<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 5, 1998
COMMISSION FILE NUMBER 0-21314
U.S. CAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER)
06-1094196
(I.R.S. EMPLOYER IDENTIFICATION NO.)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
900 COMMERCE DRIVE
OAK BROOK, ILLINOIS 60523
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES, INCLUDING ZIP CODE)
(630) 571-2500
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Indicate by check mark whether the registrants (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of April 30, 1998, 13,099,897 shares of U.S. Can Corporation's common stock
were outstanding.
<PAGE> 2
U.S. CAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED APRIL 5, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements (Unaudited)
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Balance Sheets as of December 31, 1997 and April 5, 1998....... 3
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Statements of Operations for the Quarterly Periods Ended
April 6, 1997 and April 5, 1998................................ 4
U.S. Can Corporation and Subsidiaries Condensed Consolidated
Statements of Cash Flows for the Quarterly Periods Ended
April 6, 1997 and April 5, 1998................................ 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 21
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds...................... 21
Item 5. Other Information.............................................. 21
Item 6. Exhibits and Reports on Form 8-K............................... 22
</TABLE>
2
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000'S OMITTED, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31, April 5,
ASSETS 1997 1998
------ ------------ ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,773 $ 5,537
Accounts receivable, less allowances of $15,134
and $15,249 in 1997 and
1998, respectively 74,137 88,169
Inventories 109,458 108,331
Prepaid expenses and other current assets 17,503 12,743
Prepaid income taxes 22,748 22,398
--------- ---------
Total current assets 230,619 237,178
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 5,485 4,763
Buildings 73,277 73,257
Machinery, equipment and construction in process 427,404 421,159
--------- ---------
506,166 499,179
Less -- Accumulated depreciation and amortization (181,869) (188,543)
--------- ---------
Total property, plant and equipment 324,297 310,636
--------- ---------
MACHINERY REPAIR PARTS 6,396 5,878
INTANGIBLES 59,578 59,067
OTHER ASSETS 12,814 16,409
--------- ---------
Total assets $ 633,704 $ 629,168
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,635 $ 9,205
Cash overdrafts 7,800 4,957
Accounts payable 50,686 53,598
Accrued payrolls and benefits 24,358 23,801
Accrued insurance 6,607 8,450
Restructuring reserves 31,645 23,814
Other current liabilities 19,117 28,093
--------- ---------
Total current liabilities 149,848 151,918
--------- ---------
SENIOR DEBT 91,506 79,099
SUBORDINATED DEBT 275,000 275,000
--------- ---------
Total long-term debt 366,506 354,099
--------- ---------
OTHER LONG-TERM LIABILITIES:
Postretirement benefits 27,387 27,852
Deferred income taxes 17,973 19,228
Other long-term liabilities 9,677 10,371
--------- ---------
Total other long-term liabilities 55,037 57,451
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued or outstanding -- --
Common stock, $.01 par value; 50,000,000 shares
authorized 13,097,855 and 13,132,826 shares issued
in 1997 and 1998, respectively 131 131
Paid-in capital 108,003 108,074
Unearned restricted stock (2,558) (2,258)
Treasury common stock, at cost; 44,159 and 8,955
shares in 1997 and 1998, respectively (714) (115)
Currency translation adjustment (2,193) (2,858)
Retained deficit (40,356) (37,274)
--------- ---------
Total stockholders' equity 62,313 65,700
--------- ---------
Total liabilities and stockholders' equity $ 633,704 $ 629,168
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
3
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
(000'S OMITTED, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarterly Period Ended
----------------------
April 6, 1997 April 5, 1998
------------- -------------
<S> <C> <C>
NET SALES $ 198,781 $ 192,363
COST OF SALES 173,016 169,193
--------- ---------
Gross income 25,765 23,170
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 8,668 8,215
--------- ---------
Operating income 17,097 14,955
INTEREST EXPENSE ON BORROWINGS 9,255 8,736
AMORTIZATION OF DEFERRED FINANCING COSTS 439 380
OTHER EXPENSE 429 439
--------- ---------
Income before income taxes 6,974 5,400
PROVISION FOR INCOME TAXES 2,727 2,318
Income from continuing operations 4,247 3,082
NET INCOME FROM DISCONTINUED OPERATIONS 91 --
--------- ---------
NET INCOME 4,338 3,082
OTHER COMPONENTS OF COMPREHENSIVE INCOME (4,712) (665)
--------- ---------
Comprehensive income (loss) $ (374) $ 2,417
========= =========
PER SHARE DATA:
Basic:
Income from continuing operations $ 0.32 $ 0.23
Discontinued operations 0.01 --
--------- ---------
Net Income $ 0.33 $ 0.23
========= =========
Weighted average shares
outstanding (000's) 12,995 13,144
========= =========
Diluted:
Income from continuing operations $ 0.32 $ 0.23
Discontinued operations 0.01 --
--------- ---------
Net Income $ 0.33 $ 0.23
========= =========
Weighted average shares and equivalent
shares outstanding (000's) 13,155 13,257
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
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U.S. CAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000's OMITTED)
<TABLE>
<CAPTION>
QUARTERLY PERIOD ENDED
---------------------------
APRIL 6, APRIL 5,
1997 1998
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,338 $ 3,082
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 11,281 10,149
Deferred income taxes 619 441
Change in operating assets and liabilities, net of effect of acquired
businesses--
Accounts receivable (9,314) (13,940)
Inventories 4,150 1,201
Accounts payable (6,148) 2,839
Accrued payrolls and benefits, insurance and other 7,275 11,256
Postretirement benefits 200 465
Other, net (2,125) 4,782
--------- ---------
Net cash provided by operating activities 10,276 20,275
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,273) (3,828)
Acquisition of businesses, net of cash acquired (10,364) (1,150)
Change in restricted cash 469 29
Machinery repair parts usage, net 83 525
--------- ---------
Net cash used in investing activities (24,085) (4,424)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and exercise of stock options -- 72
Net borrowings under the revolving line of credit and changes in
cash overdrafts 20,773 (12,757)
Borrowings of other long-term debt, including capital lease
obligations 14 --
Payments of other long-term debt, including capital lease
obligations (8,677) (2,871)
Payments of debt refinancing costs (525) (82)
Purchase of treasury stock, net (526) (117)
--------- ---------
Net cash provided by (used in) financing activities 11,059 (15,755)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,143) (1,332)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (5,893) (1,236)
CASH AND CASH EQUIVALENTS, beginning of period 7,966 6,773
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 2,073 $ 5,537
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
5
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U.S. CAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 5, 1998
(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, all of which are
European companies formed or acquired during 1996 (the "European
Subsidiaries"). All significant intercompany balances and transactions have
been eliminated. The consolidated group including the Corporation is
hereinafter referred to as the Company. These financial statements have been
prepared in accordance with generally accepted accounting principles for
interim reporting. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements, which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation, have not been audited by
independent public accountants. Operating results for any interim period are
not necessarily indicative of results that may be expected for the full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission; however, management believes that the
disclosures contained herein are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the previously filed financial statements and footnotes
included in the Corporation's Amendment No. 1 to Annual Report on Form 10-K
/A-1 for the year ended December 31, 1997.
Generally, quarterly accounting periods are based upon two four-week
periods and one five-week period. Management believes that this technique
provides a more consistent view of accounting data resulting in greater
comparability than the calendar month basis would provide.
(2) SPECIAL CHARGES AND DISCONTINUED OPERATIONS
In the third quarter of 1997, the Company established a pre-tax
restructuring provision of $35 million for plant closings and overhead cost
reductions. In the fourth quarter of 1997, the Company, at the direction of
its Board of Directors, employed the assistance of external business
consultants to review operations and explore other avenues for enhancing
shareholder value. As a result of this review, the Company established another
pre-tax restructuring provision of $14.7 million primarily to include further
personnel reductions and the reduction of asset value associated with equipment
used in the businesses the Company has exited or is in the process of exiting.
