SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[X] Preliminary proxy statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BWAY Corporation
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(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: BWAY
Corporation common stock, par value $0.01 per share ("Common Stock"), and
related preferred share purchase rights.
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(2) Aggregate number of securities to which transaction applies: 8,708,626
shares of Common Stock and options to purchase 1,930,364 shares of Common
Stock as of September 30, 2002.
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): The proposed maximum aggregate
value of the transaction for purposes of calculating the filing fee is
$195,632,051. The filing fee was determined by adding (a) the product of
(i) the 8,708,626 shares of Common Stock that are proposed to be retired or
exchanged in the merger and (ii) the merger consideration of $20.00 to be
paid with respect to each share of Common Stock outstanding immediately
prior to the merger, plus (b) $21,459,531 expected to be paid upon
cancellation or exchange of outstanding options (the "Total
Consideration"). The filing fee equals the product of 0.000092 multiplied
by the Total Consideration.
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(4) Proposed maximum aggregate value of transaction: $195,632,051
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(5) Total fee paid: $17,999
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO] Bway Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT
To BWAY Corporation Stockholders:
You are cordially invited to attend a special meeting of stockholders,
including any adjournment or postponement of the special meeting, of BWAY
Corporation to be held on ., . at .:00 a.m., Atlanta time, at ..
At the meeting, you will be asked to consider and vote upon a proposal to
approve and adopt the merger agreement entered into by and among BWAY, BCO
Holding Company and BCO Acquisition, Inc. and the related merger. BCO Holding
and BCO Acquisition are affiliates of Kelso & Company, L.P., a New York-based
equity investment firm. The merger agreement provides for the merger of BCO
Acquisition with and into BWAY, with BWAY continuing as the surviving
corporation.
If the merger is completed, each share of BWAY common stock issued and
outstanding at the closing of the merger will be canceled and converted into
the right to receive $20.00 in cash, except for shares held by BWAY, by BCO
Holding or BCO Acquisition, or by dissenting stockholders who have perfected
their dissenters' rights under Delaware law. Immediately prior to the merger,
certain continuing investors will exchange some of their shares of BWAY common
stock and BWAY stock options for equity interests in BCO Holding. These
continuing investors are Jean-Pierre Ergas (BWAY's Chairman and Chief Executive
Officer), Warren Hayford (BWAY's Vice-Chairman), Mary Lou Hayford (Mr.
Hayford's wife and a BWAY stockholder) and four other members of BWAY's senior
management team. As a result of the merger, BWAY will be wholly owned by BCO
Holding, which in turn will be owned by affiliates of Kelso and the continuing
investors.
In order to evaluate the advisability of the merger, the BWAY board of
directors formed a special committee of the BWAY board, consisting of four
independent directors. The special committee unanimously recommended to the
BWAY board of directors that the merger agreement and the merger be approved.
In its evaluation of the merger, the special committee considered among other
things the opinion of William Blair & Company, L.L.C., its independent
financial advisor, which states that, as of the date of such opinion, the cash
merger consideration of $20.00 per share to be received in the merger by the
stockholders of BWAY (other than the holders of shares to be exchanged for BCO
Holding common stock immediately prior to the merger) is fair from a financial
point of view to such stockholders. Blair's opinion is subject to the
assumptions, limitations and qualifications set forth in its written opinion,
which is attached as Annex B to the enclosed proxy statement.
The special committee has unanimously determined that the merger agreement
and the merger are advisable and fair to, and in the best interests of, BWAY
and its stockholders who are entitled to receive the merger consideration and
recommended the merger agreement and the merger to the full BWAY board of
directors. Based on the recommendation of the special committee, the BWAY board
of directors has unanimously determined that the merger agreement and the
merger are fair to, and in the best interests of, BWAY and its stockholders,
and recommended that the stockholders approve and adopt the merger agreement
and the merger.
The attached proxy statement provides you with detailed information about
the merger agreement and the proposed merger. We urge you to read the entire
document carefully. The affirmative vote of holders of a majority of the shares
of BWAY common stock outstanding on the record date is required to approve and
adopt the merger agreement and the merger.
Regardless of the number of shares you own, your vote is very important.
Whether or not you plan to attend the meeting, please complete, sign, date and
mail the enclosed proxy card.
/s/ Jean-Pierre M. Ergas
Jean-Pierre M. Ergas
Chairman of the Board and
Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, OR PASSED UPON THE
MERITS OR FAIRNESS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE ENCLOSED PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this proxy statement is ., ..
[LOGO] Bway Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ., .
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To BWAY Corporation Stockholders:
We will hold a special meeting of stockholders of BWAY Corporation on ., .
at .:00 a.m., Atlanta time, at .. The purpose of the meeting is:
1. To consider and vote upon a proposal to approve and adopt a merger
agreement that was entered into to effect a merger of BCO Acquisition, Inc.
with and into BWAY. The affirmative vote of the holders of a majority of the
shares of BWAY common stock outstanding on the record date is required to
approve and adopt the merger agreement and the merger.
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
We describe the merger agreement and the merger in the accompanying proxy
statement, which you should read in its entirety before voting. A copy of the
merger agreement is attached as Annex A to the proxy statement. The record date
to determine who is entitled to vote at the meeting is ., .. Only holders of
BWAY common stock at the close of business on the record date are entitled to
notice of, and to vote at, the meeting.
Your vote is very important. You should complete, sign, date and return the
enclosed proxy card as soon as possible to make sure your shares are
represented at the meeting. If you attend the meeting and wish to vote in
person, you may revoke your proxy and vote in person. If you have instructed a
broker to vote your shares, you must follow directions received from the broker
to change or revoke your proxy.
By Order of the Board of Directors,
/s/ Jeffrey M. O'Connell
Jeffrey M. O'Connell
Vice President, Treasurer and
Secretary
.., 200.
Atlanta, Georgia
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING SELF-ADDRESSED
POSTAGE PRE-PAID ENVELOPE AS SOON AS POSSIBLE.
SUMMARY TERM SHEET
The following summary briefly describes the material terms of the proposed
merger. This summary does not contain all the information that may be important
for you to consider when evaluating the merger. We encourage you to read this
proxy statement and the documents we have incorporated by reference before
voting. We have included section references to direct you to a more complete
description of the topics described in this summary.
. The Merger. BWAY Corporation has entered into a merger agreement, dated as
of September 30, 2002, with BCO Holding and BCO Acquisition. Pursuant to
the merger agreement, BCO Acquisition will merge with and into BWAY, with
BWAY continuing as the surviving corporation. The purpose of the merger is
to permit BCO Holding to acquire, in accordance with Delaware law, all of
the BWAY common stock issued and outstanding at the close of the merger.
Please read the discussion under the heading "The Merger Agreement"
beginning on page 56.
. The Companies. BWAY is a Delaware corporation that is the leading North
American manufacturer of steel containers for paint, coffee and certain
other consumer and industrial products. Over 85% of BWAY's fiscal 2002 net
sales were generated from product lines where BWAY has the leading market
share in the United States. BWAY's product offerings include a wide
variety of steel containers such as paint, coffee, aerosol and specialty
cans which are used by its customers to package a diverse range of end-use
products which, in addition to paint and coffee, include household and
personal care products, automotive after-market products, paint thinners
and driveway and deck sealants. BWAY also provides its customers with
metal shearing, coating and decorative services through its material
center services business. BCO Holding and BCO Acquisition are Delaware
corporations that are affiliates of Kelso & Company, L.P., an equity
investment firm. Please read the discussion under the heading
"Summary--The Companies" beginning on page 1.
. Merger Consideration. If the merger is completed, you will receive $20.00
per share in cash for each of your shares of BWAY common stock unless you
are a dissenting stockholder and you perfect your dissenters' rights.
Please read the discussion under the heading "The Merger Agreement"
beginning on page 56.
. The Continuing Investors. The "continuing investors" are Jean-Pierre Ergas
(BWAY's Chairman and Chief Executive Officer), Warren Hayford (BWAY's
Vice-Chairman), Mary Lou Hayford (Mr. Hayford's wife and a stockholder of
BWAY) and Kevin Kern, Thomas Eagleson, Kenneth Roessler and Jeffrey
O'Connell (who are members of BWAY's senior management team). Each of
these continuing investors has agreed with BCO Holding to exchange a
portion of his or her equity interests in BWAY for equity interests in BCO
Holding immediately prior to the merger. Each continuing investor will
sell or "cash-out" the remainder of his or her current equity interests in
BWAY in the merger. Each of their shares of BWAY common stock, including
the shares subject to their BWAY stock options, will be valued at the same
$20.00 per share price to be paid to the public stockholders. Please read
the discussion under the headings "Special Factors--Post-Merger Ownership
and Control" and "Special Factors--Interests of Certain Persons in the
Merger" on pages 15 and 40.
. Effects of the Merger. As a result of the merger:
. BWAY will be wholly owned by BCO Holding, which in turn will be owned by
affiliates of Kelso and the continuing investors;
. BWAY stockholders will no longer have any equity interest in BWAY, other
than the continuing investors, who will have an indirect equity interest
in BWAY through their equity interest in BCO Holding; and
. BWAY common stock will no longer be listed on the New York Stock
Exchange and the registration of BWAY common stock under the Exchange
Act will be terminated. Please read the discussion under the heading
"Special Factors--Effects of the Merger" beginning on page 13.
i
. Source of Funds. The following arrangements are in place to provide the
necessary financing for the merger: (1) BCO Acquisition has received a
senior debt commitment letter from Deutsche Bank Trust Company Americas by
which Deutsche Bank has committed to provide (subject to certain
conditions) a senior secured revolving credit facility of up to $90
million, of which $40 million will be drawn at closing, (2) BWAY Finance
Corp., a newly formed subsidiary of BCO Holding, intends to pursue an
issuance of $190 million of new unsecured senior subordinated notes to be
assumed by BWAY upon closing of the merger, (3) in the event this issuance
of new notes is not completed, Deutsche Bank Trust Corporation has
committed to provide (subject to certain conditions) up to $190 million in
the form of an unsecured senior bridge loan, and (4) Kelso has committed
to provide (subject to certain conditions) up to $81.2 million of equity
financing. Please read the discussion under the heading "Special
Factors--Financing of the Merger" beginning on page 46.
. Required Vote. The merger agreement and the merger must be approved and
adopted by the affirmative vote of the holders of at least a majority of
the shares of BWAY common stock outstanding on the record date. Please
read the discussion under the heading "The Special Meeting--Quorum;
Required Vote" beginning on page 72.
. Voting Agreements. Mr. Ergas and Mr. and Mrs. Hayford have each separately
agreed with BCO Holding to vote all of his or her shares of BWAY common
stock, which represent in the aggregate approximately 23.6% of the
outstanding shares of BWAY common stock, in favor of the approval and
adoption of the merger agreement and the merger. Please read the
discussion under the heading "The Voting Agreements" beginning on page 71.
. Recommendation of the Special Committee and the BWAY Board of Directors.
Because certain directors of BWAY have actual or potential conflicts of
interest in evaluating the merger, the BWAY board of directors appointed a
special committee of independent BWAY directors to review and evaluate the
proposed merger. The special committee has unanimously determined that the
merger agreement and the merger are advisable and fair to, and in the best
interests of, BWAY and its stockholders who are entitled to receive the
merger consideration and recommended the merger agreement and the merger
to the full BWAY board of directors. Based on the recommendation of the
special committee, the BWAY board of directors has unanimously determined
that the merger agreement and the merger are fair to, and in the best
interests of, BWAY and its stockholders, and recommended that the
stockholders approve and adopt the merger agreement and the merger. Please
read the discussion under the heading "Special Factors--Reasons for the
Merger; Recommendation of the Special Committee and the Board of
Directors" beginning on page 25. In addition, the affiliates of BWAY who
are participating in the merger have each concluded that the merger is
fair to those stockholders of BWAY that are not continuing investors.
Please read the discussion under the heading "Special Factors--Position of
Participating Affiliates as to the Fairness of the Merger" beginning on
page 37.
. Opinion of the Special Committee's Financial Advisor. The special
committee received an opinion from William Blair & Company, L.L.C., its
independent financial advisor, which states that as of the date of the
opinion and subject to the assumptions, limitations and qualifications set
forth in the opinion, the cash merger consideration of $20.00 per share to
be received in the merger by the stockholders of BWAY (other than the
holders of shares to be exchanged for BCO Holding common stock immediately
prior to the merger) is fair from a financial point of view to such
stockholders. Please read the discussion under the heading "Special
Factors--Opinion of the Special Committee's Financial Advisor" beginning
on page 28.
. Conditions. The obligations of BCO Holding and BCO Acquisition to complete
the merger are subject to a variety of closing conditions, including the
availability of debt financing, the approval of the merger agreement and
the merger by BWAY's stockholders, the tender of at least 51% of BWAY's
101/4% Senior Subordinated Notes due 2007 pursuant to a tender offer and
the receipt of consents from the holders of these notes consenting to
amendments to BWAY's indenture to permit the completion of the merger
without a breach of the indenture, the absence of legal prohibitions to
the merger, and the receipt of an opinion as to the solvency of BWAY
immediately after giving effect to the merger. Please read the discussion
under the heading "The Merger Agreement--Conditions to the Merger" on page
66.
ii
. Termination Fee. If the merger agreement is terminated under certain
circumstances, BWAY will be required to pay Kelso a $6 million termination
fee. In addition, BWAY will be required to reimburse Kelso for all of its
out-of-pocket expenses incurred in connection with the merger up to a
maximum amount of $4 million if the merger agreement is terminated under
certain circumstances. Under certain circumstances, the termination fee
that may become payable will be reduced to $3 million (instead of $6
million) and the maximum amount of any expense reimbursement will be
increased to $7 million (instead of $4 million). Please read the
discussion under the heading "The Merger Agreement--Termination of the
Merger Agreement" on page 68.
. Dissenters' Rights. If you do not wish to vote in favor of the merger and
you fulfill several procedural requirements, including not voting in favor
of the merger agreement, Delaware law entitles you to a judicial appraisal
of the fair value of your shares. Please read the discussion under the
heading "Special Factors--Rights of Dissenting Stockholders" beginning on
page 52.
. Tax Consequences. The receipt of cash in the merger by you will be a
taxable transaction. Please read the discussion under the heading "Special
Factors--Material Federal Income Tax Consequences" beginning on page 50.
iii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What am I being asked to vote upon?
A: You are being asked to vote to approve and adopt a merger agreement and
related merger by which BCO Acquisition will merge with and into BWAY. Under
Delaware law, the merger agreement and the merger must be approved and
adopted by the affirmative vote of the holders of at least a majority of the
outstanding shares of BWAY common stock.
Q: What will happen in the merger?
A: BCO Acquisition will be merged with and into BWAY, and BWAY will be the
surviving corporation. After the merger, BWAY will be a privately-held
company owned by BCO Holding. BCO Holding will in turn be owned by
affiliates of Kelso and the continuing investors. BCO Acquisition and BCO
Holding are corporations that are affiliates of Kelso.
Q: What will I receive in the merger?
A: You will receive $20.00 in cash in exchange for each share of BWAY common
stock owned by you at the effective time of the merger, unless you are a
dissenting stockholder and you perfect your appraisal rights under Delaware
law.
Q: Who are the continuing investors?
A: The "continuing investors" are Jean-Pierre Ergas (BWAY's Chairman and Chief
Executive Officer), Warren Hayford (BWAY's Vice-Chairman), Mary Lou Hayford
(Mr. Hayford's wife and a stockholder of BWAY) and Kevin Kern, Thomas
Eagleson, Kenneth Roessler and Jeffrey O'Connell (who are members of BWAY's
senior management team). Each of these continuing investors agreed with BCO
Holding to exchange a portion of his or her equity interests in BWAY for
equity interests in BCO Holding immediately prior to the merger. Each
continuing investor will sell or "cash-out" the remainder of his or her
current equity interests in BWAY in the merger. Each of their shares of BWAY
common stock, including the shares subject to their BWAY stock options, will
be valued at the same $20.00 per share price to be paid to the public
stockholders.
Q: What will the continuing investors receive in the merger?
A: In the aggregate, the continuing investors will receive approximately $35.1
million in cash through the sale of approximately 1,538,000 shares of BWAY
common stock and the "cash-out" of approximately 285,000 BWAY stock options
including:
. approximately $4.5 million to be paid to Mr. Ergas as a result of the sale
of 138,077 shares and the "cash-out" of 112,395 options,
. approximately $1.9 million to be paid to Mr. Hayford as a result of the
sale of 92,918 shares, and
. approximately $24.5 million to be paid to Mrs. Hayford or her donees as a
result of the sale of 1,224,677 shares, including 149,999 shares of BWAY
common stock that will be donated to four charitable organizations prior
to the closing of the merger.
In addition, the continuing investors will, in the aggregate, exchange
596,596 shares of BWAY common stock and 812,910 BWAY stock options having an
aggregate value of approximately $20.3 million into equity interests of BCO
Holding with an equivalent value immediately prior to the merger.
Q: What will be the ownership structure of BWAY after the merger?
A: Immediately after the merger, BCO Holding will hold all of the outstanding
capital stock of BWAY. In turn, it is expected that affiliates of Kelso will
hold approximately 7,991,000 shares of BCO Holding common stock,
representing in the aggregate approximately 73.9% of the fully diluted
equity of BCO Holding, and
iv
the continuing investors will hold 1,193,192 shares of BCO Holding common
stock and fully vested options to purchase 1,625,820 shares of BCO Holding
common stock, representing in the aggregate approximately 26.1% of the fully
diluted equity of BCO Holding, in each case including shares issuable upon
exercise of fully vested BCO Holding common stock options issued in exchange
for BWAY stock options but without giving effect to the grant of any new BCO
Holding stock options at or following the closing of the merger under a new
BCO Holding stock incentive plan (including the grants to be made to some of
the continuing investors at the closing of the merger) and the issuance of
any warrants in connection with the proposed financing of the merger. The
exact number of shares of BCO Holding held by Kelso's affiliates after the
closing and, accordingly, the ownership percentages stated in the preceding
sentence are subject to change to the extent that transaction fees and
expenses and BWAY's outstanding debt at closing deviate from the numbers
currently projected.
Q: Can I choose to be a continuing investor?
A: No. The continuing investors will include only those persons identified
above.
Q: How will the merger be funded?
A: BCO Acquisition has received a senior debt commitment letter from Deutsche
Bank Trust Company Americas by which Deutsche Bank has committed to provide
(subject to certain conditions) a senior secured revolving credit facility
of up to $90 million, of which $40 million will be drawn at closing. In
addition, BWAY Finance Corp., a newly formed subsidiary of BCO Holding,
intends to pursue an issuance of $190 million of new unsecured senior
subordinated notes to be assumed by BWAY upon closing of the merger. In the
event the notes are not issued, Deutsche Bank Trust Corporation has
committed to provide (subject to certain conditions) up to $190 million in
the form of an unsecured senior bridge loan. Finally, BWAY has received an
equity commitment letter from Kelso in which Kelso has agreed to provide
(subject to certain conditions) up to $81.2 million of the equity financing
required for the merger.
Q: Do any of the officers, directors or significant stockholders of BWAY have a
conflict of interest in connection with the merger?
A: Yes. The continuing investors have interests that differ from those of other
stockholders because, among other things, each will exchange some of their
equity interests in BWAY for equity interests in BCO Holding immediately
prior to the merger. In addition, each of Messrs. Ergas, Kern, Eagleson,
Roessler and O'Connell will be entitled to receive certain payments if his
employment is terminated without cause or if he leaves employment for good
reason, in each case within 24 months following the merger, and will be
granted options to acquire BCO Holding common stock under a new stock
incentive plan to be implemented upon completion of the merger.
Q: Why was the special committee formed?
A: Because Mr. Ergas and Mr. Hayford, as continuing investors, have actual or
potential conflicts of interest in evaluating the merger, the BWAY board of
directors appointed a special committee of independent directors to review
and evaluate the proposed merger on behalf of the BWAY stockholders other
than the continuing investors. The special committee unanimously recommended
to the BWAY board of directors that the merger agreement and the merger be
approved and adopted. In arriving at its conclusion, the special committee
considered, among other things, the opinion of William Blair & Company,
L.L.C., its independent financial advisor, which states that, as of the date
of the opinion and based upon the limitations, qualifications and
assumptions described in the opinion, the cash merger consideration of
$20.00 per share to be received in the merger by the stockholders of BWAY
(other than the holders of shares to be exchanged for BCO Holding common
stock immediately prior to the merger) is fair from a financial point of
view to such stockholders.
Q: Have any stockholders agreed to vote in favor of the merger agreement and
the merger?
A: Yes. Mr. Ergas, Mr. Hayford and Mrs. Hayford have agreed with BCO Holding to
vote all of their shares of BWAY common stock, which represent in the
aggregate approximately 23.6% of the outstanding shares of BWAY common
stock, in favor of the approval and adoption of the merger agreement and the
merger.
v
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement, please vote by completing, signing and mailing your proxy
card as soon as possible so that your shares can be represented at the BWAY
special stockholders meeting. Whether or not you plan to attend the meeting,
you should sign and return your proxy. If you neither vote at the meeting
nor grant your proxy as described in this proxy statement, your shares will
not be voted, which will have the effect of voting against approval and
adoption of the merger agreement and the merger.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, you will receive written instructions for
exchanging your BWAY stock certificates for cash.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote by delivering a written notice stating that
you would like to revoke your proxy or by executing and submitting a new,
later-dated proxy card to the Corporate Secretary of BWAY before the
meeting. You may also revoke your proxy by attending the BWAY special
stockholders meeting and voting your shares in person. If your shares are
held in street name, you must follow the directions provided by your broker
to change your voting instructions.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible after the
BWAY special stockholders meeting. We hope to complete the merger prior to
February 28, 2003, although we cannot assure you that we will be able to do
so.
Q: What are the tax consequences of the merger?
A: The receipt of the cash merger consideration by you will be a taxable
transaction for federal income tax purposes. You should also consult your
tax advisor as to your particular circumstances and the specific federal
income tax effects of the merger to you, as well as the application of any
foreign, state or local tax laws to you.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement or the enclosed proxy card, you should contact:
MacKenzie Partners
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
E-mail: Proxy@Mackenziepartners.com
or
Call toll free (800) 322-2885
vi
TABLE OF CONTENTS
Page
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SUMMARY....................................................................................... 1
The Companies.............................................................................. 1
Effects of the Merger...................................................................... 2
What You Will Receive in the Merger........................................................ 2
Payment for Stock Certificates............................................................. 2
The Special Meeting........................................................................ 2
Vote Required.............................................................................. 2
Post-Merger Ownership and Control.......................................................... 3
Interests of Certain Persons in the Merger................................................. 3
Legal Documents............................................................................ 5
Recommendation of the Special Committee and the Board of Directors......................... 5
Opinion of the Special Committee's Financial Advisor....................................... 5
Conditions to the Merger................................................................... 5
Termination of the Merger Agreement........................................................ 6
Termination Fees........................................................................... 7
No Solicitation of Competing Proposals..................................................... 7
Modification or Amendment of the Merger Agreement.......................................... 8
Fees and Expenses.......................................................................... 8
Material Federal Income Tax Consequences................................................... 8
Anticipated Accounting Treatment........................................................... 8
Financing of the Merger.................................................................... 8
Rights of Dissenting Stockholders.......................................................... 9
Selected Historical Consolidated Financial Data............................................ 10
Litigation Challenging the Merger.......................................................... 12
SPECIAL FACTORS............................................................................... 13
Effects of the Merger...................................................................... 13
Post-Merger Ownership and Control.......................................................... 15
Background of the Merger................................................................... 17
Reasons for the Merger; Recommendation of the Special Committee and the Board of Directors. 25
Members of the Special Committee........................................................... 27
Opinion of the Special Committee's Financial Advisor....................................... 28
Certain Projected Financial Information Prepared by BWAY's Management...................... 35
Position of Participating Affiliates as to the Fairness of the Merger...................... 37
Purposes, Reasons and Plans for BWAY after the Merger...................................... 39
Interests of Certain Persons in the Merger................................................. 40
Financing of the Merger.................................................................... 46
Repayment of Indebtedness.................................................................. 49
Financial Advisory Agreement............................................................... 49
Conduct of the Business of BWAY if the Merger is not Completed............................. 49
Regulatory Requirements.................................................................... 50
Material Federal Income Tax Consequences................................................... 50
Anticipated Accounting Treatment........................................................... 51
Potential Fraudulent Conveyance Challenge to the Merger.................................... 51
Rights of Dissenting Stockholders.......................................................... 52
Litigation Challenging the Merger.......................................................... 55
Estimated Fees and Expenses................................................................ 55
Provisions for Unaffiliated Security Holders............................................... 55
vii
Page
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THE MERGER AGREEMENT....................................................................... 56
Structure of the Merger................................................................. 56
When the Merger Becomes Effective....................................................... 56
Effect of the Merger on the Capital Stock and Stock Options of BWAY and BCO Acquisition. 56
Payment for BWAY Common Stock in the Merger............................................. 57
Dissenters' Rights...................................................................... 57
Representations and Warranties.......................................................... 58
Agreements Relating to BWAY's Interim Operations........................................ 59
No Solicitation of Competing Proposals.................................................. 61
Debt Tender Offer....................................................................... 62
Financing Covenants..................................................................... 63
Indemnification and Insurance of BWAY Directors and Officers............................ 64
Employee Matters........................................................................ 64
Other Agreements........................................................................ 65
Conditions to the Merger................................................................ 66
Termination of the Merger Agreement..................................................... 68
Fees and Expenses....................................................................... 70
Modification or Amendment of the Merger Agreement....................................... 70
THE VOTING AGREEMENTS...................................................................... 71
THE SPECIAL MEETING........................................................................ 72
Purpose, Time and Place................................................................. 72
Record Date; Voting Rights.............................................................. 72
Quorum; Required Vote................................................................... 72
Proxies; Solicitation................................................................... 73
INFORMATION CONCERNING BWAY................................................................ 74
INFORMATION CONCERNING BCO HOLDING, BCO ACQUISITION, BWAY FINANCE AND
OTHER PARTICIPATING BWAY AFFILIATES...................................................... 74
BCO Holding, BCO Acquisition and BWAY Finance........................................... 74
Kelso & Company, L.P.................................................................... 74
Jean-Pierre Ergas....................................................................... 75
Warren Hayford.......................................................................... 75
Mary Lou Hayford........................................................................ 75
Kevin Kern.............................................................................. 76
Thomas Eagleson......................................................................... 76
Kenneth Roessler........................................................................ 76
Jeffrey O'Connell....................................................................... 76
MARKET PRICES AND DIVIDEND INFORMATION..................................................... 77
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 78
TRANSACTIONS IN SHARES OF COMMON STOCK BY CERTAIN PERSONS.................................. 80
ADDITIONAL INFORMATION..................................................................... 81
BWAY Stockholder Proposals.............................................................. 81
Where You Can Find More Information..................................................... 81
Forward-Looking Statements.............................................................. 83
ANNEXES:
A--Agreement and Plan of Merger............................................................ A-1
B--Opinion of William Blair & Company, L.L.C............................................... B-1
C--Section 262 of the Delaware General Corporation Law..................................... C-1
viii
SUMMARY
This summary highlights some of the information from this proxy statement
and may not contain all of the information that is important to you. To
understand the merger fully and for a more complete description of the legal
terms of the merger, you should carefully read this entire document, including
the annexes and other documents to which we have referred you. See the
discussion under the heading "Additional Information--Where You Can Find More
Information" on page 81 for more details.
The Companies (See page 74)
BWAY Corporation
8607 Roberts Drive
Suite 250
Atlanta, Georgia 30350
Telephone: 770-645-4800
BWAY is a Delaware corporation that is the leading North American
manufacturer of steel containers for paint, coffee and other consumer and
industrial products. Over 85% of BWAY's fiscal 2002 net sales were generated
from product lines where BWAY has the leading market share in the United
States. BWAY's product offerings include a wide variety of steel containers
such as paint, coffee, aerosol and specialty cans which are used by its
customers to package a diverse range of end-use products which, in addition to
paint and coffee, include household and personal care products, automotive
after-market products, paint thinners and driveway and deck sealants. BWAY also
provides its customers with metal shearing, coating and decorative services
through its material center services business.
BCO Holding Company
c/o Kelso & Company, L.P.
320 Park Avenue
New York, New York 10022
Telephone: 212-751-3939
BCO Holding is a corporation formed under the laws of the state of Delaware
and is controlled by Kelso Investment Associates VI, L.P. and KEP VI, LLC,
affiliates of Kelso & Company, L.P. It was established solely for the purpose
of acquiring shares of BWAY in connection with the merger. At the closing of
the merger, all of the outstanding equity interests of BCO Holding will be
owned by these affiliates of Kelso & Company, L.P. and each of the continuing
investors. Kelso & Company, L.P. is a New York-based private investment firm
founded in 1971 that specializes in acquisition transactions.
BCO Acquisition, Inc.
c/o Kelso & Company, L.P.
320 Park Avenue
New York, New York 10022
Telephone: 212-751-3939
BCO Acquisition is a corporation formed under the laws of the state of
Delaware and is a wholly-owned subsidiary of BCO Holding. It was established
solely for the purpose of merging with and into BWAY.
BWAY Finance Corp.
c/o Kelso & Company, L.P.
320 Park Avenue
New York, New York 10022
Telephone: 212-751-3939
1
BWAY Finance is a corporation formed under the laws of the state of Delaware
and is a wholly-owned subsidiary of BCO Holding. It was established solely for
the purpose of issuing debt securities to finance the merger.
Effects of the Merger (See pages 13 and 56)
If the merger agreement and the merger are approved by the BWAY stockholders
and the other conditions to the closing of the merger are either satisfied or
waived, BCO Acquisition will be merged with and into BWAY, with BWAY being the
surviving corporation.
If the merger is completed, each share of BWAY common stock issued and
outstanding at the closing of the merger will be canceled and converted into
the right to receive $20.00 in cash, except for shares held by dissenting
stockholders who have perfected their dissenters' rights under Delaware law.
Immediately prior to the merger, each of the continuing investors will exchange
some of their shares of BWAY common stock and some of their BWAY stock options
for equity interests of BCO Holding. Except for these BWAY stock options that
are exchanged by the continuing investors for BCO Holding stock options, each
option granted by BWAY to acquire BWAY common stock that is outstanding
immediately prior to the closing of the merger will be canceled in exchange for
a single lump sum cash payment (less any applicable income or employment tax
withholding) equal to the product of (1) the number of shares of BWAY common
stock underlying the option and (2) the excess, if any, of $20.00 over the
option exercise price. After the merger, all of BWAY's capital stock will be
held by BCO Holding.
Upon the closing of the merger, BWAY common stock will no longer be quoted
on the New York Stock Exchange and the registration of BWAY common stock under
the Exchange Act will be terminated.
What You Will Receive in the Merger (See pages 13 and 56)
If you are not a dissenting stockholder, you will receive $20.00 in cash for
each share of BWAY common stock that you own at the closing of the merger.
Payment for Stock Certificates (See page 57)
As soon as reasonably practicable after the merger, the paying agent for the
merger will mail (and make available for collection by hand) to each record
holder of BWAY common stock a letter of transmittal to be used for surrendering
BWAY common stock certificates for $20.00 per share in cash. You should not
send in your BWAY common stock certificates until you receive the letter of
transmittal.
The Special Meeting (See page 72)
The special meeting of BWAY's stockholders will take place on . , 200. at
..:00 a.m. Atlanta time at .. At the meeting you will be asked to approve and
adopt the merger agreement and the merger.
Vote Required (See page 72)
Delaware corporate law requires that BWAY's stockholders approve and adopt
the merger agreement and the merger before BWAY can complete the merger. Each
stockholder of record on the record date is entitled to one vote on each matter
submitted to a vote at the meeting for each share of BWAY common stock held. A
majority of the shares of BWAY common stock outstanding on the record date
represented in person or by proxy at the meeting constitutes a quorum for
consideration of such matters at the meeting. The affirmative vote of at least
a majority of the shares of BWAY common stock outstanding on the record date is
required to approve and adopt the merger agreement and the merger. The merger
is not subject to a vote of a majority of those stockholders of BWAY that are
not continuing investors.
2
Post-Merger Ownership and Control (See page 15)
Immediately after the merger, BCO Holding will hold all of the outstanding
capital stock of BWAY. In turn, it is expected that affiliates of Kelso will
hold approximately 7,991,000 shares of BCO Holding common stock, representing
in the aggregate approximately 73.9% of the fully diluted equity of BCO
Holding, and the continuing investors, including Mr. Ergas and Mr. and Mrs.
Hayford, will hold 1,193,192 shares of BCO Holding common stock and fully
vested options to purchase 1,625,820 shares of BCO Holding common stock,
representing in the aggregate approximately 26.1% of the fully diluted equity
of BCO Holding. However, you should note that the exact number of shares of BCO
Holding held by Kelso's affiliates after the closing and, accordingly, the
ownership percentages stated in the preceding sentence are subject to change to
the extent that transaction fees and expenses and BWAY's outstanding debt at
closing deviate from the numbers currently projected.
Whenever we refer to the "fully diluted equity of BWAY" in this proxy
statement, we assume the exercise of all BWAY stock options, whether or not
currently vested, since all BWAY stock options will become vested upon
completion of the merger. Whenever we refer to the "fully diluted equity of BCO
Holding" in this proxy statement, we assume the exercise of all fully vested
BCO Holding stock options that will be issued in exchange for BWAY stock
options outstanding immediately prior to the merger, but do not give effect to
(1) the grant of any new BCO Holding stock options at or following the closing
of the merger under a new BCO Holding stock incentive plan (including the
grants to be made to some of the continuing investors at the closing of the
merger) as described under the heading "Interests of Certain Persons in the
Merger--BCO Holding Stock Incentive Plan" on page 44 and (2) the issuance of
any warrants in connection with the proposed financing of the merger.
Interests of Certain Persons in the Merger (See page 40)
In considering the recommendation of the special committee and the BWAY
board of directors with respect to the merger, you should be aware that certain
directors, officers and affiliates of BWAY (including all of the continuing
investors) have interests in the merger that are different than yours in
several respects. These interests include the following:
. Continuing Investors' Investment in BCO Holding. Jean-Pierre Ergas, Warren
Hayford, Kevin Kern, Thomas Eagleson, Kenneth Roessler and Jeffrey
O'Connell have agreed to exchange an aggregate of 812,910 BWAY stock
options having an aggregate net value of approximately $8.4 million for an
aggregate of 1,625,820 vested BCO Holding stock options with an equivalent
net value. Mary Lou Hayford has agreed to exchange 596,596 shares of BWAY
common stock having a value of approximately $11.9 million for 1,193,192
shares of BCO Holding common stock with an equivalent value. As a result
of these exchanges, the continuing investors will hold, in the aggregate,
1,193,192 shares of BCO Holding common stock after the merger, which,
together with the 1,625,820 options to purchase BCO Holding common stock,
will represent approximately 26.1% of the fully diluted equity of BCO
Holding immediately after the merger. However, the exact ownership
percentage of the continuing investors is subject to change since the
investment by Kelso's affiliates in BCO Holding, and accordingly the exact
number of shares of BCO Holding to be held by Kelso's affiliates, may be
adjusted to the extent that transaction fees and expenses and BWAY's
outstanding debt at closing deviate from the numbers currently projected.
. Stockholder Arrangements. BCO Holding, affiliates of Kelso, the continuing
investors and other future holders of shares of BCO Holding expect to
enter into a stockholders agreement and related agreements that will set
forth the terms of their relationship as stockholders of BCO Holding
following the completion of the merger. These arrangements will include
customary "tag-along" rights and "drag-along" rights. The continuing
investors will also be granted rights to have their shares registered
under the Securities Act and will have certain pre-emptive rights. Mr.
Hayford will be entitled to an annual director's fee of $100,000, payment
of $157,500 per year under his prior employment agreement with BWAY and a
pro rata portion of any "exit fee" received by Kelso based on his stock
ownership at the time of exit, not to exceed 15% of that fee. In addition,
members of management, which may include the continuing investors, are
expected to be entitled to purchase at fair market value up to $2 million
in BCO Holding common stock after the merger.
3
. "Cash-Out" of BWAY Stock Options. All outstanding unvested options to
purchase BWAY common stock, including options held by the continuing
investors and the other directors and members of BWAY management, will
become fully vested and exercisable at the effective time of the merger.
To the extent any options are exercised prior to the merger, the shares
acquired through the exercise will be cancelled in the merger and will
entitle the holder to $20.00 per share. Stock options not exercised prior
to the merger and not exchanged by a continuing investor for BCO Holding
stock options will entitle the holder of these options to a cash payment
equal to the product of (1) $20.00 less the exercise price of the stock
option and (2) the number of shares of BWAY common stock subject to the
stock option. The continuing investors and the executive officers and
directors of BWAY will "cash-out" an aggregate of 758,757 BWAY stock
options for an aggregate payment of approximately $9.2 million.
. Change in Control Agreements. Each of Messrs. Ergas, Kern, Eagleson,
Roessler and O'Connell is a party to a change in control agreement with
BWAY. Under those agreements, if the executive is terminated without cause
by BWAY at any time within 24 months following the merger, or if the
executive leaves employment during that period for good reason, he will be
entitled to (among other things) a lump severance payment equal to: (1) in
the case of Mr. Ergas, the sum of three times his annual base salary and
one times his target incentive bonus at the time of the merger, (2) in the
case of each of Messrs. Eagleson and Roessler, the sum of two times his
annual base salary and one times his target incentive bonus at the time of
the merger, (3) in the case of Mr. Kern, the sum of one and one-half times
his annual base salary and one times his target incentive bonus at the
time of the merger and (4) in the case of Mr. O'Connell, the sum of one
times his annual base salary and one times his target incentive bonus at
the time of the merger.
. BCO Holding Stock Incentive Plan. BCO Holding will adopt a new stock
incentive plan effective upon completion of the merger. It is expected
that the number of shares of BCO Holding common stock that will be
reserved for issuance upon exercise of options under the option plan will
represent approximately 20% of the sum of the outstanding shares of BCO
Holding common stock as of the effective date of the merger and the net
shares issuable pursuant to the exchange options. In connection with the
closing of the merger, 40% of the option pool will be granted to Mr.
Ergas, 20% of the option pool will be granted to Mr. Roessler, and the
remaining 40% will be granted to employees selected by Mr. Ergas, subject
to the reasonable approval of the compensation committee of the board of
directors of BCO Holding. The exercise price of each option under the
option plan will be determined by the compensation committee, provided
that the exercise price cannot be less than the fair market value (as
determined pursuant to the incentive plan) of BCO Holding common stock on
the date of grant. The options to be granted in connection with the
closing of the merger will be granted with an exercise price equal to the
equivalent per share merger consideration.
. Anticipated Amendments to Employment Arrangements and Bonus Targets. It is
currently anticipated that, upon completion of the merger, the existing
employment arrangements of Messrs. Ergas, Roessler, Kern and O'Connell
will be amended (effective as of the beginning of BWAY's 2003 fiscal year)
to provide that their annual base salary shall not be less than $550,000,
$300,000, $240,000 and $165,000, respectively. It is currently anticipated
that, upon completion of the merger, the target bonuses payable to Messrs.
Ergas, Roessler, Kern and O'Connell for BWAY's 2003 fiscal year under the
BWAY Officers Incentive Plan shall be, as a percentage of their respective
base salaries, 70%, 50%, 40% and 33.3%, respectively, assuming that BWAY
achieves the performance targets established for that year consistent with
BWAY's past practices. It is currently anticipated that, upon completion
of the merger, Mr. Ergas' existing employment agreement will be further
amended to provide that Mr. Ergas will remain as chairman of BWAY's board
of directors when he retires as BWAY's chief executive officer in the
future. It is currently anticipated that, as chairman, Mr. Ergas will
remain an employee of BWAY and, as such, will continue to vest his
employee benefits in accordance with the terms of the applicable plans and
agreements.
. Anticipated New Employment Agreement with Thomas Eagleson. It is currently
anticipated that, upon completion of the merger, a new employment
agreement will be entered into with Thomas Eagleson effective January 1,
2003. Under this agreement, Mr. Eagleson is expected to hold the position
of Senior Advisor, reporting to Mr. Ergas and Mr. Roessler, and is
expected to work as a part-time employee with
4
an expected annual commitment of approximately 1,000 hours per year. Mr.
Eagleson's employment period is expected to automatically extend for
successive one-year periods unless either party provides 60 days prior
written notice. Mr. Eagleson is expected to be paid on an hourly basis at
a rate of $200 per hour, and is expected to be entitled to health and
welfare benefits that are consistent with BWAY's policies for other
part-time employees. Mr. Eagleson is expected to continue to be entitled
to these benefits for one year following termination unless he is
terminated by BWAY for cause.
Legal Documents (See page A-1)
Whenever we refer to the merger agreement in this proxy statement we are
referring to the merger agreement attached as Annex A to this proxy statement.
You should read the merger agreement because it, and not this proxy statement,
is the legal document that governs the merger.
Recommendation of the Special Committee and the Board of Directors (See page 25)
A special committee of independent directors of BWAY carefully reviewed and
considered the terms and conditions of the merger agreement and the merger and
unanimously determined that the merger agreement and the merger are advisable
and fair to, and in the best interests of, BWAY and its stockholders who are
entitled to receive the merger consideration and recommended the merger
agreement and the merger to the full BWAY board of directors. Based on the
recommendation of the special committee, the BWAY board of directors has
unanimously determined that the merger agreement and the merger are fair to,
and in the best interests of, BWAY and the BWAY stockholders, and recommend
that you vote to approve and adopt the merger agreement and the merger.
Opinion of the Special Committee's Financial Advisor (See page 28)
On September 30, 2002, the special committee received a written opinion from
William Blair & Company, L.L.C., its independent financial advisor, which
states that, as of the date of such opinion, the cash merger consideration of
$20.00 per share to be received in the merger by the stockholders of BWAY
(other than the holders of shares to be exchanged for BCO Holding common stock
immediately prior to the merger) is fair from a financial point of view to such
stockholders. The full text of Blair's written opinion is attached to this
proxy statement as Annex B. We encourage you to carefully read this opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered and limitations on the review undertaken. The opinion of
Blair is directed only to the matters described in the opinion and does not
constitute a recommendation to any stockholder as to how you should vote on any
matter at the special meeting.
Conditions to the Merger (See page 66)
The obligations of BWAY, BCO Holding and BCO Acquisition to complete the
merger are subject to the following mutual closing conditions:
. approval of the merger agreement and the merger by BWAY's stockholders;
. expiration or termination of the waiting period under antitrust laws, and
the receipt of all other significant consents from all governmental
entities;
. absence of any judgment, injunction, order, decree, statute, law, rule or
regulation prohibiting the merger; and
. receipt of an appraisal letter from an independent advisor indicating that
BWAY will not be insolvent after completion of the merger.
BWAY's obligation to complete the merger is also subject to the following
additional conditions:
. accuracy of the representations and warranties made by BCO Holding and BCO
Acquisition to the extent specified in the merger agreement;
. performance by BCO Holding and BCO Acquisition of their obligations under
the merger agreement to the extent specified in the merger agreement;
5
. receipt of certificates from an executive officer of each of BCO Holding
and BCO Acquisition to the effect that the prior two conditions have been
satisfied; and
. absence of any pending suit, action or proceeding by any governmental
entity against BCO Holding or BCO Acquisition, BWAY or any of their
affiliates, partners, associates, officers or directors, or any officers
or directors of such partners, seeking (1) to prevent or restrain the
merger in a significant manner, (2) significant damages in connection with
the merger, (3) any other significant remedy in connection with the
merger, or (4) to impose material liability on any of the foregoing
persons in connection with the merger.
BCO Holding's and BCO Acquisition's obligations to complete the merger are
also subject to the following additional conditions:
. accuracy of the representations and warranties made by BWAY to the extent
specified in the merger agreement;
. performance by BWAY of its obligations under the merger agreement to the
extent specified in the merger agreement;
. receipt of a certificate from an executive officer of BWAY to the effect
that the prior two conditions have been satisfied;
. absence of any pending suit, action or proceeding by any governmental
entity against BCO Holding or BCO Acquisition, BWAY or any of their
affiliates, partners, associates, officers or directors, or any officers
or directors of such partners, seeking (1) to prevent or restrain the
merger in a significant manner, (2) significant damages in connection with
the merger, (3) any other significant remedy in connection with the
merger, or (4) to impose material liability on any of the foregoing
persons in connection with the merger;
. completion of the transactions under the exchange agreements between BCO
Holding and each of Jean-Pierre Ergas, Warren Hayford and Mary Lou Hayford
by which each of these persons will exchange a portion of his or her
equity interests in BWAY for equity interests in BCO Holding immediately
prior to the merger;
. receipt of the debt financing under the senior debt commitment letter and
the bridge financing commitment letter described under the heading
"Special Factors--Financing of the Merger" on page 46 or any substitute
debt financing, in either case in the amounts and on the terms and
conditions set forth in those letters or upon substantially equivalent
terms and conditions, and to the extent any of the terms and conditions
are not set forth in those letters or substantially equivalent thereto, on
terms and conditions reasonably satisfactory to BCO Holding;
. tender of at least 51% of BWAY's 101/4% Senior Subordinated Notes due 2007
to BWAY pursuant to a debt tender offer, and receipt of required consents
from the holders of these notes consenting to amendments to BWAY's
indenture to permit the completion of the merger without breach or default
of the indenture or the notes;
. receipt of resignations from each BWAY director other than Jean-Pierre
Ergas and Warren Hayford;
. receipt of a statement from BWAY as to certain tax matters; and
. exercise of dissenters' rights by the holders of no more than 15% of the
outstanding BWAY common stock.
Termination of the Merger Agreement (See page 68)
BCO Holding, BCO Acquisition and BWAY can mutually agree to terminate the
merger agreement at any time. In addition, either BCO Holding, BCO Acquisition
or BWAY can terminate the merger agreement if:
. the merger has not been completed by February 28, 2003 (but no party can
terminate the merger agreement on this basis if its failure to fulfill any
obligation or other breach under the merger agreement caused or resulted
in the failure to close by February 28, 2003);
6
. there is a final, non-appealable order, decree or ruling by any
governmental entity that restrains or prohibits the merger; or
. BWAY's stockholders do not approve the merger agreement and the merger at
the special meeting.
In addition, BCO Holding and BCO Acquisition can also terminate the merger
agreement if:
. before a vote of BWAY's stockholders approving the merger agreement, the
BWAY board either (1) approves or recommends an alternative acquisition
proposal, (2) fails to recommend against or reject an alternative
acquisition proposal (other than a tender or exchange offer covered under
clause (3) below) within 20 business days of public disclosure of that
proposal, or (3) recommends acceptance of (or announces that it is unable
to take a position, will remain neutral or express no opinion on) or,
within 18 business days after its commencement, fails to recommend against
or reject, a tender or exchange offer for 25% of the outstanding BWAY
common stock;
. the BWAY board withdraws, modifies or changes its recommendation of the
merger agreement or determines not to solicit proxies; or
. BWAY intentionally breaches any representation, warranty, covenant or
agreement in the merger agreement in a manner that would give rise to a
failure of BCO Holding's and BCO Acquisition's closing conditions and
which has not been cured (or is not capable of being cured) within
20 business days after BCO Holding and BCO Acquisition give notice to BWAY
of the breach.
In addition, BWAY can also terminate the merger agreement:
. if BCO Holding or BCO Acquisition intentionally breaches any
representation, warranty, covenant or agreement in the merger agreement in
a manner that would give rise to a failure of BWAY's closing conditions
and which has not been cured (or is not capable of being cured) within
20 business days after BWAY gives notice to BCO Holding or BCO Acquisition
of the breach; or
. in order to recommend, approve or accept a "superior proposal" (but BWAY
must have complied in all material respects with the provisions described
under the heading "The Merger Agreement--No Solicitation of Competing
Proposals" on page 61).
Termination Fees (See page 69)
BWAY has agreed to pay Kelso a $6 million termination fee if the merger
agreement is terminated under certain circumstances described under the heading
"The Merger Agreement--Termination of the Merger Agreement--Effects of
Terminating the Merger Agreement" on page 69. In addition, BWAY has agreed to
reimburse Kelso for all of its out-of-pocket expenses of Kelso and its
affiliates (including fees and expenses of financial advisors, outside legal
counsel and accountants) incurred in connection with the merger and the
proposed financing of the merger up to a maximum amount of $4 million if the
merger agreement is terminated under certain circumstances described under that
same heading. Under certain circumstances described under that same heading,
the termination fee that may become payable will be reduced to $3 million
(instead of $6 million) and the maximum amount of any of Kelso's expenses
payable will be increased to $7 million (instead of $4 million).
No Solicitation of Competing Proposals (See page 61)
The merger agreement generally restricts BWAY's ability to solicit,
initiate, encourage or facilitate any competing merger or acquisition
inquiries, proposals or offers. However, BWAY may participate or engage in
discussions or negotiations with respect to unsolicited offers if the special
committee determines in good faith, after consultation with its independent
financial and legal advisors, that any such offer could realistically result in
a "superior proposal" that (1) would, if completed, result in a transaction
more favorable to BWAY's stockholders from a financial point of view than the
merger, (2) is with a person that has, or is reasonably likely to obtain, the
necessary funds to complete the transaction, and (3) is capable of being, and
is reasonably likely to be, completed without undue delay.
7
Modification or Amendment of the Merger Agreement (See page 70)
BWAY, BCO Holding and BCO Acquisition may, by acting through their
respective boards of directors, amend, modify or waive any provision of the
merger agreement prior to the closing of the merger. However, no such
amendment, modification or waiver by BWAY will be effective unless it is
authorized by the special committee and, after the approval of the merger
agreement and the merger by BWAY's stockholders, there shall not be made any
amendment that by law requires the further approval by BWAY's stockholders
without such further approval.
Fees and Expenses (See page 70)
Except as otherwise described under the heading "The Merger
Agreement--Termination of the Merger Agreement--Effects of Terminating the
Merger Agreement" on page 69, all costs and expenses incurred in connection
with the merger agreement and the merger will paid by the party incurring such
expenses.
Material Federal Income Tax Consequences (See page 50)
The receipt of cash in the merger will be a taxable transaction for U.S.
federal income tax purposes under the Internal Revenue Code of 1986 and may
also be a taxable transaction under applicable state, local, foreign and other
tax laws.
Tax matters are very complicated. The tax consequences of the merger to you
will depend upon your own situation. You should consult your tax advisors for a
full understanding of the U.S. federal, state and local tax consequences of the
merger to you.
Anticipated Accounting Treatment (See page 51)
The merger is intended to be accounted for as a purchase in conformity with
Statement of Financial Accounting Standards No. 141, "Business Combinations"
and Emerging Issues Task Force Issue No. 88-16 "Basis in Leveraged Buyout
Transactions."
Financing of the Merger (See page 46)
The following arrangements are in place to provide the necessary financing
for the merger, including the payment of related transaction fees and expenses:
. BCO Acquisition has received a senior debt commitment letter from Deutsche
Bank Trust Company Americas by which Deutsche Bank has committed to
provide (subject to certain conditions) a senior secured revolving credit
facility of up to $90 million (through the amendment of BWAY's existing
$90 million senior credit facility to accommodate the merger and the other
related transactions or, if requested by BCO Acquisition, through a new
senior credit facility), no more than $40 million of which may be borrowed
at the closing of the merger;
. BWAY Finance Corp., a newly formed subsidiary of BCO Holding, intends to
pursue an issuance of $190 million of new unsecured senior subordinated
notes to be assumed by BWAY upon closing of the merger. In the event that
the notes are not issued, Deutsche Bank Trust Corporation has committed to
provide (subject to certain conditions), pursuant to a bridge facility
commitment letter, funds in the amount of up to $190 million in the form
of an unsecured senior bridge loan;
. BWAY has received an equity commitment letter from Kelso in which Kelso
has agreed to provide up to $81.2 million of the equity financing required
for the merger, subject to adjustment and subject to the conditions of the
merger agreement, the senior debt commitment letter and the bridge
facility commitment letter; and
. The continuing investors have agreed to exchange, in the aggregate,
596,596 shares of BWAY common stock and 812,910 BWAY stock options having
an aggregate value of approximately $20.3 million into equity interests of
BCO Holding immediately prior to the merger.
8
Rights of Dissenting Stockholders (See page 52)
BWAY is a corporation organized under Delaware law. Under Delaware law, if
you do not vote in favor of the merger agreement and the merger and instead
follow the appropriate procedures for demanding appraisal rights as described
under the heading "Special Factors--Rights of Dissenting Stockholders" on page
52 and in Annex C, you will receive a cash payment for the "fair value" of your
shares of BWAY common stock, as determined by the Delaware Court of Chancery.
