<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
-------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended SEPTEMBER 30, 1996
----------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
-------
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number: 1-6690
------
CONTINENTAL CAN COMPANY, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2228114
-------------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
One Aerial Way, Syosset, New York 11791
- ---------------------------------------- --------
(Address of principal executive offices) Zip Code
(516) 822-4940
----------------------------------------------
(Registrant's telephone number, including area code)
- ----------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 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.
X YES _______ NO
-------
The number of shares outstanding of the registrant's Common Stock ($.25 par
value) as of November 8, 1996 is 3,201,035.
<PAGE>
FORM 10-Q
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 and
September 30, 1995.
Consolidated Statements of Earnings for the Three Months Ended September 30,
1996 and 1995
Consolidated Statements of Earnings for the Nine Months Ended September 30, 1996
and 1995
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1996 and 1995
Notes to Consolidated Financial Statements
2
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1996 1995 1995
-------------- --------- --------------
<S> <C> <C> <C>
ASSETS:
- -------
Current Assets:
Cash and cash equivalents $ 2,748 $ 8,925 $ 13,208
Investments - 285 -
Accounts Receivable:
Trade accounts 112,345 94,461 130,678
Other 11,984 13,215 15,258
Less allowance for doubtful accounts (5,502) (6,144) (5,815)
--------------- ----------- -----------
Accounts receivable, net 118,827 101,532 140,121
Inventories 94,761 91,636 97,865
Prepaid expenses and other current 5,184 5,275 4,615
assets
--------------- ----------- -----------
TOTAL CURRENT ASSETS 221,520 207,653 255,809
--------------- ----------- -----------
Property, plant and equipment, at cost:
Land, building and improvements 51,251 52,090 51,507
Manufacturing machinery and equipment 270,742 263,331 235,302
Furniture, fixtures and equipment 9,865 9,591 9,652
Construction in progress 31,286 22,476 37,898
--------------- ----------- -----------
363,144 347,488 334,359
Less accumulated depreciation and 167,516 148,874 141,583
amortization
--------------- ----------- -----------
Net property, plant and equipment 195,628 198,614 192,776
Goodwill, net of accumulated 13,635 14,486 14,556
amortization
Other assets 24,603 24,658 18,691
--------------- ----------- -----------
TOTAL ASSETS $455,386 $445,411 $481,832
=============== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 1996 AND 1995 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
SEPTEMBER 30, DEC. 31, SEPTEMBER 30,
1996 1995 1995
---------------------------------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current Liabilities:
Short term borrowings $ 53,134 $ 47,945 $ 41,684
Accounts payable - trade 54,171 56,830 83,412
Accrued liabilities:
Employee compensation and benefits 19,999 18,238 21,413
Other accrued expenses 25,941 17,417 23,567
Current installments of long term
debt and
obligations under capital leases 24,705 10,665 11,133
Income taxes payable 3,086 1,610 1,448
Other current liabilities 9,277 8,753 9,814
--------------- ---------- ----------
TOTAL CURRENT LIABILITIES 190,313 161,458 192,471
Long term debt, excluding current 112,434 130,023 122,778
installments
Obligations under capital leases,
excluding current installments 15,304 13,115 14,012
Deferred income taxes 3,657 3,872 3,763
Other 28,976 30,365 42,756
--------------- ---------- ----------
TOTAL LIABILITIES 350,684 338,833 375,780
Minority interest 28,488 30,280 29,899
STOCKHOLDERS' EQUITY:
- ---------------------
Capital stock:
First preferred stock, cumulative $25
par value.
Authorized 250,000 shares; no - - -
shares issued.
Second preferred stock, 4%
non-cumulative,
$100 par value. Authorized 1,535
shares;
no shares issued. - - -
Common stock, $.25 par value.
Authorized 20,000,000
shares; Outstanding 3,201,035
shares in 1996, 3,196,368
shares in Dec., 1995 and 3,196,368 800 799 799
shares in September, 1995.
