary Guarantee, as the case may be, will be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of each
Guarantor, determined in accordance with GAAP. Each Subsidiary Guarantor may
consolidate with or merge into or sell its assets to the Company without
limitation, or with other Persons upon the terms and conditions set forth in the
Indenture. See "--Merger, Consolidation and Sale of Assets." In the event the
Company sells all of the capital stock of a Subsidiary Guarantor and the sale
complies with the provisions set forth in "--Certain Covenants--Limitation on
Asset Dispositions," the Subsidiary Guarantor's Subsidiary Guarantee will be
released.
SUBORDINATION OF EXCHANGE NOTES
The exchange notes are subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full, in cash or cash equivalents, of all
existing and future Senior Indebtedness of the Company. The exchange notes will
in all respects rank equally with all other Senior Subordinated Indebtedness of
the Company, and only Indebtedness of the Company that is Senior Indebtedness
will rank senior to the exchange notes. Except with respect to limitations on
consolidated Indebtedness that the Company and the Subsidiary Guarantors may
incur, the Indenture does not limit the ability of the Company or the Guarantors
to incur Senior Indebtedness or restrict the ability of the Company or the
Parent Guarantor to transfer assets to and among the Restricted Subsidiaries.
As described below, in the event of bankruptcy, liquidation or
reorganization of the Company, the Company's assets will be available to make
payments on the exchange notes only after all Senior Indebtedness has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
the exchange notes. In the event of any payment or distribution of the Company's
assets in any foreclosure, dissolution, winding up, liquidation or
reorganization, holders of any secured Indebtedness will have a secured prior
claim to the assets of the Company and its Subsidiaries.
Under certain circumstances, as described below, holders of Senior
Indebtedness may block payments on the exchange notes. Any claims by Holders
against the assets of the Company's subsidiaries (except the Subsidiary
Guarantors) would be subordinate to all existing and future obligations thereof
(including trade payables and preferred stock, if any, of such subsidiaries). As
of October 1, 2000, after giving effect to the original offering and application
of the net proceeds thereof (including the repayment through a successful tender
offer of the 10 1/8% notes), the aggregate Senior Indebtedness of the Company
and the Guarantors would have been $319.8 million (all of which is secured
Indebtedness), and the Company and the Guarantors had no outstanding Senior
Subordinated Indebtedness (other than the Notes and related Guarantees) after
giving effect to the repayment of the 10 1/8% notes. Indebtedness and other
liabilities of subsidiaries of the Company that are not Subsidiary Guarantors,
on an adjusted basis, aggregated approximately $98.1 million as of October 1,
2000.
Upon any payment or distribution of the assets of the Company to creditors
upon a total or partial liquidation or a total or partial dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness will be entitled to receive payment
in full of the Senior Indebtedness before Holders will be entitled to
receive any payment of principal of or interest on the exchange notes; and
(2) until the Senior Indebtedness is paid in full, any distribution to
which Holders would be entitled but for this provision will be made to
holders of Senior Indebtedness as their interests may appear, except that
Holders may receive shares of stock and any debt securities that are
subordinated to Senior Indebtedness to at least the same extent as the
exchange notes.
78
<PAGE>
The Company may not pay the principal of or interest on the exchange notes
or make any deposit for the purpose of the discharge of its liabilities under
the Indenture and may not repurchase, redeem or otherwise retire any notes
(collectively, "pay the exchange notes") if
(1) a default in the payment of principal or interest on any Senior
Indebtedness occurs and is continuing beyond any applicable grace period, or
(2) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms,
unless, in either case, (A) the default has been cured or waived and any such
acceleration has been rescinded, or (B) such Senior Indebtedness has been paid
in full.
During the continuance of any default (other than a default described in
clause (1) or (2) of the preceding paragraph) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the exchange notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the Company and the Trustee of written
notice of such default from the Representative of any Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"Blockage Notice") and ending 179 days thereafter, or earlier if such Payment
Blockage Period is terminated
- by written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice,
- by repayment in full of such Designated Senior Indebtedness, or
- because the default giving rise to such Blockage Notice is no longer
continuing.
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the next preceding
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders will have accelerated the maturity of such
Designated Senior Indebtedness, the Company may resume payments on the exchange
notes after such Payment Blockage Period. Not more than one Blockage Notice may
be given in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period.
In the event of the Company's insolvency, liquidation, reorganization,
dissolution or other proceedings, funds which would otherwise be payable to
Holders will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full. Moreover, the Company's
creditors who are holders of Senior Indebtedness may recover more, ratably, than
the Holders, and the Company's creditors who are not holders of Senior
Indebtedness or of the exchange notes may recover less, ratably, than holders of
the Senior Indebtedness and may recover more, ratably, than the Holders.
The Company currently has no Indebtedness that is subordinated to the
exchange notes.
SUBORDINATION OF GUARANTEES
The Parent Guarantee is subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full, in cash or cash equivalents, of all
existing and future Senior Indebtedness of the Parent Guarantor. The Subsidiary
Guarantees are subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full, in cash or cash equivalents, of all existing and
future Senior Indebtedness of Subsidiary Guarantors. As of October 1, 2000,
after giving effect to the exchange offer, there would have been no Senior
Indebtedness of the Parent Guarantor to which the Parent Guarantee
79
<PAGE>
would be subordinated and no Senior Indebtedness of Subsidiary Guarantors to
which the Subsidiary Guarantees would be subordinated.
The Guarantees will in all respects rank equally with all other Senior
Subordinated Indebtedness of the Guarantors, and only Indebtedness of the
Guarantors which is Senior Indebtedness of the Guarantors will rank senior to
the Guarantees. Except with respect to limitations on consolidated Indebtedness
that the Company and the Restricted Subsidiaries (including the Subsidiary
Guarantors) may incur, the Indenture does not limit the ability of the
Guarantors to incur additional Senior Indebtedness or restrict the ability of
the Guarantors to transfer assets to and among the Restricted Subsidiaries.
As described below, in the event of bankruptcy, liquidation or
reorganization of a Guarantor, the assets of such Guarantor will be available to
make payments under the Parent Guarantee or Subsidiary Guarantee, as the case
may be, only after all Senior Indebtedness of the Guarantors has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on the
Guarantees. As of the date of this Prospectus, substantially all of the Senior
Indebtedness of the Guarantors is secured by substantially all their respective
assets. In the event of any payment or distribution of the assets of the
Guarantors in any foreclosure, dissolution, winding up, liquidation or
reorganization, holders of the secured Indebtedness will have a secured prior
claim to the assets of the Guarantors and their Subsidiaries.
Under certain circumstances, as described below, holders of Senior
Indebtedness may block payments on the Guarantees. Any claims by Holders against
the assets of Subsidiaries of the Subsidiary Guarantors (that are themselves not
Subsidiary Guarantors) would be subordinate to all existing and future
obligations (including trade payables and preferred stock, if any) of such
Subsidiaries.
Upon any payment or distribution of the assets of the Guarantors to
creditors upon a total or partial liquidation or a total or partial dissolution
of the Guarantors or in a bankruptcy, reorganization, insolvency, receivership
or similar proceeding relating to any Guarantor or its property:
(1) holders of Senior Indebtedness of the Guarantors will be entitled to
receive payment in full of such Senior Indebtedness before Holders will be
entitled to receive any payment under the Guarantees; and
(2) until the Senior Indebtedness of the Guarantors is paid in full, any
distribution to which Holders would be entitled but for this provision will
be made to holders of such Senior Indebtedness as their interests may
appear, except that Holders may receive shares of stock and any debt
securities that are subordinated to Senior Indebtedness of the Guarantors to
at least the same extent as the Guarantees.
The Guarantors may not pay the principal of or interest on the exchange
notes pursuant to the Guarantees or make any deposit for the purpose of the
discharge of their liabilities under the Indenture and may not repurchase,
redeem or otherwise retire any notes pursuant to the Guarantees (collectively,
"pay the exchange notes") if
(1) any Senior Indebtedness of the Guarantors is not paid when due or
(2) any other default on Senior Indebtedness of the Guarantors occurs
and the maturity of such Designated Senior Indebtedness of the Guarantors is
accelerated in accordance with its terms,
unless, in either case, (A) the default has been cured or waived and any such
acceleration has been rescinded or (B) such Senior Indebtedness of the
Guarantors has been paid in full.
During the continuance of any default (other than a default described in
clause (1) or (2) of the preceding paragraph) with respect to any Designated
Senior Indebtedness of the Guarantors pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such
80
<PAGE>
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Guarantors may not pay the exchange notes for a
period (a "Guarantor Payment Blockage Period") commencing upon the receipt by
the Guarantors and the Trustee of written notice of such default from the
Representative of any Designated Senior Indebtedness of the Guarantors
specifying an election to effect a Guarantor Payment Blockage Period (a
"Guarantor Blockage Notice") and ending 179 days thereafter, or earlier if such
Guarantor Payment Blockage Period is terminated
- by written notice to the Trustee and the Guarantors from the Person or
Persons who gave such Guarantor Blockage Notice,
- by repayment in full of such Designated Senior Indebtedness of Guarantors,
or
- because the default giving rise to such Guarantor Blockage Notice is no
longer continuing.
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the next preceding
paragraph), unless the holders of such Senior Indebtedness of Guarantors or the
Representative of such holders will have accelerated the maturity of such
Designated Senior Indebtedness of the Guarantors, the Guarantors may resume
payments under the Guarantees after such Guarantor Payment Blockage Period. Not
more than one Guarantor Blockage Notice may be given in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated Senior
Indebtedness of Guarantors during such period.
In the event of a Guarantor's insolvency, liquidation, reorganization,
dissolution or other proceedings, funds which would otherwise be payable to
Holders will be paid to the holders of Senior Indebtedness of Guarantors to the
extent necessary to pay the Senior Indebtedness of Guarantors in full. Moreover,
the Guarantors' creditors who are holders of Senior Indebtedness of Guarantors
may recover more, ratably, than the Holders, and the Guarantors' creditors who
are not holders of Senior Indebtedness of Guarantors or of the exchange notes
may recover less, ratably, than holders of the Senior Indebtedness of Guarantors
and may recover more, ratably, than the Holders.
The Guarantors currently have no Indebtedness that is subordinated to the
Guarantees.
REDEMPTION
OPTIONAL REDEMPTION
Except as set forth below, the Company may not redeem the exchange notes
before October 1, 2005. On or after that date, the Company may redeem the
exchange notes, in whole at any time or in part from time to time, on at least
30 but not more than 60 days prior notice, mailed by first-class mail to the
Holders at their registered addresses, at the redemption prices (expressed in
percentages of principal amount) specified below plus accrued and unpaid
interest, if any, through the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest on the relevant
interest payment date), if redeemed during the twelve-month period beginning
October 1, of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2005........................................................ 106.188%
2006........................................................ 104.125%
2007........................................................ 102.063%
2008 and thereafter......................................... 100.000%
</TABLE>
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS
At any time, or from time to time, on or before October 1, 2003, the Company
may, at its option, use all or any portion of the net cash proceeds of one or
more Public Equity Offerings (as defined
81
<PAGE>
below) to redeem up to 35% of the aggregate principal amount of the exchange
notes issued at a redemption price equal to 112.375% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of redemption;
PROVIDED that at least 65% of the aggregate principal amount of exchange notes
initially issued remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Company will make such redemption not more than 180 days after the
consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Capital Stock of the Company (other than
Disqualified Stock) pursuant to a registration statement filed with the
Commission in accordance with the Securities Act or a firm commitment private
placement of Capital Stock (other than Disqualified Stock) pursuant to an
agreement that requires the registration of the resale of such Capital Stock (or
Capital Stock issued upon conversion thereof) contemporaneously with the
issuance thereof or as soon as practical thereafter.
In the case of any partial redemption, selection of the exchange notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion will deem to be fair and
appropriate (and which complies with applicable legal and securities exchange
requirements), although no exchange note of $1,000 in original principal amount
or less will be redeemed in part. If a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the exchange notes or
portions thereof for redemption will be made by the Trustee only on a pro rata
basis or on as nearly a pro rata basis as is practicable (subject to DTC (as
defined below) procedures), unless such method is otherwise prohibited. If any
exchange note is to be redeemed in part only, the notice of redemption relating
to such exchange note will state the portion of the principal amount thereof to
be redeemed. A new exchange note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original exchange note.
MANDATORY SINKING FUND
There are no mandatory sinking fund payments for the exchange notes.
CHANGE OF CONTROL
Upon a Change of Control, each Holder will have the right to require that
the Company repurchase all or any part of such Holder's exchange notes at a
repurchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, through the date of repurchase. See "Risk
Factors--We May Be Unable to Raise the Funds Necessary to Finance the Change of
Control Offer Required by our Indenture." If at the time of such Change of
Control the terms of the Bank Indebtedness or other Senior Indebtedness restrict
or prohibit the repurchase of exchange notes pursuant to this provision, then
before mailing the notice to Holders provided for in the next paragraph below,
but in any event within 30 days following any Change of Control, the Company
covenants to
- repay in full all Bank Indebtedness or such other Senior Indebtedness to
the extent required to permit the repurchase of exchange notes pursuant to
this provision or
- obtain the requisite consent under the agreements governing the Bank
Indebtedness or such other Senior Indebtedness to permit the repurchase of
the exchange notes as provided for in the next paragraph.
82
<PAGE>
Within 30 days following any Change of Control, the Company will send, by
first-class mail to each Holder, a notice to each Holder with a copy to the
Trustee stating:
- that a Change of Control has occurred and that such Holder has the right
to require the Company to purchase such Holder's exchange notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase;
- the purchase date (which will be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and
- the instructions determined by the Company, consistent with this
provision, that a Holder must follow in order to have its exchange notes
purchased, together with the information contained in the next paragraph
(and including any related materials).
Holders electing to have a exchange note purchased will be required to
surrender the exchange note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least five Business Days
before the purchase date. Holders will be entitled to withdraw their election if
the Trustee or the Company receives not later than three business days prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the exchange note that was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing its election to have such exchange note purchased.
On the purchase date, all exchange notes purchased by the Company under this
provision will be delivered by the Trustee for cancellation, and the Company
will pay the purchase price plus accrued and unpaid interest, if any, to the
Holders entitled thereto.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of the Company may contain prohibitions of certain events that
would constitute a Change of Control or require such Senior Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the Holders of
their right to require the Company to repurchase the exchange notes could cause
a default under such Senior Indebtedness, even if the Change of Control itself
does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources.
The Company can give no assurance that sufficient funds will be available
when necessary to make any repurchases required in connection with a Change of
Control. The Company's failure to purchase the exchange notes in connection with
a Change in Control would result in a default under the Indenture that would, in
turn, constitute a default under the Credit Agreement. In such circumstances,
the subordination provisions in the Indenture would likely restrict payment to
the Holders of the exchange notes. See "Risk Factors--We May Be Unable to Raise
the Funds Necessary to Finance the Change of Control Offer Required by our
Indenture."
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of exchange notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under such covenant by
virtue thereof.
The Company's obligations to repurchase the exchange notes upon a Change of
Control will be guaranteed on a senior subordinated basis by the Guarantors
pursuant to the Guarantees. The Guarantees will be subordinated to Senior
Indebtedness of the Guarantors to the same extent described above under
"--Subordination of Guarantees."
83
<PAGE>
COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness, unless such Indebtedness is
Permitted Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly (each of which is hereafter referred to as a "Restricted
Payment"):
- declare or pay any dividend on, or make any distribution in respect of,
any Capital Stock of the Company or the Parent Guarantor, as the case may
be, except for dividends or distributions payable solely in Capital Stock
(other than Disqualified Stock) of the Company or the Parent Guarantor, as
the case may be;
- purchase, redeem, retire or acquire for value any Capital Stock of the
Company, the Parent Guarantor or any Subsidiary of the Company or the
Parent Guarantor (other than a Restricted Subsidiary);
- purchase, repurchase, redeem, defease or acquire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Obligation; or
- make any Investment (other than Permitted Investments) in any Person,
if at the time of and after giving effect to the proposed Restricted Payment:
- any Default or Event of Default has occurred and is continuing;
- the Company could not incur at least $1.00 of additional Indebtedness
pursuant to clause (1) of the definition of Permitted Indebtedness; or
- the aggregate amount expended or declared for all Restricted Payments
after the Issue Date exceeds (without duplication) the sum of
(1) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the first day of the fiscal quarter
in which the exchange notes are issued to the end of the most recent fiscal
quarter ending at least 30 days prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income will be a deficit, minus 100% of
such deficit),
(2) 100% of the aggregate Net Cash Proceeds plus the Fair Market Value
of property other than cash received by the Company from the issuance or
sale of its respective Capital Stock (excluding the issuance or sale of
Disqualified Stock) subsequent to the Issue Date (other than an issuance or
a sale to a Subsidiary of the Company or an employee stock ownership plan or
trust),
(3) the amount by which Indebtedness of the Company or the Restricted
Subsidiaries is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Subsidiary) subsequent to the Issue Date, of
any Indebtedness of the Company or the Restricted Subsidiaries that is
convertible or exchangeable, or is exchanged, for Capital Stock (other than
Disqualified Stock) of the Company,
(4) an amount equal to the net reduction in Investments resulting from
dividends, distributions, repayments of loans or advances or other transfers
of assets (to the extent not included in Consolidated Net Income), in each
case, to the Company or any Restricted Subsidiary,
84
<PAGE>
not to exceed the amount of Investments previously made that were included
as Restricted Payments, and
(5) 50% of the gain realized by the Company or any Restricted Subsidiary
from the cash sale (other than to the Company or a Restricted Subsidiary) of
Restricted Investments made by the Company or any Restricted Subsidiary
after the issue date of the exchange notes to the extent not included in
Consolidated Net Income.