The price determined by the Delaware Court of Chancery may be less than, equal
to or more than the $20.00 in cash you would have received for each of your
shares in the merger if you had not exercised your appraisal rights. Generally,
in order to exercise appraisal rights, among other things:
. you must not vote for approval and adoption of the merger agreement and
the merger; and
. you must make written demand for appraisal in compliance with Delaware law
before the vote on the merger agreement and the merger.
Merely voting against the merger agreement and the merger will not perfect
your appraisal rights under Delaware law. Annex C to this proxy statement
contains the Delaware statute relating to your appraisal rights. If you want to
exercise your appraisal rights, please read and carefully follow the procedures
described under the heading "Special Factors--Rights of Dissenting
Stockholders" on page 52 and in Annex C. Failure to take all of the steps
required under Delaware law may result in the loss of your appraisal rights. We
encourage you to read the statute carefully and to consult with legal counsel
if you desire to exercise your dissenters' rights.
9
Selected Historical Consolidated Financial Data
Set forth below is a summary of selected historical consolidated financial
data with respect to BWAY excerpted or derived from the information contained
in BWAY's Current Report on Form 8-K filed with the SEC on November 8, 2002,
which is incorporated herein by reference. More comprehensive financial
information is included in such report and other documents filed by BWAY with
the SEC. The following summary is qualified by reference to such report and
other documents and all of the financial information, including any related
notes, contained therein. Such report and other documents may be inspected and
copies may be obtained from the offices of the SEC. See the discussion under
the heading "Additional Information--Where You Can Find More Information" on
page 81 for further details about this additional information.
Fiscal Year Ended (1)
----------------------------
September 30, September 29,
2001 2002
------------- -------------
(dollars in thousands, except
per share data)
Income Statement Data:
Net sales.......................................................... $475,039 $527,601
Cost of products sold (excluding depreciation and amortization). 425,084 456,788
-------- --------
Gross profit (excluding depreciation and amortization)...... 49,955 70,813
Depreciation and amortization (2)............................... 20,713 19,582
Selling and administrative expense.............................. 15,610 14,179
Merger-related transaction costs (3)............................ -- 1,478
Restructuring and impairment charge (4) (5)..................... 21,500 1,250
Gain on curtailment of postretirement benefit (6)............... -- --
Other, net (7).................................................. (970) (597)
-------- --------
Income from operations...................................... (6,898) 34,921
Interest expense, net........................................... 15,325 13,109
-------- --------
Income (loss) before income taxes and extraordinary item........... (22,223) 21,812
Provision (benefit) for income taxes............................ (6,042) 9,556
-------- --------
Income (loss) before extraordinary item............................ (16,181) 12,256
Extraordinary item (8).......................................... (307) --
-------- --------
Net income (loss).................................................. $(16,488) $ 12,256
======== ========
Basic earnings (loss) per common share data:
Income (loss) before extraordinary item......................... (1.80) 1.41
Extraordinary item (8).......................................... (0.04) --
-------- --------
Net income (loss).................................................. (1.84) 1.41
======== ========
Diluted earnings (loss) per common share data:
Income (loss) before extraordinary item......................... (1.80) 1.33
Extraordinary item (8).......................................... (0.04) --
-------- --------
Net income (loss).................................................. $ (1.84) $ 1.33
======== ========
Other Financial Data:
EBITDA (9)......................................................... $ 34,345 $ 56,634
EBITDA margin % (10)............................................... 7.2% 10.7%
Net cash provided by operating activities.......................... 22,116 46,063
Net cash used in investing activities.............................. (4,040) (9,528)
Net cash used in financing activities.............................. (18,752) (17,330)
Cash interest expense, net......................................... 14,345 11,720
Capital expenditures............................................... 9,421 10,586
Ratio of earnings to fixed charges (11)............................ -- 2.5x
10
Fiscal Year Ended (1)
-----------------------------
September 30, September 29,
2001 2002
------------- -------------
(dollars in thousands, except
per share data)
Balance Sheet Data:
Total working capital....... $ 8,369 $ 20,467
Total assets................ 300,895 306,686
Current assets.............. 106,408 123,362
Noncurrent assets........... 194,487 183,324
Total debt.................. 112,808 100,000
Other noncurrent liabilities 29,613 31,143
Current liabilities......... 98,039 102,895
Stockholders' equity........ 60,435 72,648
Book value per share........ 6.95 8.34
--------
(1) BWAY operates on a 52/53-week fiscal year ending on the Sunday closest to
September 30 of the applicable year.
(2) Depreciation for fiscal year 2002 includes an additional $0.7 million of
depreciation related to shortened useful lives of certain computer
equipment.
(3) The fourth quarter of fiscal year 2002 includes a $1.5 million charge for
certain professional fees and other transaction costs relating to the
transactions.
(4) The $21.5 million restructuring and impairment charge relates to the
closing of two manufacturing facilities and the write-down of intangible
assets and equipment held for disposal as a result of the closings in the
third quarter of fiscal year 2001.
(5) In the third quarter of fiscal year 2002, an additional $1.2 million
restructuring charge was recorded related to a change in estimate of
additional facility closure costs for the closure of BWAY's Elizabeth, New
Jersey manufacturing facility. Due to the weakening of both the general
economy and the real estate market, BWAY revised its estimate of facility
closure costs to allow additional time to locate a subtenant.
(6) The gains on curtailment of postretirement benefits resulted from a
reduction in liability for future medical benefits of certain employees of
the Cincinnati, Ohio facility.
(7) Other in fiscal year 2001 includes the gain on sale of the Chicago,
Illinois litho manufacturing facility closed in 2000. Other in fiscal year
2002 includes the gain on sale of stock received in the demutualization of
an insurance company and miscellaneous net gains from sales of surplus
equipment.
(8) BWAY recorded an extraordinary loss, net of related tax benefit of
$115,000, to write-off the unamortized deferred financing fees associated
with BWAY's previous credit agreement, which was terminated upon the
execution of BWAY's credit agreement in May 2001.
(9) "EBITDA" means income from operations before depreciation and amortization,
restructuring and impairment charges, gain on curtailment of postretirement
benefits and other, net and transaction expenses. BWAY believes that EBITDA
is generally accepted as useful information regarding a company's ability
to incur and service debt. While providing useful information, EBITDA
should not be considered in isolation or as a substitute for consolidated
statement of operations and cash flows data prepared in accordance with
generally accepted accounting principles. EBITDA as presented in the
preceding financial statements may not be comparable to similarly titled
measures reported by other companies.
(10) EBITDA margin is defined as the ratio of EBITDA, as defined, relative to
net sales.
(11) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges include interest on all indebtedness and one-third of rental
expense on operating leases, which is representative of the interest
factor. For fiscal 2001, BWAY's fixed charges exceeded its earnings by
$22.2 million.
11
BWAY has not provided any pro forma data giving effect to the proposed
merger as it does not believe such information is material to its stockholders
in evaluating the merger agreement since the proposed merger consideration is
all cash and, if the proposed merger is completed, BWAY common stock would
cease to be publicly traded.
BWAY has not provided any separate financial information for BCO Holding and
BCO Acquisition since each is a special purpose entity formed in connection
with the proposed merger and has no independent operations.
Litigation Challenging the Merger
On October 2, 2002, a civil action was filed in the Superior Court of Fulton
County of the State of Georgia. The plaintiff purports to represent a putative
class of the public stockholders of BWAY (excluding any person or entity
related to or affiliated with any of the defendants). Named as defendants in
the complaint are BWAY, all members of the BWAY board of directors and James
Milton (a former director and executive officer of BWAY). The plaintiff
alleges, among other things, that the individual defendants have breached their
fiduciary duties of due care and loyalty to BWAY's public stockholders and
failed to exercise ordinary care and diligence in the exercise of their
fiduciary duties by failing to announce an active auction, open bidding or
other procedures to maximize shareholder value. In addition, the complaint
alleges that Mr. Ergas and Mr. Hayford, who have agreed to exchange some of
their BWAY equity interests for equity interests of BCO Holding, have used
inside information for their own benefit and to the detriment of BWAY's public
stockholders. The complaint seeks injunctive relief, monetary damages, costs
and other relief. BWAY believes that this lawsuit is without merit and intends
to defend against it vigorously.
12
SPECIAL FACTORS
Effects of the Merger
If the merger is approved by the BWAY stockholders and the other conditions
to the closing of the merger are either satisfied or waived, BCO Acquisition
will be merged with and into BWAY, with BWAY being the surviving corporation.
After the merger, BCO Holding will own all of the capital stock of BWAY, and
BCO Holding will be owned by affiliates of Kelso and the continuing investors.
For a chart describing the ownership of BCO Holding following the merger, see
"Special Factors--Post-Merger Ownership and Control" on page 15.
When the merger is completed, each share of BWAY common stock issued and
outstanding immediately prior to the effective time of the merger (other than
(1) the shares of BWAY common stock owned by BWAY or any direct or indirect
wholly-owned subsidiary of BWAY, (2) the shares of BWAY common stock owned by
BCO Holding or BCO Acquisition (including as a result of the exchange of BWAY
common stock for BCO Holding common stock by the continuing investors), and (3)
the shares of BWAY common stock held by any dissenting stockholders) will be
canceled and converted into the right to receive $20.00 in cash. Except for
options exchanged by the continuing investors for BCO Holding stock options,
each option granted by BWAY to acquire BWAY common stock that is outstanding
immediately prior to the closing of the merger will be canceled in exchange for
a single lump sum cash payment (less any applicable income or employment tax
withholding) equal to the product of (1) the number of shares of BWAY common
stock subject to the option and (2) the excess, if any, of $20.00 over the
option exercise price.
Immediately prior to the merger, each of the continuing investors will
exchange some of their shares of BWAY common stock and some of their BWAY stock
options for equity interests in BCO Holding. The continuing investors will sell
or "cash-out" the remainder of their current equity interests in BWAY in the
merger. Each of their shares of BWAY common stock, including the shares
underlying their BWAY stock options, will be valued at $20.00 per share. The
continuing investors are Jean-Pierre Ergas, Warren Hayford, Mary Lou Hayford,
Kevin Kern, Thomas Eagleson, Kenneth Roessler and Jeffrey O'Connell.
As a result of the merger, BWAY will be a privately held company and there
will be no public market for BWAY common stock. Upon the completion of the
merger, BWAY common stock will no longer be listed on the New York Stock
Exchange and price quotations for sales of shares in the public market will no
longer be available. In addition, the registration of BWAY common stock under
the Exchange Act will be terminated.
The primary benefits of the merger to BWAY are that, because BWAY common
stock will be privately held, BWAY will enjoy certain efficiencies, such as a
reduction of the time devoted by its management and certain other employees to
compliance with certain SEC reporting requirements, and its directors, officers
and beneficial owners of more than 10% of the shares of BWAY common stock will
be relieved of the reporting requirements and restrictions on insider trading
under Section 16 of the Exchange Act. BWAY, however, will likely be required to
resume filing periodic reports with the SEC as a result of its issuing debt
securities registered under the Securities Act. In addition, BWAY will be
relieved of New York Stock Exchange listing and reporting requirements.
A potential detriment of the merger to BWAY is that BWAY and its
subsidiaries will be incurring approximately $230 million in long-term debt on
a consolidated basis in connection with the closing of the merger
(approximately $100 million of which will be used to repay existing
indebtedness) and that BWAY and its subsidiaries will be subject to restrictive
covenants under the terms of that indebtedness, some of which may be more
restrictive than those under BWAY's existing indebtedness. In addition, such
indebtedness may:
. increase the vulnerability of BWAY to general adverse economic and
industry conditions;
. require BWAY to dedicate a substantial portion of its cash flow from
operations to payments on its indebtedness, thereby reducing the
availability of its cash flow to fund working capital, capital
expenditures, acquisitions, investments and other general corporate
purposes;
. limit the ability of BWAY in planning for, or reacting to, changes in its
business and the markets in which it operates;
13
. place BWAY at a competitive disadvantage compared with its competitors
that have less debt; and
. limit, among other things, the ability of BWAY to borrow additional funds.
The primary benefits of the merger to stockholders of BWAY that will not
have a continuing interest in BCO Holding include the following:
. these stockholders will receive $20.00 in cash for each share of BWAY
common stock, representing a premium of approximately 44% over the per
share closing price of BWAY common stock on September 30, 2002, the last
trading day prior to the public announcement of the proposed merger and a
premium of 64% over the one-year average price of BWAY common stock; and
. the avoidance of the risk associated with any decrease in the future
earnings, growth or value of BWAY following the merger.
The primary detriments of the merger to stockholders of BWAY that will not
have a continuing interest in BCO Holding include the following:
. these stockholders will cease to have an interest in BWAY and therefore
will no longer benefit from any increase in the future earnings, growth or
value of BWAY or payment of dividends on BWAY common stock, if any; and
. the receipt of cash for shares of BWAY common stock in the merger will be
a taxable transaction for federal income tax purposes under the Internal
Revenue Code of 1986, as amended, and may also be a taxable transaction
under applicable state, local, foreign and other tax laws.
The primary benefits of the merger to Kelso and the continuing investors
that are participating in the transaction include the following:
. Kelso and the continuing investors will own all of the outstanding equity
of BCO Holding (which in turn will own all of the capital stock of BWAY)
after the merger and therefore will receive all of the benefit, if any, of
any increase in the future earnings, growth or value of BWAY;
. certain continuing investors will receive a variety of other benefits
under various new and existing arrangements as discussed more fully under
the heading "Special Factors--Interests of Certain Persons in the Merger"
on page 40;
. the ongoing benefits of investing in partnership with an experienced and
successful management team; and
. the other benefits described under the heading "Special Factors--Purposes,
Reasons and Plans for BWAY After the Merger" on page 39.
The primary detriments of the merger to Kelso and the continuing investors
that are participating in the transaction include the following:
. all of the risk of any decrease in the future earnings, growth or value of
BWAY following the merger will be borne by Kelso and the continuing
investors;
. all of the competitive risks related to substitute packaging products such
as plastic, and, to a lesser extent, composites and flexible packaging
containers;
. BWAY will have substantially more debt outstanding after the merger and
this may adversely affect the equity value of BCO Holding. In general,
higher levels of debt can have the effect of increasing the risk to equity
holders of losing the entire value of their investment;
. the equity interests in BCO Holding that each continuing investor will
receive in exchange for a portion of his or her equity interests in BWAY
will be subject to restrictions on transfer; and
. immediately following the merger, there will be no trading market for BCO
Holding's equity.
The $20.00 per share cash consideration to be received by BWAY stockholders
in the merger is the result of arm's length negotiations between Kelso and its
advisors, on the one hand, and the special committee and its advisors, on the
other hand.
14
Post-Merger Ownership and Control
Immediately after the merger, BCO Holding will hold all of the outstanding
capital stock of BWAY. In turn, it is expected that affiliates of Kelso will
hold approximately 7,991,000 shares of BCO Holding common stock, representing
in the aggregate approximately 73.9% of the fully diluted equity of BCO
Holding, and the continuing investors, including Mr. Ergas and Mr. and Mrs.
Hayford, will hold 1,193,192 shares of BCO Holding common stock and fully
vested options to purchase 1,625,820 shares of BCO Holding common stock,
representing in the aggregate approximately 26.1% of the fully diluted equity
of BCO Holding, in each case including shares issuable upon exercise of fully
vested BCO Holding stock options issued in exchange for BWAY stock options but
without giving effect to (1) the grant of any new BCO Holding stock options at
or following the closing of the merger under a new BCO Holding stock incentive
plan (including the grants to be made to some of the continuing investors at
the closing of the merger) as described under the heading "Interests of Certain
Persons in the Merger--BCO Holding Stock Incentive Plan" on page 44 and (2) the
issuance of any warrants in connection with the proposed financing of the
merger. However, you should note that the exact number of shares of BCO Holding
held by Kelso's affiliates after the closing and, accordingly, the ownership
percentages stated in the preceding sentence are subject to change to the
extent that transaction fees and expenses and BWAY's outstanding debt at
closing deviate from the numbers currently projected.
The following tables set forth:
. the aggregate number of shares of BWAY common stock and the percentage of
the fully diluted equity of BWAY expected to be owned by Kelso and each of
the continuing investors immediately prior to the merger, in each case
including shares issuable upon exercise of BWAY stock options that have
vested or that will fully vest upon the completion of the merger;
. the implied value of the pre-merger fully diluted equity of BWAY held by
each of these persons;
. the amount of cash that each of these persons will receive in respect of
the sale of BWAY common stock or the "cash-out" of BWAY stock options as
part of the merger;
. the aggregate number of shares of BCO Holding common stock and the
percentage of the fully diluted equity of BCO Holding expected to be owned
by each of these persons immediately following the merger, in each case
including shares issuable upon exercise of fully vested BCO Holding stock
options issued in exchange for BWAY stock options held by each such person
immediately prior to the merger but without giving effect to (1) the grant
of any new BCO Holding stock options at or following the closing of the
merger under a new BCO Holding stock incentive plan (including the grants
to be made to some of the continuing investors at the closing of the
merger) as described under the heading "Interests of Certain Persons in
the Merger--BCO Holding Stock Incentive Plan" on page 44 and (2) the
issuance of any warrants in connection with the proposed financing of the
merger; and
. the implied value of such post-merger fully diluted equity interest of BCO
Holding to be held by each of these persons.
Percentage of Implied Value of
Number of Shares of Fully Diluted Investment in
BWAY Common Equity of BWAY BWAY Pre-
Post-Merger Equity Holders Stock Pre-Merger Pre-Merger (1) Merger (2) Cash Proceeds
-------------------------- ------------------- -------------- ---------------- -------------
Kelso Entities (5).... 0 0% $ 0 $ 0
Jean-Pierre Ergas..... 614,777(7) 5.8 8,520,000 4,510,000
Warren Hayford........ 428,335(9) 4.0 4,930,000 1,860,000
Mary Lou Hayford...... 1,821,273(11) 17.1 36,430,000 24,490,000
Kevin Kern............ 64,939(13) 0.6 970,000 720,000
Thomas Eagleson....... 120,711(15) 1.1 1,710,000 1,280,000
Kenneth Roessler...... 115,454(17) 1.1 1,760,000 1,260,000
Jeffrey O'Connell..... 66,820(19) 0.6 1,080,000 910,000
--------- ---- ----------- -----------
Total.............. 3,232,309(21) 30.3% $55,400,000 $35,030,000
========= ==== =========== ===========
15
Number of Fully Percentage of
Diluted Shares of Fully Diluted Implied Value of
BCO Holding Equity of BCO Equity Investment
Common Stock Post- Holding Post- in BCO Holding
Post-Merger Equity Holders Merger Merger (3) Post-Merger (4)
-------------------------- ------------------ ------------- -----------------
Kelso Entities (5).... 7,991,001(6) 73.9%(6) $ 79,910,000(6)
Jean-Pierre Ergas..... 728,610(8) 6.7 4,010,000
Warren Hayford........ 670,834(10) 6.2 3,070,000
Mary Lou Hayford...... 1,193,192(12) 11.0 11,930,000
Kevin Kern............ 50,292(14) 0.5 250,000
Thomas Eagleson....... 63,340(16) 0.6 420,000
Kenneth Roessler...... 75,424(18) 0.7 500,000
Jeffrey O'Connell..... 37,320(20) 0.3 170,000
---------- ----- ------------
Total.............. 10,810,013(22) 100.0% $100,260,000
========== ===== ============
--------
(1) Based on 8,708,626 shares of BWAY common stock and options to purchase
1,930,364 shares of BWAY common stock outstanding as of September 30, 2002.
(2) Based on $20.00 per share of BWAY common stock and, in the case of BWAY
stock options, an amount equal to the excess of $20.00 per share over the
exercise price of the applicable BWAY stock options to be paid in the
merger.
(3) These percentages include shares issuable upon exercise of BCO Holding
stock options issued in exchange for BWAY stock options but exclude (1)
the grant of any options to purchase shares of BCO Holding common stock
under the BCO Holding Stock Incentive Plan at or following the closing of
the merger and (2) the issuance of any warrants in connection with the
proposed financing of the merger .
(4) Based on an implied value of $10.00 per share of BCO Holding common stock
and, in the case of BCO Holding stock options, an amount equal to the
excess of $10.00 per share over the exercise price of the applicable BCO
Holding stock options.
(5) The Kelso Entities include Kelso Investment Associates VI, L.P. and KEP
VI, LLC, which collectively will own approximately 7,991,000 shares of BCO
Holding common stock.
(6) This amount assumes that Kelso's equity investment in BCO Holding is $79.9
million. Kelso's equity investment in BCO Holding may be adjusted to the
extent that the actual transaction costs incurred in connection with the
merger are greater than or less than $29.8 million and/or to the extent
that BWAY's debt balance at closing (including accrued interest) is
greater than or less than $104.8 million.
(7) This amount shown for Mr. Ergas includes 138,077 shares of BWAY common
stock and options to purchase 476,700 shares of BWAY common stock at a
weighted average exercise price of $7.92.
(8) This amount shown for Mr. Ergas consists of options to purchase 728,610
shares of BCO Holding common stock at a weighted average exercise price of
$4.50 per share.
(9) This amount shown for Mr. Hayford includes 92,918 shares of BWAY common
stock and options to purchase 335,417 shares of BWAY common stock at a
weighted average exercise price of $10.85.
(10) This amount shown for Mr. Hayford consists of options to purchase 670,834
shares of BCO Holding common stock at a weighted exercise price of $5.43
per share.
(11) This amount shown for Mrs. Hayford consists of 1,821,273 shares of BWAY
common stock and includes 149,999 shares of BWAY common stock that will be
donated to four charitable organizations prior to the closing of the
merger.
(12) This amount shown for Mrs. Hayford consists of 1,193,192 shares of BCO
Holding common stock.
(13) This amount shown for Mr. Kern includes 23,906 shares of BWAY common stock
and options to purchase 41,033 shares of BWAY common stock at a weighted
average exercise price of $8.02.
(14) This amount shown for Mr. Kern consists of options to purchase 50,292
shares of BCO Holding common stock at a weighted average exercise price of
$5.11 per share.
16
(15) This amount shown for Mr. Eagleson includes 711 shares of BWAY common
stock and options to purchase 120,000 shares of BWAY common stock at a
weighted average exercise price of $5.90.
(16) This amount shown for Mr. Eagleson consists of options to purchase 63,340
shares of BCO Holding common stock at a weighted average exercise price of
$3.33 per share.
(17) This amount shown for Mr. Roessler includes 20,454 shares of BWAY common
stock and options to purchase 95,000 shares of BWAY common stock at a
weighted average exercise price of $5.75.
(18) This amount shown for Mr. Roessler consists of options to purchase 75,424
shares of BCO Holding common stock at a weighted average exercise price of
$3.37 per share.
(19) This amount shown for Mr. O'Connell includes 37,120 shares of BWAY common
stock and options to purchase 29,700 shares of BWAY common stock at a
weighted average exercise price of $8.54.
(20) This amount shown for Mr. O'Connell consists of options to purchase 37,320
shares of BCO Holding common stock at a weighted average exercise price of
$5.44 per share.
(21) This amount includes 2,134,459 shares of BWAY common stock and options to
purchase 1,097,850 shares of BWAY common stock.
(22) This amount includes 9,184,199 shares of BCO Holding common stock and
options to purchase 1,625,820 shares of BCO Holding common stock.
Background of the Merger
Beginning in January 2001, BWAY's management team focused extensive internal
efforts to reorganize BWAY's manufacturing operations, improve productivity,
reduce costs and repay debt. As a result of these efforts, BWAY began to
demonstrate improved earnings and, after completion of BWAY's 2001 fiscal year,
which ended September 30, 2001, BWAY's management team determined that the
timing was appropriate to begin exploring additional opportunities to increase
shareholder value, including a sale of BWAY to a strategic buyer or to a
private equity firm. On November 28, 2001, BWAY issued a press release
announcing its sales and earnings for the fiscal year ended September 30, 2001.
The press release also indicated that BWAY was beginning to assess and consider
various strategic options to optimize shareholder value, including a business
combination or recapitalization.
During the period from November 2001 through May 2002, Deutsche Bank met
with Mr. Ergas and Mr. Hayford a number of times to discuss the potential sale
of BWAY to a private equity firm or strategic buyer. During that period, acting
with the expectation that it would be a potential source of financing and other
services for the acquiror in connection with a potential transaction, Deutsche
Bank solicited interest from eleven private equity firms, eight of whom met
with Deutsche Bank to discuss their potential interest in an acquisition of
BWAY. Seven of these firms signed confidentiality agreements with BWAY and five
of these firms participated in meetings and/or telephone conferences with Mr.
Ergas and representatives of Deutsche Bank to discuss BWAY's operations and
strategy. Mr. Hayford attended some of these meetings. During that period, Mr.
Ergas also had initial contacts with two additional private equity firms
regarding their potential interest in an acquisition of BWAY. These two private
equity firms participated in meetings and/or telephone conferences with Mr.
Ergas to discuss a possible transaction, and one of these firms signed a
confidentiality agreement with BWAY.
In October 2001 and in April 2002, Mr. Ergas also had initial contacts with
senior executives at two companies regarding a possible strategic transaction
involving BWAY. Executives of these two companies participated in meetings
and/or telephone conferences with Mr. Ergas to discuss a possible strategic
transaction. However, after the preliminary meetings, neither of these
companies pursued any further discussions with BWAY regarding an acquisition of
BWAY.
On February 12, 2002, at a meeting of the BWAY board of directors, Mr. Ergas
and Mr. Hayford reported to the BWAY board regarding the steps they had taken
to explore a sale, combination or recapitalization of BWAY.
On March 22, 2002, Deutsche Bank provided preliminary public information
regarding BWAY to Kelso and, on or about April 10, 2002, BWAY and Kelso entered
into a non-disclosure agreement in connection with a possible investment by
Kelso in BWAY.
17
On April 12, 2002, Mr. Ergas, representatives of Kelso and Deutsche Bank met
in Chicago. Mr. Ergas introduced BWAY and provided Kelso with initial
projections for BWAY's fiscal years 2002 through 2005.
On April 18, 2002, Kelso delivered a letter addressed to Mr. Ergas in which
Kelso expressed preliminary interest in a potential acquisition of BWAY. In its
letter, Kelso stated that its "current thinking is in a range of approximately
$16.00 to $18.00 per share" and that its next steps would be to meet with other
members of BWAY's management and to begin formal due diligence.
On April 19, 2002, another private equity firm delivered a letter to Mr.
Ergas in which it expressed interest in a potential acquisition of BWAY at a
price between $13.00 and $14.00 per share in cash. Deutsche Bank held several
telephone conversations with the second firm over the next few days; however,
the firm indicated that it would not be willing to acquire BWAY at a price
greater than the range indicated in its letter. Neither Deutsche Bank nor BWAY
had any substantial further discussions with this firm regarding a possible
transaction and this firm did not contact BWAY after BWAY announced the
execution of the merger agreement.
During the period from late April 2002 until the establishment of the
special committee, Mr. Ergas and Deutsche Bank verbally conveyed to BWAY's
board of directors the preliminary expressions of interest set forth in the
letters from Kelso and the other private equity firm.
On April 24, 2002, BWAY issued a press release announcing its sales and
earnings for the fiscal quarter ended March 31, 2002. The press release
reiterated that BWAY's management was continuing to assess and consider various
strategic options to optimize shareholder value, including a business
combination or a recapitalization.
On April 30, 2002, Mr. Ergas met with Kelso and representatives of Deutsche
Bank in New York. From May 2002 through the end of June 2002, representatives
of Kelso had additional meetings and telephone conversations with Mr. Ergas
and, toward the end of June, other members of BWAY's management to discuss
BWAY's financial condition, operations, strategy and management.
Representatives of Deutsche Bank participated in some of these meetings and
conversations.
On May 28, 2002, at a dinner before a meeting of the BWAY board of
directors, representatives of Deutsche Bank informed members of the BWAY board
about the status of its contacts with potential acquirors and its views on the
general state of the financial markets. At this dinner meeting, representatives
of Deutsche Bank confirmed to members of the BWAY board that they were not
acting on behalf of BWAY, but were acting with the expectation that Deutsche
Bank would be a potential source of financing and other services for the
acquiror in connection with a potential transaction.
On June 3, 2002, representatives of Kelso met with Mr. and Mrs. Hayford.
On June 20, 2002, at a meeting of the BWAY board of directors, Mr. Ergas
updated the BWAY board of directors on the conversations regarding possible
strategic alternatives for BWAY. At the meeting, representatives from Kirkland
& Ellis, BWAY's outside counsel, reviewed with the BWAY board members their
fiduciary duties to stockholders with respect to change of control and
interested party transactions. Mr. Ergas then reported that, while no
discussions had progressed beyond preliminary stages, Kelso appeared to be
showing genuine interest in BWAY and that he expected Kelso to continue to work
diligently in its review of BWAY and to advance discussions regarding its
interest. Mr. Ergas also indicated that, based on the meetings he had with
Kelso, he had a high regard of Kelso as a prospective financial partner.
On June 28, 2002, BWAY and Kelso entered into a revised confidentiality
agreement. Beginning in early July 2002 and continuing through the next several
weeks, representatives of Kelso, Debevoise & Plimpton (Kelso's legal counsel)
and Ernst & Young (Kelso's accounting advisors) conducted business, legal and
accounting due diligence on BWAY.
In a letter dated July 23, 2002 addressed to BWAY's board of directors,
Kelso indicated its interest in acquiring all outstanding shares of BWAY common
stock for $17.50 per share in cash, which represented a
18
21.6% premium over the per share closing price of BWAY's common stock on July
22, 2002. This letter stated that Kelso, consistent with its practice, would
expect Mr. Ergas, as well as other members of BWAY's management team and Mr.
Hayford, to participate in the proposed transaction and, accordingly, to retain
a substantial portion of their existing equity ownership in BWAY's business. In
addition, Kelso's letter stated that Kelso's obligation to consummate the
proposed acquisition would be conditioned upon obtaining financing. In that
regard, Kelso's letter indicated that it had received from Deutsche Bank a
draft commitment letter for a $90 million loan facility and a "highly
confident" letter for $175 million of high-yield notes, the proceeds of which
would be used to finance an acquisition of BWAY. The letter also indicated that
Kelso would provide $68 million of equity financing pursuant to an equity
commitment letter, and that Kelso anticipated refinancing BWAY's outstanding
borrowings, including its 101/4% Senior Subordinated Notes due 2007. Copies of
each of the financing letters were attached to Kelso's indication of interest.
On July 23, 2002, at a meeting of the BWAY board of directors, Mr. Ergas
reviewed for the directors the letter received from Kelso. The BWAY board then
discussed the possible transaction with Kelso. Representatives of Kirkland then
again reviewed with the BWAY board members their fiduciary duties to
stockholders with respect to change in control and interested party
transactions. In light of the interest Mr. Hayford and Mr. Ergas might have in
the proposed transaction, the board of directors reviewed with representatives
of Kirkland the advantages of forming a special committee of independent
directors to review, evaluate and negotiate the possible transaction with
Kelso. After discussion, the BWAY board of directors, in accordance with the
Delaware General Corporation Law and BWAY's by-laws, established a special
committee of independent, disinterested directors, consisting of John W. Puth,
Thomas A. Donahoe, Alexander P. Dyer and John E. Jones. The special committee
was authorized: (1) to review, evaluate and negotiate with Kelso any proposed
transaction with Kelso; (2) to explore the possibility of and, if appropriate,
solicit interest in, review, evaluate and negotiate with any other interested
parties with respect to, any alternative transaction; (3) to determine whether
any transaction was fair to, and in the best interests of, BWAY and its
stockholders; (4) to determine the advisability of any transaction; (5) to
recommend to the BWAY board of directors what action, if any, should be taken
by BWAY with respect to any transaction; and (6) to take such other action as
the special committee, in its judgment, deemed necessary. The BWAY board of
directors authorized the special committee to retain, at BWAY's expense, a
financial advisor, a legal advisor and any other advisors the special committee
deemed necessary to assist it in carrying out its duties and responsibilities.
In addition, the BWAY board of directors informed the special committee that
the special committee and its advisors would be permitted access to all of the
officers and members of management of BWAY, as well as any books, records,
projections and financial statements the special committee and its advisors
deemed necessary for their review.
Immediately thereafter, the special committee met by telephone. The special
committee discussed the merits of various Chicago law firms, as well as various
potential independent financial advisors to the special committee. After
considering their qualifications, the special committee selected Sidley Austin
Brown & Wood as its independent legal advisor and William Blair & Company,
L.L.C. as its independent financial advisor. The special committee chose Sidley
based on the firm's reputation and experience generally in representing
companies, including special committees, in public transactions, and chose
Blair because of its reputation and experience as an investment banking firm.
In addition, the special committee selected Mr. Puth as its chairman.
In a press release issued on July 24, 2002, BWAY announced its sales and
earnings for the fiscal quarter ended June 30, 2002. The press release again
stated that BWAY was continuing to assess strategic options to optimize
shareholder value and expressly noted that such options included a sale of the
company.
On July 25, 2002, the special committee met by telephone, together with
representatives from Sidley and Blair, to discuss background and organizational
matters. Sidley provided the special committee members with the first of a
series of legal briefings about their fiduciary duties and the background legal
framework for change of control and interested party transactions. During the
discussion, each of the members of the special committee reaffirmed its
independence and disinterestedness. In addition, the special committee
authorized Sidley and Blair to conduct an independent preliminary due diligence
review of BWAY. During the next few weeks, Blair and Sidley conducted financial
and legal due diligence, respectively, on BWAY.
19
On August 2, 2002, the special committee met by telephone, together with
representatives from Sidley and Blair. The special committee received an update
on the due diligence and information gathering efforts to date. Sidley and
Blair also reported to the special committee their understanding of Deutsche
Bank's role with respect to any acquisition of BWAY. In addition, the special
committee discussed with Sidley and Blair the July 23 Kelso letter and the fact
that Kelso had conducted extensive due diligence on BWAY.
On August 8, 2002, the special committee met in person, together with
representatives from Sidley and Blair, at the offices of Blair. Three of the
four members of the special committee were present. The special committee
members were again informed by Sidley as to their fiduciary duties and the
background legal framework with respect to change of control and interested
party transactions. Sidley and Blair then provided the special committee with
an update on their continued due diligence on BWAY. Blair led a discussion of
its preliminary financial analysis of BWAY, its analysis of likely potential
buyers for BWAY and alternative approaches for a sale process, in each case
referring to the materials that had been prepared for the meeting and
distributed to the meeting participants. After a thorough discussion regarding
Blair's preliminary presentation, including questions from the special
committee, the special committee members present at the meeting unanimously
determined that it was in the best interests of BWAY and its stockholders to
consider a sale of the company at that time, primarily due to: (1) BWAY's very
recent history of strong profits and the outlook of continued strong profits
for the upcoming fiscal year; (2) the likelihood of continued competitive
threats from the plastics industry; and (3) to a lesser extent, concerns about
future production capacity in light of anticipated growth. Given the special
committee's determination to pursue a sale of the company, the special
committee discussed how it would proceed in order to obtain the best price for
BWAY's stockholders. The special committee considered several alternatives,
including (1) privately soliciting indications of interest from additional
potentially interested strategic and/or private equity buyers, (2) publicly
disclosing receipt of Kelso's indication of interest and inviting other
potentially interested parties to submit indications of interest or (3)
negotiating with Kelso in an effort to obtain a higher price on terms that
would not preclude another party from offering a superior proposal. Given the
quantity of information contained in the materials prepared by Blair for the
meeting, the special committee determined to further review those materials and
consider the discussions that had taken place at the meeting before directing
Sidley and Blair as to the appropriate next steps. The special committee agreed
to reconvene on August 10, 2002.
On August 10, 2002, the special committee met by telephone. Three of the
four members of the special committee were present at the meeting. After
discussion and review of the materials supplied by Blair on August 8, the
special committee determined that if Kelso were willing to (1) increase the
consideration specified in its indication of interest, (2) agree to a merger
agreement which (a) permitted BWAY significant flexibility in responding to
unsolicited inquiries from third-party suitors and (b) contained no provisions
that would preclude or meaningfully impede a superior proposal and (3) arrange
for a bridge financing commitment in case the high-yield note offering could
not be completed in a timely manner, then the special committee would be
willing to negotiate with Kelso without first seeking interest from other
potential buyers. This determination was made after taking into account a
number of factors, including the following:
. the fact that (1) BWAY had publicly disclosed numerous times since
November 2001 its willingness to consider strategic alternatives,
including a merger or a recapitalization, and in July 2002 had expressly
noted that these options included a sale of the company and (2) no
unsolicited offers to acquire BWAY had been made by any financial or
strategic buyers;
. the fact that, after the solicitation effort conducted by Deutsche Bank in
late 2001 and the first half of 2002, Kelso had emerged as the only entity
to express an interest in acquiring BWAY at a premium over its market
price and to commence formal business and legal due diligence on BWAY;
. given the financial condition and/or known strategic plans of potentially
viable industry buyers, the belief by the special committee (based
primarily upon its discussions with BWAY's management and the advice
provided by Blair at the August 8 meeting) that industry parties were
unlikely to have a strategic interest in acquiring BWAY;
20
. the concern of the special committee that any auction or further
solicitation efforts could cause a significant time delay in consummating
a transaction or cause Kelso to withdraw its proposal;
. the concern that if any further solicitation efforts were unsuccessful,
the special committee's bargaining position with respect to Kelso would
likely be significantly diminished; and
. BWAY management's willingness to work with Kelso as a financial partner
given Kelso's requirement that management participate in the transaction.
On August 12, 2002, Blair, at the direction of the special committee,
contacted Kelso and informed them of the terms on which the special committee
was willing to move forward with Kelso, including merger consideration per
share in excess of $20.00. Kelso had no immediate reaction but indicated it was
likely to respond during the week of August 19, 2002.
During the morning of August 16, 2002, Deutsche Bank and Blair met in person
to discuss the financial data and projections of BWAYthat Kelso, the special
committee and their respective advisors were using. Later that morning, the
special committee met by telephone, together with representatives from Sidley
and Blair, to receive an update on negotiations with Kelso. In addition, Blair
discussed with the special committee its meeting earlier that morning with
Deutsche Bank. Blair noted that the per share transaction consideration was not
discussed at that meeting.
On August 20, 2002, Mr. Ergas telephoned Blair to confirm that Blair had
been receiving the due diligence information it had requested in order to
perform its analysis. In addition, Mr. Ergas informed Blair that BWAY's fiscal
2003 budget was expected to be presented to the board of directors at its
regularly scheduled meeting on September 5, 2002.
On August 21, 2002, Blair had a conference call with Kelso during which
Kelso indicated that, based on the information it had, it would not proceed
with a transaction at a price "in the 20's." Kelso stated that: (1) it would
need to perform more due diligence as to the fiscal 2002 results as well as the
fiscal 2003 projections before it would be able to determine whether it could
make a revised proposal; (2) it wanted to discuss with Messrs. Ergas and
Hayford whether they would be interested in participating as continuing
investors in a transaction at a price higher than $17.50 per share; and (3) it
wanted to discuss a voting agreement with Mr. Hayford regarding the shares held
by his wife and him. Kelso further indicated to Blair that it would be
interested in having
Mr. Hayford serve on the post-transaction board of directors, and that it would
be flexible as to the amount of Mr. Hayford's existing equity in BWAY that
would be exchanged into equity interests in BCO Holding rather than being
cashed out. After consulting with the special committee, Blair told Kelso that
the special committee would not provide access to additional due diligence
materials unless Kelso increased its price.
Also on August 21, 2002, Mr. Ergas and Mr. Puth met in person. Mr. Ergas
informed Mr. Puth of his views on BWAY's projected fiscal year 2002 results and
the proposed budget for fiscal year 2003. In addition, Mr. Ergas informed Mr.
Puth of his understanding of the market for equity-based compensation in
management buyout transactions and, accordingly, the equity-based compensation
that Mr. Ergas expected Kelso to provide to BWAY senior management. In response
to Blair's previous request, later that day, Kelso called Blair and indicated
that, based upon satisfactory due diligence findings, it was expecting to be
able to increase its initial $17.50 indication of interest by at least $1.00.
On August 22, 2002, the special committee met by telephone, together with
representatives from Sidley and Blair. At that meeting Blair reviewed with the
special committee its discussions with Kelso on the previous day. In addition,
Mr. Puth informed the special committee of his discussions the previous day
with Mr. Ergas. The special committee then discussed (1) the level of
management's equity-based compensation in the proposed transaction and (2) Mr.
Ergas' expected proposal for the fiscal year 2003 budget, including the EBITDA
projections contained therein. The special committee requested that Kelso not
be given BWAY's updated fiscal year 2003 budget and projections until the board
of directors had the opportunity to review and approve these
21
materials. Later that day, Mr. Puth informed Mr. Ergas of the special
committee's request and Mr. Ergas agreed with the request. Blair, at the
direction of the special committee, then indicated to Kelso the schedule for
providing them with revised budgets, and that the increase of $1.00 per share
would not be sufficient for the special committee to proceed with Kelso's
proposal.
On August 27, 2002, the draft fiscal 2003 budget was delivered to the board
of directors for their review and, after discussion and modification (the
effect of which was a modest increase in EBITDA) by the board of directors, was
approved by the board of directors on August 29, 2002. Also on August 29, 2002,
Mr. Ergas informed Blair that although the fiscal year 2003 budget projected
$60.9 million of EBITDA for fiscal year 2003, Mr. Ergas believed that a "best
case forecast" could be $64 million of EBITDA for fiscal year 2003.
On August 28, 2002, representatives of Kelso and representatives of Kirkland
and Deutsche Bank met in Chicago with Mr. Hayford to discuss the voting
agreements that Kelso would require to be entered into contemporaneously with
the merger agreement and Mr. Hayford's continued interest in an acquisition at
a higher price level.
On August 30, 2002, Mr. Ergas delivered the fiscal year 2003 budget to Kelso
together with information regarding the "stretch target forecasts."
During the next few days, Blair, at the direction of the special committee,
contacted Kelso and informed them that, if necessary to increase its
indication, Kelso should consider increasing its equity commitment or modifying
the level of management's equity-based compensation in the proposed
transaction. Kelso responded that the proposed level of management's
equity-based compensation was an integral part of its transaction structure.
By letter to BWAY's board of directors dated September 4, 2002, Kelso
delivered a revised indication of interest stating that (1) it would be willing
to acquire all of BWAY's outstanding common shares for $19.00 per share (except
for certain equity interests that would be retained by Mr. Hayford and BWAY's
management team) and (2) it had obtained a draft commitment letter from
Deutsche Bank for a $175 million bridge financing facility. In addition, the
revised indication of interest letter contained an attachment discussing
proposed terms of the merger agreement. Blair reported Kelso's position to Mr.
Puth. Mr. Puth and Blair agreed to present this position at a special committee
meeting later that day.
On the evening of September 4, 2002, the special committee met in person
with representatives of Sidley and Blair to discuss Kelso's revised indication
of interest. Blair presented an updated preliminary financial analysis of BWAY
based on the proposed $19.00 per share indication, revised BWAY financial
projections, and other updated financial information, including an analysis of
the pending acquisition of Schmalbach-Lubeca by Ball Corporation that was
announced on August 30, 2002.
On September 5, 2002, Sidley discussed with Kelso and Debevoise certain of
the proposed terms for a merger agreement and, in particular, requested a lower
termination fee and greater flexibility to respond to unsolicited inquiries
from third-party suitors.
Later that day, the special committee met in person and determined that it
would not be willing to move forward with Kelso without approaching other
potential bidders unless Kelso was willing to pay at least $20.00 per share.
Mr. Puth, in accordance with the special committee's instructions, communicated
this determination to Blair and Blair relayed this information to Kelso. Later
that day, Kelso contacted Blair and indicated that it might increase its
proposed price to $19.50 per share under certain circumstances. Blair
reiterated the special committee's position that it was prepared to move
forward with Kelso only if Kelso would pay at least $20.00 per share.
Subsequently, Kelso contacted Blair and indicated that it would be willing to
raise its price to $20.00 per share, provided that (1) Kelso received and
confirmed outstanding business, legal and financial due diligence information
and (2) the merger agreement provided for a termination fee equal to 3.0% of
BWAY's total equity value plus reimbursement of expenses of up to $4 million
upon certain customary termination events.
22
After being informed by Blair of Blair's commuications with Kelso, the
special committee directed BWAY to deliver to Kelso all remaining due diligence
information over the next week. On September 16, 2002, Kelso confirmed to Blair
that it was satisfied with its review of the additional due diligence
information and confirmed its indication of interest at $20.00 per share.
Later that day, Debevoise distributed an initial draft of the merger
agreement and the form of voting agreement to the special committee, Sidley,
Kirkland and Blair. The special committee requested that Kirkland, in its
capacity as BWAY outside counsel, review with BWAY's management certain
sections of the draft merger agreement that related to BWAY's historical
condition and ongoing operations (such as representations and warranties and
pre-closing operating covenants) as well as to review disclosure schedules
prepared by BWAY.
On September 19, 2002, Sidley distributed its and Kirkland's initial
comments on the draft merger agreement and form of voting agreement to
Debevoise.
On September 20, 2002, Sidley and Debevoise discussed the major issues
identified by Sidley's and Kirkland's comments. Subsequently, Debevoise
distributed a revised draft of the merger agreement and form of voting
agreement, drafts of the form of exchange agreement pursuant to which each
continuing investor would agree to exchange some of his or her equity interests
in BWAY for equity interests in BCO Holding immediately prior to the merger,
and also the senior, bridge and equity financing commitment letters.
On September 22, 2002, the special committee met by telephone, together with
representatives of Sidley and Blair, to receive an update from Sidley on the
negotiation of the merger agreement and ancillary agreements. The special
committee discussed with Sidley several issues in the draft merger agreement
and instructed Sidley as to how to proceed. The special committee then
determined to meet in person on September 26, 2002 and to advise the full BWAY
board of directors to be prepared to meet later that day in case the special
committee determined to recommend the merger agreement and the merger.
During the week of September 23, 2002, Sidley, Kirkland and Debevoise
continued to negotiate the merger agreement and the ancillary agreements. Also
during that week, in response to Kelso's condition that Mr. Ergas exchange a
portion of his equity interests in BWAY for equity interests in BCO Holding
immediately prior to the merger, Mr. Ergas proposed to exchange 296,700 of his
BWAY stock options for BCO Holding stock options. In response, Kelso indicated
to Mr. Ergas that it wanted him to exchange a total of 364,305 BWAY stock
options. Mr. Ergas agreed to do so.
On September 25, 2002, Sidley and Blair advised the special committee that
agreement had not been reached on certain terms of the merger agreement and
bridge financing commitment letter. Thereafter, the special committee informed
the BWAY board that it would not be necessary to have a meeting of the full
BWAY board of directors on September 26, 2002. Sidley communicated this to
Debevoise.
On September 26, 2002, the special committee met in person, together with
representatives of Sidley and Blair. Sidley again reviewed with the special
committee members their fiduciary duties with respect to change of control and
interested party transactions. Sidley then provided the special committee with
an update on the open issues relating to the merger agreement and the ancillary
agreements. The special committee and its advisors discussed (1) the time at
which Kelso would be required to draw upon the bridge financing, (2) the
various conditions precedent that would need to be satisfied in order for
Deutsche Bank to be required to fund the bridge financing as set forth in the
draft bridge financing commitment letter and (3) the possibility of having the
high-yield debt offering close into an escrow account prior to the consummation
of the transactions contemplated by the merger agreement. After a discussion of
these and other open issues, and after having had an opportunity to ask
questions of Sidley and Blair regarding the drafts of the merger agreement and
the ancillary agreements previously circulated to the special committee, the
special committee directed Sidley and Blair to continue negotiating the merger
agreement and the ancillary agreements in accordance with the special
committee's instructions. In addition, Blair provided and discussed with the
special committee an update of Blair's preliminary financial analysis,
including updated financial information and the revised BWAY forecast for
fiscal year 2002.
23
Sidley and Blair continued negotiations with Kelso and Debevoise during the
evening of September 26, 2002 and the morning of September 27, 2002.
During the morning of September 27, 2002, the special committee met by
telephone, together with representatives of Sidley and Blair, to receive an
update on the negotiations that occurred earlier that morning and the previous
evening. The special committee unanimously agreed to proceed under those terms
and instructed Sidley and Blair to continue negotiations related to the merger
agreement and ancillary agreements.
On September 30, 2002, the special committee met by telephone, together with
representatives of Sidley and Blair. The special committee discussed with
Sidley the resolution of the open points on the merger agreement and ancillary
agreements (copies of which had been circulated to the members of the special
committee). Thereafter, Blair made a presentation to the special committee
(copies of which had been circulated to the members of the special committee),
which included various financial analyses of the proposed consideration payable
in the merger. Following Blair's presentation and related inquiries by the
special committee, Blair delivered its oral opinion (noting that such opinion
would be delivered in writing later that day) that the proposed $20.00 in cash
per share merger consideration to be received by BWAY's stockholders (other
than the holders of shares to be exchanged for BCO Holding common stock
immediately prior to the merger) in connection with the merger pursuant to the
merger agreement was fair, from a financial point of view, to such
stockholders. Blair also reported to the special committee that, based upon its
analysis of precedent transactions, the termination fee and expenses that may
be payable by BWAY to Kelso in connection with a termination and under the
circumstances specified in the merger agreement were within the range of
termination fees and expenses payable in similar transactions. Based in large
part on the factors described below under the heading "Special Factors--Reasons
for the Merger; Recommendation of the Special Committee and the Board of
Directors" on page 25, the special committee unanimously determined that the
merger agreement, the merger and the other transactions contemplated thereby
were advisable and fair to, and in the best interests of, BWAY and its
stockholders who are entitled to receive the merger consideration specified in
the merger agreement, and recommended the merger agreement and the merger to
the full BWAY board of directors for approval and subsequent recommendation to
the stockholders of BWAY.
Immediately following the special committee meeting, the BWAY board of
directors met by telephone, together with representatives from Kirkland and
Sidley to discuss the merger agreement and the ancillary agreements (copies of
which had been circulated to the members of the BWAY board). At the meeting,
Kirkland reviewed with the BWAY board members their fiduciary duties to
stockholders with respect to change of control and interested party
transactions. The special committee then reviewed for the BWAY board the
special committee's extensive discussions and negotiations with Kelso regarding
the terms and conditions of the merger agreement and reported to the BWAY board
on the special committee's deliberations with respect to the merger agreement.
The special committee also noted to the BWAY board that it had received a
fairness opinion from Blair. The special committee then indicated to the BWAY
board (1) its unanimous determination that the merger agreement, the merger and
the other transactions contemplated thereby were advisable and fair to, and in
the best interests of, BWAY and its stockholders who are entitled to receive
the merger consideration and (2) its unanimous recommendation that the BWAY
board approve the merger agreement and the merger and recommend the merger
agreement and the merger to the BWAY stockholders. Based on the recommendation
of the special committee and the other factors discussed below under the
heading "Special Factors--Reasons for the Merger; Recommendation of the Special
Committee and the Board of Directors" on page 25, the BWAY board unanimously
determined that the merger agreement and the merger are fair to, and in the
best interests of, BWAY and its stockholders, and recommended that the
stockholders approve and adopt the merger agreement and the merger.
Following the board meeting, the merger agreement and related agreements
were finalized and executed and, early in the morning on October 1, 2002, BWAY
issued a press release announcing the execution of the merger agreement.
24
On October 2, 2002, a purported class action lawsuit was filed in the
Superior Court of Fulton County in the State of Georgia with respect to the
merger.
On October 3, 2002, BWAY filed with the SEC a Current Report on Form 8-K
which contained as exhibits the merger agreement, the voting agreements entered
into between Kelso and each of Mr. Ergas, Mr. Hayford and Mrs. Hayford, and the
press release that was issued by BWAY on October 1, 2002.
Reasons for the Merger; Recommendation of the Special Committee and the Board
of Directors
The special committee has unanimously determined that the merger agreement
and the merger are advisable and fair to, and in the best interests of, BWAY
and its stockholders who are entitled to receive the merger consideration and
recommended the merger agreement and the merger to the full BWAY board of
directors. Based on the recommendation of the special committee, the BWAY board
of directors has unanimously determined that the merger agreement and the
merger are fair to, and in the best interests of, BWAY and its stockholders,
and recommends that the stockholders approve and adopt the merger agreement and
the merger.