--------------- ----------- ---------
800 799 799
Additional paid-in capital 43,945 43,868 43,867
Retained earnings 29,124 26,742 26,340
--------------- ----------- ---------
73,869 71,409 71,006
Cumulative foreign currency translation 2,345 4,889 5,147
adjustment
--------------- ----------- ---------
TOTAL STOCKHOLDERS' EQUITY 76,214 76,298 76,153
--------------- ----------- ---------
TOTAL LIABILITIES AND $455,386 $445,411 $481,832
STOCKHOLDERS' EQUITY
============== ============ =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1996 1995
---------------------
<S> <C> <C>
Sales $170,882 $171,024
Cost of sales 141,118 143,384
---------------------
Gross profit 29,764 27,640
Restructuring charges 400 5,003
Selling, general and administrative 18,914 19,908
expenses
---------------------
OPERATING INCOME 10,450 2,729
Other income (expense):
Interest expense, net (5,005) (5,435)
Foreign currency exchange (loss) gain (69) 109
Other - net (123) (44)
---------------------
NET OTHER EXPENSE (5,197) (5,370)
Income (loss) before provision for
income taxes
and minority interest 5,253 (2,641)
Provision for income taxes 1,523 479
---------------------
Income (loss) before minority interest 3,730 (3,120)
Minority interest 1,088 (1,248)
---------------------
NET INCOME (LOSS) $ 2,642 $ (1,872)
=====================
NET EARNINGS (LOSS) PER COMMON SHARE $0.80 $(0.56)
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1996 1995
---------------------
<S> <C> <C>
Sales $443,527 $476,436
Cost of sales 370,601 399,773
---------------------
Gross profit 72,926 76,663
Restructuring charges 1,500 5,003
Selling, general and administrative 52,675 54,632
expenses
---------------------
OPERATING INCOME 18,751 17,028
Other income (expense):
Interest expense, net (14,826) (14,857)
Foreign currency exchange gain (loss) 153 (176)
Other - net (90) (44)
---------------------
NET OTHER EXPENSE (14,763) (15,077)
Income before provision for income taxes
and minority interest 3,988 1,951
PROVISION FOR INCOME TAXES 1,618 2,235
---------------------
Income (loss) before minority interest 2,370 (284)
Minority interest (12) (781)
---------------------
NET INCOME $ 2,382 $ 497
=====================
NET EARNINGS PER COMMON SHARE $0.72 $0.15
=====================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
1996 1995
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,382 $ 497
Depreciation and amortization 26,322 25,015
Minority interest (12) (781)
Other adjustments (17,496) 2,961
-------------------
NET CASH PROVIDED BY 11,196 27,692
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,815) (29,779)
Other (219) (1,017)
-------------------
NET CASH USED IN INVESTING (26,034) (30,796)
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) 1,148 (11,296)
long term debt
Net proceeds from short term 6,954 17,827
borrowings
Other 78 959
-------------------
NET CASH PROVIDED BY 8,180 7,490
FINANCING ACTIVITIES
Effect of exchange rate changes on cash 481 46
-------------------
Increase (decrease) in cash and cash (6,177) 4,432
equivalents
Cash and cash equivalents at beginning 8,925 8,776
of period
-------------------
CASH AND CASH EQUIVALENTS AT END OF $ 2,748 $ 13,208
PERIOD
===================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CONTINENTAL CAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) Accounting Policies and Other Matters
(a) Basis of Presentation
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the
Company's 1995 Annual Report to Stockholders.
(b) Adjustments
The results for the interim period reported herein have not been
audited; however, in the opinion of management, all adjustments
necessary for a fair presentation of the interim period statements have
been made.
(c) Earnings Per Common Share
Earnings per common share is based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares include dilutive stock options (using the treasury stock method)
exercisable under the Company's option plans. Weighted average shares
outstanding in the third quarter of 1996 and 1995 were 3,285,967 and
3,330,653, respectively, and for the first nine months of 1996 and 1995
were 3,289,370 and 3,342,489, respectively.
(2) Inventories
Inventories consist principally of packaging materials. The components of
inventory were as follows: (000's omitted)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
--------------- ------------ -------------
<S> <C> <C> <C>
Finished goods $44,851 $42,241 $ 46,780
Work in process 10,066 7,795 11,109
Raw materials 41,869 43,625 43,178
--------------- ------------ -------------
$96,786 $93,661 $101,067
LIFO reserve (2,025) (2,025) (3,202)
------- -------- --------
$94,761 $91,636 $ 97,865
======= ========
=============== ============= ============
</TABLE>
(3) Restructuring Charges
The Company's subsidiary, PCI, recorded charges of $1,100,000 and $400,000 in
the second and third quarters of 1996, respectively, in connection with a
plan to consolidate certain manufacturing operations, reduce operating costs
and better position itself to achieve its corporate objectives. The charges
reflect, primarily, severance costs from workforce reductions. The Company
expects to incur additional charges in the fourth quarter resulting from the
write-down of excess equipment, employee relocation costs, and other
incremental cost of transferring production from closing to continuing
plants. Although these costs cannot be reasonably estimated at this time,
depending on the actions ultimately taken, the additional charges could
exceed $3,500,000.
8
<PAGE>
As of September 30, 1996, approximately $700,000 has been paid in connection
with the plan. The plan is expected to be completed by the end of the first
quarter of 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales during the third quarter of 1996 amounted to $170,882,000 as compared
to $171,024,000 in the third quarter of 1995. Sales in the first nine months of
1996 decreased to $443,527,000 from $476,436,000 in the same prior year period.
Approximately equal sales in the third quarter of 1996 as compared to 1995
reflected offsetting amounts from volume increases ($5.4 million) and reductions
in foreign currency translation rate differences ($3.3 million) and resin price
decrease pass-throughs ($2.1 million). Lower sales for the first nine months of
1996 resulted from volume decreases primarily at the Company's European
operations ($13 million), foreign currency translation rate differences ($6
million), and resin price decrease pass-throughs ($14 million).
Gross profit was higher in the third quarter of 1996 than the same prior
year period but lower in the first nine months of 1996 than 1995. Gross profit
as a percentage of sales increased by approximately 1.2% in the third quarter
and by 0.3% in the first nine months of 1996 from the same periods of 1995.
This increase primarily resulted from cost reduction efforts at Ferembal, and
improved manufacturing efficiencies and the effect of resin price decrease pass-
throughs at PCI.
Results for the third quarter and first nine months of 1996 included a
$400,000 and $1.5 million restructuring charge, respectively, for plant
rationalization and realignment at PCI. These amounts reflect severance costs
for employees at two plants which will be closed. The remaining business from
those facilities, which had not previously been relocated as a result of changes
in customers' filling locations, will be consolidated in PCI's other facilities.