The foregoing limitations will not prevent the Company or a Restricted
Subsidiary from:
(A) paying a dividend on its Capital Stock within 60 days after the
declaration thereof, if, on the declaration date, the Company could have paid
such dividend in compliance with the Indenture;
(B) redeeming, repurchasing, defeasing, acquiring or retiring for value,
Subordinated Obligations in exchange for or from proceeds of Refinancing
Indebtedness permitted by clause (8) of the definition of Permitted
Indebtedness;
(C) acquiring, redeeming or retiring Capital Stock or Subordinated
Obligations of the Company in exchange for, or in connection with a
substantially concurrent issuance of, Capital Stock (other than Disqualified
Stock) of the Company;
(D) repurchasing or redeeming (or paying a dividend to the Parent Guarantor
to enable the Parent Guarantor to purchase or redeem) shares of, or options to
purchase shares of, Capital Stock of the Company or the Parent Guarantor or
stock appreciation rights from officers, directors and employees (or the heirs
of such persons) of the Company, the Parent Guarantor or any Restricted
Subsidiary whose employment has terminated or who have died or retired or become
disabled or upon the vesting of stock appreciation rights, so long as the
aggregate amount of such payments in any fiscal year does not exceed the sum of
(1) $2.5 million plus (2) the proceeds of any "key man" life insurance policies
purchased by the Company for the specific purpose of making such repurchases or
redemptions, it being understood that the cancellation of Indebtedness owed by
management to the Company in connection with such repurchase or redemption will
not be deemed to be a Restricted Payment;
(E) any purchase of Subordinated Obligations from Excess Proceeds remaining
after an Offer made pursuant to the "Limitations on Asset Dispositions" covenant
below to the extent permitted to be used for general corporate purposes;
(F) cash dividends to the Parent Guarantor in amounts equal to
(1) the amounts required for the Parent Guarantor to pay any Federal,
state or local income taxes to the extent that such income taxes are
attributable to the income of the Company and its Subsidiaries,
(2) the amounts required for the Parent Guarantor to pay franchise taxes
and other fees required to maintain its legal existence,
(3) an amount not to exceed $200,000 in any fiscal year to permit the
Parent Guarantor to pay corporate overhead expenses incurred in the ordinary
course of business,
(4) on or about the Issue Date the amount required to enable the Parent
Guarantor to repay the 10 1/8% exchange notes and to enable the Parent
Guarantor to make the payments due under the Recapitalization Agreement; and
(5) reasonable and customary costs and expenses incident to a public
offering of the common stock of the Parent Guarantor to the extent that the
proceeds therefrom are intended to be contributed to the Company;
85
<PAGE>
(G) repurchases of Capital Stock deemed to occur upon the exercise of
employee stock options if such Capital Stock is surrendered in lieu of the
exercise price thereof;
(H) the payment of any dividend by a Restricted Subsidiary of the Company to
the holders of its equity interests on a pro rata basis; and
(I) so long as no Event of Default will have occurred and be continuing,
other Restricted Payments not otherwise permitted pursuant to this covenant up
to $10.0 million in the aggregate.
Proceeds of Capital Stock used to make Restricted Payments described in
clause (C) of the immediately preceding paragraph will not increase the amount
available for Restricted Payments. The Restricted Payments made pursuant to
clauses (B), (C), (D)(2), (E), (F), (G), (H) and (I) of the immediately
preceding paragraph will not be included in the calculation of subsequent
Restricted Payments. Restricted Payments made pursuant to clauses (A) and (D)(1)
of the immediately preceding paragraph will be included in the calculation of
subsequent Restricted Payments.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, cause to exist or become effective or enter into any
encumbrance or restriction (other than pursuant to law or regulation) on the
ability of any Restricted Subsidiary
(A) to pay dividends or make any other distributions in respect of its
Capital Stock or pay any debt or other obligation owed to the Company or any
other Restricted Subsidiary;
(B) to make loans or advances to the Company or any other Restricted
Subsidiary; or
(C) to transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
Such limitation will not apply
(1) with respect to clauses (A), (B) and (C), to encumbrances and
restrictions
(a) in existence under or by reason of any agreements (not otherwise
described in clause (c)) in effect on the Issue Date,
(b) relating to Indebtedness of a Restricted Subsidiary and existing
at such Restricted Subsidiary at the time it became a Restricted
Subsidiary if such encumbrance or restriction was not created in
connection with or in anticipation of the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became
a Restricted Subsidiary or was acquired by the Company,
(c) pursuant to the Credit Agreement, PROVIDED that such restrictions
or encumbrances are not more restrictive with respect to dividend and
other payment restrictions than those contained in the Credit Agreement
as in effect on the Issue Date,
(d) pursuant to the Indenture and the exchange notes,
(e) which result from the renewal, refinancing, extension or
amendment of an agreement referred to in clauses (1)(a), (b) and (f) and
in clauses (2)(a) and (b) PROVIDED, such encumbrances or restrictions,
when taken as a whole, are no more restrictive to such Restricted
Subsidiary and are not materially less favorable to the Holders than
those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced, or
(f) relating to Refinancing Indebtedness incurred pursuant to the
definition of Permitted Indebtedness, and
86
<PAGE>
(2) with respect to clause (C) only, to
(a) any encumbrance or restriction relating to Indebtedness that is
permitted to be Incurred and secured pursuant to the provisions under
"--Limitation on Indebtedness" and "--Limitation on Liens" that limits
the right of the debtor to dispose of the assets or property securing
such Indebtedness,
(b) any encumbrance or restriction in connection with an acquisition
of property, so long as such encumbrance or restriction relates solely to
the property so acquired and was not created in connection with or in
anticipation of such acquisition,
(c) customary non-assignment and non-transfer provisions in leases,
contracts or licenses entered into in the ordinary course of business,
(d) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale,
(e) Liens permitted pursuant to the provisions of "Limitations on
Liens" below and restrictions in the agreements creating such Liens,
(f) any agreement or instrument governing Indebtedness of a Foreign
Subsidiary now or hereafter outstanding if it constitutes Permitted
Indebtedness, and
(g) any amendments to any of the foregoing that, when taken as a
whole, are not more restrictive than those contained in the agreement
being amended.
LIMITATION ON ASSET DISPOSITIONS
The Company will not, and will not permit any Restricted Subsidiary to, make
any Asset Disposition unless
(A) the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the Fair Market Value of the
shares and assets subject to such Asset Disposition;
(B) at least 75% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or cash equivalents; PROVIDED,
HOWEVER, that any securities or exchange notes received by the Company or such
Restricted Subsidiary in connection with such Asset Disposition that are
converted by the Company or such Restricted Subsidiary into cash or cash
equivalents within 10 business days of the date of such Asset Disposition will
be deemed to be cash equivalents;
(C) the Company delivers an Officers' Certificate to the Trustee certifying
that such Asset Disposition complies with clauses (A) and (B); and
(D) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary)
(1) first, to the extent the Company elects (or is required by the terms
of any Senior Indebtedness), to prepay, repay or purchase Senior
Indebtedness or Senior Indebtedness of the Subsidiary Guarantors (in each
case other than Indebtedness owed to the Company or an Affiliate of the
Company) or, if the Asset Disposition is made by a Foreign Restricted
Subsidiary, Senior Indebtedness of a Foreign Restricted Subsidiary, within
270 days from the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; PROVIDED, HOWEVER that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to this
clause (1), the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased;
87
<PAGE>
(2) second, to the extent of the balance of Net Available Cash after
application in accordance with clause (1), to the extent the Company or such
Restricted Subsidiary elects, to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by the Company or a Restricted
Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) within 270 days from the later of such Asset
Disposition or the receipt of such Net Available Cash; and
(3) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (1) and (2) (which balance should
constitute "Excess Proceeds"), to make an Offer (as defined) to purchase
exchange notes pursuant to and subject to the conditions of the following
paragraph.
Pending application of Net Available Cash pursuant to this provision, such Net
Available Cash will be invested in Temporary Cash Investments or used to reduce
revolving credit borrowings of Senior Indebtedness.
The Indenture provides that, when the aggregate amount of Excess Proceeds
exceeds $15 million, the Company will apply the Excess Proceeds to the repayment
of the exchange notes pursuant to an offer to purchase (an "Offer") from all
Holders in accordance with the procedures set forth in the Indenture in the
principal amount (expressed as a multiple of $1,000) of exchange notes that may
be purchased out of an amount (the "Exchange Note Amount") equal to such Excess
Proceeds. The offer price for the exchange notes will be payable in cash in an
amount equal to 100% of the principal amount of the exchange notes plus accrued
and unpaid interest, if any, to the date (the "Offer Date") such Offer is
consummated (the "Offered Price"), in accordance with the procedures set forth
in the Indenture. To the extent that the aggregate Offered Price of the exchange
notes tendered pursuant to the Offer is less than the Exchange Note Amount
relating thereto, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of exchange notes
surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee will select the exchange notes to be purchased on a pro rata basis. Upon
the completion of the purchase of all the exchange notes tendered pursuant to an
Offer, the amount of Excess Proceeds, if any, will be reset at zero.
Within 10 days after the Company becomes obligated to make an Offer, the
Company will deliver to the Trustee and mail to each Holder a written notice of
its Offer to purchase exchange notes in whole or in part (subject to proration
as hereinafter described in the event the Offer is oversubscribed) in integral
multiples of $1,000 of principal amount, at the applicable purchase price. The
notice will specify a purchase date not less than 30 days nor more than 60 days
after the date of such notice (the "Purchase Date") and all instructions and
materials necessary to tender such exchange notes pursuant to the Offer,
together with the information contained in the next following paragraph.
Not later than the date upon which written notice of an Offer is delivered
to the Trustee as provided below, the Company will deliver to the Trustee an
Officers' Certificate as to
- the Offered Price,
- the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and
- the compliance of such allocation with the provisions of the Indenture.
On such date, the Company will also irrevocably deposit with the Trustee or with
a paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in Temporary Cash Investments an amount equal to the Offered
Price to be held for payment in accordance with the provisions of the Indenture.
88
<PAGE>
If the terms of any outstanding PARI PASSU Indebtedness require the Company
to make a similar offer to purchase to all holders of such PARI PASSU
Indebtedness with the proceeds from any Asset Disposition, the Excess Proceeds
available to fund an Offer to the Holders of exchange notes will be reduced on a
pro rata basis to reflect the Company's offer to purchase obligations under such
PARI PASSU Indebtedness.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of exchange notes pursuant to the covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under such covenant by
virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business or enter into any transaction or
series of related transactions with or for the benefit of any Affiliate, unless
(A) the terms of such transaction or series of related transactions are
- set forth in writing, and
- no less favorable to the Company or such Restricted Subsidiary than those
that could reasonably be obtained at such time in a comparable
arm's-length transaction with an unrelated third party;
(B) with respect to a transaction or series of related transactions
involving aggregate payments or value in excess of $3 million, the Board of
Directors of the Company (including a majority of the Disinterested Directors
thereof) approves such transaction or related series of transactions and, in its
good faith judgment, believes that such transaction or series of related
transactions complies with clause (A) of this paragraph, as evidenced by a
Certified Resolution delivered to the Trustee; and
(C) with respect to a transaction or series of related transactions
involving aggregate payments or value in excess of $15 million, the Company
will, prior to the consummation thereof, obtain a written opinion of a
nationally recognized accounting, appraisal or investment banking firm stating
that the transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view and file the same with the Trustee.
The provisions described above will not prohibit
- any Restricted Payment permitted to be paid pursuant to "--Limitation on
Restricted Payments" above,
- any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the
Board of Directors of the Company (including a majority of the
Disinterested Directors thereof),
- any transaction pursuant to any agreement in existence on the Issue Date
or any amendment or replacement thereof that, taken in its entirety, is no
less favorable to the Company than the agreement as in effect on the Issue
Date,
- loans or advances to employees in the ordinary course of business of the
Company, not to exceed $1 million per employee and $3 million in the
aggregate,
- the payment of indemnities provided for by the Company's charter, by-laws
and written agreements and reasonable fees to directors of the Company,
the Parent Guarantor and the
89
<PAGE>
Restricted Subsidiaries who are not employees of the Company, the Parent
Guarantor or the Restricted Subsidiaries,
- any transaction between or among the Company and a Restricted Subsidiary
or between Restricted Subsidiaries,
- the making of payments to Salomon Smith Barney Inc. or its Affiliates for
investment banking or other financial services,
- fees, compensation, and indemnities under employment arrangements entered
into by the Company or its Restricted Subsidiaries in the ordinary course
of business, and
- issuance of Capital Stock (other than Disqualified Stock) of the Company
and the granting of registration rights with respect thereto.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) to be
an Unrestricted Subsidiary if
- the Subsidiary to be so designated does not own any Capital Stock or
Indebtedness of, or own or hold any Lien on any property of, the Company
or any other Restricted Subsidiary,
- the Subsidiary to be so designated is not obligated under any Indebtedness
or other obligation that, if in default, would result (with the passage of
time or the giving of notice or otherwise) in a default on any
Indebtedness of the Company or any Restricted Subsidiary and
- either (1) the Subsidiary to be so designated has total assets of $1,000
or less or (2) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under "--Certain Covenants--Limitation on
Restricted Payments" as a "Restricted Payment."
Unless so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company or of any Restricted Subsidiary will be classified as
a Restricted Subsidiary.
Notwithstanding the foregoing sentence, the Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after
giving pro forma effect to such designation,
- the Company could incur $1.00 of additional Indebtedness pursuant to
clause (1) of the definition of "Permitted Indebtedness" and
- no Default will have occurred and be continuing.
Any such designation by the Board of Directors will be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Certified Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complies with the foregoing provisions.
LIMITATION ON LAYERED INDEBTEDNESS
Each of the Company and the Parent Guarantor will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness
that is subordinate in right of payment to any other Indebtedness of the
Company, the Parent Guarantor or such Restricted Subsidiary, as the case may be,
unless such Indebtedness is subordinate in right of payment to, or ranks PARI
PASSU with, the exchange notes in the case of the Company or the Guarantees in
the case of the Guarantors.
The Guarantors will not, directly or indirectly, Guarantee any Indebtedness
of the Company that is subordinated in right of payment to any other
Indebtedness of the Company unless such Guarantee is subordinate in right of
payment to, or ranks PARI PASSU with, the Guarantees.
90
<PAGE>
LIMITATION ON LIENS
Each of the Company and the Parent Guarantor will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, Incur any Lien of any
kind, other than Permitted Liens, on or with respect to any property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom to secure Indebtedness that is subordinate in right of payment to, or
ranks PARI PASSU with, in the case of the Company, the exchange notes, or, in
the case of the Guarantors, the Guarantees, unless the exchange notes are
secured prior to (in the case of any Indebtedness that is subordinated in right
of payment), or equally and ratably with (in the case of any Indebtedness that
ranks PARI PASSU), the Indebtedness so secured.
FUTURE SUBSIDIARY GUARANTORS
The Company will cause each Domestic Restricted Subsidiary created or
acquired after the Issue Date that has at any time a Fair Market Value of more
than $500,000 to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee payment of the
exchange notes on the same terms and conditions as those set forth in the
Indenture; PROVIDED that the aggregate Fair Market Value of Domestic Restricted
Subsidiaries that are not Subsidiary Guarantors will not at any time exceed
$1.5 million. Each Subsidiary Guarantee will be limited in amount to an amount
not to exceed the maximum amount that can be Guaranteed by the applicable
Subsidiary Guarantor without rendering such Subsidiary Guarantee voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. Notwithstanding the
foregoing, if any Foreign Restricted Subsidiary shall Guarantee any Indebtedness
of the Company, the Parent Guarantor or any Domestic Subsidiary while the
exchange notes are outstanding, then the Company will cause such Foreign
Restricted Subsidiary to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Foreign Restricted Subsidiary will guarantee
payment of the exchange notes on the same terms and conditions as those set
forth in the Indenture.