In recommending approval of the merger agreement and the merger to the BWAY
board of directors, the special committee consulted with its independent legal
and financial advisors and considered and evaluated a number of factors,
including:
. The current and historical financial condition and results of operations
of BWAY;
. The financial projections, including risks of achievement, of BWAY;
. The risks related to BWAY's future prospects and performance related to
plastics substitution. The special committee considered the fact that
several of BWAY's competitors had diversified into plastic packaging and
the potential need for BWAY to do so as well and the capital requirements
to achieve that diversification;
. the fact that (1) BWAY had publicly disclosed numerous times since
November 2001 its willingness to consider strategic alternatives,
including a merger or a recapitalization, and in July 2002 had expressly
noted that these options included a sale of the company and (2) no
unsolicited offers to acquire BWAY had been made by any financial or
strategic buyers;
. the fact that, after the solicitation effort conducted by Deutsche Bank in
late 2001 and the first half of 2002, Kelso had emerged as the only entity
to express an interest in acquiring BWAY at a premium over its market
price and to commence formal business and legal due diligence on BWAY;
. The fact that BWAY's management and Blair believed it was unlikely that
industry buyers would have a strategic interest in acquiring BWAY (a fact
borne out by the absence of any reaction by industry buyers to the
disclosures described above);
. The relationship of the $20.00 per share cash merger consideration to the
existing trading price and the historical trading price of BWAY's common
stock. The special committee also considered the fact that the $20.00 per
share cash consideration offered in the merger represented a premium of
approximately 44% over the per share closing price of BWAY's shares on
September 30, 2002, the last trading day prior to the public announcement
of the signing of the merger agreement and a premium of approximately 63%
over the average per share closing price of BWAY's shares over the 12
months preceding the delivery of Kelso's July 2002 indication of interest;
. The fact that the $20.00 per share cash merger consideration represented
more than a 14% premium over the original indication of interest received
from Kelso of $17.50 per share;
. The experience and expertise of Blair for quantitative analysis of the
financial terms of the merger agreement, including the preliminary
presentations by Blair on August 8, 2002, September 4, 2002 and September
26, 2002 and Blair's final presentation on September 30, 2002 and the
valuation analyses
25
contained therein. In its review of the final analyses prepared by Blair,
the special committee did not weigh each analysis prepared by Blair
separately, but rather considered all of them taken as a whole;
. The opinion of Blair, dated September 30, 2002, that, as of such date, the
$20.00 per share cash merger consideration was fair to the BWAY
stockholders entitled to receive such merger consideration from a
financial point of view;
. The terms and conditions of the merger agreement and the other ancillary
agreements, which the special committee believes would not preclude a
superior proposal, and the negotiation thereof. The special committee
considered in particular:
(1) the structure of the transaction as a merger which would result in
detailed public disclosure and a protracted period of time prior to
consummation of the merger for a superior proposal to be brought forth;
(2) BWAY's right to engage in negotiations with, and provide information
to, a third party that makes an unsolicited proposal if the special
committee determines in good faith, after consultation with its
independent financial and legal advisors, that such proposal could
realistically result in a transaction that is more favorable to BWAY's
stockholders, from a financial point of view, than the merger;
(3) BWAY's right to terminate the merger agreement in order to accept a
superior proposal, subject to certain conditions and the payment of a
termination fee and expense reimbursement to Kelso;
(4) the termination fee and expense reimbursement provisions of the merger
agreement. Blair reported to the special committee that, based upon
its analysis of precedent transactions, the termination fee and
expenses that may be payable by BWAY to Kelso in connection with a
termination were within the range of termination fees and expenses
payable in similar transactions. The special committee concluded that
these obligations would not deter a third party from making a proposal
that was materially more favorable to BWAY's stockholders;
(5) the provisions of the voting agreements which (1) cause the voting
agreements to terminate upon a termination of the merger agreement or
a change in the recommendation of BWAY's board of directors with
respect to the merger and (2) allow the stockholders that are parties
to those agreements to engage in negotiations with and provide
information to a third party that makes an unsolicited proposal to the
same extent as BWAY may do so under the merger agreement; and
(6) the closing conditions to the merger, including those related to
consummation of the required financing and the success of the debt
tender and consent solicitation contemplated by the merger agreement
with respect to BWAY's outstanding 101/4% Senior Subordinated Notes
due 2007;
. The fact that the aforesaid documents would be available promptly
following the public disclosure of the merger agreement via the SEC's
EDGAR database as part of a Current Report on Form 8-K to be filed by BWAY
(such Form 8-K was filed by BWAY on October 3, 2002);
. Kelso's reputation and experience in consummating transactions such as
those contemplated by the merger agreement, including Kelso's written
statement in its original indication of interest that it had never failed,
due to a lack of financing, to complete a transaction after a definitive
agreement had been signed;
. The nature of the financing commitments received by Kelso with respect to
the merger, including (1) the conditions to the obligations of the
institutions providing such commitments to fund their commitments and (2)
the identities of those institutions and their experience in consummating
transactions such as those contemplated by the merger agreement;
. The possibility that the high-yield debt offering would be closed into
escrow, which, while possibly increasing BWAY's expenses in connection
with the transaction, might increase the likelihood that the high-yield
financing would be completed;
26
. BWAY's relatively small market capitalization, even smaller public float
(due to a number of large stockholders) and low trading volume when
compared to other NYSE-listed companies;
. The mitigation of the risk of a fraudulent conveyance challenge to the
merger as a result of (1) the merger agreement's closing condition that
the parties receive an opinion from an appraisal firm of national
reputation indicating that, after the merger and the financing
contemplated by the merger agreement, BWAY would not be insolvent, will
have sufficient assets to pay its debts and will not have unreasonably
small capital, and (2) the special committee's confidence in BWAY's
ongoing management;
. The fact that the stockholders of BWAY will be entitled to exercise their
appraisal rights under the General Corporation Law of Delaware to receive
the "fair value" of their shares if they dissent from the merger;
. The conflicting interests that certain officers and directors of BWAY
(other than those on the special committee) have with respect to the
merger;
. The fact that the cash merger consideration will be taxable to the
stockholders entitled to receive such consideration;
. The careful review of the representations and warranties in the merger
agreement, and the preparation of BWAY's disclosure schedules, by BWAY's
management team and its outside counsel; and
. The active and direct role of the members of the special committee in the
negotiations with respect to the proposed merger, the consideration of the
transaction by the special committee in 13 special committee meetings, the
experience of the special committee members with BWAY and the past general
business experience of such members.
This discussion of the information and factors considered by the special
committee in reaching its conclusions and recommendations includes all of the
material factors considered by the special committee but is not intended to be
exhaustive. In view of the wide variety of factors considered by the special
committee in evaluating the merger and the complexity of these matters, the
special committee did not find it practicable to, and did not attempt to,
quantify, rank or otherwise assign relative weights to those factors. In
addition, different members of the special committee may have given different
weight to different factors.
BWAY's board of directors consists of seven members, four of whom served on
the special committee. At the September 30, 2002 meeting of the BWAY board of
directors, the special committee, with representatives of Sidley participating,
reported to the entire BWAY board of directors on its review of the merger
agreement, the ancillary agreements and the related financing commitment
letters. BWAY's board of directors considered the conclusions and
recommendations of the special committee and believes that these factors
supported the determination of fairness by the BWAY board of directors.
Furthermore, the BWAY board of directors considered the fact that the $20.00
per share cash merger consideration and the terms and conditions of the merger
agreement were the result of arm's-length negotiations among the special
committee and Kelso and their respective advisors, the fact that the special
committee received a fairness opinion from Blair and the fact that the BWAY
board of directors had agreed not to recommend the proposed merger to the BWAY
stockholders without the prior favorable recommendation of the special
committee. The BWAY board of directors believes that these factors also support
its fairness determination.
Members of the Special Committee
John Puth. Mr. Puth, the chairman of the special committee, has served as a
director of BWAY since August 1995. Since December 1987, Mr. Puth has served as
President of J.W. Puth Associates, an industrial consulting firm. From 1983 to
1987, Mr. Puth was Chairman and President of Clevite Industries, Inc., a
manufacturer of industrial products. From 1975 to 1983, Mr. Puth was President
and Chief Executive Officer of Vapor Corporation. Mr. Puth is a director of
A.M. Castle & Co., L.B. Foster Company and US Freightways Corporation as well
as several privately-held corporations. Since October 1998, Mr. Puth has been a
general partner of BVCF III & IV Institutional Venture Capital Funds.
27
Thomas Donahoe. Mr. Donahoe has served as a director of BWAY since August
1996. Mr. Donahoe was a partner in the accounting firm Price Waterhouse LLP
(the "Firm") from 1970 until he retired in June 1996. As a partner in the Firm,
Mr. Donahoe held a variety of positions including: Managing Partner-Operations
of the Firm's Audit Business Advisory Practice, July 1995 to June 1996; Vice
Chairman of the Firm, 1988 to June 1995; member of the Price Waterhouse World
Firm General Council, 1985 to June 1995; Managing Partner of the Great Lakes
Region, 1978 to June 1995; member of the Firm's Management Committee, 1978 to
June 1995; member of the Firm's Policy Board, 1976 to June 1995; and Managing
Partner of the Chicago Office, 1976 to June 1994. Mr. Donahoe is a director of
Andrew Corporation and NICOR Inc. Mr. Donahoe also serves as a Director or
Trustee of a number of not-for-profit entities, including: Chicago Botanic
Garden, Chicago Central Area Committee, Executive Service Corp. of Chicago,
Kohl's Children's Museum and Rush-Presbyterian-St. Luke's Medical Center.
Alexander Dyer. Mr. Dyer has served as a director of BWAY since August 1995.
Mr. Dyer served as Chairman of Bunzl plc from May 1993 to July 1996 and
currently serves as its Deputy Chairman and as Chairman of its Remuneration
Committee. Mr. Dyer retired from The BOC Group plc in January 1996, having
served as its Chief Executive Officer and Deputy Chairman, in which capacities
he served from November 1993 to January 1996. Prior thereto, Mr. Dyer served as
Managing Director-Gases of The BOC Group plc from 1989 to 1993 and worked for
Air Products and Chemicals Inc. for 26 years, serving most recently as
Executive Vice President responsible for worldwide gases and equipment
businesses from 1987 to 1989.
John Jones. Mr. Jones has served as a director of BWAY since August 1996.
From 1989 until his retirement in 1996, Mr. Jones served as Chairman, President
and CEO of CBI Industries, Inc. Mr. Jones is a director of Amsted Industries,
Inc., NICOR Inc. and Valmont Industries, Inc. Mr. Jones also serves as Trustee
or Director on a number of not-for-profit entities, including
Rush-Presbyterian-St. Luke's Medical Center.
Opinion of the Special Committee's Financial Advisor
The special committee retained William Blair & Company, L.L.C. to act as its
independent financial advisor in connection with the proposed merger. As part
of its engagement, the special committee asked Blair to render a fairness
opinion relating to the merger. On September 30, 2002, Blair delivered to the
special committee its written opinion to the effect that, as of that date and
based upon and subject to the assumptions and qualifications stated in its
opinion, the $20.00 per share merger consideration to be received by BWAY's
stockholders (other than the holders of shares to be exchanged for BCO Holding
common stock immediately prior to the merger) in connection with the merger
pursuant to the merger agreement was fair, from a financial point of view, to
such stockholders.
The full text of Blair's written opinion, dated September 30, 2002, is
attached as Annex B to this proxy statement and incorporated by reference. You
are urged to read the entire opinion carefully to learn about the assumptions
made, procedures followed, matters considered and limits on the scope of the
review undertaken by Blair in rendering its opinion. Blair's opinion relates
only to the fairness, from a financial point of view, to BWAY's stockholders
(other than the holders of shares to be exchanged for BCO Holding common stock
immediately prior to the merger) of the merger consideration to be received by
such stockholders in the merger pursuant to the merger agreement, does not
address any other aspect of the proposed merger or any related transaction, and
does not constitute a recommendation to any stockholder as to how that
stockholder should vote with respect to the approval of the merger agreement or
the merger. The following summary of Blair's opinion is qualified in its
entirety by reference to the full text of the opinion. Blair's opinion was
directed to the special committee for its benefit and use in evaluating the
fairness of the merger consideration. We urge you to read the opinion carefully
and in its entirety.
In connection with its opinion, Blair reviewed:
. the merger agreement, the several exchange agreements between BCO Holding
and each of the continuing investors and the several voting agreements
among BCO Holding and certain of the continuing investors (we collectively
refer to such exchange agreements and voting agreements, together with the
merger agreement, as the "Agreements");
28
. separate commitment letters from Deutsche Bank providing the terms and
conditions upon which Deutsche Bank has committed to provide the senior
secured revolving credit portion and the senior bridge loan portion,
respectively, of the financing required in connection with the proposed
merger;
. certain audited historical financial statements of BWAY for the three
years ended September 30, 2001;
. the unaudited financial statements of BWAY for the nine months ended June
30, 2002;
. certain internal business, operating and financial information and
forecasts of BWAY for each of the fiscal years ending September 30, 2002,
2003, 2004 and 2005, prepared by the senior management of BWAY, and
certain projections for each of BWAY's fiscal years ending September 30,
2006 and 2007, based solely on such forecasts and certain financial and
other information relating to the past performance and future prospects of
BWAY (which we collectively refer to as the "Forecasts");
. information regarding publicly available financial terms of certain other
business combinations Blair deemed relevant;
. the financial position and operating results of BWAY compared with those
of certain other publicly traded companies Blair deemed relevant;
. existing and historical market prices and trading volumes of BWAY common
stock;
. BWAY's annual report on Form 10-K for the fiscal year ended September 30,
2001, BWAY's quarterly reports on Form 10-Q for the fiscal quarters ended
December 30, 2001, March 31, 2002 and June 30, 2002 and certain other
publicly available information relating to BWAY and the industry in which
it conducts its business; and
. such other materials and information Blair deemed relevant.
Blair also held discussions with members of the senior management of BWAY to
discuss the foregoing. Blair also met with the special committee and the
special committee's legal counsel to discuss the merger and the other
transactions contemplated by the Agreements, and the results of its analysis
and examination. Blair also considered other matters which it deemed relevant
to its inquiry, and has taken into account the accepted financial and
investment banking procedures and considerations that it deemed relevant or
appropriate.
In rendering its opinion, Blair assumed and relied, without independent
verification, upon the accuracy and completeness of all the information
examined by or otherwise reviewed or discussed with Blair for purposes of its
opinion, including without limitation the Forecasts. Blair was advised by the
senior management of BWAY that the Forecasts had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
senior management of BWAY. In that regard, Blair assumed, with the consent of
the special committee, that the Forecasts will be achieved and that all
material assets and liabilities (contingent or otherwise) of BWAY are as set
forth in BWAY's financial statements or other information made available to
Blair. Blair expressed no opinion with respect to the Forecasts or the
estimates and judgments on which they were based.
With the consent of the special committee, Blair also assumed that the
merger will be consummated on the terms described in the merger agreement,
without any waiver of any material terms or conditions by BWAY, BCO Holding or
BCO Acquisition, that obtaining the necessary regulatory approvals for the
merger will not have an adverse effect on BWAY, and that the executed forms of
the Agreements conform in all material respects to the last drafts of the
Agreements reviewed by Blair.
Blair did not make or obtain an independent valuation or appraisal of the
assets, liabilities or solvency of BWAY. Blair was not requested to seek, nor
did it seek, alternative participants for the proposed merger. Furthermore,
Blair was not asked to consider, and its opinion does not address, the relative
merits of the merger as compared to any alternative business strategies that
might exist for BWAY or the effect of any other transaction in which BWAY might
engage. Blair relied as to all legal matters on advice of counsel to the
special committee.
Blair did not express any opinion as to the price at which BWAY common stock
would trade at any future time. Those trading prices could be affected by a
number of factors, including but not limited to:
. changes in the prevailing interest rates and other factors which generally
influence the price of securities;
29
. adverse changes in the current capital markets;
. the occurrence of adverse changes in the financial condition, business,
assets, results of operations or prospects of BWAY or in the product
markets it serves;
. any necessary actions by or restrictions of federal, state or other
governmental agencies or regulatory authorities; and
. timely completion of the merger on the terms and conditions that are
acceptable to all parties at interest.
Blair's opinion was based upon economic, market, financial and other
conditions existing on, and other information disclosed to Blair as of, the
date of such opinion. Although subsequent developments may affect its opinion,
Blair does not have any obligation to update, revise or reaffirm its opinion.
The following is a summary of the material financial analyses performed and
material factors considered by Blair to arrive at its opinion. Blair performed
certain procedures, including each of the financial analyses described below,
and reviewed with the special committee the assumptions upon which such
analyses were based, as well as other factors. Although the summary does not
purport to describe all of the analyses performed or factors considered by
Blair in this regard, it does set forth those considered by Blair to be
material in arriving at its opinion.
The fiscal year 2006 and 2007 projections included in the Forecasts used by
Blair in the discounted cash flow analysis and the leveraged acquisition
analysis discussed below were based on the Budget Projections for BWAY's 2003
fiscal year and the Stretch Target Projections for BWAY's 2004 and 2005 fiscal
years. Please see the discussion under the heading "Certain Projected Financial
Information Prepared by BWAY's Management" on page 35 for further information
about these projections. In order to develop fiscal year 2006 and 2007
projections necessary to perform the discounted cash flow analysis and the
leveraged acquisition analysis discussed below, Blair, after consulting with
BWAY's management about the reasonableness of its assumptions, assumed a 3%
growth rate and stable margins. Blair notes that it used the fiscal year 2006
and 2007 projections for the limited purposes of performing these two analyses.
Implied Merger Multiples. Blair calculated implied merger multiples for the
transaction as summarized in the table below. "Total Value" refers to equity
value plus total debt less cash and equivalents which, in the case of BWAY,
includes proceeds expected from the exercise of outstanding options to purchase
BWAY common stock. "Equity Value" was based on the $20.00 per share merger
consideration and the 10,633,790 fully diluted shares of BWAY common stock
outstanding as of September 20, 2002 per BWAY, which included 8,708,626 basic
shares outstanding and 1,925,164 shares issuable upon the exercise of
outstanding BWAY stock options. "LTM" refers to the last twelve months. For
purposes of the discussion under this heading "Opinion of the Special
Committee's Financial Advisor," "EBITDA" refers to earnings before interest,
taxes, depreciation and amortization. For BWAY, "Forward EBITDA" and "2-Year
Forward EBITDA" represent management estimates of EBITDA for the 2002 fiscal
year ending September 30, 2002 and the 2003 fiscal budget, respectively. "EBIT"
refers to earnings before interest and taxes.
BWAY Implied
Multiple Merger Multiples
-------- ----------------
Total Value/LTM Sales..................... 0.59x
Total Value/LTM EBITDA.................... 6.0x
Total Value/Forward EBITDA Estimate....... 5.3x
Total Value/2-Year Forward EBITDA Estimate 4.9x
Total Value/LTM EBIT...................... 10.1x
Equity Value/LTM Net Income............... 17.7x
Comparable Public Company Analysis. Blair reviewed and compared certain
financial information relating to BWAY to corresponding financial information,
ratios and public market multiples for certain publicly traded companies with
operations in the packaging industry that Blair deemed relevant. The comparable
companies selected by Blair were Ball Corporation, Crown Cork & Seal Company,
Inc., Owen-Illinois, Inc., Rexam plc and Silgan Holdings Inc. Blair selected
these companies because they are the publicly traded companies that engage in
businesses reasonably comparable to BWAY's business.
30
Among the information Blair considered were EBITDA, EBIT, sales and net
income. The operating results and the corresponding derived multiples for BWAY
and the comparable companies were based on each company's most recent available
publicly disclosed financial information, closing share prices as of
September 27, 2002 and consensus Wall Street analysts' EBITDA estimates for
calendar year 2002 and 2003. Since BWAY's fiscal year ends in September while
the comparable public companies' fiscal years end in December, for purposes of
comparison, Blair "calendarized" BWAY's financial results and forecasts.
Estimates for BWAY's EBITDA and net income were determined, in the case of
calendar year ("CY") 2002, by using 75% of BWAY management's forecast for the
2002 fiscal year and 25% of BWAY management's forecast for the 2003 fiscal
year, and, in the case of CY 2003, by using 75% of BWAY management's forecast
for the 2003 fiscal year and 25% of BWAY management's forecast for the 2004
fiscal year.
Blair then derived a range of implied per share equity values for BWAY by
applying the multiples from the selected comparable companies to the
corresponding data for BWAY. These implied per share equity values were based
on the 10,633,790 fully diluted shares of BWAY common stock outstanding as of
September 20, 2002 indicated by BWAY, which included 8,708,626 basic shares
outstanding and 1,925,164 shares issuable upon the exercise of outstanding BWAY
stock options. Information regarding the multiples from Blair's analysis of
selected comparable publicly traded companies, including the range of implied
per share equity values for BWAY derived from these multiples, is set forth in
the following table.
Comparable BWAY
Company Implied Per Share
Multiple Range Equity Value Range
-------------- ------------------
Multiple Low High Low High
-------- ----- ----- ------ ------
Total Value/LTM EBITDA................. 5.5x 9.2x $17.59 $34.97
Total Value/CY2002 EBITDA Estimate..... 5.8x 8.6x $23.13 $38.27
Total Value/CY2003 EBITDA Estimate..... 5.7x 8.2x $25.35 $40.08
Total Value/LTM EBIT................... 9.1x 15.2x $17.30 $34.43
Total Value/LTM Sales.................. 0.81x 1.38x $30.77 $58.23
Equity Value/LTM Net Income............ 6.4x 22.0x $ 7.85 $23.09
Equity Value/CY2002 Net Income Estimate 5.7x 18.8x $ 9.75 $28.48
Median $17.59 $34.97
The median per share equity values for BWAY implied by the comparable public
company analysis ranged from $17.59 to $34.97.
None of the selected companies is identical to BWAY. Accordingly, any
analysis of the selected comparable publicly traded companies necessarily
involved complex consideration and judgments concerning the differences in
financial and operating characteristics and other factors that would
necessarily affect the analysis of trading multiples of the selected comparable
publicly traded companies.
Comparable Transactions Analysis. Blair performed an analysis of selected
recent business combinations in the packaging industry based on publicly
available information. In total, Blair examined 12 transactions that were
chosen based on Blair's judgment that they were generally comparable, in whole
or in part, to the proposed merger. The selected transactions were not intended
to be representative of the entire range of possible transactions in the
packaging industry. The 12 transactions examined were (target/acquirer):
. Schmalbach-Lubeca/Ball Corporation
. Schmalbach-Lubeca/AV Packaging GmbH
. American National Can/Rexam plc
. U.S. Can Corporation/Berkshire Partners
. May Verpackungen/U.S. Can Corporation
. PLM AB/Rexam plc
. Blagden Packaging/Drum Holdings S.A.
31
. BTR Packaging/Owens-Illinois, Inc.
. Continental Can Company/Suiza Foods
. Crown, Cork & Seal Company, Inc. (European Aerosol Business)/U.S. Can
Corporation
. American National Can (Food Metal & Specialty)/Silgan Holdings Inc.
. CarnaudMetalbox/Crown, Cork & Seal Company, Inc.
Blair reviewed the consideration paid in the selected comparable
transactions in terms of the Total Value of such transactions as a multiple of
sales, EBITDA and EBIT and the equity value as a multiple of net income for the
latest twelve months prior to the announcement of such transactions. Blair then
derived a range of implied per share equity values for BWAY by applying the
multiples from the selected comparable transactions to the corresponding data
for BWAY. Information regarding the multiples from Blair's analysis of selected
comparable transactions, including the range of implied per share equity values
for BWAY derived from these multiples, is set forth in the following table:
Comparable BWAY
Transaction Implied Per Share
Multiple Multiple Range Equity Value Range
-------- -------------- ------------------
Total Value/LTM Sales...... 0.75x 0.85x $27.88 $32.70
Total Value/LTM EBITDA..... 5.5x 6.5x $17.59 $22.28
Total Value/LTM EBIT....... 9.5x 11.5x $18.42 $24.04
Equity Value/LTM Net Income 13.0x 15.0x $14.30 $16.25
Median $18.00 $23.16
The median per share equity values for BWAY implied by the comparable
transactions analysis ranged from $18.00 to $23.16.
Although Blair utilized the multiples implied by the selected transactions
to derive the range of implied per share equity values of BWAY, none of these
transactions or associated companies is identical to the merger or BWAY.
Accordingly, any analysis of the selected comparable transactions necessarily
involved complex considerations and judgments concerning the differences in
financial and operating characteristics, parties involved and terms of their
transactions and other factors that would necessarily affect the merger value
of BWAY versus the merger values of the companies in the selected comparable
transactions.
Blair separately analyzed the American National Can/Rexam plc transaction
and the U.S. Can Corporation/Berkshire Partners transaction because of Blair's
belief that these transactions were the most relevant and recent comparable
transactions to the merger. In addition, Blair separately analyzed the pending
Schmalbach-Lubeca/Ball Corporation transaction that was announced on August 30,
2002 due to the recency of this transaction. However, since Schmalbach-Lubeca's
product line was relatively dissimilar to BWAY's compared to that of American
National Can and U.S. Can, Blair placed less weight on the
Schmalbach-Lubeca/Ball Corporation transaction multiples. For each of the first
two transactions, Blair analyzed the respective multiples of the Total Value to
the LTM sales, EBITDA and EBIT, and equity value to LTM net income for the
selling company. In addition, Blair analyzed the respective multiples of Total
Value to the estimated EBITDA for the fiscal years 2000 and 2001, as projected
by Wall Street research analysts, for the American National Can/Rexam plc and
U.S. Can Corporation/Berkshire Partners transactions.
For purposes of this analysis, "Forward EBITDA" for the American National
Can and U.S. Can Corporation transactions represents EBITDA as estimated by
Wall Street research analysts for 2000. "2-Year Forward EBITDA" represents
EBITDA as estimated by Wall Street research analysts for 2001. Information
regarding the multiples implied by the terms of the merger compared to the
multiples from Blair's analysis of the American National Can/Rexam plc
transaction and the U.S. Can Corporation/Berkshire Partners transaction is set
forth in the following table:
32
Implied Merger Multiples
------------------------------
American U.S. Can
Multiple National Can Corporation BWAY
-------- ------------ ----------- -----
Total Value/LTM Sales..................... 0.85x 0.72x 0.59x
Total Value/LTM EBITDA.................... 5.7x 5.5x 6.0x
Total Value/Forward EBITDA Estimate....... 5.0x-5.6x 5.6x 5.3x
Total Value/2-Year Forward EBITDA Estimate 4.7x-5.3x 5.0x 4.9x
Total Value/LTM EBIT...................... 8.7x 8.3x 10.1x
Equity Value/LTM Net Income............... 9.8x 10.3x 17.7x
Blair noted that the implied multiples for the merger are comparable to the
multiples analyzed for the American National Can/Rexam plc and U.S. Can
Corporation/Berkshire Partners transactions.
Premiums Paid Analysis. Blair reviewed data from 29 publicly available
industrial domestic transactions of $100 million to $500 million in size from
July 1, 2000 to September 27, 2002. Specifically, Blair analyzed the
acquisition price as a premium to the closing share price one day, one week and
four weeks prior to the announcement of the transaction. Blair then derived a
range of implied per share equity values for BWAY by applying the premiums from
the selected transactions to the corresponding data for BWAY. Information
regarding the premiums from Blair's analysis of selected industrial domestic
transactions and the range of implied per share equity values for BWAY derived
from these premiums, is set forth in the following table:
BWAY
Range of Implied Per Share
Premium Period Acquisition Premiums Equity Value Range
-------------- -------------------- ------------------
1 Day Prior... 28.9% 39.4% $17.85 $19.31
1 Week Prior.. 40.7% 49.6% $19.57 $20.81
4 Weeks Prior. 52.8% 61.6% $22.00 $23.27
Discounted Cash Flow Analysis. Blair utilized the Forecasts to perform a
discounted cash flow analysis of BWAY's projected future cash flows for the
period commencing October 1, 2002 and ending September 30, 2007. Using
discounted cash flow methodology, Blair calculated the present values of the
projected cash flows for BWAY. Blair aggregated (1) the present value of the
free cash flows over the applicable forecast period with (2) the present value
of the range of terminal values. In this analysis, Blair assumed terminal value
multiples of 4.5x to 6.5x EBITDA and discount rates of 13% to 17%. The
discounted cash flow analysis conducted by Blair produced implied per share
equity values for BWAY as follows:
Discount Rate Terminal EBITDA Multiple Implied Per Share Equity Value Range
------------- ------------------------ ------------------------------------
13%-17%... 4.5x-6.5x $17.16-$28.85
Leveraged Acquisition Analysis. Blair prepared an analysis as to the price
that could be expected to be paid by a typical leveraged buyout purchaser to
acquire BWAY. This analysis was based upon the Forecasts. In this analysis,
Blair assumed capital structure and financing rate scenarios consistent with
the financing commitments under the capital structure proposed by BCO Holding,
as it was deemed to be representative of the prevailing market for leveraged
acquisitions in Blair's judgment based on its experience. Assuming internal
rates of return to equity investors of approximately 23% to 34% and exit
multiples of 4.5x to 6.5x EBITDA in fiscal 2007, this analysis indicated that
the consideration a leveraged buyout purchaser might be willing to pay for BWAY
ranged from approximately $17.50 per share to $21.00 per share.
Discounted Expected Share Price Analysis. Blair utilized BWAY management's
forecasts of projected EBITDA for fiscal years 2003 through 2005 to estimate
BWAY's future total enterprise values for each of these fiscal years using
EBITDA multiples ranging from 4.0x to 6.0x. Blair then deducted net debt
projected by BWAY management for each of these fiscal years (projected total
debt less cash and equivalents, which included
33
proceeds expected from the exercise of outstanding options to purchase BWAY
common stock outstanding as of September 20, 2002 as indicated by BWAY
management) to arrive at a range of estimated future equity values for these
fiscal years. Blair discounted these estimated future equity values to
September 30, 2002 using discount rates of 15% and 18% based on its judgment of
the cost of equity capital of comparable public companies. The range of
estimated per share equity values for BWAY indicated by this analysis for
fiscal year 2003 was $14.40 to $24.74. The range of estimated per share equity
values for BWAY indicated by this analysis for fiscal year 2004 was $16.18 to
$26.70. The range of estimated per share equity values for BWAY indicated by
this analysis for fiscal year 2005 was $16.22 to $26.42.
Summary. The following table summarizes the implied per share equity value
for BWAY derived from the analyses indicated, as described above.
Implied Per
Share Equity
Valuation Methodology Value Range
--------------------- -------------
Comparable Public Company Analysis...... $17.59-$34.97
Comparable Transactions Analysis........ $18.00-$23.16
Premiums Paid Analysis.................. $17.85-$23.27
Discounted Cash Flow Analysis........... $17.16-$28.85
Leveraged Acquisition Analysis.......... $17.50-$21.00
Discounted Expected Share Price Analysis $14.40-$26.70
Value of Merger Consideration per Share. $20.00
General. The preparation of an opinion regarding fairness is a complex
analytic process involving various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. The preparation of a
fairness opinion does not involve a mathematical evaluation or weighing of the
results of the individual analyses performed, but requires Blair to exercise
its professional judgment, based on its experience and expertise, in
considering a wide variety of analyses taken as a whole. Each of the analyses
conducted by Blair was carried out in order to provide a different perspective
on the proposed merger and add to the total mix of information available. Blair
did not form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion about the fairness of the
merger consideration. Rather, in reaching its conclusion, Blair considered the
results of the analyses in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole. Blair did not
place particular reliance or weight on any particular analysis, but instead
concluded its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, Blair
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, may create an incomplete view of the evaluation
process underlying its opinion. No company or transaction used in the above
analyses, as a comparison is directly comparable to BWAY or the merger. In
performing its analyses, Blair made numerous assumptions with respect to
industry performance, business and economic conditions and other matters. The
analyses performed by Blair are not necessarily indicative of future actual
values and future results, which may be significantly more or less favorable
than suggested by such analyses.
Blair is a nationally recognized firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with merger transactions and other types of strategic
combinations and acquisitions. In the ordinary course of its business, Blair
and its affiliates may beneficially own or actively trade common shares and
other securities of BWAY for its own account and for the accounts of customers,
and, accordingly, may at any time hold a long or short position in these
securities.
The special committee hired Blair based on its qualifications and expertise
in providing financial advice to companies and its reputation as a nationally
recognized investment banking firm. Pursuant to a letter agreement dated July
25, 2002, Blair has been paid fees totaling $700,000 for its role as financial
advisor to the special
34
committee. Under the terms of the letter agreement, Blair will be entitled to
receive an additional success fee upon the closing of the merger based upon a
percentage of the total consideration paid in the merger, including assumed or
repaid indebtedness. The success fee payable to Blair upon the closing of the
merger will be approximately $2,300,000. In addition, BWAY has agreed to
reimburse Blair for all of its out-of-pocket expenses (including fees and
expenses of its counsel) reasonably incurred by it in connection with its
services to the special committee under the letter agreement. BWAY has also
agreed to indemnify Blair against potential liabilities arising out of its
engagement.
Certain Projected Financial Information Prepared by BWAY's Management
BWAY does not as a matter of course make public projections as to future
sales, earnings or other results. However, BWAY's management has included the
projected financial information set forth below because such information was
provided to Kelso, the special committee and/or the special committee's
financial advisors.
The projected financial information set forth below was not prepared with a
view toward public disclosure or with a view toward complying with the
guidelines established by the American Institute of Certified Public
Accountants with respect to prospective financial information, but, in the view
of BWAY's management, was prepared on a reasonable basis, reflects the best
currently available estimates and judgments as of the date of its preparation,
and presents, to the best of management's knowledge and belief, the expected
course of action and the expected future financial performance of BWAY as of
the date of its preparation. However, this information is not fact and should
not be relied upon as being necessarily indicative of future results, and
readers of this proxy statement are cautioned not to place undue reliance on
the prospective financial information.
Neither BWAY's independent auditors, nor any other independent accountants,
have compiled, examined, or performed any procedures with respect to the
projected financial information contained in this proxy statement, nor have
they expressed any opinion or any other form of assurance on such information
or its achievability, and assume no responsibility for, and disclaim any
association with, the prospective financial information.
The assumptions and estimates underlying the projected financial information
are inherently uncertain and, though considered reasonable by BWAY's management
as of the date of its preparation, are subject to a wide variety of significant
business, economic and competitive risks and uncertainties that could cause
actual results to differ materially from those contained in the projected
financial information. Accordingly, there can be no assurance that the
projected results are indicative of the future performance of BWAY or that
actual results will not differ materially from those presented in the
prospective financial information. Inclusion of the projected financial
information in this proxy statement should not be regarded as a representation
by any person that the results contained in the projected financial information
will be achieved.
BWAY does not generally publish its business plans and strategies or make
external disclosures of its anticipated financial position or results of
operations. Accordingly, BWAY does not intend to update or otherwise revise the
projected financial information to reflect circumstances existing since its
preparation or to reflect the occurrence of unanticipated events, even in the
event that any or all of the underlying assumptions are shown to be in error.
Furthermore, BWAY does not intend to update or revise the projected financial
information to reflect changes in general economic or industry conditions.
Additional information relating to the principal assumptions used in
preparing the projections is set forth below.
35
Initial Projections. In March 2002, in the normal course of business, BWAY's
management prepared certain projections of BWAY's operating performance for
each of its fiscal years ending September 30, 2002, 2003, 2004 and 2005 (which
we refer to as the "Initial Projections"). BWAY's management provided the
Initial Projections to Kelso on April 12, 2002.
The following table summarizes certain significant elements of the Initial
Projections. The Initial Projections assumed no acquisitions, annual revenue
growth ranging from 1.8% to 7.8%, gross margin improvements based on higher
sales levels and certain operating efficiencies partially offset by inflation.
The Initial Projections were based on five months of actual results and seven
months of projected results for fiscal 2002. You should note that the 2002 and
2003 forecasts included in the Initial Projections have been replaced, given
the passage of time, with the Final 2002 Forecast and the 2003 Budget included
in the Budget Projections discussed below.
Fiscal Year Ended September 30,
-------------------------------------------------------
2002 Forecast 2003 Forecast 2004 Forecast 2005 Forecast
------------- ------------- ------------- -------------
(dollars in millions, except per share data)
Net sales......... $510.0 $550.0 $570.0 $600.0
Gross margin...... 63.7 71.8 76.3 80.7
Pre-tax income.... 18.0 27.3 34.0 41.6
Net income........ 10.1(a) 15.3 19.0 23.3
EBITDA............ 50.0(a) 57.0 61.0 65.0
Earnings per share 1.11(a) 1.68 2.09 2.56
--------
(a) Fiscal 2002 forecast information excludes restructuring charge, merger
related transaction costs and other income (expense).
Stretch Target Projections. In late July 2002, in the normal course of
business, BWAY's management prepared certain "best case" projections of BWAY's
operating performance for each of its fiscal years ending September 30, 2002,
2003, 2004 and 2005 (which we refer to as the "Stretch Target Projections").
BWAY's management prepared these projections to establish aggressive financial
targets. The Stretch Target Projections assumed no acquisitions, annual revenue
growth ranging from 4.6% to 9.5%, gross margin improvements based on higher
sales levels and certain operating efficiencies partially offset by inflation.
The Stretch Target Projections were based on nine months of actual results and
three months of projected results for fiscal 2002. In early August 2002, BWAY's
management provided the Stretch Target Projections to Kelso, the special
committee and the special committee's financial advisor.
The following table summarizes certain significant elements of the Stretch
Target Projections. However, you should note that the Stretch Target
Projections do not weigh downside financial risks and do not reflect
management's views of BWAY's likely financial performance during the periods
presented.
Fiscal Year Ended September 30,
-------------------------------------------
2002 2003 2004 2005
Forecast Forecast Forecast Forecast
-------- -------- -------- --------
(dollars in millions, except per share data)
Net sales......... $520.0 $545.0 $570.0 $600.0
Gross margin...... 67.6 79.0 83.6 88.3
Pre-tax income.... 20.0 33.8 40.0 46.0
Net income........ 11.5(a) 19.4 23.1 26.4
EBITDA............ 54.0(a) 64.0 68.0 72.0
Earnings per share 1.29(a) 2.04 2.43 2.78
--------
(a) Fiscal 2002 forecast information excludes restructuring charge, merger
related transaction costs and other income (expense).
36
Revised 2002 Forecast. In late August 2002, in the normal course of
business, BWAY's management updated the forecast for its fiscal year ending
September 29, 2002 (which we refer to as the "Revised 2002 Forecast"). The
Revised 2002 Forecast assumed no acquisitions, annual revenue growth of 10.2%,
gross margin improvements based on higher sales levels and certain operating
efficiencies partially offset by inflation. The Revised 2002 Forecast was based
on ten months of actual results and two months of projected results for fiscal
2002.
Also in late August 2002, in the normal course of business, BWAY's
management presented to the BWAY board an operating budget for fiscal 2003
(which we refer to as the "2003 Budget"). The 2003 Budget assumed no
acquisitions, annual revenue growth of 4.2%, gross margin improvements based on
higher sales levels and certain operating efficiencies partially offset by
inflation. The 2003 Budget originally presented to the BWAY board included
EBITDA of $60.0 million. The final 2003 Budget approved by the BWAY board
included EBITDA of $60.9 million.
In mid-September 2002, BWAY's management prepared a final forecast for its
fiscal year ending September 29, 2002 (which we refer to as the "Final 2002
Forecast"). The Final 2002 Forecast was based on similar assumptions as the
Revised 2002 Forecast, except it included eleven months of actual results and
only one month of projected results for fiscal 2002.
BWAY's management provided the Revised 2002 Forecast, the Final 2002
Forecast and the 2003 Budget to Kelso, the special committee and the special
committee's financial advisors.
The following table summarizes certain significant elements of the Revised
2002 Forecast, the Final 2002 Forecast and the 2003 Budget (we refer to the
Final 2002 Forecast and the 2003 Budget collectively as the "Budget
Projections").
Fiscal Year Ended September 30,
-----------------------------
Revised Final
2002 2002 2003
Forecast Forecast Budget
-------- -------- ------
(dollars in millions,
except per share data)
Net sales......... $523.6 $525.0 $545.7
Gross margin...... 69.2 70.4 74.6
Pre-tax income.... 21.3 23.0 32.3
Net income........ 12.5(a) 13.3 18.7
EBITDA............ 54.5(a) 56.4(a) 60.9
Earnings per share 1.41(a) 1.42 1.92
--------
(a) Fiscal 2002 forecast information excludes restructuring charge, merger
related transaction costs and other income (expense).
Position of Participating Affiliates as to the Fairness of the Merger
For purposes of the discussion under the headings "Position of Participating
Affiliates as to the Fairness of the Merger" and "Purposes, Reasons and Plans
for BWAY after the Merger," (1) the "Kelso affiliates" are BCO Holding, BCO
Acquisition, BWAY Finance, Kelso Investment Associates VI, L.P., KEP VI, LLC
and Kelso GP VI, LLC and (2) the "participating BWAY affiliates" are each of
the Kelso affiliates and the following stockholders who are exchanging a
portion of their equity in BWAY for equity in BCO Holding: Jean-Pierre Ergas,
Warren Hayford, Mary Lou Hayford, Kevin Kern, Thomas Eagleson, Kenneth Roessler
and Jeffrey O'Connell.
37
Each of the participating BWAY affiliates believes that the merger agreement
and the merger are fair to those stockholders of BWAY that are not continuing
investors based on their consideration of the following factors:
. The historical results of operations, financial condition, assets,
liabilities, business strategy and prospects of BWAY and the nature of the
industry in which BWAY competes, including the fact that (1) BWAY already
has a high share of a mature metal paint can market and (2) plastic paint
cans manufactured by certain of BWAY's competitors represent a threat to
BWAY's metal paint can business.
. The relationship of the $20.00 per share cash merger consideration to the
historical trading prices for BWAY common stock, including the fact that
the $20.00 per share merger consideration represents a premium of
approximately 44% over BWAY's closing price on September 30, 2002, the
last trading day prior to public announcement of the merger and a premium
of approximately 63% over the average per share closing price of BWAY's
shares over the 12 months preceding the delivery of Kelso's July 2002
indication of interest.
. The fact that BWAY's repurchases of BWAY common stock during the last two
years had been at prices substantially below $20.00 per share.
. The fact that the $20.00 per share cash consideration represents an amount
in excess of the book value per share of $8.34 as of September 29, 2002.
. The fact that (1) BWAY had publicly disclosed numerous times since
November 2001 its willingness to consider strategic alternatives,
including a merger or a recapitalization, and in July 2002 had expressly
noted that these options included a sale of the company and (2) no
unsolicited offers to acquire BWAY had been made by any financial or
strategic buyers;
. The fact that, after the solicitation effort conducted by Deutsche Bank in
late 2001 and the first half of 2002, Kelso had emerged as the only entity
to express an interest in acquiring BWAY at a premium over its market
price and to commence formal business and legal due diligence on BWAY;
. The fact that the terms of the merger were the result of arms'-length
bargaining between the special committee and its advisors, on one hand,
and Kelso and its advisors, on the other hand.
. The fact that the BWAY board of directors had agreed not to recommend the
merger to the BWAY stockholders without the prior favorable recommendation
of the special committee.
. The fact that neither Kelso nor any of the continuing investors
participated in or had any influence on the deliberative process of, or
the conclusions reached by, the special committee or the negotiating
positions of the special committee or its advisors. The participating BWAY
affiliates did, however, find persuasive the conclusions of the special
committee as to the substantive and procedural fairness of the merger to
the unaffiliated stockholders of BWAY.
. The fact that the merger agreement provides BWAY with the ability to
terminate the merger agreement in order to recommend, approve or accept a
"superior proposal" that would, if completed, result in a transaction more
favorable to BWAY's stockholders from a financial point of view than the
merger, subject to certain conditions and the payment of a termination fee
and reimbursement of certain of Kelso's out-of-pocket expenses.
. Notwithstanding that the Blair opinion, dated September 30, 2002, was
provided solely for the information and assistance of the special
committee and that the participating BWAY affiliates are not entitled to
rely on such opinion, the fact that the special committee received an
opinion from Blair that the
38
cash merger consideration of $20.00 per share to be received in the merger
by stockholders of BWAY (other than the holders of shares to be exchanged
for BCO Holding common stock immediately prior to the merger) is fair from
a financial point of view to such stockholders.
. The special committee's unanimous recommendation to the BWAY board of
directors that the merger agreement and the merger be approved.
. The fact that BWAY's stockholders who object to the merger will obtain
"fair value" for their shares if they exercise and perfect their
dissenters' rights under Delaware law.
The participating BWAY affiliates did not find it praticable to, and did
not, quantify or otherwise attach relative weights to the foregoing factors in
reaching its opinion as to the fairness of the merger agreement and the merger.
In addition, in their consideration of the fairness of the merger to BWAY's
unaffiliated stockholders, the participating BWAY affiliates did not find it
practicable to, and did not, appraise the assets of BWAY to determine a
liquidation value for BWAY.
Many of the participating BWAY affiliates are directors and/or executive
officers of BWAY and have interests in the merger transaction not shared by
other stockholders of BWAY. These interests are described below under the
heading "Interests of Certain Persons in the Merger" on page 40. Each of the
participating BWAY affiliates that is a stockholder of BWAY intends to vote in
favor of the approval and adoption of the merger agreement and the merger at
the special stockholders meeting. None of the participating BWAY affiliates
makes any recommendation as to how any stockholder of BWAY should vote on the
merger agreement and the merger.
In addition, while the Kelso affiliates believe that the merger is fair to
BWAY and its stockholders, the Kelso affiliates attempted to negotiate the
terms of a transaction that would be most favorable to them, and not to BWAY
and its stockholders, and, accordingly, did not negotiate the merger agreement
with a goal of obtaining terms that were fair to BWAY and its stockholders. The
Kelso affiliates do not believe that they had or have any fiduciary duty to
BWAY or its stockholders, including with respect to the merger and its terms.
BWAY and its stockholders were, as described elsewhere in this proxy statement,
represented by the special committee that negotiated with the Kelso affiliates
on their behalf, with the assistance of independent legal and financial
advisors.
Purposes, Reasons and Plans for BWAY after the Merger
Purposes. The purpose of the merger is to enable BCO Holding to acquire all
of the BWAY common stock issued and outstanding immediately prior to the
closing of the merger. Kelso believes that BWAY's future business prospects can
be improved through their active participation in the strategic direction and
operations of BWAY. In addition, Kelso believes that its access to capital
sources will provide BWAY with development opportunities of the sort not
currently available to it. With respect to the continuing investors, each
believes that the merger provides them with a desirable opportunity to work
with Kelso in an effort to improve the future business prospects of BWAY by
combining the strategic strengths of Kelso with each continuing investor's
understanding of the operations of BWAY.
Reasons of BWAY. The special committee and the BWAY board of directors
believe, based upon the reasons discussed above under the caption "Special
Factors--Reasons for the Merger; Recommendation of the Special Committee and
the Board of Directors" on page 25, that the merger is the best available
opportunity to enhance stockholder value at this time.
Reasons of the Participating BWAY Affiliates. Each of the participating BWAY
affiliates believes that it is best for BWAY to operate as a privately held
entity. Despite BWAY being a market leader with what the participating BWAY
affiliates believe to be an excellent management team, BWAY's historical stock
prices were at levels below what the participating BWAY affiliates believe to
be full value. As a privately held entity,
39
BWAY will have the flexibility to focus on continuing improvements to its
business without the constraints and distractions caused by the public equity
market's valuation of BWAY. In addition, as an entity whose common stock is not
publicly traded, BWAY will be able to make decisions that may negatively affect
quarterly earnings but that may, in the long-run, increase the value of BWAY's
assets or earnings. In other words, in a public equity market setting, it is
often difficult for a company to make decisions that could negatively affect
earnings in the short-term when the result of those decisions is often a
reduction in the per share price of the publicly traded equity securities of
such company.
In addition, after the merger, BWAY will no longer be subject to SEC
reporting requirements with respect to its equity securities, which will allow
BWAY to eliminate the time devoted by its management and certain other
employees to matters relating exclusively to having equity securities publicly
traded. BWAY, however, will likely be required to file, or resume filing,
reports with the SEC as a result of its issuing debt securities registered
under the Securities Act.
These assessments are based upon publicly available information regarding
BWAY and the participating BWAY affiliates' due diligence, investigation or
knowledge of BWAY and the experience of the participating BWAY affiliates in
investing in or managing public companies generally. While the participating
BWAY affiliates believe that there will be significant opportunities associated
with their investment in BWAY, and that the value of such an equity investment
could be considerably greater than the original cost thereof, they realize that
there also are substantial and significant risks that such opportunities may
not ever be fully realized.
Plans for BWAY. It is expected that, following the merger, the operations
and business of BWAY will be conducted substantially as they are currently
conducted. None of BWAY or any of the BWAY participating affiliates has any
present plans or proposals that relate to or would result in an extraordinary
corporate transaction involving BWAY's corporate structure, business or
management, such as a merger, reorganization, liquidation, relocation of any
material operations or sale or transfer of a material amount of assets.
However, BWAY and the participating BWAY affiliates will continue to evaluate
BWAY's business and operations after the merger from time to time, and may
propose or develop new plans and proposals which they consider to be in the
best interests of BWAY and its stockholders, including the disposition or
acquisition of material assets, alliances, joint ventures and other forms of
cooperation with third parties or other extraordinary transactions.
Interests of Certain Persons in the Merger
In considering the recommendation of the special committee and the BWAY
board of directors with respect to the merger agreement and the merger, you
should be aware that certain directors, officers and affiliates of BWAY
(including each of the continuing investors) have interests in the merger that
are different from your interests. These interests include those described
below. The BWAY board of directors and the special committee were aware of
these interests and considered them, among other matters, when approving the
merger agreement and the merger.
Continuing Investors' Investment in BCO Holding
At the time of the signing of the merger agreement, each of the continuing
investors entered into a separate exchange agreement with BCO Holding under
which he or she has agreed to exchange, immediately prior to the effective time
of the merger, shares of BWAY common stock for shares of BCO Holding common
stock or options to purchase BWAY common stock for options to purchase BCO
Holding common stock. The continuing investors may not be required, for U.S.
federal income tax purposes, to recognize the entire amount of gain realized on
the exchange of their equity interests in BWAY for equity interests in BCO
Holding.
Under these agreements, Jean-Pierre Ergas, Warren Hayford, Kevin Kern,
Thomas Eagleson, Kenneth Roessler and Jeffrey O'Connell (each a member of
senior management and/or a director of BWAY) have agreed to exchange an
aggregate of 812,910 BWAY stock options having an aggregate net value of
approximately
40
$8.4 million for an aggregate of 1,625,820 vested BCO Holding stock options
with an equivalent value. Under a separate exchange agreement, Mary Lou Hayford
(Mr. Hayford's wife and a stockholder of BWAY) has agreed to exchange 596,596
shares of BWAY common stock having a value of approximately $11.9 million for
1,193,192 shares of BCO Holding common stock with an equivalent value. As a
result of the exchange agreements, the continuing investors will hold, in the
aggregate, 1,193,192 shares of BCO Holding common stock after the merger,
which, together with the 1,625,820 options to purchase BCO Holding common
stock, will represent approximately 26.1% of the fully diluted equity of BCO
Holding immediately after the merger, including shares issuable upon exercise
of fully vested BCO Holdings stock options issued in exchange for BWAY stock
options but without giving effect to (1) the grant of any new stock options at
or following the closing of the merger under a new BCO Holding stock incentive
plan (including the grants to be made to some of the continuing investors at
the closing of the merger), as described under the heading "BCO Holding Stock
Incentive Plan" on page 44 and (2) the issuance of any warrants in connection
with the proposed financing of the merger.
Please read the discussion under the heading "Special Factors--Post-Merger
Ownership and Control" beginning on page . for further information on the
amount of BWAY equity interests to be exchanged by the continuing investors.