The key elements of the restructuring include closure 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
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Orlando, Florida machine shop and the Baltimore, Maryland specialty and paint
can distribution business; and organizational changes designed to reduce
general overhead. In July 1997, a major aerosol can customer and principal
customer of the Racine plant awarded all of its global aerosol business to a
single supplier which is a U.S. Can competitor. Approximately $35 million of
annual sales will be affected due to the loss of this customer. Closure of the
two litho plants and the Racine assembly plant is due to the loss of this
business and increased efficiencies at other plants. The Racine plant ceased
production on April 24, 1998. The Sparrows Point plant ceased production in
mid-February of 1998. The transfer of the custom and specialty business from
the California plant to other existing operations began in the first quarter of
1998, with a targeted closure by the end of the second quarter. The Company is
in the process of negotiating the sale of its Orlando machine shop and
anticipates it will be sold in the second or third quarter of 1998.
The restructuring provisions include $28.7 million for the non-cash write
off of assets related to the facilities to be closed or sold, $12.8 million for
severance and related termination benefits for approximately 95 salaried and
260 hourly employees (the majority of which have been terminated as of April 5,
1998), and $5.9 million for other related closure costs such as building
restoration, equipment disassembly and future lease payments. In addition to
these charges, the Company provided an additional $2.2 million related to the
continuing carrying costs (principally contractual lease payments) related to
the closed Saddle Brook, New Jersey facility which it has not been able to
sublet as originally planned. The write off of the assets included in the
charge primarily relate to fixed assets ($22.9 million) which cannot be
transferred or used in the Company's other operations and unamortized goodwill
related to the closed operations. As of April 5, 1998, approximately $ 5.3
million of the cash severance and other closure costs has been spent with the
majority of the remaining costs expected to be spent later in 1998.
In November 1997, as part of the business and operational realignments,
the Company sold its steel pail business which was conducted entirely from its
North Brunswick, New Jersey facility, for $1.4 million in cash and notes, plus
the assumption of certain liabilities and future payments. 1997 revenues of
the steel pail business up to the point of sale were $19.2 million. In
addition, the Company is actively seeking to sell its commercial metal services
business ("Metal Services") which it began reflecting as a discontinued
operation late in 1997. Metal Services includes two plants in Chicago,
Illinois, one plant each in Trenton, New Jersey and Brookfield, Ohio and the
closed Midwest Litho plant. 1997 revenues from these operations were $116
million (excluding intra-Company sales which are expected to be continued by
the buyer and including ongoing third-party sales from the closed Midwest Litho
plant, which have been transferred to other Metal Services plants). Comparable
revenue generated from these facilities in the first quarter of 1998 were $28
million. The Company anticipates that the sale of Metal Services will be
completed in 1998. The Company's historical financial statements have been
restated to reflect these businesses as discontinued operations.
In aggregate, the Company provided for a $16.0 million ($12.4 million
after income taxes) loss on the sale of these two businesses, primarily
representing the excess of recorded carrying value over the estimated aggregate
net proceeds for the net assets to be sold in the dispositions. As of April 5,
1998, the net assets of Metal Services, excluding the discontinued operations
reserve, included net current assets of approximately $17.5 million and net
other assets of approximately $29.9 million.
The Company continuously evaluates the composition of its various
manufacturing facilities in light of current and expected market conditions and
demand. While no formal plans currently exist to further consolidate plant
operations, such actions may be deemed appropriate in the future.
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(3) ACQUISITIONS
In March 1998, one of the European Subsidiaries acquired a 36.5% interest
in Formametal S.A. ("Formametal"), an aerosol can manufacturer in Argentina,
for $4.6 million, payable over a 15-month period. In connection with this
investment, Formametal has agreed to purchase approximately $2.6 million to
$3.0 million of manufacturing equipment from the Company, and the Company has
agreed to provide certain technical and engineering assistance to Formametal.
The Company has also provided a guaranty, in an amount not to exceed $2.0
million, to secure the repayment of certain indebtedness of Formametal. No
such indebtedness was outstanding as of April 5, 1998. This investment is
being accounted for on the equity method.
In January 1997, the Company acquired certain assets from Owens-Illinois
Closure Inc. ("O-I") for cash consideration of $10 million, subject to
adjustment based upon the actual value of the inventory acquired and potential
contingent payments of up to $1.5 million based upon realization of certain new
business which O-I was seeking at the time of the acquisition. The assets
acquired by the Company include metal business machinery, equipment, inventory
and raw materials formerly located at O-I's Erie, Pennsylvania plant. The
purchase price resulted in goodwill of $7.1 million.
(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 $16.4 million at December 31, 1997, and
$18.7 million at April 5, 1998, 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. Inventory costs include material, labor
and factory overhead. FIFO cost of LIFO inventories approximated their LIFO
value at December 31, 1997 and at April 5, 1998.
Inventories reported in the accompanying balance sheets were classified as
follows (000's omitted):
<TABLE>
<CAPTION>
December 31, April 5,
1997 1998
------------ --------
<S> <C> <C>
Raw materials................................... $ 33,746 $ 31,114
Work in process................................. 42,763 43,467
Finished goods.................................. 28,037 28,736
Machine shop inventory ......................... 4,912 5,014
-------- --------
$109,458 $108,331
======== ========
</TABLE>
8
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(5) DEBT OBLIGATIONS
The primary debt obligations of the Company at December 31, 1997 and April
5, 1998 consisted of the following (000's omitted):
<TABLE>
<CAPTION>
December 31, April 5,
1997 1998
---- ----
<S> <C> <C>
Senior Debt -----
Revolving line of credit..................... $ 32,600 $ 22,900
Secured equipment notes...................... 4,825 4,043
Capital lease obligations.................... 30,050 28,546
Secured term loan............................ 24,840 24,038
Industrial revenue bonds..................... 7,500 7,500
Mortgages and other.......................... 1,326 1,276
--------- ---------
101,141 88,303
Less ---- Current maturities................... (9,635) (9,204)
--------- ---------
Total senior debt...................... 91,506 79,099
Senior subordinated 10 1/8% notes.............. 275,000 275,000
--------- ---------
Total long-term debt $ 366,506 $ 354,099
========= =========
</TABLE>
In April 1997, U.S. Can entered into an Amended and Restated Credit
Agreement with a group of banks (the "Credit Agreement"), providing a $110
million revolving credit facility (the "Revolving Credit Facility"). In
February 1998, the Company and its lenders agreed to reduce the Revolving
Credit Facility to $80 million. Obligations under the Credit Agreement are
secured by U.S. Can's domestic accounts receivable and inventory. Funds
available under the Credit Facility may be used for general corporate purposes
(including ongoing working capital needs and funds for permitted acquisitions).
The Credit Agreement has a five-year maturity and permits the Company to
borrow funds available under the Revolving Credit Facility in U.S. Dollars,
British Pounds or French Francs.
The loans under the Credit Agreement bear interest at a floating rate
equal to, at the election of U.S. Can, 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 (selected by U.S. Can) of one, two,
three or six months. The weighted average interest rate of the loans
outstanding under the Credit Agreement was 6.7% and 6.8% at December 31, 1997
and April 5, 1998, respectively.
As of December 31, 1997, U.S. Can had borrowings of $32.6 million
outstanding under the Credit Agreement, $12.5 million in letters of credit had
been issued pursuant thereto, and $64.9 million of unused credit remained
available. As of April 5, 1998, U.S. Can had borrowings of $22.9 million
outstanding under the Credit Agreement, $12.5 million in letters of credit had
been issued pursuant thereto, and $44.6 million of unused credit remained
available.
Secured equipment notes, issued at various times since 1990, mature in
varying amounts through 2003 and bear interest at various rates between 8.1%
and 10.4%. Proceeds from these notes were used to purchase certain
manufacturing equipment, and the notes are secured by that equipment.
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Capital lease obligations, mature in varying amounts through 2007 and bear
interest at various rates between 4.57% and 19.64%. Other debt, consisting of
various governmental loans and real estate mortgages at interest rates between
7.0% and 9.77%, mature at various times through 2025, and were used to finance
the expansion of several manufacturing facilities.