COMMISSION REPORTS
The Company will file with the Trustee and provide the Holders at the
Company's expense, within 15 days after filing them with the Commission, copies
of their annual, quarterly and other reports, documents and information that the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with the annual, quarterly and other reports, documents and
information specified in Sections 13 and 15(d) of the Exchange Act. The Company
also will comply with the other provisions of Section 314(a) of the TIA.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, and will not permit any Restricted Subsidiary to,
merge or consolidate with or into any other entity or sell, convey, assign,
transfer, lease or otherwise dispose of all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) unless
(1) the entity formed by or surviving any such consolidation or merger
(if other than the Company or such Restricted Subsidiary) or to which such
sale, transfer or conveyance is made (the "Surviving Entity") will be a
corporation organized and existing under the laws of the United States of
America or any state thereof and such corporation expressly assumes, by
supplemental indenture satisfactory to the Trustee, all obligations of the
Company or such Restricted Subsidiary, as the case may be, pursuant to the
Indenture;
91
<PAGE>
(2) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis, no Default or Event of Default
(and no event that, after notice or lapse of time, or both, would become an
Event of Default) will have occurred and be continuing;
(3) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), the Company or the Surviving Entity,
as the case may be, would be able to Incur at least $1.00 of additional debt
pursuant to clause (1) of the definition of Permitted Indebtedness and
(4) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture.
Notwithstanding the foregoing, no Subsidiary Guarantor will merge or
consolidate with or into any other entity or sell, convey, assign, transfer,
lease or otherwise dispose of all or substantially all of its assets (other than
to the Company or another Subsidiary Guarantor) unless the Company and its
remaining Restricted Subsidiaries are in compliance with the provisions of
subclauses (2), (3) and (4) above.
The Surviving Entity will succeed to, and be substituted for, and may
exercise every right and power of, the Company or such Restricted Subsidiary, as
the case may be, under the Indenture, but in the case of a lease, the Company or
such Restricted Subsidiary, as the case may be, will not be released from the
obligation to pay the principal of and interest on the exchange notes.
Notwithstanding the foregoing clauses (2), (3) and (4), any Domestic
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or any other Domestic Restricted
Subsidiary, and any Foreign Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its properties or assets to (A) any other
Foreign Restricted Subsidiary or (B) the Company or any Domestic Restricted
Subsidiary, PROVIDED that the surviving company or the transferee entity, as
applicable, in such consolidation, merger or transfer is the Company or such
Domestic Restricted Subsidiary.
EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) the Company and the Guarantors default in any payment of interest on
any exchange note when the same becomes due and payable, and such default
continues for a period of 30 days;
(2) the Company and the Guarantors
(A) default in the payment of the principal of any exchange note when
the same becomes due and payable at its Stated Maturity, upon redemption,
upon declaration or otherwise, or
(B) fail to redeem or purchase exchange notes when required pursuant
to the Indenture or the exchange notes;
(3) the Company or any Restricted Subsidiary fails to comply with the
provisions of "--Merger, Consolidation and Sale of Assets" above;
(4) the Company, the Parent Guarantor or any Restricted Subsidiary, as
the case may be, fails to comply with "--Change of Control" above, or the
covenants described under "--Limitation on Indebtedness," "--Limitation on
Restricted Payments," "--Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries," "--Limitation on Asset
Dispositions," "--Limitation on Transactions with Affiliates," "--Limitation
on Layered Indebtedness," "--Limitation on Liens" or "--Future Subsidiary
Guarantors" in "--Certain Covenants" (other
92
<PAGE>
than a failure to purchase exchange notes when required under "--Change of
Control" or "--Certain Covenants--Limitation on Asset Dispositions") above
and such failure continues for 30 days after the notice specified under
"--Acceleration" below;
(5) the Company, the Parent Guarantor or any Restricted Subsidiary fails
to comply with any of its agreements in the exchange notes, or the Indenture
(other than those referred to in (1), (2), (3) or (4) above) and such
failure continues for 60 days after the notice specified under
"--Acceleration" below;
(6) the principal, any premium or accrued and unpaid interest of
Indebtedness of the Company, the Parent Guarantor or any Restricted
Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default, the
total amount of such Indebtedness unpaid or accelerated exceeds $10 million
at the time and such default continues for 10 days;
(7) the Company, any Guarantor or any Foreign Significant Subsidiary
pursuant to or within the meaning of any bankruptcy law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors; or
takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company, any Guarantor or any Foreign
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, any Guarantor or any Foreign
Significant Subsidiary or for any substantial part of the Company's, any
Guarantor's or any Foreign Significant Subsidiary's property; or
(C) orders the winding up or liquidation of the Company or any
Guarantor or any Foreign Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10 million at the time is entered against the Company, the Parent Guarantor
or any Restricted Subsidiary and is not discharged and either
(A) an enforcement proceeding has been commenced by any creditor upon
such judgment or decree or
(B) there is a period of 60 days following the entry of such judgment
or decree during which such judgment or decree is not discharged, waived
or the execution thereof stayed
and, in the case of (A) or (B), such default continues for 10 days; or
(10) the Parent Guarantee or any Subsidiary Guarantee is held to be
unenforceable or invalid or ceases to be in full force and effect.
93
<PAGE>
ACCELERATION
If an Event of Default (other than an Event of Default specified in clauses
(7) or (8) in "Events of Default" above with respect to the Company or any
Guarantor) occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in aggregate principal amount of the exchange notes
by notice to the Company and the Trustee, may declare the principal of and
accrued interest on all the exchange notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default specified in clauses (7) or (8) above with respect to the
Company or any Guarantor occurs, the principal of and interest on all the
exchange notes will IPSO FACTO become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders. The
Holders of a majority in aggregate principal amount of the exchange notes by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration. No such rescission
will affect any subsequent Default or impair any right consequent thereto.
Except as provided below under "--Rights of Holders to Receive Payment," a
Holder may not pursue any remedy with respect to the Indenture or the exchange
notes unless:
- such Holder gives to the Trustee written notice stating that an Event of
Default is continuing;
- the Holders of at least 25% in aggregate principal amount of the exchange
notes make a written request to the Trustee to pursue the remedy;
- such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
- the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of security or indemnity; and
- the Holders of a majority in aggregate principal amount of the exchange
notes do not give the Trustee a direction inconsistent with the request
during such 60-day period.
A Holder may not use the Indenture to prejudice the rights of another Holder
or to obtain a preference or priority over another Holder.
RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of the Indenture, the right of any
Holder to receive payment of principal of and interest on the exchange notes
held by such Holder, on or after the respective due dates expressed in the
exchange notes, or to bring suit for the enforcement of any such payment on or
after such respective dates, will not be impaired or affected without the
consent of such Holder.
DISCHARGE OF INDENTURE AND DEFEASANCE
When
(1) the Company delivers to the Trustee all outstanding exchange notes
(other than exchange notes replaced because of mutilation, loss, destruction
or wrongful taking) for cancellation or
(2) all outstanding exchange notes have become due and payable, whether
at maturity or as a result of the mailing of a notice of redemption as
described above, and the Company irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding exchange
notes, including interest thereon, and
94
<PAGE>
if in either case the Company pays all other sums payable hereunder by the
Company, then the Indenture will, subject to certain surviving provisions, cease
to be of further effect. The Trustee will acknowledge satisfaction and discharge
of the Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
Subject to conditions to defeasance described below and the survival of
certain provisions, the Company at any time may terminate
(1) all its obligations under the exchange notes and the Indenture
("legal defeasance option") or
(2) its obligations under certain restrictive covenants and the related
Events of Default ("covenant defeasance option").
The Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
exchange notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the exchange notes
may not be accelerated because of an Event of Default specified in clause (2) of
the immediately preceding paragraph.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(A) the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
exchange notes to maturity or redemption, as the case may be;
(B) the Company delivers to the Trustee a certificate from a nationally
recognized firm of independent certified public accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any deposited
money without investment will provide cash at such times and in such amounts
as will be sufficient to pay principal and interest when due on all the
exchange notes to maturity or redemption, as the case may be;
(C) 91 days pass after the deposit is made and during the 91-day period
no Default described in clauses (7) or (8) under "--Events of Default"
occurs with respect to the Company which is continuing at the end of the
period;
(D) no Default or Event of Default has occurred and is continuing on the
date of such deposit and after giving effect thereto;
(E) such deposit does not constitute a default under any other agreement
or instrument binding on the Company;
(F) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(G) in the case of the legal defeasance option, the Company delivers to
the Trustee an Opinion of Counsel stating that
- the Company has received from the Internal Revenue Service a ruling, or
- since the date of the Indenture there has been a change in the applicable
Federal income tax law,
to the effect, in either case, that, and based thereon such Opinion of
Counsel will confirm that, the Holders of the exchange notes will not
recognize income, gain or loss for Federal income tax
95
<PAGE>
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same time as
would have been the case if such legal defeasance had not occurred;
(H) in the case of the covenant defeasance option, the Company delivers
to the Trustee an Opinion of Counsel to the effect that the Holders of the
exchange notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(I) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the exchange notes have been complied with as
required by the Indenture.
TRANSFER AND EXCHANGE
Holders may transfer or exchange notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents, and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any exchange note selected for
redemption, or any exchange note for a period of 15 days before a selection of
exchange notes to be redeemed, or any exchange note for a period of 15 days
before an interest payment date. The registered holder of a exchange note may be
treated as the owner of it for all purposes.
AMENDMENT AND SUPPLEMENT
Subject to certain exceptions, the Indenture, the exchange notes, or the
Guarantees may be amended or supplemented by the Company or the Guarantors and
the Trustee with the consent of the Holders of at least a majority in aggregate
principal amount of such then outstanding exchange notes.
Without notice to or the consent of any Holder, the Company, the Guarantors
and the Trustee may amend the Indenture or the exchange notes, among other
things,
- to cure any ambiguity, defect or inconsistency;
- to provide for the assumption of the Company's or a Guarantor's
obligations to Holders by a Surviving Entity;
- to provide for uncertificated exchange notes in addition to or in place of
certificated exchange notes; or
- to make any change that does not adversely affect the rights of any
Holder.
Without the consent of each Holder affected, the Company may not
- reduce the principal amount of exchange notes the Holders of which must
consent to an amendment of the Indenture;
- reduce the rate or extend the time for payment of interest on any exchange
note;
- reduce the principal of or extend the fixed maturity of any exchange note;
- reduce the premium payable upon the redemption of any exchange note or
change the time at which any exchange note may or will be redeemed;
- reduce the premium payable upon the repurchase of any exchange note upon a
Change of Control;
- make any exchange note payable in money other than that stated in the
exchange note;
96
<PAGE>
- make any change in the provisions concerning waiver of Defaults or Events
of Default by Holders of the exchange notes or rights of Holders to
receive payment of principal or interest;
- make any change in the subordination provisions in the Indenture that
affects the rights of any Holder;
- release the Company or the Guarantors from their respective obligations
under the exchange notes, or the Guarantees (except pursuant to the
provisions described above in "--Merger, Consolidation and Sale of
Assets"); or
- make any change in the exchange notes not otherwise permitted by the
Indenture that would adversely affect the rights of any Holder.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS
No director, officer, employee or stockholder, as such, of the Company, the
Guarantors or the Trustee (as the case may be) will have any personal liability
in respect of the obligations of the Company, the Guarantors or the Trustee (as
the case may be) under the exchange notes or the Indenture by reason of his or
its status as such.
THE TRUSTEE
Bank One Trust Company, N.A. is the Trustee under the Indenture. The
Indenture provides that, except during the continuance of an Event of Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it under the Indenture and use
the same degree of care and skill in its exercise as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
DEFINITIONS
In addition to terms defined elsewhere in this prospectus, set forth below
is a summary of specific defined terms used in the Indenture. Reference is made
to the Indenture and the Trust Indenture Act for the full definition of all such
terms, as well as any other terms used herein for which no definition is
provided.
"10 1/8% EXCHANGE NOTES" means the 10 1/8% senior subordinated exchange
notes due 2006 of the Parent Guarantor.
"ADDITIONAL ASSETS" means
(1) any property or assets (other than Indebtedness and Capital Stock)
that are used or intended to be used in a Related Business;
(2) Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or another
Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary;
PROVIDED, HOWEVER, that, in the case of clauses (2) and (3), such Restricted
Subsidiary is primarily engaged in a Related Business.
"AFFILIATE" of any specified Person means
(1) any other Person, directly or indirectly, controlling or controlled
by or under direct or indirect common control with such specified Person or
97
<PAGE>
(2) any other Person who is a director or officer of such specified
Person, of any Subsidiary of such specified Person or of any Person
described in clause (1) above.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the section "Certain
Covenants--Limitation on Transactions with Affiliates" only, "Affiliate" also
means any beneficial owner of shares representing 10% or more of the total
voting power of the Voting Stock (on a fully diluted basis) of the Company or of
rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence of the preceding paragraph.
"ASSET DISPOSITION" means any direct or indirect sale including a
Sale/Leaseback Transaction, lease, transfer, conveyance or other disposition (or
series of related sales, Sale/Leaseback Transactions, leases, transfers,
conveyances or dispositions) of shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition") by the
Company, the Parent Guarantor or any of the Restricted Subsidiaries other than
- a disposition by a Restricted Subsidiary to the Company or by the Company
or a Restricted Subsidiary to a Wholly Owned Subsidiary,
- a disposition of property or assets at Fair Market Value in the ordinary
course of business of the Company or any of the Restricted Subsidiaries,
as applicable,
- a disposition with a Fair Market Value and a sale price of less than
$5 million,
- operating leases entered in the ordinary course of business,
- for purposes of the provisions of "--Certain Covenants--Limitation on
Asset Dispositions" only, a disposition subject to the limitations set
forth under "--Certain Covenants--Limitation on Restricted Payments" and
- when used with respect to the Company or any Guarantor, any Asset
Disposition pursuant to "--Merger, Consolidation and Sale of Assets" which
constitutes a disposition of all or substantially all of the Company's or
such Guarantor's property.
"ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be Incurred in
respect of a Sale/ Leaseback Transaction and will be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing
- the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to such
Preferred Stock and the amount of such payment by
- the sum of all such payments.
"BANK INDEBTEDNESS" means any and all amounts payable under or in respect of
the Credit Agreement from time to time, whether outstanding on the Issue Date or
thereafter incurred, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Guarantor whether or not a claim
for
98
<PAGE>
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable thereunder
or in respect thereof.
"BOARD OF DIRECTORS" means, as applicable, the Board of Directors of the
Company or the Parent Guarantor, or any committee thereof duly authorized to act
on behalf of such Board.
"CAPITAL EXPENDITURE INDEBTEDNESS" means Indebtedness issued to finance the
purchase or construction of any assets acquired or constructed after the Issue
Date
- to the extent the purchase or construction prices for such assets are or
should be included in "addition to property, plant or equipment" in
accordance with GAAP,
- if the acquisition or construction of such assets is not part of any
acquisition of a person or business unit, and
- if such Indebtedness is Incurred within 360 days of the acquisition or
completion of construction of such assets.
"CAPITALIZED LEASE OBLIGATIONS" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP; and the amount of Indebtedness represented by
such obligation will be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"CAPITAL STOCK" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible or exchangeable into such equity.
"CERTIFIED RESOLUTION" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or an Assistant Secretary of the Company or the Parent
Guarantor, as applicable.
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(A) before the first Public Equity Offering that results in a Public
Market,
(1) the Permitted Holders cease to be the "beneficial owners" (as
defined in Rule 13-3 under the Exchange Act, except that a Person will be
deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of at least
40% of the total voting power of the Voting Stock of the Company or the
Parent Guarantor, whether as a result of the issuance of securities of
the Company or the Parent Guarantor, any merger, consolidation,
liquidation or dissolution of the Company or the Parent Guarantor, any
direct or indirect transfer of securities by the Permitted Holders or
otherwise, or
(2) any "person" or "group" (as such terms are used in Section 13(d)
or Section 14(d) of the Exchange Act or any successor provisions to
either of the foregoing, including any group acting for the purpose of
acquiring, voting or disposing of securities within the meaning of
Rule 13-5(b)(1) under the Exchange Act) becomes the "beneficial owner"
(as defined above), directly or indirectly, of more Voting Stock of the
Company or the Parent Guarantor than is "beneficially owned" by the
Permitted Holders (for purposes of this clause (A) the Permitted Holders
will be deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation so long as the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a majority of
the total voting power of the Voting Stock of such parent corporation);
99
<PAGE>
(B) on or after the first Public Equity Offering that results in a
Public Market, if any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to
either of the foregoing), including any group acting for the purpose of
acquiring, holding, voting or disposing of securities within the meaning of
Rule 13-5(b)(1) under the Exchange Act, other than one or more Permitted
Holders or an underwriter engaged in a firm commitment underwriting in
connection with a public offering of the Voting Stock of the Company or the
Parent Guarantor, is or becomes the "beneficial owner" (as such term is used
in Rules 13-3 and 13-5 under the Exchange Act, except that a person will be
deemed to have "beneficial ownership" of all shares that any such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of the Company or the Parent
Guarantor;
(C) the Company or the Parent Guarantor consolidates or merges with or
into any other Person, other than a consolidation or merger
(1) with a Wholly Owned Subsidiary or a Permitted Holder or
(2) pursuant to a transaction in which the outstanding Voting Stock
of the Company or the Parent Guarantor is changed into or exchanged for
cash, securities or other property with the effect that the outstanding
Voting Stock of the Company or the Parent Guarantor is changed into or
exchanged for other Voting Stock of the Company, the Parent Guarantor or
the surviving corporation, or the beneficial owners of the outstanding
Voting Stock of the Company or the Parent Guarantor immediately prior to
such transaction, beneficially own, directly or indirectly, more than 50%
of the total voting power of the Voting Stock of the surviving
corporation immediately following such transaction,
(D) the Company, the Parent Guarantor or any of the Restricted
Subsidiaries, directly or indirectly, sells, assigns, conveys, transfers,
leases, or otherwise disposes of, in one transaction or a series of related
transactions, all or substantially all of the property or assets of the
Company, the Parent Guarantor and the Restricted Subsidiaries to any Person
or group of related Persons (as such term is used in Section 13( ) of the
Exchange Act), other than the Company, a Wholly Owned Subsidiary or a
Permitted Holder or
(E) the stockholders of the Company or the Parent Guarantor will have
approved any plan of liquidation or dissolution of the Company or the Parent
Guarantor, as the case may be.