Stockholder Arrangements
BWAY will be a wholly owned subsidiary of BCO Holding immediately following
the merger. BCO Holding, affiliates of Kelso, the continuing investors and
other future holders of shares of BCO Holding expect to enter into a
stockholders agreement and related agreements that will set forth the terms of
their relationship as stockholders of BCO Holding following the completion of
the merger. The terms of these arrangements are described below:
. Prior to an initial public offering of BCO Holding or BWAY (which we refer
to as an "IPO"), the continuing investors will have customary "tag-along"
rights to participate on a pro rata basis with affiliates of Kelso in
sales of equity securities by those affiliates where the amount of those
sales, together with all previous sales, represent more than 15% of the
shares held by those affiliates on the effective date of the merger;
. Prior to an IPO, the continuing investors will be subject to customary
"drag-along" rights, which will permit affiliates of Kelso to require the
continuing investors to sell their shares for cash on a pro rata basis
with the Kelso affiliates in a transaction involving the sale of more than
85% of the shares held by the Kelso affiliates on the effective date of
the merger;
. The continuing investors will have "piggyback" registration rights with
respect to their shares and, following the first anniversary of an IPO,
Mr. and Mrs. Hayford will together have two "demand" registration rights
with respect to their shares, subject in each case to customary
restrictions and limitations;
. Mr. and Mrs. Hayford and Mr. Ergas and the other continuing investors for
as long as they continue to be employed by BWAY will have pre-emptive
rights on issuances of securities by BCO Holding in order to permit them
to maintain their fully diluted equity ownership interest in BCO Holding,
subject to customary exceptions;
. Until the time of an IPO or the Kelso affiliates have sold all or
substantially all of their shares, the continuing investors other than Mr.
and Mrs. Hayford will be restricted from transferring their shares,
subject to customary estate planning exceptions. Mr. and Mrs. Hayford will
be permitted to sell their shares to a third party that agrees to be bound
by the terms of the stockholders agreement, subject to Kelso's consent,
which consent shall not be unreasonably withheld;
. BCO Holding will have the right to purchase the shares of any continuing
investor whose shares become subject to foreclosure, bankruptcy or other
involuntary transfer prior to an IPO at the lesser of the fair market
value of those shares and the amount of the liability giving rise to the
involuntary transfer plus any excess of the carrying value of the
transferred shares over that liability;
41
. The BCO Holding stock options (and underlying shares) of the continuing
investors acquired in exchange for BWAY stock options will be subject to
customary puts and calls by BCO Holding upon termination of employment;
. Mr. Hayford will be entitled to one board seat (or two in the event the
BWAY board of directors consists of 11 or more directors) and to designate
any family or non-family member to fill that seat. Mr. Ergas will be
entitled to one board seat so long as he serves as BWAY's chief executive
officer. If Mr. Ergas is no longer serving as BWAY's chief executive
officer, he, or in the event he is unable to serve, any family member or,
with Kelso's consent, other representative following his death or
disability will be entitled to one board seat so long as he or his family
or estate do not sell any of their equity in BCO Holding. Kelso or its
designees will be entitled to all other board seats;
. Mr. Hayford will be entitled to:
(1) an annual director's fee of $100,000, payable as long as he or a
designated family member serves on the board;
(2) payment of $157,500 per year under his prior employment agreement with
BWAY beginning in the month in which the effective date of the merger
occurs; and
(3) a pro rata portion of any "exit fee" received by Kelso based on his
stock ownership at the time of exit, not to exceed 15% of that fee;
. Mr. Hayford or any family-member board designee will have the right to
approve all affiliate transactions, subject to certain specified
exceptions; and
. Members of management, which may include the continuing investors, are
expected to be entitled to purchase at fair market value up to $2 million
in BCO Holding common stock after the merger.
"Cash-Out" of BWAY Stock Options
All outstanding unvested options to purchase BWAY common stock, including
options held by the continuing investors and the other directors and members of
BWAY management, will become fully vested and exercisable at the effective time
of the merger. To the extent any options are exercised prior to the merger, the
shares acquired through the exercise will be cancelled in the merger and will
entitle the holder to $20.00 per share. Stock options not exercised or
exchanged for BCO Holding stock options prior to the merger will be cancelled
in exchange for a cash payment equal to the product of:
. the excess,if any, of $20.00 over the exercise price of the stock option;
and
. the number of shares of common stock subject to the stock option.
The BWAY stock options that have been granted to the directors and the
continuing investors who are members of management were awarded as compensation
in accordance with BWAY's overall director and executive compensation policies
and were not granted in anticipation of the merger.
42
The following table sets forth information as of September 30, 2002 as to
the number of shares subject to options to purchase BWAY common stock that are
to be "cashed-out" in the merger and the cash payments to be received upon
cancellation of those stock options by each continuing investor and each
executive officer and director of BWAY.
Number of
Option Shares Aggregate Cash
to be Cashed Payment for
Continuing Investor, out in the Unexchanged
Executive Officer and/or Director Merger Option Shares
--------------------------------- ------------- --------------
Jean-Pierre Ergas................ 112,395 $1,749,000
Warren Hayford................... 0 0
Mary Lou Hayford................. 0 0
Kevin Kern....................... 15,887 246,000
Thomas Eagleson.................. 88,330 1,269,000
Kenneth Roessler................. 57,288 853,000
Jeffrey O'Connell................ 11,040 170,000
Thomas Donahoe................... 82,500 905,000
Alexander Dyer................... 86,700 943,000
John Jones....................... 82,500 905,000
John Puth........................ 86,700 943,000
John Stirrup..................... 135,417 1,212,000
Change in Control Agreements
Each of the continuing investors who is a member of management (Messrs.
Ergas, Kern, Eagleson, Roessler and O'Connell) is a party to a separate change
in control agreement with BWAY. The merger will constitute a change in control
under each such agreement. If the executive is terminated without cause by BWAY
at any time within 24 months following the merger, or if the executive leaves
employment during that period for good reason (as defined in each change in
control agreement), the executive will be entitled to:
. A lump severance payment equal to (1) in the case of Mr. Ergas, the sum of
three times his annual base salary at the time of the merger and one times
his target incentive bonus at the time of the merger, (2) in the case of
each of Messrs. Eagleson and Roessler, the sum of two times his annual
base salary at the time of the merger and one times his target incentive
bonus at the time of the merger, (3) in the case of Mr. Kern, the sum of
one and one half times his annual base salary at the time of the merger
and one times his target incentive bonus at the time of the merger, and
(4) in the case of Mr. O'Connell, the sum of one times his annual base
salary at the time of the merger and one times his target incentive bonus
at the time of the merger.
. Payment of any executive perquisites that the executive is receiving as of
his separation date until the later of six months (in the case of Mr.
Roessler, nine months) from the separation date or the end of the calendar
year in which the separation occurs.
. Reimbursement of COBRA premiums under BWAY's group health and dental plan
on a monthly basis for the period entitled to such continuation coverage.
. Individual medical and dental insurance policies on substantially similar
terms as provided by BWAY as of the separation date for a period of six to
18 months following expiration of the COBRA period (other than for Messrs.
Kern and O'Connell).
. Payment of premiums for individual life insurance coverage on
substantially similar terms as provided by BWAY as of the separation date
for a period of one to three years following the separation date.
. Full vesting of any retirement plans maintained by BWAY in which the
executive participates as of the separation date.
. In the case of the executives other than Mr. Ergas, outplacement services
for a period of 12 months.
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The change in control agreements provide that if any payments to the
executive are considered "excess parachute payments" as defined in Section 280G
of the Internal Revenue Code, the amount of the separation payment to an
executive described under the first bullet point above will be reduced by the
minimum amount necessary to reduce the parachute payments to 299% of the
executive's "base amount" as defined in Section 280G of the Internal Revenue
Code. Following termination, each executive is subject to a customary one-year
non-compete, which, if breached, would require an executive to repay (or, if
unpaid, to forfeit) all the above specified payments and benefits.
BCO Holding Stock Incentive Plan
BCO Holding will adopt a new stock incentive plan effective upon completion
of the merger. The incentive plan will provide for three types of options:
. Service options, which will generally become exercisable in up to three
equal annual installments commencing on the first anniversary of the grant
date;
. Performance options, which will generally become exercisable in five equal
annual installments if BWAY achieves certain specified EBITDA (earnings
before interest, taxes, depreciation and amortization) objectives; and
. Exit options, which will generally become exercisable only if the Kelso
affiliates are able to sell their equity investment in BCO Holding at a
price equal to at least two times their initial investment and achieve at
least a 15% internal rate of return, subject to certain exceptions.
It is expected that the number of shares of BCO Holding common stock that
will be reserved for issuance upon exercise of options under the incentive plan
will represent approximately 20% of the sum of the outstanding shares of BCO
Holding common stock as of the effective date of the merger and the net shares
issuable pursuant to the exchange options. Under the incentive plan, 40% of the
options will be service options, 10% will be performance options and 50% will
be exit options. In connection with the closing of the merger, 40% of the
option pool will be granted to Mr. Ergas, 20% of the option pool will be
granted to Mr. Roessler, and the remaining 40% will be granted to employees
selected by Mr. Ergas, subject to the reasonable approval of the compensation
committee of the board of directors of BCO Holding.
The exercise price of each option under the incentive plan will be
determined by the compensation committee, provided that the exercise price
cannot be less than the fair market value (as determined under the incentive
plan) of the BCO Holding common stock on the date of grant. The options to be
granted in connection with the closing of the merger will be granted with an
exercise price equal to the equivalent per share merger consideration. It is
anticipated that all options will be non-qualified stock options for federal
income tax purposes.
Options are not transferable other than by will or by the laws of descent
and distribution or, if permitted by the compensation committee, in connection
with certain pledges and estate planning transfers. All of the shares acquired
upon exercise of any option will be subject to the stockholder arrangements
described above.
Anticipated Amendments to Employment Arrangements and Bonus Targets
It is currently anticipated that, upon completion of the merger, the
existing employment arrangements of Messrs. Ergas, Roessler, Kern and O'Connell
will be amended (effective as of the beginning of BWAY's 2003 fiscal year) to
provide that their annual base salary shall not be less than $550,000,
$300,000, $240,000 and $165,000, respectively.
It is currently anticipated that, upon completion of the merger, the target
bonuses payable to Messrs. Ergas, Roessler, Kern and O'Connell for BWAY's 2003
fiscal year under the BWAY Officers Incentive Plan shall be,
44
as a percentage of their respective base salaries, 70%, 50%, 40% and 33.3%,
respectively, assuming that BWAY achieves the performance targets established
for that year consistent with BWAY's past practices.
It is currently anticipated that, upon completion of the merger, Mr. Ergas'
existing employment agreement will be further amended to provide that Mr. Ergas
will remain as chairman of BWAY's board of directors when he retires as BWAY's
chief executive officer in the future. It is currently anticipated that, as
chairman, Mr. Ergas will remain an employee of BWAY and, as such, will continue
to vest his employee benefits in accordance with the terms of the applicable
plans and agreements.
Anticipated New Employment Agreement with Thomas Eagleson
It is currently anticipated that, upon completion of the merger, a new
employment agreement will be entered into with Thomas Eagleson effective
January 1, 2003. Under this agreement, Mr. Eagleson is expected to hold the
position of Senior Advisor, reporting to Mr. Ergas and Mr. Roessler, and is
expected to work as a part-time employee with an expected annual commitment of
approximately 1,000 hours per year. Mr. Eagleson's employment period is
expected to automatically extend for successive one-year periods unless either
party provides 60 days prior written notice. Mr. Eagleson is expected to be
paid on an hourly basis at a rate of $200 per hour, and is expected to be
entitled to health and welfare benefits that are consistent with BWAY's
policies for other part-time employees. Mr. Eagleson is expected to continue to
be entitled to these benefits for one year following termination unless he is
terminated by BWAY for cause. For one year following his termination, Mr.
Eagleson is expected to be subject to restrictive covenants that are
substantially similar to those contained in his existing employment agreement
with BWAY.
Employee Benefits
The merger agreement provides that:
. BWAY, as the surviving corporation, will take all necessary actions to
implement certain employee-benefits related agreements, arrangements and
other transactions that have been pre-approved by BCO Holding;
. for a period of at least one year following the closing of the merger,
BWAY, as the surviving corporation, will provide all persons who are BWAY
employees at the closing of the merger, while employed by BWAY, with
compensation and benefits which are substantially comparable in the
aggregate to the compensation and benefits provided to such persons as of
the date of the merger agreement (other than modifications to medical
benefit plans in the ordinary course of business consistent with past
practice and other than with respect to any equity-based compensation);
. BWAY will continue to provide and recognize all accrued but unused
vacation as of the closing of the merger; and
. any pre-existing condition clause in any of the welfare plans (including
medical, dental and disability coverage) established or maintained by BWAY
after the closing of the merger will be waived for persons employed by
BWAY at the closing of the merger, and persons employed by BWAY at the
closing of the merger will be credited with service for all purposes under
such newly established plans. See "The Merger Agreement--Employee Matters"
on page 64.
Indemnification and Director and Officer Liability Insurance
The merger agreement provides that:
. all rights to indemnification and exculpation from liability for acts and
omissions occurring at or prior to the effective time of the merger
(including all rights to advancement of expenses) existing on the date of
the merger agreement in favor of directors and officers of BWAY under
BWAY's charter or by-laws or in
45
any indemnification agreement provided or made available to BCO Holding
and BCO Acquisition will survive the merger and will not be amended,
repealed or otherwise modified in any manner that would adversely affect
the rights of any directors or officers; and
. for six years after the effective time of the merger, BWAY will provide
officers' and directors' liability insurance for acts or omissions
occurring at or prior to the effective time of the merger covering each
person covered at or prior to the effective time by BWAY's officers' and
directors' liability insurance policy on terms no less favorable than
those of such policy in effect on the date of the merger agreement
(although BWAY will not be required to expend more than an amount per year
equal to 250% of the current annual premiums paid by BWAY for such
insurance to maintain or procure such insurance coverage). See "The Merger
Agreement--Indemnification and Insurance of BWAY Directors and Officers"
on page 64.
Financing of the Merger
Upon completion of the merger, BWAY will pay an aggregate amount of
approximately $175.3 million to acquire all outstanding shares of BWAY common
stock and to cancel all BWAY stock options (excluding shares and options held
by continuing investors that will be exchanged immediately prior to the merger
for equity interests in BCO Holding), assuming no BWAY stockholders exercise
and perfect their dissenters' rights. In addition, BWAY expects to repay and/or
assume existing debt in an aggregate amount of approximately $104.8 million
(including accrued interest thereon). Moreover, BWAY will incur approximately
$29.8 million in fees and expenses in connection with the merger and related
transactions. The following arrangements are intended to provide the necessary
financing for the merger.
Equity Commitment Letter
Pursuant to an equity commitment letter from Kelso to BWAY dated September
30, 2002, Kelso has undertaken to provide $81.2 million of the equity financing
required for the transactions contemplated by the merger agreement.
This commitment is subject to:
. the conditions set forth in the merger agreement; and
. the conditions set forth in the senior debt commitment letter to BCO
Acquisition from Deutsche Bank Trust Company Americas and the bridge
facility commitment letter to BCO Holding and BCO Acquisition from
Deutsche Bank Trust Corporation, which are each described below.
Senior Debt Commitment Letter
BCO Acquisition has received a commitment letter from Deutsche Bank Trust
Company Americas dated September 30, 2002 for BWAY to obtain, subject to the
conditions in the letter, a senior secured revolving credit facility of up to
$90 million (through the amendment of BWAY's existing $90 million senior credit
facility to accommodate the merger and the other related transactions or, if
requested by BCO Acquisition, through a new senior credit facility), no more
than $40 million of which may be borrowed at the closing of the merger. A copy
of the senior debt commitment letter has been filed as an exhibit to the
Schedule 13E-3 filed by BWAY and its affiliates and is incorporated by
reference in this proxy statement.
Deutsche Bank will have the right, in a syndication process managed and
determined by Deutsche Bank, (1) to syndicate the new or amended senior credit
facility to other institutions acceptable to Deutsche Bank and (2) to designate
other institutions acceptable to Deutsche Bank in various agency capacities
under the facility, subject in each case to the consent of BCO Acquisition, not
to be unreasonably withheld.
The proceeds of this financing will be used (1) if a new senior credit
facility is extended, to repay BWAY's outstanding debt under its existing
senior credit facility, (2) to pay a portion of the purchase price for the
merger
46
and related transactions and (3) to provide financing for BWAY's ongoing
working capital and general corporate needs. This commitment will terminate on
the earlier of February 28, 2003 or the termination of the commitment by BCO
Acquisition.
It is expected that the senior credit facility contemplated by the senior
debt commitment letter will be comprised of an up to $90 million revolving
credit facility, which will be subject to a borrowing base limitation and which
will include a sublimit for the issuance of letters of credit. The senior
credit facility is expected to have a term of five years. Revolving credit
loans under the facility are expected to bear interest at a per annum rate
determined, at BWAY's election, by reference to the prime lending rate
announced from time to time by Deutsche Bank AG or to an adjusted LIBOR rate.
Each prime rate loan is expected to bear interest at a rate per annum equal to
the prime lending rate plus 1.25% (subject to periodic adjustment based on
certain levels of financial performance), and each adjusted LIBOR rate loan is
expected to bear interest at a rate per annum equal to the applicable reserve
adjusted LIBOR rate plus 2.75% (subject to periodic adjustment based on certain
levels of financial performance). In addition, BWAY expects that it will pay
certain fees in connection with the senior credit facility, including a letter
of credit fee and an unused facility fee that will accrue at a per annum rate
of 0.50% on the unutilized total commitments under the senior credit facility.
The borrowers under the senior credit facility will be BWAY and any of its
wholly-owned subsidiaries deemed appropriate by Deutsche Bank in its reasonable
discretion. It is expected that BWAY's obligations under the senior credit
facility will be secured by a first priority perfected security interest,
subject to customary exceptions, in all present and future owned and leased
property of each borrower and substantially all present and future personal
property of each borrower. In addition, BWAY's obligations will be secured by a
pledge of:
. 100% of the issued and outstanding capital stock (or similar equity
interests) of each direct and indirect subsidiary of a borrower
incorporated or otherwise organized in the United States or any of its
territories; and
. 65% of the issued and outstanding capital stock (or similar equity
interests) of each direct subsidiary of a borrower incorporated or
otherwise organized outside the United States or any of its territories.
The availability of the senior credit facility will be subject to the
satisfaction of a number of conditions, including the following:
. the absence of any material adverse change in the condition (financial or
otherwise), results of operations or business of BWAY since September 30,
2001;
. issuance of at least $190 million of unsecured senior or subordinated
notes (or other obligations or other junior securities or financing
arrangements) and completion of the contemplated equity investment in BCO
Holding by Kelso and the continuing investors; and
. the preparation and execution of definitive loan agreements and related
documents.
The senior secured credit facility will contain customary affirmative and
negative covenants, including (1) a minimum fixed charge coverage ratio to be
set at a level acceptable to Deutsche Bank, (2) a restriction on capital
expenditures per management plan and (3) other covenants restricting
indebtedness, sales of assets, liens and dividends and other distributions. The
senior secured credit facility will also contain customary representations and
warranties and event of default provisions.
Senior Subordinated Notes
BWAY expects that BWAY Finance Corp., a newly formed subsidiary of BCO
Holding, will issue $190 million of new unsecured senior subordinated notes to
be assumed by BWAY upon closing of the merger. The interest rate and other
terms of the senior subordinated notes will depend upon interest rate and
market conditions at the time of their issuance. However, it is anticipated
that the senior subordinated notes will:
. have a maturity of 10 years from the issue date;
47
. bear interest that must be paid in cash semi-annually;
. be unsecured obligations and rank equally with all senior subordinated
indebtedness of BWAY;
. be subordinated to any senior indebtedness of BWAY, including the senior
credit facility; and
. be guaranteed by all subsidiaries of BWAY which guarantee the senior
credit facility.
BWAY expects that the senior subordinated notes will also contain covenants
that are customary for this type of financing, including, without limitation,
restrictions on dividends, stock repurchases, liens, indebtedness, affiliate
transactions, asset sales and mergers. It is expected that the senior
subordinated notes will be issued in an offering to be consummated prior to or
concurrently with the merger. See the discussion under the heading "The Merger
Agreement--Financing Covenants" on page 63 for more information. If all or any
portion of the $190 million of senior subordinated notes offering is not
completed due to then current market conditions, BCO Holding and BCO
Acquisition have obtained a bridge facility commitment, which is discussed
below, to provide this portion of the merger financing.
Bridge Facility Commitment Letter
BCO Holding and BCO Acquisition have received a commitment letter from
Deutsche Bank Trust Corporation dated September 30, 2002 for BWAY to obtain,
subject to the conditions in the letter, up to $190 million in the form of an
unsecured senior bridge loan in the event that an affiliate of BWAY or BCO
Acquisition cannot complete the intended issuance of $190 million of new senior
subordinated notes described above. A copy of the bridge facility commitment
letter has been filed as an exhibit to the Schedule 13E-3 filed by BWAY and its
affiliates and is incorporated by reference in this proxy statement.
The proceeds of this financing will be used to provide a portion of the
funds required to complete the merger and related transactions and to pay
related fees and expenses. This commitment will terminate on the earlier of
February 28, 2003, if no portion of the bridge loan has been funded, or the
termination of the merger agreement.
It is expected that the bridge facility would be comprised of a $190 million
senior bridge loan. The senior bridge loan is expected to have a maturity of
one year and to be convertible (subject to certain conditions) into a
seven-year senior term loan if the senior bridge loan is not repaid at that
time. The bridge loan is expected to bear interest at a floating rate based on
a spread over LIBOR.
It is expected that BWAY's obligations under the bridge facility will be
unconditionally guaranteed on a senior basis by each of its domestic
subsidiaries. It is also expected that the obligations of BWAY and each
guarantor under the bridge facility will be unsecured, and will rank equal in
right of payment to all unsecured senior debt of BWAY and each guarantor and
senior to any subordinated debt of BWAY and each guarantor.
The availability of the bridge facility will be subject to the satisfaction
of customary conditions, including the following:
. the absence of any occurrence since September 30, 2001 that has had or
would reasonably be expected to have a materially adverse effect on the
business, property, assets, liabilities, financial condition or results of
operations or prospects of BWAY after giving effect to the merger;
. the absence of any material change in the U.S. financial markets which in
the reasonable judgment of Deutsche Bank would materially and adversely
affect the ability to complete the intended issuance of new senior
subordinated notes;
. continuation of BWAY's existing senior credit facility or execution of a
new senior credit facility providing for borrowings of up to $90 million,
in each case on terms and conditions reasonably satisfactory to Deutsche
Bank, and completion of the contemplated equity investment in BCO Holding
by Kelso and the continuing investors; and
. the execution of definitive financing documentation.
48
The bridge facility will contain customary affirmative and negative
covenants, including restrictions on the ability of BWAY to incur additional
indebtedness, pay dividends, make certain other restricted payments and
investments, create liens, enter into affiliate transactions and merge,
consolidate or transfer substantially all of its assets. The bridge facility
will also contain customary representations and warranties and event of default
provisions.
Repurchase of Senior Subordinated Notes and Consent to Supplemental Indenture
The merger agreement provides that, at such time as requested by BCO Holding
and BCO Acquisition (provided that BCO Holding and Acquisition Sub will
coordinate with BWAY regarding such timing), BWAY will commence an offer to
purchase its 101/4% Senior Subordinated Notes due 2007, and a related
solicitation of consents regarding covenant amendments to its indenture to
permit the completion of the merger without breach or default of the indenture
or the terms of the notes, on terms and conditions that are in accordance with
the indenture, applicable law and otherwise reasonably acceptable to BCO
Holding and BCO Acquisition Sub. The price BWAY will offer for the purchase of
the notes will be no less than the applicable redemption price for the notes in
effect on the date of the merger agreement. BCO Holding agreed that, without
BWAY's prior consent, the debt tender offer will not be completed, and no
amounts will be payable by BWAY to the holders of notes in connection with the
debt tender offer, pursuant to its offer to purchase or consent solicitation or
otherwise (unless BCO Holding agrees to reimburse BWAY for any amounts so
paid), unless the merger has been completed. Subject to the terms and
conditions of the merger agreement and the terms and conditions to the debt
tender offer, BWAY will accept for payment and pay for the notes
contemporaneously with, and contingent upon, the effective time of the merger.
See the discussion under the heading "The Merger Agreement--Debt Tender Offer"
on page 62 for more information.
Repayment of Indebtedness
BWAY intends to repay the indebtedness incurred to effect the merger through
cash flow from operations. There are no other specific plans or arrangements to
refinance or repay any of that indebtedness.
Financial Advisory Agreement
Upon completion of the merger, BWAY will (1) pay to Kelso a fee of $4.95
million and (2) enter into a financial advisory agreement with Kelso for
services to be provided by Kelso or certain of its related parties to BWAY in
return for financial advisory fees to be paid annually to Kelso by BWAY. The
amount of the financial advisory fee will be determined by Kelso, but will not
exceed $495,000 per year. The financial advisory agreement will include
indemnification and expense reimbursement by BWAY of Kelso and such related
parties with respect to the merger, including with respect to the financing of
the merger and any services to be provided by Kelso or any related party to
BWAY on a going-forward basis.
Conduct of the Business of BWAY if the Merger is not Completed
Completion of the merger is subject to several conditions, in addition to
the approval of the merger by the holders of a majority of the BWAY common
stock. These conditions are described in "The Merger Agreement--Conditions to
the Merger" on page 66.
The approval of the special committee is required for any amendment,
modification or waiver of the merger agreement by BWAY.
If the merger is not completed for any reason, it is expected that BWAY's
business and operations will continue to be conducted by its current management
under the direction of the BWAY board of directors, substantially as they are
currently being conducted. No other transaction is currently being considered
by the continuing investors or BWAY as an alternative to the merger.
49
Regulatory Requirements
Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the
related rules and regulations, the merger may not be completed until
notifications have been given and certain information has been furnished to the
Federal Trade Commission and the Antitrust Division of the Department of
Justice and specified waiting period requirements have been satisfied. The
required notification and report forms under the Hart-Scott-Rodino Act were
filed with the FTC and the Antitrust Division on October 15, 2002. As a result,
the waiting period applicable to the merger is scheduled to expire at 11:59
p.m., New York City time, on November 14, 2002, unless terminated earlier by
the FTC or the Antitrust Division or unless extended by a request by the FTC or
the Antitrust Division for additional information.
At any time before or after completion of the merger, the Antitrust Division
or the FTC or any state could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to
enjoin the completion of the merger, to rescind the merger or to seek
divestiture of particular assets. Private parties also may seek to take legal
action under the antitrust laws under certain circumstances. In addition,
non-United States governmental and regulatory authorities may seek to take
action under applicable antitrust laws. If a challenge to the merger on
antitrust grounds is made, BWAY may not prevail and/or may not complete the
merger.
Material Federal Income Tax Consequences
The following summary of certain United States federal income tax
consequences relating to the merger is based upon laws, regulations and
decisions currently in effect, all of which are subject to change, possibly
with retroactive effect, or possible differing interpretations. This summary
may not be fully applicable to persons in special tax situations, such as
financial institutions, insurance companies, tax-exempt entities, regulated
investment companies, dealers in securities or currencies, persons who acquired
shares of BWAY common stock as part of a hedge, "straddle," conversion
transaction or other integrated transaction, non-U.S. individuals and entities,
persons who hold BWAY common stock through a partnership or other pass-through
entity, persons holding BWAY common stock subject to a risk of forfeiture or
otherwise as compensation, persons exercising dissenters' rights or persons
holding employee stock options and claiming tax basis in such options. This
summary also does not address the tax consequences to Kelso, its affiliates,
any person holding a direct or indirect interest in Kelso or its affiliates, or
to the continuing investors. In addition, this summary does not address the
application of any foreign tax laws or tax laws of any state or political
subdivision of the United States.
This summary is not exhaustive and may not address your individual
circumstances. You should consult your own tax advisor concerning the
application of United States federal income tax laws and the application of
state, local and foreign income tax laws to your own situation.
As described below, the receipt of cash for shares of BWAY common stock in
the merger will be a taxable transaction for federal income tax purposes under
the Internal Revenue Code of 1986, as amended.
For United States federal income tax purposes, a BWAY stockholder that
receives only cash in exchange for shares of BWAY common stock will generally
recognize gain or loss equal to the difference between the amount of cash
received and the stockholder's tax basis in the shares of BWAY common stock
surrendered. Gain or loss will be capital gain or loss if the shares of BWAY
common stock constitute capital assets in the hands of the exchanging holder.
The capital gain or loss will be long-term capital gain or loss if the shares
of BWAY common stock surrendered in the merger have been held for more than one
year at the time of the merger. Under current law, net capital gains recognized
by an individual are taxable at a maximum federal rate of 20 percent or, in the
case of a share that has been held for one year or less, will be subject to tax
at ordinary income rates. There are certain limitations on deductibility of any
loss recognized upon the exchange of shares of BWAY common stock for cash.
For United States federal income tax purposes, holders of employee stock
options to acquire BWAY common stock will recognize ordinary income equal to
the gross amount of cash received upon cancellation of
50
their options, determined as set forth under the heading "The Merger
Agreement--Effect of the Merger on the Capital Stock and Stock Options of BWAY
and BCO Acquisition" on page 56. The actual amount of the cash received by a
holder upon cancellation of the options will be net of applicable withholding
taxes.
Payments of cash to a BWAY stockholder in exchange for shares of BWAY common
stock owned by the stockholder may be subject to a backup withholding tax at a
rate of 30%, unless the stockholder:
. is a corporation or comes within certain exempt categories; or
. provides a correct tax identification number to the payor, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of backup withholding rules.
A stockholder that does not provide a correct tax identification number may
be subject to penalties imposed by the Internal Revenue Service. Any backup
withholding tax collected is creditable against the stockholder's United States
federal income tax liability or will be refunded to the stockholder by the
Internal Revenue Service, provided that certain conditions are met.
Anticipated Accounting Treatment
The merger is intended to be accounted for as a purchase in conformity with
Statement of Financial Accounting Standards No. 141, "Business Combinations"
and Emerging Issues Task Force Issue No. 88-16 "Basis in Leveraged Buyout
Transactions." The purchase will be recorded as a partial change in basis of
BWAY's assets and liabilities based upon the fair values at the effective time
of the merger. The excess purchase price over the allocated values is expected
to result in additional intangible assets.
Potential Fraudulent Conveyance Challenge to the Merger
The incurrence of indebtedness by BWAY as part of the financing of the
merger and the payment to BWAY stockholders of $20.00 in cash for each share of
BWAY common stock in connection with the merger may be subject to review under
federal bankruptcy law or relevant state fraudulent conveyance laws if a
bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of
BWAY or its subsidiaries. Under these laws, if a court were to find that, at
the time of the merger and the related financings:
. such indebtedness was incurred and the payments by BWAY were made with the
intent of hindering, delaying or defrauding current or future creditors; or
. BWAY received less than reasonably equivalent value or fair consideration
in connection with the merger or the related financings, and BWAY either
(1) was insolvent or was rendered insolvent by reason of the merger or the
related financings, (2) was engaged, or was about to engage, in a business
or transactions for which its assets constituted unreasonably small
capital, or (3) intended to incur, or believed that it would incur, debts
beyond its ability to pay as such debts matured,
then such court could determine that the cash payment of $20.00 per share to
BWAY stockholders violated applicable provisions of the United States
Bankruptcy Code and/or applicable state fraudulent conveyance laws. Such a
determination could permit the bankruptcy trustee or debtor in possession or
unpaid creditors to rescind the $20.00 per share cash payment and recover such
$20.00 per share cash payment from BWAY stockholders who received such cash
consideration.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. However, BWAY would be considered insolvent if, at the time it
incurs the indebtedness, either:
. the sum of its liabilities, including contingent liabilities, is greater
than its assets, at a fair valuation; or
. the present fair saleable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities, including contingent liabilities, as they become absolute and
matured.
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There can be no assurance as to what standards a court would use to
determine whether BWAY was solvent at the relevant time. None of the counsel
for BWAY, BCO Holding, BCO Acquisition or the lenders will express an opinion
as to the applicability of federal or state fraudulent transfer and conveyance
laws. It is a condition to the merger that BWAY receive an opinion from an
independent advisor stating that, immediately after the effective time of the
merger, BWAY will not be insolvent, will have assets sufficient to pay its
debts and will not have unreasonably small capital with which to engage in its
business.
Rights of Dissenting Stockholders
Under Section 262 of the Delaware General Corporation Law, which we
sometimes refer to as the "DGCL," any holder of BWAY common stock that does not
wish to accept $20.00 per share in cash for the stockholder's shares of BWAY
common stock may exercise appraisal rights under the DGCL and elect to have the
fair value of the stockholder's shares of BWAY common stock on the date of the
merger (exclusive of any element of value arising from the accomplishment or
expectation of the merger) judicially determined and paid to the holder in
cash, together with a fair rate of interest, if any, provided that the
stockholder complies with the provisions of Section 262 of the DGCL.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL, and is qualified in its entirety by the
full text of Section 262, which is attached in its entirety as Annex C to this
proxy statement. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the shares of BWAY common stock as to
which appraisal rights are asserted. A person having a beneficial interest in
shares of BWAY common stock held of record in the name of another person, such
as a broker or nominee, must act promptly to cause the record holder to follow
the steps summarized below properly and in a timely manner to perfect appraisal
rights.
Under Section 262, where a proposed merger is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the special
meeting, the corporation, not less than 20 days before the meeting, must notify
each of its stockholders entitled to appraisal rights that appraisal rights are
available and include in that notice a copy of Section 262. This proxy
statement constitutes that notice to stockholders, and the applicable statutory
provisions of the DGCL are attached to this proxy statement as Annex C. Any
stockholder that wishes to exercise appraisal rights or who wishes to preserve
that right should review carefully the following discussion and Annex C to this
proxy statement. Moreover, because of the complexity of the procedures for
exercising the right to seek appraisal of shares of BWAY common stock, BWAY
believes that stockholders who consider exercising such appraisal rights should
seek the advice of counsel, which counsel or other appraisal services will not
be paid for by BWAY. Failure to comply with the procedures specified in Section
262 timely and properly will result in the loss of appraisal rights.
Filing Written Demand. Any stockholder wishing to exercise the right to
demand appraisal under Section 262 of the DGCL must satisfy each of the
following conditions:
. as more fully described below, the stockholder must deliver to BWAY a
written demand for appraisal of the stockholder's shares before the vote
on the merger agreement and the merger at the special meeting, which
demand must reasonably inform BWAY of the identity of the stockholder and
that the stockholder intends to demand the appraisal of the stockholder's
shares;
. the stockholder must not vote the stockholder's shares of BWAY common
stock in favor of the merger agreement and the merger at the special
meeting; and, as a result, a stockholder that submits a proxy and wishes
to exercise appraisal rights must vote against the merger agreement and
the merger or abstain from voting on the merger agreement and the merger,
because a proxy that does not contain voting instructions will, unless
revoked, be voted in favor of the merger agreement and the merger; and
. the stockholder must continuously hold the shares from the date of making
the demand through the effective time of the merger; a stockholder that is
the record holder of shares of BWAY common stock on
52
the date the written demand for appraisal is made, but who thereafter
transfers those shares before the effective time of the merger, will lose
any right to appraisal in respect of those shares.
The written demand for appraisal must be in addition to and separate from
any proxy or vote. None of voting (in person or by proxy) against, abstaining
from voting or failing to vote on the proposed merger agreement and the merger
will constitute a written demand for appraisal within the meaning of Section
262.
Only a stockholder of record of shares of BWAY common stock issued and
outstanding immediately before the effective time of the merger is entitled to
assert appraisal rights for the shares of BWAY common stock registered in that
stockholder's name. A demand for appraisal should be executed by or on behalf
of the stockholder of record, fully and correctly, as the stockholder's name
appears on the applicable stock certificates, should specify the stockholder's
name and mailing address, the number of shares of BWAY common stock owned and
that the stockholder intends to demand appraisal of the stockholder's BWAY
common stock. If the shares are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of the demand should be made
in that capacity. If the shares are owned of record by more than one person, as
in a joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all owners. An authorized agent, including one or more joint owners,
may execute a demand for appraisal on behalf of a stockholder; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is acting as agent for such owner or
owners. A record holder such as a broker who holds shares as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares held for one or more beneficial owners while not exercising appraisal
rights with respect to the shares held for one or more other beneficial owners;
in such case, the written demand should set forth the number of shares as to
which appraisal is sought, and where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares held in the name of
the record owner. Stockholders who hold their shares of BWAY common stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine appropriate
procedures for the making of a demand for appraisal by the nominee.
Any stockholder that has duly demanded an appraisal in compliance with
Section 262 will not, after the effective time of the merger, be entitled to
vote the shares subject to that demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends
or other distributions payable to holders of record of shares as of a record
date before the effective time of the merger).
Any stockholder may withdraw its demand for appraisal and accept $20.00 per
share by delivering to BWAY a written withdrawal of the stockholder's demand
for appraisal. However, any such attempt to withdraw made more than 60 days
after the effective date of the merger will require written approval of the
surviving corporation. No appraisal proceeding in the Delaware Court of
Chancery will be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just. If the surviving corporation does not approve a stockholder's request to
withdraw a demand for appraisal when that approval is required, or if the
Delaware Court of Chancery does not approve the dismissal of an appraisal
proceeding, the stockholder will be entitled to receive only the appraised
value determined in any such appraisal proceeding, which value could be less
than, equal to or more than $20.00 per share.
A stockholder that elects to exercise appraisal rights under Section 262
should mail or deliver a written demand to BWAY Corporation, 8607 Roberts
Drive, Suite 250, Atlanta, Georgia 30350, Attention: Corporate Secretary.
Notice by BWAY. Within 10 days after the effective time of the merger, the
surviving corporation must send a notice as to the effectiveness of the merger
to each former stockholder of BWAY who (1) has made a written demand for
appraisal in accordance with Section 262 and (2) has not voted to approve and
adopt, nor consented to, the merger agreement and the merger. Under the merger
agreement, BWAY has agreed to give BCO Holding and BCO Acquisition prompt
notice of any demands for appraisal of shares of BWAY common stock received by
BWAY and the opportunity to participate in all negotiations and proceedings
with respect to any such demands.
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Within 120 days after the effective time of the merger, any former
stockholder of BWAY who has complied with the provisions of Section 262 to that
point in time will be entitled to receive from the surviving corporation, upon
written request, a statement setting forth the aggregate number of shares not
voted in favor of the merger agreement and the merger and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. The surviving corporation must mail that statement to the
stockholder within 10 days of receipt of the request or within 10 days after
expiration of the period for delivery of demands for appraisals under Section
262, whichever is later.
Filing a Petition for Appraisal. Within 120 days after the effective date of
the merger, either the surviving corporation or any stockholder that has
complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the value of the shares
of BWAY common stock held by all such stockholders. BWAY is under no
obligation, and has no present intent, to file a petition for appraisal, and
stockholders seeking to exercise appraisal rights should not assume that the
surviving corporation will file such a petition or that it will initiate any
negotiations with respect to the fair value of the shares. Accordingly,
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the
time and the manner prescribed in Section 262. Inasmuch as BWAY has no
obligation to file such a petition, the failure of a stockholder to do so
within the time specified could nullify the stockholder's previous written
demand for appraisal.
A stockholder timely filing a petition for appraisal with the Delaware Court
of Chancery must deliver a copy to the surviving corporation, which will then
be obligated within 20 days to provide the Register in Chancery with a duly
verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of
their shares have not been reached by the surviving corporation. After notice
to those stockholders, the Delaware Court of Chancery may conduct a hearing on
the petition to determine which stockholders have become entitled to appraisal
rights. The Delaware Court of Chancery may require stockholders who have
demanded an appraisal of their shares and who hold stock represented by
certificates to submit their certificates to the Register in Chancery for
notation thereon of the fact that appraisal proceedings are pending. If any
stockholder fails to comply with the requirement, the Delaware Court of
Chancery may dismiss the proceedings as to that stockholder.
Determination of Fair Value. After determining the stockholders entitled to
an appraisal, the Delaware Court of Chancery will appraise the shares,
determining their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Stockholders considering seeking appraisal should be aware that the fair
value of their shares as determined under Section 262 could be less than, equal
to or more than the $20.00 per share they would receive under the merger
agreement if they did not seek appraisal of their shares. Stockholders should
also be aware that investment banking opinions are not opinions as to fair
value under Section 262.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Court of Chancery is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider "market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which were known or
which could be ascertained as of the date of the merger and which throw any
light on future prospects of the merged corporation." Furthermore, the court
may consider "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not
the product of speculation."
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The costs of the action may be determined by the Delaware Court of Chancery
and taxed upon the parties as the Delaware Court of Chancery deems equitable.
Upon application of a dissenting stockholder, the Delaware Court of Chancery
may also order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all of the shares entitled to appraisal.
Any stockholder wishing to exercise appraisal rights is urged to consult
legal counsel before attempting to exercise appraisal rights. Failure to comply
strictly with all of the procedures set forth in Section 262 of the DGCL may
result in the loss of a stockholder's statutory appraisal rights.
Litigation Challenging the Merger
On October 2, 2002, a civil action was filed in the Superior Court of Fulton
County of the State of Georgia. The plaintiff purports to represent a putative
class of the public stockholders of BWAY (excluding any person or entity
related to or affiliated with any of the defendants). Named as defendants in
the complaint are BWAY, all members of the BWAY board of directors and James
Milton (a former director and executive officer of BWAY). The plaintiff
alleges, among other things, that the individual defendants have breached their
fiduciary duties of due care and loyalty to BWAY's public stockholders and
failed to exercise ordinary care and diligence in the exercise of their
fiduciary duties by failing to announce an active auction, open bidding or
other procedures to maximize shareholder value. In addition, the complaint
alleges that Mr. Ergas and Mr. Hayford, who have agreed to exchange some of
their BWAY equity interests for equity interests of BCO Holding, have used
inside information for their own benefit and to the detriment of BWAY's public
stockholders. The complaint seeks injunctive relief, monetary damages, costs
and other relief. BWAY believes that this lawsuit is without merit and intends
to defend against it vigorously.
Estimated Fees and Expenses
Estimated fees and expenses to be incurred by BWAY in connection with the
merger are approximately as follows:
Financing fees and expenses (1)................... $ 14,925,000
Financial advisory fees and expenses.............. 10,276,000
Legal, accounting and consulting fees and expenses 4,130,000
SEC filing fees................................... 18,000
Proxy solicitation, printing and mailing costs.... 50,000
Miscellaneous expenses............................ 432,000
------------
Total.......................................... $29,831,000
============
--------
(1) Includes an estimated aggregate premium above principal and accrued
interest of $5,125,000 to be paid in connection with the repurchase or
redemption of BWAY's $100 million outstanding 101/4% Senior Subordinated
Notes due 2007.
BWAY, as the surviving company, will be responsible for all of the foregoing
fees and expenses if the merger occurs. If the merger is not completed, each of
BWAY, on the one hand, and BCO Holding and BCO Acquisition, on the other, would
pay its own fees and expenses, provided that BWAY would be obligated under
certain circumstances to reimburse BCO Holding and BCO Acquisition for certain
of their expenses or to pay a termination fee. See the discussion under the
heading "The Merger Agreement--Termination of the Merger Agreement--Effects of
Terminating the Merger Agreement" on page 69.
Provisions for Unaffiliated Security Holders
No provision has been made to grant unaffiliated stockholders of BWAY access
to the corporate files of BWAY or any other party to the merger or to obtain
counsel or appraisal services at the expense of BWAY or any other such party.
55
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement and
is qualified in its entirety by reference to the merger agreement. A copy of
the merger agreement is attached as Annex A to this proxy statement. You should
read the merger agreement because it, and not this proxy statement, is the
legal document that governs the merger.
Structure of the Merger
At the effective time of the merger, BCO Acquisition will merge with and
into BWAY and the separate corporate existence of BCO Acquisition will end.
BWAY will be the surviving corporation in the merger and will continue to be a
Delaware corporation after the merger.
The certificate of incorporation and bylaws of BWAY, each as in effect
immediately prior to the effective time of the merger, will be the certificate
of incorporation and bylaws of BWAY, as the surviving corporation. The
directors of BCO Acquisition (together with Jean-Pierre Ergas and Warren
Hayford) will, from and after the effective time of the merger, be the
directors of BWAY, as the surviving corporation, until their successors are
duly elected and qualified. The officers of BWAY immediately prior to the
effective time of the merger will, from and after the effective time of the
merger, be the officers of BWAY, as the surviving corporation, until they are
removed, are replaced or resign.
When the Merger Becomes Effective
BWAY and BCO Acquisition will file a certificate of merger with the
Secretary of State of the State of Delaware on the second business day after
the satisfaction or waiver of all the closing conditions to the merger (other
than those conditions that by their nature are to be satisfied on the closing
date), unless BWAY and BCO Acquisition agree to another date in writing. The
merger will become effective at the time when the certificate of merger is
filed with the Secretary of State of the State of Delaware or at such other
later date or time as BWAY and BCO Acquisition agree and specify in the
certificate of merger.
Effect of the Merger on the Capital Stock and Stock Options of BWAY and BCO
Acquisition
At the effective time of the merger:
. each share of BWAY common stock issued and outstanding immediately prior
to the effective time of the merger (other than (1) the shares of BWAY
common stock owned by BWAY or any direct or indirect wholly-owned
subsidiary of BWAY, (2) the shares of BWAY common stock owned by BCO
Holding or BCO Acquisition, including as a result of the exchange of BWAY
common stock by the continuing investors, and (3) the shares of BWAY
common stock held by dissenting stockholders) will be converted into the
right to receive $20.00 in cash;
. each share of BWAY common stock owned by BWAY or any direct or indirect
wholly-owned subsidiary of BWAY will be cancelled and will cease to exist,
and no consideration will be paid in exchange for it;
. each share of BWAY common stock owned by BCO Holding or BCO Acquisition
(including as a result of the exchange of BWAY common stock for BCO
Holding common stock by the continuing investors) will be cancelled and
will cease to exist, and no consideration will be paid in exchange for it;
. each share of BWAY common stock owned by a dissenting stockholder will be
treated as described under the heading "Dissenters' Rights" on page 57; and
. each share of BCO Acquisition capital stock will be converted into and
become one share of common stock of BWAY, as the surviving corporation.
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Except for options exchanged by the continuing investors for BCO Holding
stock options, each option granted to any present or former employee,
consultant or director of BWAY to acquire BWAY common stock, which is
outstanding immediately prior to the effective time of the merger, will be
canceled in exchange for a single lump sum cash payment (less any applicable
income or employment tax withholding) equal to the product of:
. the number of shares of BWAY common stock subject to the option, and
. the excess, if any, of $20.00 over the exercise price per share of the
option.
Options with an exercise price per share equal to or greater than $20.00
will be canceled without any payment.
At the effective time of the merger, the options to be exchanged by
continuing investors will be exchanged, in accordance with the terms and
provisions of the applicable exchange agreement, into options to purchase
shares of BCO Holding common stock. BWAY's Fourth Amended and Restated 1995
Long-Term Incentive Plan will, at the effective time of the merger, be assumed
by BCO Holding and will, after the effective time of the merger, continue to be
in effect as the BCO Holding 1995 Long-Term Incentive Plan. The new options to
acquire BCO Holding common stock will be fully vested and will continue to be
subject to the terms and conditions of such plan (except as otherwise provided
in an applicable exchange agreement).
Payment for BWAY Common Stock in the Merger
At the effective time of the merger, BCO Holding will cause BWAY to deposit
with First Union National Bank (or any other bank or trust company reasonably
acceptable to BWAY), in trust for the benefit of the holders of BWAY common
stock, sufficient cash to pay those holders the amounts they are entitled to
receive under the merger agreement. After the effective time of the merger,
there will be no further transfers in the records of BWAY or its transfer agent
of certificates representing BWAY common stock and, if any certificates are
presented to BWAY for transfer, they will be cancelled against payment of the
merger consideration.
As soon as reasonably practicable after the effective time of the merger,
the paying agent will mail (and make available for collection by hand) to each
record holder of BWAY common stock a letter of transmittal and instructions for
use in effecting the surrender of their BWAY common stock certificates in
exchange for $20.00 per share in cash. You should not send in your BWAY common
stock certificates until you receive the letter of transmittal.
If payment is to be made to a person other than the person in whose name the
BWAY common stock certificate surrendered is registered, it will be a condition
of payment that the certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the certificate surrendered of the
amount due under the merger agreement, or that such person establish to the
satisfaction of the paying agent that such tax has been paid or is not
applicable.
Any portion of the payment fund held by the paying agent that remains
undistributed to the stockholders of BWAY six months after the effective time
of the merger will be repaid to BWAY, as the surviving corporation, and any
stockholders of BWAY who have not properly surrendered their stock certificates
will thereafter look, only as general creditors, to BWAY for payment of their
claim for the amount due to them under the merger agreement.
Dissenters' Rights
The merger agreement provides that any issued and outstanding shares of BWAY
common stock held by a person who has not voted to adopt the merger agreement
and who properly demands appraisal for such shares in accordance with Section
262 of the Delaware General Corporation Law will not be converted into a right
to
57
receive cash, but will, as of the effective time of the merger, be converted
into the right to receive such consideration as may be determined to be due
pursuant to Section 262 of the Delaware General Corporation Law. See the
discussion under the heading "Special Factors--Rights of Dissenting
Stockholders" on page 52 for further information. If, after the effective time
of the merger, the holder fails to perfect or withdraws or loses his or her
right to appraisal, such shares of BWAY common stock will be deemed to have
been converted, at the effective time of the merger, into the right to receive
$20.00 per share in cash, without interest.
Representations and Warranties
BWAY has made certain representations and warranties in the merger agreement
to BCO Holding and BCO Acquisition, including as to:
. corporate existence and power;
. corporate authorization;
. required consents and approvals and absence of violations;
. capitalization;
. subsidiaries;
. SEC filings;
. financial statements and the absence of undisclosed liabilities;
. disclosure documents;
. absence of certain changes;
. taxes;
. employee benefit plans;
. environmental matters;
. litigation and compliance with laws;
. intellectual property;
. material contracts;
. related party transactions;
. indebtedness and available cash;
. real estate and other assets;
. labor relations and employment;
. insurance;
. the opinion of the special committee's financial advisor;
. finders' and other fees;
. the amendment of BWAY's rights plan; and
. anti-takeover statutes.
58
Each of BCO Holding and BCO Acquisition has made certain representations and
warranties in the merger agreement to BWAY, including as to:
. corporate existence and power;
. authorization;
. required consents and approvals and absence of violations;
. litigation;
. capitalization;
. disclosure documents;
. BCO Holding's and BCO Acquisition's operations;
. financing commitments;
. management arrangements;
. finders' and other fees; and
. no registration.
The representations and warranties contained in the merger agreement do not
survive the completion of the merger or the termination of the merger agreement.
Agreements Relating to BWAY's Interim Operations
BWAY has agreed that until completion of the merger, BWAY and its
subsidiaries will carry on their businesses in the usual, regular and ordinary
course of business consistent with past practice and will use reasonable best
efforts to preserve substantially intact their present lines of business,
maintain their rights and franchises and preserve substantially intact their
relationships with customers, suppliers and others having business dealings
with them and keep available the services of their present officers and
employees, in each case to the end that their ongoing businesses will not be
impaired in a manner that would have a material adverse effect on BWAY at the
effective time of the merger. BWAY has also agreed that it will, and will cause
its subsidiaries to, comply in all material respects with all applicable laws
and regulations applicable to their financial statements, accounting practices,
corporate governance, businesses and operations.