On December 20, 1996, U.K. Can, Ltd., one of the European Subsidiaries,
entered into (and U.S. Can guaranteed) a $28 million secured term loan with
General Electric Capital Corporation, to finance the acquisition of land,
building and equipment comprising the Merthyr Tydfil, Wales aerosol can
production facility. This credit facility is secured by the real and personal
property of U.S. Can's Merthyr Tydfil operation. The loan is denominated in
U.S. Dollars. During 1997, in connection with the transaction, the Corporation
entered into foreign exchange contracts which allow the Company to exchange a
fixed amount of U.K. Pounds for U.S. Dollars at certain dates which coincide
with the repayment of principal and interest on the loan. The forward
contracts are intended to hedge against fluctuations in currency rates.
On October 17, 1996, the Corporation issued $275.0 million principal
amount of 10-1/8% Senior Subordinated Notes due 2006 in a private placement.
These notes were exchanged in March 1997 for similar notes which are publicly
registered. These exchange 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. 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 certain changes of control of the Corporation, the Note holders could
require that the Corporation repurchase all or some of the 10-1/8% Notes at a
101% premium. Net proceeds from the issuance of the 10-1/8% Notes were $268.1
million. Approximately $158.4 million of the net proceeds were used to pay
down amounts outstanding under the Company's previous credit facilities and
$109.7 million of the net proceeds were used to redeem all of U.S. Can's 13-
1/2% Senior Subordinated Notes due 2002 on January 15, 1997.
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
Corporation's and U.S. Can's ability to distribute dividends, to incur
additional indebtedness, to dispose of assets and to make investments,
acquisitions, mergers and transactions with affiliates. The Company was in
compliance with all terms and restrictive covenants of the Credit Agreement and
its other debt agreements as of April 5, 1998.
(6) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest on borrowings of approximately $1.9 million and
$2.4 million for the quarterly periods ended April 6, 1997 and April 5, 1998,
respectively.
The Company paid approximately $1.7 million and $1.0 million of income
taxes for the quarterly periods ended April 6, 1997 and April 5, 1998,
respectively.
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During the quarterly periods ended April 6, 1997 and April 5, 1998, the
Company issued stock valued at approximately $0.9 million and $0.7 million,
respectively, into certain of its employee benefit plans.
(7) LEGAL PROCEEDINGS
The Company is involved in a number of legal proceedings arising in the
ordinary course of business consistent with past experiences. Management does
not believe that any of these proceedings will have a material adverse effect
on the business or financial condition of the Company either individually or in
the aggregate. In addition, the Company is involved in the following matters.
The groundwater in San Leandro, California, formerly a site of one of the
Company's can assembly facilities, is contaminated at shallow and intermediate
depths, and the area of concern partially extends to the groundwater below the
facility formerly owned by the Company. In connection with sales in 1994 and
1995 of land on which this facility was located, the Company agreed to
indemnify the purchaser against environmental claims related to the Company's
ownership of the property. In April 1996, the California Department of Toxic
Substances Control ("CDTSC") issued an order to certain past and present owners
of this facility, including U.S. Can, directing such owners to conduct
remediation activities at this site. No specific form of remediation was
indicated. Consultants retained by the Company to evaluate the site concluded
that the Company's operations had not impacted the groundwater at this site and
that contamination detected at this site resulted from migration from off-site,
upgradient sources. However, in January 1998, the CDTSC informed the Company
that it disagrees with these conclusions and wants the Company to conduct
extensive additional testing. In May, 1998, the Company met with the CDTSC
Director. To date, there has been no resolution of this matter between the
Company and the CDTSC although discussions are ongoing. There can be no
assurance that the Company will not incur material costs and expenses in
connection with the CDTSC order and remediation at the site.
An Administrative Law Judge of the National Labor Relations Board ("NLRB")
has 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 failure to offer inter-plant job opportunities to certain affected
employees. The Company will file an appeal with the full NLRB.
(8) NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
Per Share" was issued in February 1997 and adopted by the Company as of
December 31, 1997. This new pronouncement established revised reporting
standards for earnings per share and has been applied to all periods presented
herein. Diluted earnings per share for the Company includes the impact of
assumed exercise of dilutive stock options.
SFAS No. 130, "Reporting Comprehensive Income" was issued in July 1997 and
adopted by the Company in the first quarter of 1998. This new pronouncement
established standards for the reporting and
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display of comprehensive income and its components which, for the Company,
include cumulative translation adjustments and minimum pension adjustments.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information" was also issued in July 1997 and introduces a new model for
segment reporting, called the "management approach." This approach is based on
the way that the chief operating decision maker organizes segments within the
company for making operating decisions and assessing performance. Management
of the Company is evaluating this new pronouncement to determine its impact
upon current reporting. Adoption of this new standard is scheduled for late
1998.
Statement of Position No. 98-5, "Reporting on the Costs of Start-up
Activities" was released in April, 1998, and requires companies to write off
all unamortized costs related to start up activities and to expense such future
costs as incurred. The Company is required to adopt this new accounting rule
by early 1999. Management does not expect that adoption of this rule will have
a material effect on the Company's results of operations or financial position.
(9) SUBSIDIARY GUARANTOR INFORMATION
The 10-1/8% Notes are guaranteed on a full, unconditional, unsecured,
senior subordinated, joint and several basis by each of the Corporation's
Subsidiary Guarantors. As of and through April 5, 1998, U.S. Can, wholly owned
by the Corporation, was the only Subsidiary Guarantor. The Corporation had no
assets or operations separate from its investment in U.S. Can, and there were
no non-Guarantor Subsidiaries until the acquisition by U.S. Can of the European
Subsidiaries on September 11, 1996. Separate financial statements of U.S. Can
are not presented because management of the Company has determined that they
are not material to investors.
The following condensed consolidating financial data illustrates the
composition of the Corporation (the "Parent"), U.S. Can (the "Subsidiary
Guarantor"), and the European Subsidiaries (the "Non-Guarantor Subsidiaries"),
as of December 31, 1997 and April 5, 1998, and for the quarterly periods ended
April 6, 1997 and April 5, 1998. Investments in subsidiaries are accounted for
by the Parent 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.