For purposes of the definition of Change of Control, the collective parties
to the Stockholder Agreement, as such may be amended from time to time, shall
not constitute a group solely as a result of being parties to the Stockholder
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of
- the aggregate amount of EBITDA for the period of the most recent four
consecutive fiscal quarters ending at least 30 days prior to the date of
such determination to
- Consolidated Interest Expense for such four fiscal quarters;
PROVIDED, HOWEVER, that
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness (other than revolving credit borrowings made in the ordinary
course of business for working capital purposes) since the beginning of such
period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, Consolidated Interest Expense for such period will be
calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such
100
<PAGE>
period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness
as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period the Company or any Restricted
Subsidiary will have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, the EBITDA for such period will be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an
amount equal to the EBITDA (if negative), directly attributable thereto for
such period as if such Asset Disposition had occurred on the first day of
such period and Consolidated Interest Expense for such period will be
reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period as if such Asset Disposition had occurred
on the first day of such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period as if
such Asset Disposition had occurred on the first day of such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable
for such Indebtedness after such sale),
(3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) will have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring
in connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto (including the Incurrence
of any Indebtedness) as if such Investment or acquisition occurred on the
first day of such period, and
(4) if since the beginning of such period any Person that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period will have made any
Asset Disposition or any Investment that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period will be calculated
after giving pro forma effect thereto as if such Asset Disposition or Investment
occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to
an acquisition of assets, the pro forma calculations the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, will be
determined in good faith by a responsible financial or accounting officer of the
Company and as further contemplated by the definition of pro forma. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries determined in accordance
with GAAP, plus, to the extent not included in such interest expense,
(1) interest expense attributable to Capital Lease Obligations,
101
<PAGE>
(2) amortization of debt discount and debt issuance cost,
(3) capitalized interest,
(4) non-cash interest expense,
(5) accrued interest,
(6) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing,
(7) to the extent any Indebtedness of any Person is Guaranteed by the
Company or any Restricted Subsidiary, the aggregate amount of interest
related to such Guarantee actually paid or required by GAAP to be accrued in
the Company's financial statements,
(8) net costs associated with Interest Rate Agreements and Currency
Exchange Agreements (including, in each case, amortization of fees),
(9) the interest portion of any deferred obligation,
(10) Preferred Stock Dividends in respect of all Preferred Stock of the
Company and its Restricted Subsidiaries and Redeemable Stock of the Company
held by Persons other than the Company or a Wholly Owned Subsidiary,
(11) fees payable in connection with financings to the extent not being
amortized as contemplated by (2) above, including commitment, availability
and similar fees, and
(12) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust.
"CONSOLIDATED NET INCOME" means, for any period, the net income (loss) of
the Company and its Subsidiaries determined in accordance with GAAP; PROVIDED,
HOWEVER, that there will not be included in such Consolidated Net Income
(1) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that subject to the limitations contained in
(4) below, the Company's equity in the net income of any such Person for
such period will be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (3) below),
and the Company's equity in a net loss of any such Person (including an
Unrestricted Subsidiary) for such period will be included in determining
such Consolidated Net Income to the extent funded in cash by the Company,
(2) except as required by the pro forma requirements of the definition
of "Consolidated Coverage Ratio", any net income (loss) of any Person
acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition,
(3) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company (other than pursuant to
the Credit Agreement) except that subject to the limitations contained in
(4) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period will be included in such Consolidated Net Income
up to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend to
another Restricted Subsidiary, to the limitation
102
<PAGE>
contained in this clause) and the Company's equity in a net loss of any such
Restricted Subsidiary for such period will be included in determining such
Consolidated Net Income,
(4) any gain or loss realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated Subsidiaries
(including pursuant to any Sale/ Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of any
Person,
(5) any extraordinary gain or loss,
(6) the cumulative effect of a change in accounting principles,
(7) non-cash compensation charges incurred as a result of the issuance
of employee stock options or restricted stock for less than fair market
value and
(8) the non-recurring fees, expenses and other costs incurred in
connection with the Transactions that are reflected in the financial
statements of the Company in the period the Transactions are consummated.
"CREDIT AGREEMENT" means that certain Credit Agreement, dated as of the
closing of the recapitalization, as amended, among the Company and the
Guarantors and the syndicate of lenders named therein, together with any
Guarantees, collateral documents or other instruments or agreements executed in
connection therewith, as the same may be amended, supplemented or otherwise
modified from time to time and any renewal, extensions, revisions,
restructuring, refinancings or replacements thereof (whether with the original
agent or agents or lenders or other agents or lenders and whether pursuant to
the original credit agreement or another credit or other agreement or
indenture).
"CURRENCY EXCHANGE AGREEMENT" means, in respect of any Person, any foreign
currency swap agreement or other agreement pursuant to which the Company, the
Parent Guarantor or any of the Company's Subsidiaries hedge their exposure to
foreign currency exchange rates in connection with their business operations.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least
$25 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture and has been designated as
"Designated Senior Indebtedness" for purposes of the Indenture in an Officers'
Certificate received by the Trustee.
"DESIGNATED SENIOR INDEBTEDNESS OF GUARANTORS" means (1) with respect to the
Guarantors, the Bank Indebtedness and (2) any other Senior Indebtedness of the
Guarantors which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25 million and is specifically
designated by the Guarantors in the instrument evidencing or governing such
Senior Indebtedness of the Guarantors as "Designated Senior Indebtedness of
Guarantors" for purposes of the Indenture and has been designated as "Designated
Senior Indebtedness of Guarantors" for purposes of the Indenture in an Officers'
Certificate received by the Trustee.
"DISINTERESTED DIRECTOR" means a director of the Company other than a
director (1) who is an employee of the Company or a Subsidiary of the Company,
or (2) who is a party, or who is a director, officer, employee or Affiliate (or
is related by blood or marriage to any such Person) of a party, to the
transaction in question, and who is, in fact, independent in respect of such
transaction.
103
<PAGE>
"DISQUALIFIED STOCK" of a Person means Redeemable Stock of such Person as to
which the maturity, mandatory redemption, conversion or exchange or redemption
at the option of the holder thereof occurs, or may occur, on or prior to the
first anniversary of the Stated Maturity of the exchange notes.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the
Company other than a Foreign Restricted Subsidiary.
"DOMESTIC SUBSIDIARY" means any subsidiary of the Company other than a
Foreign Subsidiary.
"EBITDA" means, for any period, the sum for such period, of Consolidated Net
Income plus, to the extent reflected in the income statement of such Person for
such period from which Consolidated Net Income is determined, without
duplication,
- Consolidated Interest Expense,
- net provision for plant closing costs,
- income tax expense,
- depreciation expense,
- amortization expense,
- any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its Stated Maturity, and
- any other non-cash charges to the extent deducted from or reflected in
Consolidated Net Income except for any non-cash charges that represent
accruals of, or reserves for, cash disbursements to be made in any future
accounting period (less any non-cash items increasing Consolidated Net
Income for such period that were not accrued in the ordinary course of
business).
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arms' length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided,
- if such property or asset has a Fair Market Value of less than
$3 million, by any Officer of the Company, or
- if such property or asset has a Fair Market Value in excess of
$3 million, by a majority of the Board of Directors of the Company and
evidenced by a Certified Resolution dated within 30 days of the relevant
transaction.
"FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the
Company that is not organized under the laws of the United States of America or
any state thereof or the District of Columbia.
"FOREIGN SIGNIFICANT SUBSIDIARY" means any Foreign Restricted Subsidiary of
the Company meeting the standards specified in Rule 1-02(w) of Regulation S-X
promulgated by the Commission as in effect on the Issue Date.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company that is not
organized under the laws of the United States of America or any state thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in
- the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants,
104
<PAGE>
- statements and pronouncements of the Financial Accounting Standards Board,
and
- such other statements by such other entity as approved by a significant
segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture will be
computed in conformity with GAAP consistently applied.
"GUARANTORS" means the Parent Guarantor and the Subsidiary Guarantors,
collectively.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person
- to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise)
or
- entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" will not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"HOLDER" means the Person in whose name a exchange note is registered on the
Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) will be deemed to be incurred by such
Subsidiary at the time it becomes a Subsidiary. The terms "Incurred",
"Incurrence" and "Incurring" will each have a correlative meaning.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal of and premium (if any) in respect of indebtedness of
such Person for borrowed money;
(2) the principal of and premium (if any) in respect of obligations of
such Person evidenced by bonds, debentures, exchange notes or other similar
instruments;
(3) all Capitalized Lease Obligations and Attributable Indebtedness of
such Person;
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(5) all obligations of such Person in respect of letters of credit,
banker's acceptances or other similar instruments or credit transactions
(including reimbursement obligations with respect thereto), other than
obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (1) through (4) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the third business day following receipt by such
Person of a demand for reimbursement following payment on the letter of
credit;
105
<PAGE>
(6) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary that is not a Subsidiary Guarantor, any Preferred
Stock (but excluding, in each case, any accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, HOWEVER, that the amount of such Indebtedness will be the lesser
of (a) the fair market value of such asset at such date of determination and
(b) the amount of such Indebtedness of such other Persons;
(8) all Indebtedness of other Persons to the extent guaranteed by such
Person; and
(9) to the extent not otherwise included in this definition, net
obligations in respect of Interest Rate Agreements and Currency Exchange
Agreements.
The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"INTEREST RATE AGREEMENT" means, in respect of a Person, any interest rate
swap agreement, interest rate option agreement, interest rate cap agreement,
interest rate collar agreement, interest rate floor agreement or other similar
agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable or trade receivables on the balance sheet of such Person)
or other extension of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the covenant
described under "--Covenants--Designation of Restricted and Unrestricted
Subsidiaries" and the limitations set forth in "--Covenants--Limitation on
Restricted Payments,"
- "Investment" will include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net
assets of any Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company
will be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to the Company's
"Investment" in such Subsidiary at the time of such redesignation less the
portion (proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of such Subsidiary
at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and
- any property transferred to or from an Unrestricted Subsidiary will be
valued at its Fair Market Value at the time of such transfer.
In determining the amount of any Investment in respect of any property or
assets other than cash, such property or asset will be valued at its Fair Market
Value at the time of such Investment (unless otherwise specified in this
definition), as determined in good faith by the Board of Directors, whose
determination will be evidenced by a Certified Resolution.
"ISSUE DATE" means the date on which the notes were issued in the original
offering.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof) or any Sale/Leaseback Transaction.
106
<PAGE>
"NET AVAILABLE CASH" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a exchange note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other noncash form) therefrom,
in each case net of
- all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition,
- all payments made on any Indebtedness that is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any
Lien upon such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition,
- all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, and
- the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition.
"NET CASH PROCEEDS," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"OFFICER" means the Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer, Senior Vice President, Chief Financial
Officer, Treasurer or Controller of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers at least
one of whom will be the principal executive officer, principal accounting
officer or principal financial officer of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be outside counsel to the Company or
an employee of or outside counsel to the Trustee.
"PARENT GUARANTOR" means U.S. Can Corporation, the Company's sole
stockholder and parent corporation.
"PARI PASSU," as applied to the ranking of any Indebtedness of a Person in
relation to other Indebtedness of such Person, means that each such Indebtedness
either (1) is not subordinate in right of payment to any Indebtedness or (2) is
subordinate in right of payment to the same Indebtedness as is the other, and is
so subordinate to the same extent, and is not subordinate in right of payment to
each other or to any Indebtedness as to which the other is not so subordinate.
"PERMITTED HOLDER" means Berkshire Partners LLC (and its Affiliates) or any
Person of which the foregoing "beneficially owns" (as defined in Rules 13-3 and
13-5 under the Exchange Act) voting securities representing at least 75% of the
total voting power of all classes of Capital Stock of such Person (exclusive of
any matters as to which class voting rights exist).
"PERMITTED INDEBTEDNESS" is defined to include:
(1) Indebtedness Incurred if, after giving pro forma effect to the
Incurrence and application of the proceeds thereof, the Consolidated
Coverage Ratio exceeds 2.0 to 1.0;
107
<PAGE>
(2) Indebtedness Incurred pursuant to the Credit Agreement in an amount
outstanding at any time not to exceed $400 million (reduced by any required
permanent repayments of the principal amount of Indebtedness under the
Credit Agreement with the proceeds of Asset Dispositions that are
accompanied by a corresponding permanent commitment reduction thereunder);
(3) Capital Expenditure Indebtedness incurred in an aggregate principal
amount not to exceed $15 million in any fiscal year of the Company;
(4) Indebtedness under Interest Rate Agreements and Currency Exchange
Agreements, entered into for the purpose of limiting interest rate or
foreign exchange risk, as the case may be, provided that the obligations
under Interest Rate Agreements are related to payment obligations on
Permitted Indebtedness and provided further that obligations under Currency
Exchange Agreements are entered into in connection with foreign business
transactions in the ordinary course of business;
(5) Indebtedness of the Company to any Restricted Subsidiary or of any
Restricted Subsidiary to the Company or any other Restricted Subsidiary for
so long as such Indebtedness is held by the Company or such Restricted
Subsidiary, in each case subject to no Lien held by a Person other than the
Company or a Restricted Subsidiary; PROVIDED that if as of any date any
Person other than the Company or a Restricted Subsidiary owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness, such date
will be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness (under any clause other than clause (1) of the definition
thereof) by the issuer of such Indebtedness;
(6) Indebtedness evidenced by the Initial Notes and the Guarantees not
to exceed the $175 million initially outstanding on the Issue Date;
(7) Indebtedness outstanding immediately after the issuance of the
Initial Notes and the application of the proceeds thereof reduced by the
amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon;
(8) Refinancing Indebtedness incurred with respect to Indebtedness
referred to in clauses (1), (3), (6), (7) and (13) of this paragraph;
(9) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims and letters of credit and
bankers acceptances for the purchase of inventory and other goods;
(10) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price, or
other similar obligations (exclusive of any Guarantee of Indebtedness of the
purchaser in such transaction), in each case, incurred or assumed in
connection with the disposition of any business, assets or a Restricted
Subsidiary of the Company, provided that the maximum assumable liability in
respect of all such Indebtedness will at no time exceed the gross proceeds
actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(11) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(12) Indebtedness of Foreign Subsidiaries not borrowed under the Credit
Agreement in an amount outstanding at any time not to exceed $75 million,
including any guarantees thereof by the
108
<PAGE>
Company, PROVIDED, HOWEVER, that the amount of Indebtedness of Foreign
Subsidiaries outstanding at any particular time under this clause (12) shall
reduce on a dollar-for-dollar basis both the amount that may be borrowed at
that time under the Credit Agreement referred to in clause (2) of this
paragraph and under the sub-facility available to Foreign Subsidiaries under
said Credit Agreement;
(13) Indebtedness in an amount not to exceed $7 million that is incurred
or assumed by the Company or a Subsidiary in connection with its acquisition
of the majority interest in the Company's Formametal S.A. joint venture in
Argentina; and
(14) Indebtedness not otherwise permitted to be incurred pursuant to the
covenant described under "--Limitation on Indebtedness" in an aggregate
principal amount not to exceed at any one time outstanding $15 million.
"PERMITTED INVESTMENT" means an Investment by the Company or any Restricted
Subsidiary in
- a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the
primary business of such Restricted Subsidiary is a Related Business;
- another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related
Business;
- Temporary Cash Investments;
- receivables owing to the Company or any Restricted Subsidiary, if created
or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER,
that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;
- payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
- loans or advances to employees made in the ordinary course of business of
the Company or such Restricted Subsidiary, as the case may be, not to
exceed $1 million per employee and $3 million in the aggregate;
- stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
- Investments in foreign joint ventures in an aggregate amount not to exceed
$5 million; and
- any securities received or other Investments made as a result of the
receipt of non-cash consideration received in connection with an Asset
Disposition that was made pursuant to and in compliance with the
provisions of the covenant described under the caption "--Limitation on
Asset Disposition" or in connection with any other disposition of assets
not constituting an Asset Disposition.