In addition, BWAY has agreed, with certain exceptions, that neither it nor
any of its subsidiaries will, prior to completion of the merger, do any of the
following without the prior written consent of BCO Holding:
. enter into any new material line of business or incur or commit to any
capital expenditures, except for (1) capital expenditures up to the
aggregate amount set forth in a capital expenditure budget plan previously
delivered to BCO Holding, (2) additional capital expenditures up to an
aggregate amount of $500,000 and (3) other capital expenditures consented
to by BCO Holding, such consent not to be unreasonably withheld;
. declare, set aside or pay any dividend or other distribution with respect
to any of its capital stock;
. split, combine or reclassify any of its capital stock;
. issue any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock;
. repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its
capital stock;
. issue, deliver or sell (1) any shares of its capital stock, (2) any bonds,
debentures, notes or other indebtedness having the right to vote on any
matters on which stockholders may vote or (3) any securities convertible
into or exercisable for, or any rights, warrants or options to acquire,
any shares of capital stock or voting debt;
59
. amend its certificate of incorporation, by-laws or other governing
documents or any material term of any outstanding security;
. acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of
the assets of, any business or otherwise acquire or agree to acquire any
assets, stock or operations of another company, other than, among other
things, acquisitions of inventory, equipment or raw materials in the
ordinary course of business;
. sell, dispose of, transfer or divest any assets, businesses or divisions,
other than, among other things, (1) sales or dispositions of unused or
obsolete assets, (2) sales or dispositions of inventory in the ordinary
course of business, and (3) the sale or disposition of BWAY's closed
manufacturing facility located in Farmers Branch, Texas;
. create, assume or otherwise consensually incur any lien on any asset;
. relinquish, waive or release any material contractual or other right or
claim;
. settle any material action, suit, claim, investigation or other proceeding;
. knowingly dispose of or permit to lapse any rights in any material
intellectual property;
. knowingly disclose to any person (other than BWAY's employees, directors
and agents) or otherwise knowingly dispose of any material trade secret,
process or know-how not a matter of public knowledge prior to the signing
of the merger agreement;
. make any loans, advances (other than business travel advances to officers
and prepaid expenses in the ordinary course of business) or capital
contributions to, or investments in, any other person or entity;
. except as contemplated by the senior debt, bridge facility and equity
commitment letters discussed under the heading "Financing Covenants" on
page 63, incur or enter into any agreement to incur any "indebtedness"
(which includes, among other things, indebtedness for borrowed money,
purchase money indebtedness, capital lease obligations, project financing,
banker's acceptances, letters of credit and hedging obligations) or issue
or sell any debt securities or warrants or rights to acquire any debt
securities, other than, among other things, indebtedness incurred in the
ordinary course of business under BWAY's existing senior credit facility
in an aggregate amount not to exceed the maximum amount authorized under
that agreement at any time outstanding;
. pay or commit to pay any severance or termination pay, except as required
to be paid pursuant to the terms of an existing employee benefits plan;
. enter into any employment, deferred compensation, consulting, severance or
other similar agreement (or any amendment to any such existing agreement)
with any director, officer or key employee;
. increase or commit to increase any employee benefits payable to any
director, officer or employee (including wages, salaries, compensation,
pension, severance, termination pay or other benefits or payments) except,
in the case of employees other than officers and directors, in the
ordinary course of business or as required by an existing employee
benefits plan or any collective bargaining agreement;
. adopt or commit to adopt any additional employee benefits plan;
. make any contribution to any employee benefits plan, other than regularly
scheduled contributions and contributions required pursuant to the terms
of any employee benefits plan;
. amend or extend or commit to amend or extend any employee benefits plan in
any material respect;
. change in any material respect its methods of accounting or accounting
practice as in effect at September 30, 2001, except for any such change as
required by reason of a change in SEC guidelines or generally accepted
accounting principles;
60
. change its fiscal year;
. make or rescind any material tax election or settle or compromise any
audit, examination, litigation, proceeding or matter in controversy
relating to taxes;
. make any change to its method of reporting income, deductions or other tax
items;
. enter into any contracts, agreements or arrangements that limit or
restrain BWAY or that would, after the effective time of the merger, limit
or restrict BCO Holding or BWAY from engaging or competing in any business
or in any geographic area or location;
. redeem the rights under BWAY's rights agreement, amend, modify or
terminate the rights agreement other than to render the rights
inapplicable to the merger agreement and the merger, or take any action
which would allow any person other than BCO Holding or BCO Acquisition or
any of their affiliates to become the beneficial owner of 15% or more of
BWAY common stock without triggering the rights agreement;
. alter the corporate structure or ownership of BWAY or any of its
subsidiaries; or
. agree, authorize or enter into any commitment to take any of the foregoing
actions.
No Solicitation of Competing Proposals
The merger agreement provides that, until the effective time of the merger
or the termination of the merger agreement, BWAY will not, and BWAY will direct
its officers, directors, affiliates, advisors, representatives or other agents
not to:
. solicit, initiate, knowingly encourage or knowingly facilitate (including
by way of furnishing information) any inquiries or the making or
submission of any proposal that constitutes, or may reasonably be expected
to lead to, an "Acquisition Proposal" (as defined below on page 62),
. participate or engage in discussions or negotiations with, or disclose any
non-public information or data relating to BWAY or afford access to BWAY's
properties, books or records to, any person that has made an Acquisition
Proposal or to any person in contemplation of an Acquisition Proposal, or
. accept an Acquisition Proposal or enter into any agreement or agreement in
principle (other than customary confidentiality and standstill agreements)
providing for or relating to an Acquisition Proposal or enter into any
agreement or agreement in principle requiring BWAY to abandon, terminate
or fail to consummate the transactions contemplated by the merger
agreement.
However, BWAY may take any of the actions described in the second bullet
point of the prior paragraph if, at any time prior to the holding of the vote
of BWAY's stockholders to approve the merger agreement and the merger:
. BWAY has received an unsolicited bona fide written Acquisition Proposal
from a third party, and
. the special committee determines in good faith, after consultation with
its independent financial and legal advisors, that such Acquisition
Proposal could realistically result in a "Superior Proposal" (as defined
below on page 62).
In such a case, the merger agreement requires BWAY to (1) provide notice to
BCO Holding of the identity of the person making such Acquisition Proposal and
its material terms and conditions prior to or promptly after commencing any
such actions, (2) not disclose any information to such person without entering
into a customary confidentiality and standstill agreement and (3) promptly
provide to BCO Holding and BCO Acquisition any non-public information
concerning BWAY provided to such other person. In addition, BWAY would be
required to keep BCO Holding and BCO Acquisition generally informed of the
status of and material developments respecting any Acquisition Proposal
reasonably likely to result in a Superior Proposal (including the identity of
the parties and price involved).
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BWAY will be permitted to keep any other person who has made such
Acquisition Proposal generally informed of the status and material developments
respecting any material amendments to the merger agreement. In addition,
nothing in the merger agreement will prohibit BWAY and the BWAY board from
taking and disclosing to BWAY's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
under the Exchange Act.
For purposes of the merger agreement, the term "Acquisition Proposal" means
any offer or proposal regarding:
. a merger, consolidation, share exchange, recapitalization,
reclassification, liquidation or other business combination involving BWAY
or any of its material subsidiaries,
. the acquisition or purchase of 30% or more of any class of equity
securities of BWAY or any of its material subsidiaries, or
. any tender offer (including self-tenders) or exchange offer or stock
purchase that if completed would result in any person beneficially owning
30% or more of any class of equity securities of BWAY or any of its
material subsidiaries, or a substantial portion of the assets of BWAY.
For purposes of the merger agreement, the term "Superior Proposal" means a
proposal:
. made by a third party to enter into:
(1) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving BWAY as a result of which either (a) BWAY's
stockholders prior to such transaction in the aggregate cease to own
at least 50% of the voting securities of the entity surviving or
resulting from such transaction (or its ultimate parent entity) or (b)
the individuals comprising the BWAY board prior to such transaction do
not constitute a majority of the board of the entity surviving or
resulting from such transaction or such ultimate parent entity
following the transaction,
(2) a sale, lease, exchange, transfer or other disposition of at least 50%
of the assets of BWAY, in a single transaction or a series of related
transactions, or
(3) the acquisition, directly or indirectly, by a person or entity of
beneficial ownership of 50% or more of the BWAY common stock whether
by merger, consolidation, share exchange, business combination, tender
or exchange offer or otherwise,
and which is
. otherwise on terms which the special committee in good faith determines
(based on such matters as it deems relevant, including the advice of its
independent financial advisor and outside counsel):
(1) would, if consummated, result in a transaction that is more favorable
to BWAY's stockholders entitled to receive the merger consideration
under the merger agreement (in their capacities as stockholders), from
a financial point of view, than the transactions contemplated by the
merger agreement,
(2) is with a person or entity that has, or is reasonably likely to
obtain, the necessary funds to consummate the proposed transaction, and
(3) is capable of being, and is reasonably likely to be, completed without
undue delay.
Debt Tender Offer
The merger agreement provides that, at such time as requested by BCO Holding
and BCO Acquisition (provided that BCO Holding and BCO Acquisition will
coordinate with BWAY regarding such timing), BWAY
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will commence an offer to purchase its 101/4% Senior Subordinated Notes due
2007, and a related solicitation of consents regarding covenant amendments to
its indenture to permit the completion of the merger without breach or default
of the indenture or the terms of the notes, on terms and conditions that are in
accordance with the indenture, applicable law and otherwise reasonably
acceptable to BCO Holding and BCO Acquisition. The price BWAY will offer for
the purchase of the notes will be no less than the applicable redemption price
for the notes in effect on the date of the merger agreement. BCO Holding agreed
that, without BWAY's prior consent, the debt tender offer will not be
completed, and no amounts will be payable by BWAY to the holders of notes in
connection with the debt tender offer, pursuant to its offer to purchase or
consent solicitation or otherwise (unless BCO Holding agrees to reimburse BWAY
for any amounts so paid), unless the merger has been completed. Subject to the
terms and conditions of the merger agreement and the terms and conditions of
the debt tender offer, BWAY will accept for payment and pay for the notes
contemporaneously with, and contingent upon, the effective time of the merger.
Financing Covenants
The merger agreement provides that:
. BCO Holding and BCO Acquisition will use reasonable best efforts to obtain
the financing set forth in (1) the senior debt commitment letter from
Deutsche Bank Trust Corporation, (2) the bridge facility commitment letter
from Deutsche Bank Trust Company Americas (or substitute debt financing
with one or more other nationally recognized financial institutions if,
and only if, the substitute financing would not reasonably be expected to
delay completion of the merger past February 28, 2003 and prevent the
delivery of a required solvency letter) and (3) the equity commitment
letter from Kelso;
. BCO Holding will provide prompt written notice to BWAY of (1) Kelso's
refusal or intended refusal to provide the financing described in the
equity commitment letter and (2) Deutsche Bank's refusal or intended
refusal to provide the financing described in the senior debt commitment
letter or the bridge facility commitment letter, and/or any other lender's
intended refusal to provide the financing contemplated by any substitute
debt financing (in which case BCO Holding will use reasonable best efforts
to find substitute financing as promptly as possible); and
. BWAY will provide all necessary cooperation reasonably requested by BCO
Holding in connection with the arrangement of the financing.
See the discussion under the heading "Special Factors--Financing of the
Merger" on page 46 for more information about these commitment letters.
If all conditions to the merger described under the headings "Closing
Conditions for Each Party" and "Additional Closing Conditions for BCO Holding
and BCO Acquisition" on pages 66 and 67 (other than BCO Holding's financing
condition) have been satisfied or waived, and all conditions to the bridge
facility commitment letter have been satisfied or waived, BCO Holding and BCO
Acquisition will be obligated to take all actions reasonably necessary and
appropriate to obtain their bridge financing by no later than February 28, 2003
so as to result in the satisfaction of BCO Holding's financing condition.
However, BCO Holding and BCO Acquisition will not be obligated to obtain those
proceeds at any time prior to February 28, 2003.
At any time before the closing of the merger, the proceeds of the
subordinated debt financing contemplated in connection with the merger may be
closed into escrow such that such proceeds are held by BWAY Finance, a newly
formed wholly-owned subsidiary of BCO Holding. See the discussion under the
heading "Special Factors--Financing of the Merger--Senior Subordinated Notes"
on page 47 for more information about this contemplated financing. At or
immediately prior to such escrow closing, BCO Holding (or an affiliate of BCO
Holding) and BWAY will each pay to BWAY Finance one-half of an amount (which we
refer to as the "Breakage Amount") sufficient to cover:
. accrued interest on the escrowed debt from the date of the escrow closing
to and including February 28, 2003, net of income earned from investing
the proceeds in permitted investments, and
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. any repayment premium applicable to the escrowed debt in the event that
the merger agreement is terminated or the merger is not completed by the
date specified by the terms of the escrowed debt.
However, in no event will BWAY's payment to BWAY Finance exceed $3 million, and
any excess of the Breakage Amount over $6 million will be paid to BWAY Finance
by BCO Holding (or an affiliate of BCO Holding).
At or immediately prior to the effective time of the merger and subject to
the completion of the merger, BWAY will assume the indebtedness of BWAY
Finance, plus any accrued and unpaid interest, and receive the proceeds held by
BWAY Finance, and BWAY Finance will be released from all obligations under the
escrowed debt.
If the merger agreement is terminated or the merger is not completed by the
date specified by the terms of the escrowed debt, any escrowed debt (plus any
applicable repayment premium) will be repaid in full by BWAY Finance and any
amount held by BWAY Finance after that repayment will be distributed in equal
parts to BCO Holding and BWAY; provided that first the excess, if any, of the
Breakage Amount over $6 million will be distributed solely to BCO Holding. The
merger agreement provides that (1) any repayment premium will not exceed 1% of
the principal amount of the escrowed debt; (2) placement agent fees or
discounts or commitments will be payable on the escrowed debt only at the
effective time of the merger and (3) BWAY Finance will invest the proceeds only
in specified permitted investments.
If the proceeds of the subordinated debt financing (together with the
Breakage Amount) plus the income earned thereon are not enough to repay in full
the escrowed debt (plus any applicable repayment premium), BWAY and BCO Holding
will each pay one-half of the shortfall to BWAY Finance to enable it to repay
such amount to the applicable debtholders.
Indemnification and Insurance of BWAY Directors and Officers
The merger agreement provides that:
. all rights to indemnification and exculpation from liability for acts and
omissions occurring at or prior to the effective time of the merger
(including all rights to advancement of expenses) existing on the date of
the merger agreement in favor of directors and officers of BWAY under
BWAY's charter or by-laws or in any indemnification agreement provided or
made available to BCO Holding and BCO Acquisition will survive the merger
and will not be amended, repealed or otherwise modified in any manner that
would adversely affect the rights of any directors or officers; and
. for six years after the effective time of the merger, BWAY will provide
officers' and directors' liability insurance for acts or omissions
occurring at or prior to the effective time of the merger covering each
person covered at or prior to the effective time by BWAY's officers' and
directors' liability insurance policy on terms no less favorable than
those of such policy in effect on the date of the merger agreement
(although BWAY will not be required to expend more than an amount per year
equal to 250% of the current annual premiums paid by BWAY for such
insurance to maintain or procure such insurance coverage).
Employee Matters
The merger agreement provides that:
. BWAY, as the surviving corporation, will take all necessary actions to
implement certain employee-benefits related agreements, arrangements and
other transactions that have been pre-approved by BCO Holding;
. for a period of at least one year following the closing of the merger,
BWAY, as the surviving corporation, will provide all persons who are BWAY
employees at the closing of the merger, while employed by
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BWAY, with compensation and benefits which are substantially comparable in
the aggregate to the compensation and benefits provided to such persons as
of the date of the merger agreement (other than modifications to medical
benefit plans in the ordinary course of business consistent with past
practice and other than with respect to any equity-based compensation);
. BWAY will continue to provide and recognize all accrued but unused
vacation as of the closing of the merger; and
. any pre-existing condition clause in any of the welfare plans (including
medical, dental and disability coverage) established or maintained by BWAY
after the closing of the merger will be waived for persons employed by
BWAY at the closing of the merger, and persons employed by BWAY at the
closing of the merger will be credited with service for all purposes under
such newly established plans.
Other Agreements
The merger agreement provides that:
. BWAY will duly call and hold a special meeting of its stockholders as
promptly as practicable for the purpose of considering and taking action
upon the merger agreement and the merger;
. the BWAY board of directors must recommend approval of the merger
agreement and the merger by BWAY's stockholders (although the BWAY board
may determine not to make or may determine to withdraw, modify or change
such recommendation if the special committee determines in good faith,
after consultation with its independent legal and financial advisors, that
BWAY has received a Superior Proposal (as defined on page 62) and the
failure to take that action could reasonably be expected to result in a
breach of the BWAY board's fiduciary duties);
. upon reasonable advance notice, BWAY must:
(1) give BCO Holding, BCO Acquisition, their potential financing sources
and their counsel, financial advisors, affiliates, auditors and other
authorized representatives reasonable access during normal business
hours to BWAY's offices, properties, books and records,
(2) furnish to the representatives of BCO Holding and BCO Acquisition such
financial and operating data and other information relating to BWAY
and its operations as they may reasonably request, and
(3) instruct its employees, counsel and financial advisors to cooperate
with BCO Holding and BCO Acquisition in their investigation of BWAY's
business;
. upon the terms and subject to the conditions of the merger agreement,
BWAY, BCO Holding and BCO Acquisition will each use its reasonable best
efforts to take all actions and to do all things necessary, proper or
advisable under applicable laws and regulations to complete the merger;
. BWAY, BCO Holding and BCO Acquisition will cooperate with one another:
(1) in determining whether any action by or in respect of, or filing with,
any governmental entity is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any
material contracts of BWAY, in connection with the completion of the
merger, and
(2) in seeking any such actions, consents, approvals or waivers or making
any such filings, furnishing any required information and seeking
timely to obtain any such actions, consents, approvals or waivers;
. BWAY will, and each of BCO Holding and BCO Acquisition will, cause its
"ultimate parent entity" to file with the Department of Justice and the
Federal Trade Commission forms required under the Hart-Scott-Rodino Act
and, subject to certain limitations, to use its reasonable best efforts to
take or cause to be taken all actions necessary to obtain any clearance,
waiver, approval or authorization relating to the Hart-Scott-Rodino Act
that is necessary to complete the merger;
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. neither BWAY, BCO Holding, BCO Acquisition nor any of their affiliates
will issue any press release or public announcement regarding the merger
without the prior approval of the other parties, except to the extent
required by law or any national securities exchange and after reasonable
prior notice to the other parties;
. BWAY, BCO Holding and BCO Acquisition will each act to eliminate or
minimize the effects of any anti-takeover statute or regulation that is or
may become applicable to the merger;
. until the effective time of the merger, BWAY will promptly notify BCO
Holding and BCO Acquisition of:
(1) any notice from any person alleging that its consent is or may be
required in connection with the merger,
(2) any notice from any governmental entity in connection with the merger,
and
(3) any action, suit, charge or complaint commenced or, to BWAY's
knowledge, threatened against BWAY which is material to BWAY or which
relates to the completion of the merger;
. BWAY, BCO Holding and BCO Acquisition will promptly notify each other in
writing after becoming aware of the occurrence of any event which will, or
is reasonably likely to, result in the failure of any closing condition
described under the heading "Conditions to the Merger" on page 66;
. BWAY, BCO Holding and BCO Acquisition will engage an appraisal firm of
national reputation reasonably acceptable to BCO Holding and BWAY to
deliver a letter addressed to the special committee, BCO Acquisition and,
if requested by them, the lenders providing the senior debt and bridge
facility financing (and on which the special committee shall be entitled
to rely) indicating that immediately after the effective time of the
merger BWAY (1) will not be insolvent and will have assets sufficient to
pay its debts and (2) will not have unreasonably small capital with which
to engage in its business;
. Prior to the closing of the merger, BWAY will comply with the applicable
requirements of the New Jersey Industrial Site Recovery Act, including
determining the applicability of and obtaining the necessary approvals for
each property subject to that statute that will allow the merger to be
completed;
. Until the effective time of the merger, BWAY will prepare and file and
will use reasonable best efforts to have recorded all assignments and
other documents in the United States Patent and Trademark Office, the
United States Copyright Office or such other filing offices as may be
required to (1) record BWAY as the owner of specified intellectual
property and (2) release any and all liens on that intellectual property
that do not secure a permitted post-closing BWAY obligation; and
. BWAY will use reasonable best efforts to obtain specified third party
consents.
Conditions to the Merger
Closing Conditions for Each Party
The obligations of BWAY, BCO Holding and BCO Acquisition to complete the
merger are subject to the satisfaction or waiver of the following conditions:
. the approval of the merger agreement and the merger by the stockholders of
BWAY;
. any applicable waiting periods under the Hart-Scott-Rodino Act shall have
expired or been terminated and all consents, approvals and actions of,
filings with, and notices to, all governmental entities required of BCO
Holding, BCO Acquisition, BWAY or any of their respective affiliates in
connection with the merger shall have been made, obtained or effected, as
the case may be, except for those, the failure of which to be made,
obtained or effected would not, in the aggregate, have a material adverse
effect on BWAY, BCO Holding or BCO Acquisition;
. no judgment, injunction, order, decree, statute, law, rule or regulation
shall prohibit the merger; and
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. BWAY, the special committee, BCO Acquisition and, if requested by them,
the lenders providing the bridge facility financing shall have received
the appraisal letter described in the 11/th/ bullet point under the
heading "Other Agreements" on page 65.
Additional Closing Conditions for BWAY
BWAY's obligation to complete the merger is subject to satisfaction or
waiver of the following additional conditions:
. the representations and warranties of BCO Holding and BCO Acquisition
contained in the merger agreement shall be true and correct in all
respects when made and as of the closing of the merger as if made at such
time (or, to the extent such representations and warranties speak as of a
specified date, they need only be true and correct in all respects as of
such specified date), without giving effect to any materiality
qualifications contained in such representations and warranties, except
where the failure of all such representations and warranties to be true
and correct, in the aggregate, would not have a material adverse effect on
BCO Holding or BCO Acquisition;
. BCO Holding and BCO Acquisition shall have performed in all material
respects their agreements and covenants in the merger agreement that are
required to be performed at or prior to the closing of the merger;
. BWAY shall have received certificates signed by an executive officer of
each of BCO Holding and BCO Acquisition to the effect that the conditions
described in the two prior bullet points have been satisfied; and
. no suit, action or proceeding by any governmental entity seeking to enjoin
the merger shall have been commenced (and be pending) against BCO Holding
or BCO Acquisition, BWAY or any of their respective affiliates, partners,
associates, officers or directors, or any officers or directors of such
partners, seeking (1) to prevent or restrain the merger in a manner which
would have a material adverse effect on BWAY, BCO Holding or BCO
Acquisition, (2) material damages in connection with the transactions
contemplated by the merger agreement which would have a material adverse
effect on BWAY, BCO Holding or BCO Acquisition, (3) any other remedy in
connection with the transactions contemplated hereby which would have a
material adverse effect on BWAY, BCO Holding or BCO Acquisition, or (4) to
impose material liability on any of the foregoing persons in connection
with the merger (we refer to each of these clauses (1) to (4) as a
"Material Adverse Consequence").
Additional Closing Conditions for BCO Holding and BCO Acquisition
BCO Holding's and BCO Acquisition's obligations to complete the merger are
subject to satisfaction or waiver of the following additional conditions:
. the representations and warranties of BWAY in the merger agreement shall
be true and correct in all respects when made and as of the closing of the
merger as if made at such time (or, to the extent such representations and
warranties speak as of a specified date, they need only be true and
correct in all respects as of such specified date), without giving effect
to any materiality qualifications contained in such representations and
warranties, except where the failure of all such representations and
warranties to be true and correct, in the aggregate, would not have a
material adverse effect on BWAY;
. BWAY shall have performed in all material respects each of its agreements
and covenants in the merger agreement that are required to be performed by
it at or prior to the closing of the merger;
. BCO Holding and BCO Acquisition shall have received certificates signed by
an executive officer of BWAY to the effect that the conditions described
in the two prior bullet points have been satisfied or waived;
. no suit, action or proceeding by any governmental entity shall have been
commenced (and be pending) against BCO Holding or BCO Acquisition, BWAY or
any of their affiliates, partners, associates, officers or directors, or
any officers or directors of such partners, seeking a Material Adverse
Consequence (as defined above on page 67);
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. the transactions contemplated by the exchange agreements by and between
BCO Holding and each of Jean-Pierre Ergas, Warren Hayford and Mary Lou
Hayford shall have been completed;
. BWAY shall have received the financing proceeds under the senior debt
commitment letter and the bridge facility commitment letter, or the
financing proceeds of any substitute debt financing, in either case in the
amounts and on the terms and conditions set forth in those letters or upon
substantially equivalent terms and conditions, and to the extent any of
the terms and conditions are not as so set forth or as substantially
equivalent, on terms and conditions reasonably satisfactory to BCO Holding
(although, if an escrow closing of subordinated debt financing described
under the heading "Financing Covenants" on page 63 has occurred with
respect to an amount as great as $190 million, the condition described in
this bullet point as it relates to the financing proceeds of the
subordinated debt financing contemplated by the bridge facility commitment
letter shall be deemed satisfied);
. at least 51% of the aggregate principal amount of BWAY's 10 1/4% Senior
Subordinated Notes due 2007 shall have been tendered to BWAY and not
withdrawn pursuant to the debt tender offer, as of immediately prior to
the effective time of the merger, and requisite consents shall have been
obtained from the holders of the notes agreeing to amendments to the
indenture to permit the completion of the merger without breach or default
of the indenture or the terms of the notes, in a manner reasonably
acceptable to BCO Holding and BCO Acquisition;
. BWAY shall have received and delivered to BCO Holding and BCO Acquisition
valid resignations, effective as of immediately following the effective
time of the merger, of each member of BWAY's board other than Jean-Pierre
Ergas and Warren Hayford;
. BWAY shall have delivered to BCO Holding and BCO Acquisition a statement
certifying that shares of BWAY common stock are not "United States real
property interests" under the Internal Revenue Code; and
. holders of no more than 15% of the issued and outstanding shares of BWAY
common stock as of the effective time of the merger shall have exercised
their dissenters' rights.
Termination of the Merger Agreement
Circumstances Under Which Any Party Can Terminate the Merger Agreement
BCO Holding, BCO Acquisition and BWAY can mutually agree to terminate the
merger agreement at any time. Either BCO Holding, BCO Acquisition or BWAY can
also terminate the merger agreement at any time if:
. the merger shall not have occurred on or before February 28, 2003 (but no
party can terminate the merger agreement on this basis if its failure to
fulfill any obligation or other breach under the merger agreement has been
the cause of, or resulted in, the failure of the merger to occur on or
before February 28, 2003);
. any governmental entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the merger, and such order, decree, ruling or other action
shall have become final and nonappealable; or
. the approval by BWAY stockholders required for the completion of the
merger shall not have been obtained at the special meeting.
Circumstances Under Which BCO Holding or BCO Acquisition Can Terminate the
Merger Agreement
BCO Holding and BCO Acquisition can also terminate the merger agreement at
any time if:
. the BWAY board, prior to a vote of the stockholders approving the merger
agreement and the merger, shall have (1) approved or recommended an
Acquisition Proposal (as defined on page 62) or resolved to take, or
announced an intention to take, any such action, (2) within 20 business
days of any public disclosure of an Acquisition Proposal, failed to
recommend against or reject an Acquisition Proposal
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(other than a tender or exchange offer covered under clause (3) below) or
(3) recommended acceptance of (or indicated or announced that it is unable
to take a position, will remain neutral or express no opinion with respect
to) or, within 18 business days after the commencement thereof, failed to
recommend against or reject, a tender or exchange offer for 25% or more of
the outstanding shares of BWAY common stock or resolved to take, or
announced an intention to take, any such action;
. the BWAY board shall have determined not to make or shall have determined
to withdraw, modify or change its recommendation that BWAY's stockholders
approve the merger agreement and the merger, or the BWAY board shall have
determined not to solicit proxies; or
. there is an intentional breach by BWAY of any representation, warranty,
covenant or agreement contained in the merger agreement that would give
rise to a failure of a condition described in any of the first two bullet
points under the heading "Conditions to the Merger--Additional Closing
Conditions for BCO Holding and BCO Acquisition" on page 67 and which has
not been cured (or is not capable of being cured) within 20 business days
following receipt by BWAY of written notice from BCO Holding and BCO
Acquisition of the breach.
Circumstances Under Which BWAY Can Terminate the Merger Agreement
BWAY can also terminate the merger agreement at any time:
. if there is an intentional breach by BCO Holding or BCO Acquisition of any
representation, warranty, covenant or agreement in the merger agreement
that would give rise to a failure of a condition described in any of the
first two bullet points under the heading "Conditions to the
Merger--Additional Closing Conditions for BWAY" on page 67 and which has
not been cured (or is not capable of being cured) within 20 business days
following receipt by BCO Holding or BCO Acquisition of written notice from
BWAY of the breach; or
. in order to recommend, approve or accept a Superior Proposal (as defined
on page 62) (provided that BWAY has complied in all material respects with
the provisions described under the heading "No Solicitation of Competing
Proposals" on page 61).
Effects of Terminating the Merger Agreement
BWAY must pay Kelso (or its designees) a $6 million termination fee and must
reimburse Kelso for all out-of-pocket expenses of Kelso and its affiliates
(including fees and expenses of financial advisors, outside legal counsel and
accountants) incurred in connection with the merger and the proposed financing
of the merger (including any Breakage Amount (as defined on page 63)) up to a
maximum amount of $4 million if BWAY terminates the merger agreement pursuant
to the second bullet point under the heading "Circumstances Under Which BWAY
Can Terminate the Merger Agreement" on page 69.
BWAY must pay Kelso all of its out-of-pocket expenses, up to a maximum
amount of $4 million, if the merger agreement is terminated by:
. BCO Holding or BCO Acquisition pursuant to any of the bullet points under
the heading "Circumstances Under Which BCO Holding or BCO Acquisition Can
Terminate the Merger Agreement" on page 68, or
. BWAY, BCO Holding or BCO Acquisition pursuant to the first or third bullet
point under the heading "Circumstances Under Which Any Party Can Terminate
the Merger Agreement" on page 68,
provided that, on or before the date of any termination described in this
paragraph, an Acquisition Proposal (as defined on page 62) with respect to BWAY
shall have been publicly announced, disclosed or otherwise communicated to the
special committee or the BWAY board.
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In addition to any amounts payable to Kelso under the previous paragraph,
BWAY must pay Kelso a $6 million termination fee if the merger agreement is
terminated by:
. BCO Holding or BCO Acquisition pursuant to any of the bullet points under
the heading "Circumstances Under Which BCO Holding or BCO Acquisition Can
Terminate the Merger Agreement" on page 68, or
. BWAY, BCO Holding or BCO Acquisition pursuant to the first or third bullet
point under the heading "Circumstances Under Which Any Party Can Terminate
the Merger Agreement" on page 68,
provided that, (1) on or before the date of any termination described in this
paragraph, an Acquisition Proposal (as defined on page 62) with respect to BWAY
shall have been publicly announced, disclosed or otherwise communicated to the
special committee or the BWAY board and (2) within 12 months of that
termination BWAY or a third party completes, or BWAY enters into a definitive
agreement with a third party for, a transaction that would qualify as either an
Acquisition Proposal or, in the case of a termination pursuant to the first
bullet point under the heading "Circumstances Under Which Any Party Can
Terminate the Merger Agreement" on page 68 only, a Superior Proposal under the
merger agreement.
Notwithstanding anything described in this section to the contrary, if an
escrow closing of subordinated debt financing described under the heading
"Financing Covenants" on page 63 occurs, then the termination fee that may be
payable will be reduced from $6 million to $3 million and the maximum amount of
Kelso's expenses payable will be increased from $4 million to $7 million.
Fees and Expenses
Except as otherwise described under the heading "Effects of Terminating the
Merger Agreement" on page 69, all costs and expenses incurred in connection
with the merger agreement and the merger will paid by the party incurring such
expenses.
Modification or Amendment of the Merger Agreement
Any provision of the merger agreement may be amended, modified or waived by
BWAY, BCO Holding or BCO Acquisition, acting through their respective boards of
directors, prior to the closing of the merger. However, no such amendment,
modification or waiver by BWAY will be effective unless it is authorized by the
special committee and, after the approval of the merger agreement and the
merger by BWAY's stockholders, there shall not be made any amendment that by
law requires the further approval by BWAY's stockholders without such further
approval.
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THE VOTING AGREEMENTS
Each of Jean-Pierre Ergas, Warren Hayford and Mary Lou Hayford has entered
into a separate voting agreement with BCO Holding under which he or she has
agreed to vote (or cause to be voted) all of their shares of BWAY common stock
(constituting in the aggregate approximately 23.6% of the outstanding shares of
BWAY common stock entitled to vote at the meeting) at any annual, special or
other meeting of BWAY stockholders:
. in favor of the approval of the merger agreement, the merger and the other
transactions contemplated thereby and any actions required in furtherance
thereof;
. against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of BWAY under the voting agreement, the merger agreement or any
other agreement contemplated by the voting agreement or the merger
agreement;
. against:
(1) any offer or proposal regarding a merger, consolidation, share
exchange, recapitalization, reclassification, liquidation or other
business combination involving BWAY or any subsidiary of BWAY whose
consolidated revenues, net income or assets constitute 10% or more of
the revenues, net income or assets of BWAY and its subsidiaries, taken
as a whole,
(2) the acquisition or purchase of 30% or more of any class of equity
securities of BWAY or any subsidiary of BWAY whose consolidated
revenues, net income or assets constitute 10% or more of the revenues,
net income or assets of BWAY and its subsidiaries, taken as a whole,
(3) any tender offer (including self-tenders) or exchange offer or stock
purchase (including any repurchase by BWAY) that if completed would
result in any person beneficially owning 30% or more of any class of
equity securities of BWAY or any subsidiary of BWAY whose consolidated
revenues, net income or assets constitute 10% or more of the revenues,
net income or assets of BWAY and its subsidiaries, taken as a whole,
or a substantial portion of the assets of, BWAY or any of its
subsidiaries taken as a whole, other than the transactions
contemplated by the merger agreement, or
(4) any other proposal for action or agreement that is intended, or could
reasonably be expected, to materially impede, interfere with, delay,
postpone or adversely affect the completion of the merger;
. against any change in the composition of the BWAY board of directors,
other than as contemplated by the merger agreement; and
. against any amendment to the certificate of incorporation or by-laws of
BWAY, other than as contemplated by the merger agreement.
Under his or her voting agreement, Mr. Ergas, Mr. Hayford and Mrs. Hayford
have each agreed to irrevocably appoint BCO Holding and each of its executive
officers, from and after September 30, 2002 until the earlier to occur of the
effective time of the merger and the termination of their voting agreement, as
his or her attorney, agent and proxy, with full power of substitution, to vote
and otherwise act with respect to all of his or her shares of BWAY common stock
on the matters and in the manner described above.
Each of Mr. Ergas', Mr. Hayford's and Mrs. Hayford's voting agreement will
terminate on the earliest to occur of (1) the termination of the merger
agreement in accordance with its terms, (2) an agreement of BCO Holding and
either Mr. Ergas, Mr. Hayford or Mrs. Hayford, respectively, to terminate their
voting agreement, (3) a determination of the BWAY board of directors to not
make or to withdraw, modify or change its recommendation of the approval of the
merger agreement and the merger and (4) the completion of the merger.
71
THE SPECIAL MEETING
Purpose, Time and Place
This proxy statement is furnished to you in connection with the solicitation
of proxies by the BWAY board of directors for the special meeting of
stockholders to be held at .:00 a.m., Atlanta time, on ., 200., at ., and any
adjournment or postponement thereof.
At the special meeting, the stockholders of BWAY will consider and vote upon
a proposal to approve and adopt the merger agreement and the merger. The
stockholders also will be asked to consider and vote upon such other business
as may properly come before the special meeting.
The special committee has determined that the merger agreement and the
merger are advisable and fair to, and in the best interests of, BWAY and its
stockholders who are entitled to receive the merger consideration and
recommended the merger agreement and the merger to the full BWAY board of
directors. Based on the recommendation of the special committee, the BWAY board
of directors has unanimously determined that the merger agreement and the
merger are fair to, and in the best interests of, BWAY and its stockholders,
and recommended that the stockholders approve and adopt the merger agreement
and the merger. See "Special Factors--Reasons for the Merger; Recommendation of
the Special Committee and the Board of Directors" on page 25.
Record Date; Voting Rights
The BWAY board has fixed the close of business on ., 200. as the record date
for the determination of stockholders entitled to notice of, and to vote at,
the special meeting. Only the record holders of BWAY common stock on that date
are entitled to vote at the special meeting. On the record date, there were .
shares of BWAY common stock outstanding and entitled to vote at the special
meeting, which were held by approximately . stockholders of record. Each such
share entitles the holder thereof to one vote.
Quorum; Required Vote
The holders of a majority of the outstanding shares of BWAY common stock
entitled to vote must be present in person or represented by proxy at the BWAY
special meeting in order for a quorum to be present and for business to be
conducted. BWAY intends to count shares of BWAY common stock whose holders are
present in person at the special meeting but not voting, and shares of BWAY
common stock for which it has received proxies but with respect to which
holders of such shares have abstained, as present at the BWAY special meeting
for purposes of determining whether a quorum exists for the transaction of
business. Without specific instructions from their customers, brokers holding
shares of BWAY common stock in nominee or "street" name for customers who are
the beneficial owners of such shares are prohibited from giving a proxy to vote
shares held for such customers with respect to the matters to be considered and
voted at the special meeting. Shares of BWAY common stock represented by
proxies returned by a broker holding such shares in nominee or "street" name
will be counted for purposes of determining whether a quorum exists, even if
such shares are broker non-votes.
Approval and adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the shares of BWAY common stock outstanding on
the record date. The merger is not subject to a vote of a majority of those
stockholders of BWAY that are not continuing investors. In determining whether
the merger agreement has received the requisite number of affirmative votes,
abstentions and broker non-votes will have the effect of a vote against the
merger agreement. Accordingly, the BWAY board urges the BWAY stockholders to
complete, date and sign the accompanying proxy and return it promptly in the
enclosed, postage-paid envelope.
Mr. Ergas, Mr. Hayford and Mrs. Hayford have agreed to vote all of the
shares of BWAY common stock (constituting in the aggregate approximately 23.6%
of the outstanding shares of BWAY common stock entitled to vote at the special
meeting) owned by them in favor of the approval and adoption of the merger
agreement at the special meeting. See "The Voting Agreements" on page 71. As of
the record date, directors and executive officers of BWAY and their affiliates
were the beneficial owners of an aggregate of . shares of BWAY common stock,
which constitute approximately .% of the shares then outstanding and eligible
to vote.
72
Proxies; Solicitation
All shares represented by properly executed proxies for BWAY common stock
that are received in time for the special meeting and which have not been
revoked will be voted in accordance with the instructions indicated in such
proxies. Proxies which do not contain voting instructions will be voted in
favor of the approval and adoption of the merger agreement. In addition, the
persons designated in such proxies will have the discretion to vote on matters
incident to the conduct of the special meeting. If BWAY proposes to adjourn the
special meeting, the persons named in the proxy card will vote all shares for
which they have authority (other than those that have been voted against the
approval and adoption of the merger agreement) in favor of such adjournment.
The grant of a proxy on the enclosed proxy card does not preclude a
stockholder from voting in person at the special meeting. You may revoke a
previously submitted proxy at any time before it is voted by either (1)
delivering written notice of revocation to Corporate Secretary, BWAY
Corporation, 8607 Roberts Drive, Suite 250, Atlanta, Georgia 30350, (2)
executing and delivering a subsequently dated proxy that is received prior to
the meeting or (3) voting your shares in person at the meeting. Attendance at
the special meeting will not by itself constitute revocation of a proxy. If you
have instructed a broker to vote your shares, you must follow directions
received from the broker to change or revoke your proxy.
BWAY will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of BWAY may solicit proxies from BWAY stockholders by telephone or
telegram, or in person, but will receive no additional compensation for these
services. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of BWAY common stock held of record by such
persons, and BWAY will reimburse these custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in connection with the solicitation.
BWAY has retained MacKenzie Partners, Inc. to assist in the solicitation of
proxies for a fee not to exceed $6,500.
73
INFORMATION CONCERNING BWAY
BWAY is a Delaware corporation that is the leading North American
manufacturer of steel containers for paint, coffee and other consumer and
industrial products. Over 85% of BWAY's fiscal 2002 net sales were generated
from product lines where BWAY has the leading market share in the United
States. BWAY's product offerings include a wide variety of steel containers
such as paint, coffee, aerosol and specialty cans which are used by its
customers to package a diverse range of end-use products which, in addition to
paint and coffee, include household and personal care products, automotive
after-market products, paint thinners and driveway and deck sealants. BWAY also
provides its customers with metal shearing, coating and decorative services
through its material center services business. A detailed description of BWAY's
businesses is contained in its Annual Report on Form 10-K for the year ended
September 30, 2001, which is incorporated by reference in this proxy statement.
See "Additional Information--Where You Can Find More Information" on page 81.
The mailing address and telephone number of the principal executive offices
of BWAY is 8607 Roberts Drive, Suite 250, Atlanta, Georgia 30350, (770)
645-4800.
INFORMATION CONCERNING BCO HOLDING, BCO ACQUISITION, BWAY FINANCE AND OTHER
PARTICIPATING BWAY AFFILIATES
BCO Holding, BCO Acquisition and BWAY Finance
BCO Holding is a corporation formed under the laws of the state of Delaware
and is controlled by Kelso Investment Associates VI, L.P. and KEP VI, LLC,
affiliates of Kelso & Company, L.P. It was established solely for the purpose
of acquiring shares of BWAY common stock in connection with the merger. At the
closing of the merger, all of the outstanding equity interests of BCO Holding
will be owned by these affiliates of Kelso and each of the continuing
investors. The business address and telephone number of BCO Holding are: c/o
Kelso & Company, L.P., 320 Park Avenue, New York, New York 10022, (212)
751-3939.
BCO Acquisition is a corporation formed under the laws of the state of
Delaware and is a wholly-owned subsidiary of BCO Holding. It was established
solely for the purpose of merging with and into BWAY. The business address and
telephone number of BCO Acquisition are identical to the business address and
telephone number of BCO Holding.
BWAY Finance is a corporation formed under the laws of the state of Delaware
and is a wholly-owned subsidiary of BCO Holding. It was established solely for
the purpose of issuing debt securities to finance the merger. The business
address and telephone number of BWAY Finance are identical to the business
address and telephone number of BCO Holding.
Set forth below are the names of each director and executive officer of BCO
Holding, BCO Acquisition and BWAY Finance. Each such person is a citizen of the
United States, and has held his present position as set forth below since BCO
Holding's and BCO Acquisition's incorporation. The business address and
telephone number of each such person is: c/o Kelso & Company, L.P., 320 Park
Avenue, New York, New York 10022, (212) 751-3939.
Name Present Principal Position
---- --------------------------
Thomas R. Wall, IV... President and Director
David I. Wahrhaftig.. Vice President, Treasurer and Director
James J. Connors II.. Vice President, Secretary and Director
Stanley de J. Osborne Vice President, Assistant Treasurer and Assistant Secretary
Howard A. Matlin..... Vice President
Kelso Investment Associates VI, L.P.
Kelso Investment Associates VI, L.P., a Delaware limited partnership, is a
private investment fund formed by Kelso. Kelso Investment Associates VI, L.P.'s
general partner is Kelso GP VI, LLC.
74
Kelso GP VI, LLC
Kelso GP VI, LLC is a Delaware limited liability company, the principal
business of which is serving as the general partner of Kelso Investment
Associates VI, L.P. Kelso GP VI, LLC is managed and controlled by substantially
the same individuals who are the principals of Kelso & Company, L.P. and has
the same principal executive offices as Kelso & Company, L.P.
KEP VI, LLC
KEP VI, LLC, a Delaware limited liability company, is a private investment
fund formed by Kelso. KEP VI, LLC is managed and controlled by substantially
the same individuals who are the principals of Kelso & Company, L.P. and has
the same principal executive offices as Kelso & Company, L.P.
Jean-Pierre Ergas
Jean-Pierre Ergas became Chairman and Chief Executive Officer of BWAY in
January 2000. Mr. Ergas has served as a director of BWAY since August 1995 and
served as Vice-Chairman of the BWAY board from July 1999 to December 1999. Mr.
Ergas served as Executive Vice President, Europe of Alcan Aluminium Limited,
President of Alcan Europe Limited, Executive Chairman of British Alcan
Aluminium plc and Chief Executive Officer of Alcan Deutschland GmbH from June
1996 to December 1999. Mr. Ergas served as Senior Advisor to the Chief
Executive Officer of Alcan Aluminium Limited from January 1995 to June 1996 and
served as a Trustee in Residence of DePaul University from February 1994 to
December 1994. Prior thereto, Mr. Ergas served as Senior Executive Vice
President of Pechiney S.A. and as a member of the Pechiney Group Executive
Committee from 1987 to January 1994 and also held several management positions
with various subsidiaries of Pechiney S.A., serving as: Chief Executive Officer
of American National Can Company from 1989 to January 1994 and Chairman of the
Board from 1991 to January 1994; Chief Executive Officer of Cegedur Pechiney
from 1982 to 1988 and Chairman of the Board from 1987 to 1988; Chief Executive
Officer of Cebal S.A. from 1974 to 1982 and Chairman of the Board during 1982;
and Marketing Manager for Pechiney Aluminum from 1967 to 1974. Mr. Ergas is a
trustee of DePaul and AUP Universities and a director of Dover Corporation and
Compagnie Plastic Omnium. Mr. Ergas is a citizen of the United States. His
business address is c/o BWAY Corporation, 8607 Roberts Drive, Suite 250,
Atlanta, Georgia 30350 and his business telephone number is (770) 645-4800.
Warren Hayford
Warren Hayford became non-executive Vice-Chairman of the BWAY board of
directors in December 1999. From 1989 until December 1999, Mr. Hayford served
as Chairman of the Board and Chief Executive Officer of BWAY. Mr. Hayford has
held a number of senior positions within the packaging industry over the past
35 years including President and Chief Operating Officer of Gaylord Container
Corporation ("Gaylord"), a manufacturer of paper packaging products, 1986 to
1988, and Vice Chairman of Gaylord, 1988 through 1992. Mr. Hayford also served
as a director of Gaylord from 1986 to 2002. Prior to Gaylord, Mr. Hayford
served as President and a director of Gencorp, Inc., President and a director
of Navistar International Corporation and Executive Vice President and a
director of the Continental Group, Inc. Mr. Hayford is a citizen of the United
States. His business address is c/o BWAY Corporation, 8607 Roberts Drive, Suite
250, Atlanta, Georgia 30350 and his business telephone number is (770) 645-4800.
Mary Lou Hayford
Mrs. Hayford is the wife of Warren Hayford, Vice-Chairman of the BWAY board
of directors. Mrs. Hayford is a citizen of the United States. Her business
address is c/o BWAY Corporation, 8607 Roberts Drive, Suite 250, Atlanta,
Georgia 30350 and her business telephone number is (770) 645-4800.
75
Kevin Kern
Kevin Kern has been Vice President of Administration and Chief Financial
Officer of BWAY since February 2001. From May 1995 until February 2001, Mr.
Kern served as Vice President, Corporate Controller of BWAY. From 1991 to May
1995, Mr. Kern was Controller of McKechnie Plastics Components, Inc. From 1981
to 1991, Mr. Kern was employed by Ernst & Young, most recently as a Senior
Audit Manager from 1988 to 1991. Mr. Kern is a citizen of the United States.
His business address is c/o BWAY Corporation, 8607 Roberts Drive, Suite 250,
Atlanta, Georgia 30350 and his business telephone number is (770) 645-4800.
Thomas Eagleson
Thomas Eagleson has served as Executive Vice President
Manufacturing/Engineering of BWAY since July 2000. Prior thereto, Mr. Eagleson
held the positions of Senior Vice President of American National Can from 1993
to 1998, Vice President Manufacturing Food/General Line from 1990 to 1993, Vice
President Manufacturing Beverage from 1988 to 1990, Vice President Metal
Integration Metal Container from 1987 to 1988, Vice President Manufacturing
Food/General Line of National Can Corp from 1985 to 1987 and Manager of
Manufacturing Food/General Line of National Can Corp from 1983 to 1985. From
1970 to 1983, Mr. Eagleson held positions of increasing responsibility within
the manufacturing organization of National Can Corp. Mr. Eagleson is a citizen
of the United States. His business address is c/o BWAY Corporation, 8607
Roberts Drive, Suite 250, Atlanta, Georgia 30350 and his business telephone
number is (770) 645-4800.
Kenneth Roessler
Kenneth Roessler has served as Executive Vice President of Sales and
Marketing of BWAY since March 2000. From June 1993 to February 2000, Mr.
Roessler served in various senior management positions with Southcorp Packaging
USA, including Vice President of Sales and Marketing from 1998 to February
2000, Vice President and General Manager from 1995 to 1998 and Vice President
and Chief Financial Officer from June 1993 through 1995. Prior to June 1993,
Mr. Roessler held senior management positions with Berwind Corporation. Mr.
Roessler is a citizen of the United States. His business address is c/o BWAY
Corporation, 8607 Roberts Drive, Suite 250, Atlanta, Georgia 30350 and his
business telephone number is (770) 645-4800.
Jeffrey O'Connell
Jeffrey O'Connell has been Vice President and Treasurer of BWAY since May
1997 and has served as Secretary of BWAY since May 2001. From June 1996 to May
1997, Mr. O'Connell served as Assistant Treasurer of BWAY. From June 1995 to
June 1996, Mr. O'Connell served as Vice President of Finance of Macmillan
Bloedel Packaging Inc. From October 1994 to June 1995, Mr. O'Connell served as
Director of Financial Planning of BWAY. Prior thereto, Mr. O'Connell served as
Vice President of Administration of Mead Coated Board Division of The Mead
Corporation. Mr. O'Connell is a citizen of the United States. His business
address is c/o BWAY Corporation, 8607 Roberts Drive, Suite 250, Atlanta,
Georgia 30350 and his business telephone number is (770) 645-4800.
None of the persons or entities discussed under the heading "Information
Concerning BCO Holding, BCO Acquisition, BWAY Finance and Other Participating
BWAY Affiliates" was, during the past five years, convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was,
during the past five years, a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree of final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
76
MARKET PRICES AND DIVIDEND INFORMATION
BWAY common stock is listed on the New York Stock Exchange, trading under
the symbol "BY." The table below sets forth, for the periods and dates
indicated, the range of high and low per share sales prices for BWAY common
stock as reported in the consolidated transaction reporting system.
High Low
------ ------
Fiscal Year Ending September 30, 2001
First quarter..................... $ 5.31 $ 2.75
Second quarter.................... 4.13 3.35
Third quarter..................... 7.00 2.60
Fourth quarter.................... 7.00 5.20
Fiscal Year Ending September 29, 2002
First quarter..................... $11.40 $ 6.27
Second quarter.................... 13.07 9.96
Third quarter..................... 16.75 12.45
Fourth quarter.................... 16.75 13.40
Fiscal Year Ending September 28, 2003
First quarter (through ., 2002)... $ . $ .
The closing prices of BWAY common stock on September 30, 2002 (the last
trading day before BWAY announced the execution of the merger agreement) and .,
200. (the most recent practicable day before the date of this proxy statement)
were $13.90 and $., respectively.
BWAY did not declare any cash dividends on BWAY common stock during fiscal
years 2001 or 2002 and has no intention to pay cash dividends in the
foreseeable future. BWAY is restricted in its ability to pay dividends under
the terms of its existing senior credit facility, its indenture and the merger
agreement. After the merger, BWAY will be a private company wholly owned by BCO
Holding and it is not anticipated that BWAY will regularly pay dividends.
77
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of BWAY common stock as of September 30, 2002 by (1) each stockholder
known by BWAY to own beneficially five percent or more of the outstanding
shares of BWAY common stock, (2) each continuing investor, (3) each director of
BWAY, (4) each "named executive officer" of BWAY and (5) all directors and
executive officers of BWAY as a group. As of September 30, 2002, there were
8,708,626 shares of BWAY common stock outstanding. To the knowledge of BWAY,
each stockholder has sole voting and investment power with respect to the
shares indicated as beneficially owned, unless otherwise indicated in a
footnote. Unless otherwise indicated in a footnote, the business address of
each person is BWAY's corporate address.
Number of Shares of
BWAY
Common Stock Percent of
Name and Address of Beneficial Owner Beneficially Owned (1) Class (2)
------------------------------------ ---------------------- ----------
Jean-Pierre Ergas (3).......................... 614,777 6.7%
Warren Hayford (4)............................. 2,249,608 24.9
Mary Lou Hayford (5)........................... 1,821,273 20.9
Kevin Kern (6)................................. 64,939 *
Thomas Eagleson (7)............................ 120,711 1.4
Kenneth Roessler (8)........................... 115,454 1.3
Jeffrey O'Connell (9).......................... 66,820 *
Thomas Donahoe (10)............................ 90,000 1.0
Alexander Dyer (11)............................ 203,047 2.3
John Jones (12)................................ 110,000 1.3
John Puth (13)................................. 150,970 1.7
John Stirrup (14).............................. 368,319 4.2
BCO Holding (15)............................... 2,513,168 27.4
Dimensional Fund Advisors, Inc. (16)........... 701,650 8.1
J. & W. Seligman & Co. Incorporated (17)....... 1,198,134 13.8
T. Rowe Price Associates, Inc. (18)............ 1,045,900 12.0
Putnam Investments, LLC (19)................... 725,752 8.3
All Directors and Executive Officers as a Group
(11 persons)................................. 4,154,645 40.4
--------
*Less than one percent.
(1) The number of shares includes shares of BWAY common stock subject to
options held by the indicated person, whether or not currently vested,
since all options will become vested upon completion of the merger.
(2) Shares subject to options are considered outstanding for the purpose of
determining the percent of the class held by the holder of such option,
but not for the purpose of computing the percentage held by others.