12
<PAGE> 13
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 5, 1998
(000's OMITTED)
<TABLE>
<CAPTION>
United States European
U.S. Can Can Company Subsidiaries U.S. Can
Corporation (Subsidiaries (Non-Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 111 $ 5,426 $ -- $ 5,537
Accounts receivable -- 64,053 24,116 -- 88,169
Inventories -- 89,666 18,665 -- 108,331
Prepaid expenses and other assets -- 10,573 2,170 -- 12,743
Prepaid income taxes -- 22,398 -- -- 22,398
--------- --------- --------- ---------- ----------
Total current assets -- 186,801 50,377 -- 237,178
--------- --------- --------- ---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT -- 243,980 66,656 -- 310,636
INTANGIBLE ASSETS -- 59,067 -- -- 59,067
OTHER ASSETS 7,140 9,254 5,893 -- 22,287
INVESTMENT IN SUBSIDIARIES 334,918 48,154 -- (383,072) --
--------- --------- --------- ---------- ----------
Total assets $ 342,058 $ 547,256 $ 122,926 $ (383,072) $ 629,168
========= ========= ========= ========== ==========
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 6,396 $ 2,809 $ -- $ 9,205
Accounts payable -- 40,451 18,104 -- 58,555
Other current liabilities -- 73,515 10,643 -- 84,158
--------- --------- --------- ---------- ----------
Total current liabilities -- 120,362 31,556 -- 151,918
--------- --------- --------- ---------- ----------
SENIOR DEBT 50,855 28,244 -- 79,099
SUBORDINATED DEBT 275,000 -- -- -- 275,000
OTHER LONG-TERM LIABILITIES -- 52,266 5,185 -- 57,451
INTERCOMPANY ADVANCES 1,358 (11,145) 9,787 -- --
STOCKHOLDERS' EQUITY 65,700 334,918 48,154 (383,072) 65,700
--------- --------- --------- ---------- ----------
Total liabilities and stockholders' equity $ 342,058 $ 547,256 $ 122,926 $ (383,072) $ 629,168
========= ========= ========= ========== ==========
</TABLE>
13
<PAGE> 14
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNITED STATES
U.S. CAN CAN COMPANY USC EUROPE U.S. CAN
CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR) SUBSIDIARY) ELIMINATIONS CONSOLIDATED
----------- ------------- -------------- ------------ ------------
(000'S OMITTED)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......... $ -- $ 415 $ 6,358 $ -- $ 6,773
Accounts receivable............... -- 53,559 20,578 -- 74,137
Inventories....................... -- 93,028 16,430 -- 109,458
Prepaid expenses and other
assets......................... -- 13,904 3,599 -- 17,503
Prepaid income taxes.............. -- 22,748 -- -- 22,748
-------- -------- -------- --------- --------
Total current assets...... 183,654 46,965 -- 230,619
-------- -------- -------- --------- --------
NET PROPERTY, PLANT AND EQUIPMENT... -- 256,464 67,833 -- 324,297
INTANGIBLE ASSETS................... -- 59,578 -- -- 59,578
OTHER ASSETS........................ 7,347 10,240 1,623 -- 19,210
INVESTMENT IN SUBSIDIARIES.......... 335,962 48,646 -- (384,608) --
-------- -------- -------- --------- --------
Total assets.............. $343,309 $558,582 $116,421 $(384,608) $633,704
======== ======== ======== ========= ========
CURRENT LIABILITIES:
Current maturities of long-term
debt........................... $ -- $ 6,817 $ 2,818 $ -- $ 9,635
Accounts payable.................. -- 42,155 16,331 -- 58,486
Other current liabilities......... -- 73,480 8,247 -- 81,727
-------- -------- -------- --------- --------
Total current liabilities...... -- 122,452 27,396 -- 149,848
-------- -------- -------- --------- --------
SENIOR DEBT......................... -- 61,850 29,656 -- 91,506
SUBORDINATED DEBT................... 275,000 -- -- -- 275,000
OTHER LONG-TERM LIABILITIES......... 52,031 3,006 -- 55,037
INTERCOMPANY ADVANCES............... 5,996 (13,713) 7,717 -- --
STOCKHOLDERS' EQUITY................ 62,313 335,962 48,646 (384,608) 62,313
-------- -------- -------- --------- --------
Total liabilities and
equity.................. $343,309 $558,582 $116,421 $(384,608) $633,704
======== ======== ======== ========= ========
</TABLE>
14
<PAGE> 15
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTERLY PERIOD ENDED APRIL 5, 1998
<TABLE>
<CAPTION>
United States
Can European
U.S. Can Company Subsidiaries U.S. Can
Corporation (Subsidiaries (Non-Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
-------- --------- ------------ ------------ ------------
(000's omitted)
<S> <C> <C> <C> <C> <C>
NET SALES --- $162,401 $29,962 --- $192,363
COST OF SALES --- 142,137 27,056 --- 169,193
--------- -------- ------- --------- --------
Gross Income --- 20,264 2,906 --- 23,170
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES --- 7,104 1,111 --- 8,215
--------- -------- ------- --------- --------
Operating Income --- 13,160 1,795 --- 14,955
INTEREST EXPENSE ON BORROWINGS --- 8,041 695 --- 8,736
AMORTIZATION OF DEFERRED
FINANCING COSTS --- 380 --- --- 380
OTHER EXPENSES --- 439 --- --- 439
EQUITY EARNINGS (LOSS) FROM
SUBSIDIARY 3,082 618 (3,700) ---
PROVISION FOR INCOME TAXES --- 1,836 482 --- 2,318
--------- -------- ------- --------- --------
NET INCOME $3,082 $ 3,082 $ 618 ($3,700) $ 3,082
========= ======== ======= ========= ========
</TABLE>
15
<PAGE> 16
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTERLY PERIOD ENDED APRIL 6, 1997
<TABLE>
<CAPTION>
United States
Can European
U.S. Can Company Subsidiaries U.S. Can
Corporation (Subsidiaries (Non-Guarantor Corporation
(Parent) Guarantor) Subsidiaries) Eliminations Consolidated
-------- --------- ------------ ------------ ------------
(000's omitted)
<S> <C> <C> <C> <C> <C>
NET SALES --- $171,432 $27,349 --- $198,781
COST OF SALES --- 148,381 24,635 --- 173,016
-------- -------- ------- -------- --------
Gross Income --- 23,051 2,714 --- 25,765
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES --- 7,604 1,064 --- 8,668
-------- -------- ------- -------- --------
Operating Income --- 15,447 1,650 --- 17,097
INTEREST EXPENSE ON BORROWINGS --- 8,878 377 --- 9,255
AMORTIZATION OF DEFERRED
FINANCING COSTS --- 439 --- --- 439
OTHER EXPENSES --- 429 --- --- 429
EQUITY EARNINGS (LOSS) FROM
SUBSIDIARY 4,338 980 --- (5,318) ------
PROVISION FOR INCOME TAXES --- 2,434 293 --- 2,727
NET INCOME FROM DISCONTINUED
OPERATIONS --- 91 --- --- 91
-------- -------- ------- -------- --------
NET INCOME $ 4,338 $ 4,338 $ 980 ($5,318) $ 4,338
======= ======== ======= ======= ========
</TABLE>
16
<PAGE> 17
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED APRIL 5, 1998
(000's OMITTED)
<TABLE>
<CAPTION>
United States
Can European
U.S. Can Company Subsidiaries U.S. Can
Corporation (Subsidiary) (Non-Guarantor Corporation
(Parent) Guarantor Subsidiaries) Eliminations Consolidated
----------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $ -- $ 18,695 $ 1,580 $ -- $ 20,275
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (2,762) (1,066) -- (3,828)
Acquisition of businesses, net of cash -- -- (1,150) -- (1,150)
Changes in restricted cash -- 29 -- -- 29
Machinery repair parts usage, net -- 189 336 -- 525
-------- --------- -------- ------- ---------
Net cash used in investing activities -- (2,544) (1,880) -- (4,424)
-------- --------- -------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances -- (2,070) 2,070 -- --
Issuance of common stock and exercise of stock options -- 72 -- -- 72
Net borrowings under the revolving lines of credit and changes
in cash overdrafts -- (12,543) (214) -- (12,757)
Borrowings of other long-term debt, including capital lease
obligations -- -- -- -- --
Payments of other long-term debt, including capital lease
obligations -- (1,715) (1,156) -- (2,871)
Payments of debt refinancing costs -- (82) -- -- (82)
Purchase of treasury stock, net -- (117) -- -- (117)
-------- --------- -------- ------- ---------
Net cash provided by (used in) financing activities -- (16,455) 700 -- (15,755)
-------- --------- -------- ------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- -- (1,332) -- (1,332)
-------- --------- -------- ------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS -- (304) (932) -- (1,236)
CASH AND CASH EQUIVALENTS, beginning of period -- 415 6,358 -- 6,773
-------- --------- -------- ------- ---------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 111 $ 5,426 $ -- $ 5,537
======== ========= ======== ======= =========
</TABLE>
17
<PAGE> 18
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTERLY PERIOD ENDED APRIL 6, 1997
(000'S OMITTED)
<TABLE>
<CAPTION>
UNITED STATES EUROPEAN
U.S. CAN CAN COMPANY SUBSIDIARIES U.S. CAN
CORPORATION (SUBSIDIARY (NON-GUARANTOR CORPORATION
(PARENT) GUARANTOR) SUBSIDIARIES) ELIMINATIONS CONSOLIDATED
----------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES..... $ -- $ 10,313 $ (37) $ -- $ 10,276
----- -------- ------- ----- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................... -- (10,720) (3,553) -- (14,273)
Acquisition of businesses, net of
cash................................. -- (10,364) -- -- (10,364)
Changes in restricted cash............. -- 469 -- -- 469
Investment in subsidiaries............. 587 -- -- (587) --
Machinery repair parts usage, net...... -- 96 (13) -- 83
----- -------- ------- ----- --------
Net cash used in investing
activities...................... 587 (20,519) (3,566) (587) (24,085)
----- -------- ------- ----- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in intercompany advances........ -- (1,487) 1,487 -- --
Net borrowings under the revolving line
of credit and changes in cash
overdrafts........................... -- 20,773 -- -- 20,773
Borrowings of other long-term debt,
including capital lease
obligations.......................... -- 14 -- -- 14
Payments of other long-term debt,
including capital lease
obligations.......................... -- (8,073) (604) -- (8,677)
Payments of debt refinancing costs..... (61) (464) -- -- (525)
Capital contribution from parent....... -- (587) -- 587 --
Purchase of treasury stock, net........ (526) -- -- -- (526)
----- -------- ------- ----- --------
Net cash from financing
activities...................... (587) 10,176 883 587 11,059
----- -------- ------- ----- --------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH................................... -- -- (3,143) -- (3,143)
----- -------- ------- ----- --------
INCREASE IN CASH AND CASH EQUIVALENTS.... -- (30) (5,863) -- (5,893)
CASH AND CASH EQUIVALENTS, beginning of
period................................. -- 628 7,338 -- 7,966
----- -------- ------- ----- --------
CASH AND CASH EQUIVALENTS,
end of period.......................... $ -- $ 598 $ 1,475 $ -- $ 2,073
===== ======== ======= ===== ========
</TABLE>
18
<PAGE> 19
'
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following narrative discusses the results of operations, liquidity and
capital resources for the Company on a consolidated basis. This section should
be read in conjunction with the Corporation's Annual Report on Form 10-K/A-1
for the fiscal year ended December 31, 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained therein.