Additional charges relating to the plant closings are expected to be taken in
the fourth quarter of 1996. The amount is presently being determined but the
total charges are expected to exceed $5 million. Results for the third quarter
and first nine months of 1995 included a $5 million restructuring charge for
severance and termination benefits at Ferembal, the Company's European can
manufacturing subsidiary, to help position Ferembal as a low cost producer.
Selling, general and administrative expense was lower in each period of
1996 than 1995. Selling, general and administrative expense as a percentage of
sales increased by approximately 0.4% in the first nine months of 1996 versus
the same prior year period. Selling, general and administrative expense as a
percentage of sales in the third quarter of 1996 was approximately 0.5% lower
than in 1995. The change in selling, general and administrative expense as a
percentage of sales primarily reflects both the reduction in costs and volume.
Because of these various factors, operating income amounted to $10,450,000 and
$18,751,000 in the third quarter and first nine months of 1996, respectively, as
compared to $2,729,000 and $17,028,000 in the same periods of 1995.
Net interest expense decreased to $5,005,000 in the third quarter of 1996
from $5,435,000 in the third quarter of 1995. Net interest expense was
approximately equal in the first nine months of 1996 and 1995.
Provision for income taxes amounted to $1,523,000 and $1,618,000 in the
third quarter and first nine months of 1996, respectively, as compared to
$479,000 and $2,235,000 in the third quarter and first nine months of 1995,
reflecting offsetting amounts of tax benefits for accounting purposes in loss
operations and tax expense in the Company's profitable operations. Minority
interest during each period reflects the interests of other shareholders in some
of the Company's subsidiaries.
9
<PAGE>
Net income amounted to $2,642,000 ($.80 per share) in the third quarter and
$2,382,000 ($0.72 per share) in the first nine months of 1996. Net loss
amounted to $1,872,000 ($0.56 per share) in the third quarter of 1995. Net
income in the first nine months of 1995 amounted to $497,000 ($0.15 per share).
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
The Company acquired $5,305,000 and $25,815,000 of capital assets during
the third quarter and first nine months of 1996, respectively, consisting
primarily of packaging equipment. These assets were acquired for cash. Similar
types of assets are expected to be acquired for the remainder of the year and
total capital expenditures are expected to amount to approximately $30 million
in 1996.
Continental Can has reached agreement with Merrywood, Inc. to purchase an
additional 34% of PCI, for $30 million. In addition, Merrywood will receive
warrants to purchase 150,000 shares of Continental Can stock at approximately
$20.00 per share. Continental Can has an obligation to purchase the remaining
16% of PCI owned by Merrywood by December 31, 2000 (or earlier at its
discretion) at a price of $15.4 million plus interest. In addition, previous
agreements with Merrywood will be cancelled. The Company will obtain the funds
necessary to purchase the Merrywood interest through a loan from PCI. In turn
PCI expects to enter into a $45 million sale and leaseback of some of its
facilities and to refinance its outstanding senior secured notes. In this
connection, PCI has tendered for its existing senior notes subject to the
completion of a new senior note offering. Upon completion of the tender, PCI
will incur an extraordinary charge for debt extinguishment and the write-off of
unamortized fees which will amount to approximately $7 million. The Company
expects all of these financing transactions to be completed in 1996.
LIQUIDITY
The Company's liquidity position declined slightly during the first nine
months of 1996. Working capital amounted to approximately $31.2 million, and
the current ratio amounted to 1.16 at September 30, 1996 compared to 1.29 at
December 31, 1995.
For the nine months ended September 30, 1996, net cash provided by
operating activities amounted to $11,196,000. The increase in the Company's
accounts receivable and inventory in the third quarter of each year is primarily
a result of the seasonality of Ferembal's business which peaks at this period
because of the harvest of vegetable crops for canning. Net cash used in
investing activities, primarily capital expenditures, amounted to $26,034,000
during the first nine months of 1996. In the same period, the Company increased
short term borrowings by approximately $7 million and funded the remainder of
its needs with existing cash. The Company expects that, as Ferembal collects
receivables and reduces its seasonally high inventories relating to vegetable
canning, these short term borrowings will be repaid or refinanced.
At September 30, 1996, the Company's consolidated subsidiaries had
available approximately $36 million in credit lines and bank overdraft
facilities. However, the Company's ability to draw upon these lines for other
than its subsidiaries' needs is restricted.
The Company expects that cash from operations and its existing banking
facilities will be sufficient to meet its operating needs for the remainder of
1996. On a long term basis the Company believes that existing funds, cash
generated by operations, its existing banking facilities and the completion of
the previously described financing transactions will be sufficient to meet its
cash needs.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits Required
(10) Stock Purchase Agreement dated October 22, 1996..... Page 12
(11) Statement re computation of per share earnings
See Note 1(c) on.................................... Page 8
(27) Financial Data Schedule............................. Page 20
All other items for which provision is made in the applicable regulations of
the Securities and Exchange Commission have been omitted as they are not
required under the related instructions or they are inapplicable.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed in the quarter ended September 30, 1996.
SIGNATURE
---------
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.
CONTINENTAL CAN COMPANY, INC.
(REGISTRANT)
By: /s/ Abdo Yazgi
---------------------------
Abdo Yazgi
Principal Financial Officer
and on behalf of registrant
DATED: NOVEMBER 8, 1996
11
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
CONTINENTAL CAN COMPANY, INC.,
PLASTIC CONTAINERS, INC.,
MERRYWOOD, INC., AND
PLAZA LIMITED
DATED AS OF OCTOBER 22, 1996
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
---------
October 22, 1996, by and among PLASTIC CONTAINERS, INC., a Delaware corporation
("PCI"), CONTINENTAL CAN COMPANY, INC., a Delaware corporation ("Continental"),
--- -----------
MERRYWOOD, INC., a Delaware corporation ("Merrywood"), and PLAZA LIMITED, a
---------
British Virgin Island corporation ("Plaza").