(3) The shares of BWAY common stock beneficially owned by Mr. Ergas include
476,700 shares subject to options and 28,077 shares held under BWAY's
401(k) plan.
(4) The shares of BWAY common stock beneficially owned by Mr. Hayford include
1,821,273 shares owned directly by his wife, Mary Lou Hayford, and 92,918
shares owned directly by Mr. Hayford. In addition, the shares of BWAY
common stock beneficially owned by Mr. Hayford include 335,417 shares
subject to options. Mr. Hayford disclaims beneficial ownership of the
shares owned directly by his wife.
(5) The shares of BWAY common stock beneficially owned by Mrs. Hayford do not
include 92,918 shares owned directly by her husband, Warren Hayford, and
do not include 335,417 shares subject to options owned directly by her
husband.
(6) The shares of BWAY common stock beneficially owned by Mr. Kern include
41,033 shares subject to options and 18,406 shares held under BWAY's
401(k) plan.
78
(7) The shares of BWAY common stock beneficially owned by Mr. Eagleson include
120,000 shares subject to options and 711 shares held under BWAY's 401(k)
plan.
(8) The shares of BWAY common stock beneficially owned by Mr. Roessler include
95,000 shares subject to options and 10,454 shares held under BWAY's
401(k) plan.
(9) The shares of BWAY common stock beneficially owned by Mr. O'Connell
include 29,700 shares subject to options and 10,307 shares held under
BWAY's 401(k) plan.
(10) The shares of BWAY common stock beneficially owned by Mr. Donahoe include
82,500 shares subject to options.
(11) The shares of BWAY common stock beneficially owned by Mr. Dyer include
4,800 shares owned directly by his wife and 86,700 shares subject to
options.
(12) The shares of BWAY common stock beneficially owned by Mr. Jones include
7,000 shares owned by his wife as trustee of a trust for the benefit of
Mr. Jones' wife and children. In addition, the shares of BWAY common stock
beneficially owned by Mr. Jones include 82,500 shares subject to options.
Mr. Jones disclaims beneficial ownership of the shares owned by his wife
as trustee of this trust.
(13) The shares of BWAY common stock beneficially owned by Mr. Puth include
86,700 shares subject to options.
(14) The shares of BWAY common stock beneficially owned by Mr. Stirrup include
135,417 shares subject to options.
(15) On October 10, 2002, BCO Holding filed a Schedule 13D reporting that it
may be deemed to have acquired beneficial ownership of 2,523,268 shares of
BWAY common stock pursuant to the separate voting agreements BCO Holding
entered into with each of Mr. Ergas, Mr. Hayford and Mrs. Hayford. In its
Schedule 13D, BCO Holding expressly disclaims any beneficial ownership of
the shares of BWAY common stock covered by the voting agreements.
(16) Based solely upon a Schedule 13G, dated February 12, 2002, filed by
Dimensional Fund Advisors Inc. ("Dimensional"), Dimensional has sole
voting and sole dispositive power with respect to 701,650 shares of BWAY
common stock. Dimensional expressly disclaims that it is the beneficial
owner of such securities. Dimensional's address is 1299 Ocean Avenue,
11/th/ Floor, Santa Monica, California 90401.
(17) Based solely upon a Schedule 13G, dated February 14, 2002, filed jointly
by each of J. & W. Seligman & Co. Incorporated ("Seligman") and William C.
Morris ("Morris"), Seligman has shared voting power with respect to
1,139,992 shares of BWAY common stock and shared dispositive power with
respect to 1,198,134 shares of BWAY common stock. Morris, as owner of a
majority of the outstanding voting securities of Seligman, may be deemed
to beneficially own the shares of BWAY common stock reported by Seligman,
which include those shares separately reported by Morris. Seligman's
address is 100 Park Avenue, New York, NY 10017.
(18) Based solely upon a Schedule 13G, dated February 4, 2002, filed jointly by
each of T. Rowe Price Associates, Inc. ("Price Associates") and T. Rowe
Price Small-Cap Value Fund, Inc. ("Small Cap"), the shares of BWAY common
stock shown as beneficially owned by Price Associates are owned by various
individual and institutional investors including Small Cap (which owns
803,000 shares), for which Price Associates serves as an investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Exchange
Act, Price Associates may be deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is the
beneficial owner of such securities. Price Associates' address is 100 E.
Pratt Street, Baltimore, MD 21202.
(19) Based solely upon a Schedule 13G, dated February 13, 2002, filed jointly
by each of Putnam Investments, LLC. ("Putnam Investments"), Putnam
Investment Management, LLC. ("Putnam Management") and Putnam Advisory
Company, LLC. ("Putnam Advisory"), the shares of BWAY common stock shown
as beneficially owned by Putnam Investments are owned by two wholly-owned
subsidiaries of Putnam Investments, Putnam Management (which owns 169,900
shares) and Putnam Advisory (which owns 555,852). For purposes of the
reporting requirements of the Exchange Act, Putnam Investments may be
deemed to be a beneficial owner of such securities; however, Putnam
Investments expressly disclaims that it is the beneficial owner of such
securities. Putnam Investments' address is One Post Office Square, Boston,
Massachusetts 02109.
79
TRANSACTIONS IN SHARES OF COMMON STOCK BY CERTAIN PERSONS
The following table indicates, with respect to any purchases of BWAY common
stock made by BWAY, BCO Holding, BCO Acquisition, BWAY Finance, Kelso
Investment Associates VI, L.P., KEP VI, LLC, Kelso GP, VI, LLC, Jean-Pierre
Ergas, Warren Hayford, Mary Lou Hayford, Kevin Kern, Thomas Eagleson, Kenneth
Roessler and Jeffrey O'Connell, or any of their respective subsidiaries,
directors, executive officers, controlling persons or affiliates during any
quarterly period since September 30, 2000, the range of prices paid for such
shares, the number of shares purchased and the average purchase price for such
shares for each quarterly period since September 30, 2000 (excluding
information on any purchases of BWAY common stock made before such person
became an affiliate of BWAY):
Number Average
of Shares Purchase
Purchaser Quarterly Period Purchased Range of Prices Price
--------- ---------------------- --------- --------------- --------
BWAY Corporation. Quarter ended 12/31/00 81,900 $3.00-$5.25 $4.51
Quarter ended 4/1/01 122,612 $3.70-$4.00 $3.97
Quarter ended 7/1/01 324,600 $2.79-$5.39 $2.87
Quarter ended 9/30/01 37,900 $5.99-$6.98 $6.46
Quarter ended 3/31/02 34,100 $9.99-$11.60 $10.76
Jean-Pierre Ergas Quarter ended 12/31/00 2,362(a) $4.50-$5.06 $4.76
Quarter ended 7/1/01 10,000 $2.95-$2.99 $2.95
Quarter ended 9/30/01 2,231(a) $6.19-$6.60 $6.39
Quarter ended 12/30/01 2,690(a) $6.70-$9.75 $7.95
Quarter ended 3/31/02 5,213(a) $10.33-$12.40 $10.60
Quarter ended 6/30/02 1,696(a) $12.46-$16.25 $14.00
Quarter ended 9/29/02 162(a) $14.90 $14.90
Kevin Kern....... Quarter ended 7/1/01 553(a) $5.20 $5.20
Quarter ended 9/30/01 6,637(b) $5.90-$6.92 $6.42
Quarter ended 12/30/01 1,246(c) $6.40-$9.75 $7.70
Quarter ended 3/31/02 1,812(a) $10.33-$12.40 $10.61
Quarter ended 6/30/02 628(a) $12.46-$16.25 $13.99
Quarter ended 9/29/02 603(a) $13.88-$15.00 $14.57
Thomas Eagleson.. Quarter ended 12/30/01 179(a) $9.75 $9.75
Quarter ended 3/31/02 319(a) $10.33-$12.40 $10.60
Quarter ended 6/30/02 121(a) $12.46-$16.25 $13.94
Quarter ended 9/29/02 93(a) $14.90 $14.90
Jeffrey O'Connell Quarter ended 6/30/02 8,444(d) $4.44-$11.05 $6.83
Alexander Dyer... Quarter ended 7/1/01 10,600 $2.80 $2.80
Quarter ended 12/30/01 7,900 $8.59-$11.27 $10.67
Quarter ended 3/31/02 7,277 $9.99-$12.75 $11.17
John Jones....... Quarter ended 7/1/01 17,000 $3.00-$3.45 $3.14
John Puth........ Quarter ended 7/1/01 5,000 $3.09 $3.09
--------
(a) Represents shares purchased under BWAY's 401(k) plan through regular
payroll deductions.
(b) Includes 1,337 shares purchased under BWAY's 401(k) plan through regular
payroll deductions.
(c) Includes 1,046 shares purchased under BWAY's 401(k) plan through regular
payroll deductions.
(d) Represents shares acquired upon exercise of BWAY stock options having
exercise prices between $4.44-$11.05 and an average exercise price of $6.83.
Except as described below, there were no transactions in shares of BWAY
common stock that were effected during the past 60 days by BWAY, BCO Holding,
BCO Acquisition, BWAY Finance, Kelso Investment Associates VI, L.P., KEP VI,
LLC, Kelso GP VI, LLC, Jean-Pierre Ergas, Warren Hayford, Mary Lou Hayford,
Kevin Kern, Thomas Eagleson, Kenneth Roessler and Jeffrey O'Connell, or any of
their respective subsidiaries, directors, executive officers, controlling
persons or affiliates.
Number of Shares Price Per Description of
Name Date of BWAY Common Stock Share Transaction
---- ------- -------------------- --------- --------------
Kevin Kern 9/18/02 211 $ 13.88 (a)
10/9/02 152 $19.24 (a)
--------
(a) Represents shares purchased under BWAY's 401(k) plan through regular
payroll deductions.
80
ADDITIONAL INFORMATION
BWAY Stockholder Proposals
BWAY will hold its 2003 annual meeting of BWAY stockholders only if the
merger is not completed. In the event that the 2003 annual meeting is held,
stockholders wishing to submit a proposal to be considered for inclusion in the
proxy material for BWAY's 2003 annual meeting must send it to the Office of the
Corporate Secretary, BWAY Corporation, 8607 Roberts Drive, Suite 250, Atlanta,
Georgia 30350, and the Corporate Secretary must have received any such proposal
on or before September 20, 2002. BWAY will consider only proposals meeting the
requirements of applicable SEC rules.
Where You Can Find More Information
BWAY, BCO Holding, BCO Acquisition and BWAY Finance, among others, have
filed with the SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 under
the Exchange Act with respect to the merger. This document does not contain all
of the information set forth in the Schedule 13E-3 and its exhibits, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. BWAY is subject to the informational requirements of the Exchange Act and,
accordingly, files reports, proxy statements and other information with the
SEC. You may read and copy that information at the public reference room of the
SEC located at:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, including BWAY,
that file electronically with the SEC. The address of that site is
http://www.sec.gov. BWAY's filings with the SEC are also available from
commercial document retrieval services.
You can also inspect reports, proxy statements and other information about
BWAY at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York, 10005.
The SEC allows BWAY to "incorporate by reference" information into this
proxy statement. This means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this proxy
statement, except for any information that is superseded by information that is
included directly in this document.
This proxy statement incorporates by reference the documents listed below
that BWAY has previously filed with the SEC. The documents contain important
information about BWAY and its financial condition. Because there is no safe
harbor for forward-looking statements under the Private Securities Litigation
Reform Act of 1995 in connection with a going private transaction such as the
proposed merger, the documents incorporated by reference herein are
incorporated exclusive of the language claiming the safe harbor.
81
BWAY'S Filings with the SEC Period
--------------------------- ------
Annual Report on Form 10-K................ Year ended September 30, 2001
Quarterly Reports on Form 10-Q............ Quarterly periods ended December 30, 2001,
March 31, 2002 and June 30, 2002
Current Reports on Form 8-K............... Filed on September 9, 2002, October 3, 2002 and
November 8, 2002
Definitive Proxy Statement on Schedule 14A Filed on January 22, 2002
The description of the BWAY common stock set forth in BWAY's registration
statement on Form 8-A (File No. 001-12415) filed with the SEC on November 5,
1996 and the description of the BWAY preferred share purchase rights set forth
in BWAY's registration statement on Form 8-A (File No. 001-12415) filed with
the SEC on November 5, 1996, including any amendments or reports filed with the
SEC for the purpose of updating such descriptions are each incorporated herein
by reference.
BWAY incorporates by reference additional documents that we may file with
the SEC between the date of this proxy statement and the date of the BWAY
stockholders' meeting. Those documents include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, as well as proxy statements.
BWAY has supplied all information contained or incorporated by reference in
this proxy statement relating to BWAY, its subsidiaries and their respective
officers, directors and affiliates, and BCO Holding has supplied all such
information relating to BCO Holding, BCO Acquisition, Kelso and their
respective officers, directors and affiliates (other than Jean-Pierre Ergas,
Warren Hayford, Kevin Kern, Thomas Eagleson, Kenneth Roessler and Jeffrey
O'Connell solely in their respective capacities as directors and/or officers of
BWAY).
You can obtain any of the documents incorporated by reference in this
document through BWAY or from the SEC's web site at the address described
above. Documents incorporated by reference are available from BWAY without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy statement.
You can obtain documents incorporated by reference in this proxy statement by
requesting them in writing or by telephone from BWAY at the following address
and telephone number:
Corporate Secretary
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
Telephone: 770-645-4800
If you would like to request documents, please do so by ., 200. to receive
them before the meeting. Please be sure to include your complete name and
address in your request. If you request any incorporated documents, we will
mail them to you by first class mail, or another equally prompt means, within
one business day after we receive your request.
BWAY has not authorized anyone to give any information or make any
representation about the merger or BWAY that is different from, or in addition
to, that contained in this proxy statement or in any of the materials that we
have incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where the solicitation of proxies is unlawful, or if you are a
person to whom it is unlawful to direct these types of activities, then the
solicitation described in this document does not extend to you. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
82
Forward-Looking Statements
This proxy statement, including information included or incorporated by
reference in this document, contains certain forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of BWAY, as well as certain information
relating to the merger, including, without limitation, statements preceded by,
followed by or that include the words "believes," "expects," "anticipates,"
"estimates" or similar expressions. Those forward-looking statements represent
management's current judgment on what the future holds. Those forward-looking
statements involve certain risks and uncertainties. Actual results may differ
materially from those contemplated by such forward-looking statements due to,
among others, the following known risks and uncertainties:
. expected sales not materializing;
. labor unrest;
. changes in market price or demand;
. changes in raw material costs or availability;
. loss of business from customers;
. unanticipated expenses;
. delays in implementing cost reduction initiatives;
. changes in financial markets;
. potential equipment malfunction;
. BWAY's inability to complete the merger; and
. the other factors discussed in BWAY's other filings with the SEC.
There is no safe harbor for forward-looking statements under the Private
Securities Litigation Reform Act of 1995 in connection with a going-private
transaction such as the merger. As a result, the reports which are incorporated
by reference herein are incorporated exclusive of the language claiming the
safe harbor.
83
ANNEX A
AGREEMENT AND PLAN OF MERGER
by and among
BCO HOLDING COMPANY,
BCO ACQUISITION, INC.
and
BWAY CORPORATION
Dated as of September 30, 2002
A-1
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
Section 1.1 The Merger.................................................... A-5
Section 1.2 Closing....................................................... A-5
Section 1.3 Effective Time................................................ A-6
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1 Effects of the Merger......................................... A-6
Section 2.2 Certificate of Incorporation.................................. A-6
Section 2.3 By-laws....................................................... A-6
Section 2.4 Officers...................................................... A-6
Section 2.5 Directors..................................................... A-6
Section 2.6 Cancellation of Treasury Shares and Holding Shares............ A-6
Section 2.7 Conversion of Company Common Stock............................ A-6
Section 2.8 Conversion of the Capital Stock of Acquisition Sub............ A-7
Section 2.9 Option Cash Out............................................... A-7
Section 2.10 Exchange Options.............................................. A-7
Section 2.11 Shares of Dissenting Stockholders............................. A-7
Section 2.12 Exchange of Certificates...................................... A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Corporate Existence and Power................................. A-10
Section 3.2 Corporate Authorization....................................... A-10
Section 3.3 Consents and Approvals; No Violations......................... A-11
Section 3.4 Capitalization................................................ A-11
Section 3.5 Subsidiaries.................................................. A-12
Section 3.6 SEC Documents................................................. A-13
Section 3.7 Financial Statements; No Undisclosed Liabilities.............. A-13
Section 3.8 Proxy Statement; Other Filings................................ A-13
Section 3.9 Absence of Material Adverse Changes, etc...................... A-14
Section 3.10 Taxes......................................................... A-14
Section 3.11 Employee Benefit Plans........................................ A-15
Section 3.12 Environmental Matters......................................... A-16
Section 3.13 Litigation; Compliance with Laws.............................. A-17
Section 3.14 Intellectual Property......................................... A-18
Section 3.15 Material Contracts............................................ A-19
Section 3.16 Related Party Transactions.................................... A-20
Section 3.17 Indebtedness; Company Cash.................................... A-20
Section 3.18 Real Estate; Assets........................................... A-21
Section 3.19 Labor Relations and Employment................................ A-21
Section 3.20 Insurance..................................................... A-22
Section 3.21 Opinion of Financial Advisors................................. A-22
Section 3.22 Finders' and Other Fees....................................... A-22
Section 3.23 Rights Amendment.............................................. A-22
Section 3.24 State Takeover Statutes....................................... A-23
A-2
Table of Contents
(continued)
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDING AND ACQUISITION SUB
Section 4.1 Corporate Existence and Power................................. A-23
Section 4.2 Authorization................................................. A-23
Section 4.3 Consents and Approvals; No Violations......................... A-23
Section 4.4 Litigation.................................................... A-24
Section 4.5 Capitalization................................................ A-24
Section 4.6 Proxy Statement............................................... A-24
Section 4.7 Acquiror Entity's Operations.................................. A-25
Section 4.8 Financing..................................................... A-25
Section 4.9 Management Arrangements....................................... A-25
Section 4.10 Brokers....................................................... A-25
Section 4.11 No Registration............................................... A-25
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Conduct of the Business of the Company........................ A-25
Section 5.2 Stockholders' Meeting; Proxy Material......................... A-29
Section 5.3 Access to Information......................................... A-29
Section 5.4 No Solicitation............................................... A-30
Section 5.5 Debt Offer.................................................... A-31
Section 5.6 Director and Officer Liability................................ A-32
Section 5.7 Reasonable Best Efforts....................................... A-33
Section 5.8 Certain Filings............................................... A-33
Section 5.9 Public Announcements.......................................... A-34
Section 5.10 State Takeover Laws........................................... A-34
Section 5.11 Certain Notifications......................................... A-34
Section 5.12 Financing..................................................... A-34
Section 5.13 Solvency Letter............................................... A-36
Section 5.14 ISRA Requirements............................................. A-36
Section 5.15 Intellectual Property Filings................................. A-36
Section 5.16 Third Party Consents.......................................... A-36
Section 5.17 Advisory Fees, etc............................................ A-37
Section 5.18 Employees and Employee Benefit Plans.......................... A-37
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CONSUMMATE THE TRANSACTIONS
Section 6.1 Conditions to Each Party's Obligations........................ A-37
Section 6.2 Conditions to the Company's Obligation to Consummate the
Merger........................................................ A-38
Section 6.3 Conditions to Holding's and Acquisition Sub's Obligations to
Consummate the Merger....................................... A-38
A-3
Table of Contents
(continued)
Page
----
ARTICLE VII
TERMINATION
Section 7.1 Termination................................................... A-40
Section 7.2 Effect of Termination......................................... A-41
Section 7.3 Fees and Expenses............................................. A-41
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices....................................................... A-42
Section 8.2 Survival of Representations, Warranties and Covenants......... A-43
Section 8.3 Certain Definitions; Interpretation........................... A-43
Section 8.4 Headings...................................................... A-43
Section 8.5 Amendments, Modification and Waiver........................... A-44
Section 8.6 Successors and Assigns........................................ A-44
Section 8.7 Specific Performance.......................................... A-44
Section 8.8 Governing Law................................................. A-44
Section 8.9 Severability.................................................. A-44
Section 8.10 Third Party Beneficiaries..................................... A-44
Section 8.11 Entire Agreement.............................................. A-44
Section 8.12 Counterparts; Fax Signatures; Effectiveness................... A-45
A-4
AGREEMENT AND PLAN OF MERGER, dated as of September 30, 2002 (this
"Agreement"), by and among BCO Holding Company, a Delaware corporation
("Holding"), BCO Acquisition, Inc., a Delaware corporation ("Acquisition Sub"),
and BWAY Corporation, a Delaware corporation (the "Company").
WHEREAS, the Board of Directors of the Company (the "Company Board"), based
upon the unanimous recommendation of a special committee thereof consisting
solely of disinterested directors (the "Special Committee"), has approved and
declared advisable this Agreement and the transactions contemplated hereby, and
has determined that the merger of Acquisition Sub with and into the Company
(the "Merger"), with the Company remaining as the surviving corporation (the
"Surviving Corporation"), whereby each issued and outstanding share of common
stock, par value $.01 per share, of the Company (the "Company Common Stock"),
and the associated Rights (as defined in Section 3.23), other than Treasury
Shares, Dissenting Shares and Holding Shares (each as defined herein), will,
upon the terms and subject to the conditions set forth herein, be converted
into the right to receive cash in an amount equal to $20.00 per share, is fair
to, and in the best interests of, the holders of such shares of Company Common
Stock;
WHEREAS, concurrently with the execution and delivery of this Agreement,
each of Mary Lou Hayford, Warren J. Hayford and Jean-Pierre Ergas is entering
into a voting agreement with Holding, in the form of Exhibit A hereto
(collectively, the "Voting Agreements"), pursuant to which, among other things,
and subject to the terms and conditions contained therein, each of them has
agreed to vote the shares of Company Common Stock owned by him or her for
approval of the transactions contemplated hereby;
WHEREAS, Mary Lou Hayford, Warren J. Hayford, Jean-Pierre Ergas and certain
other members of the Company's management designated or to be designated by
Holding have each entered into, or prior to the Effective Time will enter into,
an agreement with Holding, in the form of Exhibit B hereto (collectively, the
"Exchange Agreements"), pursuant to which, among other things, each such person
shall exchange (collectively, the "Share Exchanges"), immediately prior to the
Effective Time, each share of Company Common Stock specified therein for that
number of shares of common stock, par value $.01 per share, of Holding (the
"Holding Common Stock") specified therein; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and to
prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), at the Effective Time (as defined in
Section 1.3), Acquisition Sub shall be merged with and into the Company and the
separate corporate existence of Acquisition Sub shall thereupon cease.
Following the Effective Time, the Company, as the Surviving Corporation, shall
succeed to and assume all of the rights and obligations of Acquisition Sub in
accordance with the DGCL.
Section 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York City time, on the second business day after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), at the offices of
Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, unless
another time, date or place is agreed to in writing by the parties hereto (the
"Closing Date").
A-5
Section 1.3 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on the Closing Date, the parties shall execute and
acknowledge a certificate of merger (the "Certificate of Merger") and file it
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of the DGCL. The Merger shall become effective at such time
as the Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware, or at such subsequent date or time as the Company and
Acquisition Sub shall agree and specify in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 2.2 Certificate of Incorporation. The certificate of incorporation
of the Company (the "Certificate of Incorporation"), as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation, until thereafter amended as provided therein or by
applicable law.
Section 2.3 By-laws. The by-laws of the Company, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation,
until thereafter amended as provided therein, by applicable law or the
Certificate of Incorporation.
Section 2.4 Officers. From and after the Effective Time, the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until they are removed, are replaced or resign.
Section 2.5 Directors. From and after the Effective Time, the directors of
Acquisition Sub shall become directors of the Surviving Corporation and shall
serve on the Surviving Corporation's Board of Directors together with any
Continuing Directors (as defined below), until their respective successors are
duly elected and qualified. The Company shall use its reasonable best efforts
to obtain and deliver to Holding and Acquisition Sub the valid resignation,
effective as of immediately prior to the Effective Time, of each director of
the Company (other than the Continuing Directors). For purposes of this
Agreement, "Continuing Directors" shall mean Warren J. Hayford and Jean-Pierre
Ergas.
Section 2.6 Cancellation of Treasury Shares and Holding Shares. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, each share of Company Common Stock that is owned by the
Company or by any direct or indirect wholly-owned Subsidiary of the Company
(the "Treasury Shares") or by Holding or Acquisition Sub (including as a result
of the transactions contemplated by the Exchange Agreements) (the "Holding
Shares") shall no longer be outstanding and shall automatically be cancelled
and shall cease to exist, and no consideration shall be paid or delivered in
exchange therefor.
Section 2.7 Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder thereof,
except as otherwise provided herein, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than Treasury
Shares, Holding Shares and Dissenting Shares) shall be converted into the right
to receive $20.00 in cash (the "Merger Consideration"). As of the Effective
Time, all such shares of Company Common Stock shall no longer remain
outstanding and shall automatically be canceled and shall cease to exist, and
each holder of a certificate that immediately prior to the Effective Time
represented such shares of Company Common Stock (a "Certificate") shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration to be paid in consideration therefor upon surrender of such
Certificate in accordance with Section 2.12, without interest.
A-6
Section 2.8 Conversion of the Capital Stock of Acquisition Sub. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, each issued and outstanding share of capital stock of
Acquisition Sub shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.9 Option Cash Out. Except for Exchange Options (as defined below),
each option granted to any present or former employee, consultant or director
of the Company or any Subsidiary of the Company to acquire Company Common
Stock, which is outstanding immediately prior to the Effective Time (each, an
"Option"), shall be canceled, effective as of the Effective Time, in exchange
for a single lump sum cash payment (less any applicable income or employment
tax withholding) equal to the product of (i) the number of shares of Company
Common Stock subject to such Option immediately prior to the Effective Time and
(ii) the excess, if any, of the Merger Consideration over the exercise price
per share of such Option (the "Option Cash Out"); provided, however, that in
the event that the exercise price per share of any such Option is equal to or
greater than the Merger Consideration, such Option shall be canceled without
any cash payment being made in respect thereof. Prior to the Closing, the
Company shall take or cause to be taken any and all actions reasonably
necessary, including the amendment of stock option plans and other
equity-related plans, programs or policies, and shall use its reasonable best
efforts to obtain any necessary consent of each holder of Options, to give
effect to the treatment of Options pursuant to this Section 2.9.
Section 2.10 Exchange Options. At the Effective Time, the Options subject to
the Exchange Agreements (each such Option, an "Exchange Option") shall be
exchanged, in accordance with the terms and provisions of the applicable
Exchange Agreement, into options to purchase shares of Holding Common Stock.
The Company's Fourth Amended and Restated 1995 Long-Term Incentive Plan (the
"Company's Option Plan") will, at the Effective Time, be assumed by Holding and
shall, after the Effective Time, continue to be in effect as the Holding 1995
Long-Term Incentive Plan. The Exchange Options shall continue to be subject to
the terms and conditions of such plan (except as otherwise provided in an
applicable Exchange Agreement). Prior to the Closing, the Company shall take or
cause to be taken any and all actions necessary, including the amendment of
stock option plans and other equity-related plans, programs or policies, and
shall use its reasonable best efforts to obtain any necessary consent of each
holder of Exchange Options, to give effect to the treatment of Exchange Options
pursuant to this Section 2.10.
Section 2.11 Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Company
Common Stock held by a person (a "Dissenting Stockholder") who shall not have
voted to adopt this Agreement and who properly demands appraisal for such
shares in accordance with Section 262 of the DGCL ("Dissenting Shares") shall
not be converted as described in Section 2.7, but shall, as of the Effective
Time, be converted into the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to Section 262 of
the DGCL, unless such holder fails to perfect or withdraws or otherwise loses
his right to appraisal. If, after the Effective Time, such Dissenting
Stockholder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Stockholder's shares of Company Common Stock shall no longer be
considered Dissenting Shares for the purposes of this Agreement and such
holder's shares of Company Common Stock shall thereupon be deemed to have been
converted, at the Effective Time, into the right to receive the Merger
Consideration set forth in Section 2.7. The Company shall give Holding and
Acquisition Sub (i) prompt notice of any demands for appraisal of shares of
Company Common Stock received by the Company, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written consent of Holding,
such consent not to be unreasonably withheld, make any payment with respect to,
or settle, offer to settle or otherwise negotiate, any such demands.
Section 2.12 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, First Union National Bank, or
such other bank or trust company reasonably acceptable to the Company and
having a capital and surplus of at least $1,000,000,000, shall
A-7
be designated by Holding to act as the Paying Agent (the "Paying Agent") for
payment of the Merger Consideration.
(b) Deposit with Paying Agent. As of the Effective Time, Holding shall cause
the Surviving Corporation to, and the Surviving Corporation shall, deposit or
cause to be deposited with the Paying Agent, separate and apart from its other
funds, as a trust fund for the benefit of the holders of issued and outstanding
shares of Company Common Stock (each, a "Holder"), cash in the amount equal to
the aggregate Merger Consideration which Holders of Company Common Stock are
entitled to receive pursuant to this Article II, with irrevocable instructions
and authority to such Paying Agent to pay to each respective Holder, as
evidenced by a list of such Holders certified by an officer of the Surviving
Corporation or the Surviving Corporation's transfer agent, for each share of
Company Common Stock, the Merger Consideration upon surrender of their
respective Certificates as provided herein. Except as provided in Sections
2.12(c), (d) and (e) hereof, any such deposit of funds shall be irrevocable.
(c) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Paying Agent to mail
(and to make available for collection by hand) to each holder of record of a
Certificate or Certificates, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent
and which shall be in the form and have such other customary provisions as
Holding and the Surviving Corporation may specify), and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the cash
(pursuant to Section 2.7 hereof), in each case, to be received by the holder
thereof pursuant to this Agreement. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with a letter of transmittal duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate, to be mailed (or made available
for collection by hand if so elected by the surrendering holder of a
Certificate, provided that payment by hand is permissible by the Paying Agent)
within three business days of receipt thereof (but in no case prior to the
Effective Time), and the Certificate so surrendered shall be forthwith
cancelled. The Paying Agent shall accept such Certificates upon compliance with
such reasonable terms and conditions as the Paying Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. No
interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. After the Effective Time, there shall be no further transfer in
the records of the Surviving Corporation or its transfer agent of Certificates
and, if Certificates are presented to the Company for transfer, they shall be
canceled against delivery of the Merger Consideration.
(d) Termination of Merger Fund. Any portion of the Merger Consideration
deposited with the Paying Agent pursuant to this Section 2.12 (the "Merger
Fund") that remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to the Surviving
Corporation, upon, and in accordance with, any demand by the Surviving
Corporation therefor, and any holders of Certificates, who have not theretofore
complied with this Section 2.12 shall thereafter look, as general creditors
thereof, only to the Surviving Corporation for payment of their claim, if any,
for the cash to which such holders may be entitled at such time, subject to
escheat and abandoned property and similar laws.
(e) No Liability. None of Holding, Acquisition Sub, the Surviving
Corporation, any of their respective affiliates or the Paying Agent shall be
liable to any Person in respect of any cash held in the Merger Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificate shall not have been surrendered prior to two
years after the Effective Time (or immediately prior to such earlier date on
which any cash in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 3.3(b)
hereof)), any such cash in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any Person previously entitled
thereto.
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(f) Investment of Merger Fund. The Paying Agent shall invest the cash
included in the Merger Fund as directed by the Surviving Corporation; provided,
that such investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations rated A-1 or P-1 or better
by Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $1,000,000,000.
Any interest or other income resulting from such investments shall be paid to
the Surviving Corporation.
(g) Transfer Taxes. If any cash is to be remitted to a Person (other than
the Person in whose name the Certificate surrendered in exchange therefor is
registered), it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange shall pay to the Paying
Agent any transfer or other Taxes (as defined in Section 3.10(i) hereof)
required by reason of the payment of the Merger Consideration to a Person other
than the registered holder of the Certificate so surrendered, or shall
establish to the satisfaction of the Paying Agent that such Tax either has been
paid or is not applicable.
(h) Withholding Rights. The Surviving Corporation or the Paying Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of a Certificate such amounts as the
Surviving Corporation or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provisions of state, local or foreign tax
law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by the Surviving Corporation or the Paying Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Certificate in respect of which such
deduction and withholding was made by the Surviving Corporation or the Paying
Agent.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration to which the holder thereof is entitled pursuant to this
Agreement.
(j) Adjustments to Prevent Dilution. In the event that prior to the
Effective Time, solely as a result of a reclassification, stock split
(including a reverse stock split), stock dividend or stock distribution which
in any such event is made on a pro rata basis to all Holders, there is a change
in the number of shares of Company Common Stock outstanding or issuable upon
the conversion, exchange or exercise of securities or rights convertible or
exchangeable or exercisable for shares of Company Common Stock, then the Merger
Consideration and the Option Cash Out shall each be equitably adjusted to
eliminate the effects of such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the corresponding section of the Company's
Disclosure Schedule delivered concurrently with the delivery of this Agreement
(the "Company Disclosure Schedule"), it being understood that matters disclosed
pursuant to one section of the Company Disclosure Schedule shall be deemed
disclosed with respect to any other section of the Company Disclosure Schedule
where it is readily apparent that the matters so disclosed are applicable to
such other sections, (ii) as disclosed in the Company SEC Documents (as defined
in Section 3.6) filed prior to the date of this Agreement, or (iii) as
expressly contemplated, or expressly permitted, under this Agreement, the
Voting Agreements, the Exchange Agreements or any other agreement contemplated
hereby or thereby, the Company hereby represents and warrants to Holding and to
Acquisition Sub as follows:
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Section 3.1 Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all necessary corporate or other power, as the case may
be, required to carry on its business as now conducted. The Company is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction (to the extent such concept is recognized) where
the character of the property owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, other than
where the failure to be so duly qualified, licensed and in good standing would
not have a Company Material Adverse Effect. The Company has heretofore made
available to Holding and Acquisition Sub true and complete copies of the
Certificate of Incorporation and the by-laws of the Company as currently in
effect. As used herein, the term "Company Material Adverse Effect" shall mean
with respect to any one or more changes, circumstances, events or effects that,
individually or in the aggregate, have, or (other than in the case of
prospects) are reasonably likely to have, a material adverse effect on (i) the
business, assets, liabilities, prospects, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole, provided, that
none of the following shall be deemed to constitute a Company Material Adverse
Effect: (a) any change in the market price or trading volume of the capital
stock of the Company after the date hereof, (b) the suspension of trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or the Nasdaq National Market, and (c) any adverse change, event,
development, circumstance, effect or offset arising from or relating to (1)
general business or economic conditions, (2) the general line or aerosol
packaging industries, unless, in any such case, such change, event,
development, circumstance, effect or offset materially and disproportionately
affects the Company (relative to other similar companies), (3) this Agreement
or the transactions contemplated hereby or the announcement thereof, (4) any
change in U.S. generally accepted accounting principles ("GAAP") which the
Company is required to adopt, or (5) the availability or cost of financing to
Holding or Acquisition Sub, to the extent that, in the case of the preceding
clause (c)(5), such change, event, development, circumstance or effect is
unrelated to the Company's business, or (ii) the ability of the Company and its
Subsidiaries, taken as a whole, to consummate the transactions contemplated
hereby.
Section 3.2 Corporate Authorization.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and (subject to approval of the Holders, as set
forth in Section 3.2(c) hereof and as contemplated by Section 5.2 hereof), to
perform its obligations hereunder. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly and validly
authorized, and this Agreement has been approved by the Special Committee and
the Company Board, and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery and performance of
this Agreement (subject to the approval of the Holders, as set forth in Section
3.2(c) hereof and as contemplated by Section 5.2 hereof). This Agreement has
been duly executed and delivered by the Company, and constitutes, assuming due
authorization, execution and delivery of this Agreement by Holding and
Acquisition Sub, a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether considered in a proceeding in
equity or at law).
(b) The Special Committee, at a meeting duly called and held, has by
unanimous vote of all its members approved and declared this Agreement and the
transactions contemplated hereby advisable and has determined that the Merger
is fair to, and in the best interests of, those Holders who are entitled to
receive the Merger Consideration. The Company Board, at a meeting duly called
and held, based upon the recommendation of the Special Committee and subject to
the terms and conditions set forth herein, (i) has approved and declared this
Agreement and the transactions contemplated hereby advisable and has determined
that the Merger is fair to, and in the best interests of, the Holders and (ii)
has recommended approval by the stockholders of the Company of this Agreement
and the Merger.
(c) Under applicable law and the Certificate of Incorporation, the
affirmative vote of a majority of the votes represented by the shares of
Company Common Stock outstanding on the record date, established by the
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Company Board in accordance with the by-laws of the Company, applicable law and
this Agreement, at the Special Meeting (as defined herein), voting together as
a single class is the only vote required to approve this Agreement and the
transactions contemplated hereby, including the Merger. The provisions of
Article IX, Section 1(a) of the Certificate of Incorporation are inapplicable
to the transactions contemplated hereby, and neither the execution and delivery
of this Agreement nor the consummation of any of the transactions contemplated
hereby will require the supermajority vote of the Holders as described therein.
Section 3.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the performance
by the Company of its obligations hereunder nor the consummation by the Company
of the transactions contemplated hereby will, subject to the approval of the
Holders, as set forth in Section 3.2(c) and as contemplated by Section 5.2, (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or the by-laws of the Company or any Subsidiary thereof; (ii)
result in a violation or breach of, constitute (with or without due notice or
lapse of time or both) a default under, require the consent from or the giving
of notice to a third party pursuant to, or give rise to any right of
termination, cancellation or acceleration or obligation to repurchase, repay,
redeem or acquire or any similar right or obligation under, any of the terms,
conditions or provisions of any Material Contract (as defined herein) or any
note, mortgage, letter of credit, other evidence of indebtedness, guarantee,
license, lease, contract or agreement or similar instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their assets is bound (collectively, the "Company Contracts") or
(iii) assuming that the filings, registrations, notifications, authorizations,
consents and approvals referred to in subsection (b) below have been obtained
or made, as the case may be, violate any order, injunction, decree, statute,
rule or regulation of any Governmental Entity (as hereinafter defined) to which
the Company or any of its Subsidiaries is subject, excluding from the foregoing
clauses (ii) and (iii) such requirements, obligations, defaults, breaches,
rights or violations that would not, in the aggregate, have a Company Material
Adverse Effect.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any government or any agency, court, tribunal,
commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational, provincial, municipal, domestic
or foreign (each, a "Governmental Entity") is required in connection with the
execution and delivery of this Agreement by the Company or the performance by
the Company of its obligations hereunder, except (i) filings to maintain the
good standing of the Company, (ii) compliance with any applicable requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"); (iii) compliance with any
applicable requirements of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act"), the Trust
Indenture Act of 1939, as amended, and the rules and regulations promulgated
thereunder (the "Trust Indenture Act"), and the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"); (iv) compliance with any applicable requirements of state blue
sky, securities or takeover laws or stock exchange requirements; (v) the filing
with the Secretary of State of the State of Delaware of the Certificate of
Merger and the filing of documents, if any, required to be filed in connection
with the consummation of the transactions contemplated hereby with the relevant
authorities of other states in which the Company is qualified to do business,
and (vi) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be obtained or
made would not, in the aggregate, have a Company Material Adverse Effect.
Section 3.4 Capitalization. The authorized capital stock of the Company
consists of 24,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, $.01 par value per share, of the Company (the "Company
Preferred Stock"). As of September 20, 2002, there were (i) 8,708,626 shares of
Company
Common Stock, including associated Rights, issued and outstanding (and there
were an additional 1,142,376 shares of Company Common Stock, including
associated Rights, held in the treasury of the Company), and (ii)
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no shares of Company Preferred Stock issued and outstanding. Since September
20, 2002, no shares of capital stock of the Company have been issued, except
pursuant to the exercise of Options outstanding on such date. All shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive rights. As of September 20, 2002, except for (i) up to 1,930,364
shares of Common Stock, including associated Rights, reserved for issuance
pursuant to outstanding Options and rights granted under the Company's Option
Plan and having such respective exercise prices per share of Common Stock as
are set forth in Section 3.4 of the Company Disclosure Schedule and (ii) shares
of Company Common Stock and Company Preferred Stock reserved for issuance upon
exercise of the Rights, there were not, and as of the date hereof, there are
not, any existing options, warrants, calls, subscriptions, or other rights, or
other agreements or commitments, obligating the Company to issue, transfer or
sell any shares of capital stock of the Company or any of its Subsidiaries. As
of the date hereof, except as set forth in the preceding sentences of this
Section 3.4 or as contemplated by this Agreement or as a result of the exercise
of Options outstanding as of September 20, 2002, there are outstanding (a) no
shares of capital stock or other voting securities of the Company, (b) no
securities of the Company or any Subsidiary of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(c) no options or other rights to acquire from the Company, and no obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (d) no stock appreciation, phantom equity or other equity-based
rights issued by the Company that have value based on the capital stock or
other voting securities of the Company (the items in clauses (a), (b), (c) and
(d) being referred to collectively as the "Company Securities"). There are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. No Subsidiary
of the Company owns any capital stock or other voting securities of the Company.
Section 3.5 Subsidiaries.
(a) Each Subsidiary of the Company that is actively engaged in any business
or owns any non de minimis assets or has any non de minimis liabilities
(contingent or otherwise) (each, an "Active Company Subsidiary") (i) is an
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization (to the extent such concept is recognized),
(ii) has all necessary powers required to carry on its business as now
conducted and (iii) is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification or
licensing necessary, other than where the failure to be so duly qualified and
in good standing would not have a Company Material Adverse Effect. For purposes
of this Agreement, "Subsidiary"
means, with respect to any Person, any corporation or other legal entity of
which such Person owns, directly or indirectly, 50% or more of the outstanding
stock or other equity interests, the holders of which are entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity. All Active Company Subsidiaries and their
respective jurisdictions of organization are identified in Section 3.5 of the
Company Disclosure Schedule.
(b) All of the outstanding shares of capital stock of each Subsidiary of the
Company are duly authorized, validly issued, fully paid and nonassessable, and
such shares are owned by the Company or by a Subsidiary of the Company free and
clear of any Liens (as defined hereafter) or limitation on voting rights other
than pursuant to, or permitted under, the Company's senior credit facility.
There are no subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character relating to the
issuance, transfer, sale, delivery, voting or redemption (including any rights
of conversion or exchange under any outstanding security or other instrument)
for any of the capital stock or other equity interests of any such
Subsidiaries, other than pursuant to, or permitted under, the Company's senior
credit facility. For purposes of this Agreement, "Lien" shall mean any
mortgage, lien, pledge, charge, claim, security interest or encumbrance of any
kind, except, in the case of securities, for limitations on transfer imposed by
federal or state securities laws.
(c) Section 3.5 of the Company Disclosure Schedule sets forth all Persons in
which the Company or a Subsidiary of the Company owns 10% or more of the
outstanding voting or equity interest, the owner thereof and the amount thereof
so owned.
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Section 3.6 SEC Documents. The Company has filed all reports, proxy
statements, registration statements, forms and other documents required to be
filed by it with the Securities and Exchange Commission ("SEC") since January
1, 2000 (collectively, including all exhibits and schedules thereto and
documents incorporated by reference therein, the "Company SEC Documents"). No
Subsidiary of the Company is required to file any report, proxy statement,
registration statement, form or other document with the SEC. None of the
Company SEC Documents (other than the financial statements and notes and
schedules thereto contained therein, as to which representations are made in
Section 3.7), as of their respective filing and effective dates (or, if amended
prior to the date of this Agreement, as of the respective filing and effective
dates of such amendment), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. All of such Company SEC Documents (as amended prior
to the date of this Agreement, if amended prior to the date of this Agreement)
complied in form and substance, in all material respects, with the applicable
requirements of the Securities Act and the Exchange Act, each as in effect on
the date so filed.
Section 3.7 Financial Statements; No Undisclosed Liabilities.
(a) The consolidated financial statements of the Company (including any
notes and schedules thereto) included in the Company SEC Documents (i) were
prepared from the books and records of the Company and its Subsidiaries, (ii)
complied as to form in all material respects with all applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect on the date of filing and effectiveness thereof, (iii) are
in conformity with GAAP as in effect as of the dates of such financial
statements, applied on a consistent basis (except as may be indicated therein
or in the notes thereto and, in the case of unaudited statements, as permitted
by the rules and regulations of the SEC) during the periods involved and (iv)
fairly present, in all material respects, the consolidated financial position
of the Company and its respective consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods therein indicated (subject, in the case of unaudited statements, to
normal year-end audit adjustments that are not expected to be material in
amount).
(b) Except (1) as set forth, reflected or reserved against in the
consolidated balance sheet (including the notes thereto) of the Company
included in its Annual Report on Form 10-K (the "Form 10-K") for the fiscal
year ended September 30, 2001, (2) as set forth, reflected or reserved against
in any consolidated balance sheet (including the notes thereto) of the Company
included in any other Company SEC Documents filed with the SEC after the filing
date of the Form 10-K and prior to the date hereof, (3) for liabilities and
obligations incurred since June 30, 2002 in the ordinary course of business
consistent with past practice, or not otherwise prohibited pursuant to this
Agreement, or (4) for liabilities and obligations incurred in connection with
the Merger or any other transaction or agreement contemplated by this
Agreement, neither the Company nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) except for such liabilities and obligations which would not, in the
aggregate, have a Company Material Adverse Effect.
Section 3.8 Proxy Statement; Other Filings. None of the information
contained in the Proxy Statement (as defined in Section 5.2(b)) (and any
amendments thereof or supplements thereto) will at the time of the mailing of
the Proxy Statement to the Holders, at the time of the Special Meeting (as
defined in Section 5.2(a)), and at the time of any amendments thereof or
supplements thereto, and none of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the Schedule 13E-3
(as defined in Section 5.2(b)) to be filed with the SEC concurrently with the
filing of the Proxy Statement, will, at the time of its filing with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect
to statements made or omitted in the Proxy Statement or Schedule 13E-3 relating
to Holding, Acquisition Sub or their respective
affiliates (including Kelso & Company, L.P. ("Kelso")) based on information
supplied by Holding, Acquisition Sub or their respective affiliates (including
Kelso) for inclusion or incorporation by reference in the Proxy Statement or
Schedule 13E-3. The Proxy Statement and the Schedule 13E-3 will comply as to
form in all
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material respects with the provisions of the Exchange Act, except that no
representation is made by the Company with respect to the statements made or
omitted in the Proxy Statement or Schedule 13E-3 relating to Holding,
Acquisition Sub or their respective affiliates (including Kelso) based on
information supplied by Holding, Acquisition Sub or their respective affiliates
(including Kelso) for inclusion or incorporation by reference in the Proxy
Statement or Schedule 13E-3.
Section 3.9 Absence of Material Adverse Changes, etc. Other than in
connection with or arising out of this Agreement, and the transactions and
other agreements contemplated hereby, since June 30, 2002, the Company and its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice, and there has not been (i) a Company Material
Adverse Effect or (ii) any action taken by the Company or any of its
Subsidiaries that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 5.1 of this
Agreement.
Section 3.10 Taxes.
(a) (i) Except for such matters as would not have a Company Material Adverse
Effect, all Tax Returns required to be filed by or on behalf of the Company or
any of its Subsidiaries have been timely filed in the manner prescribed by law,
and all such Tax Returns are true, complete and accurate in all material
respects; (ii) all Taxes due and owing (whether or not reflected on any Tax
Return) by the Company or any Subsidiary of the Company have been timely paid,
or adequately reserved or properly accounted for in accordance with GAAP; (iii)
there is no presently pending, scheduled or commenced audit, examination,
deficiency, refund litigation, proposed adjustment, proceeding (whether
judicial or administrative) or matter in controversy relating to Taxes of the
Company or any Subsidiary of the Company; (iv) except for such matters as would
not have a Company Material Adverse Effect, there are no liens for Taxes on any
asset of the Company or any Subsidiary of the Company, except for liens for
Taxes not yet due and payable; and (v) the Company and each of its Subsidiaries
has duly and timely withheld in all material respects all Taxes (including
employee-related Taxes) required to be withheld and such withholding Taxes have
been either duly and timely paid to the proper Governmental Entity or properly
set aside in accounts for such purposes.
(b) Except for such matters as would not have a Company Material Adverse
Effect, no agreement or other document waiving, extending, or having the effect
of waiving or extending, the statute of limitations, the period of assessment
or collection of any Taxes on or in respect of the Company or its Subsidiaries,
and no power of attorney with respect to any such Taxes has been filed with any
Governmental Entity which waiver, extension or power of attorney is currently
in effect. Except for such matters as would not have a Company Material Adverse
Effect, neither the Company nor its Subsidiaries has requested or been granted
an extension of time (other than an automatic extension not requiring the
consent of any Governmental Entity) for filing any Tax Return to a date later
than the date of this Agreement.
(c) The statutes of limitations for the federal income Tax Returns of the
Company and the Subsidiaries of the Company have expired or otherwise have been
closed for all taxable periods ending on or before the end of the Company's
fiscal year ended September 27, 1998.
(d) The Company has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the 5-year
period ending on the date hereof.
(e) Neither the Company nor any of its Subsidiaries has any liability for
the Taxes of any person other than the Company or any of its Subsidiaries (i)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor or (iii) by contract.
(f) Except for such matters as would not have a Company Material Adverse
Effect, neither the Company nor any of its Subsidiaries is required to include
in income any adjustment pursuant to Section 481(a) of the Code (or any similar
provisions of state, local or foreign law) in its current or in any future
taxable period by reason of a change in accounting method.
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(g) No written claim against or in respect of the Company or any Subsidiary
(other than a claim that has been finally settled) has been made by any
governmental authority during the period from January 1, 1995 until the date of
this Agreement in a jurisdiction where the Company or any Subsidiary does not
file Tax Returns or pay or collect Taxes in respect of a particular type of Tax
imposed by that jurisdiction, that the Company or any Subsidiary is or may be
subject to an obligation to file Tax Returns or pay or collect Taxes in respect
of such Tax in that jurisdiction.
(h) During the period from January 1, 1995 until the date of this Agreement,
neither the Company nor any Subsidiary has received or applied for a Tax ruling
and has not entered into a closing agreement pursuant to Section 7121 of the
Code, or any predecessor provision or similar provision of state or local law
which closing agreement currently is in effect.
(i) For purposes of this Agreement, (i) "Taxes" means all taxes, levies or
other like assessments, charges or fees (including estimated taxes, charges and
fees), including income, corporation, advance corporation, gross receipts,
transfer, excise, property, sales, use, value-added, license, payroll,
withholding, social security and franchise or other governmental taxes or
charges, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof, and such term shall include any
interest, penalties or additions to tax attributable to such taxes and (ii)
"Tax Return" means any report, return, statement, declaration, form or other
written information required to be supplied to a taxing or other governmental
authority in connection with Taxes.
Section 3.11 Employee Benefit Plans.
(a) The Company has heretofore delivered or made available to Acquisition
Sub true and complete copies of each "employee benefit plan" as such term is
defined in Section 3(3) of ERISA (whether or not subject to ERISA), and (i)
each material employment, consulting, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation or other
equity-based, severance or termination pay, retention, change of control,
collective bargaining, hospitalization or other medical, life or other employee
benefit-related insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement, whether written
or oral, sponsored, maintained or contributed to or required to be contributed
to by the Company or any member of its "controlled group," within the meaning
of Section 414(b), (c) or (m) of the Code (together, the "Company Group"), for
the benefit of any employee or former employee of the Company Group
(collectively, the "Plans"); (ii) if any Plan is funded through a trust or any
third party funding vehicle (including insurance), copies of such trust or
other vehicle; and (iii) with respect to each Plan (as applicable), the most
recent actuarial and trust reports, the most recent Form 5500 and all schedules
thereto, the most recent IRS determination letter, all current summary plan
descriptions, all material communications received from or sent to the IRS, the
PBGC (as defined below) or the Department of Labor (including a written
description of any oral communication), any actuarial study of any
post-employment life or medical benefits provided under any such Plan, any
statements or other communications regarding withdrawal or other multiemployer
plan liabilities, if any, and all amendments and modifications to any such
document.
(b) Schedule 3.11 of the Company Disclosure Schedule contains a true and
complete list of all Plans.
(c) Schedule 3.11 of the Company Disclosure Schedule under the heading
"Vesting Plans" contains a true and complete list of all Plans pursuant to
which any amounts may become vested or payable as a result of the consummation
of the transactions contemplated hereby (either alone or in combination with
other events). The consummation of the transactions contemplated hereby will
not give rise to any payment (or acceleration of vesting of any amounts or
benefits) that will be an "excess parachute payment" as defined in section 280G
of the Code.