RESULTS OF OPERATIONS
In November 1997, as part of certain business and operational
realignments, the Company sold its steel pail business which was conducted
entirely from a North Brunswick, New Jersey facility, for $1.4 million in cash
and notes, plus the assumption of certain liabilities and future payments.
1997 revenues of the steel pail business up to the point of sale were $19.2
million. In addition, the Company is actively seeking to sell Metal Services
which it began reflecting as a discontinued operation late in 1997. Metal
Services includes two plants in Chicago, Illinois, one plant each in Trenton,
New Jersey and Brookfield, Ohio and the closed Midwest Litho plant. 1997
revenues from these operations were $116 million (excluding intra-Company sales
which are expected to be continued by the buyer and including ongoing
third-party sales from the closed Midwest Litho plant, which have been
transferred to other Metal Services plants). Comparable revenue generated from
these facilities in the first quarter of 1998 were $28 million. The Company
anticipates that the sale of Metal Services will be completed in 1998. The
Company's historical financial statements have been restated to reflect these
businesses as discontinued operations. The following comparisons incorporate
these restatements.
QUARTER ENDED APRIL 5, 1998, AS COMPARED TO QUARTER ENDED APRIL 6, 1997
Net Sales
Net sales for the quarterly period ended April 5, 1998, totaled $192.4
million, a 3.2% decrease versus the corresponding period in 1997. This
decrease was caused principally by the third quarter 1997 loss of a major
domestic aerosol customer (accounting for a 4.0% decrease in period-to-period
consolidated sales), partially offset by an increase in European sales for
first quarter 1998 versus first quarter 1997 (accounting for a 1.3% increase in
period-to-period consolidated sales). The European sales increase is primarily
due to stronger activity in the Schwedt, Germany and Voghera, Italy operations
versus the first quarter of last year.
Gross Income
Gross income of $23.2 million for the first quarter of 1998 was down $2.6
million, or 10%, versus the first quarter of 1997. Gross margin decreased to
12% of net sales for the period from 13% in the comparable period last year.
The primary factors influencing the decline were reduced aerosol volume in the
U.S. and, to a lesser extent, costs related to the Welsh start-up operation.
Management expects these factors to diminish over time as the Wales operation
advances beyond the qualification process with its principal customer and the
operating benefits of the late 1997 restructuring program are fully realized.
19
<PAGE> 20
Operating Income
Operating income in the first quarter of 1998 was $15.0 million, versus
$17.1 million in the first quarter of 1997. Lower gross margins in 1998 and
decreased net sales negatively impacted operating income. Selling, general, and
administrative expenses were down 5% or $0.4 million in the first quarter of
1998 as compared to the same period one year ago, due largely to overhead
reductions made as part of the restructuring actions taken in late 1997.
Interest and Other Expenses
Interest expense in the first quarter of 1998 was down 6%, or $0.5
million, versus the first quarter of 1997. Tighter controls on working capital
and capital expenditures have resulted in long-term debt reductions of $20.5
million since the first quarter of last year and $12.4 million since year-end
1997.
Net Income
First quarter net income of $3.1 million ($0.23 diluted earnings per
share) was down $1.3 million versus the corresponding period in 1997. 1997
first quarter net income was $4.3 million or $0.33 diluted earnings per share.
Lower aerosol volume year-to-year and reduced gross margins adversely affected
net income in the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1998, the Company met its liquidity needs
through internally generated cash flow and borrowings under its credit lines.
Principal liquidity needs included operations, debt amortization, capital
expenditures and the Company's minority investment in Formametal. Cash flow
from operations was $20.3 million in the first quarter of 1998, compared to
$10.3 million in the first quarter of 1997. Increased cash from operations
resulted from improved working capital management starting in 1997 and
continuing through the first quarter of 1998. Additionally, first quarter 1998
capital expenditures were significantly less than first quarter 1997 capital
expenditures. In the first quarter of 1998, the Company had $0.7 million of
payments related to restructuring activities, including costs attributable to
its discontinued operations. The Company anticipates spending another $6.5
million of such costs during the remainder of 1998.
As of April 5, 1998, U.S. Can had borrowings of $22.9 million outstanding
under the Credit Agreement, $12.5 million in letters of credit had been issued
pursuant thereto, and $44.6 million of unused credit remained available
thereunder. As of April 5, 1998, U.S. Can was in compliance with the Credit
Agreement and its other long-term debt agreements.
The Company expects total capital expenditures in 1998 to be approximately
$20 to $23 million and has spent $3.8 million in the first quarter. The
Company's capital investments have historically yielded reduced operating costs
and improved the Company's profit margins, and management believes that the
strategic deployment of capital will enable the Company to improve its overall
profitability by leveraging the economies of scale inherent in the manufacture
of containers.
In March 1998, one of the European Subsidiaries acquired a 36.5% interest
in Formametal, an aerosol can manufacturer in Argentina, for $4.6 million,
payable over a 15-month period. In connection with this
20
<PAGE> 21
investment, Formametal has agreed to purchase approximately $2.6 million to
$3.0 million of manufacturing equipment from the Company, and the Company has
agreed to provide certain technical and engineering assistance to Formametal.
U.S. Can has also provided a guaranty, in an amount not to exceed $2.0 million,
to secure the repayment of certain indebtedness of Formametal. No such
indebtedness was outstanding as of April 5, 1998.
Management believes that cash flow from operations, amounts available
under its credit facilities and proceeds from sales of assets should provide
sufficient funds for the Company's short-term and long-term capital expenditure
and debt amortization requirements, and other cash needs in the ordinary course
of business. The Company believes it will be able to refinance the Revolving
Credit Facility on or prior to maturity. If future strategic acquisition
opportunities arise, the Company would expect to finance them though some
combination of cash, stock and/or debt financing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inapplicable.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In March 1998, the Company contributed shares of Common Stock, valued at
approximately $715,000, to U.S. Can's Salaried Employee Savings and Retirement
Accumulation Plan ("SRAP"). These shares are held by a trustee for the benefit
of the SRAP participants, who have an indirect beneficial interest in the
Common Stock held by the trustee. The transaction between the Company and the
trustee is exempt pursuant to Section 4(2) of the Securities Act of 1933 (the
"Act").
During the quarter ended April 5, 1998, the Company issued 23,613 shares
of Common Stock, representing settlement of certain restricted stock awards
made to officers of the Company. These issuances were exempt pursuant to
Section 4(2) of the Act.
ITEM 5. OTHER INFORMATION.
In May 1998, an Administrative Law Judge ("ALJ") of the National Labor
Relations Board ("NLRB") issued a decision, ordering the Company to pay $1.5
million in back pay, plus interest, to certain former employees who were not
afforded inter-plant job transfer opportunities. The Company will file an
appeal with the full NLRB.