-----
RECITALS
--------
A. PCI has outstanding an aggregate of 100 shares of common stock, par
value $1.00 per share ("PCI Common Stock"), of which 50 shares are owned by
----------------
Continental and 50 shares are owned by Merrywood.
B. PCI, Continental and Merrywood are parties to the Shareholders
Agreement, dated as of October 19, 1991 (the "Original Shareholders Agreement"),
-------------------------------
and, together with Plaza, are parties to the Agreement Among PCI Shareholders,
dated as of September 10, 1992, as amended by Addendum No. 1, dated as of
November 15, 1995, (the "Agreement Among PCI Shareholders").
--------------------------------
C. Pursuant to the provisions of Section 2.1 of the Agreement Among PCI
Shareholders, Merrywood delivered to Continental a notice dated July 31, 1996
(the "Merrywood Put Notice"), pursuant to which Merrywood exercised its right to
require Continental to purchase Merrywood's 50 shares of PCI Common Stock on
December 2, 1996 at a price anticipated to be approximately $45,424,838.00.
D. Merrywood and Continental desire to enter into this Agreement to
confirm their agreement that in lieu of purchasing all of Merrywood's 50 shares
of PCI Common Stock on December 2, 1996, Continental will (i) purchase from
Merrywood 34 shares of PCI Common Stock on or before January 31, 1997, and (ii)
will purchase Merrywood's remaining 16 shares of PCI Common Stock on or before
December 31, 2000, in each case, at the price and on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF PCI SHARES
-------------------------------
Section 1.1. Purchase and Sale of PCI Shares. Subject to the terms and
-------------------------------
conditions of this Agreement, at the Initial Closing (as defined in Section 2.1)
Merrywood shall sell to Continental, and Continental shall purchase from
Merrywood, 34 shares of PCI Common Stock (the "Initial PCI Shares"), and at the
------------------
Final Closing (as defined in Section 2.2) Merrywood shall sell to Continental,
and Continental shall purchase from Merrywood, all remaining shares of PCI
Common Stock (the "Remaining PCI Shares") owned then by it, (to the extent not
--------------------
previously purchased by Continental at one or more Intermediate Closings (as
defined in Section 2.3)).
ARTICLE II
CLOSINGS AND PAYMENT
--------------------
Section 2.1. Initial Closing: Purchase Price: and Documents to be
----------------------------------------------------
Delivered. (a) The initial closing of the sale by Merrywood of 34 shares of PCI
- ---------
Common Stock owned by it shall be held at the offices of Loeb, Block, Wacksman &
Selzer, LLP, 505 Park Avenue, New York, New York, at 10:00 a.m. on February 7,
1997, or on such earlier date and at such other place as the parties hereto
shall mutually agree (the "Initial Closing," and such date the "Initial Closing
--------------- ---------------
Date"). Continental agrees that if PCI's High-Yield Bond Offering (as defined
- ----
in Section 2.2 hereof) is consummated prior to February 7, 1997, the Initial
Closing shall be held within two business days thereafter. The total purchase
price for the Initial Shares to be paid at the
12
<PAGE>
Initial Closing shall be $30,000,000, (the "Initial PCI Shares Purchase Price").
---------------------------------
(b) At the Initial Closing, Merrywood shall deliver to Continental:
(i) One or more certificates representing the Initial PCI Shares;
(ii) stock powers endorsed in blank and executed by the President or
any Vice President of Merrywood;
(iii) resignations of Charles Marquardt and Cayo Zapata as directors of
PCI and of Jose-Luis Zapata as President of PCI; and
(iv) resignations of Charles Marquardt and Cayo Zapata as directors of
Continental and of Patricio Zapata as an Advisory Director of
Continental.
(c) At the Initial Closing, Continental shall deliver to Merrywood and
Plaza:
(i) a check payable to Merrywood, issued or certified by a New York
Clearing House Bank, in the amount of the Initial PCI Shares
Purchase Price (or if Merrywood shall have so requested, such
payment shall be made by wire transfer of such funds to an account
maintained by Merrywood at a United States banking institution
which is a member of the Federal Reserve System);
(ii) a check payable to Plaza in reimbursement of Merrywood's legal
expenses, as provided in Section 6.3 hereof;
(iii) a Warrant issued to Plaza to purchase, at any time prior to
January 1, 2001, up to 150,000 shares of Continental common stock,
$.25 par value per share, at a price equal to the lower of (x)
$20.00 per share or (y) the per share book value of Continental
common stock as of December 31, 1996, which warrant shall include
registration rights (similar to those set forth in section 3.3
hereof) with respect to shares of Continental common stock issuable
on such warrant's exercise, such Warrant to be in the form attached
as Exhibit A hereto; a nd
(iv) Merrywood, as security for the performance by Continental of its
obligations under this Agreement, a security interest in all of the
shares of PCI Common Stock owned by Continental (including the 34
shares of PCI Common Stock purchased at the Initial Closing), such
Stock Pledge Agreement to be in the form attached as Exhibit B
hereto.