"PERMITTED LIENS" means, with respect to any Person,
(1) pledges or deposits by such Person under workers' compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to
secure public or statutory obligations of such Person or deposits of cash or
United States government bonds to secure surety or appeal bonds to which
such Person is a party, or
109
<PAGE>
deposits and other Liens as security for taxes or import duties or for the
payment of rent, in each case Incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings, or other Liens arising out of
judgments or awards against such Person with respect to which such Person
will then be prosecuting an appeal or other proceedings for review;
(3) Liens for property taxes not yet delinquent or which are being
contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(5) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or to the ownership
of its properties which were not Incurred in connection with Indebtedness
and which do not in the aggregate materially adversely affect the value of
said properties or materially impair their use in the operation of the
business of such Person;
(6) Liens existing on the Issue Date;
(7) Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; PROVIDED, HOWEVER, that any such Lien may not
extend to any other property owned by the Company, the Parent Guarantor or
any Restricted Subsidiary; PROVIDED FURTHER that such Liens are not Incurred
in anticipation of or in connection with the transaction or series of
related transactions pursuant to which such Person became a Restricted
Subsidiary;
(8) Liens on property at the time the Company, the Parent Guarantor or a
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into the Company, the Parent Guarantor or
any Restricted Subsidiary; PROVIDED, HOWEVER, that any such Lien may not
extend to any other property owned by the Company, the Parent Guarantor or
any Restricted Subsidiary; PROVIDED FURTHER that such Liens are not Incurred
in anticipation of or in connection with the acquisition of such property;
(9) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by any
Lien referred to in the foregoing clauses (6), (7) and (8); PROVIDED,
HOWEVER, that
- such new Lien will be limited to all or part of the same property that
secured the original Lien (plus improvements on such property) and
- the Indebtedness secured by such Lien at such time is not increased to
any amount greater than the sum of
- the outstanding principal amount or, if greater, committed amount of
the Indebtedness described under clauses (6), (7) and (8) at the time
the original Lien became a Permitted Lien under the Indenture, and
- an amount necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or
replacement;
(10) Liens securing Senior Indebtedness that the Company or its
Restricted Subsidiaries are permitted to incur under the Indenture,
including Capital Expenditure Indebtedness;
110
<PAGE>
(11) Liens in favor of the Company or the Guarantors;
(12) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances and letters of credit issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such inventory or
other goods incurred in the ordinary course of business;
(13) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off incurred in the ordinary course of business;
(14) Leases or subleases granted to others and entered into in the
ordinary course of business; and
(15) Liens to secure the performance of statutory obligations and Liens
imposed by law, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"PREFERRED STOCK DIVIDENDS" means all dividends with respect to Preferred
Stock of Restricted Subsidiaries held by Persons other than the Company or a
Wholly Owned Subsidiary. The amount of any such dividend will be equal to the
quotient of such dividend divided by the difference between one and the maximum
statutory federal income tax rate (expressed as a decimal number between 1 and
0) then applicable to the issuer of such Preferred Stock.
"PRINCIPAL" of a exchange note means the principal of the exchange note plus
the premium, if any, payable on the exchange note which is due or overdue or is
to become due at the relevant time.
"PRO FORMA" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation in accordance with Article 11
of Regulation S-X promulgated under the Securities Act (to the extent
applicable).
"PUBLIC EQUITY OFFERING" has the meaning set forth under "--Optional
Redemption upon Public Equity Offerings."
"PUBLIC MARKET" means any time after (1) a Public Equity Offering has been
consummated and (2) at least 10.0% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"REDEEMABLE STOCK" means, with respect to any Person, any Capital Stock that
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable) or upon the happening of any event
- matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise,
- is convertible or exchangeable for Indebtedness or Disqualified Stock or
- is redeemable at the option of the holder thereof, in whole or in part.
111
<PAGE>
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" will have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of
any Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
PROVIDED, HOWEVER, that
- the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced,
- the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced,
- such Refinancing Indebtedness is Incurred in an aggregate principal amount
(or if issued with original issue discount, an aggregate issue price) that
is equal to or less than the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding of
the Indebtedness being refinanced plus an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing, and
- if the Indebtedness of the Company or a Restricted Subsidiary being
refinanced is subordinated to other Indebtedness of the Company or a
Restricted Subsidiary in any respect, such Refinancing Indebtedness is
subordinated at least to the same extent;
PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness will not include
- Indebtedness of a Subsidiary that refinances Indebtedness of the Company,
or
- Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"RELATED BUSINESS" means any business related, or complementary (as
determined in good faith by the Board of Directors), to the business of the
Company and the Restricted Subsidiaries on the Issue Date.
"REPRESENTATIVE" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means
- U.S.C. Europe N.V.,
- U.S.C. Europe Netherlands B.V.,
- U.S.C. Holding U.K. Ltd.,
- U.K. Can Ltd.,
- U.S.C. Europe U.K. Ltd.,
- U.S.C. Europe Italia, S.r.l.,
- U.S.C. France Holding, S.A.S.,
- USC Aerosols France, S.A.S.,
- USC May Verpackungen Holding Inc.,
- U.S.C. Aerosoldosen Deutschland GmbH,
112
<PAGE>
- U.S.C. Can Espana Holding SCpA,
- U.S.C. Europe Espana SA,
- May Verpackungen GmbH & Co. KG,
- Wilhelm Wessel Nachfl. GmbH & Co. KG,
- May Verpackungen Verwaltung GmbH,
- May Can Company GmbH,
- Wessel Emballagen GmbH,
- any other direct or indirect Subsidiary of the Company that is not
designated by the Board of Directors to be an Unrestricted Subsidiary, and
- an Unrestricted Subsidiary that is redesignated as a Restricted Subsidiary
as permitted pursuant to the definition of "Unrestricted Subsidiary."
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now
owned or hereafter acquired whereby the Company, the Parent Guarantor or a
Restricted Subsidiary transfers such property to a Person and the Company, the
Parent Guarantor or a Restricted Subsidiary leases it from such Person.
"SENIOR INDEBTEDNESS" means
- all monetary obligations under the Credit Agreement, including without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities under
the Credit Agreement, and
- all Indebtedness of the Company including interest thereon, whether
outstanding on the date of the Indenture or thereafter issued, created or
incurred, unless in the instrument creating or evidencing the same or
pursuant to which the same is outstanding it is provided that such
obligations are not superior in right of payment to the exchange notes;
PROVIDED, HOWEVER, that Senior Indebtedness will not include
- any obligation of the Company to any Subsidiary,
- any liability for federal, state, local, foreign or other taxes owed or
owing by the Company,
- any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities),
- any Indebtedness, Guarantee or obligation of the Company which is
subordinate or junior in any respect to any other Indebtedness, Guarantee
or obligation of the Company, including any Senior Subordinated
Indebtedness and any Subordinated Obligations,
- any obligations with respect to any Capital Stock, or
- any Indebtedness Incurred in violation of the Indenture.
"SENIOR INDEBTEDNESS OF THE GUARANTORS" means all Indebtedness of the
Guarantors including interest thereon, whether outstanding on the date of the
Indenture or thereafter issued, unless in the instrument creating or evidencing
the same or pursuant to which the same is outstanding it is provided that such
obligations are not superior in right of payment to the Guarantees, PROVIDED,
HOWEVER, that Senior Indebtedness of the Guarantors will not include
- any obligation of the Guarantors to any Subsidiary,
- any liability for federal, state, local, foreign or other taxes owed or
owing by the Guarantors,
113
<PAGE>
- any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities),
- any Indebtedness, Guarantee or obligation of the Guarantors that is
subordinate or junior in any respect to any other Indebtedness, Guarantee
or obligation of the Guarantors, including Senior Subordinated
Indebtedness of Guarantors and any Subordinated Obligations,
- any obligations with respect to any Capital Stock, or
- any Indebtedness Incurred in violation of the Indenture.
"SENIOR SUBORDINATED INDEBTEDNESS" means the exchange notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the exchange notes and is not subordinated by its terms
to any Indebtedness or other obligation of the Company which is not Senior
Indebtedness.
"SENIOR SUBORDINATED INDEBTEDNESS OF THE GUARANTORS" means (1) the
Guarantees and (2) any other Indebtedness of the Guarantors that specifically
provides that such Indebtedness is to rank PARI PASSU with the Guarantees and is
not subordinated by its terms to any Indebtedness or other obligation of the
Guarantors which is not Senior Indebtedness of the Guarantors.
"STATED MATURITY" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"STOCKHOLDER AGREEMENT" means that certain Stockholder Agreement by and
among the common equity stockholders of the Parent Guarantor, including the
Permitted Holders, certain management investors and the other Persons listed
therein, as in effect on the date of the Indenture.
"SUBORDINATED OBLIGATION" means
- any Indebtedness of the Company (whether outstanding on the date of the
Indenture or thereafter Incurred) which is subordinate or junior in right
of payment to the exchange notes,
- any Indebtedness of the Guarantors (whether outstanding on the date of the
Indenture or thereafter Incurred) which is subordinate or junior in right
of payment to the Guarantees or
- any Disqualified Stock of the Company or the Guarantors.
"SUBSIDIARY" OR "SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired,
- in the case of a corporation, of which at least 50% of the total voting
power of the Voting Stock is held by such first-named Person or any of its
Subsidiaries and such first-named Person or any of its Subsidiaries has
the power to direct the management, policies and affairs thereof; or
- in the case of a partnership, joint venture, association, or other
business entity, with respect to which such first-named Person or any of
its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise if in
accordance with GAAP such entity is consolidated with the first-named
Person for financial statement purposes.
"SUBSIDIARY GUARANTORS" means (1) USC May Verpackungen Holding Inc. and
(2) each Domestic Restricted Subsidiary that in the future executes a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture as a Subsidiary Guarantor, PROVIDED that any Person
114
<PAGE>
constituting a Subsidiary Guarantor as described above will cease to constitute
a Subsidiary Guarantor when its respective Subsidiary Guarantee is released in
accordance with the terms of the Indenture.
"TEMPORARY CASH INVESTMENTS" means any of the following:
(1) investments in U.S. Government Obligations maturing within one year
of the date of acquisition thereof,
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one year of the date of acquisition
thereof, issued by a bank or trust company which is organized under the laws
of the United States of America or any state thereof having capital, surplus
and undivided profits aggregating in excess of $500 million and whose
long-term debt (or that of its parent) is rated "A-3" or A- or higher
according to Moody's Investors Service, Inc. or Standard and Poor's (or such
similar equivalent rating by at least one "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act)),
(3) repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above,
(4) investments in commercial paper, maturing not more than six months
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's, and
(5) mutual funds whose assets consist primarily of Investments of the
type described in clauses (1) through (4) above.
"TRADE PAYABLES" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
guaranteed by such Person arising in the ordinary course of business of such
Person in connection with the acquisition of goods or services.
"TRANSACTIONS" means the recapitalization of the Company and the Parent
Guarantor pursuant to which Pac Packaging Acquisition Corporation was merged
with and into the Parent Guarantor and the financing transactions of the Company
and the Parent Guarantor related thereto.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and, thereafter,
means such successor.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in
effect from time to time.
"UNRESTRICTED SUBSIDIARY" means (1) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors as permitted or required pursuant to the covenant described
under "--Certain Covenants--Designation of Restricted and Unrestricted
Subsidiaries" and not thereafter redesignated as a Restricted Subsidiary as
permitted pursuant thereto and (2) any Subsidiary of an Unrestricted Subsidiary.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"VOTING STOCK" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary of the Company, all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.
115
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We originally sold the notes on October 4, 2000 to Salomon Smith Barney and
Banc of America Securities LLC (the "Initial Purchasers") pursuant to a purchase
agreement dated September 26, 2000. The Initial Purchasers subsequently resold
the notes to qualified institutional buyers in reliance on Rule 144A under the
Securities Act and to a limited number of persons outside the United States
under Regulation S. As a condition to the purchase agreement, we entered into a
registration rights agreement with the Initial Purchasers in which we agreed to:
(1) file a registration statement registering the exchange notes with the
Commission within 120 days after the original issuance of the notes, and
(2) use our best efforts to have the registration statement relating to the
exchange notes declared effective by the Commission within 150 days after
the original issuance of the notes.
We have agreed to keep the exchange offer open for not less than 30 business
days (or longer if required by applicable law) after the date on which notice of
the exchange offer is mailed to note holders.
This prospectus covers the offer and sale of the exchange notes pursuant to
the exchange offer and the resale of exchange notes received in the exchange
offer by any broker-dealer who held notes, other than notes purchased directly
from us or one of our affiliates.
For each note surrendered to us pursuant to the exchange offer, the holder
of the surrendered note will receive an exchange note having a principal amount
equal to that of the surrendered note. Interest on each exchange note will
accrue from the last date on which interest was paid on the surrendered note or,
if no interest has been paid, from the date of original issuance of the
surrendered note.
Under existing Commission interpretations, the exchange notes will be freely
transferable by holders other than our affiliates after the exchange offer
without further registration under the Securities Act if the holder of the
exchange notes represents that it is acquiring the exchange notes in the
ordinary course of its business, that it has no arrangement or understanding
with any person to participate in the distribution of the exchange notes and
that it is not one of our affiliates, as such terms are interpreted by the
Commission. If our belief is inaccurate, holders who transfer exchange notes in
violation of the prospectus delivery provisions of the Securities Act and
without an exemption from registration may incur liability under the Securities
Act. We do not assume or indemnify holders against such liability.
Broker-dealers ("Participating Broker-Dealers") receiving exchange notes in
the exchange offer will have a prospectus delivery requirement with respect to
resales of such exchange notes. While the Commission has not taken a position
with respect to this particular transaction, under existing Commission
interpretations relating to transactions structured substantially like the
exchange offer, Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to exchange notes (other than a resale of an
unsold allotment from the original sale of the notes) with the prospectus
contained in the registration statement relating to the exchange offer. Under
the registration agreement, we are required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the registration statement
relating to the exchange offer in connection with the resale of such exchange
notes.
A holder of notes (other than certain specified holders) tendering notes in
the exchange offer is required to represent that:
- any exchange notes to be received by it will be acquired in the ordinary
course of business;
116
<PAGE>
- the holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act)
of the exchange notes; and
- it is not one of our "affiliates" as defined in Rule 405 of the Securities
Act or, if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
practicable.
If a holder is a broker-dealer that will receive exchange notes for its own
account in exchange for notes that were acquired as a result of market-making or
other trading activities, the holder will be required to acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
In the event that
- applicable interpretations of the staff of the Commission do not permit us
to effect the exchange offer,
- for any other reason, we do not consummate the exchange offer within
180 days after issuance of the original notes,
- the Initial Purchasers so request with respect to notes not eligible to be
exchanged for exchange notes in the exchange offer,
- any holder of notes is not eligible to participate in the exchange offer,
or
- an Initial Purchaser does not receive freely tradable exchange notes in
exchange for notes constituting any portion of an unsold allotment (unless
current interpretations by the Commission's staff permit the filing in
lieu of a shelf registration statement of a post-effective amendment to
the registration statement relating to the exchange offer),
we will, at our cost,
- as promptly as practicable, file a shelf registration statement covering
resales of the notes or the exchange notes, as the case may be,
- use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act and
- keep the shelf registration statement effective until two years after its
effective date (or until one year after the effective date if the
registration statement is filed at the request of an Initial Purchaser).
An Initial Purchaser or holder of a note is ineligible to participate in the
exchange offer if such Initial Purchaser or holder cannot execute the letter of
transmittal because it is unable to make the required representations therein.
We will, in the event a shelf registration statement is filed, among other
things, provide to each holder for whom the shelf registration statement was
filed copies of the prospectus that is a part of the shelf registration
statement, notify each holder when the shelf registration statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the notes or the exchange notes, as the case may be. A holder selling
notes or exchange notes pursuant to the shelf registration statement generally
would be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
those sales and will be bound by the provisions of the registration agreement
that are applicable to such holder (including certain indemnification
obligations).
In the event that
- within 120 days after the issuance of the original notes, neither the
registration statement relating to the exchange offer nor the shelf
registration statement has been filed with the Commission,
117
<PAGE>
- within 150 days after the issuance of the original notes, the registration
statement relating to the exchange offer has not been declared effective.
- within 180 days after the issuance of the original notes, neither the
exchange offer has been consummated nor the shelf registration statement
has been declared effective, or
- after either the registration statement relating to the exchange offer or
the shelf registration statement has been declared effective, such
registration statement thereafter ceases to be effective or usable
(subject to certain exceptions) in connection with resales of notes or
exchange notes in accordance with and during the periods specified in the
registration agreement (each such event a "Registration Default"),
additional interest will accrue on the notes and the exchange notes (in addition
to the stated interest on the notes and the exchange notes) from and including
the date on which any such Registration Default has occurred to but excluding
the date on which all Registration Defaults have been cured. The additional
interest will accrue at a rate of 0.50% per annum during the 90-day period
immediately following the occurrence of any Registration Default and will
increase by 0.25% per annum at the end of each subsequent 90-day period, but in
no effect will such rate exceed 1.00% per annum in the aggregate, regardless of
the number of Registration Defaults.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and the accompanying letter of transmittal, we will accept all notes validly
tendered prior to 5:00 p.m., New York City time, on the expiration date. We will
issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding notes accepted in the exchange offer. Holders
may tender some or all of their notes pursuant to the exchange offer in integral
multiples of $1,000.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the notes except for the following:
(1) the exchange notes bear a Series B designation and different CUSIP
number from the notes;
(2) the exchange notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
(3) the holders of the exchange notes will not be entitled to certain rights
under the registration rights agreement, including the provisions
providing for liquidated damages in certain circumstances relating to the
timing of the exchange offer, all of which rights will terminate when the
exchange offer is terminated.