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(d) No member of the Company Group has any legally binding plan or
commitment to create any additional Plan or modify or change any existing Plan
that would be reasonably expected to result in material liabilities to the
Company Group, except as may be required by law or under an applicable
collective bargaining agreement.
(e) No member of the Company Group has incurred, or reasonably expects to
incur, (i) any material liability under Title IV of ERISA, including any such
liability arising out of proceedings instituted by the PBGC, (ii) any material
liability under Section 4201 et seq. of ERISA in connection with any Plan that
is a Multiemployer Plan, or (iii) any material liability (including as a result
of any indemnification obligation) under Title I of ERISA or the penalty,
excise Tax or joint and several liability provisions of the Code relating to
employee benefit plans. To the knowledge of the Company, no Multiemployer Plan
is in reorganization or insolvent. For purposes of this Agreement, (i) "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder, (ii) "PBGC" means the Pension Benefit
Guaranty Corporation and (iii) "Multiemployer Plan" means a multiemployer plan
within the meaning of section 4001(a)(3) of ERISA.
(f) Each of the Plans has been operated and administered in all material
respects in accordance with the terms of such Plan, all applicable collective
bargaining agreements and all applicable laws, including but not limited to
ERISA and the Code, except where such noncompliance would not have a Company
Material Adverse Effect, and no governmental audits, actions, suits or claims
are pending or, to the knowledge of the Company, threatened which, if adversely
resolved, would have a Company Material Adverse Effect.
(g) Each of the Plans which is intended to be "qualified" within the meaning
of section 401(a) of the Code is so qualified, and the trust (if any) forming a
part thereof, has received a favorable determination letter from the Internal
Revenue Service as to its qualification under the Code and to the effect that
each such trust is exempt from taxation under Section 501(a) of the Code, and
the Company has no knowledge of an occurrence of an event since the date of
such determination letter that could reasonably be expected to adversely affect
such qualification or tax-exempt status. No Plan is a "multiple employer plan"
for purposes of sections 4063 or 4064 of ERISA.
(h) Full payment has been made, or will be made in accordance with Section
404(a)(6) of the Code, of all amounts which any member of the Company Group is
required to pay on or before the Closing Date under the terms of each of the
Plans and Section 412 of the Code. None of the Plans or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
section 302 of ERISA and Section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of each of the Plans ended prior to
the date of this Agreement.
(i) No employee, director or consultant is or will become entitled to death
or medical post-employment benefits by reason of service to the Company or its
Subsidiaries, other than coverage mandated by Section 4980B of the Code or
similar state law.
Section 3.12 Environmental Matters.
(a) The Company and each of its Subsidiaries is in compliance with all
applicable Environmental Laws, including possessing all permits,
authorizations, licenses, approvals and other governmental authorizations
required for its operations under applicable Environmental Laws (all of the
foregoing, the "Environmental Permits"), except for such violations, if any,
that would not, in the aggregate, have a Company Material Adverse Effect. All
such Environmental Permits are in effect, no appeal nor any other action is
pending to revoke or modify any such Environmental Permit, and the Company and
each of its Subsidiaries are in compliance with all terms and conditions of
such Environmental Permits, except for such failures to maintain in effect,
such appeal, or other actions, or such violations, if any, that would not, in
the aggregate, have a Company Material Adverse Effect.
(b) There is no pending or, to the knowledge of the Company, threatened
claim, lawsuit, or proceeding against the Company or any of its Subsidiaries,
under or pursuant to any Environmental Law, which, if adversely
A-16
resolved, would have a Company Material Adverse Effect, and neither the Company
nor any of its Subsidiaries has received written notice from any Person,
including any Governmental Entity, alleging that the Company or any of its
Subsidiaries has been or is in violation or potentially in violation of any
applicable Environmental Law, the adverse consequences of which written notice
would have a Company Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has received any written request for information from any
Person, including but not limited to any Governmental Entity, related to any
potential liability under or noncompliance with any applicable Environmental
Law, except for such liability or noncompliance that would not, in the
aggregate, have a Company Material Adverse Effect.
(c) With respect to the real property that is currently or, to the knowledge
of the Company, formerly owned, leased or operated by the Company or any of its
Subsidiaries or any of their predecessors in interest, there have been no
Releases of Hazardous Substances on, under, above or from any of such real
property except for those that would not, in the aggregate, have a Company
Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has entered into any
written agreement that would reasonably be expected to require them to pay to,
reimburse, guarantee, pledge, defend, indemnify or hold harmless any Person
from or against any liabilities or costs arising out of or related to the
generation, manufacture, use, transportation or disposal of Hazardous
Substances, or otherwise arising in connection with or under Environmental
Laws, except for such liabilities or costs, if any, that would not, in the
aggregate, have a Company Material Adverse Effect.
(e) To the knowledge of the Company, neither the Company, nor any of its
Subsidiaries, within the next five years, will be required to expend monies for
capital improvements in order to comply or maintain compliance with applicable
Environmental Laws, except for such expenditures that would not have a Company
Material Adverse Effect.
(f) The Company has provided to Acquisition Sub all material environmental
assessments, compliance audits, studies, written allegations of noncompliance
or liability and other material documents in its possession, custody or control
materially bearing on liabilities (i) arising from the environmental conditions
on, under or about the properties or assets currently or formerly owned,
leased, operated or used by the Company or any of its Subsidiaries or any
predecessor in interest thereto or (ii) relating to the Release of Hazardous
Substances by the Company or its Subsidiaries or any predecessors in interest.
(g) For purposes of this Agreement (i) "Environmental Laws" shall mean all
foreign, federal, state and local laws, regulations, rules and ordinances
relating to pollution or protection of the environment or public health (but
excluding occupational safety and health), including laws relating to Releases
or threatened Releases of Hazardous Substances into the indoor or outdoor
environment (including ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances as the foregoing are enacted and in effect on or prior to
the date hereof, (ii) "Hazardous Substance" shall mean any substance, whether
solid, liquid or gaseous, which is listed, defined or regulated as a "hazardous
substance", "hazardous material", "hazardous waste", "pollutant", "toxic
substance", "hazardous material waste", or "contaminant" or is otherwise
classified as hazardous or toxic, in or pursuant to any Environmental Laws; or
which contains asbestos, petroleum or petroleum products, and (iii) "Release"
means any release, spill, emission, discharge, leaking, pumping, injection,
deposit, disposal, dispersal, leaching or migration into the indoor or outdoor
environment or into or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water or groundwater.
Section 3.13 Litigation; Compliance with Laws.
(a) There is no action, suit, charge, complaint, grievance or proceeding
pending (each, an "Action") against, or to the knowledge of the Company overtly
threatened against, the Company or any Subsidiary of the Company
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or any of their respective properties, or any of their officers, employees or
directors in their capacity as such, or, to the knowledge of the Company, any
other Person with respect to which, in whole or in part, the Company or any
Subsidiary of the Company is liable or has agreed to indemnify such other
Person, before any court or arbitrator or any Governmental Entity, except for
those that would not, in the aggregate, have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries are (and since September 30, 2000 have
been) in compliance with all applicable laws, ordinances, rules and regulations
of any federal, state, local or foreign Governmental Entity applicable to their
respective financial statements, accounting practices, corporate governance,
businesses and operations, including the Sarbanes-Oxley Act of 2002, as
amended, and the rules and regulations promulgated thereunder, except for such
failures to be in compliance that would not, individually or in the aggregate,
have a Company Material Adverse Effect. The Company and its Subsidiaries have
all governmental licenses, permits, authorizations, consents and approvals
(collectively, "Licenses") required to carry on their respective business as
now conducted and all such Licenses are in full force and effect, other than
any such Licenses the failure of which to have or to be in full force and
effect would not, in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any Subsidiary thereof has received notification from
any Governmental Entity of any intent to revoke or terminate, or of any
proceedings regarding, any of their material Licenses, except for any
revocations or terminations that would not, in the aggregate, have a Company
Material Adverse Effect.
Section 3.14 Intellectual Property.
(a) To the knowledge of the Company, the Company and its Subsidiaries own or
have the right to use all Intellectual Property (as defined hereafter) used in
or necessary for the conduct, in all material respects, of the business of the
Company and its Subsidiaries as such business is currently conducted. Set forth
on Section 3.14 of the Company Disclosure Schedule under the heading "Company
Intellectual Property" is a true and complete list of all material Intellectual
Property owned by the Company or any of its Subsidiaries ("Company Intellectual
Property") and all licenses (other than "shrinkwrap" or "clickwrap" software
licenses) and other agreements to which the Company or any of its Subsidiaries
is a party providing for the use of or limiting the use of material
Intellectual Property (collectively, the "Intellectual Property Licenses").
(b) (i) all of the registrations relating to material Intellectual Property
owned by the Company and its Subsidiaries are subsisting and have not been
cancelled, and all the material owned Intellectual Property is free of all
Liens, and has not been abandoned; (ii) the Company and its Subsidiaries do
not, to the knowledge of the Company, infringe or otherwise violate, and
neither the Company nor any of its Subsidiaries has received any written or
overt notice of potential infringement or other violation of, the Intellectual
Property rights of any third party in any material respect; (iii) no third
party is challenging, or, to the knowledge of the Company, infringing on or
otherwise materially violating any right of the Company or any of its
Subsidiaries in or to any Intellectual Property owned or licensed by the
Company or any of its Subsidiaries; (iv) no judgment, decree, injunction, rule
or order has been rendered by any Governmental Entity which would limit, cancel
or question the validity of, or the Company's or its Subsidiaries' rights in
and to, any Intellectual Property owned or used by the Company in any respect
except for those that would not, in the aggregate, have a Company Material
Adverse Effect; and (v) neither the Company nor any of its Subsidiaries has
received notice of any pending or threatened suit, action or proceeding that
seeks to limit, cancel or question the validity of, or the Company's or any of
its Subsidiaries' rights in and to, any Intellectual Property, except for those
that would not, in the aggregate, have a Company Material Adverse Effect.
(c) For purposes of this Agreement, "Intellectual Property" shall mean all
rights provided under U.S. state and foreign law relating to intellectual
property, including all (a) patents, patent applications, patent disclosures,
and all rights related thereto including all reissues, divisions, and
continuations; (b) proprietary inventions, discoveries, processes, formulae,
designs, methods, techniques, procedures, concepts, developments, technology,
new and useful improvements thereof and proprietary know-how relating thereto,
whether or not patented or eligible for patent protection; (c) copyrights and
copyrightable works, including computer applications,
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programs, software, databases, Internet websites, and related items; (d)
trademarks, service marks, trade names, trade dress, and domain names, and the
goodwill of the business symbolized thereby, and all common-law rights relating
thereto; and (e) trade secrets and other confidential information, (f) all
registrations, applications and recordings for any of the foregoing, and (g)
licenses of any of the foregoing.
(d) Except as set forth in Section 3.14 of the Company Disclosure Schedule,
the consummation of the transactions contemplated hereby will not result in the
loss or impairment of the Company's or any of its Subsidiaries' ownership or
use of any Company Intellectual Property or any Intellectual Property under the
Intellectual Property Licenses.
Section 3.15 Material Contracts.
(a) As used herein, "Material Contracts" shall mean all "material contracts"
described in Item 601(b)(10) of Regulation S-K (other than this Agreement) to
which the Company or its Subsidiaries is a party or may be bound on the date
hereof and that are required to be filed with the SEC ("S-K Contracts") and the
following additional contracts to which the Company or any of its Subsidiaries
is a party:
(i) all management contracts (excluding contracts for employment) and
contracts with other consultants, including any contracts involving the
payment of royalties or other amounts calculated based upon (i) the revenues
or income of the Company or any of its Subsidiaries or (ii) the revenues or
income of any product of the Company or any of its Subsidiaries to which the
Company or any of its Subsidiaries is a party, in each case involving
aggregate annual payments by the Company or any of its Subsidiaries of more
than $150,000;
(ii) all contracts and agreements that (i) limit or purport to limit in
any material respect the ability of the Company or any of its Subsidiaries,
or, to the knowledge of the Company, any key executives of the Company or
any of its Subsidiaries, to compete in any line of business or with any
Person or in any geographic area or location or during any period of time,
(ii) require the Company or any of its Subsidiaries to use any supplier or
third party for all or substantially all of the Company's or any of its
Subsidiaries' requirements or needs, (iii) limit or purport to limit in any
material respect the ability of the Company or any of its Subsidiaries to
solicit any customers or clients of the other parties thereto, or (iv)
require the Company or any of its Subsidiaries to provide to the other
parties thereto "most favored nations" pricing;
(iii) all (or, in the case of the Company and persons other than
officers, all written) contracts, understandings, transactions, agreements
and arrangements between the Company (and all material contracts,
understandings, transactions, agreements and arrangements between any of its
Subsidiaries), on the one hand, and any of their respective officers or
directors (or any of such Person's affiliates) on the other hand (each such
contract, a "Related Party Agreement"), except for Related Party Agreements
that are immaterial, and all collective bargaining agreements to which the
Company or any Subsidiary is a party;
(iv) all joint venture contracts, partnership arrangements or other
agreements outside the ordinary course of business involving a sharing of
profits, losses, costs or liabilities by the Company or any of its
Subsidiaries of more than $150,000 per year with any third party;
(v) all voting or other agreements governing how any shares of Company
Common Stock shall be voted;
(vi) all acquisition, merger, asset purchase or sale agreements related
to the acquisition or sale of a business (each such agreement, an
"Acquisition or Divestiture Agreement"), except for any Acquisition or
Divestiture Agreement (a) providing for consideration of less than $250,000,
(b) not including continuing indemnification obligations on the part of the
Company or any of its Subsidiaries or (c) entered into prior to September
30, 1992 (other than Acquisition or Divestiture Agreements with
Owens-Illinois Group, Inc.).
A-19
(vii) all material agreements of the Company or any of its Subsidiaries
with any Governmental Entities or with any customers or suppliers;
(viii) all material Intellectual Property Licenses; or
(ix) other agreements that are material to the Company or any of its
Subsidiaries or the operation of its or their business.
(b) Set forth in Section 3.15 of the Company Disclosure Schedule is a true
and complete list as of the date of this Agreement of all Material Contracts.
(c) All Material Contracts are valid and in full force and effect, except to
the extent they have previously expired in accordance with their terms or to
the extent the failure to be in full force and effect would not have a Company
Material Adverse Effect. None of the Company, its Subsidiaries, or, to the
knowledge of the Company, the other parties thereto, has violated any provision
of, or committed or failed to perform any act which with or without notice,
lapse of time or both would constitute a default under the provisions of, any
Material Contract, except in each case for those violations and failures which
would not result in a Company Material Adverse Effect.
Section 3.16 Related Party Transactions. There are no contracts (other than
expired contracts or contracts terminated in accordance with their terms),
commitments, agreements, arrangements or other transactions between the Company
or any of its Subsidiaries, on the one hand, and any (i) present or former
officer or director of the Company or any of its Subsidiaries or any of their
immediate family members (including their spouses), (ii) record or beneficial
owner of five percent or more of the voting securities of the Company or (iii)
affiliate of any such officer, director, family member or beneficial owner, on
the other hand, except, in the case of each of clauses (i), (ii) and (iii) for
such contracts, commitments, agreements, arrangements or other transactions
involving less than $50,000.
Section 3.17 Indebtedness; Company Cash.
(a) Except for (i) Indebtedness (as defined herein) described in the notes
to the Company's unaudited consolidated financial statements included in its
Quarterly Report on Form 10-Q for the three months ended June 30, 2002 (the
"Latest Form 10-Q"), (ii) Indebtedness included in the amount set forth under
total liabilities on the balance sheet included in the Latest Form 10-Q, (iii)
Indebtedness of the Company to any of its wholly owned Subsidiaries or of any
Subsidiary of the Company to the Company, (iv) Indebtedness incurred under the
Company's senior credit facility and the Company's Indenture dated as April 11,
1997 (the "Indenture") and (v) other Indebtedness not in excess of $250,000 in
the aggregate, the Company and its Subsidiaries have no outstanding
Indebtedness and no contracts, agreements, understandings or other obligations
relating to Indebtedness, other than Indebtedness incurred after the date
hereof in compliance with Section 5.1(j) hereof.
(b) For the purposes of this Agreement, "Indebtedness" means, without
duplication, (i) any indebtedness, notes payable (including notes payable in
connection with acquisitions), accrued interest payable or other obligations of
the Company and its Subsidiaries for borrowed money, whether current,
short-term, or long-term, secured or unsecured, (ii) any purchase money
indebtedness of the Company and its Subsidiaries for purchases of property or
assets, (iii) any lease obligations of the Company and its Subsidiaries under
leases which are capital leases in accordance with GAAP, (iv) any financing of
the Company and Subsidiaries effected through "special purpose entities" and
any synthetic leases and project financing, (v) any obligations of the Company
or its Subsidiaries in respect of banker's acceptances or letters of credit
(other than stand-by letters of credit in support of ordinary course trade
payables or for the benefit of the administrator of the Company's self-insured
workers compensation program), (vi) any liability of the Company or its
Subsidiaries with respect to interest rate swaps, collars, caps and similar
hedging obligations, (vii) the obligations pursuant to any class of preferred
stock (other than Company Preferred Stock) and any dividends accrued thereon,
(viii) any indebtedness referred to in clauses (i) through (vii) above of any
Person or entity other than the Company which is either guaranteed by, or
secured
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by any Lien upon any property or assets owned by, the Company or any of its
Subsidiaries and (ix) any prepayment penalties resulting from the discharge of
any of the foregoing obligations which are or will be actually prepaid pursuant
to a pre-existing contractual arrangement as a result of the transactions
contemplated hereby; provided, however, that the foregoing definition of
Indebtedness shall not include ordinary course trade payables and accrued
expenses (other than interest). In addition to the foregoing, "Indebtedness"
also includes any indebtedness that will become due or owing as a result of the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(c) As of the date hereof, the Company and its Subsidiaries had cash and
cash equivalents on hand of not less than $18 million.
Section 3.18 Real Estate; Assets.
(a) The Company or one of its Subsidiaries has good, valid and marketable
title to each parcel of real property owned in fee by the Company or any of its
Subsidiaries (the "Company Fee Property") and a good and valid leasehold
interest in each parcel of real property leased by the Company or any of its
Subsidiaries (the "Company Leased Property" and together with the Company Fee
Property, the "Company Real Property") pursuant to a lease set forth on Section
3.18 of the Company Disclosure Schedule (the "Company Leases"), in each case
where any such real property is necessary to the conduct of the business of the
Company and its Subsidiaries as it is presently conducted. Section 3.18 of the
Company Disclosure Schedule sets forth a true and complete list of all Company
Real Property which is necessary to the conduct of the business of the Company
and its Subsidiaries as it is presently conducted. To the Company's knowledge,
(i) the Company or one of its Subsidiaries has the right to use and occupancy
of the Company Leased Property for the full term of the Company Lease relating
thereto, except for any failure which would not, in the aggregate, have a
Company Material Adverse Effect, (ii) each Company Lease is a legal, valid and
binding agreement, enforceable in accordance with its terms, of the parties
thereto and there is no, nor has the Company or any of its Subsidiaries
received notice of any, default (or any condition or event, which, after notice
or a lapse of time or both would constitute a default thereunder) which would
have a Company Material Adverse Effect, and (iii) neither the Company nor any
of its Subsidiaries has assigned its interest under any Company Lease or sublet
any part of the premises covered thereby or exercised any option or right
thereunder except as would not, in the aggregate, have a Company Material
Adverse Effect.
(b) The Company Fee Property is not subject to any Liens or other
encumbrances (collectively, "Property Restrictions"), except for: (i) any such
Property Restrictions for taxes, assessments and other governmental charges not
yet due and payable, or, if due, not delinquent or being contested in good
faith by appropriate proceedings during which collection or enforcement against
the Company Real Property is stayed, (ii) Property Restrictions imposed or
promulgated by law or any Governmental Entity with respect to real property,
including zoning, building, environmental or similar restrictions, (iii)
easements, licenses, covenants, conditions, minor title defects, mechanic's
liens, rights-of-way and other similar restrictions and encumbrances, including
any other agreements, restrictions or encumbrances which would be shown on a
current title report or survey or similar report or listing and any other
matters of record, provided the same would not, in the aggregate, have a
Company Material Adverse Effect, (iv) Liens pursuant to, or permitted under,
the Company's senior credit facility, or (v) where the existence of any such
Property Restrictions, in the aggregate, would not have a Company Material
Adverse Effect.
(c) All of the leasehold interests, properties and assets (other than
Company Real Property) owned by the Company or any of its Subsidiaries are free
and clear of all Liens, except (i) as set forth in Section 3.18 of the Company
Disclosure Schedule, (ii) for Liens pursuant to, or permitted under, the
Company's senior credit facility or (iii) for Liens that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.19 Labor Relations and Employment.
(a) Except as would not, in the aggregate, have a Company Material Adverse
Effect, (i) there is no labor strike, dispute, slowdown, stoppage, concerted
refusal to work overtime or lockout actually pending, or to the
A-21
knowledge of the Company, overtly threatened or being carried out against the
Company or its Subsidiaries which may interfere with the respective business
activities of the Company or any of its Subsidiaries; (ii) there are no labor
disputes currently subject to any grievance procedure, arbitration or
litigation; (iii) neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association; (iv) none of the employees of the Company or any of
its Subsidiaries is represented by any labor organization and neither the
Company nor any of its Subsidiaries have any knowledge of any union organizing
activities among such employees, nor does any question concerning
representation exist concerning such employees; and (v) there has not occurred,
to the knowledge of the Company, a substantial union organizing event at one or
more facilities of the Company or its domestic Subsidiaries in respect of which
there is a reasonable risk that such event would have a material adverse impact
on the labor costs of the Company and its Subsidiaries taken as a whole.
(b) The Company and its Subsidiaries are and have been in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment (including termination of employment), wages, hours of
work, occupational safety and health, and worker classification, and are not
engaged in any unfair labor practices, except for such violations, if any,
which, individually or in the aggregate, would not have a Company Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received
notice of the intent of any Governmental Entity responsible for the enforcement
of labor or employment laws to conduct an investigation with respect to or
relating to employees and, to the knowledge of the Company, no such
investigation is in progress which would, in the aggregate, have a Company
Material Adverse Effect.
Section 3.20 Insurance. All insurance policies carried by or covering the
Company and the Subsidiaries with respect to their business, assets and
properties (the "Insurance Policies") are in full force and effect, and no
notice of cancellation has been received by the Company or any of its
Subsidiaries with respect to any material Insurance Policy which has not been
cured by the payment of premiums that are due. All premiums due on the
Insurance Policies have been paid in a timely manner and the Company and the
Subsidiaries have complied in all material respects with the terms and
provisions of the Insurance Policies. The insurance coverage provided by the
Insurance Policies (including, without limitation, as to deductibles and
self-insured retentions) is reasonable and customary as compared to similarly
situated companies engaged in a similar business.
Section 3.21 Opinion of Financial Advisors. The Special Committee has
received the opinion of William Blair & Company to the effect that the Merger
Consideration is fair, from a financial point of view, to the stockholders of
the Company who are entitled to receive such Merger Consideration pursuant to
Section 2.7, and a complete and correct copy of such opinion has been, or
promptly upon receipt thereof will be delivered to, Holding and Acquisition
Sub. The Company has been authorized by William Blair & Company to include such
opinion in its entirety in the Proxy Statement.
Section 3.22 Finders' and Other Fees. Except for William Blair & Company,
whose fees will be paid by the Company, and Deutsche Bank Securities Inc.,
whose fees will be paid by Acquisition Sub, there is no investment banker,
broker, finder or other similar intermediary which has been retained by, or is
authorized to act on behalf of, the Special Committee, the Company or any
Subsidiary of the Company, or any employee or consultant of the Company or any
Subsidiary of the Company, that would be entitled to any fee, commission, sale
bonus or similar payment from the Special Committee, the Company, any
Subsidiary of the Company, Holding, Acquisition Sub or any of Holding's or
Acquisition Sub's affiliates upon consummation of the transactions contemplated
hereby.
Section 3.23 Rights Amendment. The Company and the Company Board have taken
all necessary action to render the Rights Agreement inapplicable to the
transactions contemplated hereby, and neither the execution and delivery of
this Agreement nor the consummation of any of the transactions contemplated
hereby will result in the occurrence of a Distribution Date (as defined in the
Rights Agreement) or otherwise cause the Rights to become exercisable by the
holders thereof. For purposes of this Agreement, "Rights Agreement" means the
Rights Agreement, dated June 9, 1995, as amended, between the Company and
Harris Trust and Savings Bank, as
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Rights Agent, and "Rights" shall have the meaning specified therein. Except for
the Rights Agreement, neither the Company nor any of its Subsidiaries has any
rights plan, preferred stock or similar arrangement.
Section 3.24 State Takeover Statutes. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation enacted under any state law (with the exception of Section 203 of
the DGCL) applicable to the Company is applicable to the Merger or the other
transactions contemplated hereby. Based, in part, on information provided by
Holding to the Company on or prior to the date hereof, the action of the Board
of Directors of the Company in approving this Agreement and the transactions
contemplated hereby is sufficient to render the restrictions on "business
combinations" set forth in Section 203 of the DGCL inapplicable to this
Agreement and the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
HOLDING AND ACQUISITION SUB
Each of Holding and Acquisition Sub (each, an "Acquiror Entity") hereby
jointly and severally represents and warrants to the Company as follows:
Section 4.1 Corporate Existence and Power. Each Acquiror Entity is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has all necessary corporate power required to carry on its
business as now conducted. Each Acquiror Entity is duly qualified or licensed
to do business and is in good standing in each jurisdiction where the character
of the property owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for those jurisdictions
where failures to be so qualified or licensed or in good standing would not, in
the aggregate, have an Acquiror Entity Material Adverse Effect. Each Acquiror
Entity has heretofore delivered or made available to the Company true and
complete copies of its organizational documents, as currently in effect. As
used herein, the term "Acquiror Entity Material Adverse Effect" shall mean any
one or more changes, circumstances, events or effects that, individually or in
the aggregate, have or (other than in the case of prospects) are reasonably
likely to have a material adverse effect on (i) the business, assets,
liabilities, prospects, result of operations or financial condition of the
Acquiror Entities, taken as a whole, provided that none of the following shall
be deemed to constitute an Acquiror Entities Material Adverse Effect: (a) any
adverse change, event, development, circumstance, effect or offset relating to
(1) general business or economic conditions or (2) the industries in which the
Acquiror Entities operate, unless, in each case, such change, event,
development, circumstance, effect or offset disproportionately affects the
Acquiror Entities (relative to other similar companies) or (3) this Agreement
or the transactions contemplated hereby, and (4) any adverse change, event,
development, circumstance or effect existing from or relating to any change in
GAAP, or (ii) the ability of either Acquiror Entity, taken as a whole, to
consummate the transactions contemplated hereby.
Section 4.2 Authorization. Each Acquiror Entity has the requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly and validly authorized and this
Agreement has been approved by the Board of Directors of each Acquiror Entity,
and no other proceedings on the part of either Acquiror Entity is necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by each Acquiror Entity and
constitutes, assuming due authorization, execution and delivery of this
Agreement by the Company, a valid and binding obligation of each Acquiror
Entity, enforceable against each Acquiror Entity in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
Section 4.3 Consents and Approvals; No Violations.
(a) Neither the execution and delivery of this Agreement nor the performance
by either Acquiror Entity of its obligations hereunder nor the consummation by
either Acquiror Entity of the transactions contemplated
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hereby will (i) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of such Acquiror Entity; (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or obligation to repurchase, repay, redeem or acquire or any
similar right or obligation) under any of the terms, conditions or provisions
of any note, mortgage, letter of credit, other evidence of indebtedness,
guarantee, license, lease, contract or agreement or similar instrument or
obligation to which such Acquiror Entity is a party or by which it or its
assets is bound; or (iii) assuming that the filings, registrations,
notifications, authorizations, consents and approvals referred to in subsection
(b) below have been obtained or made, as the case may be, violate any order,
injunction, decree, statute, rule or regulation of any Governmental Entity to
which such Acquiror Entity is subject, excluding from the foregoing clauses
(ii) and (iii) such requirements, defaults, breaches, rights or violations that
would not, in the aggregate, have an Acquiror Entity Material Adverse Effect.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution and delivery of this Agreement by either Acquiror Entity or the
performance by either Acquiror Entity of its obligations hereunder, except (i)
filings to maintain the good standing of such Acquiror Entity; (ii) compliance
with any applicable requirements of the HSR Act; (iii) compliance with any
applicable requirements of the Securities Act, the Trust Indenture Act and the
Exchange Act; (iv) compliance with any applicable requirements of state blue
sky or takeover laws or stock exchange requirements; (v) the filing with the
Secretary of State of the State of Delaware of the Certificate of Merger and
(vi) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings the failure of which to be obtained or
made would not, in the aggregate, have an Acquiror Entity Material Adverse
Effect.
Section 4.4 Litigation. As of the date hereof, there is no suit, claim,
action, proceeding or investigation pending, or, to the knowledge of either
Acquiror Entity, overtly threatened against either Acquiror Entity, at law or
in equity, that, individually or in the aggregate, could reasonably be expected
to prevent or materially delay the consummation of the transactions
contemplated hereby (it being understood that the mere filing of litigation, or
mere existence of litigation, by or on behalf of stockholders of the Company,
that challenges or otherwise seeks damages with respect to such transactions
shall not in and of itself be deemed to have such effect). Neither Acquiror
Entity is subject to any outstanding order, writ, injunction or decree that
could reasonably be expected to have a Acquiror Entity Material Adverse Effect.
Section 4.5 Capitalization. As of the date of this Agreement, (i) the
authorized capital stock of Holding consists of 1,000 shares of Holding Common
Stock, all of which are issued and outstanding and are owned by Kelso and one
or more affiliates thereof, and (ii) the authorized capital stock of
Acquisition Sub consists of 1,000 shares of common stock, par value of $.01 per
share, all of which are issued and outstanding and owned by Holding. All the
issued and outstanding shares of capital stock of, or other ownership interests
in, each Acquiror Entity have been duly authorized, validly issued and are
fully paid and nonassessable and are owned free and clear of all liens and free
of any other restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or such other ownership interest).
Section 4.6 Proxy Statement. None of the information relating to the
Acquiror Entities and supplied or to be supplied by either Acquiror Entity or
its respective affiliates (including Kelso) specifically for inclusion or
incorporation by reference in the Proxy Statement (and any amendments thereof
or supplements thereto) will, at the time of the mailing of the Proxy Statement
to the stockholders of the Company, at the time of the Special Meeting, and at
the time of any amendments thereof or supplements thereto, and none of the
information relating to either Acquiror Entity or its respective affiliates
(including Kelso) and supplied or to be supplied by either Acquiror Entity or
its respective affiliates (including Kelso) specifically for inclusion in or
incorporation by reference to the Schedule 13E-3, will, at the time of its
filing with the SEC, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, no representation is
made by any Acquiror Entity with respect to statements made in any of the
foregoing documents based upon information supplied by the Company or its
Subsidiaries.
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Section 4.7 Acquiror Entity's Operations. Each Acquiror Entity was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and the Exchange Agreements, and has not, other than in connection
with the transactions contemplated hereby or thereby and other than those
incidental to its organization and maintenance of corporate existence, (i)
engaged in any business activities, (ii) conducted any operations, (iii)
incurred any liabilities or (iv) owned any assets or property.
Section 4.8 Financing. Holding and Acquisition Sub have previously delivered
to the Company the following: (i) a fully executed commitment letter (the
"Senior Debt Letter") from Deutsche Bank (the "Bank") and accepted by Holding,
providing the detailed terms and conditions upon which the Bank has committed
to provide the entire senior secured revolving credit portion of the financing
required in connection with the Merger, (ii) a fully executed commitment letter
(the "Bridge Facility Commitment Letter") from the Bank and accepted by Holding
with respect to the terms and conditions upon which the Bank has committed to
provide the senior bridge loan portion of the financing required in connection
with the Merger and (iii) a fully executed letter (the "Equity Commitment
Letter") from Kelso and accepted by Holding with respect to the equity portion
of the financing required in connection with the Merger (the Equity Commitment
Letter, together with the Senior Debt Letter and the Bridge Facility Commitment
Letter, the "Financing Letters"). The financing contemplated by the Financing
Letters (the "Financing"), together with the roll-over equity, excess cash and
option proceeds referred to therein, are sufficient to pay the aggregate Merger
Consideration and Option Cash Out, repay or repurchase the Senior Notes and pay
all fees and expenses to be paid by Holding, Acquisition Sub, the Company or
any of their respective affiliates related to the transactions contemplated
hereby. The Financing Letters are in full force and effect as of the date
hereof. The obligations to fund the commitments under the Financing Letters are
not subject to any condition other than as set forth in the Financing Letters.
Holding is not aware of any fact or occurrence existing on the date of this
Agreement that makes any of the assumptions or statements set forth in the
Financing Letters inaccurate or that causes the Financing Letters to be
ineffective with respect to Holding, Acquisition Sub or the Merger or that
precludes or that is reasonably likely to preclude the satisfaction of the
conditions set forth in the Financing Letters. All commitment and other fees
required to be paid under the Financing Letters on or prior to the date hereof
have been paid.
Section 4.9 Management Arrangements. Attached to the Exchange Agreements are
true and correct copies of term sheets relating to the participation of certain
members of Company's management in the transactions contemplated by this
Agreement. Holding will provide the Company with true and correct copies of the
forms of the agreements relating to the foregoing as soon as such forms are
prepared and agreed to by Holding and the other parties thereto.
Section 4.10 Brokers. Except as provided in Section 5.16, no broker, finder
or investment banker (other than Deutsche Bank Securities, Inc.) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by Kelso or
either Acquiror Entity.
Section 4.11 No Registration. Assuming that each party to an Exchange
Agreement is an "accredited investor," no registration is required under any
federal or state securities laws in connection with the offer, sale or issuance
of shares of stock and/or options pursuant to the Exchange Agreements.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Conduct of the Business of the Company. During the period from
the date of this Agreement and continuing until the Effective Time, the Company
agrees as to itself and its Subsidiaries that (except as (i) expressly
contemplated or permitted by this Agreement, (ii) as set forth in Section 5.1
to the Company Disclosure Schedule, (iii) as required by a Governmental Entity
of competent jurisdiction, (iv) to the extent pre-approved in writing by
Holding prior to, or contemporaneously with, this Agreement, or (v) to the
extent that Holding shall otherwise consent in writing):
(a) Ordinary Course.
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(i) The Company and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course and consistent with
past practice. Without limiting the foregoing, the Company and its
Subsidiaries shall use their reasonable best efforts to preserve
substantially intact their present lines of business, maintain their rights
and franchises and preserve substantially intact their relationships with
customers, suppliers and others having business dealings with them and keep
available the services of their present officers and employees, in each case
to the end that their ongoing businesses shall not be impaired in a manner
that would have a Company Material Adverse Effect at the Effective Time.
(ii) The Company shall not, and shall not permit any of its Subsidiaries
to, (A) enter into any new material line of business or (B) incur or commit
to any capital expenditures, except for (x) capital expenditures up to the
aggregate amount set forth in a capital expenditure budget plan delivered to
Holding prior to the date of this Agreement, (y) capital expenditures not
covered by clause (x) up to an aggregate amount of $500,000 or (z) such
other capital expenditures consented to by Holding, such consent not to be
unreasonably withheld.
(iii) The Company shall, and shall cause its Subsidiaries to, comply in
all material respects with all applicable laws, ordinances, rules and
regulations of any federal, state, local or foreign Governmental Entity
applicable to their respective financial statements, accounting practices,
corporate governance, businesses and operations, including the
Sarbanes-Oxley Act of 2002, as the same may be amended from time to time,
and the rules and regulations promulgated thereunder.
(b) Dividends; Changes in Share Capital. The Company shall not, and shall
not permit any of its Subsidiaries to (i) other than pursuant to the Rights
Agreement, declare, set aside or pay any dividend or other distribution with
respect to any of its capital stock (except for dividends by wholly-owned
Subsidiaries of the Company), (ii) split, combine or reclassify any of its
capital stock or issue any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly-owned Subsidiary of the Company which remains a wholly-owned
Subsidiary after consummation of such transaction, or (iii) repurchase, redeem
or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. The Company shall not, and shall not permit any
of its Subsidiaries to, issue, deliver or sell any shares of its capital stock
of any class, any bonds, debentures, notes or other indebtedness of the Company
having the right to vote on any matters on which stockholders may vote
("Company Voting Debt") or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares of capital stock
or Company Voting Debt, other than (i) the issuance of Shares (and associated
Rights) upon the exercise of Options outstanding on the date of this Agreement
in accordance with the terms of the Plans in effect as of the date of this
Agreement, (ii) issuances by a wholly-owned Subsidiary of the Company of
capital stock to such Subsidiary's parent or another wholly-owned Subsidiary of
the Company, or (iii) issuances pursuant to the Rights Agreement.
(d) Governing Documents; Securities. The Company shall not, and shall not
permit any of its Subsidiaries to, amend (i) their respective certificates of
incorporation, by-laws or other governing documents or (ii) any material term
of any outstanding security issued by the Company or any of its Subsidiaries.
(e) No Acquisitions. The Company shall not, and shall not permit any of its
Subsidiaries to, acquire (or agree to acquire) by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, stock or
operations of another company ("Add-On Acquisitions"), other than (1)
acquisitions of inventory, equipment or raw materials in the ordinary course of
business consistent with past practice or (2) any other acquisition by the
Company (i) for cash in an aggregate amount for all such other acquisitions not
to exceed $250,000 and (ii) which does not make it materially more difficult to
obtain, or cause any material delay in obtaining, any approval or authorization
required in connection with the transactions contemplated hereby under
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any Regulatory Law (as defined in Section 5.8(d) hereof). Nothing in this
Section 5.1(e) shall prohibit the Company from continuing to investigate and
explore the desirability and availability of additional Add-On Acquisitions.
(f) No Dispositions. The Company shall not, and shall not permit any of its
Subsidiaries to, sell, dispose of, transfer or divest any assets (including
capital stock of its Subsidiaries but excluding excess or obsolete assets and
sales of inventory in the ordinary course of business), businesses or divisions
other than (i) internal reorganizations or consolidations involving existing
Subsidiaries of the Company, (ii) sales or dispositions of unused or obsolete
assets, (iii) sales or dispositions of inventory in the ordinary course of
business, (iv) the sale or disposition of the Company's closed manufacturing
facility located in Farmers Branch, Texas and (v) sales or dispositions for
which neither the fair market value of the assets disposed of nor the total
consideration, including liabilities assumed, received by the Company or its
Subsidiaries in the aggregate exceeds $250,000.
(g) No Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, create, assume or otherwise consensually incur any Lien on any
asset other than Liens (i) pursuant to, or permitted under, the Company's
senior credit facility, (ii) incurred in the ordinary course of business
consistent with past practice or (iii) which, in the aggregate, would not have
a Company Material Adverse Effect.
(h) No Relinquishment of Rights. The Company shall not, and shall not permit
any of its Subsidiaries to, (i) relinquish, waive or release any material
contractual or other material right or claim, (ii) settle any material action,
suit, claim, investigation or other material proceeding or (iii) knowingly
dispose of or permit to lapse any rights in any material Intellectual Property
or knowingly disclose to any Person not an employee, director or agent of the
Company or any of its Subsidiaries or otherwise knowingly dispose of any
material trade secret, process or know-how not a matter of public knowledge
prior to the date of this Agreement, except in the ordinary course of business
consistent with past practice or pursuant to judicial order or process or as
required by law or regulation.
(i) Investments. The Company shall not, and shall not permit any of its
Subsidiaries to make any loans, advances (other than business travel advances
to officers and prepaid expenses in the ordinary course of business consistent
with past practice) or capital contributions to, or investments in, any other
Person other than (i) in connection with actions permitted by Section 5.1(e)
hereof, (ii) by the Company or a Subsidiary of the Company to or in the Company
or any wholly-owned Subsidiary of the Company, (iii) pursuant to any contract
or other legal obligation of the Company or any of its Subsidiaries existing at
the date of this Agreement and set forth on Section 5.1(i) of the Company
Disclosure Schedule or (iv) in the ordinary course of business consistent with
past practice in an aggregate amount not in excess of $250,000.
(j) Indebtedness. Except as contemplated by the Financing Letters, the
Company shall not, and shall not permit any of its Subsidiaries to, incur or
enter into any agreement to incur any Indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the Company
or any of its Subsidiaries, except (1) Indebtedness incurred in the ordinary
course of business consistent with past practices under the Company's existing
senior credit facility in an aggregate amount not to exceed the maximum amount
authorized under that agreement at any time outstanding, (2) any Indebtedness
for borrowed money or guarantees of Indebtedness for borrowed money acquired in
connection with any Add-On Acquisition permitted under Section 5.1(e), provided
that the Company shall promptly notify Holding of any such Add-On Acquisition,
(3) Indebtedness under the Indenture and the Senior Subordinated Notes (as
defined in Section 5.5(a)) and (4) any continuation, extension, refinancing,
renewal or replacement (a "Refinancing") of any existing Indebtedness or any
Indebtedness permitted by this Section 5.1(j) other than a Refinancing of the
Company's senior credit facility or the Indenture.
(k) Compensation; Severance. Except (i) as required by law or (ii) to
satisfy contractual obligations existing on the date hereof, the Company shall
not, and shall not permit any of its Subsidiaries to, (a) pay or commit to pay
any severance or termination pay other than severance or termination pay that
is required to be paid pursuant
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to the terms of an existing Plan, (b) enter into any employment, deferred
compensation, consulting, severance or other similar agreement (or any
amendment to any such existing agreement) with any director or officer or key
employee of the Company or any of its Subsidiaries, (c) increase or commit to
increase any employee benefits payable to any director, officer or employee of
the Company or any of its Subsidiaries, including wages, salaries,
compensation, pension, severance, termination pay or other benefits or payments
(except in the case of employees other than officers and directors in the
ordinary course of business consistent with past practice or as required by an
existing Plan or any collective bargaining agreement), (d) adopt or make any
commitment to adopt any additional employee benefit plan, except as may be
required pursuant to any collective bargaining agreement, (e) make any
contribution, other than (A) regularly scheduled contributions and (B)
contributions required pursuant to the terms thereof, to any Plan and (f) amend
or extend or make any commitments to amend or extend any Plan in any material
respect.
(l) Accounting Methods; Income Tax Elections. The Company shall not, and
shall not permit any of its Subsidiaries to, (i) change in any material respect
its methods of accounting or accounting practice as in effect at September 30,
2001, except for any such change as required by reason of a change in SEC
guidelines or GAAP, (ii) change its fiscal year, (iii) make or rescind any
material Tax election or settle or compromise any audit, examination,
litigation, proceeding (whether judicial or administrative) or matter in
controversy relating to Taxes of the Company or any of its Subsidiaries, except
for the Company's contemplated election to use "Simplified LIFO" for federal
and state Tax purposes and for other settlements and compromises not to exceed
$250,000 in the aggregate, or (iv) make any change to its method of reporting
income, deductions or other Tax items for Tax purposes; provided that in the
case of matters described in clauses (iii) and (iv) above, Holding shall not
unreasonably withhold its consent.
(m) Certain Agreements. The Company shall not, and shall not permit any of
its Subsidiaries to, enter into any contracts, agreements or arrangements that
limit or restrain the Company or any of its Subsidiaries or any of their
respective affiliates or successors, or that would, after the Effective Time,
limit or restrict Holding, the Surviving Corporation or any of their respective
affiliates or successors, from engaging or competing in any business or in any
geographic area or location.
(n) Rights Agreement. The Company shall not (i) redeem the Rights, or amend
or modify or terminate the Rights Agreement other than to delay the
Distribution Date (as defined therein) or to render the Rights inapplicable to
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, (ii) permit the Rights to become non-redeemable at the
redemption price currently in effect, except by reason of clause (iii) below,
or (iii) take any action which would allow any Person (as defined in the Rights
Agreement) other than Holding or Acquisition Sub or any of their respective
affiliates to become the Beneficial Owner (as defined in the Rights Agreement)
of 15% or more of the Company Common Stock without causing a "Distribution
Date" or a "Stock Acquisition Date" (as each such term is defined in the Rights
Agreement) to occur or otherwise take any action which would render the Rights
Agreement inapplicable to any transaction contemplated by such Person.
(o) Corporate Structure. The Company shall not, and shall not permit any of
its Subsidiaries to, alter (through merger, liquidation, reorganization,
restructuring or any other fashion) the corporate structure or ownership of the
Company or any of its Subsidiaries, except for changes in the corporate
structure or ownership of the Company's Subsidiaries which (i) do not increase
the Tax liability of the Company or its Subsidiaries and (ii) do not adversely
affect (a) the ability to obtain, or the terms of, the Financing and (b) the
ability of the Company and its Subsidiaries to transfer assets and liabilities
among the Company's Subsidiaries or to the Company and except for the
liquidation, termination or dissolution of BWAY Foreign Sales Corporation.
(p) Prohibited Activities. The Company shall not, and shall not permit any
of its Subsidiaries to, agree, authorize or enter into any commitment to take
any action described in the foregoing subsections (a)-(o) of this Section 5.1,
except as otherwise permitted by this Agreement.
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Section 5.2 Stockholders' Meeting; Proxy Material.
(a) Subject to the next two sentences of this Section 5.2(a), the Company
shall, acting through the Company Board and in accordance with applicable law
and the Certificate of Incorporation and the by-laws of the Company, duly call,
give notice of, convene and hold a special meeting of its stockholders (the
"Special Meeting") as promptly as practicable after the date hereof for the
purpose of considering and taking action upon this Agreement and the Merger and
shall solicit proxies in favor of approval of this Agreement and the Merger.
The Company Board shall recommend approval of the Agreement and the Merger by
the Company's stockholders (the "Company Recommendation"); provided that,
notwithstanding anything in this Agreement to the contrary, the Company Board
may determine (i) not to make or may withdraw, modify or change such
recommendation (a "Change in Recommendation"), and (ii) not to solicit proxies
in favor of this Agreement and the Merger if, in the case of both clauses (i)
and (ii), the Special Committee has determined in good faith, after
consultation with its independent legal and financial advisors, that the
Company has received a Superior Proposal and (b) failure to take such action
could reasonably be expected to result in a breach of the Company Board's
fiduciary duties under applicable law. The Company may, if it receives a
written bona fide unsolicited Acquisition Proposal (as defined in Section
5.4(b) hereof), delay the mailing of the Proxy Statement or the holding of the
Special Meeting, in each case for such time as is necessary for the Company
Board to consider such Acquisition Proposal and to determine the effect, if
any, on its recommendation in favor of the Merger.
(b) Promptly following the date of this Agreement, the Company shall prepare
a proxy statement relating to the approval of the Merger by the Company's
stockholders (as amended or supplemented, the "Proxy Statement"), and the
parties hereto shall prepare a Schedule 13E-3 filing (as amended or
supplemented, the "Schedule 13E-3"). Holding, Acquisition Sub and the Company
shall cooperate with each other in connection with the preparation of the
foregoing documents. The Company will use its reasonable best efforts to have
the Proxy Statement, and the parties hereto will use their reasonable best
efforts to have the Schedule 13E-3, cleared by the SEC as promptly as
practicable after such filing.
(c) The Company shall as promptly as practicable notify Holding and
Acquisition Sub of the receipt of any oral or written comments from the SEC
relating to the Proxy Statement. Subject to the last sentence of Section
5.2(a), the Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Proxy Statement is cleared by the SEC. The Company shall cooperate
and provide Holding and Acquisition Sub with a reasonable opportunity to review
and comment on the draft of the Proxy Statement (including each amendment or
supplement thereto), and the parties hereto shall cooperate and provide each
other with a reasonable opportunity to review and comment on the draft Schedule
13E-3 (including each amendment or supplement thereto) and all responses to
requests for additional information by and replies to comments of the SEC,
prior to filing such with or sending such to the SEC, and the parties hereto
will provide each other with copies of all such filings made and correspondence
with the SEC. If at any time prior to the Effective Time, any information
should be discovered by any party which should be set forth in an amendment or
supplement to the Proxy Statement or the Schedule 13E-3 so that the Proxy
Statement or the Schedule 13E-3 would not include any misstatement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and, to the extent
required by applicable law, an appropriate amendment or supplement describing
such information shall be promptly filed by the Company with the SEC and
disseminated by the Company to the stockholders of the Company.
Section 5.3 Access to Information. Upon reasonable advance notice, between
the date of this Agreement and the Closing Date, the Company shall (i) give
Holding, Acquisition Sub, its potential financing sources and its and their
respective counsel, financial advisors, affiliates, auditors and other
authorized representatives (collectively, "Acquiror's Representatives")
reasonable access during normal business hours to the offices, properties,
books and records (including all Tax Returns and other Tax-related information)
of the Company and its Subsidiaries, (ii) furnish to Acquiror's Representatives
such financial and operating data and other information (including all
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Tax Returns and other Tax-related information) relating to the Company, its
Subsidiaries and their respective operations as such Persons may reasonably
request and (iii) instruct the employees, counsel and financial advisors of the
Company and its Subsidiaries to cooperate with Holding and Acquisition Sub in
their investigation of the business of the Company and its Subsidiaries;
provided, however, that such access shall only be provided to the extent that
such access would not violate applicable laws or the terms of any Company
Contract. Without limiting the foregoing, Holding, Acquisition Sub and the
Acquiror's Representatives shall be allowed to conduct a Phase I environmental
investigation of the Company, its Subsidiaries and their properties (the
"Environmental Investigation"), but shall not be allowed, absent the prior
written approval of the Company, to perform any environmental sampling or
analysis of the sort commonly referred to as a Phase II environmental
investigation. The Company and its Subsidiaries shall reasonably cooperate with
Holding, Acquisition Sub and the Acquiror's Representatives in connection with
the Environmental Investigation, including, but not limited to, making
available personnel, outside contractors and outside consultants with knowledge
of environmental matters pertaining to the Company, its Subsidiaries and their
properties and making available relevant documents related to such matters. Any
information relating to the Company or its Subsidiaries made available pursuant
to this Section 5.3, shall be subject to the provisions of the Confidentiality
Agreement, dated as of June 28, 2002, by and between the Company and Kelso (the
"Confidentiality Agreement"). Neither Holding nor Acquisition Sub shall, and
Holding and Acquisition Sub shall cause each of the Acquiror's Representatives
not to, use any information acquired pursuant to this Section 5.3 for any
purpose unrelated to the consummation of the transactions contemplated hereby.
Section 5.4 No Solicitation.
(a) From the date of this Agreement until the Effective Time or, if earlier,
the termination of this Agreement in accordance with its terms, the Company
shall not (whether directly or indirectly through affiliates, advisors, agents
or other intermediaries), and the Company shall direct its and its
Subsidiaries' respective officers, directors, affiliates, advisors,
representatives or other agents of the Company (and be responsible for
non-compliance by any of the foregoing with their directions) not to, directly
or indirectly, (i) solicit, initiate, knowingly encourage or knowingly
facilitate (including by way of furnishing information) any inquiries or the
making or submission of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal, (ii) participate or engage in
discussions or negotiations with, or disclose any non-public information or
data relating to the Company or its Subsidiaries or afford access to the
properties, books or records of the Company or its Subsidiaries to, any Person
that has made an Acquisition Proposal or to any Person in contemplation of an
Acquisition Proposal, or (iii) accept an Acquisition Proposal or enter into any
agreement or agreement in principle (other than an Acceptable Confidentiality
Agreement, as defined in the last sentence of Section 5.4(b)) providing for or
relating to an Acquisition Proposal or enter into any agreement or agreement in
principle requiring the Company to abandon, terminate or fail to consummate the
transactions contemplated hereby. Notwithstanding the previous sentence, if at
any time prior to the holding of the vote of the Company's stockholders to
approve the Merger, (a) the Company has received an unsolicited bona fide
written Acquisition Proposal from a third party and (b) the Special Committee
determines in good faith, after consultation with its independent financial and
legal advisors, that such Acquisition Proposal could realistically result in a
Superior Proposal, then the Company may take any of the actions described in
clause (ii) of this Section 5.4(a); provided that the Company (A) will provide
notice to Holding of the identity of the Person making such Acquisition
Proposal and the material terms and conditions thereof prior to or promptly
after commencing any such actions, (B) will not disclose any information to
such Person without entering into an Acceptable Confidentiality Agreement (as
defined hereafter) and (C) will promptly provide to Holding and Acquisition Sub
any non-public information concerning the Company provided to such other Person
which was not previously provided to Holding and Acquisition Sub. The Company
shall keep Holding and Acquisition Sub generally informed of the status of and
material developments respecting any Acquisition Proposal reasonably likely to
result in a Superior Proposal (including the identity of the parties and price
involved) and shall provide notice to Holding of its intent to terminate this
Agreement pursuant to Section 7.1(i), it being understood that the Company
shall be
entitled to terminate this Agreement in accordance with Section 7.1(i)
immediately after the giving of such notice. Holding agrees that the Company
may keep other Persons who have made such Acquisition Proposal
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generally informed of the status and material developments respecting any
material amendments to this Agreement. Nothing contained in this Section 5.4
shall prohibit the Company or the Company Board from taking and disclosing to
the Company's stockholders a position with respect to a tender or exchange
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act or from making any disclosure required by applicable law.