(d) At the Initial Closing, Continental shall deliver to Loeb, Block,
Wacksman & Selzer, LLP one or more certificates representing the 84 shares of
PCI Common Stock pledged pursuant to the Stock Pledge Agreement, together with
stock powers endorsed in blank and executed by the President or any Vice
President of Continental.
Section 2.2. Final Closing; Purchase Price; and Documents to be Delivered.
------------------------------------------------------------
(a) Subject to any sale of PCI Common Stock at one or more Intermediate Closings
pursuant to Section 2.3 hereof, the final closing for the sale by Merrywood to
Continental of the Remaining PCI Shares shall be held at Loeb, Block, Wacksman
& Selzer, LLP, 505 Park Avenue, New York, New York, at 10:00 a.m. on December
31, 2000, or on such other date and at such other place as the parties shall
mutually agree (the "Final Closing", and such date the "Final Closing Date").
------------- ------------------
The total purchase price to be paid by Continental for the Remaining PCI Shares
shall be an amount (the "Remaining PCI Shares Purchase Price") equal to (i) the
Remaining Balance of the Total Purchase Price for PCI Shares, less (ii) an
amount equal to the portion of any Intermediate Closing PCI Shares Purchase
Price referred to clauses (x) and (y) of the definition of that term in Section
2.3 hereof, plus (iii) interest on such difference, compounded monthly, from the
Initial Closing Date to (but not including) the Final Closing Date at a rate
equal to 0.75% above the nominal interest rate of the senior secured notes
(which PCI intends to sell in an underwritten public offering (the "High-Yield
----------
Bond Offering") for the purposes of (x) raising funds to pay the Initial PCI
- -------------
Shares Purchase Price purchase price under the Initial Closing and (y)
refinancing PCI's currently outstanding 10-3/4% Senior Secured Notes). The term
"Remaining Balance of the Total Purchase Price for PCI Shares" shall mean (i)
$45,424,838.00 as adjusted to appropriately reflect (x) any increase resulting
from any period between December 2, 1996 and the Initial Closing Date, and (y)
any change in the prime rate as announced by Citibank, N.A. from the prime rate
in effect as of the date of this Agreement (8.25% per annum), less (ii)
$30,000,000.
13
<PAGE>
(b) At the Final Closing Merrywood shall deliver to Continental:
(i) one or more certificates representing all of the Remaining PCI
Common Stock;
(ii) stock powers endorsed in blank and executed by the President or
any Vice President of Merrywood;
(iii) resignation of all directors of PCI and Continental appointed or
designated by Merrywood pursuant to this Agreement; and
(iv) the Stock Pledge Agreement and all certificates for shares of PCI
Common Stock (and related stock powers) pledged pursuant to the
Stock Pledge Agreement and held by Loeb, Block, Wacksman & Selzer,
LLP.
(c) At the Final Closing, Continental shall deliver to Merrywood:
(i) a check payable to Merrywood issued or certified by a New York
Clearing House Bank in the amount of the Remaining PCI Shares
Purchase Price (or if Merrywood shall have so requested, such
payment shall be made by wire transfer of such funds to an account
maintained by Merrywood at a United States banking institution
which is member of the Federal Reserve System);
(ii) a check payable to Plaza in reimbursement of Merrywood's expenses
in obtaining an opinion regarding the financial condition of PCI,
as provided in Section 6.4 hereof.
Section 2.3. Intermediate Closing; Purchase Price; and Documents to be
---------------------------------------------------------
Delivered.
- ---------
(a) Continental shall have the right from time to time, upon not less than
20 days' prior written notice, to purchase all or any portion of the Remaining
PCI Shares for a price (the "Intermediate Closing PCI Shares Purchase Price")
----------------------------------------------
calculated by multiplying (x) the Remaining Balance of the Total Purchase Price
for PCI Shares by (y) a fraction, (i) the numerator of which shall be the number
of Remaining PCI Shares to be purchased at such Intermediate Closing and (ii)
the denominator of which shall be 16, plus (z) interest, compounded monthly, on
such product from the Initial Closing Date to (but not including) the date of
the Intermediate Closing Date (as defined in paragraph (c) of this Section) at a
rate equal to 0.75% above the nominal interest rate of the High Yield Bond
Offering, provided, however, that the Intermediate Closing PCI Shares Purchase
-------- -------
Price shall not be less than $3,000,000.
(b) If Continental desires to exercise its right to purchase all or any
portion of the Remaining PCI Shares, Continental shall give Merrywood not less
than 20 days prior written notice, which notice shall specify: (i) the number of
Remaining PCI Shares to be purchased; (ii) the Intermediate Closing PCI Shares
Purchase Price; and (iii) the date of the Intermediate Closing.
(c) The closing of the purchase of all or a portion of the Remaining PCI
Shares shall be held at the offices of Loeb, Block, Wacksman & Selzer, LLP, 505
Park Avenue, New York, New York, at 10:00 a.m. on the date specified in the
notice referred to in paragraph (b) above (an "Intermediate Closing" and any
--------------------
such date the "Intermediate Closing Date").
-------------------------
(d) At each Intermediate Closing, Merrywood shall deliver to Continental:
(i) one or more certificates representing the number of Remaining PCI
Shares to be purchased at the Intermediate Closing;
(ii) stock powers endorsed in blank and executed by the President or
any Vice President of Merrywood; and
(iii) if all Remaining Shares are being purchased, resignations of all
officers and directors of PCI and Continental appointed or
nominated by Merrywood pursuant to this Agreement.