The exchange notes will evidence the same debt as the notes and will be
entitled to the benefits of the indenture. As of the date of this prospectus,
$175.0 million aggregate principal amount of the notes is outstanding. Solely
for reasons of administration and no other reason, we have fixed the close of
business on as the record date for the exchange offer for purposes
of determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially. Only a registered holder of notes (or such holder's
legal representative or attorney-in-fact) as reflected on the records of the
Trustee under the indenture may participate in the exchange offer. There will be
no fixed record date, however, for determining registered holders of the notes
entitled to participate in the exchange offer.
The holders of notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the indenture. We intend to conduct
the exchange offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission.
We shall be deemed to have accepted validly tendered notes when, as and if
the holder of such note has given oral or written notice thereof to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange notes from us.
118
<PAGE>
If any tendered notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth in this prospectus or
otherwise, the certificates for any such unaccepted notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
expiration date.
Those holders who tender notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of notes. We will
pay all charges and expenses, other than certain applicable taxes, in connection
with the exchange offer. See "--Fees and Expenses."
EXPIRATION DATES; EXTENSIONS; AMENDMENTS
The "expiration date" will be 5:00 p.m., New York City time, on
, unless we, in our sole discretion, extend the exchange offer, in
which case the expiration date will be the latest date to which the exchange
offer is extended. Notwithstanding the foregoing, we will not extend the
expiration date beyond .
We have no current plans to extend the exchange offer. In order to extend
the expiration date, we will notify the exchange agent of any extension by oral
or written notice and will make a public announcement of such extension, in each
case prior to 9:00 a.m., New York City time, no later than the next business day
after the previously scheduled expiration date.
We reserve the right, in our sole discretion, to
(1) delay accepting any notes;
(2) extend the exchange offer; or
(3) terminate the exchange offer
if any of the conditions set forth below under "--Conditions of the Exchange
Offer" shall not have been satisfied, in each case by giving oral or written
notice of such delay, extension or termination to the exchange agent, and to
amend the terms of the exchange offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement of such event. If we amend the exchange
offer in a manner determined by us to constitute a material change, we will
promptly disclose the amendment by means of a prospectus supplement that will be
distributed to the registered holders of the notes, and the exchange offer will
be extended for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner of disclosure to
the registered holders, assuming the exchange offer would otherwise expire
during such five to ten business day period.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, termination or amendment of the exchange
offer, we will not have an obligation to publish, advertise, or otherwise
communicate any such public announcement other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance. Interest
is payable semiannually on April 1 and October 1 of each year, commencing on
April 1, 2001, at the rate of 12 3/8% per annum. Interest on each exchange note
will accrue from the last date on which interest was paid on the note being
tendered for exchange or, if no interest has been paid, from the date on which
the notes were issued in the original offering. Consequently, holders who
exchange their notes for exchange notes will receive the same interest payment
on April 1, 2001 that they would have received had they not accepted the
exchange offer. Interest on the notes accepted for exchange will cease to accrue
upon issuance of the exchange notes.
119
<PAGE>
PROCEDURES FOR TENDERING
Only a registered holder of notes may tender such notes in the exchange
offer. To effectively tender in the exchange offer, a holder must complete, sign
and date a copy or facsimile of the letter of transmittal, have the signatures
thereon guaranteed if required by the letter of transmittal, and mail or
otherwise deliver such letter of transmittal or such facsimile, together with
the notes and any other required documents, to the exchange agent at the address
set forth below under "Exchange Agent" for receipt on or prior to the expiration
date. Delivery of the notes also may be made by book-entry transfer in
accordance with the procedures described below. If you are effecting delivery by
book-entry transfer,
(1) confirmation of such book-entry transfer must be received by the
exchange agent prior to the expiration date; and
(2) you must transmit to the exchange agent on or prior to the expiration
date a computer-generated message transmitted by means of the Automated
Tender Offer Program System of The Depository Trust Company ("DTC") in
which you acknowledge and agree to be bound by the terms of the letter of
transmittal and which, when received by the exchange agent, forms a part
of the confirmation of book-entry transfer.
By executing the letter of transmittal or effecting delivery by book-entry
transfer, each holder is making to us those representations set forth under the
heading "--Resale of the Exchange Notes."
The tender by a holder of notes will constitute an agreement between such
holder and us in accordance with the terms and subject to the conditions set
forth herein and in the letter of transmittal.
The method of delivery of the notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and sole risk
of the holder. As an alternative to delivery by mail, holders may wish to
consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the exchange agent on or prior to the
expiration date. You should not send any letters of transmittal or notes to us.
Holders may request that their respective brokers, dealers, commercial banks,
trust companies or nominees effect the above transactions for such holders.
The term "holder" with respect to the exchange offer means any person in
whose name notes are registered on our books or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose notes are held of record by DTC who desires to deliver such notes
by book-entry transfer at DTC.
If your notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to tender, you should promptly
contact the person in whose name the notes are registered and instruct such
registered holder to tender on your behalf. If a beneficial owner wishes to
tender on his or her own behalf, the holder must, prior to completing and
executing the letter of transmittal and delivering the notes, either make
appropriate arrangements to register ownership of the notes in his or her name
or to obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time. Signatures on a
letter of transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by an Eligible Institution (defined below) unless the notes are
tendered:
(1) by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
(2) for the account of an Eligible Institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed, such guarantee must be by a participant in a
recognized signature guarantee medallion program within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
120
<PAGE>
If the letter of transmittal is signed by a person other than the registered
holder of any notes listed therein, such notes must be endorsed or accompanied
by properly completed bond powers, signed by such registered holder as such
registered holder's name appears on such notes with the signature thereon
guaranteed by an Eligible Institution. If the letter of transmittal or any notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
submit with the letter of transmittal evidence satisfactory to so act.
We understand that the exchange agent will make a request, promptly after
the date of this prospectus, to establish accounts with respect to the notes at
the book-entry transfer facility of DTC for the purpose of facilitating this
exchange offer, and subject to the establishment of these accounts, any
financial institution that is a participant in the book-entry transfer facility
system may make book-entry delivery of notes by causing the transfer of such
notes into the exchange agent's account with respect to the notes in accordance
with DTC's procedures for such transfer. Although delivery of the notes may be
effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, unless the holder complies with the procedures
described in the following paragraph or the guaranteed delivery procedures
described below, an appropriate letter of transmittal properly completed and
duly executed with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
exchange agent at its address set forth below before the expiration date. The
delivery of documents to the book-entry transfer facility does not constitute
delivery to the exchange agent.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly,
DTC participants may electronically transmit their acceptance of the exchange
offer by causing DTC to transfer notes to the exchange agent in accordance with
the procedures for transfer established under ATOP. DTC will then send an
Agent's Message to the exchange agent. The term "Agent's Message" means a
message transmitted by DTC that, when received by the exchange agent, forms part
of the confirmation of a book-entry transfer and that states that DTC has
received an express acknowledgment from the DTC participant that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that we may enforce such agreement against such participant. In
the case of an Agent's Message relating to guaranteed delivery, the term means a
message transmitted by DTC and received by the exchange agent that states that
DTC has received an express acknowledgment from the DTC participant that such
participant has received and agrees to be bound by the Notice of Guaranteed
Delivery.
We will determine all questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of the tendered notes in
our sole discretion, and our determination will be final and binding. We reserve
the absolute right to reject any and all notes not validly tendered or any notes
the acceptance of which would, in the opinion of our counsel, be unlawful. We
also reserve the absolute right to waive any defects, irregularities or
conditions of tender as to particular notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of notes must be cured
within such time as we shall determine. Although we intend to notify holders of
defects or irregularities with respect to the tender of notes, neither we, the
exchange agent nor any other person shall incur any liability for failure to
give such notification. Tenders of notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any notes
received by the exchange agent that are not validly tendered and as to which the
defects or irregularities have not been cured or waived, or if notes are
submitted in a principal amount greater than the principal amount of notes being
tendered by such tendering holder, such unaccepted or non-exchanged notes will
be returned by the exchange agent to the tendering holders (or, in the case of
notes tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such unaccepted or non-exchanged notes will be credited to an
account maintained with such book-entry
121
<PAGE>
transfer facility), unless otherwise provided in the letter of transmittal
designated for such notes, as soon as practicable following the expiration date.
GUARANTEED DELIVERY PROCEDURES
Those holders who wish to tender their notes and
(1) whose notes are not immediately available; or
(2) who cannot deliver their notes, the letter of transmittal or any other
required documents to the exchange agent before the expiration date; or
(3) who cannot complete the procedures for book-entry transfer before the
expiration date;
may effect a tender if:
(1) the tender is made through an Eligible Institution;
(2) before the expiration date, the exchange agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number
or numbers of such notes and the principal amount of notes tendered,
stating that the tender is being made thereby, and guaranteeing that,
within five business days after the expiration date, either (a) that a
copy or facsimile of the letter of transmittal, together with the
certificate(s) representing the notes and any other documents required by
the letter of transmittal, will be deposited by the Eligible Institution
with the exchange agent or (b) that a confirmation of book-entry transfer
of such notes into the exchange agent's account at DTC, will be delivered
to the exchange agent; and
(3) either (a) a copy or facsimile of such properly completed and executed
letter of transmittal, together with the certificate(s) representing all
tendered notes in proper form for transfer and all other documents
required by the letter of transmittal, or (b) if applicable, confirmation
of a book-entry transfer into the exchange agent's account at DTC, are
actually received by the exchange agent within five business days after
the expiration date.
Upon request, the exchange agent will send a Notice of Guaranteed Delivery
to holders who wish to tender their notes according to the guaranteed delivery
procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of notes may be withdrawn at
any time on or prior to the expiration date.
To validly withdraw a tender of notes in the exchange offer, the exchange
agent must receive a telegram, telex, letter or facsimile transmission notice of
withdrawal at its address set forth herein on or prior to the expiration date.
Any such notice of withdrawal must:
(1) specify the name of the person having deposited the notes to be
withdrawn (the "Depositor");
(2) identify the notes to be withdrawn, including the certificate number or
numbers and the aggregate principal amount of such notes or, in the case
of notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited;
(3) be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfers sufficient to permit the Trustee with respect to the notes to
register the transfer of such notes into the name of the person
withdrawing the tender; and
122
<PAGE>
(4) specify the name in which any such notes are to be registered, if
different from the name of the Depositor.
We will determine all questions as to the validity, form and eligibility
(including time of receipt) of such notices in our sole discretion, and our
determination will be final and binding. Any notes so withdrawn will be deemed
not to have been validly tendered for purposes of the exchange offer, and no
exchange notes will be issued in exchange for withdrawn notes unless those notes
are validly retendered. Any notes that have been tendered but that are not
accepted for exchange because of the rejection of the tender due to uncured
defects or the prior termination of the exchange offer, or which have been
validly withdrawn, will be returned to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.
CONDITIONS OF THE EXCHANGE OFFER
The offer is subject to the condition that the exchange offer, or the making
of any exchange by a holder, does not violate applicable law or any applicable
interpretation of the staff of the Commission. If there has been a change in
policy of the Commission such that, in the reasonable opinion of our counsel,
there is a substantial question whether the exchange offer is permitted by
applicable federal law, we have agreed to seek a no-action letter or other
favorable decision from the Commission allowing us to consummate the exchange
offer.
If we determine that the exchange offer is not permitted by applicable
federal law, we may terminate the exchange offer. In connection with any
termination we may:
(1) refuse to accept any notes and return any notes that have been tendered
by the holders thereof;
(2) extend the exchange offer and retain all notes tendered prior to the
expiration date, subject to the rights of the holders of tendered notes
to withdraw their tendered notes; or
(3) waive the termination event with respect to the exchange offer and
accept all properly tendered notes that have not been properly withdrawn.
If the waiver of a termination event constitutes a material change in the
exchange offer, we will disclose the change by means of a supplement to this
prospectus that will be distributed to each registered holder of notes, and we
will extend the exchange offer for a period of five to ten business days,
depending upon the significance of the waiver, if the exchange offer would
otherwise expire during such period.
EXCHANGE AGENT
Bank One Trust Company, N.A., the Trustee under the indenture, has been
appointed as exchange agent for the exchange offer. Questions and requests for
assistance, requests for additional copies of this prospectus or the letter of
transmittal and requests for the Notice of Guaranteed Delivery should be
directed to the exchange agent addressed as follows: By Hand Delivery, Overnight
Courier, or Registered or Certified Mail:
Bank One Trust Company, N.A.
One North State Street, 9th Floor
Chicago, Illinois 60602
Attention: Exchanges
Facsimile: (312) 407-2088
Any requests or deliveries to an address or facsimile number other than as
set forth above will not constitute a valid delivery.
123
<PAGE>
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are making the principal
solicitation by mail, but our officers, employees and affiliates may make
additional solicitations in person, by telegraph or telephone.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will pay the exchange agent,
however, reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer.
We will pay the cash expenses incurred in connection with the exchange
offer. Such expenses include fees and expenses of the exchange agent and the
Trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
notes in the exchange offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the notes in the exchange offer, then the
amount of any such transfer taxes, whether imposed on the registered holder or
any other persons, will be payable by the tendering holder. If satisfactory
evidence of payment of or exemption from such taxes is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the notes,
which is face value, as reflected in our accounting records on the date of
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes. The costs of the exchange offer will be amortized over the term of the
exchange notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The notes that are not exchanged for exchange notes in the exchange offer
will remain restricted securities. Accordingly, those notes may be resold only
as follows:
(1) to us, upon redemption or otherwise;
(2) (a) so long as the notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes
is a qualified institutional buyer within the meaning of Rule 144A under
the Securities Act in a transaction meeting the requirements of
Rule 144A, (b) in accordance with Rule 144 under the Securities Act, or
(c) pursuant to another exemption from the registration requirements of
the Securities Act and based upon an opinion of counsel reasonably
acceptable to us;
(3) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
(4) pursuant to an effective registration statement under the Securities
Act.
Persons who acquire the exchange notes are responsible for compliance with the
state securities or blue sky laws regarding resales. We assume no responsibility
for compliance with these requirements.
124
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain United States federal
income tax consequences relevant to the acquisition, ownership and disposition
of the exchange notes by the beneficial owners thereof who exchange the
outstanding notes therefor ("Holders"). This discussion is limited to the tax
consequences to the initial Holders of exchange notes and does not address the
tax consequences to subsequent purchasers of exchange notes. This summary does
not purport to be a complete analysis of all of the potential United States
federal income tax consequences relating to the acquisition, ownership and
disposition of the exchange notes, nor does this summary describe any federal
estate tax consequences (except with respect to Foreign Holders (as defined
below)). There can be no assurance that the Internal Revenue Service ("IRS")
will take a similar view of the tax consequences described herein. Furthermore,
this discussion does not address all aspects of taxation that might be relevant
to particular Holders in light of their individual circumstances or to Holders
who are subject to special treatment under United States federal tax law or to
certain types of Holders (including dealers in securities, insurance companies,
financial institutions, tax-exempt entities and, except to the extent discussed
below, Foreign Holders (as defined below)). This discussion is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date hereof and all of which
are subject to change (possibly on a retroactive basis). The discussion below
assumes that the exchange notes are held as capital assets (generally, property
held for investment) within the meaning of Code Section 1221.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT SUCH INVESTOR'S TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES OF A PURCHASE OF EXCHANGE NOTES IN LIGHT OF
SUCH INVESTOR'S PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT
OF THE CODE, AS WELL AS STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
The following summary is a general description of certain United States
federal income tax consequences applicable to a "United States Holder." For the
purpose of this discussion, a "United States Holder" means a Holder that is for
United States federal income tax purposes (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or a trust if (a) a
court within the United States is able to exercise primary supervision over the
administration of the trust, and (b) one or more United States persons have the
authority to control all substantial decisions of the trust.
TAXATION OF INTEREST
Interest paid on an exchange note will generally be taxable to you as
ordinary interest income at the time the interest accrues or is received in
accordance with your method of accounting for United States federal income tax
purposes.
ADDITIONAL PAYMENTS
We intend to take the position for United States federal income tax purposes
that any additional payments as a result of a redemption pursuant to a change of
control should be taxable to you as additional interest income when received or
accrued, in accordance with your method of tax accounting. This position is
based in part on the assumption that as of the date of issuance of the exchange
notes, the possibility that additional payments will have to be paid is a
"remote" or
125
<PAGE>
"incidental" contingency within the meaning of applicable Treasury regulations.