21
<PAGE> 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Incorporation
Exhibit by reference
Number Description of Document (if applicable)
- -------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of
U.S. Can Corporation.................................. * 4.3
3.2 By-Laws of U.S. Can Corporation....................... & 4.1
10.1 Employment Agreement Between U.S. Can Corporation
and Paul W. Jones dated as of April 1, 1998...........
27.1 Financial Data Schedule (EDGAR version only)..........
</TABLE>
- -------------------------
* Previously filed with Registration Statement on Form S-3 of the
Corporation, filed on June 1, 1994 (Registration No. 33-79556).
& Previously filed with Registration Statement on Form S-8 of the
Corporation, filed on March 23, 1994 (Registration No. 33-76742).
(b) U.S. Can Corporation filed no reports on Form 8-K during the quarterly
period ended April 5, 1998.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. CAN CORPORATION
Date: May 19, 1998 By: /s/ John R. McGowan
---------------------------------------
John R. McGowan
Vice President, Chief Financial Officer,
Controller and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the
principal financial officer of the registrant.
Date: May 19, 1998 /s/ John R. McGowan
---------------------------------------
John R. McGowan
Vice President, Chief Financial Officer,
Controller and Secretary
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of April 1, 1998 (the "Agreement"), is
by and between U.S. Can Corporation, a Delaware corporation, having its
principal offices at 900 Commerce Drive, Oak Brook, Illinois 60521 ("US Can"),
and Paul W. Jones (the "Employee").
WHEREAS, US Can desires to retain the Employee's services, and the
Employee is willing to enter into employment as an employee of US Can on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT. The Employee shall be employed by US Can as President and
Chief Executive Officer for the Term of Employment (as herein defined), on the
terms and conditions set forth herein. In addition, at the April 24, 1998
meeting of US Can's Board of Directors (the "Board of Directors" or "Board"),
the Board of Directors shall name the Employee to fill the vacancy on the Board
created by the resignation of Eugene Connelly, whose term as a director expires
at US Can's annual meeting in 2000. Effective July 1, 1998, the Employee shall
be elected Chairman of the Board of Directors. At US Can's annual meeting in
2000, the Board of Directors of US Can shall nominate the Employee for election
as a director of US Can for a three-year term. The Employee shall also, during
the term of employment, hold the title of President and Chief Executive Officer
of United States Can Company, a Delaware corporation
<PAGE> 2
and subsidiary of US Can, and such other subsidiaries of US Can as the
Employee shall deem appropriate.
2. DUTIES. While the Employee is serving as President and Chief Executive
Officer of US Can and United States Can Company, the Employee shall perform
those duties normally associated with the position of President and Chief
Executive Officer as well as any other customary duties and tasks as may be
assigned from time to time to the Employee by the Board of Directors of US Can.
During the Term of Employment, the Employee shall work exclusively for US Can
and its Affiliates (as hereinafter defined) and devote all his business efforts
and time to fulfill the duties of his employment; provided, however, that
Employee shall be permitted to continue to serve on the boards of directors of
the companies on which he currently serves and such other companies or
organizations as he, with the consent of the Board of Directors of US Can,
shall determine from time to time.
For purposes of this Agreement, the term "Affiliate" as used herein shall
mean US Can, any other corporation owned or controlled by US Can, directly or
indirectly, and any subsidiary of US Can including, without limitation, United
States Can Company, a Delaware corporation.
3. SITE OF EMPLOYMENT. During the Term of Employment, the Employee's
regular place of employment shall be at US Can's principal offices.
4. COMPENSATION AND BENEFITS.
A. BASE SALARY. In full consideration for the aforementioned services and
subject to the due performance thereof, the Employee shall receive an annual
base salary of $500,000 ("Base Salary") (payable bi-monthly in arrears) during
the Term of Employment;
-2-
<PAGE> 3
provided, however, that the Employee's annual salary for calendar year 1998
shall be prorated to reflect the portion of such year during which the Employee
is employed hereunder. The Employee's Base Salary and other compensation
payable hereunder shall be reviewed annually by the Compensation Committee of
the Board of Directors and may be increased but shall not be decreased. In the
event the Term of Employment is terminated with Cause (as defined in Section 8
hereof) by US Can pursuant to Section 8(i) hereof or in the event Employee
unilaterally terminates his Term of Employment other than for Good Reason (as
hereinafter defined), the Employee shall receive only a pro rata share of such
Base Salary up to the date of termination. US Can shall calculate any pro rata
share of the Employee's Base Salary earned through the date of termination or
resignation, including accrued but unused vacation time. Except as set forth
below, in the event the Employee is terminated by US Can without Cause pursuant
to Section 8(ii) hereof, the Employee shall be entitled to receive Base Salary
for the remainder of the Term of Employment or 18 months, whichever is longer,
and benefits equivalent to that to which Employee is entitled to receive
pursuant to subsection 4(e) hereof during that period. In the event of
termination of the Term of Employment due to Employee's death or permanent
disability in accordance with Sections 8(iv) and 9 hereof, the Employee (or the
Employee's estate, as the case may be) shall be entitled to receive Base Salary
for one year following such death or permanent disability. Following the
expiration of the one-year period, US Can shall have no further obligation to
pay the Employee (or the Employee's estate, as the case may be) any further
Base Salary. Any increase in Base Salary shall be made in the sole discretion
of the Board of Directors of US Can.
-3-
<PAGE> 4
B. BONUS. For calendar year 1998, the Employee shall receive a bonus in
an amount equal to 100% of the prorated Base Salary paid to the Employee in
such year. For years subsequent to 1998, the Board of Directors of US Can
intends to establish a bonus plan providing for an annual bonus to the Employee
equal to 100% of the Employee's Base Salary upon achievement by US Can of
annual performance goals set by the Compensation Committee of the Board of
Directors, with increased bonuses to be awarded in the event such performance
goals are exceeded, and appropriate reductions in bonuses in the event such
performance goals are not reached. In the event the Employee is terminated
without Cause pursuant to Section 8(ii) hereof, the Employee shall be entitled
to receive a bonus prorated to reflect any partial year of employment if, at
the end of that year, US Can determines that performance goals have been met.
In the event the Employee is terminated with Cause by US Can pursuant to
Section 8(i) hereof or in the event the Employee unilaterally terminates his
Term of Employment other than for Good Reason, the Employee shall not receive
or be entitled to a bonus, or any portion thereof.
C. PERFORMANCE GOALS. Approximately 60 days following the commencement of
the Term of Employment, the Board of Directors shall hold a strategic planning
session (the "Strategic Planning Session") to establish performance goals for
US Can and its Affiliates. As soon as reasonably practical thereafter, the
Compensation Committee of the Board of Directors shall, together with the
Employee, meet to determine jointly the performance goals on which the
Employee's future compensation will be based.
D. BOARD AND COMMITTEE FEES. For so long as the Employee is serving as
the President and Chief Executive Officer of US Can, the Employee shall not be
entitled to
-4-
<PAGE> 5
receive board or committee fees for service on the Board of Directors of
US Can, any subsidiary of US Can or any committee thereof.
E. BENEFITS. During the Term of Employment, the Employee shall be entitled
to the following additional financial benefits:
(i) a payment of $225,000, less the amount of any bonus paid to the
Employee in respect of services to Greenfield Industries, Inc.
for calendar year 1998 (excluding any severance payment, to the
extent such payment does not include payment of or settlement
for bonus payments), as compensation for the lost bonus
opportunity resulting from the Employee's resignation from
Greenfield Industries, Inc. to accept employment hereunder;
(ii) group term life insurance in the amount of $2,000,000;
(iii) health, welfare, retirement and other similar benefits provided
to other senior executives of US Can;
(iv) automobile allowance in the amount of $900 per month;
(v) reasonable relocation expenses to Chicago, Illinois;
(vi) reasonable temporary housing allowance for a period not to
exceed six (6) months;
(vii) financial assistance relating to the resale of the Employee's
residence in Georgia, as provided for in US Can's Relocation
Policy Guide, a copy of which the Employee hereby acknowledges
having received; and
(viii) payment of up to $10,000 of the fees and expenses of Employee's
legal counsel incurred in connection with the negotiation of
this Agreement.