(e) At each Intermediate Closing, Continental shall deliver to Merrywood:
(i) a check payable to Merrywood issued or certified by a New York
Clearing House Bank in the amount of the Intermediate Closing PCI
Shares Purchase Price (or if Merrywood shall have so requested,
such payment shall be made by wire transfer of such funds to an
account maintained by Merrywood at a United States banking
institution which is a member of the Federal Reserve System); and
(ii) an addendum to the Stock Pledge Agreement, pursuant to which
Continental grants Merrywood a security interest in the Remaining
PCI Shares purchased by Continental at such Intermediate Closing.
14
<PAGE>
(f) At such Intermediate Closing, Continental shall deliver to Loeb, Block,
Wacksman & Selzer, LLP one or more certificates representing the Remaining PCI
Shares purchased by Continental at such Intermediate Closing and pledged
pursuant to the Stock Pledge Agreement (together with stock powers endorsed in
blank and executed by the President or any Vice President of Continental).
ARTICLE III
CERTAIN REMEDIES OF MERRYWOOD
-----------------------------
Section 3.1. Failure to Pay Initial PCI Shares Purchase Price. In the
------------------------------------------------
event that Continental shall fail to pay the Initial PCI Shares Purchase Price
at the Initial Closing, then this Agreement shall terminate and be of no further
force or effect (except that Continental shall continue to be obligated (i) to
reimburse Merrywood for its legal expenses, as set forth in Section 6.3 hereof
and (ii) to reimburse Merrywood for its expenses in obtaining an opinion
regarding the financial condition of PCI, as set forth in Section 6.4 hereof).
Furthermore, the Original Shareholders Agreement, the Agreement Among PCI
Shareholders and the Merrywood Put Notice shall automatically be reinstated and
be in full force and effect, with the same effect as if they had not been
terminated pursuant to this Agreement.
Section 3.2. Failure to Pay Remaining PCI Shares Purchase Price. If for
--------------------------------------------------
any reason Continental shall fail to pay the Remaining PCI Shares Purchase Price
on the Final Closing Date, Merrywood may, at its option, either (i) enforce its
right to receive payment of the Remaining PCI Shares Purchase Price or (ii)
elect, in a written notice to Continental, to receive shares of Continental
Common Stock in lieu of the Remaining PCI Shares Purchase Price. In the event
that Merrywood elects to receive shares of Continental Common Stock in lieu of
the Remaining PCI Shares Purchase Price, Merrywood shall be entitled to receive
that number of shares of Continental Common Stock (the "Continental Exchange
Shares") equal to the number obtained by dividing (x) the Remaining PCI Shares
Purchase Price by (y) the lower of (aa) $11.93 (appropriately adjusted to
reflect any stock split) or (bb) the average closing price for Continental
Common Stock for the 20 business days prior to the Final Closing Date. The
Continental Exchange shares shall not be subject to any restriction on the
rights of the holder thereof to vote or dispose of such shares, other than any
restriction under the Securities Act of 1933 or any other applicable law.
Section 3.3. Registration of Continental Exchange Shares. (a) Promptly
-------------------------------------------
following the issuance and delivery of the Continental Exchange Shares,
Continental will, at its sole cost, use its best efforts to prepare and file
with the Securities and Exchange Commission (the "Commission"), within 30 days
after the issuance and delivery of the Continental Exchange Shares, a
registration statement (the "Registration Statement") registering the resales by
----------------------
Merrywood of the Continental Exchange Shares under the Securities Act of 1933,
as amended ("the 1993 Act") and will use its best efforts to cause such
------------
Registration Statement to be declared effective by the Commission as
expeditiously as possible and will prepare and file with the Commission such
amendments and supplement to such Registration Statement and the related
prospectus used in connection therewith (the "Prospectus") as may be necessary
----------
to keep such Registration Statement effective and to comply with the provisions
of the 1933 Act with respect to the offer of the Continental Exchange Shares
covered by such Registration Statement;
(b) In connection with the filing of any Registration Statement and any
related Prospectus for the registration of the Continental Exchange Shares,
Continental shall also
(i) use its best efforts to register or qualify the Continental
Exchange Shares (or obtain exemptions from such registration or
qualification) under all state securities or blue sky laws reasonably
requested by writing by Merrywood, and otherwise comply with all applicable
blue sky laws;
(ii) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission relating to the Registration Statement;
(iii) cause all Continental Exchange Shares to be listed on the New
York Stock Exchange (or such other exchange (if any) on which the
Continental Common Stock is then listed), upon official notice of issuance;
(iv) provide promptly to Merrywood upon request each document filed by
Continental with
15
<PAGE>
the Commission pursuant to the requirement of Section 13
or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during
------------
the effectiveness period;
(v) pay all registration expenses incident to the registration under
the 1933 Act of the Continental Exchange Shares, regardless of whether a
Registration Statement becomes effective;
(vi) from time to time furnish Merrywood and Plaza and their affiliates
such number of copies of the Prospectus as may reasonably be requested, all
at the expense of Continental;
(vii) Continental agrees to indemnify Merrywood, Plaza and their
affiliates, each officer and director thereof, and each person who shall
control Merrywood within the meaning of Sections 15 of the 1933 Act and 20
of the Exchange Act, and each underwriter of any of the Continental
Exchange Shares being registered, under the 1933 Act, against all claims,
losses, damages and liabilities or actions in respect thereof (including
reasonable attorneys' fees and expenses) arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained
in the Registration Statement or Prospectus or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation
by Continental of any rule or regulation promulgated under the 1933 Act
applicable to Continental in connection with such registration; provided,
--------
that the forgoing shall not apply to the extent that any claims, losses,
damages or liabilities are based upon written information furnished to
Continental by Merrywood, Plaza, their affiliates or any such underwriter
specifically for inclusion in the Registration Statement or Prospectus.