Our determination that such possibility is a remote or incidental contingency is
binding on you, unless you explicitly disclose to the IRS, on your return for
the year during which the exchange note is acquired, that you are taking a
different position. Regardless of our position, however, the IRS may take the
contrary position that the payment of additional payments is not a remote or
incidental contingency. Such a contrary position could affect the timing and
character of both your income from the exchange notes and our deduction with
respect to payments of additional payments.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF THE EXCHANGE NOTES: GENERAL
In general, upon the sale, exchange, redemption or retirement of an exchange
note, you will recognize capital gain or loss equal to the difference between
the amount realized on such sale, exchange, redemption or retirement (not
including any amount attributable to accrued but unpaid interest that you have
not already included in gross income) and your adjusted tax basis in the
exchange note. To the extent attributable to accrued but unpaid interest that
you have not already included in gross income, the amount recognized by you will
be treated as a payment of interest. See "Tax Consequences to United States
Holders--Taxation of Interest" above. Your adjusted tax basis in an exchange
note generally will equal the issue price of the exchange note, reduced by any
principal payments you received.
The excess of net long-term capital gains over net short-term capital losses
is subject to tax at a lower rate for non-corporate taxpayers. Non-corporate
taxpayers are generally subject to a maximum tax rate of 20% on capital gain
realized on the disposition of a capital asset (including an exchange note) held
for more than one year. The distinction between capital gain or loss and
ordinary income or loss is relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF NOTES: EXCHANGE OFFER
The exchange of an outstanding note for an exchange note pursuant to the
exchange offer is not anticipated to be taxable to the Holder. As a result, a
Holder:
- would not be expected to recognize any gain or loss on the exchange;
- would be expected to have a holding period for the exchange note that
includes the holding period for the note exchanged therefor;
- would be expected to have an adjusted tax basis in the exchange note equal
to its adjusted tax basis in the note exchanged therefor; and
- would be expected to recognize taxable gain or loss on a subsequent sale,
exchange, redemption or retirement of an exchange note under the same
circumstances and conditions as a holder of the outstanding note would
have with respect to a sale, exchange, redemption or retirement of an
outstanding note.
See "Tax Consequences to United States Holders--Sale, Exchange, Redemption or
Retirement of the Exchange Notes: General" above.
The exchange offer is not expected to result in any United States federal
income tax consequences to a nonexchanging holder of outstanding notes.
TAX CONSEQUENCES TO FOREIGN HOLDERS
The following summary is a general description of certain United States
federal income tax consequences to a "Foreign Holder" (which, for the purpose of
this discussion, means a Holder that is not a United States Holder). The
following summary is subject to the discussion below concerning
126
<PAGE>
backup withholding and assumes that a Holder is not subject to provisions of the
Code applicable to expatriates such as Code Section 877.
(a) In general, payments of interest on an exchange note by the Company
or any paying agent to a Foreign Holder will not be subject to United States
federal income tax or withholding tax, provided that:
- the interest received is not effectively connected with a United States
trade or business;
- such Holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote;
- such Holder is not, for United States federal income tax purposes, a
controlled foreign corporation related, directly or indirectly, to the
Company through stock ownership;
- such Holder is not a bank receiving interest described in Code
Section 881(c)(3)(A); and
- the certification requirements under Code Section 871(h) or 881(c) and
Treasury Regulations thereunder (summarized below) are met.
Subject to any treaty exemption or rate reduction payments of interest on an
exchange note that do not satisfy all of the foregoing requirements are
generally subject to United States federal income tax and withholding tax at
a flat rate of 30%. Federal withholding tax is not an additional tax.
Rather, any amounts withheld from a payment to a Holder are generally
allowed as a credit against the affected Foreign Holder's United States
federal income tax liability. Payments of interest which are effectively
connected with a United States trade or business conducted by the Holder
will be subject to tax at graduated rates applicable to United States
Holders.
In the event any additional payments we are required to pay as a result of a
redemption pursuant to a change of control are treated as interest, the tax
treatment of such payments should be the same as other interest payments
received by a Foreign Holder. However, the IRS may treat such payments as
other than interest, in which case (i) if such payments are not effectively
connected with a United States trade or business conducted by the Holder
they would be subject to United States federal withholding tax at a rate of
30%, unless the Holder qualifies for a reduced rate of tax or an exemption
under a tax treaty, or (ii) if such payments are effectively connected with
a United States trade or business conducted by the Holder, they would be
subject to tax at graduated rates applicable to United States Holders.
(b) In general, a Foreign Holder of an exchange note will not be subject
to United States federal withholding tax on the receipt of payments of
principal on the exchange note and will not be subject to United States
federal income tax on any gain recognized on the sale, exchange, redemption,
retirement or other disposition of any exchange note, unless (i) such
Foreign Holder is a non-resident alien individual who is present in the
United States for 183 or more days in the taxable year of disposition and
certain other conditions are met, or (ii) such Foreign Holder is engaged in
a United States trade or business and such gain is effectively connected
with such trade or business.
Under Code Sections 871(h) and 881(c) and the underlying Treasury
Regulations, in order to obtain the exemption from withholding tax described in
paragraph (a) above, either (1) the Holder of an exchange note must provide its
name and address, and certify, under penalties of perjury, to the Company or
paying agent, as the case may be, that such Holder is a Foreign Holder or (2) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the exchange note on behalf of the Holder
thereof must certify, under penalties of perjury, to the Company or paying
agent, as the case may be, that such certificate has been received from the
Holder by it or by a Financial Institution between it and the Holder and must
furnish the payor with a copy thereof. A certificate described in
127
<PAGE>
this paragraph is effective only with respect to payments of interest made to
the certifying Foreign Holder after issuance of the certificate in the calendar
year of its issuance and the two immediately succeeding calendar years. Under
Treasury Regulations, the foregoing certification may be provided by the Holder
of an exchange note on IRS Form W-8BEN, W-8ECI, W-8IMY or W-8EXP, as applicable.
Notwithstanding the provision of a Form W-8ECI, a Holder who is engaged in a
United States trade or business will be subject to tax as described above with
respect to amounts which are effectively connected with such trade or business.
If any of the payments with respect to the exchange notes are effectively
connected with a United States trade or business conducted by a Holder and such
Holder is a foreign corporation, such Holder may also be subject to a United
States "branch profits" tax on such effectively connected income at a 30% rate
(or such lower rate as may be specified by an applicable income tax treaty,
subject to certain adjustments).
An exchange note held by an individual who is not a citizen or resident of
the United States at the time of death will not be includible in the decedent's
gross estate for United States estate tax purposes, provided that such Holder or
beneficial owner did not at the time of death actually or constructively own 10%
or more of the combined voting power of all classes of stock of the Company
entitled to vote, and provided that, at the time of death, payments with respect
to such exchange note would not have been effectively connected with the conduct
by such Holder of a trade or business within the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% backup withholding
tax and information reporting requirements apply to certain payments of
principal and interest made to, and to the proceeds of sale before maturity by,
certain Holders.
In the case of a non-corporate United States Holder, information reporting
requirements will apply to payments of principal or interest made by the Company
or any paying agent thereof on an exchange note. The payor will be required to
withhold backup withholding tax if: a Holder fails to furnish its Taxpayer
Identification Number ("TIN") (which, for an individual, is his Social Security
number) to the payor in the manner required; a Holder furnishes an incorrect TIN
and the payor is so notified by the IRS; the payor is notified by the IRS that
such Holder has failed to properly report payments of interest or dividends; or
under certain circumstances, a Holder fails to certify, under penalties of
perjury, that it has furnished a correct TIN and has not been notified by the
IRS that it is subject to backup withholding for failure to report interest or
dividend payments.
Backup withholding and information reporting does not apply with respect to
payments made to certain exempt recipients, including a corporation (within the
meaning of Code Section 7701(a)). United States Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding and
information reporting, and the procedure for obtaining such an exemption if
applicable. The amount of any backup withholding imposed upon a payment to a
United States Holder will be allowed as a credit against such Holder's United
States federal income tax liability and may entitle such Holder to a refund,
provided that certain required information is furnished to the IRS.
In the case of a Foreign Holder, under currently applicable Treasury
Regulations, backup withholding and information reporting will not apply to
payments of principal or interest made by the Issuer or any paying agent thereof
on an exchange note (absent actual knowledge that the Holder is actually a
United States Holder) if such Holder has provided the required certification
under penalties of perjury that it is not a United States Holder or has
otherwise established an exemption. If such Holder provides the required
certification, such Holder may nevertheless be subject to withholding of United
States federal income tax as described above under "Tax Consequences to Foreign
Holders." Foreign Holders of exchange notes should consult their tax advisors
regarding the application of
128
<PAGE>
information reporting and backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available. Any amounts withheld from a payment to a Foreign Holder
under the backup withholding rules will be allowed as a credit against such
Holder's United States federal income tax liability and may entitle such Holder
to a refund, provided that certain required information is furnished to the IRS.
New Treasury Regulations relating to withholding tax on income paid to
Foreign Holders will generally be effective for payments made after
December 31, 2000, subject to certain transition rules. In general, these new
regulations do not significantly alter the substantive withholding and
information reporting requirements, but rather unify current certification
procedures and forms, and clarify reliance standards. The new regulations also
alter the procedures for claiming benefits of an income tax treaty and permit
the shifting of primary responsibility for withholding to certain financial
intermediaries acting on behalf of beneficial owners under some circumstances.
On January 24, 2000, the IRS issued Rev. Proc. 2000-12 providing guidance for
entering into a "qualified intermediary" withholding agreement with the IRS to
allow certain institutions to certify on behalf of their non-United States
customers or account holders who invest in United States securities. We strongly
urge prospective Foreign Holders to consult their own tax advisors for
information on the impact, if any, of these new withholding regulations.
129
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer in exchange for notes that such broker-dealer acquired as
a result of market-making or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such exchange notes.
Any such broker-dealer may use this prospectus, as we may amend or supplement it
from time to time, in connection with resales of exchange notes received in
exchange for notes. For a period of one year after we complete the exchange
offer, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. All resales must be made in
compliance with state securities or blue sky laws. We assume no responsibility
for compliance with these requirements.
We will not receive any proceeds from any sales of the exchange notes by
broker-dealers. Broker-dealers may sell exchange notes received for their own
account pursuant to the exchange offer from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to the purchaser or to or through brokers-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells the exchange notes that it received for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will
deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the expiration date of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the holder of the
notes) other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
The initial purchasers have advised us that, following completion of this
exchange offer, they intend to make a market in the exchange notes. However, the
initial purchasers are under no obligation to do so, and they may discontinue
any market activities with respect to the exchange notes at any time.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the notes offered
hereby will be passed upon for the Company by Ropes & Gray, Boston,
Massachusetts.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of U.S. Can Corporation and its
subsidiaries as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999 included in this prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as stated in their
report appearing herein.
130
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 under the Securities Act
with the Securities and Exchange Commission with respect to the exchange notes.
This prospectus, which forms a part of the registration statement, does not
contain all of the information included in the registration statement. Certain
parts of this registration statement are omitted in accordance with the rules
and regulations of the Commission. For further information about us and the
exchange notes, we refer you to the registration statement. You should be aware
that statements made in this prospectus as to the contents of any agreement or
other document filed as an exhibit to the registration statement are not
necessarily complete. We refer you to the copy of such documents filed as
exhibits to the registration statement. Each such statement is qualified in all
respects by such reference.
We are not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended.
We have agreed that, whether or not we are required to do so by the rules and
regulations of the Commission, for so long as any of the exchange notes remain
outstanding, we will furnish to the holders of the exchange notes and, if
permitted, will file with the Commission, within the time periods specified in
the rules and regulations of the Commission:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
and, with respect to the annual information only, a report thereon by our
certified independent accountants; and
(ii) all reports that would be required to be filed with the Commission
on Form 8-K if we were required to file such reports in each case.
Any reports or documents we file with the Commission, including the
registration statement, may be inspected and copied at the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such reports or other
documents may be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a web site that contains reports and other
information that is filed through the Commission's Electronic Data Gathering
Analysis and Retrieval System. The web site can be accessed at
http://www.sec.gov.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. We will
provide without charge to each person to whom a copy of this prospectus is
delivered, upon written or oral request of any such person, a copy of any and
all of such information. Requests for such copies should be directed to the
Treasurer, United States Can Company, 900 Commerce Drive, Suite 302, Oak Brook,
Illinois 60523 (Telephone Number (630) 571-2500). You should request any such
information at least five days in advance of the date on which you expect to
make your decision with respect to the exchange offer. In any event, you must
request such information prior to .
131
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF U.S. CAN CORPORATION AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
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
</TABLE>
F-1
<PAGE>
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
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
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)
======== ======== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-3
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
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
-------- -------- ---------- -------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
==== ======== ======= ======= ======= ===== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-5
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-6
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
(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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======== =======
</TABLE>
F-7
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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)
======= ========
</TABLE>
------------------------
(a) Includes $3.5 million and $17.7 million of long-term liabilities as of
December 31, 1999 and 1998, respectively.
F-10
<PAGE>
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):
<TABLE>
<S> <C>
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
========
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net Sales................................................... $859,478 $857,322
Income Before Discontinued Operations and Extraordinary
Item...................................................... 21,928 (9,130)
Net Income.................................................. 20,632 (17,658)
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======== ========
</TABLE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<S> <C>
2000........................................................ $ 38,824
2001........................................................ 6,185
2002........................................................ 45,012
2003........................................................ 4,065
2004........................................................ 16,637
Thereafter.................................................. 248,594
--------
$359,317
========
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current......................................... $ 1,304 $ -- $ --
Deferred........................................ 11,124 (6,916) (17,788)
Foreign......................................... 2,194 1,254 996
------- ------- --------
Total....................................... $14,622 $(5,662) $(16,792)
======= ======= ========
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
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)
======= ======= ========
</TABLE>
F-14
<PAGE>
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):
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------- ----------------------
BENEFITS OBLIGATIONS BENEFITS OBLIGATIONS
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
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)
======= ======== ======= ========
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======= =======
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======= =======
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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)
======== ========
</TABLE>
F-16
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======= =======
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
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
======= =======
</TABLE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
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
=======
</TABLE>
F-20
<PAGE>
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:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING EXERCISABLE OPTIONS
--------------------- --------------------
WTD. AVG. WTD. AVG.
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
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
========= ======
</TABLE>
<TABLE>
<CAPTION>
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
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$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
========= =======
</TABLE>
F-21
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
UNITED
STATES EUROPE CONSOLIDATED
-------- -------- ------------
<S> <C> <C> <C>
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
</TABLE>
F-23
<PAGE>
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):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
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
======== ======== =========
</TABLE>
------------------------
(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
<PAGE>
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
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN
CORPORATION UNITED STATES USC EUROPE U.S. CAN
(PARENT CAN COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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
======= ======== ======== ======== ========
</TABLE>
F-26
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(000'S OMITTED)
<TABLE>
<CAPTION>
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
----------- ------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
======== ======== ======= ======== ========= ========
</TABLE>
F-27
<PAGE>
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)
<TABLE>
<CAPTION>
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
----------- ------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
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
======== ======== ======== ======= ========
</TABLE>
F-28
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN
CORPORATION UNITED STATES USC EUROPE U.S. CAN
(PARENT CAN COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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)
======== ======== ======== ======= ========
</TABLE>
F-29
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1998
(000'S OMITTED)
<TABLE>
<CAPTION>
U.S. CAN UNITED STATES
CORPORATION CAN USC EUROPE
(PARENT COMPANY (NON-GUARANTOR U.S. CAN
GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CORPORATION
----------- ------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
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
======== ======== ======== ========= ========
</TABLE>
F-30
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN UNITED STATES
CORPORATION CAN USC EUROPE U.S. CAN
(PARENT COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED
----------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
F-31
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN
CORPORATION UNITED STATES USC EUROPE U.S. CAN
(PARENT CAN COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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)
======== ======== ======== ======= ========
</TABLE>
F-32
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN UNITED STATES
CORPORATION CAN USC EUROPE U.S. CAN
(PARENT COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED
----------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
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
======= ======== ======== ========
</TABLE>
F-33
<PAGE>
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.
<TABLE>
<CAPTION>
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
------------------------------
(a) See Note 3 of the "Notes to Consolidated Financial Statements."
F-34
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE QUARTERLY FOR THE NINE MONTHS
PERIOD ENDED ENDED
------------------------- ------------------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3
2000 1999 2000 1999
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-35
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 1, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-36
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED
-----------------------
OCTOBER 1, OCTOBER 3,
2000 1999
---------- ----------
<S> <C> <C>
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
======== ========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these statements.