F. REASONABLE AND NECESSARY BUSINESS EXPENSES. The Employee shall be
entitled to reimbursement from US Can, in accordance with US Can's policies
regarding same,
-5-
<PAGE> 6
of reasonable and necessary business expenses incurred by the Employee in the
course of his employment.
G. VACATION/HOLIDAYS. During each year of the Term of Employment, the
Employee shall be entitled to four (4) weeks of paid vacation plus the paid
holidays observed by US Can and its Affiliates.
H. STOCK OPTIONS. On the commencement date of the Term of Employment
hereunder, US Can shall grant to the Employee options to purchase 300,000
shares of common stock of US Can at the then current market price (the "Initial
Options"). The Initial Options will be Incentive Stock Options, as defined in
US Can's 1995 Equity Incentive Plan (the "Plan"), to the maximum extent
permitted by Section 422 of the United States Internal Revenue Code of 1986, as
amended (the "Code"). At the time the Employee exercises the portion of the
Initial Options which are not Incentive Stock Options under the Code, US Can
will make an additional payment to the Employee in an amount sufficient on a
net, after-tax basis, to compensate the Employee for the difference between the
actual tax treatment to the Employee of the exercise of the Initial Options and
the tax treatment that would have occurred had the lowest available long-term
capital gain tax rate applied. One hundred thousand (100,000) of the Initial
Options will vest at the end of each of the three years of the Term of
Employment. In the event of the Employee's death or permanent disability or a
Change of Control, or if the Board of Directors of US Can terminates Employee's
employment as Chief Executive Officer of US Can for any reason other than for
Cause, the Initial Options granted to Employee will vest automatically. The
Company will cause a registration statement on Form S-8 (or such other form as
shall be
-6-
<PAGE> 7
applicable) to be filed with the Securities and Exchange Commission
and use its best efforts to cause such registration statement to become
effective.
I. STOCK PURCHASES. The Employee shall purchase 30,000 shares of common
stock of US Can. The Employee may purchase those shares immediately or from
time to time provided that he purchases at least 10,000 shares prior to the
first anniversary of the date of this Agreement, a cumulative 20,000 shares
prior to the second anniversary of the date of this Agreement and a cumulative
30,000 shares prior to the end of the Term of Employment. For each such share
purchased by the Employee, US Can will grant the Employee an option to purchase
an additional 3-1/3 shares of common stock of US Can at the current market
price at the time of the purchase of the shares. These options will be
nonqualified stock options under the Code and will be immediately exercisable.
Any shares purchased by the Employee prior to the commencement date of the Term
of Employment will be credited against the 30,000 share purchase obligation, it
being acknowledged that Employee has purchased 12,000 shares as of the date
hereof and therefore shall be granted options to purchase 40,000 shares of
common stock of US Can at the current market price on the date hereof.
J. FUTURE STOCK OPTIONS. Future stock options will be considered by the
Board of Directors in connection with the Strategic Planning Session and in
accordance with the Board of Directors' annual review of the Employee's
performance and compensation.
5. TERM OF EMPLOYMENT. The Employee's term of employment by US Can shall
commence on April 1, 1998 and shall continue through March 31, 2001, unless
terminated pursuant to Sections 6, 8 or 9 hereof (the "Term of Employment"),
subject also to the provisions of Section 10 hereof.
-7-
<PAGE> 8
6. RESIGNATION FOR CAUSE.
A. DEFINITIONS. (i) "Change of Control" shall mean any one or more of the
following: the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of a block of Fifteen Percent (15%) or more of
the shares of the then outstanding common stock of US Can (the "Outstanding
Common Stock"), a merger or consolidation of US Can in which US Can does not
survive as an independent public company, a sale of all or substantially all of
the assets of US Can, a liquidation or dissolution of US Can or, during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of US Can cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period or the Employee shall have approved
the election of such director; provided, however, that the following
acquisitions shall not constitute a Change of Control for the purposes of this
section: (A) the acquisition by an underwriter of stock of US Can or any of
its Affiliates, or (B) any acquisition of stock by any employee benefit plan
(or related trust) sponsored or maintained by the Company.
(ii) "Constructive Termination", as used herein, shall mean any one or
more of the following occurrences within two years following the Effective Date
of a Change of Control: the assignment to the Employee of any duties
inconsistent in any material respect with the Employee's position, authority,
duties or responsibilities immediately prior to the Effective Date of the
Change of Control referred to above, or any other action by US Can which
results
-8-
<PAGE> 9
in a diminution in any material respect of the Employee's position,
authority, duties or responsibilities as the same existed immediately prior to
the Effective Date of the Change of Control referred to above.
(iii) "Effective Date", as used in this Section 6, shall mean the first
date during which a Change of Control occurs.
b. In the event that there is a Change of Control of US Can, and within
two years of the Effective Date of such Change of Control the Employee resigns
due to (i) a material diminution in salary or benefits or (ii) Constructive
Termination, (iii) a requirement by US Can that the Employee relocate more than
fifty (50) miles from Oak Brook, Illinois or (iv) a failure of the Company to
obtain the assumption of this Agreement by any successor to the business or all
or substantially all of the assets of the Company (each of which is referred to
herein as a termination for "Good Reason"), the Employee shall be entitled to
receive the same compensation as if employment hereunder was terminated by the
Company without Cause.
7. GOLDEN PARACHUTE EXCISE TAX REIMBURSEMENT. If any portion of the
Employee's compensation is for any reason treated as an excess parachute
payment under Section 280G(b) of the Code, US Can shall reimburse the Employee
in an amount such that the total value of the Employee's compensation, net of
all applicable taxes, would be the same as if no excise tax under Section
4999(a) of the Code were payable in respect to such excess parachute payment.
8. TERMINATION. The Term of Employment may be terminated prior to March
31, 2001 (i) by US Can with Cause (as defined hereunder), effective
immediately; (ii) by US Can without Cause, effective 30 days after written
notice to Employee; (iii) by Employee unilaterally,
-9-
<PAGE> 10
effective 30 days after written notice to US Can; (iv) by Employee, for Good
Reason, effective 30 days after written notice to US Can; or (v) on death of
Employee, effective immediately.
Termination with Cause is permitted only in the following circumstances:
a. if the Employee has been convicted of a felony involving moral
turpitude;
b. if the Employee is in open disregard of his responsibilities hereunder
and refuses to devote substantial time and energy to the business and
affairs of US Can and its Affiliates within thirty (30) days after
having been notified in writing by the Board of Directors that, in its
good faith judgment, the Employee has consistently failed to do so; or
c. if the Employee shall compete with US Can and its Affiliates, in
violation of Section 11 hereof.
The preceding three events shall be the only events which shall constitute
"Cause" for all purposes of this Agreement, and in no event shall the
Employee's inability to substantially perform his responsibilities hereunder
which is due to a temporary or permanent disability give rise to a termination
for Cause. In every other case of termination by US Can, the termination shall
be deemed to be without Cause.
9. DEATH OR DISABILITY OF THE EMPLOYEE. If the Employee dies or is
totally and permanently disabled during his Term of Employment hereunder, the
Term of Employment shall conclude on the date thereof, and the Employee
shall not be entitled to receive any further salary hereunder except for the
pro rata share of the Employee's salary earned through the date of his death or
total and permanent disability, as the case may be, including accrued but
unused vacation time and the compensation provided hereunder in accordance with
Section 4(a) hereof.
-10-
<PAGE> 11
The compensation and benefits owed to the Employee pursuant to Section
4(a) hereof which are designated to continue following termination of this
Agreement shall be paid to the Employee's designated beneficiary or, in the
event no beneficiary has been designated or survives the Employee, to the
estate of the Employee. Total and permanent disability shall mean a disability
because of which the Employee is physically or mentally unable to substantially
perform the duties required of him under this Agreement for a period of six (6)
consecutive months or more.