(c) In connection with the filing of any Registration Statement and any
related Prospectus for the registration of the Continental Exchange Shares,
Merrywood, Plaza and their affiliates
(i) agree to furnish to Continental such information concerning the
distribution of the Continental Exchange Shares being registered under the
1933 Act, and the holders thereof, as shall be required in connection with
such registration; and
(ii) Merrywood and Plaza agree that they shall jointly and severally
indemnify Continental, each officer and director thereof, and such person
who controls Continental within the meaning of Sections 15 of the 1933 Act
and 20 of the Exchange Act, against all claims, losses, damages and
liabilities or action in respect thereof (including reasonable attorneys'
fees and expenses) arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact relating to Plaza or Merrywood
and based on information supplied by them required to be stated therein or
necessary to make the statements therein not misleading, or any violation
by Merrywood or Plaza of any rule or regulation promulgated under the 1933
Act, applicable to Merrywood or Plaza in connection with such registration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CONTINENTAL AND PCI
-----------------------------------------------------
Continental and PCI represent and warrant to Merrywood as follows which
representations and warranties shall survive the Initial Closing, any
Intermediate Closing and the Final Closing, as the case may be:
Section 4.1 Authority. The execution, delivery and performance of this
---------
Agreement, and each of the Stock Pledge Agreement and the Warrant has been duly
authorized and approved by all requisite corporate action, and this Agreement
has been, and such agreements will be, duly executed and delivered by
Continental and PCI pursuant to such authorization and shall constitute valid
and binding obligations of Continental and PCI, enforceable against them in
accordance with their terms, except as the enforcement thereof may be limited by
applicable bankruptcy laws and laws generally affecting creditor's rights and
equitable remedies. Neither the execution or delivery of this Agreement or such
other agreements, the consummation of the transactions contemplated hereby or
thereby, nor compliance by Continental and PCI with any of the provisions hereof
or thereof:
(i) violates or conflicts with, or results in a breach of any
provisions of the Certificate of Incorporation or Bylaws of
Continental and PCI, as the case may be; or
(ii) contravenes or constitutes a breach of, or default under, any
agreement, instrument,
16
<PAGE>
obligation or document of, or binding upon, Continental or PCI, as
the case may be; or
(iii) violates any order, writ, injunction or decree applicable to
Continental and PCI or any of their respective material assets, as
the case may be.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF MERRYWOOD AND PLAZA
----------------------------------
Merrywood and Plaza represent and warrant to Continental as follows, which
representations and warranties shall survive the Initial Closing, any
Intermediate Closing and the Final Closing, as the case may be:
Section 5.1 Title to Shares. Merrywood has valid and marketable title to
---------------
the Initial Shares and the Remaining Shares, free and clear of any security
interests, pledges, liens or similar encumbrances of any other person, and has
the absolute and unrestricted right, power, authority and capacity to sell such
shares, and, upon delivery thereof to Continental, Merrywood will transfer to
Continental good and marketable title thereto, free and clear of any security
interests, pledges, liens or encumbrances.
Section 5.2 Authority. The execution, delivery and performance of this
---------
Agreement and the Stock Pledge Agreement has been duly authorized and approved
on behalf of each of Merrywood and Plaza, as the case may be, by all requisite
corporate action, and each of such agreements has been duly executed and
delivered by Merrywood and Plaza, as the case may be, pursuant to such
authorization and constitutes a valid and binding obligation of each of them
enforceable in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy laws and laws generally affecting creditor's
rights and equitable remedies. Neither the execution or delivery of this
Agreement, or the Stock Pledge Agreement, the consummation of the transactions
contemplated hereby and thereby, nor compliance by Merrywood and Plaza with any
of the provisions hereof or thereof;
(i) violates or conflicts with, or results in a breach of any
provisions of the Certificate of Incorporation or Bylaws of either
of Merrywood or Plaza, as the case may be; or
(ii) contravenes or constitutes a breach of, or default under, any
agreement, instrument, obligation or document of, or binding upon,
each of Merrywood or Plaza, as the case may be; or
(iii) violates any order, writ, injunction or decree applicable to
Merrywood or Plaza.
ARTICLE VI
OTHER AGREEMENTS
----------------
Section 6.1 Termination of Shareholder Agreements. Effective as of the
-------------------------------------
date hereof (and subject to Section 3.1 hereof), the Original Shareholders
Agreement, the Agreement Among PCI Shareholders and the Merrywood Put Notice are
terminated and shall be of no further force or effect.
Section 6.2 Appointment of Directors. (a) Continental agrees that as long
------------------------
as this Agreement remains in full force and effect, Continental and its
management shall cause Jose-Luis Zapata (or some other member of the Zapata
family designated by Merrywood) to be included in the slate of directors
submitted by the management of Continental to the Continental stockholders for
election at each annual meeting of stockholders.
(b) Continental agrees that as long as this Agreement remains in full force
and effect, Continental and its management shall cause Jose-Luis Zapata (or some
other member of the Zapata family designated by Merrywood) to be elected a
director of PCI.