F-37
<PAGE>
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
<PAGE>
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):
<TABLE>
<S> <C>
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
========
</TABLE>
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):
<TABLE>
<CAPTION>
FIRST NINE-
THIRD QUARTER 1999 MONTHS 1999
------------------ -----------
<S> <C> <C>
Net Sales....................................... $216,782 $656,754
Net Income...................................... 6,201 18,268
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
OCTOBER 1, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
Raw materials......................................... $ 25,920 $ 30,821
Work in process....................................... 50,324 49,884
Finished goods........................................ 36,336 35,274
-------- --------
$112,580 $115,979
======== ========
</TABLE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -----------------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
</TABLE>
(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):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -----------------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
======= ====== ======== =======
</TABLE>
(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
<PAGE>
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
<PAGE>
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)
<TABLE>
<CAPTION>
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
----------- ------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
======= ======== ======= ======== ======== ========
</TABLE>
F-45
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF OCTOBER 1, 2000
(000'S OMITTED)
<TABLE>
<CAPTION>
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
----------- ------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
======== ======== ======== ======== ========= ========
</TABLE>
F-46
<PAGE>
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)
<TABLE>
<CAPTION>
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
----------- ------------- ---------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
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
======= ======== ======= ======== =======
</TABLE>
F-47
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN UNITED STATES
CORPORATION CAN USC EUROPE U.S. CAN
(PARENT COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
-------------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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
======= ======== ======== ======== ========
</TABLE>
F-48
<PAGE>
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)
<TABLE>
<CAPTION>
U.S. CAN UNITED STATES
CORPORATION CAN USC EUROPE U.S. CAN
(PARENT COMPANY (NON-GUARANTOR CORPORATION
GUARANTOR) (ISSUER) SUBSIDIARIES) CONSOLIDATED
----------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
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
======= ======== ======= ========
</TABLE>
F-49
<PAGE>
U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(000'S OMITTED)
<TABLE>
<CAPTION>
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
----------- ------------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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
======== ======== ======= ======== ========= ========
</TABLE>
F-50
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a corporation to indemnify and advance reasonable expenses to any person who was
a party, is a party, or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. In addition, Section 145 of the DGCL
states that no indemnification may be made in respect of any claim, issue or
matter as to which such person is adjudged to be liable to us unless and only to
the extent that the Court of Chancery or the court in which the action was
brought determines that, despite the adjudication of liability but in view of
all of the circumstances of the case, he or she was fairly and reasonably
entitled to indemnity for the expenses which the court deems proper.
Our Certificate of Incorporation includes indemnification provisions that
mirror Section 145 of the DGCL Consequently, any of our directors or officers or
any person serving at our request in those capacities will be fully indemnified
against such judgments, penalties, fines, settlements and reasonable expenses
actually incurred, except if (1) he or she did not conduct himself or herself in
good faith and did not reasonably believe his or her conduct was in the
corporation's best interests; or (2) in the case of any criminal action or
proceeding, he or she had reasonable cause to believe his or her conduct was
unlawful.
Our Certificate of Incorporation also contains a provision eliminating
liability to us or our shareholders for monetary damages from breach of
fiduciary duty as a director, except under certain specified circumstances. The
inclusion of these indemnification provisions in our Certificate of
Incorporation and is intended to enable us to attract qualified persons to serve
as directors and officers who might otherwise be reluctant to serve.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are either filed herewith or incorporated by
reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger (the "Merger Agreement") dated
as of June 1, 2000 between U.S. Can Corporation and Pac
Packaging Acquisition Corporation (Exhibit 2 to the current
report on Form 8-K, filed on June 15, 2000).(2)
2.2 First Amendment to Merger Agreement dated as of June 28,
2000 (Exhibit 2.2 to the current report on Form 8-K, filed
on June 30, 2000).(2)
2.3 Second Amendment to Merger Agreement dated as of August 22,
2000 (Exhibit 2.3 to the current report on Form 8-K, filed
on August 31, 2000).(2)
3.1 Restated Certificate of Incorporation of U.S. Can
Corporation.(1)
3.2 Amended and Restated By-laws of U.S. Can Corporation.(1)
3.3 Restated Certificate of Incorporation of United States Can
Company.(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
3.4 Amended and Restated By-laws of United States Can
Company.(1)
3.5 Certificate of Incorporation of USC May Verpackungen
Holding Inc.(1)
3.6 By-Laws of USC May Verpackungen Holding Inc.(1)
4.1 Indenture dated as of October 4, 2000 between the Company
and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to
the current report on Form 8-K, filed on October 18,
2000).(2)
4.2 Registration Rights Agreement dated as of October 4, 2000
among United States Can Company, Salomon Smith Barney and
Banc of America Securities LLC.(1)
4.3 Form of Letter of Transmittal.**
4.4 Form of Notice of Guaranteed Delivery.**
4.5 Form of Exchange Agent Agreement.**
4.6 Form of Exchange Note.**
5 Opinion of Ropes & Gray.**
10.1 Credit Agreement dated as of October 4, 2000, among United
States Can Company, the guarantors and Bank of
America, N.A. and the other financial institutions listed
therein, as Lenders (Exhibit 10.1 to the current report on
Form 8-K, filed on October 18, 2000).(2)
10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can
Corporation, United States Can Company, each of the domestic
subsidiaries of United States Can Company and Bank of
America, N.A.(1)
10.3 Security Agreement dated as of October 4, 2000 among U.S.
Can Corporation, United States Can Company, each of the
domestic subsidiaries of United States Can Company and Bank
of America, N.A.(1)
10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce,
CA property (Exhibit 10.10 to the quarterly report on
Form 10-Q for the quarter ended April 6, 1997, filed on
May 20, 1997).(2)
10.5 Lease Agreement, dated 1/1/76, as amended, relating to the
Weirton, WV property (Exhibit 10.11 to the quarterly report
on Form 10-Q, for the quarter ended April 6, 1997, filed on
May 20, 1997).(2)
10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000
(Exhibit 10.7 to the annual report on Form 10-K for the
fiscal year ended December 31, 1999, filed on March 30,
2000).(2)
10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as
amended, relating to the Weirton, WV property.(1)
10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr
Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to
the annual report on Form 10-K for the fiscal year ended
December 31, 1996, filed on March 26, 1997).(2)
10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the
annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the
annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and
May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the
quarterly report on Form 10-Q for the quarter ended July 2,
2000, filed on August 15, 2000).(2)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as
amended, relating to the Weirton, WV property (Exhibit 10.55
to the annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.13 Employment Agreement dated October 4, 2000 by and among
Paul W. Jones, United States Can Company and U.S. Can
Corporation.(1)
10.14 Employment Agreement dated October 4, 2000 by and among
John L. Workman, United States Can Company and U.S. Can
Corporation.(1)
10.15 Employment Agreement dated October 4, 2000 by and among
Gillian V. Derbyshire, United States Can Company and U.S.
Can Corporation.(1)
10.16 Employment Agreement dated October 4, 2000 by and among
Roger B. Farley, United States Can Company and U.S. Can
Corporation.(1)
10.17 Employment Agreement dated October 4, 2000 by and among
J. Michael Kirk, United States Can Company and U.S. Can
Corporation.(1)
10.18 Employment Agreement dated October 4, 2000 by and among
Thomas A. Scrimo, United States Can Company and U.S. Can
Corporation.(1)
10.19 Service Agreement with David R. Ford dated November 24, 1997
(Exhibit 10.34 to the annual report on Form 10-K for the
fiscal year ended December 31, 1998, filed on March 31,
1999).(2)
10.20 Employee Agreement dated October 4, 2000 by and among
David R. Ford, United States Can Company and U.S. Can
Corporation.**
10.21 Change-in-Control Agreement dated February 4, 1998 by and
among David R. Ford, U.S. Can Corporation and United States
Can Company (Exhibit 10.51 to the annual report on
Form 10-K for the fiscal year ended December 31, 1997, filed
on March 26, 1998).(2)
10.22 U.S. Can Corporation Executive Deferred Compensation Plan
(Exhibit 10.30 to the annual report on Form 10-K for the
fiscal year ended December 31, 1998, filed on March 31,
1999).(2)
10.23 Amendment No. 1 to the U.S. Can Corporation Executive
Deferred Compensation Plan, dated as of October 4, 2000.**
10.24 U.S. Can Corporation 2000 Equity Incentive Plan.(1)
10.25 United States Can Company Executive Severance Plan, dated as
of October 13, 1999 (Exhibit 10.34 to the annual report on
Form 10-K for the fiscal year ended December 31, 1999,
filed on March 30, 2000).(2)
21 Subsidiaries of the Registrants.(1)
23.1 Consent of Arthur Andersen LLP.(1)
23.2 Consent of Ropes & Gray.**
25 Statement of Eligibility of Trustee.(1)
</TABLE>
------------------------
** To be filed by amendment.
(1) Filed herewith.
(2) Incorporated by reference.
(b) Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
(1) The Company undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(x) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(y) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered, if the total dollar value of
securities offered would not exceed that which was registered, and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(z) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, and where applicable, each filing of employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934, that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities, other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding, is asserted by that director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(4) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this registration
statement, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of this registration statement through the date of responding to the
request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this registration statement when it
became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Chicago, state of
Illinois, on January 5, 2001.
<TABLE>
<S> <C> <C>
U.S. CAN CORPORATION
By /s/ JOHN L. WORKMAN
------------------------------------------
John L. Workman
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on January 5, 2001.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ PAUL W. JONES Chairman of the Board, President and Chief
-------------------------------------------- Executive Officer
Paul W. Jones
/s/ JOHN L. WORKMAN Director, Executive Vice President and Chief
-------------------------------------------- Financial Officer
John L. Workman
/s/ CARL FERENBACH Director
--------------------------------------------
Carl Ferenbach
/s/ RICHARD K. LUBIN Director
--------------------------------------------
Richard K. Lubin
/s/ RICARDO POMA Director
--------------------------------------------
Ricardo Poma
/s/ FRANCISCO A. SOLER Director
--------------------------------------------
Francisco A. Soler
/s/ LOUIS B. SUSMAN Director
--------------------------------------------
Louis B. Susman
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Chicago, state of
Illinois, on January 5, 2001.
<TABLE>
<S> <C> <C>
UNITED STATES CAN COMPANY
By /s/ JOHN L. WORKMAN
------------------------------------------
John L. Workman
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on January 5, 2001.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ PAUL W. JONES Chairman of the Board, President and Chief
-------------------------------------------- Executive Officer
Paul W. Jones
/s/ JOHN L. WORKMAN Director, Executive Vice President and Chief
-------------------------------------------- Financial Officer
John L. Workman
/s/ CARL FERENBACH Director
--------------------------------------------
Carl Ferenbach
/s/ RICHARD K. LUBIN Director
--------------------------------------------
Richard K. Lubin
/s/ RICARDO POMA Director
--------------------------------------------
Ricardo Poma
/s/ FRANCISCO A. SOLER Director
--------------------------------------------
Francisco A. Soler
/s/ LOUIS B. SUSMAN Director
--------------------------------------------
Louis B. Susman
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Chicago, state of
Illinois, on January 5, 2001.
<TABLE>
<S> <C> <C>
USC MAY VERPACKUNGEN HOLDING INC.
By /s/ JOHN L. WORKMAN
------------------------------------------
John L. Workman
VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on January 5, 2001.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/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
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger (the "Merger Agreement") dated
as of June 1, 2000 between U.S. Can Corporation and Pac
Packaging Acquisition Corporation (Exhibit 2 to the current
report on Form 8-K, filed on June 15, 2000).(2)
2.2 First Amendment to Merger Agreement dated as of June 28,
2000 (Exhibit 2.2 to the current report on Form 8-K, filed
on June 30, 2000).(2)
2.3 Second Amendment to Merger Agreement dated as of August 22,
2000 (Exhibit 2.3 to the current report on Form 8-K, filed
on August 31, 2000).(2)
3.1 Restated Certificate of Incorporation of U.S. Can
Corporation.(1)
3.2 Amended and Restated By-laws of U.S. Can Corporation.(1)
3.3 Restated Certificate of Incorporation of United States Can
Company.(1)
3.4 Amended and Restated By-laws of United States Can
Company.(1)
3.5 Certificate of Incorporation of USC May Verpackungen
Holding Inc.(1)
3.6 By-Laws of USC May Verpackungen Holding Inc.(1)
4.1 Indenture dated as of October 4, 2000 between the Company
and Bank One Trust Company, N.A., as Trustee (Exhibit 4.1 to
the current report on Form 8-K, filed on October 18,
2000).(2)
4.2 Registration Rights Agreement dated as of October 4, 2000
among United States Can Company, Salomon Smith Barney and
Banc of America Securities LLC.(1)
4.3 Form of Letter of Transmittal.**
4.4 Form of Notice of Guaranteed Delivery.**
4.5 Form of Exchange Agent Agreement.**
4.6 Form of Exchange Note.**
5 Opinion of Ropes & Gray.**
10.1 Credit Agreement dated as of October 4, 2000, among United
States Can Company, the guarantors and Bank of
America, N.A. and the other financial institutions listed
therein, as Lenders (Exhibit 10.1 to the current report on
Form 8-K, filed on October 18, 2000).(2)
10.2 Pledge Agreement dated as of October 4, 2000 among U.S. Can
Corporation, United States Can Company, each of the domestic
subsidiaries of United States Can Company and Bank of
America, N.A.(1)
10.3 Security Agreement dated as of October 4, 2000 among U.S.
Can Corporation, United States Can Company, each of the
domestic subsidiaries of United States Can Company and Bank
of America, N.A.(1)
10.4 Sublease Agreement, dated 2/10/89, relating to the Commerce,
CA property (Exhibit 10.10 to the quarterly report on
Form 10-Q for the quarter ended April 6, 1997, filed on
May 20, 1997).(2)
10.5 Lease Agreement, dated 1/1/76, as amended, relating to the
Weirton, WV property (Exhibit 10.11 to the quarterly report
on Form 10-Q, for the quarter ended April 6, 1997, filed on
May 20, 1997).(2)
10.6 Frank J. Galvin Separation Agreement, dated 2/1/2000
(Exhibit 10.7 to the annual report on Form 10-K for the
fiscal year ended December 31, 1999, filed on March 30,
2000).(2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
10.7 Amendment No. 4 to the Lease Agreement, dated 1/1/76, as
amended, relating to the Weirton, WV property.(1)
10.8 Lease relating to Dragon Parc Industrial Estate, Merthyr
Tydfil, Wales, dated November 27, 1996 (Exhibit 10.24 to
the annual report on Form 10-K for the fiscal year ended
December 31, 1996, filed on March 26, 1997).(2)
10.9 Nonqualified Supplemental 401(k) Plan (Exhibit 10.33 to the
annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.10 Nonqualified Benefit Replacement Plan (Exhibit 10.34 to the
annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.11 Lease Agreement between May Grundbesitz GmbH & Co. KG and
May Verpackungen GmbH & Co. KG (Exhibit 10.1 to the
quarterly report on Form 10-Q for the quarter ended July 2,
2000, filed on August 15, 2000).(2)
10.12 Amendment No. 3 to the Lease Agreement, dated 1/1/76, as
amended, relating to the Weirton, WV property (Exhibit 10.55
to the annual report on Form 10-K for the fiscal year ended
December 31, 1995, filed on March 26, 1996).(2)
10.13 Employment Agreement dated October 4, 2000 by and among
Paul W. Jones, United States Can Company and U.S. Can
Corporation.(1)
10.14 Employment Agreement dated October 4, 2000 by and among
John L. Workman, United States Can Company and U.S. Can
Corporation.(1)
10.15 Employment Agreement dated October 4, 2000 by and among
Gillian V. Derbyshire, United States Can Company and U.S.
Can Corporation.(1)
10.16 Employment Agreement dated October 4, 2000 by and among
Roger B. Farley, United States Can Company and U.S. Can
Corporation.(1)
10.17 Employment Agreement dated October 4, 2000 by and among
J. Michael Kirk, United States Can Company and U.S. Can
Corporation.(1)
10.18 Employment Agreement dated October 4, 2000 by and among
Thomas A. Scrimo, United States Can Company and U.S. Can
Corporation.(1)
10.19 Service Agreement with David R. Ford dated November 24, 1997
(Exhibit 10.34 to the annual report on Form 10-K for the
fiscal year ended December 31, 1998, filed on March 31,
1999).(2)
10.20 Employee Agreement dated October 4, 2000 by and among
David R. Ford, United States Can Company and U.S. Can
Corporation.**
10.21 Change-in-Control Agreement dated February 4, 1998 by and
among David R. Ford, U.S. Can Corporation and United States
Can Company (Exhibit 10.51 to the annual report on
Form 10-K for the fiscal year ended December 31, 1997, filed
on March 26, 1998).(2)
10.22 U.S. Can Corporation Executive Deferred Compensation Plan
(Exhibit 10.30 to the annual report on Form 10-K for the
fiscal year ended December 31, 1998, filed on March 31,
1999).(2)
10.23 Amendment No. 1 to the U.S. Can Corporation Executive
Deferred Compensation Plan, dated as of October 4, 2000.**
10.24 U.S. Can Corporation 2000 Equity Incentive Plan.(1)
10.25 United States Can Company Executive Severance Plan, dated as
of October 13, 1999 (Exhibit 10.34 to the annual report on
Form 10-K for the fiscal year ended December 31, 1999,
filed on March 30, 2000).(2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
21 Subsidiaries of the Registrants.(1)
23.1 Consent of Arthur Andersen LLP.(1)
23.2 Consent of Ropes & Gray.**
25 Statement of Eligibility of Trustee.(1)
</TABLE>
------------------------
** To be filed by amendment.
(1) Filed herewith.
(2) Incorporated by reference.