10. EFFECT OF EXPIRATION OR TERMINATION. Section 4 of this Agreement
governs the calculation of any unpaid portion of the Employee's compensation
where the Employee's Term of Employment terminates or concludes prematurely
pursuant to Sections 8 or 9. If the Term of Employment comes to an end for any
reason whatsoever, the obligations of the parties under Sections 11 and 12
shall continue in accordance with the terms and conditions of each respective
Section. In the event the Term of Employment is terminated for Cause pursuant
to Section 8(i) hereof, and if at such time the Employee is a Director of US
Can or any Affiliates, the Employee shall tender his resignation from the Board
of Directors of US Can and from the Board of Directors (or comparable body) of
each Affiliate of US Can. This obligation will survive until satisfied.
11. NON-COMPETITION. The Employee hereby agrees that, during the Term of
Employment, and during the Agreed Period (as hereinafter defined), the Employee
shall not (a) engage, directly or indirectly, in any Prohibited Activities (as
hereinafter defined) in any Prohibited Territory (as hereinafter defined) as an
owner, officer, director, employee, stockholder, principal, consultant, agent,
lender, guarantor, cosigner, investor or trustee of any corporation,
partnership, proprietorship, joint venture, association or any other entity of
any nature or
-11-
<PAGE> 12
(b) solicit any customers or clients of US Can or its Affiliates in
connection with any transactions which are in direct competition with the
business of US Can and its Affiliates. Notwithstanding the foregoing, the
Employee may be the owner of not more than 5% of the outstanding capital stock
of any corporation engaged in Prohibited Activities (as defined herein). For
purposes of this Section 11, (i) "Prohibited Activities" shall mean any
manufacturing, development, sales, marketing, licensing and/or distribution of
any containers which is directly competitive with any products or services its
Affiliates and the provision of any services directly competitive with services
offered by US Can or its Affiliates and (ii) "Prohibited Territory" means the
United States and any other country or applicable geographic area where the
products and/or services of US Can or its Affiliates are sold. The term
"Agreed Period" shall mean the Term of Employment and the two (2) year period
following the date on which the Term of Employment is terminated.
12. CONFIDENTIALITY.
a. For purposes of this Section 12, "US Can Confidential Information"
means all Trade Secrets and Other Confidential Technical and Business
Information (as defined below) (whether or not reduced to writing and whether
or not patentable or protectable by trademark or copyright) which US Can now
owns or is licensed to use, or may in the future own or be licensed to use
during the entire term of the Employee's employment at US Can, including the
Term of Employment hereunder. "Trade Secrets and Other Confidential Technical
and Business Information" means all confidential or proprietary product
development and design information and all confidential or proprietary
procedures, techniques, manuals, customer information, specifications, data
bases, test results, information concerning business or product acquisitions,
-12-
<PAGE> 13
strategic plans, customer lists, pricing data, and discoveries, inventions and
innovations made, created, acquired or developed by or on behalf of US Can
and/or its Affiliates, but excluding in each case any information which as a
whole (a) is contained at the time of disclosure or thereafter in a patent or a
printed publication available to the general public (b) is obtained from a
third party lawfully in possession of such information and who is not subject
to a contractual or a fiduciary relationship to prevent such disclosure, or (c)
any other information which is known generally by the public except as the
result of a direct or indirect disclosure by the Employee.
b. The Employee agrees to take the following steps to preserve the
confidential and proprietary nature of US Can Confidential Information:
(i) During or after the Employee's employment by US Can, the Employee
will not disclose or transfer any of the US Can Confidential
Information other than as authorized by US Can within the scope of
the Employee's duties with US Can. Except to the extent the Employee
is authorized to do so in his capacity as an employee or officer of
US Can, the Employee understands that he is not authorized to sell,
license or otherwise exploit any products or services which embody
or utilize in whole or in part any US Can Confidential Information.
(ii) The Employee will take all reasonable precautions to prevent the
unauthorized disclosure (whether inadvertent or deliberate) of
US Can Confidential Information to unauthorized persons or entities,
and will promptly report to appropriate US Can management any such
activities by others.
(iii) While the Employee is permitted to retain all personal information
which is not comprised of or derived from US Can Confidential
Information (in whole or in part), all notes, files, data, tapes,
reference materials, reports, sketches, drawings, price lists,
customer lists, plans, memoranda, records and any other document or
matter comprised of, or derived from, US Can Confidential
Information (in whole or in part) shall belong exclusively to US
Can. At the request of US Can or upon termination of the Employee's
employment with US Can, the Employee will deliver to US Can all
tangible materials embodying US Can Confidential Information in his
possession or control.
-13-
<PAGE> 14
c. Except as otherwise provided herein, this Section 12 shall survive for
a period of three (3) years following termination of this Agreement.
13. EQUITABLE RELIEF. The Employee understands that a breach by him of
any provision of this Agreement may cause substantial injury to US Can and/or
its Affiliates which may be irreparable and/or in amounts difficult or
impossible to ascertain and that, in the event the Employee breaches any
provision of this Agreement, US Can shall have, in addition to all other
remedies available in the event of a breach of this Agreement, the right to
injunctive or other equitable relief. Further, the Employee acknowledges and
agrees that the restrictions and commitments set forth in this Agreement are
necessary to protect US Can's legitimate interests and are reasonable in scope,
area and time, and that if, despite this acknowledgment and agreement, at the
time of the enforcement of any provision of this Agreement a court of competent
jurisdiction shall hold that the period or scope of such provision is
unreasonable under the circumstances then existing, the maximum reasonable
period or scope under such circumstances shall be substituted for the period or
scope stated in such provision.
14. NON-WAIVER OF RIGHTS. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement,
or any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
15. ARBITRATION. Any dispute as to any claim under this Agreement shall
be settled by arbitration in Chicago, Illinois by an arbitrator, who shall be
appointed pursuant to the rules of the American Arbitration Association. The
arbitration shall be conducted promptly
-14-
<PAGE> 15
and expeditiously in accordance with the applicable arbitration rules of the
American Arbitration Association. Any award issued as a result of such
arbitration shall be final and binding on the parties, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof; provided, however, that any award issued as a result of
arbitration shall be reviewable de novo by a court of competent jurisdiction
for errors of law. Notwithstanding the foregoing, the parties hereto shall not
be entitled to, and no award shall include in whole or in part, punitive
damages or exemplary damages.
16. SEVERABILITY. Whenever there may be a conflict between the provisions
of this Agreement and any statute, prevailing law, judicial decision, ordinance
or regulation, the latter shall prevail, but in such event the provisions of
this Agreement so affected shall be construed and limited only to the extent
necessary to bring it within the requirements of such law, and in no event
shall such illegality or unenforceability offset the remaining provisions or
remaining portions of a provision of this Agreement.
17. NOTICES. Any notice given by either party hereunder shall be in
writing and shall be personally delivered or shall be mailed, certified or
registered mail, postage prepaid, return receipt requested, as follows:
To US Can: U.S. Can Corporation
900 Commerce Drive
Oak Brook, Illinois 60521
Attention: Executive Vice President-Operations
with a copy to: Lawrence R. Samuels, Esq.
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601
To Employee: At the address of the Employee as set forth on the
payroll records of US Can
-15-
<PAGE> 16
with a copy to: Matthew G. Maloney, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street NW
Washington, D.C. 20037-1526
or to such other address as may have been furnished to the other party by
written notice in accordance with this Section 17.
18. ASSIGNMENT. The rights and obligations of US Can under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of US Can.
19. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior or contemporaneous agreements and representations, written or
oral with respect to the subject matter hereof. No representations or
agreements, written or oral, other than the representations and agreements
contained in this Agreement, have been made to or in favor of the Employee.
This Agreement may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
20. APPLICABLE LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Illinois, without regard to its
conflicts of law doctrine, and the Employee hereby consents to personal
jurisdiction in Illinois for such purpose.
-16-
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement, in
duplicate, on the date first written above.
EMPLOYEE U.S. CAN CORPORATION
/s/ Paul W. Jones By: /s/ William J. Smith
- ----------------- ----------------------------
Paul W. Jones Name: William J. Smith
Title: Chairman
-17-
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