(c) The director of Continental designated by Merrywood pursuant to
paragraph (a) above and the director of PCI designated by Merrywood pursuant to
paragraph (b) above, shall have full and complete access to the books, records,
operating results (including monthly operating reports), financial records and
financial and operating projections of Continental and PCI, as the case may be.
Section 6.3. Reimbursement of Legal Expenses. On the Initial Closing Date,
-------------------------------
Continental will reimburse Plaza for any legal expenses of Merrywood (up to an
aggregate maximum of $100,000) related to the negotiation, execution and
delivery of this Agreement.
Section 6.4. Reimbursement for Financial Opinion Expense. On the Final
-------------------------------------------
Closing Date (or any Intermediate Closing Date on which Continental purchases
Shares of the Remaining PCI Shares), Continental
17
<PAGE>
shall reimburse Plaza for the expense of Merrywood (up to a maximum of $150,000)
of obtaining an opinion regarding the financial condition of PCI, from a
reputable investment banking firm or other financial advisor. In addition to the
reimbursing to Plaza for such expense, Continental shall pay Plaza interest,
compounded monthly, on such amount from the Initial Closing Date to (but not
including) the date of payment at a rate equal to 0.75% above the nominal
interest rate of the High Yield Bond Offering. If for any reason Continental
shall fail to pay the Initial PCI Shares Purchase Price at the Initial Closing,
then PCI shall be obligated to reimburse Plaza on the Initial Closing Date in
the amount set forth in the first sentence of this Section.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Headings. The section headings herein are for convenience of
--------
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
Section 7.2 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications hereunder, including notice of a change of
address, shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by certified mail, postage prepaid, addressed as
follows (provided that any notice of a change of address shall only be effective
upon receipt):
(a) If to PCI, to:
Plastic Containers, Inc.
c/o Continental Can, Inc.
One Aerial Way
Syosset, New York 11791
Attn: Abdo Yazgi, Esq.
Vice President, Treasurer and Secretary
(b) If to Continental, to:
Continental Can Company, Inc.
One Aerial Way
Syosset, New York 11791
Attn: Abdo Yazgi, Esq.
Executive Vice President and Chief Administrative Officer
(c) If to Merrywood, to:
Merrywood, Inc.
c/o Loeb, Block, Wacksman & Selzer, LLP
505 Park Avenue
New York, New York 10022
Attn: Charles J. Block, Esq.
(d) If to Plaza, to:
Plaza Limited
c/o Loeb, Block, Wacksman & Selzer, LLP
505 Park Avenue
New York, New York 10022
Attn: Charles J. Block, Esq.
Section 7.3. Cumulative Rights and No Waiver. Each and every right
-------------------------------
granted to any party hereunder or under any other document delivered hereunder
or in connection herewith, or allowed it by law or equity, shall be cumulative
and may be exercised from time to time. No failure on the part of any party to
exercise any right shall operate as a waiver thereof, nor shall any single or
partial exercise by any party of any right preclude any other or future exercise
thereof or the exercise of any other right.
Section 7.4. Transfers and Assignments; Binding Agreement. The rights and
--------------------------------------------
obligations of the parties hereto shall inure to the benefit of and shall be
binding upon the successors, transferees, assigns, executors, administrators or
personal representatives of each of them; provided, however, that this Agreement
shall not be transferable or assignable by any party without the prior written
consent of the other parties
18
<PAGE>
hereto, and any attempted transfer or assignment shall be void and of no effect,
except, that Merrywood shall have the right to assign its rights under this
Agreement to Plaza, or any other corporation controlled by, or under common
control with Merrywood.
Section 7.5 Governing Law. This Agreement shall be governed by the
-------------
Federal laws of the United States and, to the extent of the absence of any
controlling Federal law, by the laws of the State of New York, excluding the
conflicts of law provisions thereof.
Section 7.6. Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which counterparts shall have the same force and effect as
if the parties hereto had executed a single copy of this Agreement.
Section 7.7. Amendment. This Agreement may not be changed orally, but
---------
only by an agreement in writing signed by the person against whom enforcement of
any waiver, change, modification or discharge shall be sought.
Section 7.8 Severability. If, and insofar as, any part or provision of
------------
this Agreement is or becomes void or unenforceable, it shall be deemed not to be
a part of this Agreement, and the remaining Provisions of this Agreement shall
continue in full force and effect.
Section 7.9. Entire Agreement. This Agreement constitutes and contains
----------------
the entire agreement of the parties respecting the subject matter hereof and
supersedes any and all prior negotiations, correspondence, understandings, and
agreements between the parties respecting the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement at the locations
and
on the dates indicated below.
PLASTIC CONTAINERS, INC.
By: /s/ Donald J. Bainton
---------------------
Name: Donald J. Bainton
Title: Chief Executive Officer
Executed at: Syosset, New York, on October 22, 1996
-----------------
By: /s/ Donald J. Bainton
---------------------
Name: Donald J. Bainton
Title: Chief Executive Officer
Executed at: Syosset, New York, on October 22, 1996
-----------------
MERRYWOOD, INC.
By: /s/ Howard Berke
----------------
Name: Howard Berke
Title: Vice President
Executed at: New York, New York, on October 23, 1996
------------------
PLAZA LIMITED
By: /s/ Gath A.T. Hewlitt
---------------------
Name: Gath A.T. Hewlitt
Title: Vice President
Executed at: Tortola, B.V.I., on October 23, 1996
---------------
19
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<PERIOD-START> JAN-01-1996
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0
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