(b) For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal regarding a merger, consolidation, share exchange,
recapitalization, reclassification, liquidation or other business combination
involving the Company or any of its Material Subsidiaries (as defined
hereafter) or the acquisition or purchase of 30% or more of any class of equity
securities of the Company or any of its Material Subsidiaries, or any tender
offer (including self-tenders) or exchange offer or stock purchase (including
any repurchase by the Company) that if consummated would result in any Person
beneficially owning 30% or more of any class of equity securities of the
Company or any of its Material Subsidiaries, or a substantial portion of the
assets of, the Company or any of its Subsidiaries taken as a whole, other than
the transactions contemplated hereby. For purposes of this Agreement, "Superior
Proposal" means a proposal made by a third party to enter into (i) (a) a
merger, reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company as a result of which either (A) the Company's stockholders prior to
such transaction (by virtue of their ownership of Company Common Stock) in the
aggregate cease to own at least 50% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof) or (B) the individuals comprising the Company Board prior to such
transaction do not constitute a majority of the board of the entity surviving
or resulting from such transaction or such ultimate parent entity following the
transaction, (b) a sale, lease, exchange, transfer or other disposition of at
least 50% of the assets of the Company and its Subsidiaries, taken as a whole,
in a single transaction or a series of related transactions, or (c) the
acquisition, directly or indirectly, by a Person of beneficial ownership of 50%
or more of the Company Common Stock whether by merger, consolidation, share
exchange, business combination, tender or exchange offer or otherwise, and
which is (ii) otherwise on terms which the Special Committee in good faith
determines (based on such matters as it deems relevant, including the advice of
its independent financial advisor and outside counsel), (a) would, if
consummated, result in a transaction that is more favorable to its stockholders
entitled to receive the Merger Consideration hereunder (in their capacities as
stockholders), from a financial point of view, than the transactions
contemplated hereby, (b) is with a Person that has, or is reasonably likely to
obtain, the necessary funds to consummate the proposed transaction and (c) is
capable of being, and is reasonably likely to be, completed without undue
delay. As used herein, "Material Subsidiary" means any Subsidiary whose
consolidated revenues, net income or assets constitute 10% or more of the
revenues, net income or assets of the Company and its Subsidiaries, taken as a
whole. As used in this Agreement, an "Acceptable Confidentiality Agreement"
shall mean a confidentiality and standstill agreement in customary form.
Section 5.5 Debt Offer.
(a) At such time as requested by Holding and Acquisition Sub (provided that
Holding and Acquisition Sub shall coordinate with the Company regarding such
timing), the Company shall commence an offer to purchase, accompanied by
related solicitations of consent regarding covenant amendments to the Indenture
to permit the consummation of the Merger and the other transactions
contemplated hereby without breach or default of the Indenture or the terms of
the Senior Subordinated Notes (as defined below), the Company's outstanding
101/4% senior subordinated notes due 2007 (the "Senior Subordinated Notes"), on
such terms and conditions as are in accordance with the Indenture, applicable
law and otherwise reasonably acceptable to Holding and Acquisition Sub, in the
exercise of their reasonable judgment; provided that the price so offered for
the purchase of the Senior Subordinated Notes (the "Tender Price") shall be no
less than the redemption price for such Senior Subordinated Notes in effect on
the date hereof as provided in the Indenture (the "Debt Offer"). The Company
shall waive any of the conditions to the Debt Offer and make any other changes
in the terms and conditions of the Debt Offer as may be reasonably requested by
Holding and Acquisition Sub, and the Company shall not, without Holding's and
Acquisition Sub's prior consent, which shall not be unreasonably withheld or
delayed, waive any material condition to the Debt Offer, or make any changes to
the terms and conditions of the Debt Offer.
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Notwithstanding the foregoing, Holding agrees that without the Company's prior
consent the transactions contemplated by the Debt Offer shall not be
consummated, and in connection therewith no amounts shall be payable by the
Company to the holders of Senior Subordinated Notes in connection with such
Debt Offer, pursuant to any offer to purchase or consent solicitation or
otherwise (unless Holding provides an undertaking to reimburse the Company for
any amounts so paid), unless the Merger has been consummated. In connection
therewith, the Company covenants and agrees that, subject to the terms and
conditions of this Agreement, including but not limited to the terms and
conditions to the Debt Offer, it will accept for payment, and pay for, the
Senior Subordinated Notes contemporaneously with, and contingent upon, the
Effective Time.
(b) Promptly following the date of this Agreement, the Company shall
prepare, subject to reasonable advice and comments of Holding and Acquisition
Sub, an offer to purchase the Senior Subordinated Notes and forms of the
related letters of transmittal and summary advertisement, as well as all other
information and exhibits (collectively, the "Offer Documents"). In the event
that this Agreement is terminated, the Company will have the right to amend the
Offer Documents without Holding's consent. All mailings to the holders of
Senior Subordinated Notes in connection with the Debt Offer shall be subject to
the prior review, comment and approval of Holding and Acquisition Sub, such
review, comment and approval not to be unreasonably withheld or delayed. The
Company will use its reasonable best efforts to cause the Offer Documents to be
mailed to the holders of the Senior Subordinated Notes as promptly as
practicable following receipt of the request from Holding and Acquisition Sub
under paragraph (a) above to do so.
(c) If at any time prior to the Effective Time any information relating to
the Company or the transactions contemplated hereby should be discovered by the
Company, Holding or Acquisition Sub, which should be set forth in an amendment
or supplement to the documents mailed to holders of Senior Subordinated Notes
in connection with the Debt Offer so that such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement describing such
information shall promptly be prepared by the Company and, if required, filed
by the Company with the SEC or disseminated by the Company to the holders of
the Senior Subordinated Notes.
Section 5.6 Director and Officer Liability.
(a) Holding and Acquisition Sub agree that all rights to indemnification and
exculpation from liability for acts and omissions occurring at or prior to the
Effective Time and rights to advancements of expenses relating thereto now
existing in favor of the current or former directors or officers of the Company
and its Subsidiaries (the "Indemnitees") as provided in their respective
charters (or similar constitutive documents) or by-laws or in any
indemnification agreement provided or made available to Holding and Acquisition
Sub prior to the date hereof shall survive the Merger and shall not be amended,
repealed or otherwise modified in any manner that would adversely affect the
rights thereunder of any such Indemnitees, unless an alteration or modification
of such documents is required by applicable law or the Indemnitee affected
thereby otherwise consents in writing thereto.
(b) For six years after the Effective Time, the Surviving Corporation shall
provide officers' and directors' liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time covering each such Person
covered at or prior to the Effective Time by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date
hereof; provided, however, that in no event shall the Surviving Corporation be
required to expend more than an amount per year equal to 250% of current annual
premiums paid by the Company for such insurance (the "Maximum Amount") to
maintain or procure insurance coverage pursuant hereto; provided, further, that
if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, the Surviving Corporation shall
maintain or procure, for such six-year period, the most advantageous policies
of directors' and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
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(c) This Section 5.6 shall survive the consummation of the Merger and is
intended to be for the benefit of, and shall be enforceable by, the Indemnitees
referred to herein, their heirs and personal representatives and shall be
binding on the Surviving Corporation and its successors and assigns.
(d) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each case, to the extent necessary, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 5.6.
(e) The obligations of the Company and the Surviving Corporation under this
Section 5.6 shall not be terminated or modified in such a manner as to
adversely affect any Indemnitee to whom this Section 5.6 applies without the
consent of such affected Indemnitee.
Section 5.7 Reasonable Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each party hereto shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated hereby.
Section 5.8 Certain Filings.
(a) Holding, Acquisition Sub and the Company shall cooperate with one
another (i) in connection with the preparation of the Proxy Statement and the
Schedule 13E-3, (ii) in determining whether any action by or in respect of, or
filing with, any Governmental Entity is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any Material
Contracts, in connection with the consummation of the transactions contemplated
hereby and (iii) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection
therewith or with the Proxy Statement or the Schedule 13E-3 and seeking timely
to obtain any such actions, consents, approvals or waivers. Without limiting
the provisions of this Section 5.8, the Company shall, and Holding and
Acquisition Sub shall, cause its "ultimate parent entity" to file with the
Department of Justice and the Federal Trade Commission a Pre-Merger
Notification and Report Form pursuant to the HSR Act in respect of the
transactions contemplated hereby within ten (10) business days of the date of
this Agreement, and, subject to Section 5.8(c) hereof, each party will use its
reasonable best efforts to take or cause to be taken all actions necessary,
including to comply promptly and fully with any requests for information from
regulatory Governmental Entities, to obtain any clearance, waiver, approval or
authorization relating to the HSR Act that is necessary to enable the parties
to consummate the transactions contemplated hereby. Without limiting the
provisions of this Section 5.8, each party hereto shall use its reasonable best
efforts to promptly make the filings required to be made by it with all foreign
Governmental Entities in any jurisdiction in which the parties reasonably
believe it is necessary or advisable.
(b) Subject to Section 5.8(c) hereof, (i) the Company, Holding and
Acquisition Sub shall each use its reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated hereby under any Regulatory Law and (ii) if any administrative,
judicial or legislative action or proceeding, including any proceeding by a
private party, is instituted (or threatened to be instituted) challenging the
transactions contemplated hereby as violative of any Regulatory Law, the
Company, Holding and Acquisition Sub shall each cooperate in all respects and
use its respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions contemplated hereby, including by pursuing all
reasonable avenues of administrative and judicial appeal.
(c) Each of the Company, Holding and Acquisition Sub shall (i) subject to
any restrictions under any Regulatory Law, to the extent practicable, promptly
notify each other of any communication to that party from
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any Governmental Entity (including the Federal Trade Commission and the
Antitrust Division of the Department of Justice) with respect to this Agreement
and the transactions and other agreements contemplated hereby and permit the
other party to review in advance any proposed written communication to any
Governmental Entity; (ii) unless required by applicable law, not agree to
participate in any meeting with any Governmental Entity in respect of any
filings, investigation or other inquiry with respect to this Agreement and the
transactions and other agreements contemplated hereby unless it consults with
the other party in advance and, to the extent permitted by such Governmental
Entity, gives the other party the opportunity to attend and participate
thereat, in each case to the extent practicable; (iii) subject to any
restrictions under any Regulatory Law, furnish the other party with copies of
all correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its affiliates and their respective
representatives on the one hand, and any Governmental Entity or members of its
staff on the other hand, with respect to this Agreement and the transactions
and other agreements contemplated hereby (excluding documents and
communications which are subject to preexisting confidentiality agreements and
to the attorney client privilege or work product doctrine); and (iv) furnish
the other party with such necessary information and reasonable assistance as
such other party and its affiliates may reasonably request in connection with
their preparation of necessary filings, registrations, or submissions of
information to any Governmental Entities in connection with this Agreement and
the transactions and other agreements contemplated hereby and thereby,
including without limitation any filings necessary or appropriate under the
provisions of any Regulatory Law.
(d) "Regulatory Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate (i) foreign investment, (ii)
foreign exchange or currency controls or (iii) actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition.
Section 5.9 Public Announcements. None of the Company, Holding, Acquisition
Sub, or any of their respective affiliates shall issue or cause the publication
of any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby without the prior approval of
the other parties, except to the extent required by law or by any listing
agreement with, or the policies of, a national securities exchange and after
reasonable prior notice to the other parties hereto.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation (other than Section 203 of the DGCL) is or may become applicable to
the transactions contemplated hereby, the Company, Holding and Acquisition Sub
shall each take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any such statute or regulation on the transactions contemplated hereby.
Section 5.11 Certain Notifications. Between the date hereof and the
Effective Time, the Company shall promptly notify Holding and Acquisition Sub
of (i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated hereby, (ii) any notice or communication from any
Governmental Entity in connection with the transactions contemplated hereby,
and (iii) any Action commenced or, to the Company's knowledge, threatened
against the Company or any Subsidiary which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.13 or which relates to the consummation of the transactions contemplated
hereby. Between the date hereof and the Effective Time, each party shall
promptly notify the other parties hereto in writing after becoming aware of the
occurrence of any event which will, or is reasonably likely to, result in the
failure to satisfy any of the conditions specified in Article VI hereof.
Section 5.12 Financing.
(a) Holding and Acquisition Sub shall use their reasonable best efforts to
obtain the Financing as set forth in the Financing Letters; provided, however,
that notwithstanding anything in this Agreement to the contrary,
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Holding and Acquisition Sub shall be entitled to obtain, in their sole
discretion, substitute debt financing ("Substitute Debt Financing") with one or
more other nationally recognized financial institutions if, and only if, such
substitute financing would not (i) reasonably be expected to delay the
consummation of the Merger past February 28, 2003 and (ii) prevent the delivery
of the solvency letter contemplated by Section 5.13.
(b) Holding shall provide prompt written notice to the Company of (i)
Kelso's refusal or stated intent to refuse to provide the financing described
in the Equity Commitment Letter, (ii) the Bank's refusal or stated intent to
refuse to provide the financing described in the Senior Debt Letter or Bridge
Facility Commitment Letter, and/or any other lender's stated intent to refuse
to provide the financing contemplated by any Substitute Debt Financing, and, in
each case, the stated reasons therefor. In any such event, Holding shall use
its reasonable best efforts to find substitute financing for such financing as
promptly as possible; provided, that any such substitute financing shall be on
terms and conditions substantially similar to the terms and conditions of the
financing so substituted.
(c) The Company agrees to provide, and will use its reasonable best efforts
to cause its officers and employees to provide, all necessary cooperation
reasonably requested by Holding in connection with the arrangement of, and the
negotiation of agreements with respect to, the Financing (and any
substitutions, replacements or refinancing thereof), including by making
available to Holding and such lenders and their representatives, personnel
(including for participation in road shows), documents and information of the
Company and its Subsidiaries as may reasonably be requested by Holding or such
lenders and by cooperating with lenders under the Financing Letters in
achieving a timely offering and/or syndication of the Financing (or such
substitutions, replacements or refinancings) reasonably satisfactory to Holding
and such lenders. Without limiting the generality of Section 5.12(e), the
Company agrees to attend an organizational meeting relating to the subordinated
debt financing contemplated in connection with the Merger promptly after the
date hereof and to use reasonable best efforts to complete an offering
memorandum relating to such subordinated debt financing within 30 days of the
date hereof.
(d) Each of Holding and Acquisition Sub agrees that, if all conditions to
Closing set forth in Sections 6.1 and 6.3 (other than the conditions set forth
in Section 6.3(f)) have been satisfied or waived, and all conditions to the
senior bridge loan portion of the Financing set forth in the Bridge Facility
Commitment Letter have been satisfied or waived, Holding and Acquisition Sub
will take all actions reasonably necessary and appropriate to obtain, by no
later than the Termination Date, the proceeds available to Holding and
Acquisition Sub pursuant to the Bridge Facility Commitment Letter, so as to
result in the satisfaction of the conditions set forth in Section 6.3(f);
provided, however that Holding and Acquisition Sub shall not be obligated to
obtain such proceeds at any time prior to the Termination Date and provided,
further, that there shall be no such obligation if an Escrow Closing (as
defined in Section 5.12(e)) has theretofore occurred.
(e) At any time prior to consummation of the Merger, the proceeds of the
subordinated debt financing contemplated in connection with the Merger may be
closed into escrow such that such proceeds are held by a newly formed
corporation (the "EscrowCo") formed at the direction of Holding (such closing,
an "Escrow Closing"). At or immediately prior to such Escrow Closing, Holding
(or an affiliate of Holding) and the Company shall each pay to EscrowCo
one-half of an amount (the "Breakage Amount") sufficient to cover (i) accrued
interest on the EscrowCo Debt (as defined below) from the Escrow Closing to and
including the Termination Date (as defined in Section 7.1(b)), net of income
earned by EscrowCo from investing the proceeds of the subordinated debt
financing in Permitted Investments (as defined below) to be determined by the
Company and Holding prior to the deposit of the Breakage Amount with EscrowCo
and (ii) any repayment premium applicable thereto in the event that this
Agreement is terminated by the parties in accordance with its terms or the
Merger is not consummated by the date specified by the terms of the EscrowCo
Debt; provided, however, that in no event will the Company's payment to
EscrowCo exceed $3,000,000 and provided, further, that any excess of the
Breakage Amount over $6,000,000 shall be paid to EscrowCo by Holding (or an
affiliate of Holding). At or immediately prior to the Effective Time and
subject to consummation of the Merger, (i) the Surviving Corporation shall
assume the indebtedness of EscrowCo plus any accrued and unpaid interest
thereon (the
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"EscrowCo Debt") and receive the proceeds held by EscrowCo and (ii) EscrowCo
shall be released from all obligations with respect thereto. In the event that
this Agreement is terminated by the parties in accordance with its terms, or
the Merger is not consummated by the date specified by the terms of the
EscrowCo Debt, any EscrowCo Debt (plus any applicable repayment premium) shall
be repaid in full by EscrowCo and any amount held by EscrowCo after the
repayment of any EscrowCo Debt in accordance with this sentence shall be
distributed in equal parts to Holding (or, at its direction, one or more of its
affiliates) and the Company; provided, however, that first the excess, if any,
of the Breakage Amount (prior to any such repayment) over $6,000,000 shall be
distributed solely to Holding (or, at its direction, one or more of its
affiliates). The parties hereto agree that (i) any applicable repayment premium
shall in no event exceed 1% of the principal amount of the EscrowCo Debt; (ii)
placement agent fees or discounts or commitments shall be payable with respect
to the EscrowCo Debt only at the Effective Time and (iii) EscrowCo shall invest
the proceeds of its borrowings in Permitted Investments. In the event that (A)
the proceeds of the subordinated debt financing together with the Breakage
Amount plus (B) the income earned thereon are not enough to repay in full the
EscrowCo Debt (plus any applicable repayment premium), the Company and Holding
(or an affiliate of Holding) shall each pay one-half of such shortfall to
EscrowCo to enable it to repay such amount to the applicable debtholders. As
used herein, "Permitted Investments" shall mean United States treasury
securities (without regard to maturity) and investments in time deposits,
certificates of deposit or money market deposits maturing within 90 days of the
date of acquisition thereof and entitled to U.S. Federal deposit insurance for
the full amount thereof or issued by a bank or trust company which is organized
under the laws of the United States or any state thereof having capital in
excess of $500 million.
Section 5.13 Solvency Letter. The parties shall engage, at the expense of
the Company (except that, if the Closing does not occur, the Company and
Acquisition Sub shall share such expense equally), an appraisal firm of
national reputation reasonably acceptable to Holding and the Company to deliver
a letter addressed to the Special Committee, Acquisition Sub and, if requested
by them, the lenders providing the Financing (and on which the Special
Committee shall be entitled to rely) indicating that immediately after the
Effective Time, and after giving effect to the Merger and the other
transactions contemplated hereby, including the Financing, the Company (i) will
not be insolvent and will have assets sufficient to pay its debts and (ii) will
not have unreasonably small capital with which to engage in its business.
Section 5.14 ISRA Requirements. Prior to the Closing Date, the Company shall
comply with the applicable requirements of the New Jersey Industrial Site
Recovery Act, N.J.S.A. 13:1K-6 et seq., as amended ("ISRA"), including
determining the applicability of and obtaining the necessary approvals for each
property subject to ISRA that will allow the transactions contemplated hereby
to be completed. The Company shall reasonably consult with Holding with respect
to any required ISRA filings and strategy. The Company shall allow Holding to
comment on such filings (including any environmental reports provided in
connection with such filings) and the Company shall incorporate all reasonable
comments provided by Holding. The Company shall provide Holding with copies of
all environmental reports and all correspondence to and from the New Jersey
Department of Environmental Protection with respect to ISRA compliance.
Section 5.15 Intellectual Property Filings. Between the date hereof and the
Effective Time, the Company shall prepare and file or cause to be prepared and
filed and shall thereafter use reasonable best efforts to have recorded, all
assignments and other documents in the United States Patent and Trademark
Office, the United States Copyright Office or such other filing offices,
domestic or foreign in form and substance reasonably satisfactory to Holding
and Acquisition Sub as may be required to (i) record the Company as the record
and beneficial owner of any of the Intellectual Property subject to
registrations and applications identified in Section 5.15 of the Company
Disclosure Schedule as owned by the Company or any of its Subsidiaries
(regardless of the name in which such owned Intellectual Property is currently
held) and (ii) release any and all Liens thereon to the extent that such Liens
do not, as of the Effective Time, secure a permitted post-closing obligation of
the Company.
Section 5.16 Third Party Consents. Between the date hereof and the Effective
Time, the Company shall use reasonable best efforts to obtain the third party
consents set forth in Part 2 of Section 3.3 of the Company Disclosure Schedule.
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Section 5.17 Advisory Fees, etc. The Company acknowledges that, in the event
the Closing occurs, Holding shall cause the Company to (i) pay to Kelso a fee
of $4,950,000 in connection with the transactions contemplated hereby and (ii)
enter into a financial advisory agreement with Kelso with respect to services
to be provided by Kelso or certain of its related parties to the Company in
return for certain financial advisory fees (the amount of which shall be
determined by Kelso not to exceed $495,000 per annum), to be paid annually to
Kelso by the Company, which agreement shall also provide for reimbursement of
Kelso's and such related parties' expenses and indemnification by the Company
of Kelso and such related parties, in each case with respect to both the
transactions contemplated hereby, including the Financing (and any
substitution, replacement or refinancing thereof), and any services to be
provided by Kelso or any related party to the Company on a going forward basis.
Section 5.18 Employees and Employee Benefit Plans.
(a) The Surviving Corporation will take all necessary actions to implement
the employee-benefits related agreements, arrangements and other transactions
pre-approved by Holding in writing prior to, or contemporaneously with, this
Agreement pursuant to the first paragraph of Section 5.1.
(b) For a period of not less than one year following the Closing Date, the
Surviving Corporation shall provide all individuals who are employees of the
Company and the Subsidiaries (including employees who are not actively at work
on account of illness, disability or leave of absence) on the Closing Date (the
"Affected Employees"), while employed by the Company or the Subsidiaries, with
compensation and benefits which are substantially comparable in the aggregate
to the compensation and benefits provided to such Affected Employees as of the
date of this Agreement (other than modifications to medical benefit plans in
the ordinary course of business consistent with past practice and other than
with respect to any equity-based compensation). Nothing contained in this
Section 5.18 shall be deemed to grant any Affected Employee any right to
continued employment after the Closing Date. The Company shall continue to
provide and recognize all accrued but unused vacation as of the Closing Date.
Any preexisting condition clause in any of the welfare plans (including
medical, dental and disability coverage) established or maintained by the
Surviving Corporation after the Closing Date shall be waived for the Affected
Employees, and Affected Employees shall be credited with service with the
Company for all purposes under such newly established plans.
(c) The Surviving Corporation and the Subsidiaries shall be responsible for
all liabilities or obligations under the Worker Adjustment and Retraining
Notification Act and similar state and local rules, statutes and ordinances
resulting from the Closing or from the actions of the Surviving Corporation or
any Subsidiary following the Closing. The Company shall continue to be liable
for any workers' compensation or similar workers' protection claims of any
Affected Employee incurred prior to the Closing Date.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE
PARTIES TO CONSUMMATE THE TRANSACTIONS
Section 6.1 Conditions to Each Party's Obligations. The respective
obligations of the Company, Holding and Acquisition Sub to consummate the
transactions contemplated hereby are subject to the satisfaction or, to the
extent permitted by applicable law, the waiver on or prior to the Closing of
each of the following conditions:
(a) The affirmative vote of a majority of the votes represented by the
shares of Company Common Stock outstanding on the record date approving the
Agreement and the Merger shall have been obtained at the Special Meeting (the
"Required Company Vote");
(b) Any applicable waiting periods (including any extensions thereof) under
the HSR Act shall have expired or been terminated and all consents, approvals
and actions of, filings with, and notices to, all Governmental Entities
required of Holding, Acquisition Sub, the Company or any of their respective
affiliates in connection
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with the transactions contemplated hereby shall have been made, obtained or
effected, as the case may be, except for those, the failure of which to be
made, obtained or effected would not, in the aggregate, have a Company Material
Adverse Effect or an Acquiror Entity Material Adverse Effect; and
(c) No judgment, injunction, order, decree, statute, law, rule or regulation
shall prohibit the consummation of any of the transactions contemplated hereby.
(d) The Company, the Special Committee, Acquisition Sub and, if requested by
them, the lenders providing the Bridge Financing shall have received the letter
referred to in Section 5.13 or Acquisition Sub shall have provided to the
Company, the Special Committee and such lenders, if requested, from another
appraisal firm a comparable letter in form and substance reasonably
satisfactory to the Company, the Special Committee and Acquisition Sub.
Section 6.2 Conditions to the Company's Obligation to Consummate the Merger.
The obligation of the Company to consummate the Merger shall be further subject
to the satisfaction or, to the extent permitted by applicable law, the waiver
on or prior to the Closing of each of the following conditions:
(a) The representations and warranties of Holding and Acquisition Sub
contained in Article IV hereof shall be true and correct in all respects when
made and as of the Closing as if made at such time (or, to the extent such
representations and warranties speak as of a specified date, they need only be
true and correct in all respects as of such specified date) interpreted without
giving effect to the words "materially" or "material" or to any qualifications
based on such terms or based on the defined term "Acquiror Entity Material
Adverse Effect," except where the failure of all such representations and
warranties to be true and correct, in the aggregate, would not have an Acquiror
Entity Material Adverse Effect. Without limiting the foregoing, the
representations of Holding and Acquisition Sub contained in the first sentence
of Section 4.1 and Section 4.2 shall be true and correct in all respects with
regard to any such representations containing the qualifications "materially"
or "material" or any other qualifications based on such terms or based on the
defined term Company Material Adverse Effect, and shall be true and correct in
all material respects, both individually and in the aggregate, with regard to
any representation not so qualified, in each case as of the Closing (or, to the
extent such representations and warranties speak as of an earlier date, they
shall be true and correct in all respects as of such earlier date).
(b) Holding and Acquisition Sub shall have performed in all material
respects their respective agreements and covenants contained in or contemplated
by this Agreement that are required to be performed by it at or prior to the
Closing pursuant to the terms hereof;
(c) The Company shall have received certificates signed by an executive
officer of each of Holding and Acquisition Sub, dated the Closing Date, to the
effect that the conditions set forth in Sections 6.2(a) and 6.2(b) hereof have
been satisfied; and
(d) No suit, action or proceeding by any Governmental Entity seeking to
enjoin the Merger shall have been commenced (and be pending) against Holding or
Acquisition Sub (or its permitted designees), the Company or any of their
respective affiliates, partners, associates, officers or directors, or any
officers or directors of such partners, seeking (i) to prevent or restrain the
transactions contemplated hereby in a manner which would have a Company
Material Adverse Effect or an Acquiror Entity Material Adverse Effect, (ii)
material damages in connection with the transactions contemplated hereby which
would have a Company Material Adverse Effect or an Acquiror Entity Material
Adverse Effect, (iii) any other remedy in connection with the transactions
contemplated hereby which would have a Company Material Adverse Effect or an
Acquiror Entity Material Adverse Effect, or (iv) to impose material liability
on any of the foregoing Persons in connection with the transactions
contemplated hereby (each of clauses (i)-(iv), a "Material Adverse
Consequence").
Section 6.3 Conditions to Holding's and Acquisition Sub's Obligations to
Consummate the Merger. The obligations of Holding and Acquisition Sub to
consummate the Merger shall be further subject to the satisfaction,
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or to the extent permitted by applicable law, the waiver on or prior to the
Closing of each of the following conditions:
(a) The representations and warranties of the Company contained in Article
III hereof shall be true and correct in all respects when made and as of the
Closing as if made at such time (or, to the extent such representations and
warranties speak as of a specified date, they need only be true and correct in
all respects as of such specified date) interpreted without giving effect to
the words "materially" or "material" or to any qualifications based on such
terms or based on the defined term "Company Material Adverse Effect," except
where the failure of all such representations and warranties to be true and
correct, in the aggregate, would not have a Company Material Adverse Effect.
Without limiting the foregoing, the representations of the Company contained in
the first sentence of Section 3.1, in Section 3.2, in Section 3.4, in Section
3.17, in Section 3.21, in Section 3.22 and in Section 3.24 shall be true and
correct in all respects with regard to any such representations containing the
qualifications "materially" or "material" or any other qualifications based on
such terms or based on the defined term Company Material Adverse Effect, and
shall be true and correct in all material respects, both individually and in
the aggregate, with regard to any representation not so qualified, in each case
as of the Closing (or, to the extent such representations and warranties speak
as of an earlier date, they shall be true and correct in all respects as of
such earlier date);
(b) The Company shall have performed in all material respects each of its
agreements and covenants contained in or contemplated by this Agreement that
are required to be performed by it at or prior to the Closing pursuant to the
terms hereof;
(c) Holding and Acquisition Sub shall have received certificates signed by
an executive officer of the Company, dated the Closing Date, to the effect that
the conditions set forth in Sections 6.3(a) and 6.3(b) hereof have been
satisfied or waived;
(d) No suit, action or proceeding by any Governmental Entity shall have been
commenced (and be pending) against Holding or Acquisition Sub (or its permitted
designees), the Company or any of their respective affiliates, partners,
associates, officers or directors, or any officers or directors of such
partners, seeking a Material Adverse Consequence;
(e) The transactions contemplated by the Exchange Agreements by and between
the Company and each of Jean-Pierre Ergas, Warren J. Hayford and Mary Lou
Hayford shall have been consummated;
(f) The Company shall have received the financing proceeds under the
Financing Letters (other than the equity portion of the Financing under the
Equity Commitment Letter), or the financing proceeds of any Substitute Debt
Financing, in either such case in the amounts and on the terms and conditions
set forth in the Financing Letters or upon terms and conditions which are
substantially equivalent thereto, and to the extent any of the terms and
conditions are not as so set forth or as substantially equivalent, on terms and
conditions reasonably satisfactory to Holding; provided, that if an Escrow
Closing has occurred with respect to an amount as great as that set forth in
the Bridge Facility Commitment Letter and if the Surviving Corporation shall
have assumed the EscrowCo Debt and received the proceeds held by EscrowCo and
EscrowCo shall have been released from the EscrowCo Debt in accordance with the
terms thereof, the condition set forth in this Section 6.3(f) as it relates to
the financing proceeds of the subordinated debt financing contemplated by the
Bridge Facility Commitment Letter shall be deemed satisfied;
(g) At least 51% of the aggregate principal amount of the Senior
Subordinated Notes shall have been tendered to the Company and not withdrawn,
as of immediately prior to the Effective Time, provided, that such tender shall
have occurred in accordance with the terms and conditions of the Debt Offer and
at a price no less than the Tender Price, and requisite consents shall have
been obtained from the holders of the Senior Subordinated Notes agreeing to the
execution and delivery of a supplemental indenture amending the terms and
provisions of the Indenture to permit the consummation of the Merger and the
other transactions contemplated hereby without breach or default of the
Indenture or the terms of the Senior Subordinated Notes, in a manner reasonably
acceptable to Holding and Acquisition Sub;
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(h) The Company shall have received, and delivered copies to Holding and
Acquisition Sub of, valid resignations, effective as of immediately following
the Effective Time, of each member of the Company Board other than the
Continuing Directors;
(i) The Company shall have delivered to Holding and Acquisition Sub a
statement conforming with the requirements of Treasury Regulation section
1.1445-2(c)(3) certifying that shares of capital stock of the Company do not
constitute "United States real property interests" under section 897(c) of the
Code. Such statement shall be complete, accurate and valid on the Closing Date;
and
(j) The total number of Dissenting Shares shall not exceed 15% of the issued
and outstanding shares of Company Common Stock as of the Effective Time.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Closing.
(a) By mutual written consent of Holding, Acquisition Sub and the Company;
(b) By the Company, Holding or Acquisition Sub if the Closing shall not have
occurred on or before February 28, 2003 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation or
other breach under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before the Termination Date;
(c) By the Company, Holding or Acquisition Sub if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) By the Company, Holding or Acquisition Sub if the approval by the
stockholders of the Company required for the consummation of the transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the Required Company Vote upon the taking of such vote at a duly held
meeting of stockholders of the Company or at any adjournment thereof;
(e) By Holding or Acquisition Sub, if the Company Board, prior to obtaining
the Required Company Vote, shall have (i) approved or recommended an
Acquisition Proposal or resolved to take, or announced an intention to take,
any such action, or (ii) within twenty business days of any public disclosure
of an Acquisition Proposal, failed to recommend against or reject an
Acquisition Proposal (other than a tender or exchange offer covered under
clause (iii) below) or (iii) recommended acceptance of (or indicated or
announced that it is unable to take a position, will remain neutral or express
no opinion with respect to), or, within eighteen business days after the
commencement thereof, failed to recommend against or reject, a tender or
exchange offer for 25% or more of the outstanding shares of the Company or
resolved to take, or announced an intention to take, any such action;
(f) By Holding or Acquisition Sub, if the Company Board shall have effected
a Change in Recommendation or shall have determined not to solicit proxies
pursuant to Section 5.2(a)(ii);
(g) By the Company, if there is an intentional breach by Holding or
Acquisition Sub of any representation, warranty, covenant or agreement
contained in this Agreement that would give rise to a failure of a condition
set forth in Section 6.2(a) or 6.2(b) and which has not been cured (or is not
capable of being cured) within 20 business days following receipt by Holding or
Acquisition Sub, as the case may be, of written notice from the Company of such
breach;
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(h) By Holding or Acquisition Sub, if there is an intentional breach by the
Company of any representation, warranty, covenant or agreement contained in
this Agreement that would give rise to a failure of a condition set forth in
Section 6.3(a) or 6.3(b) and which has not been cured (or is not capable of
being cured) within 20 business days following receipt by the Company of
written notice from Holding and Acquisition Sub of such breach; or
(i) By the Company, in order to recommend, approve or accept a Superior
Proposal; provided, however, that prior to such termination the Company must
have complied in all material respects with all provisions contained in Section
5.4.
The party desiring to terminate this Agreement shall give written notice of
such termination to the other party.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company, Holding or Acquisition Sub as provided in
Section 7.1 hereof, this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of the Company, Holding or
Acquisition Sub or their respective officers or directors, except as provided
in this Article VII, which provisions shall survive such termination, and
except that, notwithstanding anything to the contrary contained in this
Agreement, neither the Company, nor Holding or Acquisition Sub shall be
relieved or released from any liabilities or damages arising out of any willful
breach of this Agreement.
Section 7.3 Fees and Expenses.
(a) The Company agrees to pay Kelso (or its designees) the sum of $6,000,000
(the "Termination Fee") and to reimburse Kelso (or its designees) for all
out-of-pocket expenses of Kelso and its affiliates (the "Expenses"), including
fees and expenses of financial advisors, outside legal counsel and accountants,
incurred in connection with the transactions contemplated hereby and fees and
expenses incurred in connection with the proposed financing of the Merger,
including, without limitation, any Breakage Amount, up to a maximum amount of
Expenses of $4,000,000, if this Agreement is terminated by the Company pursuant
to Section 7.1(i) hereof.
(b) The Company agrees to pay Kelso (or its designees) the Expenses, up to a
maximum amount of Expenses of $4,000,000, if this Agreement is terminated by
(i) Holding or Acquisition Sub pursuant to Section 7.1(e) or 7.1(f) hereof or
(ii) the Company, Holding or Acquisition Sub pursuant to Section 7.1(b),
Section 7.1(d) or Section 7.1(h) hereof; provided, that, on or before the date
of any such termination described in this Section 7.3(b), an Acquisition
Proposal with respect to the Company shall have been publicly announced,
disclosed or otherwise communicated to the Special Committee or the Company
Board.
(c) In addition to the amounts payable to Kelso (or its designees) under
Section 7.3(b), the Company agrees to pay Kelso (or its designees) the
Termination Fee if this Agreement is terminated by (i) Holding or Acquisition
Sub pursuant to Section 7.1(e) or 7.1(f) hereof or (ii) the Company, Holding or
Acquisition Sub pursuant to Section 7.1(b), Section 7.1(d) or Section 7.1(h)
hereof; provided, that, (I) on or before the date of any such termination
described in this Section 7.3(c), an Acquisition Proposal with respect to the
Company shall have been publicly announced, disclosed or otherwise communicated
to the Special Committee or the Company Board and (II) within twelve months of
any such termination the Company or a third party consummates, or the Company
enters into a definitive agreement with a third party for, a transaction that
would qualify as (A) an Acquisition Proposal, or, (B) in the case of
termination pursuant to Section 7.1(b) only, a Superior Proposal, hereunder.
(d) Notwithstanding anything in Sections 7.3(a), (b) or (c) to the contrary,
if an Escrow Closing occurs, then the Termination Fee will be $3,000,000 and
the maximum amount of Expenses payable pursuant to Sections 7.3(a) or (b) will
be $7,000,000.
A-41
(e) Any payment required to be made pursuant to Section 7.3(a), (b) or (c)
shall be made (X) concurrently with a termination by the Company giving rise to
the payments provided for in Section 7.3(a) or Section 7.3(b)(ii), (Y) not more
than three business days after a termination by Holding or Acquisition Sub
giving rise to the payments provided for in Section 7.3(b), or (Z) not more
than three business days after the satisfaction of the conditions provided for
in Section 7.3(c). All payments under this Section 7.3 shall be made by wire
transfer of immediately available funds to an account designated by the party
entitled to receive payment.
(f) Except as otherwise provided in this Section 7.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given if addressed as provided
below (or at such other address as the addressee shall have specified by notice
actually received by the addressor) and if either (i) actually delivered in
fully legible form, to such address, (ii) in the case of any nationally
recognized express mail service, one (1) day shall have elapsed after the same
shall have been deposited with such service, or (iii) if by fax, on the day on
which such fax was sent, provided that a copy is sent the same day by overnight
courier or express mail service.
If to the Company, to:
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350-2230
Attention: Jean-Pierre Ergas
Kevin Kern
Telephone: (770) 645-4800
Facsimile: (770) 587-0186
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
Aon Center
200 East Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, P.C.
Telephone: (312) 861-2288
Facsimile: (312) 861-2200
If to the Special Committee, to:
J.W. Puth & Associates
5215 Old Orchard Road, Suite 440
Skokie, Illinois 60077
Attention: John W. Puth
Chairman of the Special Committee
Telephone: (847) 967-4390
Facsimile: (847) 967-4398
A-42
with a copy (which shall not constitute notice) to:
Sidley Austin Brown & Wood LLP
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq.
Jon A. Ballis, Esq.
Telephone: (312) 853-7000
Facsimile: (312) 853-7036
If to Holding or Acquisition Sub, to:
c/o Kelso & Company, L.P.
320 Park Avenue
New York, NY 10022
Attention: James J. Connors II
Telephone: (212) 751-3939
Facsimile: (212) 223-2379
with a copy (which shall not constitute notice) to:
Debevoise & Plimpton
919 Third Avenue
New York, New York 10022
Attention: Margaret A. Davenport, Esq.
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Section 8.2 Survival of Representations, Warranties and Covenants. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. All
other covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or which prohibit actions, subsequent to the
Effective Time, shall survive the Effective Time in accordance with their terms.
Section 8.3 Certain Definitions; Interpretation. References in this
Agreement to "reasonable best efforts" shall not require a Person so obligated
to use its reasonable best efforts to obtain any consent of a third party or to
incur a material amount of out-of-pocket expenses or indebtedness or, except as
expressly provided herein, to institute litigation. Reference herein to the
"knowledge of the Company" or words of similar import shall mean the actual
knowledge of Jean-Pierre Ergas, Kevin C. Kern, Thomas N. Eagleson, Jeffrey M.
O'Connell or Kenneth M. Roessler and what such persons should have known after
reasonable investigation. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The phrases "delivered" or "made available"
when used in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
delivered or made available. As used in this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange
Act. References to "the date hereof" shall mean as of the date of this
Agreement. "Person" or "person" means an individual, corporation, partnership,
limited liability company, joint venture, trust, estate, association,
organization, Governmental Entity or other entity of any kind or nature.
Section 8.4 Headings. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
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Section 8.5 Amendments, Modification and Waiver.
(a) Except as may otherwise be provided herein, any provision of this
Agreement may be amended, modified or waived by the parties hereto, by action
taken by or authorized by their respective Board of Directors, prior to the
Closing Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Holding and Acquisition
Sub or, in the case of a waiver, by the party against whom the waiver is to be
effective; provided that no such amendment, modification or waiver by the
Company shall be effective unless it is authorized by the Special Committee;
and provided further that, after the approval of the Agreement and the Merger
by the stockholders of the Company, there shall not be made any amendment that
by law requires the further approval by such stockholders without such further
approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.6 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that none of the Company, Holding
or Acquisition Sub may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of the other parties
hereto and, in the case of the Company, the Special Committee. Notwithstanding
anything to the contrary herein, either of Holding and Acquisition Sub may
assign any of its rights hereunder to any affiliate of Holding or Acquisition
Sub.
Section 8.7 Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
Section 8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof).
Section 8.9 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein are not affected in any
manner materially adverse to any party hereto. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner.
Section 8.10 Third Party Beneficiaries. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns, with respect
to the obligations of Holding and Acquisition Sub under this Agreement, and for
the benefit of Holding and Acquisition Sub, and their respective successors and
permitted assigns, with respect to the obligations of the Company under this
Agreement, and this Agreement shall not be deemed to confer upon or give to any
other third party any remedy, claim, liability, reimbursement, cause of action
or other right; provided, however, that the Indemnitees referred to in Section
5.6 hereof shall be third party beneficiaries entitled to enforce the
provisions of Section 5.6 of this Agreement and Kelso shall be a third party
beneficiary entitled to enforce the provisions of Section 7.3 and Section 5.17
of this Agreement.
Section 8.11 Entire Agreement. This Agreement, including any exhibits or
schedules hereto, and the Confidentiality Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and supersede all other prior agreements or understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof.
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Section 8.12 Counterparts; Fax Signatures; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be deemed an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. Each of the parties hereto (i) has agreed to permit
the use, from time to time and where appropriate, of faxed signatures in order
to expedite the Closing, (ii) intends to be bound by its respective faxed
signature, (iii) is aware that the other parties hereto will rely on the faxed
signature, and (iv) acknowledges such reliance and waives any defenses to the
enforcement of the documents effecting the transactions contemplated hereby
contemplated by this Agreement based on the fact that a signature was sent by
fax. This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
BCO HOLDING COMPANY
By: /S/ JAMES J. CONNORS, II
______________________________
Name: James J. Connors, II
Title: Vice President
BCO ACQUISITION, INC.
By: /S/ JAMES J. CONNORS, II
________________________________
Name: James J. Connors, II
Title: Vice President
BWAY CORPORATION
By: /S/ JEAN-PIERRE M. ERGAS
______________________________
Name: Jean-Pierre M. Ergas
Title: Chairman & CEO
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ANNEX B
OPINION OF WILLIAM BLAIR & COMPANY, L.L.C.
[GRAPHIC]
William Blair & Company/R/
Limited Liability Company
September 30, 2002
Special Committee of the Board of Directors
BWAY Corporation
8607 Roberts Drive, Suite 250
Atlanta, GA 30350
Dear Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock (other than the
Exchanged Shares, as defined herein) (collectively the "Stockholders") of BWAY
Corporation (the "Company") of $20.00 per share in cash (the "Merger
Consideration") to be received by the Stockholders pursuant to the Agreement
and Plan of Merger dated as of September 30, 2002 (the "Merger Agreement") by
and among BCO Holding Company ("BCO Holding"), BCO Acquisition, Inc., a
wholly-owned subsidiary of BCO Holding ("Acquisition Sub") and the Company.
Pursuant to the terms of and subject to the conditions set forth in the Merger
Agreement, Acquisition Sub will be merged with and into the Company (the
"Merger") and each outstanding share of common stock, par value $0.01 per
share, of the Company (the "Company Common Stock") (other than shares owned by
the Company or any of its direct or indirect subsidiaries, shares as to which
dissenters' rights have been perfected or the Exchanged Shares), will be
converted into the right to receive the Merger Consideration upon consummation
of the Merger. The Merger Agreement contemplates that certain members of the
Company's management (or related parties) designated by BCO Holding will each
enter into an Exchange Agreement (as defined in the Merger Agreement) with BCO
Holding pursuant to which, among other things, each such person shall exchange,
immediately prior to the effective time of the Merger, each share of Company
Common Stock then owned by such person and specified in such Exchange Agreement
for that number of shares of common stock, par value $.01 per share, of BCO
Holding specified in such Exchange Agreement (such shares of Company Common
Stock to be so exchanged pursuant to the Exchange Agreements are collectively
referred to herein as the "Exchanged Shares").
In connection with our review of the proposed Merger and the preparation of
our opinion herein, we have examined: (a) the Merger Agreement, the Exchange
Agreements and the voting agreements among BCO Holding and certain holders of
the Exchanged Shares (such voting agreements, together with the Merger
Agreement and the Exchange Agreements, are collectively referred to herein as
the "Agreements"); (b) (i) a commitment letter from Deutsche Bank providing the
terms and conditions upon which Deutsche Bank has committed to provide the
senior secured revolving credit portion of the financing required in connection
with the Merger and (ii) a commitment letter from Deutsche Bank providing the
terms and conditions upon which Deutsche Bank has committed to provide the
senior bridge loan portion of the financing required in connection with the
Merger; (c) certain audited historical financial statements of the Company for
the three years ended September 30, 2001; (d) the unaudited financial
statements of the Company for the nine months ended June 30, 2002; (e) certain
internal business, operating and financial information and forecasts of the
Company for each of the fiscal years ending September 30, 2002, 2003, 2004 and
2005, prepared by the senior management of the Company, and certain projections
for each of the Company's fiscal years ending September 30, 2006 and 2007,
based solely on such forecasts and certain financial and other information
relating to the past performance and future prospects of the Company
(collectively, the "Forecasts"); (f) information regarding publicly available
financial terms of
B-1
certain other business combinations we deemed relevant; (g) the financial
position and operating results of the Company compared with those of certain
other publicly traded companies we deemed relevant; (h) current and historical
market prices and trading volumes of the common stock of the Company; and (i)
the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 2001, the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended December 30, 2001, March 31, 2002 and June 30, 2002 and certain other
publicly available information on the Company and the industry in which it
conducts its business. We have also held discussions with members of the senior
management of the Company to discuss the foregoing, have considered other
matters which we have deemed relevant to our inquiry and have taken into
account such accepted financial and investment banking procedures and
considerations as we have deemed relevant.
In rendering our opinion, we have with your consent assumed and relied,
without independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with us for purposes
of this opinion, including without limitation the Forecasts. We have not made
or obtained an independent valuation or appraisal of the assets, liabilities or
solvency of the Company. We have been advised by the senior management of the
Company that the Forecasts have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the senior management
of the Company. In that regard, we have assumed, with your consent, that (i)
the Forecasts will be achieved and (ii) all material assets and liabilities
(contingent or otherwise) of the Company are as set forth in the Company's
financial statements or other information made available to us. We express no
opinion with respect to the Forecasts or the estimates and judgments on which
they are based. We were not requested to, nor did we, seek alternative
participants for the proposed Merger nor were we asked to consider, and our
opinion does not address, the relative merits of the Merger as compared to any
alternative business strategies that might exist for the Company or the effect
of any other transaction in which the Company might engage. Our opinion herein
is based upon economic, market, financial and other conditions existing on, and
other information disclosed to us as of, the date of this letter. It should be
understood that, although subsequent developments may affect this opinion, we
do not have any obligation to update, revise or reaffirm this opinion. We have
relied as to all legal matters on advice of counsel to the Special Committee of
the Board of Directors of the Company, and have assumed that the Merger will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by the Company or BCO Holding, and that
obtaining the necessary regulatory approvals for the Merger will not have an
adverse effect on the Company. We have assumed, with your consent, that the
executed forms of the Agreements conform in all material respects to the last
drafts of the Agreements reviewed by us.
William Blair & Company has been engaged in the investment banking business
since 1935. We continually undertake the valuation of investment securities in
connection with public offerings, private placements, business combinations,
estate and gift tax valuations and similar transactions. In the ordinary course
of our business, we may from time to time trade the securities of the Company
for our own account and for the accounts of customers, and accordingly may at
any time hold a long or short position in such securities. We have acted as the
investment banker to the Special Committee of the Board of Directors of the
Company in connection with the Merger and will receive a fee from the Company
for our services, a significant portion of which is contingent upon
consummation of the Merger. In addition, the Company has agreed to indemnify us
against certain liabilities arising out of our engagement.
We are expressing no opinion herein as to the price at which the common
stock of the Company will trade at any future time. Such trading price may be
affected by a number of factors, including but not limited to (i) changes in
prevailing interest rates and other factors which generally influence the price
of securities, (ii) adverse changes in the current capital markets, (iii) the
occurrence of adverse changes in the financial condition, business, assets,
results of operations or prospects of the Company or in the product markets it
serves, (iv) any necessary actions by or restrictions of federal, state or
other governmental agencies or regulatory authorities, and (v) timely
completion of the Merger on terms and conditions that are acceptable to all
parties at interest.
Our investment banking services and our opinion were provided for the use
and benefit of the Special Committee of the Board of Directors of the Company
in connection with its consideration of the transaction
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contemplated by the Merger Agreement. Our opinion is limited to the fairness,
from a financial point of view, to the Stockholders (other than holders of the
Exchanged Shares) of the Merger Consideration in connection with the Merger,
and we do not address the merits of the underlying decision by the Company to
engage in the Merger and this opinion does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
proposed Merger. It is understood that this opinion may not be disclosed or
otherwise referred to without our prior written consent, except that this
opinion may be included in its entirety in a proxy statement filed with the
Securities and Exchange Commission and mailed to Stockholders by the Company in
connection with the Merger.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Merger Consideration to be received by
the Stockholders (other than holders of the Exchanged Shares) in the Merger
pursuant to the Merger Agreement is fair, from a financial point of view, to
the Stockholders (other than holders of the Exchanged Shares).
Very truly yours,
/S/ WILLIAM BLAIR & COMPANY, L.L.C.
--------------------------------------
WILLIAM BLAIR & COMPANY, L.L.C.
B-3
ANNEX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262--APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S)228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to (S)(S) 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, then either a constituent corporation, before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter, shall notify each of the holders of
any class or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or consolidation
and that appraisal rights are available for any or all shares of such class
or series of stock of such constituent corporation, and shall include in
such notice a copy of this section. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder that is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the
C-2
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder that has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder that has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
C-3
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder that has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
BWAY CORPORATION
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ., 200.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jean-Pierre Ergas, Kevin Kern and Jeffrey
O'Connell, and each of them, proxies, with power of substitution and
revocation, acting together or, if only one is present and voting, then that
one, to vote the stock of BWAY Corporation which the undersigned is entitled to
vote at the Special Meeting to be held on ., 200. and at any adjournments or
postponements thereof, with all the powers the undersigned would possess if
personally present, as designated herein, and authorizes the proxies to vote in
accordance with the recommendations of BWAY's management upon such other
business as may properly come before the Special Meeting.
The Board of Directors Recommends a Vote "FOR" Item 1.
1. Approve and adopt the Agreement and Plan of Merger, dated as of September
30, 2002, by and among BCO Holding Company, BCO Acquisition, Inc. and BWAY
Corporation, and the merger thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED, OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEM 1.
Check here if you plan to attend the Special Meeting [_]
Check here if address has changed [_] (make corrections on reverse side)
THIS AREA RESERVED FOR ADDRESSING
Dated: ___________________, 200.
______________________________________
______________________________________
Signature(s)
Please sign exactly as name appears
hereon. Joint owners should each sign
personally. Executors, trustees,
officers, etc. should indicate their
titles when signing.
FOLD AND DETACH HERE
PLEASE VOTE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.